Life Science Compliance Update

November 24, 2015

Stage III Meaningful Use CMS Doubles Down as Opposition Mounts

Despite Congressional interest in delaying Stage 3 of the electronic health record Meaningful Use program and the AMA coming out strongly against the roll out, HHS recently went forward and published its 752-page Final Rule for Stage 3 and Stage 2 modifications. One of the central pieces to the Affordable Care Act, along with the American Reinvestment and Recovery Act (ARRA) was the implementation and "meaningful use" of electronic health records (EHRs)—through the HITECH provision. Implemented in stages, Stage 3 is the final step of the program.

Final Rule

The 2015-2017 Meaningful Use (MU) Final Rule establishes MU program requirements for 2015 - 2017, creating a new "Modified Stage 2." All providers, including those in the Medicaid program, would attest to a single set of objectives and measures beginning in 2015. The Modified Stage 2 program reduces the number of requirements and lowers certain measure thresholds compared to Stage 2. All providers are required to move to Stage 3 beginning in 2018 regardless of their prior participation or Stage of MU.

The final rule establishes a modified version of Stage 2 for 2015 - 2017 for all participants. In 2015, all participants must follow Modified Stage 2 with accommodations for providers who were schedule to demonstrate Stage 1 in 2015. Next year, in 2016, all participants would follow the Modified Stage 2 with a smaller set of accommodations for providers who were scheduled to demonstrate Stage 1 in 2016. The following year, in 2017, participants may select to report on Modified Stage 2 or the full version of Stage 3 outlined in the Stage 3 rule. By 2018 all participants would follow the full version of Stage 3.

CMS recently announced a new FAQ that allows any provider to apply for a hardship exception for 2015 under the "extreme and uncontrollable" circumstances category due to the lateness of the modifications rule. The agency has also clarified that physicians switching EHRs or experiencing issues with a vendor product may apply for a hardship exemption under the existing "extreme and uncontrollable circumstances" category.

The MU Stage 3 Final Rule allows for a 60-day public comment period to continue to consider program changes and align requirements with the Medicare Access and CHIP Reauthorization Act (MACRA). This is the last stage of MU and Stage 3 requirements are optional in 2017 and mandatory for all participants in 2018, no matter when they started the MU program.

All Stage 3 MU participants (both physicians and hospitals) must meet 8 objectives. Each objective may include multiple measures. Objections include: (1) Protect Electronic Health Information; (2) Electronic Prescribing (eRx); (3) Clinical Decision Support (CDS); (4) Computerized Provider Order Entry (CPOE); (5) Patient Electronic Access; (6) Coordination of Care through Patient Engagement; (7) Health Information Exchange (HIE); and (8) Public Health and Clinical Data Registry Reporting.

Physicians in opposition, economics of practice changing in part due to Health IT

As reported by Politico, the American Medical Association helped lead the charge to pause finalization of the Stage 3 rules. AMA argued Stage 3 takes a "drastic step backwards" from CMS's proposed changes to Stage 2. The implementation of electronic health records has been especially difficult for independent and smaller physician practices—one of the most consistent arguments against moving forward with the MU program.

As also reported in Modern Healthcare, according to a recent report, independent practices acquired by hospitals are seeing operating costs spike as they try to keep up with the federal electronic health record requirements. Multispecialty physician practices spent an average of $20,693 per full-time-equivalent doctor in 2014, a 12% increase from the year before and a 34% increase from 2010.

More than 3,100 physician groups were surveyed for the report, which includes information on other administrative issues such as staffing ratios. It found that between 2010 and 2014, physician practices increased use of non-physician providers, such as physician assistants and nurse practitioners, to meet demand and compete to hire from a limited supply of doctors. Administrative burdens and costs related to running an independent practice has a growing number of physicians opting to become employees of hospitals. Reports indicate that physicians will continue leaving private practice to work for hospitals and that only a third of physicians would remain independent by the end of 2016.

Along these lines, Politico recently asked if electronic health records are creating a spike in hospital mergers. According to American Hospital Association CEO Rick Pollack in a recent House Judiciary Committee hearing, he estimated hospitals will spend between $20 million and $200 million on EHRs each year depending on their size, and that dollar amount is unmanageable for smaller hospitals. This causes them to merge and results in fewer players in the market. "The fundamental restructuring that CMS anticipates in response to its alternative reimbursement models will undoubtedly come with a high cost that will be particularly difficult to bear for small and stand-alone hospitals," Pollack testified.

GOP Doctors Caucus Resistance

In line with the aforementioned physician resistance, the GOP Doctors Caucus announced plans to ask House of Representatives Speaker Paul Ryan for end-of-year legislation to include a delay in Stage 3 of meaningful use and broad exemptions for the programs penalties. This forthcoming letter is in addition to a letter sent in September to the Obama administration. The September letter asked for a delay in meaningful use Stage 3, and was signed by approximately 25% of House members. 

Tennessee Representative Phil Roe, chairman of the GOP Doctors Caucus, said, "Many of us believe the appropriations process is also an effective way to get this done. The Caucus is open to various vehicles for these requests and looks forward to working with Speaker Ryan and other House leaders on these important initiatives."

Problems with vendors

Over the past year, health IT vendors have come under scrutiny for the practice of intentionally blocking the sharing of patient information, hurting progress toward a national goal of interoperability. New legislation, the Transparent Ratings on Usability and Security to Transform Information Technology Act of 2015, or the "TRUST IT Act" hopes to combat this practice. The legislation aims to ensure that certified health IT systems are performing as promised in the field, and establish a rating system that will enable consumers to compare different products based on that performance.

According to Senator Bill Cassidy's press release—one of the three Senate physiciansthe legislation will also:

  • Authorize the Office of the National Coordinator for Health Information Technology to make publicly available information, such as summaries, screen shots, or video demonstrations, showing how certified health information technology meets certification requirements;
  • Require the certification program to establish that health IT products meet applicable security requirements, incorporate user-centered design, and achieve interoperability, consistent with the reporting criteria developed for the Health IT Rating Program;
  • Require health IT vendors to attest they do not engage in certain information blocking activities, including nondisclosure clauses in their contracts, as a condition of certification and maintenance of certification;
  • Authorize the Inspector General of the Department of Health and Human Services to investigate claims of information blocking and assess civil monetary penalties on any person or entity determined to have committed information blocking.

This comes after CMS also published recommendations earlier this year to address the information blocking problem, including:

  • Assisting federal and state law enforcement agencies in identifying information blocking cases that violate current laws;
  • Bolstering oversight of certified health IT capabilities "in the field" through new requirements;
  • Creating a nationwide health information exchange governance framework;
  • Requiring certified health IT developers to disclose additional costs, limitations and restrictions associated with their products;
  • Working with CMS to create incentive payments that reward interoperability and health data sharing; and
  • Working with HHS' Office for Civil Rights to educate stakeholders on how HIPAA privacy and security standards apply to information sharing.

Now, despite federal rules, many developers of electronic health records are not meeting federal design requirements, according to research published in JAMA. The researchers from the National Center for Human Factors in Healthcare at MedStar Health in Washington, D.C. found that not all vendors filed required reports on usability testing. The report adds to the mounting concern that EHRs are failing to raise the quality and safety of healthcare and lower its costs.

Gag orders, another previously raised issue, are a separate, but related concern. A Politico investigation found that some of the biggest firms marketing electronic record systems inserted "gag clauses" in their taxpayer-subsidized contracts, effectively forbidding health care providers from talking about glitches that slow their work and potentially jeopardize patients. The website obtained 11 contracts through public record requests from hospitals and health systems in New York City, California, and Florida that use six of the biggest vendors of digital record systems. With one exception, each of the contracts contains a clause protecting potentially large swaths of information from public exposure. This is the first time the existence of the gag clauses has been conclusively documented. Politico faults the government's slow response, noting that little has been done to address the problem despite many years of warnings.



There is a significant amount of opposition to current health information technology policies both within the government and the larger medical community. Stage 3 of Meaningful Use could ultimately be delayed through Congressional action, and larger legislative fixes may be necessary to combat the litany of problems raised by stakeholders over the past few years. The ultimate goals of electronic health records may be laudable, but the unintended consequences could be far greater than the Administration had originally perceived.

November 23, 2015

House E&C Committee Turns Focus to the Regulation of Diagnostic Tests and Laboratory Operations



The House Energy & Commerce Committee's Health Subcommittee held a hearing on November 17, 2015, to discuss a proposal by the Food and Drug Administration (FDA) that would broaden FDA authority on the regulation of laboratory developed tests (LDTs).

As part of the 21st Century Cures initiative, the Committee has heard from a wide range of interested parties about the important role diagnostic tests play in the advancement of precision medicine. Following a July 2014 roundtable on the topic, the FDA informed Congress of FDA's intent to issue draft guidance documents that would alter the regulatory landscape for the review and oversight of LDTs. As with most policy proposals, there are significant differences of opinion about the FDA's proposed approach. However, the draft guidance has served as a catalyst for conversations about the "ideal" modern regulatory framework for these unique and evolving tests and services.

In December 2014, the Energy & Commerce Committee issued a white paper, asking for feedback on what roles the FDA and the Centers for Medicare and Medicaid Services (CMS) should play in the framework. This November 17th hearing was the first time that FDA and CMS testified together for a comprehensive understanding of their areas of expertise, their current responsibilities, and what their responsibilities should be moving forward.

Currently, CMS has authority from the Clinical Laboratory Improvement Amendments (CLIA) to inspect labs and lab equipment to ensure that tests are being completed properly. However, in this system, no pre-market evaluation is done to ensure the clinical validity of the tests themselves, which brings the FDA into the issue, as they claim to have better expertise than CMS in pre-market evaluations.

Opening Statements

During the opening statements, Chairman Joe Pitts seemed to understand the importance of precision medicine, biomarkers, and diagnostic testing, asserting that the medical community "needs a regulatory environment that supports this kind of testing," and asking the FDA how its authority of LDTs could be "clarified or improved." Ranking Member Gene Green seemed to agree with Rep. Pitts in claiming the best way to establish a regulatory framework is through legislative action.


Dr. Jeffrey Shuren, the Director of the Center for Devices and Radiological Health at the FDA, stated it was his belief and understanding that modern diagnostic tests have a much higher risk and are exceedingly more complicated than when the original legislation regarding their regulation was passed in the 1970s. He claimed that the FDA has been asked to "more actively regulate" LDTs, but when they issued a proposal in 2007 to regulate a subset of tests, labs said they wanted a more comprehensive framework. That desire for a more comprehensive framework has resulted in the upcoming final guidance.

Dr. Patrick Conway, Deputy Administrator for Innovation and Quality and Chief Medical Officer at CMS, maintained that CLIA has been working for twenty-five years and would remain relevant going forward. However, Dr. Conway is cognizant of limitations with the framework, especially the fact that it is designed to reduce harm based on where the test is performed, not the validity of the test itself. He agreed with the FDA's stance on expertise, that the FDA is be better equipped to ensure the clinical validity of tests.


Both Dr. Shuren and Dr. Conway warned against having both the FDA and CMS attempt to perform pre-trial evaluation of LDTs as it would likely "lead to duplication and inefficiency." Dr. Shuren went a step further, claiming it would lead to "inconsistent standards" and make coordination between the FDA and CMS much more difficult.

Dr. Conway insisted that while his staff is not "trained to test for clinical validity," they would still play a "critically important role" by ensuring that the labs have the right procedures, staff, and equipment in place in order to accurately complete LDTs.

Representative Michael Burgess was concerned about the FDA playing a greater role, saying, "It's unclear to me how we can separate the practice of medicine from lab processes," somewhat suggesting that mandated premarket approval of LDTs would potentially impose unnecessary requirements and additional costs. Representative Joe Barton agreed, bringing up the old adage," If it's not broke, don't fix it."

Rep. Marsha Blackburn's was curious as to when we can expect final LDT guidance from the FDA. Dr. Shuren stated that the FDA planned a 2016 release – "hopefully earlier rather than later." (See the draft guidance here.)

Dr. Shuren and Dr. Conway both asserted that a risk-based approach would be used in conducting a pre-market review. The FDA is planning to focus on clearing the high-risk tests first and then move onto moderate-risk evaluations. Importantly, under this risk-based approach, all low-risk and some moderate-risk tests would not be subject to a strict pre-market evaluation. The FDA will determine levels of risk based upon assessments of the consequences if a test were to demonstrate an incorrect result.

Several members were concerned that an adjustment in the review of diagnostic tests would lead to them being taxed differently, under the Affordable Care Act's medical device excise tax. Dr. Shuren was unable to provide a confirmation that they would not be, instead stating that the FDA would work to maintain LDTs tax-exempt status.


Over the years, the FDA has pushed to regulate LDTs, all the while maintaining that the lack of oversight has resulted in real harm to patients. However, the FDA has been unable to back up those claims, save a few examples. The aforementioned recently released FDA report came up with twenty such examples, but even with those additional examples, Congress is remaining somewhat skeptical.

Congress seems concerned with the current path of progress, with some members concerned about new government regulation and others concerned about what an FDA "stamp of approval" would suggest to physicians and consumers about the accuracy of the tests. Overall, most present members offered support for some legislative action to be taken to clarify the regulatory structure of LDTs.

November 20, 2015

Drug Pricing Forums and Congressional Actions


As our readers know, from both their own experience and the articles written on our website, drug pricing is a hot issue right now. Given that we are also in the run up to an election year, it is a hot issue that is likely to stick around for quite some time. Politicians of all stripes and branches and levels of government are getting involved, with several Congressional committees conducting investigations and holding hearings, and the Department of Health and Human Services (HHS) holding their own forum on the topic. Below is an outline of forums and hearings on drug pricing that we are aware of to date. We will aim to update the website with any new drug pricing information that comes through any of these hearings and forums.

HHS Pharmaceutical Forum – November 20, 2015

The Department of Health and Human Services is hosting a Pharmaceutical Forum on Friday, November 20, that promises to focus on "innovation, access, affordability, and better health." HHS Secretary Sylvia M. Burwell is asking a variety of stakeholders to share information and their opinion as to how to address the complex problem of rising drug costs. This forum will bring together consumers, providers, employers, manufacturers, health insurance issuers, representatives from state and local governments, and other stakeholders to discuss how to promote competition and drive innovation, among other things.

The forum includes topics such as: "The Balance between Innovation & Smarter Spending," "Addressing Patient Access & the Affordability of Prescription Drugs," and "Value-Based & Outcomes-Based Pharmaceutical Purchasing Programs." Invited speakers include CEOs of Merck & Co. and Kaiser Permanente, high-level federal employees from HHS and Office of Personnel Management (OPM), and representatives of other miscellaneous organizations like the Brookings Institution and AARP.

House of Representatives, Oversight Committee – TBA

The House Oversight Committee announced that it would hold a hearing on drug pricing practices "early next year," according to Chairman Jason Chaffetz. The Committee is currently conducting an investigation and has reached out to a number of drug companies, including the prominent Valeant and Turing Pharmaceuticals, to gather information to continue their current actions of "actively reviewing drug pricing."

As we have previously written, Elijah Cummings, the ranking member of this committee, has also formed a task force – the Affordable Drug Pricing Task Force – to engage in "meaningful action to combat the skyrocketing costs of pharmaceuticals."

Senate Special Committee on Aging – December 9, 2015

The Senate Special Committee on Aging has tentatively set an initial hearing on their ongoing investigation into pharmaceutical drug pricing for December 9, 2015. Per Senators Susan Collins and Claire McCaskill, this hearing is the first of multiple.

Senate Committee on Health, Education, Labor & Pensions

While no hearing is currently set on drug pricing in this committee, during Dr. Robert Califf's nomination hearing to head the Food and Drug Administration (FDA) on November 17, 2015, Sen. Lamar Alexander focused questions on how he would help to "ensure that affordable drugs are available to American patients." Sen. Alexander recognized that while it is not the job of the FDA to set drug prices, he would hope that the FDA can help the market "lower drug prices by approving generic drugs and other products as quickly as it possibly can, so there is more choice and competition in the market."


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