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How does the recent healthcare reform law affect manufacturers?
Earlier this year, President Obama signed Public Law PL 111-148, the Patient Protection and Affordable Care Act. This law introduces sweeping and controversial changes to the American healthcare system by limiting an insurer’s ability to deny coverage and expanding the role of state and federal governments in our healthcare affairs.
Most of the press has been about Title I, “Quality, Affordable Health Care for all Americans.” But the law is 906 pages long; surely ample room for Congress to stash other goodies. I just reviewed the entire document, looking for items that affect QPharma and its clients. Sure enough, I found a number of items that directly impact upon Life Science manufacturers. Today’s blog consists of summaries of what I found, along with a couple of non-sequiter notes at the end.
Note: at last count there were some two dozen lawsuits seeking to overturn various sections of the PPACA, so this may be subject to change!
Title III, Improving the Quality and Efficiency of Health Care
Section 3507 directs FDA to consider if summarizing risks and benefits of prescription drugs in a standardized labeling table would “improve healthcare decision making by clinicians and patients and consumers.” [sic] Within one year (i.e. by March 2011), FDA is to consult with health care groups, manufacturers, representatives of minority advocacy groups, and experts in women’s and children’s health, and determine if standardized labeling should be implemented; and if so, implement Final Rules within three years.
This is, in short, a prescription drug version of the tried-and-true Principle Display Panel (“Drug Facts”) box on most non-prescription drug products as established by the Over-The-Counter regulations in 21 CFR 201 Subpart C, to become part of the labeling for some or potentially most prescription medicines.
Stay tuned!
Title IV, Prevention of Chronic Disease and Improving Public Health
Section 4203 amends the Rehabilitation Act of 1973, Title V, section 510, to require FDA and the Architectural and Transportation Barriers Compliance Board, within 24 months (i.e., mid-2012), to promulgate regulations establishing the minimum technical criteria for medical diagnostic equipment used in hospitals, clinics, physicians’ offices, emergency rooms, and “other medical settings” to ensure that the equipment allows independent entry to, use of, and exit from the equipment by disabled persons.
If you design and manufacture certain types of large diagnostic devices, this is could be huge! 21 CFR 820.30(c) and ISO 13485:2003:7.3.2 already require Medical Device firms to include specific requirements of users and patients as design criteria. The basic need for Medical Devices to accommodate, to the extent practical, the capabilities of the patient has already become a E.U. expectation (MMD 2007/47/EC, Annex II, paragraph 1, amendment to Annex I of 93/42/EEC), but this new law authorizes the little-known A&TBCB* to come up with specific technical requirements that will then be one of the standards that are used in the design of future diagnostic devices. Like compliance with other consensus standards, it is entirely possible that you may have to redesign your products to meet the new requirements even if you feel your existing design is fine (try getting NRTL approval of your electronic Medical Device on the argument that it’s “just as good” as meeting the latest revision of IEC 60601 and see how far you get). If you make diagnostic devices for which accessibility could be an issue, you will want to watch this carefully to see how it develops!
*I admit it: I never heard of them either until I read this section of the Act and looked them up at http://www.access-board.gov/about.html
Title V, Health Care Workforce
Have you ever been visited by an FDA official wearing a smart white uniform? Those are members of the Public Health Service’s Commissioned Corps (the Surgeon General is an Admiral in the Corps). Outside of FDA headquarters these folks are a rare sight because their numbers were capped by law at 2,800. Section 5209 removes that cap, and Section 5210 established a “Ready Reserve,” based on the military’s reserve forces, to backfill regular PHS/FDA duties. This is backed by a financial commitment of five million dollars for establishing this reserve force, increasing to over twelve million. You’ll no doubt be impressed by the professional attitude and appearance of these young officers...as they hand you a 483.
Title VI, Transparency and Program Integrity
The most widespread changes for manufacturers and distributors are probably those found in Title VI, which was originally the “Physician Payment Sunshine Act” before it got absorbed into the overall reform legislation (you will still hear people refer to Title VI as the “Sunshine Act”). This severely limits what gifts or other considerations Life Science firms can give to hospitals and practitioners; requires extensive reporting; and introduces some changes to the Prescription Drug Marketing Act regarding reporting free samples given to doctors. (Of drugs; on a federal level, there continues to be no equivalent for Medical Devices – but check your state’s regulations.) Unfortunately, the elements of Title VI consist mostly of amendments to the Social Security Act and until they are consolidated into the United States Code, they can be very difficult to read and understand (pending transcription, you’ll need the healthcare bill, and the amendments to the healthcare bill in Title X, and the social security law in front of you to make sense of it all).
The requirements are too extensive to cover here in detail, but I’ll try to hit the highlights. Meanwhile, please check our previous blog entry on Title VI at http://validationandregulatorycompliance.blogspot.com/2010/06/physician-payment-sunshine-provisions.html and if you want more information, e-Mail me at Jeff.Boatman@QPharmacorp.com and we’ll “take it off-line.”
Section 6001 modifies existing limits on a doctor’s ability to partly or completely own hospital facilities or refer patients to facilities they in turn own, and requires certain notifications to HHS and patients. Some of this deals with rural facilities where there may not be many alternatives for patients. This probably doesn’t apply to many manufacturers, but several industry watchdog groups have investigated and publicly criticized drug firms for not carefully screening their physician consultants. If a drug or device firm is hiring doctors as bone fide consultants, then depending on the capacity they are hired for, you might want to make sure that they are in compliance with this section. Ditto the self-referral rules in Section 6003 where doctors happen to own their own diagnostic equipment (MRIs, PET scanners, CT scanners).
Section 6002 requires reports of corporate payments to doctors, starting in March 2013. This section does not itself establish specific limits on what a doctor may or may not accept (but see other rules such as the PhRMA and AdvaMed Codes of Conduct, as well as individual state’s legislation that prohibit certain gifts and expenditures), just what needs to be reported, which is: practically everything! Furthermore, this information will then become publicly available through the Internet, and to top it off, HHS will send reports to each state so that the state government can take any actions according to their own laws and regulations (the quid pro quo being that your state government will not be able to require you to file a separate report directly to them – but a state can still demand reports when they require information that goes beyond the scope of this section).
By the way, I hear a lot of confusion about this: for example, that this only applies to cash payments to doctors, or only applies to prescription drug manufacturers. Be warned! It applies to anything of value given to, exchanged with, or assigned to any practitioner or teaching hospital; and it applies not only to drug firms but any also the manufacturer or distributor of any “biological product, device, or medical supply” that is or could conceivably be reimbursable under Medicare, Medicaid, or CHIPs. And bear in mind that FDA interprets the term “manufacturer” far more broadly than common parlance; to quote the Act: “any entity which is engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply…or provides support to such entity with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological, or medical supply.”
In other words: if you make a healthcare product or market a healthcare service that Uncle Sam could wind up paying for, then you are subject to this section, period!
There are a mind-boggling number of exclusions to the reporting requirements (including income earned by the doctor because he happens to own your common stock – but if you gave the doctor that stock, then that stock transfer is reportable). Some of the more common scenarios include:
1. The doctor in question is not an independent practitioner acting as your consultant but your full-time employee who just happens to have a medical degree (i.e. not a practicing physician).
2. You are not required to report payments or transfers of less than $10, but: a) you still need to follow the applicable PhRMA/AdvaMed codes (which may be “voluntary,” but some states require you to follow them or their own similar versions), and b) if you allow “payments or transfers”—and yes, that includes your Sales Rep dropping off ballpoints—you will then need an “aggregate spend” policy and program to track the total amount of transfers to each doctor, and report anything that goes over a certain limit. This “certain limit” is itself complicated, because it will start out at $100 per year, but will then increase according to the “Urban Consumer Price Index.” And don’t forget that the PhRMA and AdvaMed codes further restrict what can be handed out. So manufacturers should be asking themselves: is it really worth the trouble?
3. Patient product samples are not reportable as an expense, although for prescription drugs there continue to be the accountability requirements of the Prescription Drug Marketing Act and 21 CFR 203. Samples of Medical Devices continue to be a reporting loophole – but your state (or the state you are marketing in) may say otherwise!
4. Warranty replacements, and temporary equipment loans or demonstrators (these are fairly common arrangements with durable electronic medical devices, e.g. under 21 CFR 820.200).
5. Educational materials for patients (a patient brochure is an obvious example).
6. I’ll mention this just so the reader can’t say “nobody told me that”: there is an exclusion in the event that another party makes payment to a doctor without the manufacturer’s knowledge. But before anyone starts setting up some shell company to pay doctors off-the-books, they should first look up the criminal penalties for conspiracy in 18 U.S.C. 286 et al. I expect the HHS Inspector General to take a dim view of such schemes!
Section 6004 mirrors the Prescription Drug Marketing Act’s requirements for drug sample tracking, but clarifies that aggregate summaries of all drug samples are to be reported to the federal government (starting April 2012) whenever such drugs are, or could be, federally reimbursable. There are no penalties defined, no timeline set, no publication objectives, and no directive for Agency procedures. The information that is required to be collected is identical to that already captured under 21 CFR 203. Does this mean that you are not to report drug samples that are not federally reimbursable? Or (for simplicity) can you report everything irrespective of its Medicare status? I suspect there will be a fair amount of confusion about this until FDA finalizes their rules.
Section 6005 amends the Social Security Act to require special reporting by Pharmacy Benefits Managers (these are middlemen organizations who arbitrage product distributions and payments on a large scale). Basically, they will be required to report what payments they receive versus what they disbursed, and how much of their prescriptions were filled via mail order versus through retail locations (think Walgreens). The federal government is keenly interested in this because of the growth of Prescription Drug Plans and accompanying fraud (think, um, Walgreens). Again, this section does not define the actual amounts or conditions that are violative or of concern, just the reporting – but such rules do exist elsewhere, e.g. the federal “best pricing” requirements for Medicare reimbursement.
Earlier this year, President Obama signed Public Law PL 111-148, the Patient Protection and Affordable Care Act. This law introduces sweeping and controversial changes to the American healthcare system by limiting an insurer’s ability to deny coverage and expanding the role of state and federal governments in our healthcare affairs.
Most of the press has been about Title I, “Quality, Affordable Health Care for all Americans.” But the law is 906 pages long; surely ample room for Congress to stash other goodies. I just reviewed the entire document, looking for items that affect QPharma and its clients. Sure enough, I found a number of items that directly impact upon Life Science manufacturers. Today’s blog consists of summaries of what I found, along with a couple of non-sequiter notes at the end.
Note: at last count there were some two dozen lawsuits seeking to overturn various sections of the PPACA, so this may be subject to change!
Title III, Improving the Quality and Efficiency of Health Care
Section 3507 directs FDA to consider if summarizing risks and benefits of prescription drugs in a standardized labeling table would “improve healthcare decision making by clinicians and patients and consumers.” [sic] Within one year (i.e. by March 2011), FDA is to consult with health care groups, manufacturers, representatives of minority advocacy groups, and experts in women’s and children’s health, and determine if standardized labeling should be implemented; and if so, implement Final Rules within three years.
This is, in short, a prescription drug version of the tried-and-true Principle Display Panel (“Drug Facts”) box on most non-prescription drug products as established by the Over-The-Counter regulations in 21 CFR 201 Subpart C, to become part of the labeling for some or potentially most prescription medicines.
Stay tuned!
Title IV, Prevention of Chronic Disease and Improving Public Health
Section 4203 amends the Rehabilitation Act of 1973, Title V, section 510, to require FDA and the Architectural and Transportation Barriers Compliance Board, within 24 months (i.e., mid-2012), to promulgate regulations establishing the minimum technical criteria for medical diagnostic equipment used in hospitals, clinics, physicians’ offices, emergency rooms, and “other medical settings” to ensure that the equipment allows independent entry to, use of, and exit from the equipment by disabled persons.
If you design and manufacture certain types of large diagnostic devices, this is could be huge! 21 CFR 820.30(c) and ISO 13485:2003:7.3.2 already require Medical Device firms to include specific requirements of users and patients as design criteria. The basic need for Medical Devices to accommodate, to the extent practical, the capabilities of the patient has already become a E.U. expectation (MMD 2007/47/EC, Annex II, paragraph 1, amendment to Annex I of 93/42/EEC), but this new law authorizes the little-known A&TBCB* to come up with specific technical requirements that will then be one of the standards that are used in the design of future diagnostic devices. Like compliance with other consensus standards, it is entirely possible that you may have to redesign your products to meet the new requirements even if you feel your existing design is fine (try getting NRTL approval of your electronic Medical Device on the argument that it’s “just as good” as meeting the latest revision of IEC 60601 and see how far you get). If you make diagnostic devices for which accessibility could be an issue, you will want to watch this carefully to see how it develops!
*I admit it: I never heard of them either until I read this section of the Act and looked them up at http://www.access-board.gov/about.html
Title V, Health Care Workforce
Have you ever been visited by an FDA official wearing a smart white uniform? Those are members of the Public Health Service’s Commissioned Corps (the Surgeon General is an Admiral in the Corps). Outside of FDA headquarters these folks are a rare sight because their numbers were capped by law at 2,800. Section 5209 removes that cap, and Section 5210 established a “Ready Reserve,” based on the military’s reserve forces, to backfill regular PHS/FDA duties. This is backed by a financial commitment of five million dollars for establishing this reserve force, increasing to over twelve million. You’ll no doubt be impressed by the professional attitude and appearance of these young officers...as they hand you a 483.
Title VI, Transparency and Program Integrity
The most widespread changes for manufacturers and distributors are probably those found in Title VI, which was originally the “Physician Payment Sunshine Act” before it got absorbed into the overall reform legislation (you will still hear people refer to Title VI as the “Sunshine Act”). This severely limits what gifts or other considerations Life Science firms can give to hospitals and practitioners; requires extensive reporting; and introduces some changes to the Prescription Drug Marketing Act regarding reporting free samples given to doctors. (Of drugs; on a federal level, there continues to be no equivalent for Medical Devices – but check your state’s regulations.) Unfortunately, the elements of Title VI consist mostly of amendments to the Social Security Act and until they are consolidated into the United States Code, they can be very difficult to read and understand (pending transcription, you’ll need the healthcare bill, and the amendments to the healthcare bill in Title X, and the social security law in front of you to make sense of it all).
The requirements are too extensive to cover here in detail, but I’ll try to hit the highlights. Meanwhile, please check our previous blog entry on Title VI at http://validationandregulatorycompliance.blogspot.com/2010/06/physician-payment-sunshine-provisions.html and if you want more information, e-Mail me at Jeff.Boatman@QPharmacorp.com and we’ll “take it off-line.”
Section 6001 modifies existing limits on a doctor’s ability to partly or completely own hospital facilities or refer patients to facilities they in turn own, and requires certain notifications to HHS and patients. Some of this deals with rural facilities where there may not be many alternatives for patients. This probably doesn’t apply to many manufacturers, but several industry watchdog groups have investigated and publicly criticized drug firms for not carefully screening their physician consultants. If a drug or device firm is hiring doctors as bone fide consultants, then depending on the capacity they are hired for, you might want to make sure that they are in compliance with this section. Ditto the self-referral rules in Section 6003 where doctors happen to own their own diagnostic equipment (MRIs, PET scanners, CT scanners).
Section 6002 requires reports of corporate payments to doctors, starting in March 2013. This section does not itself establish specific limits on what a doctor may or may not accept (but see other rules such as the PhRMA and AdvaMed Codes of Conduct, as well as individual state’s legislation that prohibit certain gifts and expenditures), just what needs to be reported, which is: practically everything! Furthermore, this information will then become publicly available through the Internet, and to top it off, HHS will send reports to each state so that the state government can take any actions according to their own laws and regulations (the quid pro quo being that your state government will not be able to require you to file a separate report directly to them – but a state can still demand reports when they require information that goes beyond the scope of this section).
By the way, I hear a lot of confusion about this: for example, that this only applies to cash payments to doctors, or only applies to prescription drug manufacturers. Be warned! It applies to anything of value given to, exchanged with, or assigned to any practitioner or teaching hospital; and it applies not only to drug firms but any also the manufacturer or distributor of any “biological product, device, or medical supply” that is or could conceivably be reimbursable under Medicare, Medicaid, or CHIPs. And bear in mind that FDA interprets the term “manufacturer” far more broadly than common parlance; to quote the Act: “any entity which is engaged in the production, preparation, propagation, compounding, or conversion of a covered drug, device, biological, or medical supply…or provides support to such entity with respect to the production, preparation, propagation, compounding, conversion, marketing, promotion, sale, or distribution of a covered drug, device, biological, or medical supply.”
In other words: if you make a healthcare product or market a healthcare service that Uncle Sam could wind up paying for, then you are subject to this section, period!
There are a mind-boggling number of exclusions to the reporting requirements (including income earned by the doctor because he happens to own your common stock – but if you gave the doctor that stock, then that stock transfer is reportable). Some of the more common scenarios include:
1. The doctor in question is not an independent practitioner acting as your consultant but your full-time employee who just happens to have a medical degree (i.e. not a practicing physician).
2. You are not required to report payments or transfers of less than $10, but: a) you still need to follow the applicable PhRMA/AdvaMed codes (which may be “voluntary,” but some states require you to follow them or their own similar versions), and b) if you allow “payments or transfers”—and yes, that includes your Sales Rep dropping off ballpoints—you will then need an “aggregate spend” policy and program to track the total amount of transfers to each doctor, and report anything that goes over a certain limit. This “certain limit” is itself complicated, because it will start out at $100 per year, but will then increase according to the “Urban Consumer Price Index.” And don’t forget that the PhRMA and AdvaMed codes further restrict what can be handed out. So manufacturers should be asking themselves: is it really worth the trouble?
3. Patient product samples are not reportable as an expense, although for prescription drugs there continue to be the accountability requirements of the Prescription Drug Marketing Act and 21 CFR 203. Samples of Medical Devices continue to be a reporting loophole – but your state (or the state you are marketing in) may say otherwise!
4. Warranty replacements, and temporary equipment loans or demonstrators (these are fairly common arrangements with durable electronic medical devices, e.g. under 21 CFR 820.200).
5. Educational materials for patients (a patient brochure is an obvious example).
6. I’ll mention this just so the reader can’t say “nobody told me that”: there is an exclusion in the event that another party makes payment to a doctor without the manufacturer’s knowledge. But before anyone starts setting up some shell company to pay doctors off-the-books, they should first look up the criminal penalties for conspiracy in 18 U.S.C. 286 et al. I expect the HHS Inspector General to take a dim view of such schemes!
Section 6004 mirrors the Prescription Drug Marketing Act’s requirements for drug sample tracking, but clarifies that aggregate summaries of all drug samples are to be reported to the federal government (starting April 2012) whenever such drugs are, or could be, federally reimbursable. There are no penalties defined, no timeline set, no publication objectives, and no directive for Agency procedures. The information that is required to be collected is identical to that already captured under 21 CFR 203. Does this mean that you are not to report drug samples that are not federally reimbursable? Or (for simplicity) can you report everything irrespective of its Medicare status? I suspect there will be a fair amount of confusion about this until FDA finalizes their rules.
Section 6005 amends the Social Security Act to require special reporting by Pharmacy Benefits Managers (these are middlemen organizations who arbitrage product distributions and payments on a large scale). Basically, they will be required to report what payments they receive versus what they disbursed, and how much of their prescriptions were filled via mail order versus through retail locations (think Walgreens). The federal government is keenly interested in this because of the growth of Prescription Drug Plans and accompanying fraud (think, um, Walgreens). Again, this section does not define the actual amounts or conditions that are violative or of concern, just the reporting – but such rules do exist elsewhere, e.g. the federal “best pricing” requirements for Medicare reimbursement.
Section 6507 contains clarifications to the uniform coding system for medical procedures and tests. You’re probably thinking “that doesn’t apply to me,” but hold on – in some special cases, a manufacturer (in the broadest sense) of Medical Devices may be subject to this provision. Consider this: you receive patient samples to conduct diagnostic testing, which is conducted using commercially available (and FDA-approved or -cleared) Medical Devices…but in a unique or proprietary way. You are both a provider of medical services in the practice of medicine, and ALSO a Medical Device manufacturer (specifically, you are a Medical Device specification developer (21 CFR 807(3)(d)(3)) – the “device” being the process itself). I’ve been called in to help several companies like this, who didn’t know they happened to be both kinds of companies until the FDA showed up at their door. If such a “manufacturer” is or could be directly or indirectly reimbursed by the federal government, they need to comply with this section (and private insurance companies will no doubt insist on it as well).
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