Last month, the Department of Health and Human Services’ Office of Inspector General (OIG) released its latest report on compliance with the Drug Supply Chain Security Act (DSCSA). As we discussed in a prior post, the DSCSA requires enhanced security and accountability for prescription drugs throughout the U.S. pharmaceutical supply chain, with phased-in obligations for the various trading partners over 10 years, beginning with the law’s passage in November 2013. Covered trading partners include manufacturers, repackagers, wholesale distributors, and dispensers.

The OIG’s most recent study focuses on dispensers of various sizes and types, including independent retail pharmacies, chain retail pharmacies, and small and large hospital pharmacies. Of the 40 dispensers interviewed, the agency found that all them had received at least some drug product tracing information from their trading partners, and 26 of these dispensers received all required elements of this information. The remaining 14 dispensers were missing a few of the required elements. Two of the dispensers were unaware of the DSCSA. The following table summarizes the missing information:

The OIG also found that dispensers received drug product tracing information in a variety of transmission modes and formats. The agency believes this is a result of dispensers and their trading partners using different systems rather than adopting a standardized way to exchange this information. Neither the DSCSA nor FDA guidance requires a uniform transmission mode or format for the exchange of drug product tracing information.

To facilitate dispensers’ compliance with the DSCSA, the OIG recommends that FDA offer educational outreach to dispensers where appropriate. Specifically, the agency recommends that FDA provide education to ensure that dispensers understand their responsibilities to receive complete drug product tracing information from trading partners before taking ownership of drug products.

For its part, FDA concurred with the OIG’s recommendation and intends to review its dispenser communications plan and identify and create opportunities to work with dispenser-centric trade and professional organizations to provide additional education and outreach. FDA also noted in its response that, as the last trading partner in the supply chain before a drug product is dispensed to a patient, dispensers play a vital role in ensuring patient safety, making it essential that they understand their product tracing responsibilities under DSCSA.

We will continue to monitor and report on the industry’s implementation of the DSCSA, including the OIG’s planned study of the extent to which drug product tracing information can be used to trace drugs through the entire supply chain.

As we’ve previously discussed on Health Law and Policy Matters, agencies within the Department of Health and Human Services (DHHS) pushed through several final rules towards the end of the Obama Administration (see here and here). However, since taking office, President Trump has followed through on his campaign promise to significantly roll back Federal regulations and has taken several actions aimed at slowing and reversing agency regulatory processes, including processes at the DHHS sub-agencies CMS and FDA. These executive actions are creating a climate of uncertainty for regulated industries and their stakeholders. Continue Reading Trump Executive Orders Create Uncertainty for Health Care & Pharmaceutical Industries

Back in early October, we were all transfixed by the announced Mylan settlement with the U.S. Department of Justice (DOJ) over Mylan’s alleged underpayments of Medicaid Drug Rebates for the EpiPen.  Although Mylan indicated that its $465 million settlement resolved all potential liability to government programs over EpiPen’s classification for Medicaid Drug Rebate purposes, DOJ would not confirm the specifics of the settlement and it appeared that no actual settlement documents had even been drafted. We blogged our thoughts that the “settlement”  was actually a handshake deal that had not been reduced to writing, had not been agreed to by the states, and had left the extent of any releases and future compliance to be negotiated.  And we said Congressional scrutiny would not end due to the announced settlement.

Multiple state and government officials decried the announced settlement as inadequate. Senator Grassley went so far as to schedule a Senate hearing on the settlement, but was forced to postpone it when no one from DOJ or Mylan would agree to attend and testify.

Then the election intervened, and EpiPen rebates were yesterday’s news. However, Senator Grassley, for one, is not letting go.  But at this point, his focus is more on government action, or inaction, over drug classifications.  And depending on what his inquiry reveals, it may end up hurting, not helping, any government case against Mylan, and potentially other drug manufacturers, based on classification of drugs for purposes of Medicaid Drug Rebates.

Continue Reading Grassley Continues To Press CMS on Medicaid Drug Rebate Classifications: What Will Be the Fallout?

In this final installment of our Health Care Enforcement Review and 2017 Outlook series, we analyze health care enforcement trends gathered from 2016 civil settlements and criminal resolutions of health care fraud and abuse cases. Behind the headlines covering enormous recoveries in 2016, several themes are apparent.

The False Claims Act continued to generate large civil settlements.

Continuing the trend from recent years, the False Claims Act (“FCA”) remained the primary civil enforcement tool against health care providers as well as pharmaceutical, life sciences, and medical device companies, predominantly driven by qui tam FCA complaints filed by relators.  In fiscal year 2016, the Department of Justice obtained more than $4.7 billion in settlements and judgments from FCA cases, $2.5 billion of which it obtained from the health care industry.  Continue Reading Health Care Enforcement Review and 2017 Outlook: Significant Health Care Fraud and Abuse Civil Settlements and Criminal Resolutions

While 2016 marked one of the least productive years in the history of Congress, the same cannot be said of health care enforcement and regulatory agencies.  Perhaps motivated by the impending change in administration, these agencies promulgated a number of notable regulations in 2016, including:

  • A Department of Justice (DOJ) Interim Final Rule that significantly increases penalties under the False Claims Act (FCA), making already high stakes litigation even higher.
  • An Interim Final Rule from the Office of Inspector General for the U.S. Department of Health and Human Services (OIG) and other agencies increasing civil penalties for violations of various statutes and regulations, including the Civil Monetary Penalties Law (CMPL) and its implementing regulations.
  • A Final Rule that addresses the OIG’s expanded authority under the CMPL.
  • A long-awaited Final Rule from the Center for Medicare & Medicaid Services (CMS) concerning the “60 Day Rule” for returning overpayments.
  • A Final Rule from the OIG that amends the safe harbors under the federal Anti-Kickback Statute (AKS) and adds exceptions under the CMPL’s beneficiary inducement prohibition.

Below we discuss the highlights of each rule and how we expect each to impact the enforcement environment in 2017 and beyond. Continue Reading Health Care Enforcement Review and 2017 Outlook: Significant Regulatory Developments

Last week, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services released a report analyzing CMS’ readiness to implement major parts of the Medicare Access and CHIP Reauthorization Act  of 2015 (MACRA). The report provides an inside look at the steps CMS is taking to implement MACRA’s Quality Payment Program (QPP), which is an ambitious transformation of the way in which the federal government reimbursements health care providers. The report highlights two key vulnerabilities for the MACRA transition, a process that will hopefully be smoother than the troubled roll out of HealthCare.gov.

Continue Reading OIG Report Offers Glimpse into CMS Progress Towards MACRA Implementation

Pharmaceutical industry enforcement has been one of the hottest topics in the news in the past month.  Last week, Ellyn Sternfield and Rodney Whitlock were quoted by cnbc.com regarding the recent Mylan settlement:

[T]he Justice Department ‘does not have the authority to settle states’ individual drug rebate claims against Mylan, which means any potential ‘global’ settlement with the states raises a variety of issues.’  Those issues include the fact ‘Medicaid Drug Rebate settlement terms for each individual state will have to be agreed to by each individual participating state’s Attorney General and in many states, also by the State Medicaid Agency.’

For more insight from Ellyn, Theresa Carnegie, and Larry Freedman, please join us this Wednesday, October 26 at 1pm (ET) for a webinar discussing health care fraud enforcement in the pharmacy and pharmaceutical industry.  In addition to covering topics related to pharmaceutical manufacturers, the webinar will cover topics related to pharmacies, pharmacy benefit managers (PBMs), and health insurers.

The webinar is approved for CLE credit in California and New York.

You can register for the webinar here.

Last week, the OIG issued a favorable opinion to a hospice provider seeking to make supplemental payments to skilled nursing facilities.  Under the proposed arrangement, the hospice provider would make a supplemental payment to the nursing facility for dual-eligible individuals electing the hospice benefit that would be in addition to and separate from what the managed care organization (“MCO”) pays the nursing facility.

This supplemental payment by the hospice provider is different than the traditional payments that hospice providers make to nursing facilities for dual-eligible individuals.  Traditionally, when a dual-eligible individual residing in a nursing facility elects the hospice benefit, Medicare pays the hospice provider a per diem rate that does not include room and board.  Medicaid is responsible for paying the individual’s room and board.  Medicaid pays room and board to the hospice provider and the hospice provider pays the nursing facility the negotiated rate.  In a 1998 Special Fraud Alert on nursing home arrangements with hospices, the OIG specifically stated that this payment arrangement, in which the hospice provider pays the nursing facility only after receiving payment from Medicaid, is acceptable. Continue Reading OIG Gives Green Light to Hospice Provider’s Payment to Nursing Facilities

Last week, the OIG posted favorable advisory opinion (16-07) regarding a proposed discount program for Part D beneficiaries who are prescribed a statutorily excluded erectile dysfunction drug.  The OIG concluded that while the proposed discount program could potentially generate prohibited remuneration under the anti-kickback statute (“AKS”) if the parties had the requisite intent, the discount program presented no more than a minimal risk of fraud and abuse under the AKS and therefore it would not impose administrative sanctions.

When analyzing the discount program, the OIG cited its September 2014 Advisory Bulletin on Pharmaceutical Manufacturer Copayment Coupons, and reminded readers that copayment coupons constitute remuneration and can implicated the AKS.  The OIG then explained that coupons may induce the purchase of federally reimbursable items in two ways: first, if the coupon reduces a beneficiary’s copayment on a federally reimbursable items, and second, if beneficiaries are induced to purchase other federally reimbursable products (not covered by the coupon) from the entity issuing the coupons. Continue Reading OIG Advisory Opinion Approves Drug Discount Program

As we start a new year, let’s take a look back at a few hot topics that emerged in the managed care industry in 2015 and will likely be drivers of developments in 2016.

Industry Consolidation – The Changing Landscape

2015 was a year of significant activity for MCOs large and small. In addition to proposed mergers among some of the largest payors, smaller MCOs are also consolidating with other MCOs, as well as service providers, in an attempt to leverage purchasing power and integrate care models. As we discussed in our Pharmacy Industry year in review, consolidation reshaped the traditional PBM industry paradigms with a move away from stand-alone PBMs to MCO and provider-affiliated PBMs.

Competition Scrutiny

Moving into 2016, we will learn whether the proposed consolidations will be approved and whether the trend will continue. The government will also generally continue to scrutinize health care competition, paying close attention to the proposed mergers among Aetna/Humana and Anthem/Cigna. In early 2015, our colleagues highlighted the FTC-DOJ workshop examining health care competition where the agencies’ worked together to identify and examine the potential competitive implications of strategies currently used by providers and payors seeking to reduce costs and improve quality.

We are also beginning to see competition scrutiny expand beyond the regulatory agencies. For example, the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law held hearings examining competition in the PBM industry, while the Central District of Illinois District Court permitted a small regional hospital’s antitrust challenge to its largest competitor’s exclusive dealing contracts with payors to move forward. Continue Reading The Managed Care Industry – 2015 Year in Review