NTSB Recommendations on San Bruno Put Pressure on Congress and Obama Administration to Act on Gas Pipeline Safety

Pipeline & Gas Journal...October 2011

     The pipeline safety recommendations issued by the National Transportation Safety Board (NTSB) on August 30 puts significant pressure on both Congress and the Obama administration to respond to the problems discovered as part of the NTSB investigation of the PG&E San Bruno explosion in December 2010. Eight persons were killed and many others injured as a result of that accident. The NTSB recommendations go way beyond the legislation Congress has begun to pass through committees and in the advanced notice of proposed rulemaking (ANPR) the Pipeline and Hazardous Materials Safety Administration (PHMSA) issued on August 24.

     The House Transportation and Infrastructure Committee passed a pipeline safety reform bill on September 8 a few days after returning to Washington from the summer recess. Called the Pipeline Safety, Regulatory Certainty, and Job Creation Act of 2011(H.R. 2845), the bill came a week after the NTSB released its final conclusions on San Bruno. The explosion was caused by escape of gas from a fracture in a defective piece of pipe installed in 1956. PG&E's integrity management program, which the NTSB called "deficient and ineffective," should have caught the defect, but did not.

      The NTSB was also sharply critical of the PHMSA which released an ANPR on August 24 which sets the stage for possible regulatory changes to the transmission integrity management program (TIMP) authorized by Congress in 2002 and put in place by PHMSA in 2003. The TIMP requires interstate pipelines to test segments running through “high consequence areas” (HCAs) and repair any potential problems.

     The NTSB recommendations focus on PHMSA supervision of the TIMP but also push enhancements of many other pipeline safety rules, such as exemption from hydrostatic testing for pipelines built prior to 1970. The defective PG&E segment which ruptured in San Bruno was exempt from hydrostatic testing, which would have probably found the defect. The NTSB recommended that the Department of Transportation provide considerably more oversight to PHMSA supervision of the TIMP in addition to directives to PHMSA itself in the areas of control room operation, supervisory control and data acquisition (SCADA) systems, installation of shutoff valves, provision of pipeline data to local emergency responders, expanded inline testing, drug and alcohol programs and on other topics. The Board also asked for elimination of the pre-1970 pipeline exemption from hydrostatic testing.

     Damon Hill, a PHMSA spokesman, did not respond to an e-mail asking whether the agency had any comment on the NTSB recommendations, or whether those recommendations would affect the limited scope of the ANPR the agency issued on August 24.

     INGAA CEO Don Santa says his association's Pipeline Safety Task Force’s Integrity Management Continuous Improvement (IMCI) team is implementing action plans that address NTSB’s recommendations.

      The bill passed by the House committee on September 8, a second House bill in the Energy & Commerce Committee and a third bill passed in May by the Senate Commerce Committee respond to only a handful of the NTSB recommendations, and partially at that. The House Transportation Committee bill is very similar to the Energy & Commerce bill, which is called the Pipeline Infrastructure and Community Protection Act of 2011. INGAA prefers the House E&C bill to the Senate bill, called the Pipeline Transportation Safety Improvement Act of 2011(S. 275).

      In its San Bruno report, the NTSB criticized the PHMSA for inadequate TIMP inspection protocols and for not incorporating the use of effective and meaningful metrics as part of its guidance for effective performance-based pipeline safety management programs. Neither the House nor Senate bills require upgrading PHMSA standards or inspection of transmission company implementation of the TIMP. The bills do charge PHMSA with making recommendations whether to expand the TIMP to areas not now considered HCAs.

      The House and Senate bills do cover some of the ground in the NTSB recommendations but stop short of requiring most of what NTSB recommends, such as automatic shutoff valves. The bills, for example, require shut off valves if they are "economically, technically and operationally feasible" and then only for new pipelines. The NTSB wants  automatic shutoff valves or remote control valves in high consequence areas and in class 3 and 4 locations.  

     A House staffer explains that widespread use of remote control valves "which run in the hundreds of thousands of dollars – in every transmission line in every HCA would place an impossible burden on industry and consumers alike." 

     The House and Senate bills have no provisions related to SCADA, for example. The House Energy & Commerce bill does end the grandfathering of pre-1970 pipelines from maximum allowable operating pressure requirements.  "Closing this loophole will help prevent accidents like San Bruno in the future," says the House staffer. She adds, "Also, as part of expanding integrity management programs into transmission lines located outside high consequence areas, we are starting the process of requiring inline inspection of many more miles of gas transmission lines."  

     The NTSB investigation also determined that a sewer line installation in 2008 near the rupture did not damage the defective pipe. Nonetheless, the House Transportation bill requires PHMSA to conduct a study of third-party excavation damage, a provision missing from the Senate bill. Both bills eliminate current exemptions for local government civil works arms from state "one-call" notification systems. Andy Black, President and CEO of the Association of Oil Pipelines, singles out the removal of exemptions from one-call programs for praise. But he adds, "We encourage Congress and PHMSA to remove additional exemptions for mechanized excavation, in order to eliminate the safety gap they cause."

    The PHMSA ANPR issued in August focuses on integrity management standards inside HCAs and whether to include pipeline segments, currently outside HCAs, in them. Terry Boss, Senior Vice President for INGAA, says the group does not support expanding HCAs but does want to bring ASME (American Society of Mechanical Engineers) protections to areas outside HCAs. In its detailed submission in July, INGAA committed to "coverage of affected population as the basis for extending integrity management principles of B31.8S to at least 70% of the population within the PIR by 2020." B31.8S is an ASME standard on which most of the TIMP regulatory program is based. However, the ASME standard does not include, for example, a requirement that companies reinspect pipeline segments in HCAs every seven years. That has been a TIMP provision which INGAA has tried, unsuccessfully, to convince Congress to alter.

    Boss explains that gas transmission pipelines have already done much more than what is required by the TIMP, in terms of protecting non-HCAs, but have done a poor job of communicating their extra efforts to PHMSA. That said, he adds that the PHMSA ANPR "pretty well matches"--in terms of what could become potential new requirements--what most pipelines are already doing. So there were no big surprises in the document.

Pitting the FDA Against CMS

Biotechnology Healthcare...Fall 2011

The good, the bad, and the ugly about “parallel review.”
 
BY STEPHEN BARLAS


    

    

     When the Food and Drug Administration (FDA) approved Dendreon's novel prostate cancer vaccine in April 2010, the company believed PROVENGE® (sipuleucel-T) would lead it to the financial promised land. After all, the drug was a novel treatment, the first autologous cellular immunotherapy for the treatment of prostate cancer. Medicare's regional contractors quickly fell in behind the FDA, agreeing to pay for the drug.

     But Dendreon hit a speed bump on its fast track to fortune later in 2010. That is when federal Medicare, under the aegis of the Centers for Medicare and Medicaid Services (CMS), announced it would issue a National Coverage Determination (NCD) on Provenge, whose price is pegged at about $90,000 per treatment. Federal Medicare rarely questions the coverage decisions of its contractors, much less the quality of clinical trials ordered by the FDA as part of the approval process, although it has done so more frequently, and in high profile cases, in the past few years. Subsequently, a Medicare Evidence Development & Coverage Advisory Committee met in November 2010. It blessed coverage of the FDA approved use of Provenge with faint praise and threw icy water on off-label use.

     "For Medicare to take on a new cancer drug, that is pretty unusual," states Steve Phurrough, Chief Executive Officer of the Center for Medical Technology Policy. Phurrough served in executive positions at the CMS coverage and analysis division during the terms of Presidents George W. Bush and Barack Obama.

      Medicare's decision to undertake a NCD probably cooled the ardor of oncologists and urologists who might have been expected to prescribe the expensive new drug. Decision Resources, one of the world’s leading research and advisory firms for pharmaceutical and healthcare issues, released a survey in mid-June 2011, two weeks before the CMS published the final NCD, which ratified the recommendations of the November Advisory Committee. The Decision report said that over the next 12 months, according to surveyed physicians’ estimates, only 15 percent of patients eligible to receive Provenge would get prescriptions for it, despite the views of many surveyed physicians that the launch of Provenge represents a breakthrough in the treatment of prostate cancer.

    Provenge is a prime example of what can happen when the FDA approves a new drug it deems "safe and effective" based on clinical trials it prescribes, clinical trials which do not answer Medicare's questions about whether reimbursing for that drug is "reasonable and necessary." That FDA/CMS dissonance was examined at one session at the BIO convention in Washington, D.C. on June 28. The panel was called "Common Needs and Uncommon Cooperation: The State of Joint FDA and CMS Initiatives." The panel focused on a joint FDA/CMS proposal in the Federal Register in September 2010 to conduct "parallel reviews" of some drugs and/medical devices. The idea is to prevent FDA/Medicare "disconnects" such as the one caused by Provenge.

     The agencies are concerned that new drug applications have fallen off because brand name companies fear spending millions on clinical trials necessary to get FDA approval only to find that the FDA gift wrapping provides only " limited predictability of market access" and for that reason may "hinder investment in the development of innovative therapies and diagnostics."

     Drug companies, patient advocacy groups, physician professional organizations and others all sent in comments to the agencies with varying viewpoints. The agencies have been sifting through those comments and are apparently preparing a guidance document, whose publication may be imminent. Peter C. Beckerman, Senior Policy Advisor, FDA Office of Policy, says the agencies plan to announce a pilot program for medical devices. "Subsequently, pending our experience with the pilot, we would consider additional steps or public communications, he adds.

     Michael McCaughan, senior editor of the RPM Report, a newsletter which covers federal drug regulatory issues, and who spoke during the BIO panel, explained that the reaction from the pharmaceutical industry to the joint review proposal was "an almost hyperbolic fear."     

     "Fear" may be a bit too strong a description. But many trade associations such as BIO and pharmaceutical companies have nonetheless clearly voiced strong reservations about the concept of parallel review. In a letter to the CMS, Evan L. Morris, Vice President, Government Affairs, Genentech, Inc., wrote: "At this time, Genentech does not feel that the current system, under which Medicare initiates national or local coverage analyses/determinations only after FDA has approved a drug or biologic, has resulted in significant delays in post-approval coverage. Therefore, we do not see the need for the proposed parallel review process with respect to drugs and biologics."

    Patricia DeSantis, Vice President, Global Regulatory Policy and Intelligence, Johnson & Johnson, thinks collaborative review might make sense for some subgroups of drugs such as theranostics (e.g., therapy-related biomarkers) and regenerative medicine. But in the main, she states that if FDA trials were able to be used by the CMS toward a NCD, "the benefits of early discussions with CMS may be overcome by the disadvantages of premature initiation of an NCD that could lead to high risk of a negative coverage decision due to the paucity of clinical data."

    In fact, one pharmaceutical industry executive, who asks not to be identified, says the FDA is grasping for the wrong straw. He says, "It is more important for the FDA to get its house in order, as we move toward personalized health care, so that drugs and diagnostics get approved at the same time."

   Of course health insurers have a stake in the debate, too. They are somewhat unenthusiastic, but for the opposite reason drug companies have voiced. Allan M. Korn, MD, FACP, Senior Vice President, Clinical Affairs and Chief Medical Officer, the Blue Cross and Blue Shield Association (BCBSA), is concerned that parallel review, rather than keeping the FDA "honest," in a sense, by allowing Medicare some say in clinical trials, might end up watering down Medicare's coverage standards. "Assessments by the BCBSA Technology Evaluation Center over the course of two decades have identified numerous instances where the science supporting new devices cleared by the FDA did not also demonstrate improved clinical benefit or safety relative to existing covered products," says Korn. "In light of this, the establishment of parallel review must not allow a foregone conclusion that products evaluated through parallel review will be covered by Medicare if cleared for market by the FDA."

     Provenge is just the latest in some notable differences of opinion which have split the FDA and CMA over the years. Phurrough cites Erythropoiesis Stimulating Agents (ESAs) such as Epogen, Procrit and Aranesp, the hemoglobin boosters manufactured by Amgen. They were approved starting in 1989 by the FDA for use in cancer and kidney patients. Medicare undertook an NCD  nearly 20 years after their approval and in July 2007 restricted use of ESAs to cancer patients with hemoglobin levels below 10 and to treatments of no more than 150 micrograms three times a week. "That was a reasonable decision," states Phurrough, another speaker at the BIO seminar. The FDA subsequently adjusted the label indication for cancer to comply somewhat closely, but not exactly with the NCD.

     Subsequently, three years later, Dennis Cotter, president, Medical Technology & Practice Patterns Institute, submitted a request to CMS to issue a NCD for ESAs for chronic kidney disease (CKD). On June 16, 2011 Medicare declined to issue the NCD for chronic kidney disease. "This was despite the fact that the agency found no evidence of benefit and evidence of harm," says Phurrough, who suggests the Obama administration may have applied political pressure to the CMS.  "The decision was incongruent with the evidence." Amgen did not respond to a request for its view of the CMS decision. 

     But when the FDA in 2011 looked again at ESAs and CKD, it took the opposite tack from the CMS deciding on June 24, 2011 to revise the Black Box warning that had previously been required for ESAs with regard to CKD.  Cotter worked for the U.S. Public Health Service for five years advising Medicare on which drugs to cover. With regard to ESAs and CKD, he argues that for two decades no one has done a clinical trial to identify the appropriate hemoglobin target, a fault of Amgen, the FDA and the CMS.

      Phurrough thinks it is unlikely that the FDA and Medicare will begin a robust parallel review process in the near future simply because the CMS is constrained by its legal authorities. However, he notes that the Affordable Care Act, the health care reform bill passed by Congress, established an Independent Payment Advisory Board (IPAB) with authority to make changes in Medicare payment procedures. The IPAB could clear the way for Medicare to work more closely with the FDA. "If the IPAB survives, it has significant potential for allowing there to be greater cooperation between the two agencies," Phurrough says.

New Proposed HIPAA Disclosures Vex Healthcare Players

     P&T Journal...September 2011

 

     Pharmacists are already concerned about various new federal requirements coming down the pike which would complicate pharmacy software systems. We're talking about things such as potential drug package verification and electronic health record (EHR) entries. Now there is another software hurdle appearing on the track: compiling audit records of people inside the pharmacy and outside who take a peak at a customer's personal medical and pharmaceutical information.

        That is one of the looming new requirements for both in- and out-patient pharmacies stemming from the 2009 Health Information Technology for Economic and Clinical Health (HITECH) Act. Some HITECH provisions made changes to the  Health Insurance Portability and Accountability Act (HIPAA) Privacy Rule. Players throughout the pharmacy industry will be affected by the new HITECH requirements when they come into play. No word yet on when the final rule with compliance deadlines will be published.

    The HIPAA Privacy Rule requires covered entities such as physicians, health plans, hospitals and pharmacies, and their business associates--pharmacy benefit managers, for example. When a patient makes a request, the entity must disclose which third parties it sent that individual's protected health information to. There has been an exemption since 2000 for disclosed information pertaining to "treatment, payment, and health care operations (TPO)."    

      The proposed rule the Department of Health and Human Services issued on May 31 suggested one expanded and one new disclosure covered entities and business associates would have to make, both stemming from HITECH requirements: (a) the currently required accounting of disclosures (AOD) would have to include TPO information for the first time, where the AOD was made via either electronic or hard copy-- and (b)  individuals could, for the first time, request an access report of electronic-only disclosures of that person's designated record set (DRS) information.  An access report would include the date and time of the access, the identity of the person accessing the information, and, if available, a description of the information that was accessed and what actions were taken while in the system (e.g., create, modify, view, print, etc.).

     The expanded AOD and new access report requirements have earned numerous detractors. The HHS views compilation of an access report as a relatively easy, automated process, and thinks it will contain more useful information than an AOD, which would be more detailed, and would also have to be done manually. So it will be expensive.

       The College of Healthcare Information Management Executives (CHIME) disputes the notion that access reports will be quick and easy to assemble.  “CHIME is extremely concerned about the entire concept of access reports,” said Pam McNutt, Senior Vice President and Chief Information Officer at Dallas-based Methodist Health System and chair of CHIME’s Policy Steering Committee. “We believe the access logs, report filters, and other technical specifications needed to generate an access report would be inconsistent or nonexistent across many clinical data sources that might be considered part of a DRS.” For these and other reasons, CHIME is urging rule-makers not to include access report requirements in the final rule. If rule-makers include access reports in the new rules, CHIME believes that only data gathered through certified EHRs, not the full array of designated record sets, should be expected to populate such reports.

     There are numerous critics, too, of  the HHS's conception of an expanded AOD.  Daniel C. Walden,  Senior Vice President, Corporate Compliance and Privacy Officer, Medco Health Solutions, Inc., says, "Accounting of Disclosure provisions and ensuing proposed regulations if applicable to PBMs would  impact Medco’s ability to utilize patient-specific information and as such could delay access to care and create an unnecessary increase in our paperwork burden."

     Rebecca Carlson, General Counsel Assistant and Privacy Officer, Dean Health System, says her hospital assembled a trial AOD for a patient, and it was 46 pages long. It took somewhere between 40-50 hours to assemble the data required currently in an AOD.  And Dean did not compile the additional information which would be required under the proposed rule, including pharmacy information.

    Another problem with the potential AOD requirement is that the EHRs currently on the market do not account for TPO within a personal medical record, nor does the HHS stage 1 meaningful use requirement--tied to the eligibility of physician practices and hospitals for federal HIT incentive payments--require EHRs to do so. Moreover, only a handful of people have ever asked for the existing AODs established by the 2000 HIPAA Privacy Rule requirement. Since 2003, Medco has captured over 13.6 million records in its accounting of disclosures database.  How many requests has Medco received for AODs in the past eight years? Thirteen!

     One wonders why Congress even expanded the requirement as part of the HITECH Act. But these days, many of the things Congress does raises questions about its ability to formulate sound public policy.

Real-Time Reporting of Swaps Could Disadvantage End-Users

Strategic Finance Magazine...August 2011

    With the CFTC and SEC having pushed back to December 31 the date by which Dodd-Frank final rules have to be published, the focus of the business community now returns to convincing the agencies to make changes to some of the proposed rules whose provisions have left a bad taste. CFTC Chairman Gary Gensler who in mid-June announced that the original Dodd-Frank July 16 deadline for final rules was being delayed about six months noted that the effective dates of some of the derivatives provisions in Title VII could be staggered. Title VII includes provisions on swaps trading, repositories and margin requirements for companies who trade swaps simply to manage risk, companies called--in the argot of Title VII--end users, meaning manufacturing, transportation, energy and other companies who don't trade swaps in the manner of AIG and Lehman Brothers. Gensler told the Senate Agriculture Committee on June 16 that staggered dates would mean "those rules that could be implemented sooner should be so as to lower risk." He wasn't clear what he meant by that. In a similar vein, he noted that clearinghouses, for example, may be required to be registered and provide for client clearing at an effective date in advance of any determinations of clearing mandates.

     End-users won't have to clear swaps, but the banks they contract with for those swaps will have to clear them on a repository and report those swaps in real-time on some sort of public website that may be like the current TRACE website which investors can view to see current trades of corporate and municipal bonds. This second Title VII requirement will, however, affect end-users, but has pretty much been a forgotten provision during debate during the first half of 2011 over the margin requirements for swaps proposed by federal banking agencies. We have discussed these previously, and the issue here has diminished considerably.

      With concern over margin receding, reporting of swaps by banks in real-time, and its potential impact on end-users, comes to the fore. It will be a key focus of business groups between now and December 31 as the CFTC attempts to publish final rules. The proposed rule requires all trades, except those that qualify as block trades, to be reported on a real-time basis.  Certain larger trades could be reported 15 minutes later. The real-time reporting requirements – when applied to large trades that don’t qualify as blocks – don’t sit well with business end users. "We are concerned that proposed real-time reporting rules could inadvertently jeopardize end user’s ability to secure efficient market pricing in certain situations," says Luke Zubrod, Director at Chatham Financial and an advisor to the Coalition for Derivatives End-Users. "In particular, it is important that large or less liquid transactions be classified as block trades and that the public reporting of such transactions be adequately delayed. If reporting of these types of trades occurs instantaneously, it could provide a roadmap for other market participants to trade on that information – ultimately adversely impacting pricing." Zubrod wants the CFTC to delay reporting for 24 hours. In addition, Zubrod would like to see the CFTC expand the size of the block trading exemption so that a wider array of trades qualify, perhaps by applying block trade calculations to discrete products which would provide a more granular look at the market.

How are Health Care Organizations Saving on Their Prescription Costs?

 August 9, 2011...ASHHRA e-News Brief (American Society for Healthcare Human Resources Administration)

By Stephen Barlas

Bob Melendy, human capital services executive at Scripps Health in San Diego, could not believe what he had just learned. One of the hospital system's 13,000 employees, a member of Scripps’ self-insured health benefits plan, had been filling prescriptions for Factor 8 (an expensive hemophilia drug) at the outpatient pharmacy of another local hospital. That hospital was qualified under the federal government's 340B drug discount program and therefore able to buy Factor 8 at roughly half the average wholesale price. This in turn gave the hospital’s outpatient pharmacy a competitive advantage and significant revenue when it dispensed expensive drugs. Based on usual and customary reimbursement rates, the nearby hospital’s pharmacy was earning about $400,000 each year from this single patient, all paid by Scripps’ health plan. But the real "ah-ha moment" for Melendy came with the realization that two hospitals of Scripps’ five hospital campuses were also 340B eligible and could buy and dispense discounted 340B prescriptions as well.

"We should be keeping those savings," thought Melendy. But while two Scripps hospitals were 340B-eligible, neither had taken advantage of purchasing drugs at the 340B discount rate. Discounts can be 25 to 50 percent off the average wholesale price (AWP) of many drugs including those for treating cancer, arthritis, HIV/AIDS, and other serious conditions.

Back in 2006, when he first ran into the Factor 8 employee's prescription situation, Melendy was only vaguely aware of the 340B program and its possibilities. But after some initial research he quickly realized that if he could start capturing 340B savings for some of the 24,000 employee and family member participants in the Scripps health plan -- especially those with expensive prescriptions for chronic diseases -- he could significantly reduce the corporate health plan's outlays on drugs.

Today, five years later, after fits and starts, Scripps is saving about $400,000 a year with the 340B program; the money it saves remains in the plan in order to cushion premium increases for employees. "And we are just scratching the surface," adds Dayna Pearson, the company's health plan administrator.

About 14,000 hospitals and Federally Qualified Health Clinics (FQHCs) qualify for the 340B program, which Congress established in 1992. Recently, the Affordable Care Act extended eligibility to another 1,500 hospitals, most in low income areas. The savings and revenue they generate as a result of the 340B program is used to help offset the cost of services provided to the underinsured or uninsured population they serve.

However, the 340B program has been on the back-burner for most hospitals. Very few have taken advantage of 340B’s monumental cost savings potential since the program was established two decades ago, as was the case with Scripps in 2006. The underutilization is due in part to the program’s complexities, guidelines and limitations. For example, at the time Scripps began its program, qualified entities could only designate a single pharmacy to fill 340B prescriptions, either an in-house pharmacy or a contracted retail or mail order pharmacy. All inventory dispensed through the program had to be distinguished from other prescriptions filled by the pharmacy.

Once he learned the Scripps plan could save $400,000 on just one employee's annual prescriptions, Melendy was determined to figure out how he could start a 340B program for the plan’s 24,000 covered lives. But when he presented the business proposal, it became clear that the organization did not have even a basic understanding of 340B regulations. "Our legal team had never heard of this," remembers Melendy. "They thought it was too good to be true."

At that time, the pharmacy benefit manager (PBM) that administered the Scripps prescription program was also just coming up to speed on the implications of a 340B program for employees. Melendy was undeterred. He decided to go the mail order route because Scripps did not have an onsite pharmacy at either of its two 340B-eligible hospitals. He also began trying to align Scripps’ mail order pharmacy partner behind the program (unsuccessfully it turned out). At the same time he fulfilled another 340B requirement: setting up a 340B-eligible clinic at Scripps Mercy Hospital where employees would go for care.

Thus began the Scripps Health Plan Care Partner Program, which targets employees and dependents with high cost prescriptions. Employees enter the program with an initial visit and the creation of a medical record. In the early days, they would often arrive at the clinic with the Care Partner brochure in hand. It explained the benefits of the program, including things like co-pay waivers for office visits and prescriptions. Over the course of a year, the co-pay on one prescription can total as much as $1,200, and some employees use more than one maintenance medication. Not only did employees save money, they had continuity of care from a specialist who was, in most cases, a Scripps affiliated physician. A

After getting started in 2007, the Care Partner Program moved forward slowly, weighed down by the lack of enthusiasm of its mail order partner and the need to research and comply with a complicated set of federal regulations. So in 2009, Scripps brought in Wellpartner, a Portland, Oregon, contract pharmacy administrator, to manage its 340B program. "At that time, there wasn't any other pharmacy administrator other than Wellpartner who knew how to structure a 340B program, whether for a hospital's employee plan or for patients of the hospital," explains Corey Belken, a managing consultant at The Burchfield Group, Inc., which was helping Scripps navigate pharmaceutical industry contracts. "Wellpartner was dominant because they were innovative enough to define and start serving this market."

Wellpartner is responsible for administering the Scripps 340B program and for filling qualified prescriptions through its mail order pharmacy. Wellpartner handles all the inventory and payment administration necessary to meet Health Resources and Services Administration (HRSA) and drug manufacturer audit requirements. According to Melendy, Scripps could have undertaken this work itself. But given staffing limitations and lack of internal expertise, this would have been extremely difficult, so it was much better to work with a recognized leader in this highly specialized field.

Today, the Scripps corporate health plan enjoys significant savings from the Care Partner Program. Between June 2010 and May 2011, Scripps employees filled 1,507 prescriptions at 340B prices, the total cost of which would have been approximately $840,000 without the 340B discounts. But Scripps paid only $418,000, saving $423,000 (and that number would have been considerably higher had not the employee with the Factor 8 prescription left the company).

Scripps Care Partner has gained popularity among employees because of the waived co-pays and other benefits of using the program -- so much so that Scripps hired a pharmacist at the Scripps Mercy clinic whose fulltime job is to consult with employees who want to enroll. One indication of the program's increasing attraction is that the number of 340B prescriptions filled in March 2011 was 80 percent more than the previous year.

The 1,507 eligible 340B prescriptions are a tiny percentage of the 230,000 total filled by all 24,000 Scripps Health Plan members over a 12-month period. Those prescriptions cost the plan about $12 million last year. Not all employees are participating in the Care Partner Program, nor does Melendy expect the number to ever approach 100 percent. But if only 10 percent of the total prescriptions covered by the plan were filled through the Care Partner, the savings to Scripps would increase geometrically as the downward pressure on employee health premium increases.

Pearson says that at an open enrollment benefit fair in 2010 at Torrey Pines, one employee told her that "the amount of money we have saved, thanks to my family member being enrolled in the Care Partner Program, has made a big difference in our lives."

Mr. Barlas, a freelance writer based in Washington, D.C., covers issues inside the Beltway.

Disclosure. The author reports that he has received financial compensation from WellPartner, Inc., for writing this article.

Nailing Down Grid Cyber Security

EnergyBiz Magazine...July/August 2011

     The Obama administration's economy-wide cyber security plan presented by the White House in May makes it much more likely that the holes in existing electric utility cyber defense plans will be plugged sooner rather than later.

     Legislation passed in 2005 gave the Federal Energy Regulatory Commission (FERC) the responsibility for overseeing cyber security defenses for transmission and generation companies, the only companies for whom there is a national legislative mandate. But recent federal reports have underlined the swiss cheese nature of the standards published by the North American Electric Reliability Corporation (NERC), who FERC designated to produce standards aimed at guarding against computer virus attacks on critical assets.

      The Obama legislative initiative would extend the federal mandatory cyber attack umbrella to the steel, chemical and other industries. Sens. Jeff Bingaman (D-N.M.) and Lisa Murkowski (R-Alaska), chairman and ranking member of the Senate Energy and Natural Resources Committee, held hearings on May 5 on a draft bill which would strengthen the original 2005 electric utility provisions; that bill, some of whose provisions are opposed by the industry, would become amendments to a broader bill, based on the Obama initiative, expected to be shepherded through the Senate by Sen. Jay Rockefeller (D-W. Va.), chairman of the Commerce Committee.

      The 2005 Energy Policy Act gave FERC authority to designate a private sector group to establish standards for the "bulk power system," which excludes local distribution companies and transmission facilities in Hawaii and Alaska. The FERC designated the NERC as that standards setter. FERC has the authority to review NERC standards, and ask for revisions.

      But since August 2006, when NERC submitted its first eight proposed cyber security standards, FERC has repeated directed NERC to fill gaping holes in those standards, which have also been the subject of criticism from the Inspector General at the Department of Energy and the Government Accountability Office (GAO). Joseph McClelland, director, office of electric reliability at FERC, told the Senate Energy Committee on May 5 that the majority of FERC modifications have not been incorporated into the NERC standards. "Until they are addressed, there are significant gaps in protection such as a needed requirement for a defense in depth posture," McClelland stated.

      In a January 2011 report, the DOE IG implied that FERC was to blame for not pressing NERC harder and faster. "Although the Commission had taken steps to ensure cyber security standards were developed and approved, our testing revealed that such standards did not always include controls commonly recommended for protecting critical information systems," the report stated. "In addition, the standards implementation approach and schedule approved by the Commission were not adequate to ensure that systems-related risks to the nation's power grid were mitigated or addressed in a timely manner."

     The Bingaman/Murkowski draft bill would allow FERC to issue an interim final rule establishing electric reliability standards if it felt NERC had failed to do so, and FERC could do that without the prior notice and public comment period that traditionally accompany federal rulemaking, and issue that IFR with less than 30 days notice. In the event of an emergency cyber threat, the secretary of the department of energy could issue an emergency order forcing the power industry to take certain steps to protect critical electric infrastructure. The order would be effective for 90 days initially and could be extended if public hearings were held. Companies could recover reasonable costs from complying with that emergency order from rate payers.

     David K. Owens, executive vice president, business operations, Edison Electric Institute, says any new authority given to FERC or the DOE should be limited to truly critical assets. "Over-inclusion of electric utility infrastructure would be counterproductive," he explained at the hearings.. Critics of NERC's standards say they only cover a limited number of generation and transmission assets. The DOE IG report said: "Even though critical assets could include such things as control centers, transmission substations, and generation resources, the former NERC Chief Security Officer noted in April 2009, that only 29 percent of generation owners and operators, and less than 63 percent of transmission owners identified at least one critical asset on a self-certification compliance survey."

    Owens adds that any new DOE emergency authority "should be limited to true emergency

situations involving imminent cyber security threats where there is a significant declared national

security or public welfare concern." The draft legislation is much broader; it doesn't mention that there needs to be an "imminent threat," for example.  On the FERC interim final rule authority, he notes, "we are concerned about the lack of due process for stakeholder input.