Over 30 years of reporting on Congress, federal agencies and the White House for corporate America as well as national trade and professional associations.

Health Care Consolidation Continues Apace

P&T Journal - December 2015 - for the original online article go HERE.

The Impact on Providers and Patients Is Either Mixed or Unclear

A potential reduction in pharmacy costs to insurance plan members is a key rationale underlying the most recent proposed mega-mergers in the health care industry. The Anthem/Cigna and Aetna/Humana combinations, now under scrutiny at the U.S. Department of Justice (DOJ), theoretically would benefit consumers by lowering drug costs, given the increase in covered lives the new companies would have as leverage when negotiating with pharmaceutical manufacturers. Those drug-cost savings might be boosted further by the secondary consolidation of pharmacy benefit managers (PBMs). Anthem uses Express Scripts, while Cigna uses Catamaran. Catamaran itself was merged with UnitedHealth’s OptumRx PBM in 2015. Aetna uses the CVS Health PBM (which acquired Caremark PBM in 2007), while Humana has an in-house PBM.

The deals are likely to have repercussions in other sectors, too, extending to drug wholesalers, retail drugstores, and hospitals. “The biggest potential impact for us is if we are locked out of additional payer networks due to the consolidation,” says Kyle Skiermont, PharmD, Director of Specialty Pharmacy Operations for Fairview Pharmacy Services. “These groups often want to use their own specialty pharmacies, which make it difficult for health systems to care for their own patients.”

The dizzying pace of mergers within the health care industry drew a reaction from presidential candidate Hillary Clinton, who said on October 21, “As we see more consolidation in health care, among both providers and insurers, I’m worried that the balance of power is moving too far away from consumers.” But Robert Berenson, MD, an Institute Fellow of The Urban Institute, says he doesn’t see health care consolidation becoming a front-rank political issue during the 2016 presidential campaign. While he views it as a very legitimate policy issue, he explains, “It is not as if there are clean solutions. It is murky, complicated stuff.”

The Causes of Merger Mania


The phrase “fast and furious” has already been taken (by Vin Diesel as the title of his skein of action movies), but it could also be used to describe the pace of mergers in all sectors of the health care industry. Walgreens joined the merger mania at the end of October when it announced that Boots Alliance wants to absorb Rite Aid. The deal would unite two of the country’s three biggest drugstore owners. Boots Alliance is composed of the Walgreens and Duane Reade retail pharmacies in the U.S. and Boots retail pharmacies in the United Kingdom and other foreign countries.

The health industry merger trend has probably been hastened in the past few years by the Patient Protection and Affordable Care Act (PPACA), which included a number of provisions aimed at encouraging “integrated care”—a concept in which success depends on the provision of a broad range of medical services by a single institution. “The national health care law reinforces the trend of providers, including doctors and hospitals, to merge into large regional health systems that dominate local markets,” Christopher Pope wrote in a 2014 issue brief published by the Heritage Foundation. “The law also introduces new rules and restrictions that will reduce the degree of competition in the insurance market.”

But the push toward integrated care doesn’t explain consolidation among pharmaceutical manufacturers, which has more to do with filling in gaps in research and development pipelines. Only 11 of the original 43 members of the industry lobbying group Pharmaceutical Research and Manufacturers of America (PhRMA) exist today. The big deals of 2015 so far have been the acquisition by Valeant Pharmaceuticals International, Inc., of Salix Pharmaceuticals, Ltd.; the acquisition by Impax Laboratories, Inc., of CorePharma, LLC; and the purchase by Sun Pharmaceutical Industries Ltd. of Ranbaxy Laboratories Ltd. In the Impax/CorePharma and Sun/Ranbaxy cases, the Federal Trade Commission (FTC) ordered some divestiture of assets. These deals followed the Actavis PLC takeover of Allergan PLC in the fall of 2014. But whatever the rationale for drug company mergers, no one could argue that they have led to lower consumer prices for drugs, which have risen rapidly—in some cases geometrically—over the last few years.

Nor does the PPACA explain consolidation of PBMs, such as the 2015 acquisition by UnitedHealthcare, which operates the OptumRx PBM, of Catamaran. Express Scripts swallowed the Medco PBM in 2011, turning the Big Three in that industry into the Big Two. CVS ate CaremarkRx in 2007. The proposed Anthem/Cigna and Aetna/Humana mergers are partly about the presumed ability to obtain lower drug costs. The degree to which those costs will drop, much less whether the savings will be passed along to consumers, won’t be established for some time.

Theoretically, to the extent consolidation promotes integration, the trend has positive potential, both in terms of saving money for consumers (not to mention the federal government, through Medicare, Medicaid, and Tricare) and promoting higher-quality care. But the evidence so far from accountable care organizations (ACOs)—the PPACA’s major contribution to integrated care—is very mixed on both cost and quality metrics.

In a post on the Health Affairs blog on July 16, 2015, Thomas Greaney, Co-Director of the Center for Health Law Studies at the St. Louis University School of Law and a former FTC antitrust official, wrote that mergers within an industry can be self-perpetuating, without any particular benefit to consumers. “History also teaches that mergers often tend to beget mergers,” he wrote. “Mergers are not always driven by efficiency considerations; sometimes a merger ‘cascade’ occurs simply because the other guy is doing it, hubris, or even ‘empire-building.’ ”

Finger-Pointing on Insurers’ Mergers


The current political flashpoint is the two insurance-company mergers, Aetna’s acquisition of Humana and Anthem’s of Cigna. Advocates and detractors are in the midst of a heated “he said, she said” debate, hoping to influence the DOJ, which has taken the lead in investigating possible antitrust problems with both mergers. These prospective mega-mergers would result in larger companies competing in numerous markets, both in terms of the services provided and the geographic areas.

For example, the insurance companies provide administrative services to large, self-insured companies and offer health care services to individuals through the PPACA marketplaces, Medicare, and Medicaid. In both potential mergers, the new partners would have some overlap in products sold in particular geographic markets, but the overlap is not extensive. It appears likely that the DOJ will approve both mergers but require the two new giants to divest some business lines in some states.

Aetna’s $37 billion acquisition of Humana is almost entirely about enlarging its Medicare Advantage business. Aetna has traditionally been a large commercial health-insurance company. By appending Cigna and its Medicare Advantage business, Aetna would balance itself out between private and public health plans. The resulting combined Medicare Advantage market for the new company would be only 8%, which is not likely to cause DOJ angst. Moreover, the Medicare Advantage population is half of the Medicare fee-for-service population: 18 million versus 37 million. Aetna CEO Mark Bertolini explains:
We believe that the combination of Aetna and Humana will enhance competition at the local level by giving consumers a strong alternative to Blue Cross Blue Shield plans and other competitors. In this way, this combination is actually strongly procompetitive. Even after the acquisition, Aetna will continue to face significant competition from a large number of health plans and other new market entrants such as ACOs.
The Anthem/Cigna combo would also have a relatively small Medicare Advantage footprint—about 6%, according to a recent analysis by the Kaiser Family Foundation. Anthem does business in 20 states, primarily in New York, Ohio, and California. Cigna, meanwhile, does business in 15 states and the District of Columbia, primarily in Florida, Tennessee, Pennsylvania, and Texas. The companies thus have a highly complementary geographic footprint. As for the purchase of individual plans, where consumers obtain coverage directly for themselves (often through the exchange marketplaces or a broker), Anthem has a presence in 14 states and Cigna has a presence in 12 states. “The combined company would only share a limited number of rating regions within just five states, where there is now and will continue to be robust competition,” states Joseph Swedish, President and CEO of Anthem, Inc. “Underscoring this is the fact that consumers can now choose from an average of 40 health plans in states participating in the insurance exchange marketplace—an increase of 25% in 2015.”

Paul B. Ginsburg, PhD, Norman Topping Chair in Medicine and Public Policy at the University of Southern California, says the potentially problematic impacts of the Aetna/Humana merger appear mostly in the Medicare Advantage arena, where some local markets would become substantially more concentrated. These impacts can be addressed through divestitures, he believes.
However, the hospital and physician lobbies aren’t buying that procompetitive claim. Rick Pollack, President of the American Hospital Association (AHA), says:
The unprecedented level of consolidation these deals threaten could make health insurance more expensive and less accessible for consumers. This applies to health insurance purchased in the commercial market as well as Medicare Advantage (MA) plans. These deals also could further entrench the power of the Blues plans, which currently dominate the market in nearly every state.
The American Medical Association produced an analysis showing that there has been a near-total collapse of competition among health insurers, with seven out of 10 metropolitan areas rated as highly concentrated based on the DOJ and FTC Horizontal Merger Guidelines (2010) used to assess market competition. Moreover, 38% of metropolitan areas had a single health insurer with a commercial market share of 50% or more. Of course, just because one company holds 50% of any one market, that doesn’t necessarily guarantee market dominance.

Hospitals on the Defensive


While the hospitals are playing offense against the proposed insurance-company mega-mergers, they are more accustomed to playing defense because of antitrust issues in their own industry. The FTC has been very active in opposing hospital mergers in local markets for years. Ginsburg says: “The effects of mergers in health care on prices and quality of care have received a great deal of attention from economists. Much of the research has focused on mergers among providers, especially hospitals, and clearly shows that hospital mergers have led to higher prices without measurable effects on quality.” The United States has roughly 5,000 hospitals. Between 1998 and 2012, there were 1,113 mergers and acquisitions involving a total of 2,277 hospitals, according to the AHA’s Trendwatch Chartbook 2012: Trends Affecting Hospitals and Health Systems.

Although no high-profile hospital merger is in the works at the moment, such mergers have clearly been multiplying faster in the wake of the PPACA’s passage than they were before it. Health insurers have been sharply critical of hospital consolidations across the country, such as those in recent years between Trinity Health and Catholic Health East and between the Baylor Health Care System and Scott & White Healthcare. America’s Health Insurance Plans, the industry’s lobbying group, has said that when hospitals merge, it “comes with a price that consumers and employers simply cannot afford.”

Not only are hospitals combining, they are taking over the ambulatory surgical centers that provide less-expensive medical services than the hospitals’ outpatient wings. There are about 5,300 Medicare-certified ambulatory surgical centers across 50 states, according to the Ambulatory Surgery Center (ASC) Association. Medicare now pays ASCs about 56%, on average, of the hospital outpatient department payment rate for providing identical services. An analysis conducted by the association found that of 179 ASC closures since 2009, about one-third were a result of purchase by a hospital.

This disparity will worsen because reimbursements for outpatient surgery in general hospitals are automatically indexed to medical costs, while those in independent centers are adjusted by much-lower general inflation rates. That disadvantage for ASCs was compounded by the PPACA, which requires that payments to independent surgical facilities be further reduced in line with annual improvements in “medical productivity.”

The PPACA has, in some minds, greased the skids for mergers in a number of ways. Pope’s 2014 paper for the Heritage Foundation cited, for example, the medical loss ratio (MLR) requirement imposed on marketplace insurers. It dictates that they spend at least 85% of premium revenues for large groups (80% for small groups and individuals) on claims or “activities that improve health care quality.” The need for sufficient scale to comply with MLRs is likely to impede start-up providers, Pope wrote, while the requirement to minimize administration costs as a percentage of revenues can be expected to induce mergers.

In addition, the PPACA created barriers to physician-owned hospitals. The act requires that such hospitals must obtain a federal certificate of need. A so-called “Stark exception” had allowed physicians to have an ownership or investment interest in a hospital where they referred patients, but Section 6001 of the PPACA eliminated that option for physicians who did not have such provisions in place as of December 31, 2010. A physician-owned hospital also cannot expand its treatment capacity unless certain restrictive exceptions can be met. According to Greaney: “The ACA all but put an end to one source of new competition in hospital markets by banning new physician-owned hospitals that depend on Medicare reimbursement.”

A Dose of Pharmaceutical Mergers


Merger mania has characterized the pharmaceutical sector, too, with acquisitions by both brand-name and generics companies. A March 2015 Reuters story stated that 2015 pharmaceutical deals had “reached $59.3 billion, a 94% increase over that same period a year ago, and the highest value for this stage in any year since 2009.”

The battle cry for drug-company mergers may have been sounded in 2014 by Actavis CEO Brent Saunders, who said his company’s purchase of Allergen made Actavis a pioneer “in a new industry model: growth pharma.” Then came 2015. Valeant beat out Endo for the absorption of Salix. Valeant had tried and failed the year before to acquire Allergan. Endo lost out on Salix, licked its wounds, and vowed to look for other deals. It announced in late September that it was spending $8 billion to buy Par Pharmaceutical Holdings, which would make it a top-five generics company in the U.S. based on sales.

Two of the early 2015 mergers brought FTC-imposed divestitures. Impax agreed to divest all of CorePharma’s rights and assets to generic pilocarpine tablets and generic ursodiol tablets to settle FTC charges that Impax’s proposed $700 million acquisition of CorePharma would likely be anticompetitive. Another 2015 consent decree forced Sun to divest Ranbaxy’s interests in generic minocycline tablets after Sun bought Ranbaxy for $4 billion.

Consolidation of Pharmacy Benefit Managers


Valeant announced it was pulling back in its expansionist drive and focusing more on research and development (R&D). Health insurance companies such as Anthem and Aetna don’t have any basic-science R&D to fall back on. They do plenty of marketing R&D, however, and those efforts have informed their two mergers—especially, it appears, in the area of the benefits of pharmacy synergy. It is not clear whether one current PBM will win out in each of the mergers, or whether Anthem/Cigna will ditch both PBMs and start its own, for example. In the case of Aetna and Humana, Humana already runs its own PBM, but would it have to be scaled up to accommodate the lives Aetna brings to the combined companies? Could it be scaled up?

Steve Miller, Chief Medical Officer at Express Scripts, said in an interview last January that his company covers about 85 million people, for whom Express Scripts simply administers pharmacy benefits. About 25 million of those members are on the national preferred formulary, mostly for commercial clients. That group’s prescription drug choices are determined by Express Scripts. But Miller noted that noncommercial clients tend to follow the Express Scripts national formulary, too.

“Express Scripts has 85 million covered lives,” notes Berenson. “Will another 10 million increase its clout? I have trouble accepting that argument.”

Anthem’s Swedish was somewhat opaque about potential pharmacy benefits during a conference call this summer with investment analysts. “Regarding the PBM, I’d like to highlight that we do believe there is significant value and opportunity for the combined company and our customers from a better pharmacy contract.” But he seemed to indicate that there were some uncertainties around that “potential value” by adding, “That being said, we really want to take advantage of the time for our integration to look at the optionality that is available to our companies. And we think this requires a lot more research beyond that done through our due diligence.”

An Anthem spokesman did not respond to a question about what Swedish meant by “optionality.” Perhaps it was a reference to efficiencies in pharmacy operations that the new, larger company could achieve. However, David Balto, a Washington antitrust lawyer who formerly worked on health care issues at the FTC, says Anthem and Cigna, and Aetna and Humana, don’t have to combine their PBMs in order to have smarter pharmacy operations. “Target doesn’t have to combine with Walmart to become smarter,” he says. “It just has to roll up its sleeves and get better. Maybe that means hiring better managers away from rival companies. It doesn’t need a merger to do that.”

It is probably reasonable to assume that, given the size of the two prospective mergers, the DOJ may be a bit more severe in its requirements for letting the Aetna/Humana and Anthem/Cigna deals go through. That assumes the department doesn’t reject one or both deals. The DOJ showed its skepticism toward industry-changing mergers when it turned down Comcast’s acquisition of Time Warner Cable. In that case, according to Balto, the two companies did not compete in the same markets geographically and product-wise. The DOJ’s thumbs-down was the result of concerns that the new company would have a stranglehold as “gatekeeper” on “Internet-based services that rely on a broadband connection to reach consumers.” Such a concern, if translated to the health care mergers up for review, could result in a rejection of the mergers because of their impact as gatekeepers on hospitals and physicians, not because of any consolidation in Medicare Advantage or PPACA marketplace offerings.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Government: Shippers Press for Pipeline Rate Reviews and Refunds

Pipeline & Gas Journal - December 2015 - for the original online article go HERE.

Natural gas consumers led by the Industrial Energy Consumers of America (IECA) have begun a campaign to encourage the Federal Energy Regulatory Commission (FERC) to get tough on pipeline rates. It is a two-pronged attack. One path seeks to persuade FERC to resume mandatory three-year reviews of interstate natural gas pipeline rates. The other aims to persuade Congress to amend Section 5 of the Natural Gas Act to provide FERC with refund authority.

The letter sent to Congress states that FERC Chairman Norman Bay and past Chairs Cheryl LaFleur, Jon Wellinghoff and Joseph Kelliher openly acknowledged the problem of pipeline overcharges and the need for Congress to pass legislation to address it. Wellinghoff, in an email, acknowledges the accuracy of that statement.

Tamara Young-Allen, FERC spokesperson, said the commission, which must ensure that pipeline rates are “just and reasonable,” has made no decision on whether it will respond to the letter. The agency has authority to file rate cases independently and has done so in the past. In a letter former FERC Chairman Wellinghoff sent leaders of the Senate Energy Committee in 2013, he said the agency had done 10 rate reviews between 2009 and 2013. In seven of those instances pipelines signed consent decrees committing to lower rates.

“At that rate, pipeline rates would get reviewed every 10 years,” complained Paul Cicio, IECA president. Shippers can file rate cases themselves but that can be a costly process, and FERC’s inability to order refunds for past overcharges serves as a double disincentive, he added.

Cathy Landry, spokeswoman for the Interstate Natural Gas Association of America (INGAA), said if FERC were able to order refunds, a pipeline could be punished for charging the rate FERC had previously approved.“Such a change in long-standing law would introduce significant financial uncertainty for regulated pipelines,” she said. “From the start of a Section 5 proceeding until its completion at some undetermined date, a pipeline would no longer know its FERC-approved rate, and would be unable to calculate its revenues with certainty. This significant level of business risk and uncertainly would ultimately be reflected in the cost of capital across the entire pipeline sector, leading ironically to higher rates for service.”

There seems little groundswell in Congress favoring pro-refund legislation. No bill has been introduced. Dan Schneider, press secretary to the House Energy and Commerce Committee, home to Chairman Fred Upton (R-MI), one of the recipients of the letter, said no legislation has been introduced there.

The IECA and its allies believe FERC needs to crack down on pipeline rates based on a recent report from the Natural Gas Supply Association (NGSA) which analyzed the cost recovery of 32 major interstate natural gas pipelines representing 80% of the market. The study showed from 2009-13 pipelines over-collected $3 billion more than they would have collected on an average 12% return on equity allowed by FERC.

Landry responded, “As NGSA notes in the 2015 report, there has been a downward trend in the overall average return of the pipelines reviewed, to 12.6% in 2013, the most recent year reflected in the analysis. Seven of the pipelines had rates of return below 10% in 2013, including two below 5%.”
The NGSA did not sign onto the IECA letters to FERC Chairman Bay and Energy Committee chairmen and ranking members in Congress.

“We support reviews of pipelines’ rates when the data suggests they are over-earning,” said Daphne Magnuson, spokeswoman for the NGSA. “FERC can use Form 2s to help monitor the data and use that information as a guidepost to determine if there is a need to initiate a review.”

She added, “NGSA is also interested in establishing a refund-effective date when FERC determines that there has indeed been overearning, since currently there are no refunds, just a change in rate going forward. Interestingly, there are refunds on the electric side – it’s just a gas thing that we don’t get refunds.”

FERC usually likes to see pipeline rates earn around 12% return on equity. But a pipeline’s return on equity (ROE) can fluctuate over time, based on changing conditions such as higher or lower costs, or higher or lower volumes. Higher ROEs are not the result of price gouging. However, critics argue that pipelines are quick to file a rate case when their ROEs fall below 12%.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Congress Likely to Rein in 340B Drug Discount Program

P&T Journal - October 2015 - for the original online article go HERE or for a PDF go HERE.

The HRSA’s Draft Guidance and a Proposed Rule Give Legislators an Opening

Congress appears to be considering reining in a federal program that lets safety-net hospitals and community clinics use outpatient prescription sales to generate revenue. Repeated negative reports from federal watchdog agencies depict the 340B drug program as running off the rails for numerous reasons. The Health Resources and Services Administration (HRSA), the agency of the Department of Health and Human Services (HHS) that supervises the program, says it does not have the legal authority to provide the kind of oversight that is required. As of February 28, 2015, 11,180 providers were participating in the 340B program, according to HHS.1 Hospitals buy 78% of the drugs purchased by those providers.

The HRSA Office of Pharmacy Affairs (OPA), which runs the 340B program, published a long-awaited “omnibus” draft guidance in late August 2 ostensibly clarifying some key issues that the Government Accountability Office (GAO) and the HHS Office of the Inspector General (OIG) have highlighted as undermining program integrity. But guidance is not enforceable.

“Rulemaking allows us to be more specific about our regulations and gives us stronger enforcement ability,” states Diana Espinosa, HRSA Deputy Administrator. However, a 2014 federal court decision severely limited the OPA’s rulemaking authority, a situation only Congress can correct.

The omnibus draft guidance hit the street at about the same time that 340B players were commenting on a proposed rule from the HRSA having to do with the prices drug companies can charge eligible hospital patients.3 The omnibus draft guidance would limit the patients who would be eligible for discounted drugs. These latest events give Congress, which has long ignored the 340B program, a chance to legislate, taking into account complaints about the draft guidance and proposed rule and giving the OPA a stronger legal footing that can be translated into enforceable regulations.

Stephanie Silverman, spokeswoman for the Alliance for Integrity and Reform of 340B, a group composed of drug companies, pharmacy benefit managers (PBMs), and some patient groups, points out that there was bipartisan support for 340B reform legislation to be included in the 21st Century Cures bill the House passed in July by a vote of 344–77. But a 340B amendment came up late in the game, and legislators dropped it out of fear that stakeholders had not had enough time to vet the language.

Now that the draft guidance is out, “we’ll see where the holes are, and any legislation will be faster-moving,” Silverman states. “There is clearly bipartisan appetite for moving legislation.”

Josh Trent, a staffer at the House Energy and Commerce Committee, which held oversight hearings in March 2015, says he cannot comment on whether 340B remedial legislation is imminent. But the House has approved a new 0.1% fee on participants that is expected to generate $7.5 million in fiscal year 2017 to be used for program integrity (that is, additional audits). This would be added to an annual budget that in fiscal 2015 amounted to about $10 million.

Complaints About 340B


About one-third of the hospitals in the country and a large number of federally funded health clinics use the 340B program to generate revenue, in some cases millions of dollars, by selling discounted prescription drugs at outpatient clinics. Hospitals and clinics love the program. Pharmaceutical manufacturers, PBMs, and others hate it. John J. Castellani, President and CEO of Pharmaceutical Research and Manufacturers of America, says:
Current hospital qualification criteria is misaligned with Congress’ goal of supporting vulnerable patient access to prescription medicines. We owe it to these patients to ensure that the program remains sustainable in the future and, as such, it is critical to revise the eligibility criteria for hospitals and improve accountability and oversight.
The push by drug manufacturers to convince Congress to reform the 340B program gained support in June from a newly released GAO report.4 The GAO looked at a sample of 340B hospitals and found they were billing Medicare for higher drug costs under Part B than non-340B hospitals. Part B drugs are typically provided in a physician’s office; a considerable percentage of those drugs are oncology medicines. “This indicates that, on average, beneficiaries at 340B disproportionate-share hospitals were either prescribed more drugs or more expensive drugs than beneficiaries at the other hospitals in GAO’s analysis,” the GAO said.

Hospital groups disputed the GAO’s methodology. Bruce Siegel, MD, CEO of America’s Essential Hospitals (a trade group for safety-net hospitals), said in a statement: “We’re surprised not only by the lack of evidence and data for GAO’s conclusions and recommendations, but also by its suggestion that physicians in our nation’s essential hospitals would ignore patient needs to enrich hospitals.”

For their part, hospitals have complained about manufacturers overcharging and refusing to provide pricing information required by the 2010 Patient Protection and Affordable Care Act (PPACA). One of its provisions mandated that manufacturers report 340B prices to the HHS, which would make those prices public. That has not happened. HRSA’s Espinosa says the new pricing system will be operational in late 2015.

340B Program Details


Congress established the 340B program in 1992. To qualify to sell discounted 340B pharmaceuticals, hospitals and clinics, called “covered entities” in the program’s argot, must serve a large number of uninsured patients. The qualification standard relies on an indirect measure of the percentage of hospital patients covered by Medicaid. Covered entities include safety-net hospitals (referred to as disproportionate-share hospitals) owned or operated by state or local governments, as well as federal grantees such as federally qualified health centers (FQHCs), FQHC look-alikes, family planning clinics, state-operated AIDS drug-assistance programs, Ryan White CARE Act grantees, sexually transmitted disease clinics, and others as identified in the Public Health Service Act.

Drug companies must sell their medicines to 340B out patient pharmacies at discounts of 25% to 50% if they want to sell to state Medicaid programs. The 340B cost for a drug paid by covered entities—sometimes referred to as the 340B ceiling price—is based on a statutory formula and represents the highest price a drug manufacturer may charge covered entities. It is based on the price companies charge Medicaid programs for that drug. Manufacturers are permitted to audit covered entities’ records if they suspect product diversion or multiple discounts are taking place. Occasionally, the formula results in a negative price for a 340B drug. In these cases, HRSA has instructed manufacturers to set the price for that drug at a penny for that quarter—a directive known as HRSA’s penny pricing policy.

The covered entities make their revenue by encouraging qualified patients—and the definition of patient is among the rubs—with commercial insurance to use those 340B pharmacies. There is no family income cap on patient eligibility; millionaires with or without health insurance and the destitute are both eligible to visit 340B pharmacies. The hospital or clinic then bills the insurance company of insured patients for the full price of the drug, and pockets the difference between that price and the discounted price.

Some programs provide 340B drugs to prison inmates, a fact that appeared to take one House subcommittee chairman by surprise. David Bowman, an HRSA spokesman, explains that under current law, correctional facilities are not 340B covered entities eligible to purchase drugs under the 340B Drug Pricing Program. However, these facilities and their patients may be eligible for the 340B program under certain circumstances:
  • In the case of hospitals, if the clinic at which the covered entity provides health care services to incarcerated persons is an integral part of the hospital and the clinic is listed as reimbursable on the entity’s most recently filed Medicare cost report, then the clinic may be eligible.
  • For other covered entities, if the clinic where the covered entity provides health care services to incarcerated persons is within the scope of its grant, then the clinic may be eligible.
“There are a very small number of 340B covered entities, 29, that currently operate sites within a prison, jail, or detention center,” Bowman says.

Criticism of the Program


The OIG has evaluated and audited the program for more than a decade, focusing on the impact of 340B on federal Medicaid and Medicare spending. From the start, the OIG found numerous deficiencies in HRSA’s oversight of the program.1 These deficiencies included inaccurate information about which providers were eligible for the discounted prices and a lack of systematic monitoring to ensure that drug manufacturers were charging 340B providers the correct prices. In the latter case, confidentiality protections prevented HRSA from sharing the ceiling prices with the 340B providers, leaving them in the dark as to whether they were being charged correctly by drug manufacturers. The PPACA provision was supposed to eliminate that problem.

The lack of price transparency can result in the federal government and states paying more for drugs for Medicaid patients than otherwise necessary. Medicaid patients are eligible to receive 340B drugs. States pay for 340B-purchased drugs when 340B providers dispense them to Medicaid patients. Many states have established Medicaid policies to pay for 340B-purchased drugs at 340B providers’ actual acquisition cost; these policies ensure that Medicaid realizes savings from the discounted 340B prices. However, OIG found that without access to 340B ceiling prices, states are unable to implement automated, prepayment edits to enforce these policies. A decade ago, the OIG found that 14% of prices charged by drug companies were too high, resulting in overcharges of $3.9 million a month.5 That report has never been updated.

Apart from the impact of opaque and excess pricing on Medicaid expenditures, the increasing number of contract pharmacies used by covered entities—first allowed by HRSA in 2010—has made it difficult for state Medicaid programs to determine which 340B claims are actually eligible for reimbursement at the higher rate. A corollary to this problem is that confusion over claims can result in drug manufacturers having to offer discounts for the same patient and drug twice. Duplicate discounts occur when drug manufacturers pay state Medicaid agencies rebates under the Medicaid drug rebate program on drugs they sold at the already-discounted 340B price.

The contract pharmacy expansion the OPA allowed in 2010 also complicates a pharmacy’s ability to know whether a particular customer is eligible for 340B pricing. The pre-2010 guidance specifies that an individual is an eligible patient only if he or she has an established relationship with the 340B provider, he or she receives health care services from the 340B provider, and those services are consistent with the service or range of services for which federal funding is being granted. That determination was much easier to make prior to 2010, when eligible patients could obtain 340B drugs only from the hospital’s inpatient pharmacy.

Now covered entities send their ostensibly eligible patients to retail pharmacies, which have a much more difficult time determining whether their customer is 340B-eligible. Most do that after the fact, often matching information from the 340B providers, such as patient and prescriber lists, to their dispensing data. “Depending on the interpretation of HRSA’s patient definition, some 340B provider eligibility determinations would be considered diversion and others would not,” says Ann Maxwell, OIG’s Assistant Inspector General for Evaluation and Inspections.

The GAO has focused more on the impact of 340B idiosyncrasies on Medicare spending. The GAO’s latest report in June reported higher spending by Medicare for drugs sold to patients at 340B hospitals than at non-340B hospitals.4 The Centers for Medicare and Medicaid Services, which administers the  Medicare program, uses a statutorily defined formula to pay hospitals for drugs at set rates regardless of hospitals’ costs for acquiring the drugs. The report states:
Therefore, there is a financial incentive at hospitals participating in the 340B program to prescribe more drugs or more expensive drugs to Medicare beneficiaries. Unnecessary spending has negative implications, not just for the Medicare program, but for Medicare beneficiaries as well, who would be financially liable for larger copayments as a result of receiving more drugs or more expensive drugs. In addition, this raises potential concerns about the appropriateness of the health care provided to these beneficiaries.
“The federal government doesn’t know where the dollars are going,” says U.S. Representative Renee Ellmers (R-North Carolina). She cites a study by the IMS Institute for Healthcare Informatics that found the cost of 10 chemotherapy infusion drugs was 189% higher at the 340B hospitals than at private physicians’ offices.6

The HRSA in many cases does not have the legal authority to respond to these programmatic weaknesses. In May 2014, a ruling by the U.S. District Court for the District of Columbia said HRSA could issue legally binding, enforceable regulations in only three areas, which did not include the definition of a patient, participation of contract pharmacies, and hospital participation in the program. U.S. Representative Fred Upton (R-Michigan), Chairman of the House Energy and Commerce Committee, says HRSA’s inability to issue regulations is “hampering the ability of the agency to manage the program as we’d like.”

Congress Becomes More Attentive to 340B


The GAO and OIG reports, with their negative implications for federal health care spending, along with the federal court decision, have apparently forced Congress to revisit a program it has long ignored. Moreover, the PPACA’s support for expansion of state Medicaid programs—28 states have done that so far—means that far fewer poor individuals are uninsured and that uncompensated care at hospitals is falling sharply as a result.

At hearings in March—the first 340B oversight hearings the committee had held since 2005—U.S. Representative Joe Pitts (R-Pennsylvania), Chairman of the House Energy and Commerce health subcommittee, asked Debbie Draper, Director of Health Care at the GAO, whether the PPACA’s Medicaid expansion means the access of hospitals to the 340B program should be circumscribed. Her response: “That is an interesting question, and difficult to answer because much has changed in the health care landscape the last few years. The bigger question is, what is the intent of 340B? There is lack of clarity around that.”  HRSA’s Espinosa agrees. “The law doesn’t specify how the savings hospitals earn from 340B should be used,” she says.

Aside from the kind of technical, definitional, and accounting shortcomings plaguing the program, there is also the matter of the program’s objective. When Congress established the 340B program in 1992, the rationale was that hospitals and community clinics serving low-income patients needed a way to stretch scarce resources, allowing them to reach more eligible patients and provide more comprehensive services. Rather than set up a grant program using federal dollars, Congress forced drug manufacturers to sell medications at a discounted price and allowed hospitals to raise revenue via the differential between the discounted price and the price they billed insurance companies when an insured person purchased those drugs. It was not clear, however, which patients were eligible to purchase the discounted drugs, and whether the program’s purpose was to help the poor and uninsured afford expensive drugs or to allow hospitals in poorer communities to fund their operations.

The GAO’s Maxwell, when asked by Pitts about the impact of the reduction in uncompensated hospital care, replied, “The bigger problem is the intent of the 340B program.” Echoing Draper, she added: “There is a lack of clarity on that.”

This lack of clarity looms larger every year as the program expands almost geometrically, with the result that both hospitals, for their reasons, and drug manufacturers, for their reasons, complain louder and louder about unqualified patients using the program and about rogue drug company pricing. In 2010, Congress in the PPACA allowed states to expand the number of Medicaid patients they serve, which had the contradictory effect of first boosting the number of hospitals that are eligible (because eligibility is tied loosely to a hospital’s Medicaid population) and simultaneously reducing uncompensated hospital care.

The PPACA also expanded the kinds of health care settings that could qualify for the 340B program to: 1) certain children’s and free-standing cancer hospitals excluded from the Medicare prospective payment system; 2) critical-access hospitals; and 3) certain rural referral centers and sole community hospitals. In 2011, the number of hospitals participating in the program was nearly three times what it was in 2005, and the number of these organizations, including their affiliated sites, was close to four times what it was in 2005, according to the GAO. Hospitals’ participation in the 340B program has grown faster than that of federal grantees; the number of participants increased almost threefold from 2005 to 2011. Disproportionate-share hospitals alone represent about 75% of all 340B drug purchases.

In 2010, HRSA pumped up the program by allowing hospitals to sell discounted drugs from outpatient pharmacies located off a hospital’s main grounds. Before, sales were only allowed where a pharmacy was located next to an inpatient facility.

HRSA’s Response


It wouldn’t be fair to blame the OPA entirely, or even mostly, for the shortcomings of the 340B program. Congress provided some weak underpinnings initially and then piled more program complexities on top of that shaky foundation. Congressional appropriations for the program have been anemic, particularly until 2009, when the program’s budget was $1.5 million. It has risen to $10 million a year, but that still makes it one of the worst-funded federal agencies with enforcement responsibilities. The program’s visibility is almost nil. The OPA, whose sole responsibility is the 340B program, isn’t even listed with the other “offices” on the HRSA organizational chart.

Additional congressional appropriations over the past few years have allowed the OPA to begin auditing—mostly hospitals and not many drug manufacturers. The OPA has conducted about 50 to 100 audits a year since fiscal 2011, according to its website. Looking through the summaries of the most recent audits in fiscal 2015, the vast majority of hospitals that were audited either terminated their contract pharmacies or repaid manufacturers because of diversion of 340B drugs to unqualified patients.

Some of that diversion will go away based on the proposed restrictions in the draft guidance on patients eligible for 340B drugs. Hospital groups aren’t happy about the new restrictions. 340B Health, a trade group representing safety-net hospitals who take advantage of the program, says it hopes “safety-net health care providers will not find themselves limited in their ability to meet their mission to treat the underserved.” So there will be pushback, undoubtedly, against the proposed definitional changes to “patient.” And in any case, whatever the language in the final guidance, it will still just be guidance. The HHS won’t be able to enforce it unless Congress encodes the changes into law.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

EPA Eases Compliance Costs for UST Inspection and Testing

Aftermarket Business World - September 30, 2015

The costs of complying with the new rule on underground storage tanks won't be nearly as onerous for service stations and others in the aftermarket sector as once thought. The Environmental Protection Agency eased some of the mandates it had proposed back in late 2011 when it finally published a final rule in mid-July.  Five years in the making, the rule adds maintenance and inspection requirements to equipment requirements for underground storage tanks  (USTs) first established in 1988.

Underground storage tanks holding petroleum and motor oil are ubiquitous in the automotive service station sector.  The changes the EPA made to the final rule resulted in much lower compliance costs for service stations, who, according to Bob Renkes, Executive Vice President & General Counsel, Petroleum Equipment Institute, account for about 360,000 of the 560,000 tanks that currently exist.

The Petroleum Marketers Association of America (PMAA) estimated the proposed rule would have cost upwards of $6000 per site. Mark Morgan, Regulatory Counsel to the PMAA, says the burden is now estimated to be $2377 per site.

Kirk McCauley, Director of Member Relations and Government Affairs WMDA Service Station & Automotive Repair Association, states the final rule is "not as bad as I expected." His group had a number of problems with the proposed rule after it was published in 2011. "Not having to check containment sumps monthly will save a lot of backs; some covers are in the 200 pound class," he notes. They will have to be visually checked once a year.

And the elimination of interstitial space testing on storage tanks' underground piping and sumps is the right decision," adds McCauley. That would have been a major problem, and cost, for service stations with old tanks with secondary containment. The owners would have had to break through concrete or asphalt to get to the interstitial opening in order to do the test.

A lot of what is in this regulation is already standard practice. Overall I think it will cause some heart burn but not as bad as the industry was expecting," notes McCauley.

But the PMAA's Morgan adds, "However, we believe that testing requirements for sumps under the final rule would be very costly and burdensome. We are seeking clarification from EPA and will then reassess." The initial rule was established in 1988. It set standards for spill, overfill, corrosion protection, and release detection.  But there are still approximately 6,000 releases each year. The EPA says lack of proper operation and maintenance of UST systems is the main cause of new releases. For example, EPA required spill prevention equipment to capture drips and spills when the delivery hose is disconnected from the fill pipe, but did not require periodic testing of that equipment.”

The final rule doesn't require anyone to install new equipment, or for service stations (or others) buying new USTs to purchase tanks with newer, more expensive features. The rule is all  about inspecting and testing equipment that was specified in the 1988 rule. The implementation date for most of the new requirements is three years hence.

The inspection requirements are not expected to be onerous. Some of the testing requirements could be costly, though, especially for service stations and gasoline retail locations which don't have the expertise to do the testing. They will hire outside contractors, according to Wayne Geyer, Executive Vice President, the Steel Tank Institute.

The new testing requirements include testing of spill prevention equipment (using vacuum, pressure, or liquid methods) every three years unless the equipment is double-wall spill prevention equipment and both walls are periodically monitored for integrity. Integrity monitoring must be performed at least once every 30 days. The rule includes a three-year testing requirement for containment sumps used for interstitial monitoring of piping unless the containment sumps are double wall and the integrity of the walls is periodically monitored. Integrity monitoring must be performed at least once every 30 days. The rule also requires annual operation and maintenance tests on electronic and mechanical components of release detection equipment to ensure they are operating properly. This includes automatic tank gauge systems and other controllers, probes and sensors, automatic line leak detectors, vacuum pumps and pressure gauges, and handheld electronic sampling equipment associated with vapor and groundwater monitoring.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Brand and Generics Companies Unite to Pressure FDA

P&T Journal - August 2015 - for the original online article go HERE or for a PDF version go HERE.

One wouldn’t think that the idea of drug companies red-flagging safety concerns about a product would be that controversial in this day and age. Yet the Food and Drug Administration (FDA) has encountered stiff opposition in its effort to allow generic drug companies to change their labels quickly, without prior agency approval, when they discover adverse effects in patients once their generic reaches the market. Brand-name drug manufacturers can do that via submission of a “changes being effected” (CBE) supplement, but generics manufacturers cannot. However, once the FDA reviews and approves the CBE supplement, all drug manufacturers selling that product must change their labels. That FDA review can take nine to 12 months, according to David Gaugh, Senior Vice President for Sciences and Regulatory Affairs of the Generic Pharmaceutical Association (GPhA).

A 2013 FDA proposal to put generics companies on the same “automatic” footing as brand-name companies1 has raised all sorts of objections, from patent-holders and generics companies alike, on both ostensibly substantive and legal grounds. Gaugh says the proposed changes exceed the FDA’s authority and are contrary to provisions of the Federal Food, Drug, and Cosmetic Act. “The proposed rule would contradict Hatch-Waxman’s goal of encouraging competition, by driving competitors out of the market,” he adds. Generics companies are most worried about product liability lawsuits against them if they suddenly get the responsibility of unilaterally changing safety labels once adverse information about a drug they sell comes into their possession. Brand-name companies can be sued, and frequently are, for not adding new safety warnings to labels quickly enough.

Product liability suits are costly to defend, even when the company wins. In June 2015, for example, a state court in Philadelphia sided with Pfizer in a trial in which its labeling of Zoloft (sertraline) was at issue. Plaintiffs argued that Pfizer had failed to disclose that pregnant women taking Zoloft could deliver children with birth defects. The Zoloft label warns physicians to weigh the benefits of using the medication against its risks to pregnant women before prescribing it. Pfizer lost patent protection in 2006, and sertraline is now available in generic form.

Possible customer confusion also worries generics companies. Theoretically, numerous generics companies could update their labels with different safety warnings simultaneously if the FDA proposal becomes final. “We believe the methodology FDA is proposing with multiple manufacturers submitting different label changes will ultimately do more harm than good by creating confusion for all stakeholders,” says John Ducker, President and Chief Executive Officer of Fresenius Kabi U.S.A., which specializes in medicines and technologies for infusion, transfusion, and clinical nutrition. The Fresenius portfolio comprises more than 100 injectable drugs and approximately 400 dose presentations, including anesthetics, analgesics, and a wide range of anti-infective and other critical-care drugs.

It isn’t just the generics manufacturers who oppose the FDA proposal. So do brand-name companies and pharmacy groups. Jeff Francer, Vice President and Senior Counsel of the Pharmaceutical Research and Manufacturers of America (PhRMA), calls the FDA plan problematic. “By allowing multiple different drug warnings for the very same bioequivalent medicine when there’s more than one manufacturer of the same drug, the proposed rule would increase confusion for pharmacists, doctors, and other health care professionals, and put patients at risk,” he says.

The American Pharmacists Association (APhA) agrees that the plan could sow confusion and subject pharmacists to new liability, because they, physicians, and perhaps consumers might be obligated to check a new FDA website set up to track safety-label changes. Could a pharmacist be sued for dispensing a medication without telling a customer about a new safety alert that just popped up on an FDA website? The APhA thinks the answer may be “yes.”

“We would like FDA to clarify that health care providers, including prescribers and pharmacists, and patients would not be required to check a website for generic safety information before prescribing, dispensing, or using that medication, as the case may be,” states Thomas E. Menighan, Executive Vice President and CEO of the APhA. “Such a requirement could expose health care providers to new liability and would also interrupt established workflows for providers prescribing or dispensing these medications.” He wants the FDA to make it clear that any FDA “alert” website is for informational purposes only, and that providers, including physicians and pharmacists, are not required to check the website before prescribing or dispensing medications. As part of its proposal, the FDA would post new labels on a website immediately. Ostensibly, that would provide some clarity for consumers, according to the agency.

The PhRMA and the GPhA, often on opposing sides of regulatory battles, have issued a joint alternative proposal that the FDA is now considering,2 to the dismay of consumer groups. It is called the expedited agency review proposal.

“This whole situation is complicated,” concedes Janet Woodcock, MD, Director of the FDA’s Center for Drug Evaluation and Research. At a hearing in March, Dr. Woodcock said that 86% of all drugs dispensed in the outpatient setting are generics, underlining the importance of generic drug labels.

Emotions Run High at Public Hearing


The political complexities bedeviling the FDA’s proposal were on full display at the public meeting the agency held on March 27, 2015.3 Six people told heart-breaking stories of children or themselves being hurt by generic drugs.

Emily Mitchell, a 29-year-old woman from Chattanooga, Tennessee, told of taking fluoxetine, the generic form of Prozac, after being diagnosed with obsessive-compulsive disorder. She continued to take it while pregnant. Her son was born with a congenital heart defect and died in her arms days later. She told the FDA hearing that she had watched a TV commercial while she was pregnant asking viewers whether they had a child with a heart defect, and if so, it might be because the mother had been taking Prozac or fluoxetine during pregnancy. “My heart sank,” she recalled. “I grabbed my medication bottle, and there wasn’t any type of warning on it about taking while pregnant. I want justice, and I want the FDA and all drug companies to put safety first.” Mitchell’s expenses to visit Washington were paid by the American Association for Justice, the professional lobby for trial lawyers.

Two representatives of different groups of African-Americans made conflicting statements. Derrick Humphries represented groups such as the National Association for the Advancement of Colored People and the National Urban League. Maryland State Senator Catherine Pugh is President of the National Black Caucus of State Legislators (NBCSL). Humphries said the FDA’s proposal jeopardizes patient safety, safe access for patients, physicians, pharmacists, and payer accessibility to generic medicines. He favored the PhRMA/GPhA alternative. Pugh said Humphries may be correct about the proposed rule limiting minority communities’ access to medications because it may add costs to generic drugs. But Pugh added, “We at NBCSL believe that safety of these drugs trumps costs, and unsafe generic brand-name drugs pose a threat to our communities, as it would others. We at NBCSL support the concept of making safety information for generic drugs available as soon as possible.”

FDA Responds to Supreme Court Decision


The FDA decided to propose the rule after a 2011 Supreme Court decision. The court ruled in PLIVA v. Mensing, by a 5–4 vote, that Gladys Mensing could not recover damages for debilitating injuries she received from a drug with an inadequate warning label because her prescription was filled with a generic version of the drug rather than with the brand-name version.4 The court had previously held in Wyeth v. Levine that federal law does not pre-empt failure-to-warn claims against brand-name drug manufacturers. The Mensing decision created an arbitrary distinction, whereby a court’s ruling on whether or not a consumer can obtain relief turned solely on the happenstance of whether his or her prescription was filled with a brand-name drug or a generic drug.

Brand-name companies have been allowed to make safety changes to their labels since 1985 via the CBE process. In 2013, the FDA proposed to give generics manufacturers the same opportunity by allowing them to file with the agency a CBE-0 supplement. The proposed rule also would amend the regulations to allow submission of a CBE-0 labeling supplement for certain changes to the “Highlights of Prescribing Information.”

The proposed rule requires a company with an approved abbreviated new drug application (ANDA)—that is, a generics company—to submit a CBE-0 supplement if the company obtains or receives new information that should be reflected in product labeling to accomplish any of the following objectives:

  • To add or strengthen a contraindication, warning, precaution, or adverse reaction for which the evidence of a causal association satisfies the standard for inclusion in the labeling under §201.57(c), the requirements for full prescribing information in FDA regulations.
  • To add or strengthen a statement about drug abuse, dependence, psychological effect, or overdose.
  • To add or strengthen an instruction about dosage and administration that is intended to increase the safe use of the drug product.
  • To delete false, misleading, or unsupported indications for use or claims for effectiveness.

The ANDA holder would be required to send notice of the labeling change proposed in the CBE-0 supplement, including a copy of the information supporting the change, to the holder of the new drug application (NDA) for the reference listed drug—that is, the brand-name company—at the same time that the supplement to the ANDA is submitted to the FDA (unless approval of the NDA has been withdrawn). To make the safety-related changes to drug labeling described in a CBE-0 supplement readily available to prescribing health care providers and the public while the FDA is reviewing the supplement, the FDA proposed to establish a dedicated Web page where the FDA would promptly post information about labeling changes proposed in a CBE-0 supplement.

Critics Make Multi-Pronged Attack on Proposal


Criticism of the proposed rule has centered on the possibility of consumer confusion when a generic label differs from the brand-name label. Concerns have also been voiced about higher generic costs, with a consultant to the GPhA publishing a controversial study forecasting a $4 billion-a-year hit to consumers. Those increased costs would arise as generics companies passed their expected and actual legal costs to consumers. Product liability suits could result from several scenarios, according to the GPhA:

  • If the first ANDA applicant’s proposal is accepted, every other ANDA applicant that did not submit its own CBE-0 or that submitted a CBE-0 with different language will be subject to state-law tort suits (including the NDA holder).
  • If a proposal submitted by an ANDA applicant following the first ANDA applicant’s submission is accepted, the first ANDA applicant and every other ANDA applicant that did not submit its own CBE-0 or that submitted a CBE-0 with different language will be subject to state-law tort suits (including the NDA holder).
  • If the FDA rejects the proposals submitted by all applicants and instead adopts its own language, all applicants will be subject to state-law tort suits (including the NDA holder).
  • In each instance, all manufacturers will be subject to state-law tort suits for not making a change earlier.

Candis Edwards, Senior Vice President of Clinical Regulatory Affairs at Amneal Pharmaceuticals, says she is not convinced that the FDA’s proposed rule as it now stands would change some of the outcomes that some consumers have been experiencing. “And so Amneal is taking the position that we actually oppose the proposed labeling rule,” she states. She reiterates a common theme sounded by representatives of generics companies: An active ingredient can be sold in generic form by many companies, sometimes as many as 20. Amlodipine has 29 different ANDA approvals listed in the FDA’s Orange Book.

Douglas Boothe, Executive Vice President and General Manager for Pharmaceutical Products at Perrigo Corporation, says, “Currently, there are over 300 companies with 15 or more approved ANDAs, some of those ANDAs held by companies marketing over-the-counter [OTC] products.” He wants OTC products removed from the scope of the proposed rule.

Generics companies have procedures for monitoring adverse effects, of course. Marcie McClintic Coates, Vice President and Head of Global Regulatory Affairs for Mylan, Inc., says interpreting post-marketing safety data is complex. It involves analysis of post-approval clinical data, detailed review of adverse drug experience reports, the context of relevant clinical studies, estimates of drug usage, adverse drug experience reporting dates, estimates of background, and rates of the adverse event, among other relevant information. According to Coates:
Generic companies lack access to all of the required data to make a scientifically substantiated label change; although, the rule as written would require generics to unilaterally make label changes and distribute the label before FDA’s review of this comprehensive data. As a result, patient safety would be compromised when generic drug manufacturers distribute revised labeling that also includes risk information that FDA may later determine, based on the full dataset, is not scientifically accurate.
The GPhA–PhRMA alternative would establish defined time parameters for the FDA to act on label changes that are made following the FDA’s receipt and review of new safety information from either an NDA or ANDA holder, or following receipt of data through the sentinel system or any other database that appears to suggest a need for a label change. If the FDA decides a labeling change is warranted, it would notify all NDA and ANDA holders within 15 days, and they would have 30 days in which to issue revised electronic labeling.

Countering Industry Arguments


An economist working for the American Association for Justice disputed the $4 billion estimate of added costs to consumers made by Alex Brill, CEO of Matrix Global Advisors. The FDA contends that although the proposed rule would eliminate the pre-emption of certain failure-to-warn claims with respect to generic drugs, it would nonetheless not result in higher costs to generic manufacturers. “I find these two assertions to be patently inconsistent,” Brill states.

But Frank Ackerman, Senior Economist of Synapse Energy Economics, said the Brill estimate was fundamentally mistaken on three separate grounds: in terms of the understanding of what the cost–benefit analysis should include, in terms of the specifics of the calculation, and in terms of the significance of the calculation were it found to be correct. His major criticism is that Brill based his calculation on what American industry in general spent on product liability insurance in general between 1980 and 1984. “So this is a fresh up-to-the-minute picture of what product liability insurance cost when President Reagan first thought it was morning in America,” Ackerman chides.
Public Citizen’s Health Research Group disputes the contention that generics companies do not have enough information to change safety labels unilaterally, without the FDA’s approval. “You don’t need access to the totality of the data to make important safety updates,” says Michael Carome, MD, Director of the Health Research Group. His group has successfully petitioned the agency to add new safety warnings, including boxed warnings, to the labels of multiple drugs, based on its review of FDA reports and the scientific literature. Its petition to add boxed warnings about the risk of tendon rupture to the labels of all fluoroquinolones, many of which were generic, was based on reports in the FDA Adverse Event Reporting System. “Generic companies have access to that same data,” Dr. Carome states.

The PhRMA–GPhA alternative doesn’t sit well with some groups, either. The Alliance for Justice argues that the alternative would shelter brand-name companies from product liability lawsuits once the first generic competitor enters the marketplace. At that point, changes to either the brand-name or generic label would require prior approval by the FDA. No longer would manufacturers be permitted promptly to update a safety warning in advance of the FDA’s review of the change, irrespective of the critical safety information that the change may provide. So a drug company could defend itself by saying: “The FDA approved our change.”

Even the AARP, which submitted a brief in the 2011 Supreme Court case supporting Gladys Mensing and which believes generics companies should be liable for labeling under state tort law, has problems with the FDA’s proposed rule. David Certner, Legislative Counsel and Legislative Policy Director for Government Affairs, explains the AARP’s concerns:
It is essential for generic drug manufacturers to be able to make appropriate updates to their labeling without having to wait for changes to be initiated by a brand-name drug manufacturer. While the AARP wholeheartedly supports the goal of ensuring new drug safety information is available to consumers as quickly as possible, we do have some concerns that the proposed rule could lead to inconsistent labeling information on multiple versions of equivalent drugs for a substantial period of time. The resulting confusion could affect confidence in generic drugs and complicate decision-making conversations between providers and consumers about appropriate drug therapies based on their safety, efficacy and quality.
The AARP’s alliance with the drug manufacturers on this issue probably spells withdrawal of the FDA’s original proposal and issuance of a new proposal that hews closer to what the PhRMA and GPhA have proposed.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

Government: Obama Nominates New PHMSA Administrator

Pipeline & Gas Journal - July 2015 - for the original online version of this article go HERE.

With Congress riled about PHMSA's slow implementation of the last pipeline safety law, the Obama administration has nominated a new administrator for the Pipeline and Hazardous Materials Safety Administration who lacks pipeline and hazardous materials experience. Nor has she ever been a regulator.

Marie Therese Dominguez began in the Clinton White House and worked her way through administrative positions in the Federal Aviation Administration, U.S. Postal Service and the Army, where she spent the last two years as deputy assistant secretary of the Army for Civil Works.

If one compares her professional background and its relevance to the PHMSA job with the background of Colette Honorable, the recently appointed FERC chairman, and the suitability of Honorable's background, the difference is night and day. Honorable was supremely qualified.

The only positive with Dominguez is that she knows her way around Washington bureaucracy, and ostensibly has a sharper political antennae than Timothy Butters, the former assistant chief of pperations for a northern Virginia fire department and current PHMSA deputy administrator.

Effort to End Crude Oil Export Ban

Sen. Lisa Murkowski's bill (S. 1312) to end the U.S. ban on crude oil exports looks to be running into substantial opposition from the Obama administration and Democrats on Capitol Hill. Her Energy Supply and Distribution Act does have one Democratic co-sponsor, Sen. Heidi Heitkamp (ND), but is otherwise a solidly GOP bill.

Energy Secretary Ernst Moniz appeared to forecast administration opposition when he told an energy conference in Houston in April: “In a situation where we still import 7 million barrels of crude oil per day, I don’t think an overly compelling argument has been made on the basis of pragmatic economics." says Carlos Pascual, senior vice president at IHS, an international consulting firm, said, “The United States now has the fastest growing oil economy in the world."

He previously served as the Coordinator for International Energy Affairs and Special Envoy on Energy at the State Department. Since 2008, U.S. crude oil output has increased by 81% – 4.1 million bpd principally of light tight oil.

"This increase is the fastest in U.S. history and exceeds the combined production gains from the rest of the world," adds Pascual. "The conditions that justified the crude oil export ban in 1973 no longer apply."

GOP Trying to Get Permit Reforms Past Democrats

House Republicans have restarted efforts to pass legislation making it more difficult for federal environmental agencies to drag their feet reviewing new pipeline applications.A key House committee reviewed a new draft bill, partially devoted to pipelines, which is a pale alternative to another bill which passed the House in January.That would be the Natural Gas Pipeline Permitting Reform Act (H.R. 161) which passed Jan. 21 by a vote of 253-169.

But H.R. 161, sponsored by Rep. Mike Pompeo (R-KS) cannot pass the Senate because of opposition. So the new draft bill is an attempt to craft pipeline permitting reform which Democrats can agree to.

The Pompeo bill would give an agency such as the Corps of Engineers or the Fish and Wildlife Service an extra 30 days beyond the current 90-day limit, which starts once FERC has finalized an environmental impact statement, in which to approve or disapprove a pipeline application. If it failed to act, FERC could approve the project.

The draft pipeline section unveiled at hearings in May before the House Energy & Commerce Committee's subcommittee on energy and power is weaker than what is in the Pompeo bill from a pipeline advocacy standpoint.It does set the 90-day deadline, now an administrative requirement, as a federal statute. But it substitutes "issue resolution meetings" instead of hard deadlines, which the Pompeo bill imposed. If a federal agency doesn't meet the 90/30 day deadlines, it
must notify Congress and "describe in that notification an implementation plan to ensure completion."

Sen. Shelly Moore Capito (R-WV) has already introduced an actual bill encompassing the House draft language (S. 1210). The Capito bill is called the Oil and Gas Production and Distribution Reform Act of 2015.But this new, draft pipeline approval language, weak as it is, is still unacceptable to Democrats. Both Frank Pallone, Jr. (NJ) and Bobby Rush (IL), the top two Democrats on the full committee and energy and power subcommittee, oppose the draft. Rush called it "a solution in search of a problem."

The new version may pass the House as part of whatever larger energy bill it is included in. But it will run into trouble in the Senate if House GOPers don't meet at least some of the Democratic objections, if that is possible.

Complicating the draft's future, too, was opposition from Ann F. Miles, Director, Office of Energy Projects, FERC.She said,"I am concerned that codifying the commission's practices too rigidly might have the unintended consequence of limiting the commission's ability to respond to the circumstances of specific cases, to changes in the natural gas industry, and to the nation's energy needs."

Don Santa, President and CEO of the Interstate Natural Gas Association of American, said the current FERC pipeline approval process "remains a good, albeit complex, process." He added, however, "There have been some trends in the wrong direction. What was once orderly and predictable is now increasingly protracted and contentious."

He said the bill would "modestly" improve the permitting process. But he argued Congress should do more by creating "real consequences for agencies that fail to meet reasonable deadlines." That appeared to be a reference to the Pompeo bill or something similar.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

How Congress Finally Killed SGR

Legislators and physician organizations took last year’s failed attempt at reform and pushed it through in a different political climate

Medical Economics - June 4, 2015 - for the original online version of this article go HERE.

What a difference a year makes. Congress passed the Medicare Access and CHIP Reauthorization Act of 2015 (MACRA)—also known as the “doc fix” in mid-April by overwhelming, bipartisan votes.

Contrast that outcome with 2014, when House Republicans barely passed essentially the same bill with just 20 Democratic votes and the Senate, then controlled by Democrats, never even voted on it.

What MACRA does

The doc fix legislation eliminates the sustainable growth rate (SGR) formula that has dictated drastic reductions in the Medicare fee update for many of the past 15 years, after being established in 1997.

The underlying provisions in H.R. 2 are the very same ones that were in the legislation that ran aground in the last Congress. The new law eliminates the SGR, substitutes a .5% fee-for-service (FFS) update through 2019, eliminates any update for the five years thereafter.

Also starting in 2019, the bill offers physicians two options for increasing earnings beyond the zero percent update. One is an FFS-grounded Merit-Based Incentive Payment System (MIPS). The other is Alternative Payment Model (APM) program.

Physician groups pushed hard for the bill. Says American Medical Association President Robert M. Wah, MD, “Not only did MACRA stabilize the Medicare program, it put in place significant reforms that could reshape how we deliver health care in this country.”

But that popping of champagne corks is probably a bit premature. It is true that future SGR-mandated cuts in Medicare reimbursements are averted. In addition, some of the penalties currently assessed in three Medicare programs—Physician Quality Reporting, Meaningful Use and Value-Based Payment Modifier—will be reduced starting in 2019. Physician reporting, now required separately for all three, will be consolidated in one report for MIPS. Those are solid pluses.

However, inflation will almost certainly swallow the .5% update in each of the next five years. Rep. Michael Burgess, MD, (R-TX), the prime sponsor of MACRA, says in an interview with Medical Economics, “Half a percent for five years was not high enough, and I walked out of the room on several occasions. But it wasn’t going to go any higher and it was important for me to leave a fee for service option and eliminate the doc fix drama.”

What changed from last year?

The AMA’s Wah praised House Speaker Rep. John Boehner (R-OH) and Majority Leader Rep. Nancy Pelosi (D-CA) for getting MACRA through a contentious Congress, especially since its predecessor, H.R. 4015, failed last year. A variety of factors accounted for this year’s success, the most important of which was the financing package.

In 2014, the GOP “paid for” elimination of the SGR, and the associated $141 billion hit to the budget over the next 10 years, by introducing legislation that would have effectively killed the Affordable Care Act. That source of financing was anathema to Democrats. The bill passed the House of Representatives by a vote of 238-181, with near-exclusive Republican support. But Sen. Harry Reid (D-Nev.), then the Senate majority leader, refused to bring the bill up for a vote.

But the November 2014 election changed the political calculus. Republicans won control of the Senate. Reid was no longer at the wheel, replaced by Sen. Mitch McConnell (R-KY). Democrats in the Senate still could filibuster the bill, and perhaps block its passage in 2015. But that became less of an issue as Boehner began negotiating the financial terms with Pelosi. Eliminating the ACA was no longer considered as an option to pay for SGR repeal.

Instead, Boehner and Pelosi came up with a financing package built on compromise and concessions from a number of parties, both inside and outside Congress. According to one source, the scuttlebutt is that Boehner and Pelosi both plan to retire at the end of this Congress, and were motivated by the desire to erect a legislative edifice to their tenure. The House passed the bill by a vote of 392 - 37 on March 26.

The major Republican concession was to finance the bill in part by adding $141 billion to the federal deficit over the next 10 years. But Burgess explains that the deficit-busting nature of H.R. 2 did not incite more of a Republican House revolt because the 10-year cost of repealing the SGR was $1 billion less than keeping the SGR and continuing to pass one-year “patches“ to the fee schedule over the next 10 years.

Burgess points out that the remaining cost of the $214-billion SGR repeal package was paid for by making structural changes to Medicare.

Here is where the Democrats compromised, as did some of their constituencies, primarily seniors. The legislation includes $34 billion of Medicare beneficiary reforms, in the form of higher premiums for wealthier seniors in Parts B and D in 2018, and increasing the number of beneficiaries paying those higher premiums in following years.

In addition, Medicare recipients will have to pay higher out-of-pocket costs for Part B supplemental insurance, which will save the federal government another $1 billion or so.

Hospitals contributed $34 billion to the funding of the bill in the form of reduced payments. Testifying before a House committee in January, Richard Umbdenstock, president and chief executive officer of the American Hospital Association (AHA), said “Offsets should not come from other health care providers, including hospitals, who are themselves working to provide high-quality, innovative and efficient care to beneficiaries in their communities and are being paid less than the cost of providing services to Medicare beneficiaries.” In the end, hospitals swallowed a bitter pill.

After the House passed the legislative package, its fate still hung in the balance during an early April congressional recess. But upon its return, on April 14, the Senate passed the bill by a vote of 92-8. President Obama signed it into law soon thereafter.

What it means for docs

Despite the accolades from physicians groups, it is unclear just how good a deal MACRA will turn out to be for doctors. Again, inflation is expected to consume the .5% update in each of the next five years.

After that, FFS transitions to the Merit-based Incentive Payment System (MIPS). Whether a physician receives a negative or positive update between 2019 and 2024 will depend on his or her score above or below some pre-established threshold. The score will depend on how well that physician does with reporting under PQRS, meaningful use, and value-based modifier programs, which will be consolidated into a single program that will be—at least theoretically— easier to comply with.

Scores falling below the threshold will result in penalties. Doctors who don’t report at all—and Burgess acknowledges that some physicians won’t—will receive the maximum penalty, which will be 4% in 2019 and up to 9% after 2022. Even physicians who do report will face penalties if their score is below the established threshold, with the exact amount dependent on how far below the threshold they score.

Physicians who score above the threshold will receive incentive payments of up to 4% in 2019 and up to 9% in 2024, depending on how far above the threshold they score. Exceptional performers will also qualify for an additional bonus pool.

Physicians who choose to participate in an APM program will receive a 5% bonus. However, they will be participating in risk-based, value-payment programs such as accountable care organizations (ACOs). Consequently, they face the possibility of the 5% bonus eroding in part or in full if their costs exceed their revenue. Several of the Pioneer ACOs participating in Medicare’s first-generation program have left the program exactly because the penalty was more than the incentive.

The elimination of the SGR allows physicians to breathe somewhat easier until 2019, although current penalty/incentive programs remain in place until then.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.

EPA Adds Requirements on Disposal and Recycling of Solvents and Hazardous Substances

The Fabricator - March 2015

The new Environmental Protection Agency (EPA) rule on recycling of hazardous waste will affect many manufacturing sectors, including metal fabricating. The rule goes into effect in July, and adds some regulatory hoops  for companies who have been storing spent solvents on site--maybe with the thought of recycling them some indeterminate time in the future-- land filling them or incinerating them. However, the new rule does not affect the recycling of scrap metal. That has been subject to an exclusion from the Resource Conservation and Recovery Act, meaning it has never been considered a "hazardous secondary material," and can therefore be sent off for recycling with very few restrictions.

Going forward, the same will not be true for solvents, spent oil and other substances which are considered hazardous secondary materials, therefore also solid waste, but are not subject to any exclusion. Regulatory rules are changing there. Companies who want to continue to accumulate hazardous materials on site will need to get state or federal permits. Those that send the materials offsite will have to comply with new recordkeeping and reporting requirements.

The EPA has been concerned for a decade about solvents and other hazardous materials being land filled, and ending up creating a Superfund site. The agency started a rulemaking all the way back in 2003, but got waylaid by lawsuits, additional studies, and various rulemakings that went nowhere. In 2011, the EPA proposed ending its "transfer" exclusion, which had been in place to shield many hazardous secondary materials from being defined as solid waste. Many industrial sectors erupted in anger.

For fabricators who do want to continue to accumulate wastes on site, the final rule offers a new option called the Certified Recycling Facility option, which comes with considerable recordkeeping, storage requirements, spill prevention, financial assurance, worker training and notification requirements. Under the new "Definition of Solid Waste" (DSW)  rule, manufacturers can register as a Certified Recycling Facility with either the EPA or the state solid waste agency. Facilities who successfully certify under the new rule can stockpile hazardous secondary materials such as solvents and oil. While this option may be attractive to some, most facilities may choose to avoid the regulatory commitments that come with being registered as a Certified Recycling Facility, and opt for the “Generator Option” under the new rule, according to Phillip Retallick, Senior Vice President, Compliance and Regulatory Affairs, Clean Harbors Environmental Services, Inc. Retallick worked for the EPA for 10 years, then as Director of the Delaware Solid and Hazardous Waste Program before coming over to the private sector.

Retallick notes, “The final rule allows fabricators the option to register as a 'generator' with the authorized state environmental program or the EPA, if a state opts not to promulgate the new rule. This option allows the company to collect and store hazardous wastes designated for recycling as long as the yard meets some requirements, such as notifying either the state or the EPA that the yard is a generator subject to the rule, insuring that any hazardous secondary materials are properly collected and stored in proper containers or storage tanks, maintaining records of the amount of secondary hazardous waste collected and stored on-site, documentation showing the amount and description of the secondary hazardous materials sent off-site for recycling and notifying local emergency response officials where the accumulated secondary hazardous wastes are being stored on-site at the salvage yard.

Author bio: 
Mr. Barlas, a freelance writer based in Washington, D.C., covers topics inside the Beltway.