Life Science Compliance Update

January 09, 2017

OIG Report Addresses High Federal Spending on Catastrophic Part D Coverage

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The Department of Health and Human Services (HHS) Office of Inspector General (OIG) today released a report examining federal spending on drugs in the catastrophic portion of the Medicare Part D prescription drug benefit. Although the optional benefit is provided by private companies, the federal government pays 80 percent of drug costs in a catastrophic coverage portion of the benefit after a beneficiary’s out-of-pocket costs exceed a certain threshold.

OIG focused on federal spending from 2010 through 2015, relying on federal drug spending data. According to the report, federal spending on the catastrophic portion of the benefit in 2015 was greater than $33 billion, a more than three-fold increase from the $10.8 billion spent in 2010. OIG noted that higher payments in recent years reflect a significantly higher growth in spending compared to prior years of the program, with the highest growth coming in 2014 and 2015.

In the report, OIG noted that “spending for high-price drugs were responsible for almost two-thirds of the total drug spending in catastrophic coverage” in 2015, as compared to only one-third of the spending in 2010. OIG also noted that the increase in spending was also driven by an increase in beneficiaries receiving high-priced drugs and an increase of beneficiaries who received catastrophic coverage.

According to the report, ten high-price drugs accounted for nearly one-third of all drug spending for catastrophic coverage in 2015, most of which cost thousands of dollars per month. These ten drugs treat conditions such as hepatitis C, cancer, and multiple sclerosis, ranging in price from $1,200 to almost $34,000 per month. This leads to high out-of-pocket costs for some beneficiaries in catastrophic coverage. OIG also stated that even for drugs that have been on the market for awhile, steep price increases have happened since 2010.

Some Beneficiaries Face High Out-of-Pocket Costs

High-price drugs mean high out-of-pocket costs for some beneficiaries. In catastrophic coverage, beneficiaries who do not receive the low-income subsidy typically pay five percent of each drug’s price. These costs are on top of the out-of-pocket costs they face before entering catastrophic coverage.

From 2010 to 2015, beneficiaries’ out-of-pocket costs for high-price drugs in catastrophic coverage increased 47 percent. In 2015, beneficiaries paid an average of $257 a month for each high-price drug in catastrophic coverage, up from $175 in 2010.

Some beneficiaries faced even higher out-of-pockets costs, especially if they were taking hepatitis C drugs. For two hepatitis C drugs, beneficiaries paid more than $1,300 a month. For example, beneficiaries in catastrophic coverage paid an average of $1,556 a month for Harvoni. This means that, on average, beneficiaries paid $4,669 for a typical 3-month course of treatment.

Conclusion

OIG concludes that “securing the future of the Part D program while ensuring beneficiaries have access to needed drugs is a complex issue that calls for a multifaceted approach.” CMS recently published information about certain drugs with substantial increases in price, noting that action is necessary to address rising drug costs and asked the industry to partner with the agency to find solutions that allow for both innovation and affordability.

In the future, CMS will likely look for additional tools to address and meet those goals. Some potential tools mentioned include restructuring the Part D benefit so that sponsors have more incentives and opportunities to lower costs, creating more transparency about drug pricing, promoting value-based options, and revising the law to allow the Federal Government to negotiate prices for certain drugs. OIG recommend that CMS “carefully assess these and other options and should, working with Congress, make any needed changes to the Part D program.”

December 30, 2016

OIG Issues Semiannual Report to Congress

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The Department of Health and Human Services (HHS) issued its Semiannual Report to Congress, covering April 1, 2016 to September 30, 2016, on November 30, 2016. The Report summarizes the activities of the HHS Office of Inspector General (OIG) for the six-month period that ended September 30, 2016. OIG provides independent, objective oversight for HHS programs. OIG is a multidisciplinary organization principally comprising auditors, investigators, and evaluators who work in concert to protect the integrity of HHS programs, as well as the health and welfare of the people they serve.

During this reporting period, OIG expanded its focus on the quality and safety of care provided to vulnerable populations, including those in non-institutional settings. Programs that deliver health care in non-institutional settings are increasingly popular choices that help beneficiaries live in their homes and communities while avoiding costly and potentially disruptive facility-based care. Over half of all spending on Medicaid long-term services and supports is now for home and community based services (HCBS), exceeding Medicaid spending on institutional services.

OIG’s examinations of HCBS programs have revealed gaps in policies and controls to protect patients. For example, during this reporting period, OIG identified troubling compliance issues with requirements for monitoring and reporting critical incidents involving developmentally disabled Medicaid beneficiaries at group homes in Massachusetts and Connecticut.

This Report outlines many areas of improvement requiring sustained HHS attention. Program integrity must be a top priority as HHS programs continue to grow in size and complexity and incorporate new paradigms focused on value, quality, and patient-centered care. Since its 1976 establishment, OIG has worked collaboratively with its partners to protect and oversee HHS’s vital health and human services programs. The achievements of this office would not be possible without the dedication and professionalism of OIG’s employees. Once again, I would like to express my appreciation to Congress and to the Department for their sustained commitment to the important work of our office.

Numbers At-A-Glance

For FY 2016, OIG reported expected recoveries of more than $5.66 billion consisting of nearly $1.2 billion in audit receivables and about $4.46 billion in investigative receivables. The investigative receivables include about $953 million in non-HHS investigative receivables, resulting from work in areas such as the States’ shares of Medicaid restitution.

Also during FY 2016, OIG reported 844 criminal actions against individuals or entities that engaged in crimes against HHS programs. OIG reported 708 civil actions, which include false claims and unjust-enrichment lawsuits filed in Federal district court, CMP settlements, and administrative recoveries related to provider self-disclosure matters. The CMP recoveries have increased almost five-fold over the past 3 years.

Health Care Fraud Strike Force Teams and Other Enforcement Actions

The Health Care Fraud Prevention and Enforcement Action Team (HEAT) was started in 2009 by HHS and DOJ to strengthen programs and invest in new resources and technologies aimed at preventing and combating health care fraud, waste, and abuse. Health Care Fraud Strike Force teams, a key component of HEAT, coordinate law enforcement operations conducted jointly by Federal, State, and local law enforcement entities.

The Strike Force model operates in Miami, Florida; Los Angeles, California; Detroit, Michigan; southern Texas; Brooklyn, New York; southern Louisiana; Tampa, Florida; Chicago, Illinois; and Dallas, Texas. During FY 2016, Strike Force efforts resulted in the filing of charges against 255 individuals or entities, 207 criminal actions, and $321 million in investigative receivables.

One example of Strike Force action is the unprecedented nationwide sweep in 36 Federal districts, with the assistance of 24 State Medicaid Fraud Control Units (MFCU). The sweep resulted in criminal and civil charges against 301 individuals, including 61 doctors, nurses, and other licensed medical professionals, for their alleged participation in health care fraud schemes involving approximately $900 million in false billings.

Prescription Drugs

Part D is the fastest growing component of the Medicare program, and Medicaid expenditures for prescription drugs are also increasing, influenced by Medicaid expansion and increasing expenditures for expensive specialty drug costs. HHS’ oversight of prescription drug programs face numerous challenges, affecting beneficiary and community safety and the integrity of the benefit itself.

High Part D Spending on Opioids & Growth in Compounding Drugs Raise Concerns Medicare Part D spending for commonly abused opioids exceeded $4 billion in 2015, and spending for compounded topical drugs increased more than 3,400 percent since 2006. This data brief builds on OIG’s June 2015 data brief, which described trends in Part D spending and identified questionable billing by pharmacies. It updates information on spending for commonly abused opioids and provides data on the dramatic growth in spending for compounded drugs.

OIG will continue to conduct investigations and reviews to address the ongoing problems created by opioid abuse and the emerging problems linked to compounded drugs. The Centers for Medicare & Medicaid Services (CMS) has taken steps to combat the problems associated with commonly abused opioids, such as identifying outlier prescribers. CMS also needs to assess the implications of the compounded drug trends identified in this data brief and take action where needed to protect the integrity of the program.

CMS Should Address Medicare’s Flawed Payment System for DME Infusion Drugs

This review, following up on an earlier recommendation, investigated the impact of the current Part B payment methodology on provider reimbursement rates for two vital drugs: pump administered insulin and milrinone lactate. We found that in 2015, Medicare paid suppliers 65 percent less than their cost for pump-administered insulin, which hindered beneficiary access to the drug. Using the same reimbursement methodology, Medicare paid suppliers of milrinone lactate, an infusion drug used to treat congestive heart failure, 20 times the drug’s cost, thereby creating incentives for overutilization and improper billing. Therefore, OIG continued to recommend that CMS take action to ensure that payment amounts for infusion drugs more accurately reflect provider acquisition costs.

Conclusion
As written in a January 2017 article in Life Science Compliance Update, it is too soon to tell the effect the Trump Administration will have on the pharmaceutical industry. This report and the recommendations contained therein highlight some of the focuses of OIG, but those have the propensity to change, depending on the incoming Administration. 

November 14, 2016

OIG Releases FY 2017 Work Plan

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The United States Health and Human Services (HHS) Office of Inspector General (OIG) recently released its 2017 Work Plan, which summarizes new and ongoing reviews and activities that OIG plans to pursue with respect to HHS programs and operations during the current fiscal year (and beyond). The Work Plan is updated throughout the year, and this edition describes OIG audits and evaluations that are either currently underway or planned, as well as certain legal and investigative initiatives that are continuing. The Work Plan also notes items that have been completed, postponed, or canceled, and includes new items that have been started or planned since April 2016.

Some of the projects that are described in the Work Plan are statutorily required, such as the audit of the Department’s financial statements (mandated by the Government Management Reform Act).

Additionally, OIG does not provide additional details on jobs to be undertaken or information on the status of jobs contained in its Work Plan. For example, while estimated issue dates are included in the Work Plan, OIG will not provide revised estimates, nor will it provide current status updates.

Open Payments

The Work Plan notes that the Physician Payments Sunshine Act (PPSA) requires that manufacturers disclose payments made to physicians and teaching hospitals to CMS. Manufacturers and group purchasing organizations (GPOs) must also report ownership and investment interests held by physicians. OIG plans to analyze 2015 data extracted from the Open Payments website to determine the number and nature of financial interests.

OIG will also determine how much Medicare paid for drugs and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) ordered by physicians who had financial relationships with manufacturers and GPOs. OIG plans to determine the volume and total dollar amount associated with drugs and DMEPOS ordered by these physicians in Medicare Parts B and D for 2015. The expected issue date of a “Data Brief on Financial Interests Reported Under the Open Payments Program” is FY 2017.

Skilled Nursing Facility Reimbursements

Another area of focus will be skilled nursing facility (SNF) reimbursements, with a special focus on therapy documentation. According to the report, “Previous OIG work found that SNFs are billing for higher levels of therapy than were provided or were reasonable or necessary. We will review the documentation at selected SNFs to determine if it meets the requirements for each particular resource utilization group.”

OIG also noted it plans to conduct reviews into how state agencies conduct nursing home complaint investigations, whether incidents of abuse and neglect at SNFs were properly reported, and the outcomes of the National Background Check program for long-term care employees.

Protecting Access to Medicare Act of 2014 (PAMA)

In the report, OIG states that it will conduct a review of Medicare payments for certain clinical diagnostic laboratory tests, as mandated under Section 216 of PAMA. OIG will perform the required annual analysis of the top twenty-five laboratory tests by Medicare payments and analyze the implementation and effect of the new payment system. OIG will also analyze Medicare payments for clinical diagnostic laboratory tests performed in 2016 and monitor CMS’ implementation of the new Medicare payment system for these tests.


This work continues to build upon previous analyses performed by CMS of Medicare Part B laboratory test payments in 2014 and 2015 and our review of CMS’ progress toward implementing the new Medicare payment system.

Conclusion

These three topics are just a small sample of what is covered under the OIG 2017 Work Plan. We encourage pharmaceutical and medical device companies, clinical laboratories and other healthcare entities to review the Work Plan in full to determine areas of government focus. The Work Plan can serve as a useful resource for companies planning and prioritizing compliance activities for the upcoming year, including training, auditing, and monitoring. Other reports issued by the OIG after a review can also be a valuable resource regarding the OIG’s current analysis of industry activities.

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