California mandates new rules in drug cost pricing changes

By on October 11, 2017

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.

Filed under Prescription Drugs, Uncategorized Tagged with , , , , , ,

CMS ISSUES CHANGES TO REQUIREMENTS OF PARTICIPATION AFFECTING LTC FACILITIES: ARBITRATION IS OUT—ARE WAIVER OF JURY TRIALS IN?

By on October 4, 2016

Effective November 28, 2016, long-term care facilities that participate in Medicare and Medicaid will no longer be able to enter into “pre-dispute” agreements for binding arbitration with their residents.  The Centers for Medicare & Medicaid Services (CMS) issued the final rule on September 28, 2016, after consideration of extensive comments from key stakeholders in the long-term care community regarding proposed revisions.

Under the rule, a facility can ask a resident or a resident’s representative to enter into an arbitration agreement after a dispute arises.  However, the facility must comply with several requirements, such as ensuring that the agreement provides for the selection of a neutral arbitrator and a venue convenient to both parties.  Further, a resident’s right to remain in the facility cannot be contingent upon entering into the arbitration agreement and the agreement cannot contain language that discourages communications with federal, state or local surveyors and other officials.

As one of the more controversial changes, critics of the new arbitration rule have reacted strongly against the change and have commented that this part of the rule “clearly exceeds” CMS’s statutory authority.  In its response to public comments, CMS explains that the Secretary of Health and Human Services has the authority to administer the program under the Social Security Act by setting general practice parameters for payment under Medicare and Medicaid.  CMS further cites to its authority to promulgate regulations for residents’ health, safety and well-being and states that there is “significant evidence that pre-dispute arbitration agreements have a deleterious impact on the quality of care for Medicare and Medicaid patients.”  Nevertheless, there are several legal bases upon which to challenge the agency’s ability to preclude an arbitration agreement.

While CMS’s comments cite to a resident’s waiver of the right to a jury trial as a major factor considered in its decision to disallow pre-dispute arbitration agreements, the final rule does not expressly preclude jury trial waiver provisions within facility admissions agreements.  Jury waivers may help to address runaway verdicts that have become a concern in negligence cases in past years, while still respecting expressed concerns that arbitration presents undue costs to residents and creates an environment of “secrecy.”  Note that state law may vary on whether such waivers are enforceable.

Also remarkable is CMS’s comment that it will not address waiver of class-action litigation in this rule, but rather reserve the issue for consideration during future rulemaking.

The broad-sweeping final rule also contains several other provisions that directly affect compliance programs, training of nursing staff, updating infection and control programs, and other key requirements that long-term care facilities must comply with in order to participate in the Medicare and Medicaid programs.  It is advisable for long-term care facilities to promptly consult with a knowledgeable healthcare attorney to assess modifications to admissions packets and to otherwise establish the framework necessary to comply with the revised Requirements of Participation.

Filed under Arbitration, Centers for Medicare and Medicaid Services, Department of Health and Human Services, Health Care Facilities, Hospice Programs, Long Term Care, Medicaid, Medicare, Nursing Home Regulations, Nursing Homes, Uncategorized Tagged with , , , , ,

The Effects of Medicaid Expansion under the ACA: Findings from a Literature Review — The Henry J. Kaiser Family Foundation

By on June 20, 2016

Research on the effects of Medicaid expansions under the Affordable Care Act (ACA) can help increase understanding of how the ACA has impacted coverage; access to care, utilization, and health outcomes; and various economic outcomes, including state budgets, the payer mix for hospitals and clinics, and the employment and labor market. These findings also may…

via The Effects of Medicaid Expansion under the ACA: Findings from a Literature Review — The Henry J. Kaiser Family Foundation

Filed under Affordable Care Act, Department of Health and Human Services, Medicaid, Uncategorized

The Yates Memo: A Wake-Up Call for Individual Executives

By on June 8, 2016

What is the Yates memo?

The Yates memo is a memorandum written by Sally Quillian Yates, Deputy Attorney General for the U.S. Dept. of Justice, dated September 9, 2015.

It basically outlines how federal investigations for corporate fraud or misconduct should be conducted  and what will be expected from the corporation getting investigated. It was not written specifically about health care providers; it is a general memo outlining the investigations of corporate wrongdoing across the board. But it is germane to health care providers.

By far the most scary and daunting item discussed within the Yates memo is the DOJ’s interest in indicting individuals within corporations as well as the corporate entities itself, i.e., the executives…the management. Individual accountability.

The Yates Memo outlines 6 steps to strengthen audits for corporate compliance:

  • To be eligible for any cooperation credit, corporations must provide to the DOJ all relevant facts about individuals involved in corporate misconduct.
  • Both criminal and civil corporate investigations should focus on individuals from the inception of the investigation.
  • Criminal and civil attorneys handling corporate investigations should be in routine communication with one another.
  • Absent extraordinary circumstances, no corporate resolution will provide protection from criminal or civil liability for any individuals.
  • Corporate cases should not be resolved without a clear plan to resolve related individual cases before the statute of limitations expires and declinations as to individuals in such cases must be memorialized.
  • Civil attorneys should consistently focus on individuals as well as the company and evaluate whether to bring suit against an individual based on considerations beyond that individual’s ability to pay.

Since its dissemination, a few points have been clarified that were otherwise in question.

About a month after its publication, U.S. Assistant Attorney General Leslie Caldwell emphasized the Yates memo’s requirement that corporations must disclose all relevant facts regarding misconduct to receive cooperation credit. Caldwell went so far to say that companies must affirmatively seek relevant facts regarding misconduct.

For example, Hospital X is accused of Medicare fraud, waste, and abuse (FWA) in the amount of $15 million. The Yates memo dictates that management at the hospital proactively investigate the allegations and report its findings to the federal government. The memo mandates that the hospital “show all its cards” and turn itself in prior to making any defense.

The problem here is that FWA is such a subjective determination.

What if a hospital bills Medicare for inplantable cardioverter defibrillator, or ICD, for patients that had coronary bypass surgery or angioplasty within 90 days or a heart attack within 40 days? What if the heart attack was never documented? What if the heart attack was so minor that it lasted under 100 milliseconds?

The Medicare National Coverage Determinations are so esoteric that your average Medicare auditor could very well cite a hospital for billing for an ICD even when the patient’s heart attack lasted under 100 milliseconds.

Yet, according to the Yates memo, the hospital is required to present all relevant facts before any defense. What if the hospital’s billing person is over zealous in detecting mis-billings? The hospital could very well have a legal defense as to why the alleged mis-billing is actually compliant. What about a company’s right to seek counsel and defend itself? The Yates memo may require the company to turn over attorney-client privilege.

The second point that has been clarified since the Yates’ memo’s publication came from Yates herself.

Yates remarks that there will be a presumption that the company has access to identify culpable individuals  unless they can make an affirmative showing that the company does not have access to it or are legally prohibited from producing it.

Why should this matter? It’s only a memo, right?

Since its publication, the DOJ codified it into the revised U.S. Attorneys’ Manual, including the two clarifying remarks. Since its inception, the heads of companies have been targeted.

A case was brought against David Bostwick, the founder, owner and chief executive officer of Bostwick Laboratories for  allegedly provided incentives to treating physicians in exchange for referrals of patients who would then be subjected to these tests.

When the pharmaceutical company Warner Chilcott was investigated for health care fraud prosecutors also went after W. Carl Reichel, the former president, for his alleged involvement in the company’s kickback scheme.

Prior to the Yates’ memo, it was uncommon for health care fraud investigations to  involve criminal charges or civil resolutions against individual executives. But executives of health care companies accused of fraud, waste, and abuse should be very wary given this apparent new focus of law enforcement.

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