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King v. Burwell: Appreciating the Stakes of the Case

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By Rachel Sachs

Yesterday, the Supreme Court heard oral arguments in King v. Burwell, and the Justices seemed split on the central issue of whether the Affordable Care Act (ACA) permits health insurance subsidies to flow to citizens of states that have chosen not to establish their own insurance exchanges.  Trying to predict the outcome of a case like this is notoriously difficult, but I do want to highlight briefly an important difference between the Court three years ago, when it decided NFIB v. Sebelius, and the Court yesterday.

In NFIB, seven Justices declared that the ACA’s Medicaid expansion was unconstitutionally coercive, concluding that the Secretary of Health and Human Services could not condition existing Medicaid funds on a state’s failure to expand Medicaid.  However, the Secretary was instead permitted to offer additional funds to states choosing to expand Medicaid, effectively making the expansion optional.  The Court at the time understood that this outcome could result in a national patchwork, in which certain states would adopt the Medicaid expansion and others would not. Read More

The Medical Innovation Act: Addressing the Shrinking NIH Budget

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By Rachel Sachs

Senator Elizabeth Warren (D-MA) recently introduced a new bill, the Medical Innovation Act, which would require pharmaceutical companies who settle with the government after committing certain illegal activities to reinvest additional money into the NIH.  Senator Warren views the bill as a “swear jar” for drug companies, seeking to target those who commit certain types of wrongdoing, including violating the anti-kickback statutes or defrauding Medicare and Medicaid, in order to increase government support for research at a time when the NIH’s budget has been falling.  Scholars and researchers who have lamented the shrinking of the NIH’s budget will find much to love in the bill, and they may even wish it had gone farther.

The Medical Innovation Act would be triggered under the following set of circumstances: drug companies (1) who sell at least one drug whose annual net sales exceed $1 billion, (2) where that drug can be traced at least in part to federally funded research (the Act refers to such products as “covered blockbuster drug[s]”), and (3) who enter into a settlement agreement of at least $1 million with the government after committing certain types of wrongdoing, would pay an additional penalty.  As a threshold matter, the Act will not affect companies unless they appear to have broken the law.  But even where companies have committed various forms of wrongdoing, the Act would not affect smaller drug companies, those who developed their drugs without the aid of the federal government, those who engaged in minor wrongdoing (and therefore only have small settlements), or those who take the government to trial rather than settling.

Affected companies would be required to pay an additional fine on top of the value of their settlement, paying 1% of the company’s profits multiplied by the number of covered blockbuster drugs sold by that company each year for five years.  Because the annual profits attributable to these companies are typically very high, even with the Act’s various carve-outs, Senator Warren estimates that if the Act had existed for the past five years, it would’ve provided an additional $6 billion every year to the NIH, a full 20% increase in its budget.  Going forward, this number might be smaller, if some companies respond to the Act’s incentives by committing less wrongdoing (a positive development in itself) or taking the government to trial (a relatively unlikely outcome, but possible in some cases), but the total amount is still likely to be substantial.

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Highlights from the 21st Century Cures Act

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By Rachel Sachs

At the end of January, the House Energy & Commerce Committee released a discussion draft of the 21st Century Cures Act.  This document marks the beginning of the legislative phase of the 21st Century Cures Initiative, during which the Committee has held numerous roundtables and hearings and issued several white papers.  The first discussion draft of the Act, clocking in at nearly 400 pages (even with several sections “to be supplied”), is incredibly wide-ranging, including proposals that could affect every stage of the innovation process.

The discussion draft should be of interest to everyone in the health policy field.  One series of proposals is targeted at the NIH, including more support for the National Center for Advancing Translational Sciences and for the NIH’s BRAIN initiative.  Another set would act on the FDA, including one provision giving new drugs for unmet medical needs the option of 15 years of exclusivity.  This provision, based on the MODDERN Cures Act, is particularly likely to inspire a great deal of controversy and opposition.  The draft also contains a series of proposals designed to promote the development of new antibiotics, in keeping with President Obama’s recent focus on this issue.  Its attention to the use of social media by drug companies and to the FDA’s regulation of health-related software will be of interest to many, as well.

The proposed draft is much too long to catalog fully in this brief blog post, although those who are interested in a broader summary might enjoy the 13-page summary of the Act put out by the Committee, the Science summary by Kelly Servick and Jocelyn Kaiser, or Alexander Gaffney’s comprehensive Regulatory Explainer.  But I do want to highlight one section of the draft which deserves more attention than it has gotten: section 2021, which would create a national Medical Product Innovation Advisory Commission.

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FDA Holds Public Workshop on Regulatory Oversight of Laboratory-Developed Tests (Part II)

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The FDA’s public workshop on their draft guidance framework for the regulation of laboratory-developed tests (LDTs) continued yesterday, featuring sessions on three additional issues: 1) notification and adverse event reporting, 2) public procedures for classification and prioritization, and 3) quality system regulation.

Many issues that had been raised during Thursday’s sessions reappeared in the context of these new subjects.  Commenters considered whether and when laboratories should be able to submit one (rather than many) LDT notifications and/or registrations, the relationship between clinical use and risk classification, and the need to be sensitive to the diversity of LDTs and their providers in formulating the final guidelines.  Other, more legal aspects were also raised again, including concerns about redundancy between FDA regulations and those already promulgated by the Centers for Medicare & Medicaid Services under the Clinical Laboratory Improvement Amendments, whether the FDA possesses the legal authority to regulate most LDTs, and whether the FDA is required to proceed by notice-and-comment rulemaking rather than acting through the guidance process.  (Litigation is almost certain to arise on these last two topics, about which I’ll have more to say in future posts.)

But I want to briefly highlight one theme that cropped up on both days more frequently than I had anticipated: the role of insurers and insurance reimbursement.  Panelists considered whether insurers or other payers should have a seat at the table when advisory committees are convened to classify and prioritize LDTs for review.  They discussed the effect of FDA approval on insurance coverage, debating whether the proposed regulations would increase or decrease access to FDA-approved LDTs.  But most importantly (at least in my view), they explicitly considered the way in which increased FDA regulation would combine with decreasing insurance reimbursement to decrease incentives for innovation in diagnostic testing.

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FDA Holds Public Workshop on Regulatory Oversight of Laboratory-Developed Tests (Part I)

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By Rachel Sachs

Over the past several months, I’ve been blogging (here, here, and here) about the FDA’s recent forays into regulating laboratory-developed tests (LDTs).  Since the release of the draft guidance framework in October, serious arguments have been made on opposing sides of the issue, and industry groups have made additional moves in opposition to the proposed regulation.  And now, today (and tomorrow), the FDA is holding a public workshop on their draft guidance framework, focusing on a wide range of issues.

Today’s workshop featured sessions on three main issues: 1) labeling considerations, 2) clinical validity and intended use, and 3) categories for continued enforcement discretion.  Many commenters simply presented the unique concerns of their organization and urged the FDA to consider them in finalizing the guidelines, which was helpful when it did seem as if the draft guidance may have insufficiently considered the needs of a particular set of laboratories, such as public health laboratories that focus on testing for infectious diseases like Ebola and chikungunya (about which I’ve also blogged, here and here).

More helpful, though (at least in my view), were the comments of those who sought to provide concrete recommendations for the FDA on the basis of 1) the policy concerns they saw underlying the guidance and 2) the practical effects of implementation that they foresaw.  I’ll illustrate with an example, which hopefully will display the complexity inherent in even the simplest questions that the FDA must answer here.

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How Should the FDA Regulate Fecal Transplantation Safely and Effectively?

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By Rachel Sachs

Last week’s issue of the New Yorker featured a terrific article about fecal microbiota transplantation, or FMT.  Much of the article focused on OpenBiome, a nonprofit stool bank spun off from MIT that screens donors, processes samples, and ships them to hospitals around the country.  For those who are unfamiliar with FMT, it is a startlingly effective treatment for recurrent C. difficile infection.  C. diff infections have become among the most common hospital-acquired infections in the United States, causing more than 300,000 hospitalizations and 14,000 deaths annually.  And unfortunately, many of these infections are resistant to antibiotics, with resistance rates rising rapidly.  But FMT may provide a way forward: a recent randomized trial (antibiotics versus antibiotics plus FMT) was stopped early, when 94% of patients in the FMT group were cured, as compared to roughly 30% of those in the antibiotics groups.

Coincidentally, I’ve been working with OpenBiome over the past few months on an interesting question that the New Yorker article touched on only briefly: how should the FDA regulate FMT to best ensure its safety and efficacy?  At present, the FDA is proposing to regulate FMT as a biologic drug.  However, many (including OpenBiome’s co-founder, Mark Smith) have argued that it ought to be regulated like human tissue, which from a scientific standpoint it resembles more closely than it does a small molecule drug, given the challenge of characterizing stool’s active ingredients and providing consistency across batches.  OpenBiome’s Policy Director, Carolyn Edelstein, and I are currently working on a paper examining the pluses and minuses of the FDA’s current approach.  I want to briefly summarize a few key points of our paper here, but essentially we argue that classifying FMT as a drug is simultaneously underregulatory and overregulatory.  Our primary goal is to ensure that patients have access to safe, effective treatments – and that means the FDA should be more involved in regulating some aspects of FMT, and less involved in others.

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First Circuit Upholds ACA’s Medicaid Maintenance-of-Effort Provision Against Constitutional Challenge

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By Rachel Sachs

Last week, the First Circuit Court of Appeals upheld the ACA’s maintenance-of-effort provision against a constitutional challenge brought by the Maine Department of Health and Human Services. The court’s opinion has received relatively little media attention, but it should be of interest to all in the health policy space. Its post-NFIB v. Sebelius Spending Clause analysis will be relevant to scholars who are interested in King v. Burwell, challenging the grant of subsidies on health insurance exchanges run by the federal government. Its procedural posture will fascinate those who are interested in plural executive systems. And its fulsome discussion of the Medicaid program and its history will be of broader interest to health policy scholars.

States participating in Medicaid must agree to cover certain groups of people up to certain income thresholds, but states may choose to expand these groups in various ways. Relevant to this case, most states have increased the income thresholds for covering children or pregnant women through the SCHIP program (sometimes quite substantially), and some have extended SCHIP to include low-income 19- and 20-year-olds. Maine had done both, providing coverage to 19- and 20-year-olds since 1991. The ACA subsequently included a maintenance-of-effort provision (42 U.S.C. § 1396a(gg)), requiring states participating in Medicaid to maintain their eligibility standards through 2019. As such, in 2012 HHS denied Maine’s request to stop providing coverage to 19- and 20-year-olds.

Maine’s Department of Health and Human Services sought review in federal court. Maine’s executive branch was not united in this choice: the Attorney General declined to represent the state and even intervened on the side of HHS Secretary Burwell. This mirrors a phenomenon that was often observed in the context of the Medicaid expansion, in which several states whose Attorneys General joined the legal fight against the expansion in NFIB subsequently expanded anyway, as that separate power was exercised by Governors and legislatures.  Read More

Article III Standing in Patent Law May Be Before the Supreme Court Soon

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By Rachel Sachs

Who has standing to challenge a patent’s validity? And under what circumstances can Congress define an injury for the purpose of creating Article III standing? Those questions underlie a new petition for certiorari filed by Consumer Watchdog, who is asking the Supreme Court to reverse a Federal Circuit opinion holding that Consumer Watchdog lacked Article III standing to challenge a patent on embryonic stem cells.

Consumer Watchdog, a non-profit consumer organization, requested an inter partes reexamination of a patent on embryonic stem cells held by the Wisconsin Alumni Research Foundation (WARF), alleging that the patent should be invalidated on several grounds. After a lengthy administrative process, the Patent Trial and Appeal Board (PTAB) upheld the patent as valid. Consumer Watchdog subsequently appealed, under sections of the Patent Act that expressly permit third-party requesters (like Consumer Watchdog) in inter partes reexamination proceedings to appeal to the Federal Circuit if they are “dissatisfied” with the PTAB’s decision or if any “final decision [is] favorable to the patentability” of the claims in question. The Federal Circuit held that Article III’s case or controversy requirement imposes a separate, irreducible constitutional minimum requirement on standing — and that Consumer Watchdog hadn’t met that requirement.  Read More

The Globalization of Infectious Diseases

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By Rachel Sachs

The recent arrival of Ebola in the United States has captured the attention of both the public and the media for many reasons.  One key reason is that Ebola is making many people realize for the first time that serious diseases which were formerly confined largely to developing countries have the potential to spread more widely across the globe.  But Ebola is not the first infectious disease to spread in this way, and it’s valuable for Americans to realize that many diseases which are often viewed as existing only in developing countries are already present in the developed world, due to a complex set of factors including migration and climate change.

Specifically, serious diseases transmitted by insects like chikungunya, dengue fever, and Chagas disease are already here in the United States.  I blogged here in August about DARPA’s prize to predict the spread of chikungunya, and the CDC’s estimates suggest that the disease may be finding a foothold in this country, with 11 locally-transmitted cases in addition to the more than 1500 travel-associated cases confirmed so far in 2014.  Compared to an average of just 28 cases per year since 2006, the spread is concerning.  Scientists also contend that dengue fever, a disease with similarly debilitating symptoms, is now endemic to Florida.

The case of Chagas is even more dramatic.  Categorized by the CDC as a “neglected parasitic infection,” it is estimated that 300,000 infected people live in the United States.  That’s ten times as many people as are diagnosed with ALS, a disease which has made much more of a mark on the public consciousness.  Chagas’ impact (both human and economic) on the United States’ health system is and will continue to be extremely costly, with one study estimating the economic cost to the United States at roughly $900 million annually.  Some of these costs are indirect — for instance, donated blood must now be screened for the presence of the parasite, to prevent its transmission.  But most are direct.  Over the long term, Chagas can cause severe, even fatal damage to the heart and gastrointestinal tract.  Read More

PhRMA Sues HHS (Again) For Trying To Expand 340B Discounts To Orphan Drugs

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By Rachel Sachs

For all those who have been following the ongoing fight between pharmaceutical companies and HHS over the 340B Program’s coverage of orphan drugs (I know you’re out there), last week PhRMA filed a new complaint challenging HRSA’s interpretive rule on the subject under the APA. For all those who are not (but should be) paying attention to this battle, here’s what’s happening.

The 340B Program allows certain health care organizations (such as disproportionate share hospitals) to purchase drugs for their patients at significant discounts. The Affordable Care Act expanded the number and kind of organizations that can participate in the 340B Program, but it also added an exception stating that most of the covered organizations could not obtain 340B discounts for orphan drugs — or, as the statute puts it, for “a drug designated … for a rare disease or condition.” 42 U.S.C. § 256b(e).

The battle between PhRMA and HHS is over is whether this statutory exclusion applies to orphan drugs or orphan indications. There are many drugs which have received an orphan designation for certain indications but are also FDA-approved and prescribed more generally for non-orphan indications. In such a case, can a 340B facility purchase the drug at a discount if it is being prescribed for a non-orphan indication?  Read More