Life Science Compliance Update

April 14, 2017

Grassley Seeks Answers from EpiPen Competitor


In early March 2017, Senator Chuck Grassley sent a letter to the manufacturer of Auvi-Q (an epinephrine injector similar to EpiPen), requesting an explanation of its pricing, including which entities within the health care system pay the cited list price of $4,500 for a two-pack when consumers without insurance pay $360 for the product.

Kaléo said that as a part of its Auvi-Q AffordAbility program, patients with commercial insurance will pay nothing out-of-pocket. For patients without insurance and a household income of less than $100,000, Auvi-Q will be made available free of charge, according to the company.

Each prescription includes 2 auto-injectors and a training device. The Auvi-Q features voice instructions to guide users through the delivery process and an automatic retractable needle system, which Kaléo touts as a 1st for epinephrine auto-injectors.

“We met with patients and physicians and listened to the very real challenges in the current healthcare environment with obtaining access to affordable medicines,” president & CEO Spencer Williamson said in prepared remarks.  “As a result, starting Feb. 14, for more than 200 million Americans with commercial insurance, including those with high-deductible plans, the out-of-pocket cost for Auvi-q will be $0.”

“We know how important it is that severely allergic patients have an epinephrine auto-injector that can be with them at all times and used correctly, even without training, during a panic-stricken allergic emergency,” VP of product strategy Dr. Eric Edwards added. “We are excited to make Auvi-q, an epinephrine auto-injector with innovative features, available for millions of patients living with severe, life-threatening allergies.”

“Kaléo has offered various patient support programs in an effort to ensure that some patients pay effectively nothing for the Auvi-Q,” Grassley wrote to Spencer Williamson, president and chief executive officer of Kaléo Pharmaceuticals.  “However, your pricing structure may simply shift the burden and cost to another entity within the health care system. With respect to your choice of price, a number of insurance companies and pharmacy benefit managers do not support the strategy and have stated they will not be adding the Auvi-Q to their list of covered medications.”

Grassley asked a series of questions to understand the pricing decision-making, including:

  • Why the company is charging $4,500 for a two pack, and requesting an explanation of their decision-making process in terms of charging that price and whether patient accessibility and research and development were considerations;
  • How much Kaléo spent on R&D for the drug;
  • Whether any entity in the health care system will have to pay $4,500, and if so, which entity; and
  • How the pricing structure will result in reduced prices to the consumer.

Reminiscent of EpiPen

Grassley began looking at EpiPen’s pricing last year after Iowans raised concern to him about high prices for the product. The EpiPen maker, Mylan, gave an incomplete response to his inquiry. Grassley continues to the press the federal government on the misclassification of EpiPen under the Medicaid Drug Rebate Program, which resulted in overcharges of potentially hundreds of millions of dollars to states and taxpayers. President Trump’s nominee to lead the Centers for Medicare and Medicaid Services pledged to produce records on the misclassification. Grassley requested those records from the Obama Administration, which claimed it took action on the problem, to no avail. 

June 01, 2015

Senator Grassley Sets Sights On Medicare Advantage; Sends Letters To CMS and DOJ Asking For Their Strategies To Mitigate "Risk Score" Fraud


Senator Charles Grassley (R-IA), the co-author of the Physician Payments Sunshine Act, sent letters last week to the Centers for Medicare and Medicaid Services (CMS) and the Department of Justice (DOJ) concerning alleged Medicare Advantage fraud.

Update: Senator Claire McCaskill, the top ranking Democrat on the Senate Special Commission on Aging, also sent a letter to CMS asking what steps the government is taking to combat alleged Medicare Advantage fraud and abuse. 


Medicare Advantage plans are run through approved private insurance companies, and offer an alternative to traditional Medicare for seniors. CMS pays Aetna, Cigna, United HealthCare, etc., a fee per month, per patient, based on a formula known as a “risk score,” which attempts to reflect patient health. The government provides more funds to Medicare Advantage plans for patients with higher risk scores.

Recently, however, there has been a lot of scrutiny into how plans land on a given risk score. There have been reports that a number of whistleblower lawsuits have been cropping up against plans, alleging that they have been fraudulently inflating their risk scores. See Modern Healthcare’s breakdown of two recent whistleblower cases filed under the False Claims Act.

"With fraudulently inflated risk scores potentially costing taxpayers billions of dollars every year and resulting in less money in the Medicare Trust Funds for our seniors, this is an issue that must be investigated further," McCaskill wrote regarding these suits.

The Center for Public Integrity has been spotlighting Medicare Advantage for a while now, and has even developed a tool to show how much more money plans get based on different diagnoses. For example, if a doctor documents that a patient is drug or alcohol dependent, the government pays the plan $2,400 extra for the added risk and associated anticipated expense.

A Public Integrity article entitled "Home is where the money is for Medicare Advantage plans," states: "Health plans can profit because Medicare pays them higher rates for sicker patients using a billing formula known as a 'risk score.' So when a home visit unearths a medical condition, as it often does, health plans may be able to raise a person’s risk score and collect thousands of dollars in added Medicare revenue over a year — even if they don’t incur any added expenses caring for that person." The article notes that "Medicare made nearly $70 billion in “improper” payments to Medicare Advantage plans from 2008 through 2013, mostly overbillings based on inflated risk scores, according to government estimates."

In light of a number of these reports, Sen. Grassley penned a letter to DOJ and CMS asking about their approach to fighting Medicare Advantage fraud. 

According to news reports, there is an increasing number of lawsuits against insurance companies for potential Medicare Advantage fraud. Some insurance companies that offer Medicare Advantage are allegedly engaging in billing abuse by altering patient records in order to claim patients are sicker than they actually are. Medicare Advantage uses risk scores to determine how much insurance companies are reimbursed with higher rates for sicker patients. News reports indicate that some insurance companies are wrongfully claiming sicker patients, leading to inflated risk scores and reimbursements. Reportedly, the Department of Justice (DOJ) is investigating this issue.

Senator Grassley requested that CMS provide answers to the following four questions:

  1. What steps has CMS taken, and is currently taking, to ensure that insurance companies are not fraudulently altering risk scores? Please provide a detailed explanation.

  2. Is CMS working in conjunction with DOJ to investigate risk score fraud? Please explain the relationship. If not, why not?

  3. Since the inception of Medicare Advantage, how many risk score audits has CMS conducted each year? For each year and each audit, what was the value of the overcharge? How much was recovered via settlement or other measures?

  4. How much money per year is allocated by CMS for auditing Medicare Advantage fraud, waste and abuse?

Senator Grassley also requested that the DOJ provide answers to the following three questions:

  1. What steps has DOJ taken, and is currently taking, to ensure that insurance companies are not fraudulently altering risk scores? Please provide a detailed explanation.

  2. Is DOJ working in conjunction with CMS to investigate risk score fraud? Please explain the relationship. If not, why not?

  3. In the past 5 years, how many Medicare Advantage risk score fraud investigations has DOJ conducted? Of the investigations, how many resulted in criminal and/or civil sanction?

Grassley's office requested responses from CMS and DOJ by June 3, 2015.


July 11, 2013

Senator Grassley Asks 50 States for Coordination Procedures with CMS for Sanctioned Physicians

Senator Charles Grassley (R-IA), the co-author of the Sunshine Act, recently sent letters to all 50 states this week asking how they sanction doctors in their state health programs and whether they alert the federal government when they do. The letters cited examples from ProPublica's reporting on its new Prescriber Checkup campaign, which identified doctors who had been kicked out of state Medicaid programs, but were still able to continue prescribing drugs to patients under Medicare.

Grassley expressed his concern that States were not communicating with Medicare or CMS about state or Medicaid related violations. As a result, patients may be exposed to unsafe medical treatment and millions of tax payer dollars may be wasted on fraudulent, abusive, and unreliable providers.

In his letter, Grassley explained that by statute (citing a recently enacted regulation implementing a new section of the Affordable Care Act), Medicare must terminate any individual physician or entity from its rolls if that provider was terminated under any State's Medicaid program. However, the requirement to terminate only applies if the provider, supplier, or individual was terminated or had their billing privileges revoked "for cause. Accordingly, any Medicaid provider terminated "without cause" will not be mandatorily removed from Medicare.

States have broad discretion in terminating providers and may do so both for and without cause. Unfortunately, this flexibility means that States may bar doctors from State Medicaid programs and state medical boards may even censure providers because of fraudulent activity without reporting that the action was taken "for cause." As a result, a "without cause" termination enables duplicitous and untrustworthy providers to continue to draw from Medicare, wasting tax dollars and putting patients at risk, Grassley wrote.

After citing the various incidents ProPublica found in its initial Prescriber Checkup reporting, Senator Grassley asked that the States submit answers to the following questions by July 15, 2013.

  1. Please provide your definition of both (i) for cause and (ii) without cause termination.
  2. Please provide any factors you consider when determining without cause provider termination over for cause, including how much notice you give the provider
  1. Is termination from Medicare a factor in your termination considerations?
  1. Please provide the ten (10) most recent physicians, including their Medicare provider numbers, who were terminated for cause, as well as the allegations against and detailed reasoning for their termination.
  1. Please provide the ten (10) most recent physicians, including their Medicare provider numbers, who were terminated without cause, as well as the allegations against and detailed reasoning for their termination. Please exclude those physicians who were terminated without cause due to inactivity within the program.
  1. Does the Medicaid program reimburse for prescriptions that are issued by a provider that has been terminated?
  1. Once you have terminated a provider from Medicaid, do you notify the Centers for Medicare and Medicaid Services ("CMS")? If yes:
  1. Please list the last five (5) providers, including Medicare provider numbers, you have transmitted to CMS.
  2. How many providers has CMS terminated from Medicare due to your notifications? Please list each of these providers, including their Medicare provider number.
  3. Please describe the manner in which you notify CMS.
  4. What information do you include in your notification?

If not, why not?


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