Life Science Compliance Update

November 15, 2016

Post-Election Decompression: Where Do We Go from Here?

Donald_trump_flag

After almost fifteen months of campaigning, polls, and 24/7 election coverage of “he-said-she-said,” we finally have our answer: President-Elect Donald Trump. Regardless of where you fall politically, or who you voted for, the top question on everyone’s mind is what is next for industry once Mr. Trump is in the Oval Office. Even still, knowing who the next president is, and which party will be in control of each chamber of Congress, there is a tremendous amount of uncertainty.

The rhetoric on the campaign trail often does not fully come to fruition once the candidate is elected; it is either tampered down a bit, or ramped up a bit, depending on what kind of platform the candidate ran on and where the candidate’s party wants the direction to go.

Mr. Trump’s major policy priorities have been: trade, immigration, infrastructure, and the Federal Reserve. One of the centerpieces of Trump’s economic platform was to reverse free trade, including declaring some countries as currency manipulators; putting tariffs on Mexico and China; renegotiating, or withdrawing from, the North American Free Trade Agreement (NAFTA); and exiting from the World Trade Organization (WTO).

As far as other campaign centerpieces, Mr. Trump promised to “build a wall” along the Mexican border and deport some or all undocumented workers, as well as pledging to invest heavily in infrastructure.

Lame Duck

The outlook for the lame duck session remains uncertain: Speaker Paul Ryan and Senate Majority Leader Mitch McConnell are surveying their caucuses, working with the Trump transition team to determine the scope and length of the lame duck session. However, there are several “must pass” pieces of legislation for the lame duck session, including fiscal year 2017 spending bills and the National Defense Authorization Act. Additionally, the 21st Century Cures and Mental Health Reform legislation are likely on a “want to pass” column.

One vote certainly taken off the table with the election of Mr. Trump is the vote on whether or not to confirm President Barack Obama’s Supreme Court of the United States (SCOTUS) Merrick Garland. Senate Leader Mitch McConnell has already confirmed that confirming Merrick Garland to the Supreme Court will not be on the Senate’s lame duck agenda.

Passage of the Trans Pacific Partnership (TPP) is also unlikely during the lame duck session. While Senator McConnell has said that the Senate will not vote on the TPP this year, Senate Finance Committee Chairman Orrin Hatch has continued to negotiate with the White House. As alluded to above, Mr. Trump rejected the trade package during the campaign, and so we may see an increased pressure from the White House and pro-trade lawmakers for Congress to at least consider TPP before Trump takes office in January.

Trump’s First 100 Days

The first 100 days has been seen as the most important period of time for a new president to lay out their primary policy priorities. Again, Trump was a very unconventional candidate, and as such, his first 100 days may very well be unconventional as well. It is estimated that during his first 100 days, Trump will focus on repealing Obama Executive actions; legislation on building a wall on the southern border; Supreme Court nomination to replace Justice Scalia; Dodd-Frank reforms; and implementing a $550 billion (or larger) infrastructure plan.

21st Century Cures

Both Leader McConnell and Speaker Ryan have expressed a shared interest in passing a version of the 21st Century Cures Act during the lame duck session. However, a key sticking point for Democrats to pass the overarching legislation has been finding how to pay for additional funding for NIH. There is a group of unions and liberal organizations that are urging Congress to hold off on passing the legislation until after Trump is inaugurated, because they feel as though it would give lawmakers time to include provisions to address prescription drug pricing.

Drug Pricing

There have been numerous high profile oversight and investigation hearings in Congress, leading to criticism of the pharmaceutical industry acting as perhaps one of the few things legislators in both parties can agree on. If any movement is to be made legislatively, it would likely be focused on areas that have seen great bipartisan interest, such as expediting the approval of generic drugs in instances of steep price hikes.

However, once again, Trump ran an unconventional campaign as an unconventional candidate. While some believe that Trump will govern as a traditional conservative, there is no prior government experience of Mr. Trump to look to, to make an educated guess as to how he will govern. Trump has been known to embrace policies such as allowing Medicare to negotiate drug prices, price transparency across the field, and importing foreign drugs

Medicare and Medicaid Reform

Republicans have long hoped to reform the nation’s entitlement programs, with full control of the legislative and executive branches. While any major overhaul of Medicare or Medicaid will always have political pitfalls, the odds are more likely than in recent history that there are major changes that could be made. One such suggestion made by House Republicans is changing the Medicare program from a system where recipients are entitled to defined benefits to one that works more like a defined-contribution system, where beneficiaries receive a set amount of federal subsidy dollars to help them purchase coverage.

Conclusion

While it is still too soon to be sure how the election will affect the industry, what is sure is that Pharma stocks immediately benefitted from the election results. Short-term success does not confirm that the gains will continue, but as of November 9, 2016, the NYSE Arca Biotechnology Index jumped 8.9%, Allergan shares rose 8%, Celgene Corp. rose 8.6%, and Pfizer Inc. rose 7%. Drug wholesalers and other industry middlemen also got a boost, with McKesson up 6.4% and Express Scripts up 3.4%.

With a fully-Republican federal government, it is possible that we finally see the stalemate in Washington break. However, with great power comes great responsibility, and the ability of the Republican-led government to govern will be tested over the next two years and has the potential to result in major legislative reforms being implemented during this period, circa 2008-2010, when Democrats controlled the executive and legislative branches.

June 21, 2016

CMS: Hospital and Critical Access Hospital (CAH) Changes to Promote Innovation, Flexibility, and Improvement in Patient Care Proposed Rule

CMS recently released a proposed rule updating the Conditions of Participation (CoP) for 6,228 hospitals and critical access hospitals (CAH) that participate in the Medicare and Medicaid programs. By incorporating elements of the Department of Health and Human Services' (HHS) Quality Strategy and Centers for Disease Control and Prevention's (CDC) Strategy to Combat Antibiotic Resistant Bacteria, CMS says the revisions aim to reduce readmissions; ease barriers to care; stem hospital-acquired conditions, including infections; address workforce shortages; and advance non-discrimination protections. Comments on the proposed rule are due by Aug. 15. 

The implication of these and various other provisions will cost the industry between $773 million to $1.1 billion, according to the CMS. However, CMS also expects complying with the various parts of the policy will result in a net savings of up to $284 million.

"Working with tools provided by the Affordable Care Act, hospitals have taken significant steps to improve safety and quality in the past several years. Already, efforts to reduce healthcare-associated infections have resulted in reducing health care costs by nearly $20 billion and saving 87,000 lives," said Kate Goodrich, M.D., M.H.S., Director, Center for Clinical Standards & Quality, CMS. "This proposal further supports hospitals' safety and quality efforts by requiring all Medicare and Medicaid hospitals to have designated leaders in charge of specialized programs to prevent infections, improve antibiotic use, and follow nationally recognized guidelines."

Rule Details

Highlights of the rule include a requirement that hospitals must have infection prevention and antibiotic stewardship programs for healthcare-related infections and for the appropriate use of antibiotics. In addition, hospitals would be required to designate qualified leaders of such programs. In a statement to The Wall Street Journal, the American Hospital Association said, "The emphasis on good infection control and antibiotic stewardship is consistent with the important work hospitals are doing to reduce infections and preserve the effectiveness of our current antibiotics. We join CMS in recognizing the importance of these programs and are always looking to make them more effective."

The rule further requires hospital adopt non-discrimination policies on the basis of race, religion, national origin, sex and gender identity, sexual orientation, age, or disability. CMS specifically says that "discriminatory behavior, or even the fear of discriminatory behavior, by healthcare providers remains an issue and can create barriers to care and result in adverse outcomes for patients." The rule also proposes a clarification of the requirement for patient access to their health records to account for the electronic format in which records may be accessible. It notes that "the patient has the right to access their medical records, including current medical records, upon an oral or written request, in the form and format requested by the individual, if it is readily producible in such form and format (including in an electronic form or format when such medical records are maintained electronically); or, if not, in a readable hard copy form or such other form and format as agreed to by the facility and the individual, within a reasonable time frame."

This rule will also enable hospitals to create a policy that specifies the outpatient departments which would not be required to have a registered nurse physically present and alternative staffing plans established under such a policy. Hospitals would also be required to incorporate quality indicator data related to hospital admission and hospital-acquired conditions. Hospitals already compile data for the Hospital Inpatient Quality Reporting program, the Hospital Value-Based Purchasing Program, the Hospital-Acquired Condition Reduction Program, the Medicare and Medicaid Electronic Health Record Incentive Programs, and the Hospital Outpatient Quality Reporting program.

CMS further proposes that a patient's medical record contain information to justify all admissions and continued hospitalizations, support the diagnoses, describe the patient's progress and responses to medications and services, and document all inpatient stays and outpatient visits to reflect all services provided to the patient. The agency notes that it emphasizes "the distinctions between discharges and transfers as well as between inpatients and outpatients by proposing to revise §482.24(c)(4)(viii) so that the content of the medical record would contain final diagnoses with completion of medical records within 30 days following all inpatient stays, and within 7 days following all outpatient visits."

Some of the other proposals in the rule include changing the existing "licensed independent practitioner" term to only "licensed practitioner" which is intended to facilitate hospitals' use of physician assistants as appropriate. CMS also establishes a requirement that a CAH develop, implement, maintain and evaluate its own QAPI program to monitor and improve patient care and a requirement that individual patient nutritional needs are met in accordance with recognized dietary practices and the orders of the attending practitioner or a qualified, state-approved nutrition professional.

   

   

April 05, 2016

2015 Front Line of Healthcare Report – CME and Conferences are a More Frequently Utilized Source of Information

Bain & Company, Inc. has published their Front Line of Healthcare Report 2015, a report that focuses on the shifting United States healthcare landscape by the numbers.

Bain & Company took a natural survey of 632 physicians across specialties and 100 hospital procurement administrators in the United States in an attempt to update their 2011 Physician Attitudes Survey. To highlight the idea that the dynamics of change vary substantially across different regions of the country, Bain oversampled two regions with distinct market characteristics (Massachusetts and Mississippi/Alabama). Bain found that in states like Massachusetts, the pace of change is faster because of several factors in play: more competition among payers and provider organizations, and an activist policy and regulatory environment that promotes change.

Since the report is focused on the shifting United States healthcare landscape, the report opens with a brief infographic that includes a variety of information on just how much the landscape is changing. For example, of physicians who have changed employment in the past five years, almost three-fourths, 72%, now work in large management-led organizations. Additionally, it was noted that in the last three years, the percentage of surgeons who state that procurement officers influence most of the purchasing decisions for devices has more than doubled, and 65% of physicians say that formularies limit their prescribing decisions.

Bain found that CE and conferences were a much more influential to physicians than their interviews in 2011 with a 23% increase in the utilization of CE as a source of information. Physicians are relying more and more on CME to help them figure out what to do next for their patients. Other sources of information that increased included Key Opinion Leaders (16%), Manufacturer Websites (9%) and Academic Journals (7%) big losers included Colleagues (-10%), Pharmacists (-18%) and Sales Reps (-26%). One could hypothesized that systems integration has actually lead to less communication between colleagues and discussions with pharmacists. In large systems physicians have quota's to meet and patient discussions are happening less and less with colleagues. In the same vein sales reps have been continuing to lose access especially to physicians who join integrated health systems as time is a huge commodity in those systems.

Financing and Delivery of Healthcare

Even though healthcare costs have slowed, per capita costs do not seem to have decreased. Organizational shifts and the trend toward consolidation and more professionally managed organizations have produced many changes, including: increasing the use of standardized clinical protocols and electronic medical records, more objective metrics for measuring clinical performance, payment models that put providers at risk for outcomes, and a shift in physicians' perceptions of their own cost responsibility.

When physicians were asked about their change in use of analytic and clinical tools over time, they responded that over the last two years alone, their use of electronic medical records (EMRs) has nearly tripled, and use of treatment protocols more than doubled. Bain also found that physicians who work in management-led systems of care tend to be significantly less likely to recommend their organization to others than those in physician-led organizations. One explanation could be that physicians in management-led organizations also report having less knowledge of their organization's mission and being less engaged in the organization's activities.

Direct Impact on MedTech and Pharma

These changes in healthcare affect the entire supply chain, and as delivery systems continue growing larger and more complex, decisions become more focused on outcomes and economics.

While centralized purchasing in healthcare organizations is not new, Bain found that there is an increasing use of preferred vendor lists by procurement departments, which is quickly reducing the number of available products and putting lower-share players at risk. It is estimated that forty percent of surgeons no longer use a particular product because it is no longer available at their hospital.

The decline in physician autonomy is also affecting the pharmaceutical sector, with the exception of selected specialties that are highly differentiated and require drugs with a high-impact nature (i.e. oncology).

These shifts in decision-making power also have an effect on where physicians and surgeons obtain information about new products. For decades, sales representatives have been a common and highly valued source of information. Today, however, physicians are relying more on manufacturer websites, academic journals, and conferences. In Bain's recent survey, only 41% of physicians reported sales reps as being one of their top three sources of information about a new drug, compared to 56% three years ago. This holds true for medical devices as well, with 48% of surgeons reporting that sales reps are an important source of information, down from 59% three years ago.

However, those figures vary widely from state to state, as well as physician demographics. Of surgeons in Alabama and Mississippi, 69% rate sales reps as one of their top sources of information, compared with only 31% in Massachusetts. More experience physicians, orthopedic surgeons, and cardiologists, also report a higher reliance on sales representatives, as do self-employed physicians.

What Does This Mean?

With the purchase of drugs and devices becoming more competitive and centralized in hospitals and drug benefit plans, it is important for sales representatives to adapt to serve a more complex customer. To meet the likely challenges ahead, manufacturers will need to develop more sophisticated and flexible go-to-market models that reflect both regional and practice differences. The pharmaceutical, device, and MedTech companies that come out ahead will be those that can achieve flexibility while minimizing the complexity of their operating model. Manufacturers should also recognize that category leadership will likely continue to matter more than range in a company's portfolio when it comes to both loyalty and advocacy.

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