Life Science Compliance Update

July 12, 2017

Prices Testifies On Proposed Budget Cuts

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We continue to follow the President’s budgets with potential cuts to the NIH and possible legislation to address drug prices. With that in mind, HHS Secretary Tom Price’s testimony in front of a House appropriations subcommittee is particularly relevant. The head of HHS reiterated his support for the President’s cuts to NIH and noted that he is working on a plan to lower the cost of drugs in the United States. Chairman Tom Cole’s (R-Okla.) remarks before Price’s testimony can be found here.

Price’s testimony

The Secretary faced a number of questions regarding the promotion of Obamacare plans along with drug prices and NIH funding. On the funding of the NIH, Price argued the agency could be trimmed by cutting “inefficiencies,” such as overhead payments. As has been reported, “About 30% of the grant money that goes out is used for indirect expenses, which as you know means that money goes for something other than the research that's being done,” Price said. The Trump budget, he explained, is “trying to … be the first step in this process” of getting “a bigger bang for our buck.”

In 2016, NIH paid $6.4 billion in overhead costs on top of the $16.9 billion in extramural funds to support the direct costs of research projects and other awards. Price’s comments were echoed by Representative Andy Harris (R–MD), who noted that many private foundations limit overhead payments to grantees to 10%, whereas others, such as the American Lung Association, pay nothing. “It’s very interesting that the private sector doesn’t hold these indirect costs to be so valuable as to pay them,” Harris said.

Rep. Tom Cole, who chairs the appropriations subcommittee that oversees HHS, told Price that current levels of proposed cuts to the NIH and CDC are highly unlikely to be supported by Congress. He said NIH and the Centers for Disease Control and Prevention are every bit as important as national defense. "Frankly, you're much more likely to die in a pandemic than you are in a terrorist attack," said Cole, adding: "I'd rather fight Ebola (the deadly virus) in West Africa than in West Dallas."

Regarding drug prices, Regulatory Focus described Price’s reference to President Trump’s planned “bidding” system, although he did not elaborate on Trump’s call to double user feeds in an effort to offset budget cuts to the FDA.

Price also critiqued the structure of the current Medicaid program during the hearing, calling the system "broken" because it focuses too much on funding and not enough on ensuring beneficiaries achieve better health outcomes. It has been previously noted that Price has expressed support in the past for requiring Medicaid beneficiaries to pay premiums in exchange for program participation and lowering those premiums depending on beneficiaries meeting healthy behavior requirements, such as getting physicals.

May 30, 2017

Medicare Backlog Must Be Fixed

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Since 2014, the American Hospital Association (AHA) has been in court with HHS regarding HHS’ failure to meet statutorily-imposed deadlines for Medicare administrative appeals. And, as has been reported, the Medicare appeals backlog has reached its all-time worst. If you’re a healthcare provider or supplier waiting for a hearing before an Administrative Law Judge (ALJ) at the Office of Medicare Hearings and Appeals (OMHA) – the third level of the Medicare appeals process – you’ve likely been waiting years to have your case heard or, at least, you’re expecting such a wait.

The suit centered on the Recovery Audit Contractor program. The RAC program's mission is to correct improper Medicare payments by identifying and collecting over- and underpayments. Healthcare providers have the option of appealing recovery auditors' findings, and HHS' Office of Medicare Hearings and Appeals administers hearings concerning denied Medicare claims. Claim denials that reach the third level (of five possible levels) of the appeals process are brought before administrative law judges, who issue decisions regarding coverage determinations.

Court order

Recently, a court determined that there were equitable grounds to issue a writ of mandamus. The Court reasoned that even with certain good faith efforts made by HHS to reduce the backlog (such as a Proposed Rule issued this past summer), the appeals backlog was “still unacceptably high.” In its decision, the Court found that HHS did not “point to any categorically new administrative actions” and continues “to promise the elimination of the backlog only ‘with legislative action’ — a significant caveat.”

The Court ordered HHS to achieve the following reduction thresholds, as proposed by AHA, from the current backlog of cases pending at the ALJ level:

  • 30% by December 31, 2017;
  • 60% by December 31, 2018;
  • 90% by December 31, 2019; and
  • 100% by December 31, 2020

In the ruling, U.S. District Court Judge James Boasberg ordered HHS to eliminate the backlog in accordance with the timeline AHA outlined in its motion for summary judgment. Boasberg also ordered HHS to file progress reports every 90 days on its efforts to reduce the backlog.

AHA Statement

On December 6, 2016, the AHA released a statement from its general counsel: AHA General Counsel Melinda Hatton said the decision “is a victory for hospitals that continue to have billions of dollars in Medicare reimbursement tied up in a heavily backlogged appeals system. To meet the court-ordered backlog reductions, we trust that HHS will implement real reforms critical to resolving the backlog, including fundamental reforms of the Recovery Audit Contractor program.”

Good news for providers

As cited by the Advisory Board, William Dombi, VP for law at the National Association for Home Care and Hospice, said the "ruling may finally spur concrete action by [CMS] to reduce what are wholly unreasonable delays in providing appeal rights to Medicare beneficiaries and providers of health services." However, HHS has said even with additional resources, it likely will not be able to eliminate the backlog before 2021, so we will continue to monitor this story.

January 30, 2017

Senate Finance Committee Holds Hearing on Dr. Price to Lead Department of Health and Human Services

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On Tuesday, January 24, 2017, the Senate Committee on Finance held a hearing to consider the nomination of Representative Thomas Price, M.D., to be Secretary of the Department of Health and Human Services (HHS). The hearing was the last for Dr. Price before the entire Committee holds its formal vote on confirmation and provided key insights to Representative Price’s views on healthcare reform, from the Affordable Care Act (ACA) repeal and replace to Medicare and Medicaid reform.

The hearing somewhat highlighted the division between the political parties, with Democrats focusing on concerns surrounding Representative Price’s healthcare investments, his previous statements on health policy, and his legislative record combating the ACA. On the other hand, Republican support for Representative Price remained strong, and he seems to be on track for confirmation some time over the next couple of weeks.

Opening Remarks

In his opening remarks, Senate Finance Committee Chairman Orrin Hatch offered glowing remarks on Representative Price’s qualifications to lead HHS, noting that he has the “experience and qualifications necessary to effectively lead this large and diverse set of agencies.” Chairman Hatch noted numerous stakeholder organizations that have “enthusiastically” supported Price’s nomination, including the American Medical Association, the American Hospital Association, and the Healthcare Leadership Council.

Senator Hatch also criticized Senate Democrats for their “grossly exaggerated attacks” on Representative Price’s record, attempting to derail his nomination. “I have never seen a party in the Senate – from its leaders on down – publicly commit to not only opposing virtually every nomination, but to attacking and maligning virtually every single nominee,” noted Chairman Hatch.

Senate Finance Committee Ranking Member Ron Wyden voiced concerns surrounding Representative Price’s nomination for HHS Secretary. Senator Wyden pointed to the Trump Administration’s promises not to cut Medicare and Medicaid, noting that the President’s positions are in contrast with Representative Price’s policy positions.

Senator Wyden labeled Representative Price’s ACA replacement plan as “repeal and run,” stating that if it became law, “18 million Americans would lose their health care plans in less than two years.” Senator Wyden expressed concern the future of women’s health and coverage for individuals with pre-existing conditions if Representative Price’s replacement bill were enacted.

In his opening remarks, Representative Price spoke fondly about his time as a physician and legislator in the Georgia State Assembly, highlighting his experience in strengthening children’s healthcare throughout his tenure. Representative Price also complimented HHS’ “incredible work” in the areas of drug treatment research, as well as food safety. Representative Price commented on his frustrations with the current healthcare system, noting that the system has lost focus on its top priority: the patient. He emphasized a “bipartisan, team-driven” policy when it comes to reforming healthcare, calling for a “patient first” system that strengthens medical innovation, accessibility, and choice.

Discussion and Commentary

Affordable Care Act

Senate Democrats harped on several different issues related to repeal and replace of the ACA, especially focused on the ACA’s individual mandate and the ban on denying coverage based on pre-existing conditions. Representative Price strongly stated that Republicans will not “abandon” people with pre-existing conditions as the Republican-led Congress makes plans to repeal and replace the law. Additionally, Representative Price voiced support for extending funding for the Children’s Health Insurance Program (CHIP).

Representative Price noted that he would not commit to utilizing the executive order issued by President Trump to eliminate the ACA individual mandate, nor did he promise that no one would lose coverage because of the executive order. “I’m humble enough to appreciate and understand that I don’t have all the answers,” Representative Price said, stating that “the people in the department have incredible knowledge and expertise.” Additionally, Representative Price did not comment on whether HHS would wait for Congress to prepare a replacement plan before taking steps to dismantle the ACA, noting that he would promise to put “patients at the center of healthcare.”

Sunshine Act

During the hearing, Senator Chuck Grassley went into detail about the Sunshine Act that he worked hard to implement. Senator Grassley noted that several years back, he worked hard to get the Patient Physician Sunshine Act passed in Congress, and that it took the prior Administration several years to get the Act in full swing, working the way it was intended. Senator Grassley questioned Dr. Price as to whether he would help support an expansion of the Sunshine Act, to include nurse practitioners and others, because he feels that the increased transparency is truly a good thing for patients and the healthcare industry as a whole.

When Dr. Price responded, he did not give a yes or no answer, instead opting to note that he does believe transparency is vital in so many different ways in health care, including drug pricing and industry interactions, so that patients can understand what is going on in the health care system.

Medicare and Medicaid Reform

Throughout Representative Price’s confirmation process, Democrats have emphasized that his position on Medicare and Medicaid is at odds with President Trump’s promise not to cut either program.  In the Senate hearing, Representative Price stated that Medicare must be reformed if the government wishes to keep its promise to seniors, while avoiding questions surrounding his support of reforming Medicaid into a block grant program, only commenting that he is in favor of turning Medicaid into a system “that responds to patients, not government.”

Representative Price indicated some support for the Center for Medicare and Medicaid Innovation (CMMI), calling it “vehicle that might help” incentivize innovation. At the same time, however, he also argued that the directives and programs from CMMI should not be mandatory, and that the center’s work had “gotten a bit off track” during the previous Administration.

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