Life Science Compliance Update

April 25, 2018

The End of Guidance Documents or Simply a Reminder of Well-Established Administrative Law Principles?


As discussed in several news outlets, the Trump Administration recently announced that it would begin to enforce long-standing administrative law principles and limit the weight guidance documents carry in government actions against private companies and individuals. While the ramifications of this decision are still months away from realization, this article outlines the principles and the possible effects we will see in the future from this decision.

Chaos and controversy seem to be synonymous with Trump Administration activities. This was certainly the case a few weeks ago when the United States Department of Justice (“DOJ”), with the support of the White House, recently announced that it would begin limiting the use of “guidance documents” and that non-compliance with guidance documents did not constitute a punishable violation.

The announcement, quickly picked up by several news outlets, had the predictable effect of having the pundits take sides on whether this announcement was simply a reminder of the proper role of guidance documents, a domino effect that may have vast implications for the government’s ability to sue companies accused of violating those document or something more nefarious such as Trump was trying to dismantle Executive Branch agencies.

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March 13, 2018

White House White Paper on Pharma Pricing Released


In February 2018, the White House Council of Economic Advisers released a white paper, “Reforming Biopharmaceutical Pricing at Home and Abroad,” a report that discusses the affordability of healthcare and biopharmaceutical drugs.

According to the report, federal policies that affect drug pricing should satisfy two goals. First, domestic drug prices paid by Americans should be reduced. Second, the price of better health in the future should also be reduced by spurring medical innovation. The report considers policy options to simultaneously advance these two seemingly conflicting goals.

Reducing drug prices that Americans pay means recognizing that many artificially high prices result from government policies that prevent, rather than foster, healthy price competition. Drug prices, for example, can be artificially high due to government regulations that raise prices. The report discusses changes to the Medicare and Medicaid programs that could help lower domestic prices, as well as reforms to the Food and Drug Administration (FDA) that could encourage more robust price competition.

The report notes that concerns about affordability have been magnified by the high price of newly-approved drugs. The report also notes that it is misleading to consider only the prices of these new drugs without evaluating the well-being of patients before the drug became available. It is important to separate the price of healthcare, such as drugs, from the effective price of better health, such as how costly it is to live longer. Innovations such as new drugs often reduce the price of health even when the new drug is very expensive relative to other goods. The example of HIV drugs from the mid-1990s was given to make the point that even though the price of the drug was considerable and drug spending rose, the effective price of better health declined.

The objective of government in biopharmaceutical policy is to ensure that the private sector competes and invests in meaningful innovations that lower the price of health, rather than incentivizing market exclusivity and high prices on products. The two goals of reducing American prices and stimulating innovation are consistent but can be achieved through a combined strategy that corrects government policies that hinder price-competition at home, while at the same time limiting free-riding abroad.

One topic discussed in more detail in the report is how to reduce prices that are induced by Medicare and Medicaid reimbursement policies. Other topics include: how to cut the duration of high prices induced by price manipulation and how to enhance price competition in the Pharmacy Benefit Manager (PBM) market.

Another discussion, how to raise the innovation incentives to reduce the price of better health in the future, mentioned how to limit the under-pricing of drugs in foreign countries, limit under-pricing domestically, reduce the cost of innovation through change at the FDA, and create reforms that reduce the costs of innovation and raise price competition of new innovations.

The report concludes by noting that the two “seemingly inconsistent goals” of reducing American prices and stimulating innovation can be achieved by using a combined strategy, and that preserving this industry and encouraging it to innovate while making drugs more available and affordable for all Americans is an attainable goal.

February 19, 2018

Trump Administration Releases Budget Proposal Calls for Changes to Open Payments and Increased Funding for Fighting Fraud and Abuse


The Trump Administration recently released its fiscal year (FY) 2019 budget proposal, including extensive health policy provisions.

The budget proposal features numerous program integrity provisions. For instance, the budget calls for: a $45 million increase in Health Care Fraud and Abuse Control funding; expanded prior authorization requirements for high utilization practitioners of radiation therapy, therapy services, advanced imaging, and anatomic pathology services; expansion of the items of DME, prosthetics and orthotics that are subject to prior authorization; a demonstration to test the use of a benefits manager for serial/refill DME claims; a requirement that clearinghouses and billing agents enroll in Medicare; and the addition of the National Provider Identifier of covered recipients on the public Open Payments website.

The budget proposal also snuck in some proposed changes to Open Payments, including altering the Open Payments reporting and publication cycle, and publishing the National Provider Identifier for covered recipients in the Open Payments Program, as ways to address fraud and abuse in Medicare.  

The budget also includes proposals to streamline Medicare program rules for providers and suppliers, including: relaxing Medicare meaningful use program requirements for hospitals and physicians, simplifying Merit-based Incentive Payment System (MIPS) rules and Advanced Alternative Payment Model (APM) bonus rules for physicians, and various reforms to the Medicare appeals process.

The budget also proposes a new exception to the physician self-referral law for arrangements that arise due to participation in Advanced APMs. Furthermore, several provisions are intended to boost accountable care organizations (ACOs), including a proposal to allow ACOs to pay beneficiaries for a primary care visit.

Trump continues to attempt a “repeal and replace” method to the Affordable Care Act (ACA). This year’s budget calls for a “Market-Based Health Care Grant Program” (similar to the pending Graham-Cassidy-Heller-Johnson legislation) as an initial step to help states stabilize their insurance markets during a transition period. The second step would then repeal the ACA’s Medicaid expansion and significantly restructure Medicaid by allowing states to choose between a per capita cap or a block grant.

Another area of emphasis in this year’s budget proposal is reducing prescription drug prices, although there is debate regarding the potential effectiveness of the Administration’s approach. Among other things, the budget would:

  • “Modernize” the Medicare Part D benefit by requiring Part D sponsors to apply at least one-third of total rebates and price concessions at the point of sale and eliminating cost sharing for generic drugs for low-income, among others.
  • Establish new standards for hospitals to receive redistributed savings resulting from reduced payment for outpatient drugs purchased through the 340B discount drug program, based on the hospital’s level of uncompensated care.
  • Reduce Medicaid drug spending by establishing a Medicaid demonstration to test coverage and financing reforms that build on private sector best practices,  requiring state Medicaid to cover all FDA-approved Medication Assisted Treatments for opioid use disorder, and establishing minimum standards for Medicaid drug utilization review programs.

This budget proposal is separate from the two-year budget deal passed by Congress in early February, which is complicating efforts made by the White House to reorder federal priorities.


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