Life Science Compliance Update

April 22, 2016

American College of Physicians Calls on Federal Government to Regulate Prescription Drug Prices

Late last year, we reported on the AMA's House of Delegates vote to adopt several recommendations in support of regulating medication pricing, including a recommendation that the AMA encourage the Federal Trade Commission to limit anticompetitive behavior by companies attempting to reduce competition from generic manufacturers through manipulation of patent protections and abuse of regulatory exclusivity incentives. Now, the American College of Physicians (ACP) has come out with some of their own suggestions in a paper published in the Annals of Internal Medicine.

ACP paper

The ACP's Health and Public Policy Committee's paper urges the federal government to tackle rising prices, noting that the United States is the only member of the Organization for Economic Cooperation and Development that does not impose government regulations on drug pricing. Other recommendations include a call for the federal government to allow Medicare to negotiate prescription drug prices with manufacturers, the re-import prescription drugs from other countries, a requirement that manufacturers disclose actual research and production costs for drug development and manufacturing, and requirement that manufacturers disclose the prices of drugs that were developed using research funded by the federal government. The American College of Physicians says it plans to bring its messages about drug prices to Washington in May, when its members will call on legislators in Congress to press for action.

Industry reaction

Industry is less than pleased with the paper. Biotechnology Innovation Organization's President and CEO Jim Greenwood issued a statement slamming several parts of the ACP report.

"Many of the proposals released by the American College of Physicians would significantly hinder the ability of emerging biotechnology companies to develop the new cures and therapies that patients need to live longer, more productive lives. Several provisions of this plan, including the reimportation of prescription drugs from other countries and allowing HHS to negotiate prices in Medicare Part D, have been proposed many times in the past, and have always been rebuffed on a bipartisan basis because of the widely recognized fact that they are simply bad ideas for patients, or would produce scant savings. The Congressional Budget Office has estimated that allowing HHS to negotiate prices for drug covered under Medicare Part D, as recommended by the ACP, would produce a 'negligible effect.' On reimportation, the College itself acknowledge the 'various safety concerns' posed by the proposal."

Greenwood did try to find some common ground: "However, we share the College's concern with the rising use of specialty tier cost-sharing, in which patients must pay a relatively high percentage of their drug costs rather than a flat co-payment. The College rightly calls upon payers to ensure that patient cost sharing for specialty drugs do not create a 'substantial economic barrier' to patients obtaining needed medicines."

The Coalition for Healthcare Communication's Executive Director John Kamp echoed Greenwood's criticism of ACP when it came to the paper's position on direct-to-consumer (DTC) drug advertising. According to the ACP's report, "the practice of DTC advertising for prescription drugs is concerning," and that the group of 143,000 physicians "believes that DTC is inappropriate because it may undermine the patient-physician relationship and foster confusion." The paper argues that if the government will not ban DTC advertising, as the AMA recently called for, then there should be "broad efforts by federal regulators to ensure that information about a drug's effectiveness and safety, and about alternative treatments, is clearly disclosed to patients".

"What the ACP and other entities do not seem to recognize is that in numerous ways, DTC ads actually help to improve the patient-physician relationship because the ads often get patients talking to their doctors about conditions – many of which are underdiagnosed and undertreated – that they have seen or heard about in DTC ads," said Kamp. "And, to the ACP's point about both the effectiveness and safety of treatments and alternative treatments," Kamp continued, "the duty to interpret and relay that information has and will continue to fall on the physician, who ultimately is the individual writing prescriptions for patients."

The ACP also states that the "many of the largest pharmaceutical companies are spending more on marketing and administration than they are on research and development." However, the Pharmaceutical Research and Manufacturers of America (PhRMA) counters that the biopharmaceutical sector is the single largest funder of business R&D in the United States, and that biopharmaceutical companies invested more than 12 times the amount of R&D per employee than manufacturing industries overall between 2000 and 2010. According to PhRMA, economists also believe that biopharmaceutical healthcare communication costs are overstated, because they are grouped with other costs, such as pension costs and office furniture and supply costs, which are not directly related to marketing.

April 04, 2016

Courts to Finally Take Up CMS Recovery Audit Contractors Appeals Backlog

According to HHS, a backlog exists of more than 800,000 appeals from health care providers challenging denied Medicare claims, most of them generated by the program's Recovery Audit Contractors (RACs). That is about 10 times as many as the program can adjudicate in a year at its current funding levels. However, a federal appeals court has given new life to a lawsuit that seeks to force the government to complete the appeals more quickly. The court's ruling sends the case back to the district court for reconsideration. This moved was quickly celebrated by the American Hospital Association.

We have previously reported on problems related to RACs, including an OIG report suggesting CMS may not be catching sufficient numbers of overpaid claims. The report found problems with CMS' action--or inaction--regarding improper payment vulnerabilities and referrals for potential fraud, as well as with RAC performance evaluations. While CMS identified 46 vulnerabilities that resulted in improper payments, it only took corrective action to address 28 of them and failed to evaluate the effectiveness of these actions. The OIG pointed out that by not evaluating corrective actions CMS could not determine if they effectively reduce improper payments.

What are RACs?

Congress authorized the program in the Medicare Modernization Act of 2003 and made permanent in the Tax Relief and Health Care Act of 2006. Its intended goal is to detect and correct improper Medicare payments. Over a billion claims are submitted to Medicare each year and it is estimated 3.9% of the dollars paid do not comply with coverage rules. This has been confirmed by GAO reports and as a result, there has been a renewed interest by the DOJ and the OIG to combat health care fraud and protect Medicare in the process. The RAC program is designed to detect improper payments, both under and overpayments, and corrects errors by collecting money or repaying money depending on the original payment.

Appeals Process

The RAC appeals process mirrors the five-level Medicare claims appeal process through which fee-for-service providers appeal reimbursement decisions. The five levels of appeal include:

1. Redetermination by the Fiscal Intermediary

2. Reconsideration by a Qualified Independent Contractor

3. Administrative Law Judge Hearing

4. Medicare Appeals Council Review

5. Judicial Review in U.S. District Court

If RAC determination appeal requests are not filed within the specified timeframe for the applicable level of appeal, the opportunity to appeal is lost.

AHA Lawsuit

According to FiereceHealthFinance, the American Hospital Association (AHA) filed the suit in 2014 to try and clear a backlog of RAC appeals at the administrative law court level. There were at least 800,000 appeals at that level as of 2014. A lower federal court had dismissed the lawsuit due to lack of jurisdiction, concluding because Congress was working on trying to procure more funding to review claims, it did not yet have the authority to act further. However, the case was recently reinstated by an appeals court.

The AHA notes that in December 2013, with the large backlog of appeals mounting, HHS imposed a two-year moratorium on assigning new appeals of claim denials. The court's opinion observed that the department "has the capacity to process only about 72,000 appeals per year, a far cry from the almost 400,000 appeals it received in fiscal year 2013, or from the more than 800,000 appeals that composed its backlog in July 2014. These figures suggest that at current rates, some already filed claims could take a decade or more to resolve." That administrative logjam delays billions of dollars in Medicare reimbursements to hospitals, the AHA noted.

This was illustrated in 2014 when, as an example, it was reported administrators at Baxter Regional Hospital in Mountain Home, Ark., said it had so much money tied up in endless Medicare appeals that it could not afford to replace the roof over their surgery department or buy new beds for their intensive-care unit. Baxter joined other providers with the AHA in the 2014 lawsuit.

Next steps?

Modern Healthcare reported a number of potential next steps after this ruling. The outlet cited Jessica Gustafson from Health Law Partners, who called the decision a "positive development for hospitals," but did say she would be surprised if the district court mandated HHS to more quickly address the appeals. There is legislation in Congress introduced last year that would make changes to the appeals process and reduce the backlog.

Other suggested possibilities include an added push on Congress to pass the bill, but that court action may be necessary if the political will is not there. Should the lower court force HHS to comply with the statutory timelines, HHS may need to find ways to reduce audits or hire more administrative law judges. The court could also not make an order, or ask HHS to issue status reports on efforts to deal with the backlog.


October 28, 2014

Physician Payments Sunshine Act: Medical Societies Express Strong Support for H.R. 5539 To Exclude Education Materials From Reporting


Last month we wrote about a bipartisan effort in Congress to exempt medical textbooks and journals, as well as indirect payments that pharmaceutical and device manufacturers offer to CME providers, from Sunshine Act reporting requirements. Click here for the text of H.R. 5539. Now, the AMA and dozens of physician organizations representing both national specialty societies and state medical societies have expressed their support of the bill. "H.R. is needed to ensure patients benefit from the most up-to-date and relevant medical knowledge," the letter states.

View the medical societies' letter to Representative Michael Burgess (R-TX), who introduced the bill. Allyson Schwartz (D-PA) co-sponsored. 

Congress outlined 12 specific exclusions from Sunshine Act reporting, including “[e]ducational materials that directly benefit patients or are intended for patient use.” In its interpretation of the statute, CMS concluded that medical textbooks, reprints of peer reviewed scientific clinical journal articles, and abstracts of these articles are not directly beneficial to patients, nor are they intended for patient use. "This conclusion is inconsistent with the statutory language on its face, congressional intent, and the reality of clinical practice where patients benefit directly from improved physician medical knowledge," states the letter.

The American Medical Association and other physician organizations have repeatedly stressed the importance of up-to-date, peer reviewed scientific medical information as the foundation for patient care. "Scientific peer-reviewed journal reprints, supplements, and medical text books have long been considered essential tools for clinicians to remain informed about the latest in medical practice and patient care," the letter states. "Independent, peer reviewed medical textbooks and journal article supplements and reprints represent the gold standard in evidence-based medical knowledge and provide a direct benefit to patients because better informed clinicians render better care to their patients."

Furthermore, the letter states that FDA's reprint guidance underscores the “important public health and policy justification supporting dissemination of truthful and non-misleading medical journal articles and medical or scientific reference publications.” H.R. 5539 clarifies that the Sunshine Act was designed to support the dissemination of this type of educational material.

The letter also addresses the Centers for Medicare and Medicaid Services (CMS) proposal to eliminate the continuing medical education exemption from the Act. "[This] proposal is inconsistent with the legislative history of the Sunshine Act and will further erode support of independent medical education," the societies note. "There is widespread consensus that the agency’s proposal will harm the dissemination of clinically relevant and critical medical knowledge that improves and enhances patient care. We strongly support the provisions in H.R. 5539 which would clarify that CME that meets the standard for independence must be exempt from Sunshine Act reporting." 

Click here for our article on the outpouring of support in favor of keeping the CME exemption. 


H.R. 5539 revises the Sunshine Act in the following way: 

Transparency Reports and Reporting of Physician Ownership or Investment Interests, Sec. 1128G. [42 U.S.C. 1320a-7h]

(B) Exclusions.—An applicable manufacturer shall not be required to submit information under subsection (a) with respect to the following:

(iii) Educational materials that directly benefit patients or are intended for patient use, including peer-reviewed journals, journal reprints, journal supplements, and medical textbooks;

(xiii) A transfer of anything of value to a covered recipient who is a physician if the thing of value is intended solely for purposes of providing continuing medical education to the physician.



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