Five days and counting until our May 10, 2016 Pharmacy Industry Summit, here in our DC offices.

Following our first panel discussing Drug Pricing Challenges and Opportunities, the second panel, which Theresa is moderating involves a subject near and dear to the heart of many of our clients: The New Wave of Value-Based Pricing and Contracting.  Manufacturers, insurers, PBMs, and health care providers all would like to consider value-based options for pharmaceutical purchases, but may be intimidated by potential legal and regulatory roadblocks.

So we were thrilled when Josh O’Harra, Assistant General Counsel at Lilly, and Jennifer Kowalski, Vice President of Anthem’s Public Policy Institute, agreed to join Theresa to discuss the growing body of value-based pricing benchmark models and how payors and manufacturers are responding to the opportunities and challenges presented by value-based contracting arrangements.

It is not too late to join us and the other Senior Counsel and Policy Executives who are registered to attend the Summit.  Check out the Summit Microsite  and click on the registration tab to complete your registration.  We look forward to seeing you there.

We are thrilled that our inaugural Pharmacy Industry Summit is now less than a week away.  The Summit is next Tuesday May 10th, 2016, here in our DC offices.  Since we started planning for the Summit many months ago, this hottest of topics that we chose to cover, drug pricing, has become even hotter.

The stage for our day will be set by our opening panel: State of The Industry – Drug Pricing Challenges and Opportunities.  The panelists include Andy Cosgrove, VP of Policy for the Pharmaceutical Care Management Association; Matt Eyles, EVP of Policy & Regulatory affairs for America’s Health Insurance Plans; and, Stacie Maas, Senior VP, of Pharmacy Practice and Government Affairs, American Pharmacists Association.  Moderated by Rodney Whitlock, ML Strategies Vice President and former Health Policy Advisor to Senator Grassley, this panel will discuss and consider the root causes of rising drug prices and the myriad of proposed fixes, and try to predict the realities of legislative change.  This panel is sure to spark lively discussion and set the tone for an interesting and thought-provoking day.

Registered attendees for the Summit include Senior Counsel and Policy Executives for insurers, PBMs, drug manufacturers, pharmacies, hospital systems, and other health care providers.  It is not too late to join them.  Please take a look at the full Summit agenda, study the list of participating speakers, and click on the registration bar on the Summit microsite to complete your registration. We look forward to seeing you there.

On April 27, 2016, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule that would put in place key parts of the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA). MACRA impacts a number of laws and government initiatives that have been implemented over the past two decades affecting physician reimbursement, and in doing so, will fundamentally change the way that Medicare reimburses physicians.

The MACRA Proposed Rule contains two key initiatives: Merit-Based Incentive Payment Systems (MIPS), which partially repeals the meaningful use program for electronic health records, and alternative payment models (APMs). In this first of three blogs we discuss the MACRA Proposed Rule generally and provide an overview of MIPS.


Elimination of the Sustainable Growth Rate

One of MACRA’s most notable features is its elimination of the Sustainable Growth Rate (SGR) formula which was introduced in 1997 in an attempt to rein in the skyrocketing costs of physician services. Under the SGR, Medicare payments for physician services were supposed to be adjusted annually based in part on changes in the United States gross domestic product. Over the past several years, application of the SGR formula would have resulted in annual decreases to physician payments were it not for recurring legislative “patches” that implemented temporary delays in the application of the SGR formula.  MACRA permanently repeals the SGR formula and replaces it with modest increases in Medicare physician fees. The additional cost to Medicare resulting from the repeal of the SGR is to be offset in part by the increased reliance on APMs and on the implementation of other cost-saving measures.

The Current Physician Reimbursement System

Physician services furnished to Medicare beneficiaries are generally reimbursed on the basis of the lesser of actual charges or the amount determined under the Medicare Physician Fee Schedule. Currently and through 2018, physician reimbursement under this system depends on the physician’s participation in, and performance under, three separate programs: (1)  the Physician Quality Reporting System (PQRS), under which eligible physicians who do not satisfactorily report required quality measure data are subject to a reduction in their Medicare fees; (2) the Medicare Electronic Health Record (EHR) Incentive Program (also known as the “meaningful use” program), under which physicians who fail to achieve meaningful use of EHR systems will incur a reduction in their Medicare fees and (3) the Value-based Modifier Program, which provides incentive payments to physicians based on the quality of care they furnish compared to their cost of care during a performance period. Continue Reading CMS Releases Proposed Rule for MACRA Implementation – Overview and Merit-Based Incentive Payment Systems (MIPS)

Last month, FDA released three draft guidance documents that are expected to have significant implications for traditional pharmacy-based compounding and the distribution of those drug products.

First, however, a little bit of historical context might be helpful.  As previously reported here and widely known in health care circles, in late 2013 Congress passed a law called the Drug Quality and Security Act (DQSA).  Among other things, DQSA created a new class of federally regulated drug compounders called “outsourcing facilities” and also clarified requirements for compounding by licensed pharmacists and physicians in compliance with the Federal Food, Drug, and Cosmetic Act.  In the 2.5 years that have elapsed since enactment of the law, FDA has been busy implementing its new authority over outsourcing facilities and issuing guidance for those entities, such as how current Good Manufacturing Practice (cGMP) regulations will apply to them and how they should go about registering and paying a required annual establishment fee. The three draft policies issued in mid-April address issues that affect both outsourcing facilities and State-licensed pharmacies that compound drugs on behalf of health care practitioners who need customized, non-commercially available products for specific patients.  The policies address, for example, what constitutes a “prescription” for a compounded drug; how much product can be prepared in anticipation of receiving future prescription orders; and how large hospital or health system pharmacies may distribute compounds to other areas of the facility in advance of receiving a patient-specific order. Continue Reading New Compounding Policies from FDA May Affect Hospital and Health System Pharmacy Operations

It is generally understood that if a managed care member utilizes the services of a non-participating provider, the member could incur significant out of pocket expenses.  However, there are instances where a member may unknowingly receive services from an out-of-network provider, such as a radiologist or anesthesiologist, while receiving emergency or non-emergency care at an in-network hospital.  The “surprise” or “balance bill” that results from these services – i.e., the invoice from the non-participating provider for the difference between his billed charges and the amount the insurer actually paid – can be devastating.  It was recently reported that 23 states have or are working toward legislation that eliminates or curtails the effects of surprise billing.  New York passed comprehensive legislation last year, and now Florida will have a similar law when HB 221 goes into effect on July 1, 2016.

Emergency Services

Currently, Florida law prohibits balance billing for emergency services but only for members of a health maintenance organization (HMO).   HB 221 will extend this prohibition to members of preferred provider organizations (PPOs) and exclusive provider organizations (EPOs) by requiring the PPOs and EPOs to cover emergency services without prior authorization and without regard for whether the provider is in- or out-of-network. Like the HMO members, the PPO and EPO members will remain responsible only for their cost sharing obligation, such as copayments or deductibles.

Non-emergency Services

The new law will protect consumers from surprise bills for non-emergency covered services received in a network facility if the insured “does not have the ability and opportunity to choose a participating provider at the facility who is available to treat the insured.”  The term “facility” means a hospital, ambulatory surgery center, mobile surgical center, and urgent care center.  Thus, a patient who undergoes a procedure in an office-based setting and is then unknowingly treated by a non-participating provider would not be protected from a surprise bill. Continue Reading After New York, Florida Curbs Surprise Bills for Emergency and Out-of-Network Services

As noted in a post published yesterday, CMS issued the final rule regarding Medicaid managed care earlier this week.  With this rule, CMS is taking a much more active role in overseeing states’ Medicaid managed care contracts.  CMS will now require states to submit managed care contracts and rates for review.  Given that 80% of Medicaid enrollees are served through managed care delivery systems, this action is significant.

This regulation impacts state Medicaid managed care contracts in three major areas.

  • Actuarial Soundness.  State must now demonstrate that payments to Medicaid managed care are actuarially sound.  Before, CMS let states determine their own methods to certify actuarial soundness, but that was clearly lacking.  A 2010 GAO report found that CMS inconsistently reviewed state Medicaid plans’ rate setting and had not even reviewed rates for Medicaid programs in Nebraska and Tennessee.  With the new regulation, CMS will now require more stringent documentation and transparency in rate certification.
  • Medical Loss Ratio.  The new regulations create a medical loss ratio (MLR) for Medicaid managed care plans.  Previously, there was no MLR federal policy for Medicaid.  The final rule aligns Medicaid with commercial Qualified Health Plans and Medicare Advantage Plans, which have been operating under an enforceable 85% MLR since they were created through the Affordable Care Act, and this change will require additional tracking and accountability on state Medicaid spending.
  • Network Adequacy Standards.  CMS will now require states to establish network adequacy standards that mirror those in commercial Qualified Health Plans, to ensure that Medicaid beneficiaries also have access to important services.  Now, states must set time and distance standards for specific providers in Medicaid managed care plans.  Further, these plans will now be required to provide provider directory updates.

For many years, Medicaid advocates complained that CMS was far too laissez faire in their review of state Medicaid managed care contracts.  With this regulation, CMS is taking an active role to ensure that state Medicaid managed care plans meet the standards set for commercial Qualified Health Plans.  As states look to managed care plans to address rising Medicaid costs (e.g., Iowa), these new regulations will be critical to the negotiations between CMS and the states.


On Monday, CMS finalized their long-awaited Medicaid managed care regulation.  Deep in the regulation was a change to allow Medicaid reimbursement for facilities that had previously been excluded from receiving payments.  Known as the Institution for Mental Disease (IMD) Exclusion, this change has a significant impact on mental health and substance abuse treatment now and in the future.

Federal funding for states to provide mental health and substance abuse treatment through IMDs for non-elderly adults has been forbidden since the founding of the Medicaid program.  An IMD is defined as a hospital nursing facility or other institution greater than 16 beds that is engaged in providing diagnosis, treatment or care of persons with mental diseases.

CMS proposes at page 220 of the regulation “…to permit FFP for a full monthly capitation payment on behalf of an enrollee aged 21 to 64 who is a patient in an IMD for part of that month to cases in which: (1) the enrollee elects such services in an IMD as an alternative to otherwise covered settings for such services; (2) the IMD is a hospital providing psychiatric or substance use disorder (SUD) inpatient care or a sub-acute facility providing psychiatric or SUD crisis residential services; and (3) the stay in the IMD is for no more than 15 days in that month.”  If a facility that would be considered an IMD under the statute is providing psychiatric or substance abuse care to an adult ages 21 to 64 for a Medicaid-covered individual in a managed care plan, the facility can treat that patient for 15 days and be paid by the state Medicaid program with the state receiving the federal matching payment for the service. Continue Reading The IMD Exclusion: Changes Now and Changes to Come

As an update to my post on Friday, April 22, FDA has extended the deadline for comments on third-party servicing of medical devices. According to FDA’s notice of extension, comments are now due by June 3, 2016.

Comments may be submitted electronically through or in writing. If your company has not already participated, it’s time to start crafting comments that tell FDA why this issue is critical to all medical device manufacturers. And make sure to submit by June 3!

Last week the Supreme Court heard oral argument in a False Claims Act (“FCA”) case in which the Court is considering the validity of the so-called implied false certification theory. This theory attaches FCA liability when a person submits a claim for payment notwithstanding a violation of an underlying law or regulation, but without a factually false claim form. Because of the massive volume of Medicare and Medicaid regulations that a provider could potentially violate, the case is significant. More than two dozen stakeholders weighed in with amici briefs.  Here we discuss some of the important questions raised in the oral argument. Continue Reading Justices Grapple with Limits of False Claims Act Liability in Implied Certification Cases

On March 4, 2016, the FDA issued notice in the Federal Register that it had opened a docket to accept comments on the agency’s proposed plan to address the refurbishing, remarketing, rebuilding, remanufacturing, and servicing of medical devices by entities other than the officially listed manufacturer. Although the deadline is drawing near (comments are due by May 3), only 36 comments have been submitted and almost none from manufacturers.  This is surprising, given (1) the number of medical devices on the market that are critical to patient health, (2) the variety of independent servicing organizations (ISOs) and original equipment manufacturers (OEMs), which may or may not have appropriate quality standards or employ technicians with appropriate credentials, and (3) the enormous reporting and quality system responsibilities FDA imposes on manufacturers.  All medical device manufacturers whose products could be serviced by ISOs once on the market should be weighing in on this issue to ensure FDA understands the risks associated with third-party servicing and the potential burdens new regulations could place on manufacturers. Continue Reading FDA Still Seeking Manufacturer Views on Medical Device ISO Regulation