Life Science Compliance Update

November 14, 2017

Changes to 340B Program Reduces Hospital Reimbursement for Pharmaceutical Products by 28.5%


Recently, the Centers for Medicare & Medicaid Services (CMS) issued the Calendar Year (CY) 2018 Hospital Outpatient Prospective Payment System (OPPS) and Ambulatory Surgical Center (ASC) Payment System final rule with comment period (CMS-1678-FC), which includes updates to the 2018 rates and quality provisions, and other policy changes. CMS adopted many policies that will support care delivery; reduce burdens for health care providers, especially in rural areas; lower beneficiary out of pocket drug costs for certain drugs; enhance the patient-doctor relationship; and promote flexibility in healthcare. This final rule puts forth a change to the reimbursement rate for Part B medicines purchased by 340B hospitals.

OPPS will adjust payment for drugs purchased through the 340B program to the average sales price (ASP) minus 22.5%, a change from the current rate of ASP plus 6% constituting a 28.5% change of reduced reimbursement for some clinics and health systems. Rural sole community hospitals, certain cancer hospitals, and children’s hospitals will, however, be exempt from the reductions. A provision of the ruling will reduce some administrative burdens that rural providers face.  

Mixed statements have been issued by the healthcare community since the release of this news. A sampling of the responses are included below.

CMS Stance

According to CMS, the rule will help lower the cost of prescription drugs for seniors and other Medicare beneficiaries by reducing the payment rate for certain Medicare Part B drugs purchased through the 340B program. The savings from this will be redistributed equally to hospitals covered under the OPPS. A provision of the OPPS will alleviate some burden rural hospitals face by placing a 2-year moratorium on the direct physician supervision requirements for rural hospitals and critical access hospitals.

Community Oncology Alliance

The Community Oncology Alliance (COA) commended CMS for the reform, saying it is good for both patients and taxpayers and represents an important first step in stopping abuse of the program by certain hospitals.

“COA strongly supports this new policy because it will reduce drug costs for seniors by an estimated $320 million on copayments for drugs in 2018 alone; help to curb outrageous abuse of the 340B program by some large hospitals; and, hopefully, start to reverse the profit incentives that dismantled our nation’s community cancer system,” the statement says.

The reform will also follow COA’s initial recommendation that CMS should allocate funds from the program to support rural hospitals and providers.

Hospital Associations

The nation’s leading hospital associations have joined together to sue CMS over the payment cuts. America’s Essential Hospitals, the American Hospital Association, and the Association of American Medical Colleges said that they believe CMS has overstepped its authority by cutting the drug payments.

“CMS’ decision in today’s rule to cut Medicare payments to hospitals for drugs covered under the 340B program will dramatically threaten access to healthcare for many patients, including uninsured and other vulnerable populations,” Tom Nickels, executive vice president of the American Hospital Association, said in a statement yesterday. “It is not based on sound policy and punishes hospitals and patients for participation in a program outside of CMS’ jurisdiction.”


PhRMA also released on statement on the news,

The announcement from the Administration regarding changes to the Hospital Outpatient Prospective Payment System aims to improve the payment policy for Part B medicines purchased by certain 340B facilities and used by Medicare beneficiaries. There is growing evidence that in certain instances Medicare is vastly over-paying for medicines used at some 340B facilities, and moreover patients are not always seeing any benefit. This rule corrects the overpayment problem, and Medicare patients will also see a reduction in their costs.

There is still more work to be done to fix the 340B program so that patients do in fact benefit and it no longer drives up health care costs. We encourage Congress and the Administration to build on this momentum and continue to push for changes to the program.

According to PhRMA, there is growing evidence that the 340B program is structured in a way that benefits hospitals at the expense of patients. With that in mind, the group created a new resource that outlines flaws with the 340B program and suggested reform.

The changes to the 340B program will begin on January 1, 2018.

November 13, 2017

Accountable Care Organization Performance Results


2016 was the fifth performance year for the Medicare Shared Savings Program (MSSP). 2016 brought $652 million in savings to Medicare via Accountable Care Organizations, according to the Health Care Transformation Task Force.

The Shared Savings Program offers providers and suppliers (e.g., physicians, hospitals, and others involved in patient care) an opportunity to create a new type of health care entity, an Accountable Care Organization (ACO). An ACO agrees to be held accountable for the quality, cost, and experience of care of an assigned Medicare fee-for-service (FFS) beneficiary population. The Shared Savings Program has different tracks that allow ACOs to select an arrangement that makes the most sense for their organization.

Roughly one-third of MSSP ACOs generated savings in 2016, according to CMS data. In terms of quality, 330 of the 428 ACOs subject to pay-for-performance measures earned an average quality score of 94 percent. Ninety-eight of the ACOs garnered a 100 percent quality score. Overall, the average performance score improved by more than 10 percent across five measures: screening for fall risk, depression screening and follow-up, high blood pressure screening and follow-up, hemoglobin checks for diabetic patients, and diabetes eye exams.

ACOs that have been in MSSP since 2012 and 2013 accounted for $503 million in gross savings. The newer the participants, the less money they saved: ACOs that entered in 2014 saved $94 million, 2015 entrants saved $50 million and the 100 ACOs that entered MSSP in 2016 saved only $6 million.

The 2012 and 2013 ACOs received $351 million in shared savings payments, leaving the remaining $151 million as savings for CMS. That’s in contrast to 2015, when CMS spent $217 million more in awarding bonuses to ACOs in both the MSSP and Pioneer ACO programs than what participants were projected to have saved.

“These results demonstrate the promise of new models of care delivery and financing for improving patient outcomes and reducing spending,” stated David Lansky, Health Care Transformation Task Force Chair. “This provides further evidence that we need more, not less, public and private sector investigation of alternatives to traditional fee-for-service medicine.”

MSSP ACOs in the program for at least three years also decreased costs by an average of $10.1 million per organization in 2015. In comparison, MSSP ACOs just starting the program only cut costs by an average of $5.4 million per organization.

The top ten ACOs with the highest shared savings in 2016 were:

  1. Palm Beach ACO (Palm Springs, Fla.): $30,540,508
    2. Advocate Physician Partners Accountable Care (Rolling Meadows, Ill.): $28,924,272
    3. Hackensack (N.J.) Alliance ACO: $22,835,022
    4. USMM Accountable Care Partners (Troy, Mich.): $21,195,787
    5. AMITA Health ACO (Arlington Heights, Ill.): $20,489,157
    6. Cleveland Clinic Medicare ACO: $19,914,592
    7. Millennium ACO (Fort Myers, Fla.): $18,530,680
    8. UT Southwestern Accountable Care Network (Dallas): $17,464,034
    9. Memorial Hermann ACO (Houston): $14,025,212
    10. Orange Accountable Care of South Florida (Miami Lakes, Fla.): $13,033,788

November 10, 2017

Insight into 21st Century Cures Implementation


According to a proposal of how 21st Century Cure funds will be used (subject to the congressional appropriations process), FDA released a document explaining the bulk would be dedicated to sections of the law on “Advancing New Drug Therapies” and “Patient Access to Therapies and Information.” Other funds will go to modernizing clinical trial designs, patient-focused drug development, medical device innovation and improving scientific expertise and outreach at FDA.

Cures Implementation

FDA proposes to allocate the authorized Innovation Account amounts to the activities that represent the best opportunity to achieve the goals of the Cures Act in conjunction with other funding sources subject to their availability. FDA’s proposed allocation does not spread the Innovation Account funds across all eligible sections. Some eligible provisions may assist FDA in carrying out its responsibilities but do not require any specific investment in new or expanded program activities. Others complement projects and commitments under current or anticipated reauthorized user fee programs and could be funded in part through some user fee resources subject to the availability of funds. Still others dovetail with on-going work supported by budget authority.

Charge to FDA Science Board

In the Cures Act, Congress requested “recommendations from the Science Board to the Food and Drug Administration, on the proposed allocation of funds … and on the contents of the proposed work plan.”

The Cures Act requires FDA to allocate Innovation Account funds for identified eligible activities. The resulting proposals were evaluated and prioritized according to the following criteria:

  • Provisions that present the greatest opportunity for FDA to foster innovation and integrate advances in biological sciences, engineering, information technology, and data science, to most directly improve the Agency’s product review tools and processes.
  • Provisions that address the greatest need for scientific modernization.
  • Provisions that have the most immediate impact on delivery of services to patients, the medical product industry, academia, and health professionals.
  • Provisions for which other funds may not be available.

Patient-Focused Drug Development

The Cures Act emphasizes the need for patient engagement and directs the Agency to include the patient’s voice in drug development and review. Section 3001 requires FDA to make public a brief statement regarding whether and how patient experience data and related information that was submitted, if any, was used in the review of a drug or biologic marketing application. Section 3002 requires FDA to issue one or more guidances for the purposes of drug development and regulatory decision making. Guidance should address such issues as acceptable methodological approaches for collecting, measuring, and analyzing patient experience data. Section 3004 directs FDA to issue reports at specified intervals assessing the use of patient experience data in regulatory decision making, especially focusing on the review of patient experience data and information on patient-focused drug development tools as part of approved applications.

In implementing these provisions FDA aims to facilitate a more systematic gathering and use of patients’ perspectives on their disease/condition and available therapies to treat their disease/condition. The work plan proposes to use Innovation Account funds to implement certain elements of these provisions.

Advancing New Drug Therapies

FDA must develop a new regulatory process under the Cures Act to qualify drug development tools (DDTs) in order to facilitate timely and consistent review of DDT qualification submissions and publicly disseminate broader information about DDTs under review and following a qualification determination. Once a DDT is qualified under this new process, any sponsor may use it for its qualified context of use to support an application for approval or licensure of a drug or to support the investigational use of a drug. Expert FDA staff and contractors will help develop evidentiary criteria needed to support qualification, develop regulatory informatics platforms, and integrate new review processes. This must occur quickly to ensure FDA can meet its obligations under this section within statutory timeframes, including developing and issuing guidance outlining procedures for the qualification process, holding public meetings, and posting public reports. Once fully implemented, this section has the potential to transform drug development and review.

Other Sections

FDA’s plan addresses several other important areas as mandated by the Cures legislation. First, under Modern Trial Design and Evidence Development, FDA notes Section 3021: Novel Clinical Trial Designs. This section directs FDA to assist sponsors in incorporating complex adaptive and other novel trial designs into proposed clinical protocols and applications for new drugs and biological products in order to facilitate more efficient product development. To accomplish this FDA must hold a public meeting months after the date of enactment of the Cures Act and issue guidance on, among other things, how to use such novel trial designs, how they can help to satisfy the substantial evidence standard, and recommended analysis methodologies.

Regarding Patient Access to Therapies and Information, Section 3036 is interesting: Standards for Regenerative Medicine and Regenerative Advance Therapies. This section requires the establishment of standards and consensus definitions to support the development and review of regenerative medicine therapies, including with respect to the manufacturing processes and controls of such products. In order to meet the requirements of the Cures Act, CBER will use innovation funds to facilitate a public process with the National Institute of Standards and Technology and other stakeholders to coordinate and prioritize the development of standards and consensus definitions of terms. Such standards and terms will help foster the development, evaluation, and review of regenerative medicine therapies, including with respect to the manufacturing processes and controls for such products. Innovation funds will support expert FDA staff engaged in this work, as well as help facilitate long-term engagement with stakeholders on regenerative medicine standards development and consensus definitions through the creation of a public-private partnership.

Regarding Medical Device Innovation plans, FDA writes about Section 3051: Breakthrough Devices. This section writes into law and expands FDA’s Expedited Access Pathway program, which allows for expedited development and review of devices that represent breakthrough technologies for life threatening or irreversibly debilitating diseases/conditions. The Breakthrough Devices program requires frequent and extensive interactions between device companies and FDA staff during the device development phase, as well as priority review for breakthrough medical devices. FDA estimates that this program will grow at a rate as high as 20 percent per year over the next 10 years. FDA expert staff will accommodate the increased workload and will need to acquire the IT systems needed to fully implement the program. The program will accelerate patient access to these lifesaving therapies.

FDA aims in another subsection of the document to outline its work to improve scientific expertise and outreach. Section 3073 relates to Intercenter Institutes. This section requires FDA to establish one or more intercenter institute(s) to help develop and implement processes for coordination of activities in major disease areas between the drug, biologics, and device centers. FDA has established the Oncology Center of Excellence (OCE) to create a unified policy approach and clinical review for all drugs, biologics, and devices used in medical oncology. It will leverage the combined talents and skills of all FDA regulatory scientists and reviewers who work in medical oncology product review.

OCE will also serve as a single point of contact for external stakeholders for our work in cancer, including professional societies and patient advocacy groups. FDA medical and professional staff will coordinate review of oncology product applications across the medical product centers, policy development, and collaboration with external stakeholders. This Center of Excellence will help expedite the development of oncology and hematology medical products and support an integrated approach in the clinical evaluation of drugs, biologics, and devices for the treatment of cancer.


The proposed FDA work plan describes activities that are intended to successfully achieve the Cures Act requirements in areas that are a high priority for any Innovation Account funding that is appropriated. Together with other funding sources, as available, FDA’s proposed Innovation Account funding allocations can help chart a path for advancing medical product development and reviews and help bring innovative new therapies and products to patients and health care providers in a more timely and efficient manner.


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