Cardinal Health pays $27M to resolve radiopharmaceutical monopoly allegations

Cardinal Health has agreed to settle allegations that the manufacturer illegally monopolized 25 local markets for the sale and distribution of low-energy radiopharmaceuticals through anti-competitive tactics. Under the terms of the proposed final order with the Federal Trade Commission (FTC), Cardinal Health will pay $26.8 million into a fund that will be used to compensate customers injured by the manufacturer’s anti-competitive conduct.

Radiopharmacies

Radiopharmaceuticals are used by providers to diagnose a variety of medical conditions, including heart disease. As a result of the short half-life of the radioactive isotopes used in the drugs, “hospitals and clinics rely on radiopharmacies located nearby, resulting in highly localized markets.” According to the FTC complaint, following 2003 and 2004 acquisitions, “Cardinal became the largest operator of radiopharmacies in the United States and the sole radiopharmacy operator in 25 metropolitan areas.” With its market power, the complaint alleged that Cardinal targeted Bristol-Myers Squibb (BMS) and General Electric (GE)—the only U.S. manufacturers of the radiopharmaceuticals known as heart perfusion agents (HPAs) between 2003 and 2008. Cardinal Health allegedly coerced BMS and GE to refuse to grant distribution rights for their HPA products to new competitors in the markets where Cardinal Health had taken hold.

Consumer harm

According to FTC Chairwomen Edith Ramirez, “Cardinal, by preventing other radiopharmacies from entering its markets, was able to deny customers the benefits of competition and reap monopoly profits from the sale of radiopharmaceuticals for a sustained period of years.” The FTC alleges that through its exercise of illegal market power, Cardinal Health “obtained de facto exclusive distribution rights” for HPAs in the relevant markets. As a result, the complaint alleged that Cardinal Health violated the FTC Act by blocking or delaying competitive entry into 25 local HPA markets across the country.

Agreement

In addition to the $26.8 million disgorgement, Cardinal Health is also barred under the proposed final order from “entering into simultaneous exclusive deals with manufacturers of the same radiopharmaceutical product or from using coercion or retaliation to obtain de facto exclusivity.” Additionally, Cardinal Health is required to notify the FTC before entering into any further exclusivity distribution agreements or buying any radiopharmacy assets. Finally, the agreement allows for enhanced entry into some of the radiopharmaceutical markets by requiring Cardinal Health to give its customers the option to terminate their contracts with Cardinal Health for low energy radiopharmaceuticals.

Study explores the reform wilderness of Pioneer ACOs

Performance of provider organizations enrolled in the Medicare Pioneer accountable care organization (ACO) program differed significantly in 2012, the program’s first year. In order to sustain or expand the program, according to a study published in the New England Journal of Medicine, researchers believe it may be necessary to require “greater and more reliable rewards for ACOs that reduce spending than those currently in place.” Additionally, the performance differences of organizations with high pre-enrollment spending and those with low pre-enrollment spending indicate that benchmarks for ACOs should be better tailored to the efficiencies of particular organizations.

ACA

Under Section 3021, the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), authorized the creation of ACOs for Medicare in order to incentivize the formation of legal entities, compromised of multiple health care providers, who work together to coordinate care and keep costs down. Under the Pioneer model, “ACOs share in savings with Medicare if spending for an attributed patient population falls sufficiently below a financial benchmark and incur losses if spending sufficiently exceeds the benchmark.”

Method

To evaluate the performance of ACOs in the Medicare Pioneer ACO program, the study reviewed Medicare claims data between 2009 and 2012. The study compared the performance of Medicare fee-for-service organizations with the 32 Medicare Pioneer ACOs. Specifically, for the year 2012, the study evaluated differences in spending and quality between traditional Medicare providers and the Pioneer ACO’s. Researchers also used data prior to 2012 to look into differences between the performances of organizations that had high spending prior to enrolling in the Pioneer program and organizations with relatively low spending prior to their participation in the Pioneer program.

Spending

The study estimated savings by ACOs in spending on acute inpatient care, hospital outpatient care, and post-acute care, particularly in skilled nursing facilities. However, the researchers also identified that “spending on outpatient care in office settings differentially increased in 2012 for the ACO group, partially offsetting the lower spending on hospital outpatient care.” Savings were greater for ACOs with baseline spending above local averages, while savings were lower for ACOs with pre-program spending below local averages. The study projected an “overall per-beneficiary estimate of -$29.2,” which suggests that the total Medicare spending for 2012 was approximately $118 million lower than expected as a result of the Pioneer program. According to the study, this figure “exceeds the $76 million in bonuses paid by CMS to Pioneer ACOs by $42 million.” Additionally, for the 13 ACOs that withdrew from the Pioneer program, estimated savings were comparable to those of the 19 ACOs that remained in the program.

Implications

The findings were consolidated by researchers into three issues pertinent to the future of the Pioneer ACO program: (1) a lack of a relationship between estimated savings and program participation; (2) the appropriation by CMS of savings generated by ACOs and the lack of strong incentives to participate; and (3) the need for more equitable benchmarks that do not unnecessarily favor organizations with higher pre-program spending.

Medical management techniques not so reasonable, report says

Variation exists in how health plans are interpreting the regulation allowing them to apply “reasonable medical management” (RMM) techniques to allow coverage of prescribed FDA-approved contraceptive services and supplies without cost sharing. In a recent report on health insurance coverage of contraceptive services in five states, the Kaiser Family Foundation and The Lewin Group noted that, while most carriers are complying with the spirit of the law, some are circumventing it, in particular by refusing to cover multiple contraceptive methods with the same chemical formulation. The report’s authors note that this action fails to support family planning guidelines issued by the Centers for Disease Control and Prevention and the HHS Office of Population Affairs.

Coverage without cost sharing

Section 1001 of the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) amended section 2713 of the Public Health Service Act to require nongrandfathered health plans to provide certain preventive services, without copays, to plan recipients, including FDA-approved contraceptive services and supplies. However, 45 C.F.R. section 147.130(a)(4) allows plans and issuers to use RMM techniques, to determine the frequency, method, treatment, or setting for an item or service . . . to the extent not specified in the recommendation or guideline.” There is no clear definition of RMM.

Methodology

The authors focused on California, Georgia, Michigan, New Jersey, and Texas, five states that were geographically and politically diverse and differed as to type of Marketplace utilized, Medicaid expansion status, and pre-ACA status of contraceptive coverage mandates. They conducted interviews and/or examined plan documents for 20 of the carriers with the largest market shares with respect to coverage of the ring, the patch, injections, implants, and intrauterine devices (IUDs), along with emergency contraception and sterilization. The study did not review medical management techniques of oral contraceptives because of the large scale of availability of various formulations, brands, and generics.

Results

The vaginal ring is a hormonal contraceptive that is inserted into the vagina and works by releasing the same hormones as the combination pill. The birth control patch is applied to the skin and also releases those hormones. A small minority of carriers does not cover the ring or the patch or require cost sharing because the chemical composition is equivalent to less expensive generic oral contraceptives. Still, 12 carriers covered the vaginal ring with no RMM limitations and no cost sharing. The contraceptive method that was most frequently covered without RMM limitations and cost sharing was generic Plan B emergency contraception, with 19 or 20 carriers providing that type of coverage, followed by the generic Depo-Provera injection at 16 carriers, and the generic Xulane patch and the copper ParaGard® IUD, with 14 carriers. Other types of RMM techniques applied to different forms of contraceptive methods, as well as to other preventive services, include step therapy, in which a carrier requires a member to try a lower tier formulary drug and will only cover a higher tier drug if the lower tier drug fails, and prior authorization, in which providers must secure carrier approval prior to prescribing a service or medication.

Waivers

The study authors also note that the Department of Labor issued a series of frequently asked questions (FAQs) in which it noted that carriers should have a process in place for members to seek waivers of cost sharing when medically necessary. The authors note that some carriers were confused about the definition of “waiver.” Members may generally request “an exception to the initial coverage decision” or follow the appeals process outlined by the ACA. However, the authors expressed concern that the procedures are time-consuming and “not in the best interest of standards for quality contraceptive care.”

Report: early lessons from Medicaid payment incentive waivers

CMS has granted seven state Medicaid programs the opportunity to conduct Delivery System Reform Incentive Payment (DSRIP) demonstration waivers. So far, there are preliminary results from four states, and the Kaiser Foundation has examined the lessons learned from their demonstrations.

Three of the states, California, Massachusetts, and New York, expanded Medicaid under the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148), while the fourth, Texas, did not. California’s waiver was approved for the period from 2010 to 2015, and the state currently is seeking renewal. The Massachusetts and Texas waivers were initially approved in 2011; Massachusetts’ three- year Delivery System Transformation Initiative (DSTI) was renewed in 2014 for a second three-year term. Texas is currently considering its options for extension of its waiver. New York’s waiver was approved to begin in 2015 after lengthy negotiations.

Changes to CMS process

CMS’ stance concerning terms and conditions has become more strict, at least partly in alignment with the agency’s general move to increase transparency and accountability with respect to the funding of demonstration projects generally. California’s waiver granted the state’s public hospitals leeway to determine their own projects, though they were required to meet defined metrics; the Massachusetts waiver allowed internal work groups to define the metrics for the projects they developed.

In New York, the waiver involves the creation of Performing Provider Systems (PPS), including hospitals and community-based health care providers. Each PPS must choose five of 44 possible projects. Not only must each PPS meet defined benchmarks, but the state as a whole must meet accountability measures and risks losing funding if it does not.

New collaboration and focus

The waivers have been instrumental in developing relationships among hospitals and other providers, such as community clinics and community mental health centers. To some extent this has helped to “break down the traditional silos” between providers. In Texas, urban teaching hospitals have begun to work with rural health care providers so that seriously ill patients can receive care in their communities rather than traveling. Texas providers also have tried innovations to improve care. One project involved training paramedics to visit with “frequent fliers” to help them fill prescriptions and meet other needs in order to reduce emergency room usage.

Change is hard, planning needed

Kaiser analysts found that the state agencies and stakeholders had difficulty coming up with measures that were quantifiable and appropriate to local needs. Providers who had not previously worked together closely had to do so. Sometimes providers were competing for Medicare and private pay patients but were expected to cooperate in treating Medicaid patients. In addition, small providers found the detailed recordkeeping and reporting required for the demonstrations to be burdensome. When projects were developed by local and regional hospitals, the protocols and benchmarks were not always consistent, making it difficult to measure the effectiveness of the program as a whole. Participants also felt tremendous pressure to implement complex changes right away.

Money talks

Much of the impetus for states to participate came from the need to preserve or maximize diminishing federal funding. The providers who could bring money to the table had a great deal of influence on how the projects were designed and implemented. For example, in Texas, the community mental health centers had funds to contribute. As a result, there was a greater focus on behavioral health care than there would have been without it. In New York, where the programs created incentives for hospitals to contact with PPS entities, some were concerned that finances, not the patients’ needs, would dictate patient referrals.

Sustainability concerns

The DSRIP funding has been replacing other payments to hospitals, so that the providers do not view them as temporary. Yet, the demonstrations are not intended to be permanent redesigns. CMS is reportedly urging states to plan for the expiration of the demonstration funding. The goals of the incentive programs overlap a great deal with those of Medicaid managed care, but only in New York has the demonstration linked DSRIP payments to managed care. The terms of its demonstration that 90 percent of managed care payments to providers must be made with value-based methodologies. In Texas, the coverage gap created by the choice not to expand Medicaid has limited the prospects for actual reform of the delivery system. It is unclear whether Texas or any other state will be granted a renewal or a new waiver without expanding Medicaid.