California mandates new rules in drug cost pricing changes

The State of California has taken an unprecedented step with regard to transparency in the pricing of pharmaceuticals.

On Monday, October 9, 2017, California Governor Jerry Brown signed bill SB 17, which will mandate that drug manufacturers substantiate the need for price increases of their drugs to the public.  Specifically, the bill requires the manufacturers to notify both private and public health insurers and plans at least 60 days prior to any price hike for any drug that amounts to more than 16% over a two-year period.  Even more importantly, the drug manufacturer would be required to justify the need for a price hike by providing a public explanation.

According to Governor Brown, “Californians have a right to know why their medical costs are out of control, especially when pharmaceutical profits are soaring.”  One of the goals Brown hopes to achieve with this bill is to level the playing field between the pharmaceutical leaders and those who struggle to pay for necessary medication.

Those in support of such a bill are spread across a variety of industries, including labor, business, consumer, local government and healthcare.  Even health insurance companies have agreed to provide information and data to assist in effort toward transparency.  Under the bill, they will have to disclose the premium increases which are attributable to the costs of drugs.

Supporters believe that such regulation is a necessity given that there has been a 127% increase in U.S. prices for top brand-name drugs between 2008 and 2014.  In a world-wide comparison, other developed nations average just 41% of U.S. net drug prices for the 20 top-selling drugs. Scrutiny into these U.S. price hikes has been growing.  In 2016, Mylan Pharmaceuticals was strongly criticized and publicly condemned for increasing the price of the EpiPen by more than 500% over a 10-year period.

Not surprisingly, the drug lobby has spent significant time and money opposing SB 17.  This is likely out of fear that such a bill will become the national standard.  Specifically, they argue that Governor Brown is not keeping the best interests of the patients in mind and that the bill could result in a drug shortage.  They also assert that the bill does not allow for disclosure of the rebates and discounts that insurance companies and pharmacy benefit managers receive but fail to pass onto the patients.

Ultimately, SB 17 will not actually lower the prices of drugs in the U.S.  It will, however, shed some light on the process used by pharmaceutical companies to set drug prices.

HHS Office of Inspector General Issues 2015 Work Plan (Part 2)

This final post on the OIG’s 2015 Work Plan summarizes many of the OIG’s initiatives in other areas.  To read Part 1, click here.

Medical Equipment and Sales: The OIG plans to examine 10 areas regarding equipment and supplies, including issues relating to power mobility devices, lower limb prosthetics, nebulizer machines and related drugs, diabetes testing supplies, and the payment system for renal dialysis services and drugs.  The OIG will also review claims for frequently replaced medical equipment supplies to determine supplier compliance with medical necessity, frequency, and other Medicare requirements, noting that suppliers have automatically shipped certain device supplies without physician orders for refills.

Other Providers: The OIG plans to review other providers’ policies, practices, and billings and payments, including ambulance, anesthesia, chiropractic, diagnostic radiology, imaging, and clinical laboratory services. The OIG also will examine inappropriate and questionable billing by ophthalmologists, physician place of service coding errors, high use of outpatient physical therapy services, supplier compliance with transportation and set-up fee requirements for portable X-ray equipment, and high use of sleep-testing procedures by sleep disorder clinics.

Prescription Drugs: The OIG will review several areas relating to prescription drugs. Of note, the OIG plans to examine payments for drugs purchased under the 340B Drug Pricing Program by determining how much Medicare Part B spending could be reduced if Medicare could share the savings for drugs purchased under the 340B program.

Part A and B Contractors: The OIG plans to examine seven areas relating to oversight of contracts and contractor functions and performance.

Information Technology Security, Protected Health Information, and Data Accuracy: Of note, the OIG plans to examine whether CMS oversight of hospitals’ security controls over networked medical services is adequate to protect electronic-protected health information. The OIG states that computerized medical devices that are integrated with electronic medical records and a health network are a growing threat to the security and privacy of health information. These medical devices monitor a patient’s health status and transmit and receive health data.

Other Part A and Part B Program Management Issues: The OIG will examine enhanced enrollment screening procedures for Medicare providers under the ACA. For the first time, the OIG will conduct a risk assessment of the Pioneer Accountable Care Organization Model.

Medicare Part C and Part D: The OIG plans several activities regarding Medicare Part C and Part D, including Medicare Advantage Organizations’ compliance with Part C requirements, ensuring dual -eligible patient access to drugs under Part D, and Part D billing and payments including Medicare Part D payments for HIV drugs for deceased beneficiaries.

Medicaid Program: The OIG will investigate several areas relating to Medicaid, noting that protecting Medicaid from fraud, waste, and abuse takes on a heightened urgency as the program continues to expand. Thus, the OIG will investigate a variety of areas in the Medicaid program, including state claims for drug rebates and claims for federal reimbursement. The OIG will also review Medicaid payments by states for home health services and other community-based care, including determining whether adult day care services providers complied with federal and state requirements and whether home health agency health care workers were screened in accordance with federal and state requirements. In addition, the OIG will review issues relating to medical equipment and supplies, transportation, health care-acquired conditions, and managed care. Finally, the OIG will review a variety of issues regarding state management, funding, oversight, and payment for Medicaid.

Other: The OIG plans to review and investigate many other areas. For the first time, the OIG will determine the extent to which hospitals comply with the contingency planning requirements found in the Health Insurance Portability and Accountability Act (HIPAA), as well as compare the hospitals’ contingency plans with government and industry recommended practices.