A Roadblock in Maryland

By Zack Buck

In a 2-1 decision, a three-judge panel of the Fourth Circuit Court of Appeals has struck down Maryland’s pharmaceutical price-gouging law.

The law, which went into effect on October 1 of last year, prohibited drug manufacturers from imposing “unconscionable” price increases, empowering the state attorney general to assess civil penalties against drug manufacturers and to enjoin the sale of such drugs in Maryland.  The law applied only to essential off-patent or generic drugs, and specifically allowed the attorney general “to intervene if a generic or off-patent drug’s price increased by 50 percent or more in a single year,” in addition to acting on other “unjustified” increases.

The court, writing through Judge Stephanie Thacker, found that the law ran afoul of the “dormant” commerce clause, in that it empowered Maryland to regulate transactions that occurred completely outside of the state.

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Keeping an Eye on the Eleventh

By Zack Buck

A particularly noteworthy health care fraud case—one that could have a major impact on the falsity requirement of the Federal Civil False Claims Act (FCA)—awaits a decision from the Eleventh Circuit as we enter the second half of 2017.  U.S. v. AseraCare, a case that could determine whether “objective falsity” and not only a “difference of opinion” is required for FCA liability, had oral arguments in mid-March in front of the Eleventh Circuit, and has been called a “case to watch” in 2017.  A decision is still forthcoming.

AseraCare was particularly notable because the FCA claim—which was alleged against the corporate hospice provider for allegedly fraudulently certifying individuals for hospice eligibility among other alleged claims—was abruptly dismissed in the Northern District of Alabama in 2016.  Rejecting the claims because the government failed to prove that the claims at issue were objectively false, Federal District Court Judge Judge Karon Owen Bowdre found that the government only proved that a clinical disagreement existed as to whether or not the patients should have been certified as hospice-eligible, which was insufficient to prove a false claim under the FCA.  According to the court, allowing the government to prove that a FCA action could be maintained based only upon the government’s disagreement with the defendant’s clinical judgment would allow the government to “short-circuit” the FCA’s falsity requirement. Read More

Over Before It Started: CMS Abandons New Payment Pilot

By Zack Buck

With little fanfare, last month, the Centers for Medicare and Medicaid Services (CMS) abandoned its proposal to begin a payment pilot in which Medicare Part B would change the way it pays for pharmaceutical drugs.  As I blogged about last March, under the proposed pilot, providers’ payments would be changed from the Average Sales Price (ASP) plus 6 percent of drugs’ costs (ASP+6), to ASP plus 2.5 percent of the drugs’ costs plus a flat fee per drug per day (of $16.80). This new proposed pilot would have been time-limited, and would have allowed officials to observe the effects of such a reimbursement change on prescribing patterns in an effort to cut Medicare’s substantial drug costs.

Following an outburst of negative reaction from Medicare’s providers, the pharmaceutical industry, and Congress (including the new nominee to be Secretary of Health and Human Services Tom Price), CMS announced in December that more than 1300 public comments were submitted in reaction to the proposal.  And following November’s election and the public comments shared with CMS, the agency announced that it had decided that “the complexity of the issues and the limited time available led to the decision not to finalize the rule at this time.”

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Understanding Financial Toxicity

By Zack Buck

In the ongoing fight to control the cost of health care, new understanding of the phenomenon of financial toxicity could play a vital role.  Seen currently in the long-term cancer context, recent studies (here and here, and discussed here and here) have shown that individuals experiencing financial distress as a result of the cost of their care experience higher rates of mortality than those who do not.

In a forthcoming article in the Boston College Law Review (draft here), I make the argument that, following these groundbreaking studies, a new understanding of financial toxicity could transform clinical decision-making.  Indeed, a doctor’s examination of the impact of cost on the patient before deciding to rely on an expensive drug (particularly where a cheaper clinical equivalent exists) could serve as an important tool in limiting the worst effects of expensive care.  And treating cost as a negative side effect (like any other negative side effect) may allow for an explicit awareness and consideration of cost—something too often missing from health care decision-making today.

The Evolving Crisis of the ACA Exchange Marketplace

By Zack Buck

Following news last week that Aetna was pulling out of health care insurance exchange markets in eleven states, Pinal County, Arizona became the epicenter in the rapidly evolving and growing crisis facing the Affordable Care Act’s insurance exchanges.  Sandwiched between Phoenix and Tucson, Pinal County is home to about 400,000 residents, but no insurance companies; in short, Pinal County has been left without any insurance companies signed up to sell insurance on the exchange to its residents for 2017—becoming the “county that Obamacare forgot.”

Pinal County had nearly 10,000 citizens sign up on the exchange in 2016, but Aetna’s departure bookends a rough period for Pinal County residents.  In addition to Aetna, the county has recently endured the departure of UnitedHealth Group, Humana, and a non-profit co-op from Arizona’s exchange.  As a result, Pinal County is reportedly looking to other insurers who may be interested in selling on the exchange to its residents; in a bit of hopeful news, Blue Cross Blue Shield of Arizona is said to be “re-evaluating where it will offer plans next year.”

But the crisis isn’t contained to Pinal County.  Two states—Tennessee and Alaska—have been trying to avoid a similar fate.

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Medicare’s Coming Battle Over Drug Reimbursement

By Zack Buck

Following months of news coverage highlighting how American drug prices are “out of control,” the Centers for Medicare and Medicaid Services (CMS) seems to have been spurred into action. Last week, CMS proposed a new reimbursement regime for drugs paid for by Medicare Part B (drugs administered on an outpatient basis).

Addressing the concerns that the existing reimbursement formula may encourage physicians to rely on more expensive drugs, the proposal calls for testing new payment models designed to save money. The most striking of these changes calls for altering the “average sales price plus 6 percent” reimbursement formula (the amount Medicare pays doctors to reimburse them for drugs) to a formula which would pay doctors the average sales price plus 2.5 percent, plus a fee of $16.80 per drug per day. Further, the proposal also calls for testing indications-based and reference pricing. If implemented, all of these tools would be likely to produce cost savings for Medicare Part B, which spends $20 billion annually on drugs.

According to the New York Times, the proposal “touched off a tempest,” as physicians, politicians, and drug manufacturers criticized  the proposed changes. The American Society of Clinical Oncologists decried the “heavy-handed” government intervention that would adversely affect seniors’ quality of care. Senator Orrin G. Hatch (R-UT) implied that the change would allow “unelected bureaucrats” to usurp medical judgment, with negative effects on access to care. And a statement from the Pharmaceutical Research and Manufacturers of America (PhRMA) noted that the proposal “puts Medicare patients who rely on these medicines at risk.”

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Update: Another Wave of ICD Settlements

By Zack Buck

There has been an update to a story I recently blogged about here.

As announced by the Department of Justice (DOJ) on Wednesday, another 51 hospitals have settled allegations that the hospitals placed implantable cardioverter defibrillators (ICDs) in the chests of patients without complying with Medicare’s mandatory waiting periods.  These 51 settlements amount to $23 million, meaning that the DOJ’s ICD review has now has resulted in settlements with more than 500 hospitals totaling more than $280 million.

According to the DOJ, this is the final stage of the investigation, concluding an initiative that has highlighted the tension that exists between fraud enforcement, medical necessity, and reimbursement standards (recent articles here, here, and here).

High Deductibles and Consumer-Based Health Care

By Zack Buck

Last week, the New York Times highlighted a recent study by Zarek C. Brot-Goldberg, et al., with fascinating implications for cost control within American health care. The paper, entitled, What Does A Deductible Do? The Impact of Cost-Sharing on Health Prices, Quantities, and Spending Dynamics, and posted by the National Bureau of Economic Research, shares that while deductibles do cause patients to use less health care, the type of health care that patients cut represents both high-quality, high-value care as well as low-value, wasteful care.

The study tracks the results of an insurance switch by a large employer—from a plan that provided free health care to a high deductible plan for its employees—and noted that the switch reduced overall spending by about 12 percent. However, while spending dropped, beneficiaries were cutting the wrong type of health care. The authors concluded that there was “no evidence of consumers learning to price shop after two years in high-deductible coverage,” finding that the beneficiaries “reduced low-value medical services and medically important ones at about the same rate, raising questions about their long-term health.” According to the authors, “90 percent of all spending reductions occur[red] in months that began under the deductible.”

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Cost Control’s Growing Complexity

By Zack Buck

A paper entitled “The Price Ain’t Right? Hospital Prices and Health Spending on the Privately Insured” has a number of health policy experts talking this week. Authors Zack Cooper, Stuart Craig, Martin Gaynor, and John Van Reenen—as part of the Health Care Pricing Project—present new findings demonstrating that geographic areas with low Medicare costs and geographic areas with low private insurance costs are nearly completely unrelated. That is, locales with comparatively low Medicare costs are not necessarily areas with comparatively low costs for care paid for by private insurers. Though stunning, this lack of relation between the two metrics does make sense; the report notes that Medicare’s costs are largely driven by the amount of provided care and services, whereas care paid for by private insurance is largely affected by the price at which the care is set by each hospital. (Kevin Quealy and Margot Sanger-Katz of the New York Times have a number of interesting graphs and charts that reflect the study’s findings here.)

Indeed, before the study, and because of a dearth of private insurance pricing data, many simply believed that locales that were cheaper for Medicare were cheaper for private insurance—that is, areas that were great stewards of Medicare funds were likely efficient for private insurers as well. But this new paper demonstrates that this is not true. The two metrics are completely separate.

At the risk of overstating it, this finding could drastically change the paradigm for controlling health care costs going forward. The paper got the attention of Atul Gawande, who noted its importance in an article for The New Yorker. There, Gawande revisits the story of McAllen, Texas, which focused on exploding Medicare costs largely driven by large volume. (I even look at the McAllen story in a forthcoming article here because of its fascinating impact on cost control for Medicare.)

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The Record-Breaking Resolution of a Groundbreaking Fraud Investigation

By Zack Buck

After more than four years of investigation, and 70 separate agreements, the Department of Justice (DOJ) announced news Friday of a massive $257 million settlement, covering a record-breaking 457 hospitals, for the alleged fraudulent placement of implantable cardioverter defibrillators (ICDs) between 2003-2010. I have previously written about the twists and turns of this particular nationwide investigation—the most prominent example of the medical necessity-based health care fraud investigations—herehere, and here.

Why ICDs initially caught the attention of the DOJ seemed to be the fact that ICDs are highly expensive—costing Medicare about $25,000 per implantation—and, following a whistleblower’s lawsuit in 2008, the DOJ commenced a review of “thousands” of ICD placements nationwide. As I have written about before, hospitals across the country—including renowned hospitals such as the Cleveland Clinic—were included in the initial review, but not all of ended up on the settlement list (a full list of settling hospitals is available here).

Although the full details of the settlement have not yet been made public, there seems to have been a difference between all of the hospitals that placed ICDs outside of Medicare’s timing guidelines and those that the DOJ felt were particularly egregious (apparently less than half of the hospitals on the original investigation list ended up as part of this settlement). This is important because it may indicate a difference—in the DOJ’s thinking—between Medicare’s coverage standard, and its “medical necessity” standard for purposes of fraud enforcement.

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