A&B Healthcare Week in Review, July 5, 2014

I. REGULATIONS, NOTICES, & GUIDANCE

• On July 1, 2014, the Centers for Medicare and Medicaid Services (CMS) released a proposed rule entitled “Medicare and Medicaid Programs; CY 2015 Home Health Prospective Payment System Rate Update; Home Health Quality Reporting Requirements; and Survey and Enforcement Requirements for Home Health Agencies”. This proposed rule would update the Home Health Prospective Payment System (HH PPS) rates, including the national, standardized 60-day episode payment rates, the national per-visit rates, and the non-routine medical supply (NRS) conversion factor under the Medicare prospective payment system for home health agencies (HHAs), effective January 1, 2015. As required by the Affordable Care Act (ACA), this rule implements the second year of the four-year phase-in of the rebasing adjustments to the HH PPS payment rates. This rule provides information on CMS’ efforts to monitor the potential impacts of the rebasing adjustments and the ACA-mandated face-to-face encounter requirement. This rule also proposes: changes to simplify the face-to-face encounter regulatory requirements; changes to the HH PPS case-mix weights; changes to the home health quality reporting program requirements; changes to simplify the therapy reassessment timeframes; a revision to the Speech-Language Pathology (SLP) personnel qualifications; minor technical regulations text changes; and limitations on the reviewability of the civil monetary penalty provisions. Finally, this proposed rule also discusses Medicare coverage of insulin injections under the HH PPS, the delay in the implementation of ICD-10-CM, and solicits comments on a HH value-based purchasing (HH VBP) model. CMS projects that Medicare payments to home health agencies in CY 2015 will be reduced by 0.30 percent, or -$58 million, based on the proposed policies. The proposed decrease reflects the effects of the 2.2 percent home health payment update percentage ($427 million increase)and the rebasing adjustments to the national, standardized 60-day episode payment rate, the national per-visit payment rates, and the NRS conversion factor ($485 million decrease). The proposal will be published in the Federal Register on July 7, 2014; comments are due September 2, 2014. A fact sheet on the proposed rule may be found here.
• On July 2, 2014, CMS released a proposed rule entitled “Medicare Program; End-Stage Renal Disease Prospective Payment System, Quality Incentive Program, and Durable Medical Equipment, Prosthetics, Orthotics, and Supplies”. This rule proposes to update and make revisions to the End-Stage Renal Disease (ESRD) prospective payment system (PPS) for calendar year (CY) 2015. This rule also proposes to set forth requirements for the ESRD quality incentive program (QIP), including payment years (PYs) 2017 and 2018. This rule also proposes to make a technical correction to remove outdated terms and definitions. In addition, this rule proposes to set forth the methodology for adjusting Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS) fee schedule payment amounts using information from the Medicare DMEPOS Competitive Bidding Program (CBP); make alternative payment rules for DME and enteral nutrition under the Medicare DMEPOS CBP; clarify the statutory Medicare hearing aid coverage exclusion and specify devices not subject to the hearing aid exclusion; update the definition of minimal self-adjustment regarding what specialized training is needed by suppliers to provide custom fitting services if they are not certified orthotists; clarify the Change of Ownership (CHOW) and provides for an exception to the current requirements; revise the appeal provisions for termination of a contract and notification to beneficiaries under the Medicare DMEPOS CBP, and add a technical change related to submitting bids for infusion drugs under the Medicare DMEPOS CBP. The proposed rule will be published in the Federal Register on July 11, 2014; comments are due September 2, 2014. A fact sheet addressing the general payment provisions of the ESRD PPS for CY 2015 and the issues related to DMEPOS in the proposed rule may be found here. A separate fact sheet addressing the quality provisions of the ESRD PPS for CY 2015 may be found here.
• On July 3, 2014, CMS released a proposed rule entitled “Medicare and Medicaid Programs: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs; Physician-Owned Hospitals: Data Sources for Expansion Exception; Physician Certification of Inpatient Hospital Services; Medicare Advantage Organizations and Part D Sponsors: Appeals Process for Overpayments Associated with Submitted Data”. This proposed rule would revise the Medicare hospital outpatient prospective payment system (OPPS) and the Medicare ambulatory surgical center (ASC) payment system for CY 2015 to implement applicable statutory requirements and changes arising from CMS’ continuing experience with these systems. The proposed rule describes proposed changes to the amounts and factors used to determine the payment rates for Medicare services paid under the OPPS and those paid under the ASC payment system. In addition, this proposed rule would update and refine the requirements for the Hospital Outpatient Quality Reporting (OQR) Program and the ASC Quality Reporting (ASCQR) Program. The proposed rule will be published in the Federal Register on July 11, 2014; comments are due September 2, 2014. A fact sheet addressing the general quality provisions of the Hospital OPPS and ASC proposed rule for CY 2015 may be found here. A separate fact sheet addressing the payment provisions of the proposed rule may be found here.
• On July 3, 2014, CMS released a proposed rule entitled “Medicare Program; Revisions to Payment Policies under the Physician Fee Schedule, Clinical Laboratory Fee Schedule, Access to Identifiable Data for the Center for Medicare and Medicaid Innovation Models & Other Revisions to Part B for CY 2015.” This proposed rule addresses changes to the physician fee schedule, and other Medicare Part B payment policies to ensure that CMS’ payment systems are updated to reflect changes in medical practice and the relative value of services, as well as changes in the statute. The rule will be published in the Federal Register on July 11, 2014; comments are due September 2, 2014. A fact sheet outlining proposed changes for the physician value-based payment modifier may be found here; a fact sheet on proposed changes to physician quality and other Medicare programs may be found here; a fact sheet outlining proposed policy and payment changes to the Medicare physician fee schedule for CY 2015 may be found here.
• On July 1, 2014, the Food and Drug Administration (FDA) issued a request for comments on the “Food and Drug Administration Fiscal Year 2014-2018 Strategic Priorities Document”. FDA is seeking public comments on its draft Strategic Priorities Fiscal Year (FY) 2014-2018 document. The purpose of this document is to outline FDA's strategic intentions and plans for the next 4 years. This document identifies five cross-cutting strategic priorities and four core mission goals that will guide efforts to achieve FDA's public health mission and to fulfill its role in supporting the larger mission and strategic goals of the Department of Health and Human Services (HHS). The five cross-cutting strategic priorities are: (1) Regulatory science, (2) globalization, (3) safety and quality, (4) smart regulation, and (5) stewardship. The four core mission goals are: (1) enhance oversight of FDA-regulated products, (2) improve and safeguard access to FDA-regulated products to benefit health, (3) promote better informed decisions about the use of FDA-regulated products, and (4) strengthen organizational excellence and accountability. Responses are due July 31, 2014.
• On July 1, 2014, FDA announced that the agency is reopening the comment period for the notice of public hearing, published in the Federal Register of February 24, 2014 (79 FR 10168), requesting comment on how to improve or alter the current Over-the-Counter (OTC) Monograph Process for reviewing nonprescription drugs marketed under the OTC Drug Review. Comments are now due July 31, 2014. More information may be found here.
• On July 2, 2014, FDA issued a proposed rule entitled “Additions and Modifications to the List of Drug Products That Have Been Withdrawn or Removed From the Market for Reasons of Safety or Effectiveness”. FDA is proposing to amend its regulations to revise the list of drug products that may not be compounded under the exemptions provided by the Federal Food, Drug, and Cosmetic Act because the drug products have been withdrawn or removed from the market after the drug products or components of such drug products were found to be unsafe or not effective. Specifically, the proposed rule would add 25 drug products to this list of drug products and modify the description of one drug product on this list to add an exception. These revisions are necessary because new information has come to the Agency's attention since March 8, 1999, when FDA published the original list as a final rule. Comments must be submitted by September 2, 2014.
• On July 2, 2014, FDA issued a revised request for nominations entitled “Bulk Drug Substances That May Be Used To Compound Drug Products in Accordance With Section 503A of the Federal Food, Drug, and Cosmetic Act”. FDA is preparing to develop a list of bulk drug substances that may be used to compound drug products in accordance with section 503A of the Federal Food, Drug, and Cosmetic Act, although they are neither the subject of a United States Pharmacopeia (USP) or National Formulary (NF) monograph nor components of FDA-approved drugs. In response to a notice published in the Federal Register of December 4, 2013, interested groups and individuals previously nominated a wide variety of substances for this list. However, many of those nominations either were for a substance that is already the subject of a USP monograph or a component of an FDA-approved drug, were not for bulk drug substances used in compounding as active ingredients, or did not include sufficient information to justify inclusion of the nominated substance on the list. To improve the efficiency of the process for developing the list of bulk drug substances that may be used to compound drug products under section 503A, FDA is providing more detailed information on what it needs to evaluate a nomination. Because the deadline for nominations has passed, FDA is reopening the nomination process so that interested persons can submit nominations of bulk drug substances that are not the subject of a USP or NF monograph or a component of an FDA-approved drug. Interested persons will also have the opportunity to provide adequate support to justify placement of the substances on the list. Bulk drug substances that were previously nominated will not be further considered unless they are re-nominated and those nominations are adequately supported. Substances that are already eligible for use in compounding or that are not adequately supported will not be placed on the list. Submissions must be received by September 30, 2014.
• On July 2, 2014, FDA issued a revised request for nominations entitled “Bulk Drug Substances That May Be Used To Compound Drug Products in Accordance With Section 503B of the Federal Food, Drug, and Cosmetic Act, Concerning Outsourcing Facilities”. FDA is preparing to develop a list of bulk drug substances (active ingredients) that may be used to compound drug products in accordance with section 503B of the Federal Food, Drug, and Cosmetic Act concerning outsourcing facilities. In response to a notice published in the Federal Register of December 4, 2013, interested groups and individuals previously nominated a wide variety of substances for this list. However, many of those nominations were not for bulk drug substances used in compounding as active ingredients, and none included sufficient information to justify inclusion of the nominated substances on the list. To improve the efficiency of the process for developing the list of bulk drug substances that may be used to compound drug products under section 503B of the FD&C Act, FDA is providing more detailed information on what it needs to evaluate a nomination. Because the deadline for nominations has passed, FDA is reopening the nomination process so that interested persons can submit nominations of bulk drug substances and provide adequate support to justify placing the substances on the list. Bulk drug substances that were previously nominated will not be further considered unless they are re-nominated and adequately supported. Substances that are not adequately supported will not be placed on the list. Submissions must be received by September 30, 2014.
• On July 2, 2014, FDA announced the availability of draft guidance for industry entitled “Current Good Manufacturing Practice—Interim Guidance for Human Drug Compounding Outsourcing Facilities under Section 503B of the FD&C Act”. This draft guidance describes FDA's current expectations regarding compliance with current good manufacturing practice (CGMP) requirements for facilities that compound human drugs and register with FDA as outsourcing facilities under the Federal Food, Drug, and Cosmetic Act, in accordance with provisions added by the Drug Quality and Security Act. FDA is also soliciting public input on specific potential alternative approaches regarding certain CGMP requirements. These potential approaches are explained in detail in the draft guidance. Comments must be received by September 2, 2014 before the Agency begins work on a final version of the guidance. More information may be found here.
• On July 2, 2014, FDA announced the availability of a guidance entitled “Pharmacy Compounding of Human Drug Products Under Section 503A of the Federal Food, Drug, and Cosmetic Act.” The guidance announces the Agency's intention with regard to enforcement of the Federal Food, Drug, and Cosmetic Act to regulate entities that compound drugs, now that the FD&C Act has been amended by the Drug Quality and Security Act. Comments may be submitted at any time. More information may be found here.
• On July 3, 2014, CMS announced that it had submitted an information collection request (ICR) to OMB for review entitled “Durable Medical Equipment, Prosthetics, Orthotics and Supplies (DMEPOS) Competitive Bidding Program”. Section 302 of the Medicare Modernization Act (MMA) amended section 1847 of the Social Security Act (the Act) to require the implementation of the DMEPOS competitive bidding program. The MMA also requires the Secretary to re-compete contracts not less often than once every 3 years. The Round 1 Rebid contract period for all product categories except mail-order diabetic supplies expired on December 31, 2013. The most recent approval for this information collection request (ICR) was issued by OMB on June 10, 2013. That ICR included the estimated burden to collect the information in bidding Forms A and B for the Round 1 Re-compete. CMS is now seeking approval to collect the information in Forms A and B for competitions that will occur before 2017. For these upcoming competitions CMS will publish a slightly modified version of the Request for Bids (RFB) instructions and accompanying Forms A and B so that suppliers will be better able to identify and understand the requirements of the program. CMS decided to modify the RFB instructions and forms based on their experience from the last round of competition. The end result is expected to produce more complete and accurate information to evaluate suppliers. No new collection requirements have been added to the modified RFB instructions or Form A or B. Finally, CMS is retaining without change the Change of Ownership (CHOW) Purchaser Form and the CHOW Contract Supplier Notification Form, the Subcontracting Disclosure Form, and Forms C and D and their associated burden under this ICR. Comments are due August 4, 2014.
• July 3, 2014, FDA announced that a proposed information collection, entitled “Antiparasitic Drug Use and Antiparasitic Resistance Survey”, had been submitted to OMB for budget review. The results from this survey will provide FDA information that can be used to make decisions about future approaches to antiparasitic drugs. FDA will make the results of the survey publicly available. Comments are due August 4, 2014.
• On July 3, 2014, FDA announced an opportunity for public comment on a proposed collection entitled “Exports: Notification and Recordkeeping Requirements”. This notice solicits comments on export notification and recordkeeping requirements for persons exporting human drugs, biological products, devices, animal drugs, food, cosmetics, and tobacco that may not be marketed or sold in the United States. Comments are due September 2, 2014.
• On June 30, 2014, the Internal Revenue Service (IRS) issued final regulations entitled “Tax Credit for Employee Health Insurance Expenses of Small Employers”. The document contains final regulations on the tax credit available to certain small employers that offer health insurance coverage to their employees. The rule establishes eligibility requirements for a tax credit introduced under the ACA, which has been available since 2010 but was implemented through IRS notices rather than formal rulemaking.

II. LEGISLATION & COMMITTEE ACTION

U.S. Senate

• The Senate was in recess this week and returns to regular legislative business Monday.
• On July 2, 2014, Senators Ed Markey (D-MA), Richard Blumenthal (D-CT), Elizabeth Warren (D-MA), Sherrod Brown (D-OH), and Dick Durbin (D-IL) issued a letter to OMB urging the administration to release draft guidance from FDA regarding federal oversight of laboratory developed diagnostic tests (LDTs). “For years this draft guidance has languished at OMB causing continued unpredictability and uncertainty for industry, clinicians, patients and the general public,” write the lawmakers. “These tests and their results are increasingly relied on by patients and medical professionals to help predict the most appropriate course of treatment and care. These tests hold great promise to customize healthcare to be more efficient and targeted for an individual patient.” A press release on the letter may be found here.

House of Representatives

• The House was in recess this week and returns to regular legislative business Monday.

III. REPORTS, STUDIES, & ANALYSES

• On June 30, 2014, the US Government Accountability Office (GAO) published a report entitled “Comparison of DOD, Medicaid, and Medicare Part D Retail Reimbursement Prices”. This report compares retail reimbursement prices paid by the Department of Defense (DOD), Medicaid, and Medicare Part D for a sample of prescription drugs, and describes factors affecting these prices. GAO found that Medicaid paid the lowest average net prices across a sample of 78 high-utilization and high-expenditure brand-name and generic drugs when compared to prices paid by DOD and Medicare Part D. Specifically, Medicaid's average net price for the entire sample was $0.62 per unit, while Medicare Part D paid an estimated 32 percent more ($0.82 per unit) and DOD paid 60 percent more ($0.99 per unit). Similarly, Medicaid paid the lowest net price for the subset of brand-name drugs in the sample, while DOD paid 34 percent more and Medicare Part D paid an estimated 69 percent more. Medicaid also paid the lowest net price for the subset of generic drugs, while Medicare Part D paid 4 percent more and DOD paid 50 percent more. GAO attributed the lower costs in large part to steeper rebates from drug manufacturers.
• On July 1, 2014, the Office of Inspector General (OIG) released an audit and associated report on the ACA Federally-Facilitated and State-Based Marketplaces (FFMs, SBMs), examining how the Marketplaces ensured accuracy of information submitted by applicants for enrollment in qualified health plans (QHPs) and for advance payment of premium tax credits and cost sharing reductions. OIG found that during the period of review (October through December 2013) Marketplaces were unable to resolve most inconsistencies, which they reported most commonly as citizenship and income. Specifically, the Federal Marketplace was unable to resolve 2.6 million of 2.9 million inconsistencies because the CMS eligibility system was not fully operational. OIG found that SBMs had varied ability to resolve inconsistencies: four states reported that they were unable to resolve inconsistencies; seven reported that they resolved inconsistencies without delay; one reported that it resolved only some inconsistencies; and three reported that their State Medicaid offices resolved inconsistencies. OIG also sent a letter to Congress indicting that these are the first two reports in a series relating to operations of the Marketplaces.
• Last week Avalere Health released the results of a recently-completed survey which finds that 90% of pharmaceutical and biotech manufacturers are offering cost-sharing assistance to exchange patients. However, the results suggest that the type of support, generosity and program structure vary widely. Additionally, while most companies are beginning to transition patients off of patient assistance programs (PAPs), companies are doing so incrementally given ongoing uncertainty in the market. The full report is not availably publicly. More information may be found here.
• On July 2, 2014, the White House Council of Economic Advisers released a report entitled “Missed Opportunities: The Consequences of State Decisions Not to Expand Medicaid”. The report details the effects of state decisions regarding Medicaid expansion on access to care, financial security, overall health and well-being of residents, and state economies. The report asserts that the 24 states that opted not to expand their Medicaid programs under the ACA are missing out on billions of dollars in federal funds, economic expansion, and improved health outcomes.
• On July 2, 2014, a study published in the New England Journal of Medicine finds that approximately 20 million Americans had gained coverage as of May 1, 2014 under the ACA. The figure includes all existing coverage expansions under the health law. The authors note: “We do not know yet exactly how many of these people were previously uninsured, but it seems certain that many were.” The report offers a “progress report” on the impact of the law on factors such as the number of uninsured Americans and the adequacy of insurance, but cautions “It may take years, however, before we can render a considered judgment on these critical outcomes”.

IV. OTHER HEALTH POLICY NEWS

• On June 30, 2014, the US Supreme Court ruled 5-4 in Burwell v. Hobby Lobby Stores, Inc. that “closely held” companies can claim a religious exemption from the ACA requirement that they offer birth-control coverage in their employee health plans. The owners of Hobby Lobby, a chain of retail arts and crafts stores, along with the owners of Conestoga Wood Specialties Corp., had challenged the law’s requirement that health plans cover FDA-approved contraceptives without cost sharing. Writing for the majority, Justice Samuel Alito Jr. asserted that the requirement imposes a substantial burden on the companies’ religious liberty; however, he framed the ruling as “very specific” to the case before the court, and said it "should not be understood to hold that all insurance-coverage mandates, e.g. for vaccinations or blood transfusions, must necessarily fall if they conflict with an employer's religious beliefs." He suggested that the government could decide to assume the cost of providing contraception to women who are unable to obtain the coverage because of their employers' objections. In her dissent, Justice Ruth Bader Ginsburg warned that the ruling could have unintended repercussions: “Although the court attempts to cabin its language to closely held corporations,” she wrote, “its logic extends to corporations of any size, public or private.” In a statement following the ruling, Senate Majority Leader Harry Reid (D-NV) said: “If the Supreme Court will not protect women’s access to health care, then Democrats will. We will continue to fight to preserve women’s access to contraceptive coverage and keep bosses out of the examination room.” On July 2, 2014, Representatives Diana DeGette (D-CO) and Jerrold Nadler (D-NY) announced that they will introduce legislation in response to the ruling to “…ensure that for-profit employers cannot use [the Religious Freedom Restoration Act (RFRA) of 1993] to override women’s access to contraception.”
• On June 30, 2014, the US Supreme Court ruled in Harris v. Quinn that home health aides in Illinois cannot be forced to pay union dues. Writing for the 5-4 majority, Justice Alito indicated that the ruling narrowly applied to home health workers, who, unlike “full-fledged public employees…are almost entirely answerable to the customers and not to the State”.
• This week President Obama announced that he would nominate former Proctor & Gamble Chief Executive Officer Robert McDonald as Veterans Affairs Secretary. The announcement follows the release of a White House investigation—summary here—into the problems at VA hospitals across the country, which determined that "…there are significant and chronic systematic failures" that must be addressed within the Department.

This advisory is published by Alston & Bird LLP’s Health Care practice area to provide a summary of significant developments to our clients and friends. It is intended to be informational and does not constitute legal advice regarding any specific situation. This material may also be considered attorney advertising under court rules of certain jurisdictions.