FDA user fees reauthorized by House vote

In a bipartisan action, the House of Representatives today passed H.R. 2430, the FDA Reauthorization Act (FDARA) of 2017, by voice vote. FDARA reauthorizes the FDA’s user fee programs for prescription drug, medical device, generic drug, and biosimilar biological products. The current user fee programs are set to expire in September 2017 and account for almost a quarter of the FDA’s funding.

In April 2017, the House Energy and Commerce Committee, along with the Senate Health, Education, Labor and Pensions (HELP) Committee, released a discussion draft of the Food and Drug Administration (FDA) Reauthorization Act of 2017, reauthorizing the FDA’s user fee agreements (see Discussion draft of FDA user fee amendments is on the table, Health Law Daily, April 18, 2017). The draft followed a series of hearings examining the four individual user fee programs – the Generic Drug User Fee Amendments (GDUFA) and the Biosimilar User Fee Act (BsUFA), the Prescription Drug User Fee Act (PDUFA), and the Medical Device User Fee Amendments (MDUFA) (see HELP Committee hears ardent support for next round of user fee agreements, Health Law Daily, April 4, 2017 Committee holds optimistic hearing on medical device fees, Health Law Daily, March 29, 2017; PDUFA VI reauthorization would aid 21st Century Cures Act implementation, Health Law Daily, March 23, 2017; and User fee program reauthorizations necessary for product development, Health Law Daily, March 3, 2017).

FDARA is currently before the Senate (see HELP committee advances FDA user fee agreements to Senate floor, Health Law Daily, May 12, 2017).

Feds allege 412 individuals responsible for $1.3B in Medicare fraud

In the largest health care fraud enforcement action by the Medicare Fraud Strike Force, 412 individuals allegedly participated in schemes involving almost $1.3 billion in false billings. The Department of Justice (DOJ) and HHS noted that the charges were levied against the individuals across 41 federal districts and included 115 doctors, nurses, and other licensed medical professionals. Over 120 defendants were named, including doctors for their roles in prescribing and distributing opioids and other dangerous narcotics. Thirty state Medicaid Fraud Control Units participated in the arrests. HHS also initiated suspension actions 295 providers, including doctors, nurses and pharmacists.

The Medicare Fraud Strike Force cases are being prosecuted and investigated by U.S. Attorney’s Offices in the states of Florida, Michigan, New York, Texas, California, Louisiana, and Illinois, along with Medicare Fraud Strike Force teams from the Criminal Division’s Fraud Section, the FBI, DEA, and various state fraud entities. In addition to the Strike Force locations, enforcement actions included cases and investigations brought by an additional 31 U.S. Attorney’s Offices.

Charges

The charges focus on Medicare, Medicaid, and TRICARE billing schemes for medically unnecessary prescription drugs and compounded medications that often were never purchased or distributed to beneficiaries. According to court documents, patient recruiters, beneficiaries and other co-conspirators were allegedly paid cash kickbacks in return for supplying beneficiary information to providers, so that the providers could then submit fraudulent bills to Medicare for services that were medically unnecessary or never performed. The fraud schemes also involved medical professionals who unlawfully distributed opioids and other prescription narcotics.

For example, in the Southern District of Florida, a total of 77 defendants were charged with offenses relating to their participation in various fraud schemes involving over $141 million in false billings for services including home health care, mental health services, and pharmacy fraud. The DOJ highlighted one case where the owner and operator of a purported addiction treatment center and home for recovering addicts and one other individual were charged in a scheme involving the submission of over $58 million in fraudulent medical insurance claims for purported drug treatment services. The allegations included recruiting patients to move to South Florida in order to bill insurance companies. Patients were provided kickbacks in the form of gift cards, free airline travel, casino trips, and drugs.

Seven defendants in Louisiana were charged in connection with health care fraud, wire fraud, and kickback schemes involving more than $207 million in fraudulent billing. In another instance, a pharmacist was charged with submitting and causing the submission of $192 million in false and fraudulent claims to TRICARE and other health care benefit programs for dispensing compounded medications that were not medically necessary and often based on prescriptions induced by illegal kickback payments

Economic, job losses predicted with BCRA

The Better Care Reconciliation Act (BCRA), the Senate alternative to the American Health Care Act (AHCA), would lead to significantly larger job losses and reductions in states’ economies by 2026, if passed into law. Both bills seek to partially repeal and replace the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148). According to an issue brief by the Commonwealth Fund, both the draft BCRA and the AHCA, which passed the House earlier (see The AHCA strikes back, May 4, 2017), would have similar effects on the number of uninsured Americans. The Congressional Budget Office (CBO) estimated that this draft version of the BCRA would lead to 22 million fewer insured Americans by 2026, roughly the same as the 24 million uninsured estimated for the AHCA (see BCRA would curb Medicaid spending growth, increase uninsured numbers, Health Law Daily, June 30, 2017; Revised AHCA costlier with same number of uninsured, Health Law Daily, March 24, 2017).

The issue brief noted that, generally, federal health funds are used to purchase health care, with fiscal effects from these purchases spreading throughout the rest of the economy by creating jobs and other economic growth. Federal health funds pay hospitals, doctors’ offices, and other providers; these facilities use revenue to pay their employees and buy goods and services, such as rent or equipment. In turn, health care employees or other businesses (and eventually their workers) use their income to purchase consumer goods like housing, transportation, or food. An analogous effect is when federal taxes are reduced, the expectation is that consumers or businesses retain income and purchase goods and services, invest, or save.

Impact on jobs

The Commonwealth Fund noted that Medicaid expansion states would be hardest hit under the BCRA. In terms of job creation or losses, the proposed BCRA would add over 750,000 jobs in 2018, but employment would then deteriorate. It is projected that in 2026, under the BCRA, there would be 1.45 million fewer jobs with the health care sector bearing the brunt of the losses at over 900,000 fewer jobs. State coffers would be reduced by $162 billion.

BCRA would repeal a number of taxes along with a phase-in of coverage-related spending reductions, including Medicaid. The tax repeals would increase federal deficits by more than $50 billion in 2018 and 2019. However, as noted, the number of jobs outside of the health care sector in 2018 would rise. Health care sector jobs would fall immediately with the loss of 30,000 jobs.

By 2026, 1.45 million fewer people would have jobs. Additionally, gross state products would drop by $162 billion and business output would be $265 billion lower, while overall 919,000 jobs would be lost in health care. The issue brief estimated that more than 534,000 jobs in other sectors, including construction, real estate, finance, retail trade, and public employment, would be lost by 2026.

States that expanded Medicaid were estimated to have deeper and faster losses. Having earned more federal funds under the ACA, these states lose more when Medicaid matching rates are cut. In addition to cutting funds to states that expanded health insurance for low-income Medicaid populations, BCRA also increases funding to states that did not expand Medicaid. Nonetheless, the issue brief noted that states that did not expand Medicaid, like Florida and Maine, would also experience job and economic losses after a few years. For instance, Florida would have the sixth highest level of job loss in the nation by 2026.

Billions in ‘transfers of value’ to physicians, hospitals by industry get DOJ attention

In calendar year (CY) 2015, over $7.5 billion in “transfers of value” were made by pharmaceutical companies to physicians and hospitals through the federal Open Payments program, which in turn has caused the Department of Justice (DOJ) to focus on this area while investigating fraud in the health care system. In an HCCA sponsored seminar titled “Sunshine, Open Payments, and Potential Conflicts of Interest,” Senior Compliance Executive C.J. Wolf, M.D., of Healthicity, noted that under the Open Payments program, CMS has now accumulated over 28 million records of transfer of value. Within this vast repository of data, CMS uses it to uncover outliers in payments, and as a result, industry and providers, alike, are very interested in how the open payment system affects their operations.

Open Payments

Under Section 6002 of the Affordable Care Act (ACA), manufacturers must disclose to CMS payments made to physicians and teaching hospitals. Manufacturers and group purchasing organizations must also report ownership and investment interests held by physicians. The HHS Office of Inspector General (OIG) included these aspects into its list of priorities in its 2017 Work Plan, with Medicare and Medicaid payments high on the list (see Focus remains on Medicare, Medicaid payments in 2017 OIG Work Plan, Health Law Daily, November 10, 2016).

The 2017 Work Plan also stressed that the OIG will also determine how much Medicare paid for drugs and durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS) ordered by physicians who had financial relationships with manufacturers and group purchasing organizations.

Wolf noted the DOJ has taken a keen interest in this area of open payments, as evidenced by actions such as Teva Pharmaceuticals USA, Inc., and its subsidiary IVAX, LLC, agreeing to pay a total of $27.6 million to the federal government and the State of Illinois in a settlement regarding allegations of false billing practices under the False Claims Act (see Teva Pharmaceutical to pay federal and state government $27.6 million to resolve false billing allegations, Health Law Daily, March 11, 2014).

Conflicts of interest

There are 11 payment “categories” that must be reported under the Open Payments program: (1) consulting fees, (2) honoraria, (3) gift, (4) entertainment, (5) food and beverage, (6) travel and lodging, (7) education, (8) charitable contribution, (9) royalty or license, (10) grant, and (11) research.

As part of the transparency initiatives under the ACA, the dollars that physicians receive from industry is reported and documented. Physicians and providers should be aware that these categories touch upon even compensation for serving as faculty or as a speaker for a non-accredited and noncertified continuing education program.

Because the Open Payments program also includes ownership interests that physicians or their immediate family members have in various companies and the data is then made available to the public each year, reporting often is paramount.