Today, led by Chief Justice John Roberts, the Supreme Court upheld the constitutionality of the Affordable Care Act in almost all respects. While upholding the controversial individual mandate to purchase health insurance, the Court did alter one important aspect of the law, however, in that it limited the government’s ability to withhold all Medicaid funds from a state contingent on the states’ acceptance of the significant Medicaid expansion called for under the Act. Under the Court’s ruling, a state must be allowed to opt out of the Medicaid expansion without threatening the state’s current Medicaid coverage and federal funding. The text of the decision can be found here.
On April 10, 2012, the Centers for Medicare & Medicaid Services (CMS) announced 27 organizations selected to participate in the Medicare Shared Savings Program.
As required by the Affordable Care Act, CMS established the Medicare Shared Savings ACO program. Under this program, ACOs are charged with improving care coordination for Medicare fee-for-service beneficiaries. ACOs that participate in the program have the opportunity to share in Medicare cost savings they achieve. In some circumstances, CMS holds ACOs accountable for failing to achieve cost savings (i.e., by making ACOs partially responsible for costs above established benchmarks).
Additional Medicare Shared Savings Program participants are expected to be announced later this year. For additional information about the program, please refer to the CMS Medicare Shared Savings Program website.
On March 12, 2012, the Department of Health and Human Services (HHS) published a final rule that outlines a framework for states to establish Exchanges . The final rule combines policies from two proposed regulations that were issued last summer, and addresses eligibility and enrollment in Exchanges as well as employer eligibility for the Small Business Health Options Program (SHOP). According to the final rule, Exchanges will perform a variety of functions, including:
- certifying health plans as “qualified health plans” in order to be eligible to participate in the Exchanges;
- operating a website to facilitate consumer comparisons among plans offered in the Exchange;
- operating a toll-free hotline for consumer support and conducting other consumer outreach and education;
- determining eligibility for premium tax credits and other reductions in cost-sharing; and
- facilitating enrollment of consumers in qualified health plans.
The final rule provides minimum standards that health insurers must meet to participate in an Exchange; however, states are given flexibility in determining the number, type and overall requirements for eligible health plans. HHS will accept further comments on certain sections of the rulemaking, which are issued as an interim final rule, including provisions related to the role of agents and brokers. Future rulemaking will address other areas related to Exchanges, including standards for issuing exemptions from the individual mandate, the definition of essential health benefits and standards relating to quality.
On February 9, 2012, FDA issued its long-awaited draft guidance on biosimilar product development. The agency issued a suite of three guidance documents that collectively address scientific considerations and quality considerations in demonstrating biosimilarity to a reference product and offer a Q&A on the Biologics Price Competition and Innovation Act of 2009 (BCPIA). The scientific considerations document emphasizes a risk-based approach based on the totality of the evidence and recommends a “stepwise” approach to developing biosimilars. The quality considerations document, applicable to reference protein products, gives an overview of analytical factors to consider in assessing the biosimilarity of a therapeutic protein product. The third, as its name indicates, is meant to answer common questions. The documents area meant to help industry in developing generic equivalents to brand-name biologic drugs and have been anticipated since BCPIA was enacted as part of health care reform in March 2010. FDA has also updated its Biosimilars web page to include the draft guidance document and a February 15theducational webinar and presentation slides where the agency provided participants with an overview of the law, the FDA’s progress in implementation, and updates on next steps.
On February 14, 2010, CMS issued a Proposed Rule to implement the Affordable Care Act’s requirement that any person who receives a Medicare or Medicaid overpayment report and return the overpayment within 60 days of the date on which the overpayment was identified or the date of any corresponding cost report due, if applicable. The Proposed Rule would apply only to Medicare Part A and Part B providers and suppliers. CMS plans to issue further guidance for other stakeholders, including Medicaid managed care organizations and Prescription Drug Plans. CMS proposes to require providers to report and return overpayments identified within ten years of the date the overpayment as received.
Under the Proposed Rule, CMS will consider a provider to have identified an overpayment if it has actual knowledge of the existence of the overpayment or acts in reckless disregard or deliberate ignorance of the overpayment. CMS provided several examples of reckless disregard or deliberate ignorance, including a provider’s failure to make a “reasonable inquiry” when it experiences a “significant increase in Medicare revenue and there is no apparent reason” to be of the existence of an overpayment.
CMS proposes to require providers and suppliers to report and return overpayments through existing reporting processes that Medicare Administrative Contractors (MAC) currently administer. Under the proposed “self-reported overpayment refund process,” Medicare providers and suppliers would report overpayments using forms that each MAC makes available on its website. CMS stated that it plans to develop a uniform reporting form in the future.
Comments on the proposed rule are due by April 16, 2011.
The Internal Revenue Service (IRS) published a Notice of Proposed Rulemaking (NPRM) on February 7, 2012, that provides guidance on how it will tax certain medical devices under the 2.3 percent excise tax provided for in the Affordable Care Act (ACA). Comments on the NRPM are due by May 7, 2012. A public hearing on the NPRM is scheduled for May 16, 2012.
The proposed regulations will affect manufacturers, producers, or importers who sell taxable medical devices after December 31, 2012. The NPRM defines “taxable medical devices” as those that generally meet the definition under the Federal Food, Drug, & Cosmetic Act (FFDCA) and are used in humans. Under the ACA, veterinary devices and those sold for export or further manufacture are automatically excluded. In response to industry concerns that this definition was too broad, the IRS guidance clarifies that all devices required to be listed by FDA are considered “taxable medical devices” and are subject to the excise tax unless the device falls within an exemption. Medical devices that are not required to be listed because they fall under an IDE or are for research purposes only also fall outside of the definition of “taxable medical devices,” because they are not subject to FDA listing requirements.
Significantly, the “retail exemption” exempts devices such as eyeglasses, contact lenses, and hearing aids that the general public typically purchases for individual use. The NPRM outlines the criteria that IRS will use when determining whether a medical device is typically purchased by the general public for individual use, which include how readily consumers who are not medical professionals can purchase the product and whether the product is primarily used in a medical institution or office or by medical professionals. The NPRM additionally contains a safe harbor provision for many over-the-counter products that would otherwise be considered “taxable medical devices.”
The tax has been controversial from the beginning and industry has been steady and strong in vocalizing its opposition, primarily complaining that the tax will hamper innovation that is already stifled by slow and inconsistent regulation of medical devices. In response to industry backlash, several lawmakers have introduced legislation to repeal the tax.
On February 9, 2012, the departments of Health and Human Services, Labor and Treasury published final regulations implementing the Affordable Care Act’s Summary of Benefits and Coverage (SBC) and Uniform Glossary requirements. The final rule requires that health insurers provide certain standardized information on benefits ad coverage, as well as a uniform glossary of common coverage terms. According to the agencies, the final rule standards “ensure this information is presented in clear language and in a uniform format that helps consumers to better understand their coverage and better compare coverage outcomes.”1
The final rule requires that the SBC be provided by: (1) a group health insurance issuer to a group health plan; (2) a group health insurance issuer and a group health plan to participants and beneficiaries; and (3) a health insurance issuer to individuals and dependents in the individual market. Depending on the scenario, the SBC must be provided in different circumstances, such as on application for coverage, by the first day of coverage (if information in the SBC has changed), upon renewal or reissuance and upon request.2
The final rule requires that SBC’s have a total of 12 content elements, including standard definitions of coverage terms, a description of coverage (including cost-sharing requirements) and information regarding exceptions and limitations to coverage.
The final rule also provides that failure to provide required information may result in a fine of up to $1,000 for each such failure.3
Although the agency had initially proposed implementation of this requirement on March 23, 2012, the final rule delays the start date of the requirement by six months, to September 23, 2012.4
The Center for Consumer Information and Insurance Oversight (CCIIO) has provided a number of tools on its website related to the SBC, including an SBC template, sample SBC, and instructions for completing the SBC.
1 Internal Revenue Service, Department of the Treasury, Department of Labor and Department of Health and Human Services, Summary of Benefits and Coverage and Uniform Glossary, Final Rule, Prepublication copy, at 4.
2 Id. at 5.
3 Id. at 134.
4 Id. at 135; 149; 150.
On Friday, January 27, 2012, the Centers for Medicare & Medicaid Services (CMS) released a proposed rule revising Medicaid requirements for covered outpatient drugs. The purpose of the rule is to implement changes to Medicaid drug pricing and reimbursement requirements made by the Patient Protection and Affordable Care Act of 2010,1 as amended by the Health Care and Education Reconciliation Act of 20102 (collectively referred to as the “ACA”). The proposed rule was published in the Federal Register on Thursday, February 2, 2012. Comments to the proposed rule are due by 5 p.m. on April 2, 2012.
The proposed rule addresses a number of issues relevant to pharmaceutical manufacturers and pharmacies. The ACA increased the minimum rebate percentage for most single source and innovator multiple source drugs from 15.1 percent of the average manufacturer price (AMP) to 23.1 percent of AMP. However, until now, CMS had provided little guidance to manufacturers on the agency’s interpretation of the various revisions to AMP made by the ACA. The following are the highlights of the proposed rule, which are explained in more detail below—
- the definition of “retail community pharmacy”
- bundled sales
- moving away from the “default rule”
- bona fide service fees
- “5i” products
- the treatment of authorized generic drugs
- base date AMP recalculation
- line extensions
- rebates for drugs dispensed through Medicaid managed care organizations (MCOs)
- expanding rebate-eligible sales to include sales made to U.S. territories
- reporting revised pricing data
- AMP smoothing
- penalties for late filers
- pharmacy reimbursement.