Annual report to HHS for improving Medicare, Medicaid, and related services

HHS should undertake steps to (1) guard against fraud, waste, and abuse, (2) help beneficiaries and providers, and (3) implement better payment policies, according to the Office of Inspector General’s (OIG) annual report on the top unimplemented recommendations from the previous year. While the report ranged far and wide in its recommendations, including a suggestion to the FDA to improve food safety inspections, the bulk of the report was dedicated to addressing fraud, waste, and abuse in Medicare and Medicaid (OIG Report, July 22, 2019).

Background

Each year, the OIG creates a report that focuses on what it contends are the top recommendations for improvement in HHS programs that were not implemented over the past year. This report offers suggestions to both HHS and the FDA on where they should direct their reform efforts for maximum benefit.

The OIG made the following recommendation pertaining to fraud, waste, and abuse.

Inpatient rehab facilities 

In 2013, Medicare paid $5.7 billion to inpatient rehabilitation facilities (IRF) for care to beneficiaries that was not reasonable and necessary. The errors, the OIG said, were due in part to the fact that the payments to the IRFs were not properly aligned with the costs. The current system gives the IRFs a financial incentive to admit patients inappropriately. CMS is apparently evaluating the payment system, which includes a recently issued final year 2019 IRF prospective payment system final rule to update policies and payment rates for fiscal year 2019.

‘Least costly alternative’ Part B drugs

If the least costly alternative requirement had not been rescinded for Part B drugs, Medicare would have saved $33.3 million in one year ($264.6 to $231.3 million). Once the requirement was removed, utilization patterns shifted dramatically in favor of costlier products.

Part D drug oversight

Medicare Part D spending on compounded topical drugs soared from $13.2 million in 2010 to $232.5 million in 2016. Questionable billing practices seem to be concentrated in a few metropolitan areas. OIG has identified prescribers with troubling order patterns. States are hamstrung in their ability to prevent drug overpayments. State agencies need to know the 340B ceiling prices and which Medicaid claims are associated with 340B drugs to ensure that the claims are paid correctly.

Managed care organization improvements

OIG believes that a significant amount of underreporting of fraud and abuse is occurring in Medicaid involving managed care organizations. For example, even where a managed care organization discovers fraud or abuse, OIG says that it will handle the situation by itself (terminating the contract) rather than report it to CMS. CMS must do more to ensure that the organizations identify and refer fraud and abuse to the state.

Help beneficiaries and providers

In addition, the OIG recommended that CMS analyze the impact of counting time as an outpatient toward the 3-night requirement for skilled nursing facility services (SNF). Beneficiaries with similar post-hospital care needs have different access to SNF services depending upon whether they were outpatients or inpatients because of the requirement that the beneficiary spend at least three nights as an inpatient to obtain post-hospital SNF Medicare coverage. Furthermore, CMS paid an estimated $84.2 million in improper payments between 2013 and 2015 because SNFs incorrectly determined whether the 3-night requirement was met. CMS should consider changes to make the system fairer, which could include counting time as an outpatient.

FDA

The OIG had a single recommendation for the FDA, noting that deficiencies exist in the FDA’s electronic recall data system. The FDA relies too much on voluntary corrections by facilities. Just over half the facilities that were inspected and should have received warning letters actually received warning letters. The FDA also frequently fails to conduct timely follow-up inspections to ensure compliance. The OIG suggested that the FDA act to address these shortcomings.

Draft guidance seeks to make drug labels clear, concise, more consistent

In an effort to assist applicants in writing the Indications and Usage section of labeling for human prescription drug and biological products, the FDA issued a new draft guidance. The FDA’s intent is to make information in prescription drug labeling easier for health care practitioners to access, read, and use. The goal of the guidance is to help ensure that the labeling is clear, concise, useful, and informative and, to the extent possible, consistent in content and format within and across drug and therapeutic classes (Notice, 83 FR 31759, July 9, 2018).

Indications

The Indications and Usage section should clearly communicate the scope of the approved indication, including the population to which the determination of safety and effectiveness is applicable. The guidance includes information on how and when evidence may support approval of an indication that is broader or narrower in scope than the precise population studied.

The indication should begin “Drug X is indicated” and be followed by the disease, condition, or manifestation of the cease or condition being treated, prevented, mitigated, cured, or diagnosed, and when applicable other information necessary to describe the approved indication. The other information may include selected patient subgroups or disease sub populations for whom the drug is approved, adjunctive or concomitant therapy or therapeutic modalities to use before initiation drug therapy, or specific tests needed to select patients in whom to use the drug.

Limitations of use

Limitations of use should be presented separately from the indication and should only be included when the awareness of such information is important for practitioners to ensure the safe and effective use of the drug. Limitations of Use are appropriate for drugs for which there is reasonable concern or uncertainty about effectiveness or safety in a certain clinical situation, drugs approved without evidence of benefits known to occur with other drugs in the same class, or drugs with dose, duration, or long-term use considerations.

Language

Certain products have statutory or regulatory required or recommended language for the Indications and Usage section. The guidance includes preferred wording and wording to generally avoid. For example, the guidance explains why it is better to use the phrase “reduce the risk” or “reduce incidence of” rather than using “prevent” in the indication. It also discusses when the terms “only” and “also indicated” should be avoided. Finally, product should be identified by the proprietary name or trade name if it has one, and other information such as the dosage form, and route of administration should not be included in the indication.

 

FDA effectively spends prescription drug user fee collections

After conducting its 2017 review of FDA policies and procedures and financial records related to the FDA’s use of prescription drug user fee collections, the Office of Inspector General (OIG) concluded that, overall, the FDA spent prescription drug user fee collections appropriately. Since the passage of the Prescription Drug User Fee Act (PDUFA) of 1992 (P.L. 102-571), prescription drug user fees have significantly helped in expediting the drug approval process and eliminating backlogs of pending human drug applications. The average approval time for an application prior to the PDUFA was two years (OIG Report, A-05-16-00040, September 2017).

The PDUFA

The PDUFA, which must be reauthorized by Congress every five years, authorizes the FDA to collect user fees from pharmaceutical and biotechnology companies that are seeking FDA approval of certain human drug and biological products to expedite the review of human drug applications. The user fees provide the FDA with resources, including the ability to hire more reviewers and support staff and upgrade information technology systems. According to the OIG, these resources help the FDA meet its goal of timely review of human drug and supplement applications.

Inadequate documentation

The OIG reviewed $796,065,980 in prescription drug user fees reported for October 1, 2014, through September 30, 2015, and determined that the FDA did not have adequate supporting documentation for $6,402 in travel expenses, made a duplicate payment for airfare of $1,213, and overpaid a traveler $587. The OIG attributed the inadequate documentation to oversight by FDA staff rather than a systemic issue. Therefore, the OIG made no recommendations.

Over-the-counter drug monograph reform the topic of subcommittee hearing

Under proposed legislation, “Over-the-Counter Monograph Safety, Innovation, and Reform Act of 2017,” the over-the-counter (OTC) monograph process would be modernized to streamline rule-making and cut down on FDA resources, while being funded through the establishment of a user fee program. In a hearing before the House Committee on Energy and Commerce’s subcommittee on health on September 13, 2017 regarding the discussion draft, witnesses from the industry and the FDA voiced their support, as well as real world examples and reasoning, for the proposed changes.

Monographs and current process

Unless the FDA has approved a new drug application, the only way an OTC drug can be marketed is if it conforms to a monograph—a standard set of specifications established by the FDA for each therapeutic category of product—and is thus considered generally recognized as safe and effective (GRASE). A monograph is created through a three-step public rulemaking process via the Federal Register and a public comment period. It requires the convening of advisory review panels, publishing of an advanced notice of proposed rulemaking (ANPRM) with a comment period, review by the FDA, publishing a tentative final monograph (TFM), and later finalization of the monograph and subsequent amendments and updates. The FDA has around 88 rulemakings in 26 therapeutic categories covering over 100,000 OTC drug products, and there are 800 active ingredients for over 1,400 uses that the FDA oversees. There are no user fees associated with monograph products currently, and a small staff oversees the OTC program as well as attending to other current mandates. The rulemaking process spans many years and the industry waits for a decade or more for finalized monographs, for example, the ANPRM for external analgesic products was published in 1979 and the monograph has still not been finalized.

Legislation

Since 2014, the FDA has examined monograph reform and the possible creation of a user fee program. The discussion draft includes proposes the following changes: (1) authorizing of the OTC Monograph User Fee Program; transition of OTC monographs from a rulemaking process to an administrative order procedures; (2) expediting administrative order procedures for OTC monograph drugs that pose an imminent hazard to public health or are associated with serious adverse events; (3) providing for a procedure to account for minor changes; (4) providing for a two-year exclusivity period for certain OTC innovative changes; and (5) clarifying how sunscreens would be reviewed.

Stakeholder witnesses

 Witnesses from across the industry presented statements before the subcommittee. They touched not only on the problems with the current process and their support of the proposals, but also their support in the industry supplementing the government’s efforts with the user fee program.

  • Bridgette L. Jones, MD, FAAP, representing the American Academy of Pediatrics (AAP), raised an example of how long it takes to get a monograph changed. Over a decade ago, in response to a petition to the FDA, an FDA advisory committee voted unanimously “that it was no longer appropriate for adult data on cough and cold products to be extrapolated to establish efficacy of the drugs in children under 12 . . . [and that] cough and cold drugs not be used in children under 6 years of age.” Currently, not even draft changes have been made to the monograph. She also noted that it is appropriate that the monograph be amended to provide dosing instructions for children under two years of age and that “if the monograph process worked better, surely this change would have happened years ago.”
  • Scott Melville, President and CEO of Consumer Healthcare Products Association (CHPA), notes the value that OTC medicines bring to the health of Americans and to the U.S. health care system and stresses that it’s important that the oversight process “is one that is efficient, transparent, and accommodating to innovation.” He also notes that his industry “is willing to supplement government resources with a modest user fee program.”
  • Kirsten Moore, Project Director, Health Care Products, The Pew Charitable Trusts, gave examples of the “unnecessary delay incorporated into a multi-step rulemaking system, which compromises FDA’s ability to respond swiftly to address new safety information and protect consumers” and urged Congress to pass the legislation as soon as possible.
  • Michael Werner, Partner, Holland & Knight, on behalf of the Public Access to SunScreens (PASS) Coalition, and Gil Roth, President, Pharma & Biopharma Outsourcing Association, also spoke in support of the OTC legislation.
  • Janet Woodcock, MD, Director for the Center for Drug Evaluation and Research (CDER) with the FDA confirmed the troubles with the current process and the present staffing levels raised by the other stakeholders. Her agency, as well as the other organizations, offered to continue to work with Congress to make the OTC reforms a reality.