340B Drug Pricing Program Litigation Update: Court Rejects CMS Drug Pricing Cuts

On December 27, 2018, the U.S. District Court for the District of Columbia issued an opinion that ruled against the Trump Administration in its plan to cut funding from the 340B Drug Pricing Program (“340B Program”).[1]

Background

As discussed in a November 17, 2018 posting on this blog, the reimbursement rates for the 340B Program were significantly reduced when the Centers for Medicare & Medicaid Services (“CMS”) promulgated the “Medicare Program: Hospital Outpatient Prospective Payment and Ambulatory Surgical Center Payment Systems and Quality Reporting Programs” (the “Final Rule”). The Final Rule decreased the reimbursement rates for participating hospitals purchasing medicine through the 340B Program from 6% above the average sales price to 22.5% below the average sales price.[2]

After the Final Rule was published on November 13, 2017, the American Hospital Association, America’s Essential Hospitals and the Association of American Medical Colleges (the “Plaintiffs”) sued the Department of Health and Human Services (“HHS”) and sought a preliminary injunction to stop the enforcement of the Final Rule.[3] The motion for the preliminary injunction was denied, so the Final Rule’s reimbursement cuts went into effect on January 1, 2018. Continue Reading

Day 3 Notes from the 2019 JP Morgan Healthcare Conference

The 2019 JP Morgan Healthcare Conference did not see multiple blockbuster announcements like in some earlier years but instead showcased an industry hard at work calmly and meaningfully trying to address and innovate to solve the industry’s structural, systemic and demographic challenges. We saw some companies trying to respond to the current fragmentation of healthcare delivery and financing through expansion of their vertical continuum, while others continued to strive to use technological solutions to shift behaviors and close gaps. There frankly was little question that the industry is continuing to move toward value-based and risk-based reimbursement – the challenge now is building or buying the necessary infrastructure, educating stakeholders and obtaining commitment and engagement, and structuring appropriate partnerships and relationships with other industry participants. We expect the pace of acquisitions and alliances to continue at current or higher levels as the industry repositions for this reimbursement shift. Similarly, the industry appears ready to innovate with artificial intelligence and machine learning, as incumbent technology providers develop new products and strategy and disruption is expected from new market entrants.

There also was no panic nor concerns voiced in the presentations we attended about the Affordable Care Act or the other possible results of the current political situation. Rather, several presenters noted that the exchange population relatively is minimal in size as compared to the commercial and Medicare/Medicaid markets. With exchange enrollment holding relatively steady and many plans reaching profitability with their exchange products, plans and providers are looking instead to the coming massive transformation of the commercial and federal products markets as risk further proliferates. Continue Reading

Day 2 Notes from the 2019 JPMorgan Healthcare Conference

What is Quality Anyways?: James Hinton, the CEO of Baylor Scott and White, got a good laugh from the audience when he said that he was proud to be one of the five or six hundred hospitals in the nation’s top 100 hospitals. And looking at the multiple “ego wall” slides we saw in day one and day two of the conference, all of which systems or companies were recognized for their outstanding quality and achievements, it brings to mind the old Lake Woebegon comment by Garrison Keillor that their town is a place where all of the children are above average. As some/many may ask, if everyone is doing so well per the awards, then how is it that we as a nation are not doing well with our health and our healthcare system? Is it just “those other guys” who are not winning those awards that are so far below average and dragging us all down in quality and exceeding in costs? Perhaps there is a place for some new thinking on measuring quality based on meeting patient goals, rather than third party quality organization goals. Put another way, healthcare today still is focusing more on process than results. Did you get your mammogram is the question, rather than did you make it another year without succumbing to a major disease. Continue Reading

The Eliminating Kickbacks in Recovery Act: An Altered Landscape for Financial Relationships with Clinical Laboratories

Section 1822 of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act (the “SUPPORT Act”), passed at the end of October 2018, includes the “Eliminating Kickbacks in Recovery Act of 2018” (“EKRA”). Although EKRA was created to address “patient brokering,” the practice by recovery homes and treatment facilities of engaging third parties, or “body brokers,” to recruit patients in exchange for kickbacks, EKRA’s language prohibits a much broader scope of conduct. Specifically, EKRA has significant implications for any financial relationship that any clinical laboratory has with any individual or legal entity that generates business for it, even for clinical laboratories not involved in addiction recovery programs – including ownership, investment, employment, lease, purchasing, and independent contractor arrangements. Continue Reading

Day 1 Notes on the 2019 JP Morgan Healthcare Conference

Please Don’t Poke the Baby – Sharing a best practice and talking about taking a local hospital learning and turning it into a systemwide approach, Mark Harrison of Intermountain Healthcare shared the fact that taking fewer blood samples from neonatal intensive care unit (NICU) babies was shown to lead to less infections in the NICU and on average a two week earlier discharge from the NICU. Who knew?

Drug Pricing – Drug pricing was on many lips today. Intermountain Healthcare launched Civica to address generic drug pricing and reported that it had approximately 500 hospital members now. More than one-third of US hospitals (!!) have inquired about joining Civica, which provides an exclamation point on the issue of generic drug pricing and availability. Mark Harrison of Intermountain said that products would start being available in 2019. He also noted that Civica doesn’t have to produce pills if the generic manufacturers will engage appropriately. Teva predicted generic drug market stabilization in their presentation today, which was also noted in the Walgreens Boots presentation as well. Walgreens Boots thought that the pace of cost reduction has slowed though. Let’s see who wins this game of “chicken.” Also today, Northwell announced that they were launching their own pharmacy benefit management (PBM) operation. We expect to see a lot of realignment and new entries in the PBM space, given the recent mergers and other activity (CVS/Aetna, Cigna/ESI, Anthem/IngenioRx). Much of the PBM space is being rethought now as its scope can expand to chronic condition management (an objective highlighted by Cigna today) or to medical benefits management as ESI is hoping with its recent acquisition of eviCore. Continue Reading

“Pathways to Success” Update: CMS Issues Final Rule on Changes to the ACO Program

As discussed in our August 16, 2018 blog post, CMS Proposes Massive Changes to ACO Program – Pushing Providers to Accept Downside Risk, on August 9, 2018, the Centers for Medicare & Medicaid Services (“CMS”) published a proposed rule referred to as “Pathways to Success” (the “Proposed Rule”) to redesign the Medicare Shared Savings Program (“MSSP” ). As proposed, the redesign would require Accountable Care Organizations (“ACOs”) to accept downside risk or shared losses sooner than was originally scheduled under the then-current MSSP. Continue Reading

Texas v. United States: Texas Federal Court “Strikes Down” the ACA

On Friday, December 14, 2018, a federal district court judge in Texas issued a widely anticipated opinion that struck down the entire Patient Protection and Affordable Care Act (“ACA”) as unconstitutional. The judge ruled in favor of the plaintiffs by determining that the “individual mandate”[1] is no longer a tax and is therefore an unconstitutional exercise of congressional authority. The judge also found that the individual mandate was inseverable from the rest of the ACA, which makes the entire ACA, not just the guaranteed issue and community rating provisions, unconstitutional. Continue Reading

Reforming America’s Healthcare System Through Choice and Competition: The Trump Administration Recommends Healthcare De-Regulation

On December 3, 2018, the U.S. Department of Health and Human Services (“HHS”), in collaboration with the Departments of the Treasury and Labor, the Federal Trade Commission, and several offices within the White House, produced a 119-page report outlining recommendations to reform the healthcare system. This report is in response to Executive Order 13813, in which President Donald Trump directed the Administration, to the extent consistent with law, to facilitate “the development and operation of a healthcare system that provides high-quality healthcare at affordable prices” through the promotion of choice and competition. Continue Reading

OCR Seeks Ideas on HIPAA Rule Changes to Promote Value-Based Care and Coordinated Care

The Office for Civil Rights (“OCR”) issued a request for information (“RFI”) to assist OCR in identifying provisions of the Health Insurance Portability and Accountability Act (“HIPAA”) privacy and security regulations (the “HIPAA Rules”) that may impede the transformation to value-based health care or that limit or discourage coordinated care among individuals and covered entities without meaningfully contributing to the protection of the privacy or security of individuals’ protected health information (“PHI”). Continue Reading

California Supreme Court Confirms Validity Of Meal Period Waivers For Healthcare Employees

On December 10, 2018, the California Supreme Court handed down its unanimous decision in Gerard, et al. v. Orange Coast Memorial Medical Center, affirming the Court of Appeal ruling that voluntary meal period waivers are permissible for healthcare employees who work long shifts, even if they work more than 12 hours. By allowing healthcare employees to waive one of their two meal periods, the Gerard decision preserves a choice for employees who work 12-hour shifts. They continue to have the flexibility to work shifts that span 12 ½ hours with one 30-minute meal period or shifts that span 13 hours and include two 30-minute meal periods.

Sheppard Mullin argued this case before the California Supreme Court and has represented Orange Coast Memorial Medical Center in the case since 2008.

Not only was this case hard fought throughout California courts for 10 years, but it also involved novel legislative action. Notably, it was the only wage-hour victory for an employer before the California Supreme Court in 2018. Continue Reading

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