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Category — Regulations and Guidance

The Supreme Court Largely Upholds the ACA in a Landmark Decision

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.

June 28, 2012   No Comments

FDA Issues Long-Awaited Draft Guidance on Biosimilar Product Development

On February 9, 2012, FDA issued its long-awaited draft guidance on biosimilar product development.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  FDA has also updated its Biosimilars web page to include the draft guidance document and a February 15th educational webinar and presentation slides where the agency provided participants with an overview of the law, the FDA’s progress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.

February 24, 2012   No Comments

CMS Issues Proposed Rule re Reporting and Returning of Overpayments

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.

February 14, 2012   No Comments

IRS Publishes Proposed Rulemaking on Medical Device Excise Tax

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.

February 10, 2012   No Comments

Agencies Release Summary of Benefits and Coverage Final Rule

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.

February 9, 2012   No Comments

CMS Issues Medicaid Average Manufacturer Price (AMP) Proposed Rule

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 2010[2] (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.  

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February 6, 2012   No Comments

HHS Issues Bulletin on Essential Health Benefits

The Center for Consumer Information and Insurance Oversight within the Department of Health and Human Services (HHS) issued a bulletin on December 16 to provide information and solicit comments on HHS’s approach to defining Essential Health Benefits (EHB) under the Patient Protection and Affordable Care Act (ACA).  The ACA requires non-grandfathered plans in the individual and small group markets, Medicaid benchmark and benchmark-equivalent, and Basic Health Programs to cover EHB beginning in 2014.  The scope of EHB, as defined by HHS, must equal the scope of benefits provided under a “typical” employer plan.  In the bulletin, HHS stated that it intends to define EHB through a benchmark plan that each state selects.  Significantly, HHS intends to allow states to select a benchmark plan from among the following existing health plans: 

  • One of the three largest small group plans in the state;
  • One of the three largest state employee health plans;
  • One of the three largest federal employee health plan options; or
  • The largest health maintenance organization in the state’s commercial market. 

If a state fails to select a benchmark, the default would be the state’s largest small group market plan.  Comments on the intended approach are due by January 31, 2012.

December 19, 2011   No Comments

Institute of Medicine Releases Essential Health Benefits Report

On October 7, 2011, the Institute of Medicine (IOM) released a report setting forth the methodology it recommends that the Department of Health and Human Services (HHS) use to determine the essential health benefits package.  The Affordable Care Act requires plans participating in the insurance exchanges to, at minimum, provide coverage for a  defined set of benefits, known as essential health benefits.  While the statute provides a set of ten broad categories of services to be included in the benefits package, HHS asked the IOM to recommend a process by which the Secretary could define and update the essential health benefits.  In its report, the IOM concluded that the federal government should consider cost as a factor in deciding what benefits should be included.  Although HHS is not bound by the IOM recommendations, Secretary Sebelius said in a statement that HHS would consider IOM’s report and anticipates issuing its proposed rule on the benefits package “soon.”   Before publication of such rule, however, HHS plans to hold a series of listening sessions to gain input from relevant stakeholders.  The IOM report is available through the IOM web site:

October 7, 2011   No Comments

TIGTA Report Examines IRS Implementation of ACA Tax Provisions

In a recent report, the Treasury Inspector General for Tax Administration (TIGTA) audited Internal Revenue Service (IRS) efforts to implement the Affordable Care Act (ACA) tax provisions. The report found that:

The IRS has revised Form 990 Schedule H to require hospitals to report on their financial assistance policies and community health benefits as required to maintain tax-exempt status under the ACA.  The ACA requires the IRS to review at least once every three years the community benefit activities of tax-exempt hospitals subject to these new exemption requirements and the IRS expects to complete reviews of the activities of 1,700 hospitals by the end of calendar year 2011 out of the approximately 5,100 hospitals subject to the new tax-exemption requirements.  

Also, in consultation with the Department of Health and Human Services (DHHS), the IRS is required to provide annual reports to Congress on (i) the levels of charity care, bad debt expenses, and unreimbursed costs for services provided under government programs by private tax-exempt, government-owned, and taxable hospitals and (ii) costs incurred by private tax-exempt hospitals for community benefit activities.  The TIGTA report indicates that the IRS is starting to collect some of this information for private tax-exempt hospitals from the revised Form 990 Schedule H, but the IRS is exploring the need to enter into a memorandum of understanding with DHHS to help clarify data responsibilities regarding the preparation of this report.  The TIGTA report does not mention that such a memorandum of understanding may be needed because the IRS currently does not have any mechanism to collect such data with regard to government-owned and taxable hospitals.

September 30, 2011   No Comments

CMS Announces Bundled Payment Initiative

On August 23, 2011, the Center for Medicare & Medicaid Innovation (Innovation Center) announced a new initiative regarding bundled payments for care improvement.  The new bundled payment models combine payments for physician, hospital, and other provider services into a single, predetermined payment amount for all services furnished to a beneficiary during a defined episode of care.  The Innovation Center offers four different payment models for interested applicants.  Akin Gump has put together a Comparison of Bundled Payment Models Chart comparing some of the features of each of these models.  Further detail is available in the full request for applications (RFA), available at the Innovation Center website:

Important Dates

Entities interested in applying for any of these models should note the following program deadlines:

Model 1

  • Interested organizations must submit a non-binding letter of intent by September 22, 2011
  • Applications must be submitted to the Innovation Center by October 21

Models 2-4

  • Interested organizations must submit a non-binding letter of intent by November 4, 2011
  • Organizations who want to be considered for receipt of data must submit a Research Request Packet containing specific information about their study design (including how they will use data to construct an episode definition and develop care episode redesign protocols) by November 4, 2011
  • Potential applicants must also submit a Data Use Agreement by November 4, 2011
  • Applications must be submitted by March 15, 2012

September 2, 2011   No Comments