As 2017 began, FDA appeared poised to implement significant changes to the rules governing off-label communications related to drugs, biologics, and medical devices. The Agency had hosted a public hearing in November 2016 to receive input from interested industry stakeholders and members of the public about possible alternatives for off-label regulation, seemingly a first step in exploring more liberal (or possibly stricter) enforcement standards. However, in January, FDA released a new final rule amending the definitions of “intended use” applicable to drugs and devices in 21 C.F.R. §§ 201.128, 801.4, which would affect how off-label uses are considered with respect to intended use of regulated products, and issued a memo discussing its current position on off-label uses and communications. In short, all of FDA’s actions since the November public hearing have shown that it intends to continue strict enforcement of off-label promotion despite changes in the highest levels of government and strongly negative industry response. Continue Reading The Past, Present, and Future of Government Regulation of Off-Label Communications – Part 1
From 2015 to 2016, FDA appeared to open the door to loosening the standards around intended use and off-label use, but recent rule-making and public comments suggest that FDA is becoming more sclerotic instead of flexible. However, given the political climate in the federal government and the lack of an appointed FDA commissioner, it is unclear whether FDA will hold its ground or be forced to retreat.
As we’ve previously reported, FDA has recently been forced to reexamine its legal position and enforcement policies related to drug and device manufacturers’ off-label communications. Although the Agency has for years resisted calls to loosen its long-standing prohibitions on the off-label promotion of unapproved products, it has simultaneously recognized that truthful and non-misleading scientific or medical information coming from manufacturers about their own drug, biologic, and device products plays an important role in the U.S. health care system. This has especially been true in a climate where individual products are becoming more complex; precision medicine approaches to treating disease are gaining ground in clinical practice; and the health system is evolving into one more focused on outcomes and value-based arrangements between entities. The expansion of First Amendment commercial speech principles by the courts over the past decade and lawsuits against FDA also have pushed the Agency to move towards the potential reform of its existing off-label policies. Continue Reading Five Important Themes to Watch in the Reform of FDA’s Off-Label Communications Policy
Times, They Are A-Changin’
On Wednesday, FDA announced that it will hold a two-day public hearing on November 9th and 10th to obtain input from a broad cross-section of the health care industry, including pharmaceutical and medical device companies, doctors, patients, research institutions, health care organizations, and payors and insurers, regarding the appropriate regulation of manufacturers’ communications about off-label uses for their marketed medical products. Medical products include prescription drugs, biologics, medical devices, and animal drugs. This public meeting was originally “teased” by Agency officials as far back as April 2015, so it has been highly anticipated by all interested stakeholders. FDA’s announcement also comes after a series of high-profile losses for the Agency and the DOJ in the government’s attempt to prohibit and criminalize truthful, non-misleading off-label marketing. Continue Reading FDA Announces Dates for Long-Awaited Public Hearing on Its Regulation of Off-Label Communications
On March 8, 2016, Amarin Pharma, Inc. and FDA entered into a formal settlement, close to a year after the U.S. District Court for the Southern District of New York granted a preliminary injunction against FDA’s threats to treat Amarin’s proposed truthful and non-misleading off-label marketing about its drug, Vascepa (icosapent ethyl), as violative of the Food, Drug, and Cosmetic Act (“FDCA”). In August of last year, the Court ruled that FDA was impermissibly chilling truthful speech in violation of the First Amendment. Amarin Pharma, Inc. v. FDA, 2015 U.S. Dist. LEXIS 103944 (S.D. N.Y. Aug. 7, 2015). The parties’ settlement now accepts the court’s decision, reflecting a fundamental change in FDA’s previous policy of effectively prohibiting any off-label marketing by prescription drug and medical device companies, regardless of whether the proposed speech was objectively truthful.
The settlement comes after a series of high-profile losses for FDA and the DOJ in the government’s attempt to prohibit and criminalize truthful off-label marketing. Continue Reading Amarin/FDA Settlement: A Significant First Amendment Victory for Off-Label Marketing
In a post published earlier this week this week our colleagues Brian Dunphy and Joanne Hawana examined key issues in the recent Amarin decision from the Southern District Court of the New York. The August 7th ruling provided Amarin Pharma, Inc. with a preliminary injunction that blocks FDA from bringing a misbranding action against the company when making truthful statements to physicians regarding off-label uses of the drug Vascepa® (icosapent ethyl).
In addition to giving rise to potential misbranding charges under the Food, Drug, and Cosmetics Act, off-label marketing can give rise to False Claims Act (FCA) lawsuits and has resulted in many sizeable settlements. The basis for FCA cases involving off-label marketing is not that the marketing or prescribing of drugs paid for by federal health care programs for off-label uses is outright illegal, but rather that misleading marketing causes the prescriber to mistakenly believe that the drug is effective for off-label use and that the FDA has approved it for such off-label use. Off-label marketing causes a “false” claim to be made to the federal government when the physician prescribes a drug based on misleading marketing material, which is then paid for by a federal health care program, and the physician would not have prescribed the drug if he or she had known that the drug was not in fact FDA-approved or clinically proven to be effective for the off-label use. Continue Reading Off-Label Marketing and the False Claims Act
Pharmaceutical manufacturers have likely taken note of Amarin Pharma Inc.’s recent success in a pre-enforcement legal challenge against the Food and Drug Administration (FDA or the Agency). On August 7, 2015, Amarin obtained a preliminary injunction that prevents the Agency from bringing misbranding charges against the company for making truthful statements to doctors about off-label (unapproved) uses of the drug Vascepa® (icosapent ethyl). Amarin claimed that FDA’s threat of initiating a misbranding action had a chilling effect on the company’s ability to engage in constitutionally protected truthful speech, and from providing valuable information to physicians. This significant ruling from Judge Paul Engelmayer in the Southern District of New York represents the first time FDA has been enjoined on First Amendment grounds from prosecuting a drug manufacturer for misbranding based on the manufacturer’s truthful marketing of its product.
In filing its complaint against FDA, Amarin sought protection for its speech “both at a general and a statement-specific level.” At a general level, Amarin’s First Amendment challenge alleges that FDA’s threat of misbranding under provisions of the Federal Food, Drug and Cosmetic Act (FFDCA or the Act), 21 U.S.C., §§ 331(a) and 333(a)(1), restricted Amarin’s speech. Based on United States v. Caronia – a 2012 decision from the Second Circuit, discussed previously on our blog, here and here, in which the conviction of a drug company sales representative was vacated because Caronia could not be convicted for on the basis of his truthful speech about off-label uses for a drug – the court broadly held that Amarin may engage in truthful and non-misleading speech promoting an off-label use of Vascepa, and that this speech may not form that basis of a prosecution for criminal misbranding. At the statement-specific level, the court also reviewed in great detail specific statements and disclosures for which Amarin sought comfort would not be the subject of a misbranding action.
As has been widely covered in the news, regulations and guidance developed under the Affordable Care Act (“ACA”) require that non-grandfathered health plans make preventive care and screenings available to their members at no cost (i.e. no deductibles, coinsurance, or co-payments). The Department of Health and Human Services (“HHS”) was charged with developing guidelines for preventive services and determined that contraceptive services, which include all Food and Drug Administration (“FDA”)-approved contraceptives, should be made available to plan members at no cost. This determination resulted in protests from religious employers who believe that forcing them to offer and pay for contraceptive services, something to which they are religiously opposed, violates their first amendment right to religious freedom.
Religious Freedom Exemption
Due to the concerns raised by religious employers, the government sought to create an exception to the contraceptive coverage mandate for religious employers that would protect the employer’s first amendment rights while still allowing women plan members to receive contraceptive services at no cost. The result is a convoluted system in which health plans and third party administrators, including pharmacy benefit managers (“PBMs”), must pay for these contraceptive services and then receive reimbursement for the services more than a year later, if at all.
To address religious freedom concerns, the Department of Labor (“DOL”) and HHS promulgated regulations creating an exception to the contraceptive coverage mandate for religious employers that qualify as an “eligible organization.” An “eligible organization” is one that self-certifies that it is an “eligible organization” and therefore is not required to pay for coverage of contraceptive services for its plan members. Although this portion of the regulations is intended to respect the religious freedom of the eligible organization, the Little Sisters of the Poor have challenged the certification requirement arguing that it violates their rights by forcing them to sign a permission slip that in essence instructs another entity (their plan administrator) to do something to which they are morally opposed, provide contraceptive services to their members. Other religious entities have begun to follow the Sisters’ lead. The U.S. Supreme Court granted the Little Sisters of the Poor an injunction while their case is pending in the Tenth Circuit Court of Appeals. Under current regulations, once the eligible organization has self-certified, the responsibility to provide contraceptive services at no cost passes to the eligible organization’s health plan or PBM. This portion of the regulations is intended to respect a woman’s right to access contraceptive services at no cost.
Stuck between the ACA contraceptive coverage requirement and the religious freedom exemption are the health plans and PBMs servicing these eligible organizations. Current HHS/DOL regulations require these health plans and PBMs to provide contraceptive services at no cost and without passing the cost of the services on to the eligible organization or its plan members. (It is unclear how health plans and PBMs should act when faced with a situation where an eligible organization refuses to self-certify, as the Little Sisters have done.) In addition, coverage for contraceptive services may not be built into the plan premiums charged to the employer or the member. This means that when an eligible organization’s plan member goes to a pharmacy to receive a contraceptive drug, the pharmacy must provide the drug to the member free of charge and charge the health plan or PBM for the drug. The health plan or PBM then pays the pharmacy for the drug, but no one reimburses the health plan or PBM. So when, if ever, are these companies reimbursed for the provided contraceptive services? Who pays for them? The answers vary based on whether the services are provided by a health plan or a PBM.
Health plans that provide the mandated free contraceptive coverage to eligible organization plan members are able to recoup these costs through a direct reduction in the Federal Facilitated Exchange (“FFE”) User Fee. The FFE User Fee is a tax that the health plan must pay in order to participate in a federally facilitated Exchange. A health plan’s Exchange tax will be reduced by the amount of money the health plan paid during the previous year for contraceptive services provided to eligible organization plan members. In addition, a health plan’s Exchange tax will be reduced by an “allowance” to cover the health plan’s administrative costs for providing free contraceptives. For 2014, HHS has proposed that the “allowance” equal 15% of the total dollar amount that the health plan pays for applicable contraceptive services. This mechanism provides a direct avenue for health plans to obtain reimbursement, but health plans will not receive this “tax credit” until the year after they paid for the services (tax credits will be granted in 2015 for services provided in 2014). This will result in health plans being forced to float the money for the contraceptive services and administrative services for at least a year.
Third Party Administrators (which for purposes of these regulations includes PBMs) that provide the mandated free contraceptive coverage to eligible organization plan members may recoup service costs only by contracting with a health plan that agrees to report the PBM’s contraceptive costs to the government. Under such an arrangement, the health plan would report the payments for contraceptive services provided by the PBM and, in return, receive a reduction in its Exchange tax, just as though the health plan itself had paid for the contraceptive services. The reduction would similarly include the administrative cost “allowance” of 15% for 2014. The health plan is then required to pass on to the PBM the amount of the Exchange tax reduction it received as a result of the PBM payments for contraceptive services, but it is not required to pass on to the PBM the administrative cost allowance. The health plan and PBM may negotiate to determine how the allowance will be divided between the two entities. PBMs that are able to find a health plan partner must inform HHS that they are planning to request reimbursement. This notice must be given at the later of January 1, 2014 or sixty (60) days after receiving an eligible organization’s self-certification.
Difficult Scenario for PBMs
In establishing this mechanism, DOL and HHS failed to consider the following:
First, providing and paying for services and not being compensated for over a year imposes a financial hardship on plans and PBMs. Second, the regulations create a difficult scenario for PBMs. Because PBMs do not have a direct reimbursement mechanism, the regulations heavily favor PBMs that are owned by health plans and therefore have a built-in partner for purposes of providing contraceptive services. If independent PBMs want to receive any reimbursement for these mandated services, they will have to expend significant resources and incur significant costs to identify a health plan partner. If a PBM is unable to identify a health plan partner, it will not be paid at all for the contraceptive services or its administrative costs. Even if a PBM is able to identify a health plan partner, the partner may not agree to pass on the administrative allowance. PBMs must expend resources (time, employees, claims processing systems, contracting, etc.) to provide the contraceptive services, but there is no guarantee that the health plan it convinces to be its partner will agree to pass through any of the “allowance,” therefore leaving the PBM with a loss.
Pending Supreme Court Cases
It is unclear how much money is at stake for plans and PBMs, but the amount could potentially increase significantly based on cases pending before the Supreme Court. In March of this year, the Supreme Court will consider cases involving for-profit, secular employers, such as Hobby Lobby, requesting on religious grounds the same contraceptive exception as that available for “eligible organizations.” The outcome of such cases could potentially increase the volume of services that fall under this mechanism, in turn increasing the burden on health plans and PBMs.
In what is believed to be the first legal challenge to the HIPAA Omnibus Rule (the “Rule”), a vendor of prescription drug adherence services is seeking an injunction to block certain provisions of the Rule related to drug refill reminders. In its complaint, Adheris, Inc., an InVentiv Health company, argues that drug adherence communications are free speech protected under the First Amendment of the Constitution and that the Rule imposes unconstitutional limits on those communications. Adheris also claims that the rule unfairly permits non-profit and government-funded organizations to make communications that are prohibited by for-profit organizations.
HIPAA Rule Limits Compensation for Adherence Communications
By way of background, the Rule, which goes into effect September 23rd, amends HIPAA’s existing (and already complex) marketing provisions to specify that regulated entities may not accept payment for patient information used in marketing activities without first obtaining a patient authorization. For example, a pharmacy would be required to obtain patient authorization before accepting payment for a list of patients on high blood pressure medication from a pharmaceutical manufacturer whose products might benefit those patients. The Rule includes exceptions for subsidized communications regarding drugs that have already been prescribed to a patient, including adherence communications intended to help patients stay on therapy. For example, a pharmacy would not have to obtain patient authorization before accepting payment for providing a list of high blood pressure medication patients to a company that would provide medication adherence services to those patients. However, coupled with the exception is a limit on the amount of compensation that may be paid to health care providers, or third parties, like Adheris, that facilitate adherence communications. Under the Rule, any compensation for such communications must be “reasonable in amount” or “reasonably related to the regulated entity’s cost of making the communication,” including labor, supplies and postage (78 Fed. Reg. 5597 (Jan. 25, 2013)). The Office for Civil Rights (OCR) made clear in the Rule that if the entity being paid for the communication generates a profit from the services, it violates the Rule and the adherence communication exception does not apply. As a result, companies such as Adheris must either obtain patient authorization prior to providing medication adherence services, or limit the payments they receive to an amount equal to their actual costs.
First Amendment Challenge
Adheris’s suit alleges that the Rule threatens to end refill reminders that serve millions of Americans with chronic diseases and charges the federal government with attempting to restrain speech protected by the First Amendment. The complaint points to the Supreme Court’s 2011 decision in Sorrell vs. IMS Health Inc., in which the Court affirmed that speech in aid of pharmaceutical marketing is a form of expression protected by the First Amendment. Adheris also claims that the Rule would not apply to it if it operated on a non-profit basis or was funded by the government. “This rule addresses a non-existent problem with an unconstitutional regulation that is contrary to the best interests of patients and society. We are hopeful that the court will agree,” states Eric Sherbert, General Counsel for InVentiv Health.
We note that while the Rule may have an adverse effect on for-profit organizations, its provisions apply equally to all covered entities, business associates, and downstream entities subject to HIPAA compliance obligations. It is critical, therefore, that every regulated entity scrutinize all subsidized marketing communications for compliance with the Rule.
Broader Implications of the HIPAA Rule for Adherence Programs
Adheris’s motion for preliminary injunction comes in the wake of industry turmoil over the Rule. In August, the Specialty Pharmacy Association of America (SPAARx) announced that it had sent a letter to OCR requesting clarification and/or revision of the Rule. On August 16th, Modern Healthcare reported that the World Privacy Forum sent a separate letter to OCR in support of the limitations in the Rule. In response to the Rule, the drugstore chain CVS chose earlier this year to end its practice of using patient drug records to mail drug refill reminders to customers on behalf of pharmaceutical manufacturers.
In its statement regarding the lawsuit, Adheris contends that the Rule undermines a valuable service that promotes patient health and is consistent with the Affordable Care Act’s objective to reduce healthcare costs. Adheris’s complaint cites to a Congressional Budget Office Report that a one percent increase in prescription adherence could lower Medicare spending by one-fifth of one percent. The Affordable Care Act creates a variety of programs and initiatives that are intended to better coordinate patient care and reduce overall health care costs. A key element of many of these programs is the potential to reduce costs and save lives through increased medication adherence.
- Accountable Care Organizations (ACOs): Many of the quality measures to which the newly created Medicare ACOs are accountable relate to safe and effective use of medications. ACOs are likely to make medication adherence a priority since they are eligible to share in a portion of their generated costs savings for the Medicare program.
- The Hospital Readmissions Reduction Program (HRRP): The HRRP requires CMS to reduce payments to hospitals with excess readmissions of patients hospitalized for acute myocardial infarction, heart failure, or pneumonia. Hospitals seeking to reduce readmissions will be more likely to invest in post-discharge management that includes a focus on medication adherence. Just last month, the OIG issued a favorable advisory opinion regarding the proposal by a wholly owned subsidiary of a major pharmaceutical manufacturer to contract with hospitals to provide services to patients (many of which related to medication compliance) following hospital discharge with the goal of reducing preventable hospital readmissions.
- Medicare Advantage Star Ratings: CMS publicly reports and provides financial bonuses to Medicare Advantage plans based on “Star Ratings” determined by certain quality measures. Several of the measures used to calculate a plan’s Star Ratings relate to adherence with statin, oral diabetes, and hypertension medications. Adherence measures are considered “intermediate outcome” measures and are weighted heavily.
Due to these initiatives, the pharmaceutical industry is investing greater amounts in adherence programs and providers, such as pharmacies, hospitals and physicians, and payors are increasingly focused on promoting patient adherence to prescribed drug regimens. Accordingly, the viability and ultimate success or failure of Adheris’s lawsuit will affect not only implementation of the HIPAA marketing rules, but will likely have implications for many stakeholders in the health care industry.