Life Science Compliance Update

February 24, 2017

Are the Safe Harbors Still Safe? - OIG Issues Final Rule


The Department of Health and Human Services Office of Inspector General published a final rule, after considering various comments from stakeholders, about safe harbor provisions of the Anti-Kickback statute. This article goes into detail of what the changes were, and how they affect various health care providers.

On December 7, 2016, the Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) published a final rule, revising safe harbors under the Anti-Kickback Statute (“AKS”). At the same time, the OIG revised the definition of “remuneration” under the Civil Monetary Penalty (“CMP”) rules regarding beneficiary inducements. As has always been the case, the safe harbor revisions will prevent certain initiatives of doctors, hospitals, and pharmacies from being treated as fraudulent kickbacks by Medicare and Medicaid. The final rule took effect January 6, 2017.

Read the full article in the February 2017 issue of Life Science Compliance Update

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January 09, 2017

OIG Report Addresses High Federal Spending on Catastrophic Part D Coverage


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.


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


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.

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. 


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