Category: Health Care Finance

Generic Drug Price Increases: Implications for Medicaid

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By Rachel Sachs

The internet (not just the health policy part of the internet!) is fascinated by today’s New York Times story about dramatic recent increases in the costs of many decades-old drugs.  The story focuses on the case of Daraprim, the standard of care for treating the parasitic infection toxoplasmosis.  Daraprim was recently acquired by a start-up, which then raised the drug’s price from $13.50 a pill to $750 a pill.  Daraprim has been around for decades, and as the story notes, it’s just one of many recent examples of dramatic price increases for generic drugs, often after their acquisition by other companies (as in this case).

The article raises an enormous number of issues of interest to intellectual property and health policy scholars, both explicitly and implicitly, and other commentators have begun to canvass them.  But I want to spend the rest of this blog post unpacking a single point made in the article, because it actually contains an enormous amount of complexity.  As the author notes, “[the company’s] price increase could bring sales to tens or even hundreds of millions of dollars a year if use remains constant. Medicaid and certain hospitals will be able to get the drug inexpensively under federal rules for discounts and rebates. But private insurers, Medicare and hospitalized patients would have to pay an amount closer to the list price.”

The author is right that there’s one sense in which Medicaid and entities eligible for the 340B program (I assume this is what the author is referring to when he says “certain hospitals”) will be able to obtain this drug “inexpensively” – but there’s another sense in which they won’t be able to.

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A Circuit Split on Contraceptives Coverage

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Perhaps foreshadowed by the dissent in the 10th Circuit that I wrote about here, the 8th Circuit has now officially launched a circuit split regarding the legal validity of the accommodation that allows modified compliance/objection to the contraceptives coverage mandate.  Unlike the seven other circuits to have considered the question since Hobby Lobby, the 8th Circuit yesterday issued opinions upholding preliminary injunctions in two cases (here and here), thereby preventing the mandate+accommodation from being enforced against the objecting non-profits.

First, the 8th Circuit determined that the accommodation still substantially burdens objectors’ religious beliefs because it imposes significant financial penalties if they refuse to comply with a requirement that they view as violative of those religious beliefs. As I explained previously, I do think the court was right to focus on the monetary consequences of objection, rather than assuming that merely filing the required paperwork for an accommodation does not or cannot actually make objectors complicit in the way they claim it does.

Like SCOTUS in Hobby Lobby, the 8th Circuit then went on to assume that the contraceptives coverage mandate advances a compelling government interest, which is the next step in the analysis under the Religious Freedom Restoration Act once the substantial burden test is met.  So far, so good.  But that’s the end of my agreement.

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Fiduciary Duty and the Payer-Provider Relationship

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By Zack Buck

Even though the Centers for Medicare and Medicaid Services (CMS) has set an ambitious goal to move the reimbursement paradigm away from a fee-for-service model for half of all Medicare services by 2018, incentives built into the delivery of American health care that encourage and result in overtreatment remain. One recent illustration of the reimbursement incentives facing physicians to administer either more care, or more expensive care, is the Lucentis-Avastin example I blogged about here earlier this year.

My newest article, forthcoming in the California Law Review in 2016, examines another legal tool that could be employed to recalibrate the incentives in Medicare: fiduciary duty. Others have characterized the patient-physician relationship as being fiduciary in nature; this piece advocates for the extension of the metaphor to the payer-physician relationship. This move would introduce much-needed pressures on providers to limit or avoid excessive or expensive care by placing a duty of loyalty on providers owed to the payers of Medicare’s services–American taxpayers. This move would respect provider autonomy but provide remedies for overtreatment without substantially growing the regulatory scheme or expanding oversight costs. The abstract is available here.

HHS’ Proposed Anti-Discrimination Regulations: Protective But Not Protective Enough

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By Elizabeth Guo

Last week, the Department of Health and Human Services (HHS) Office of Civil Rights (OCR) released a proposed rule implementing section 1557 of the Affordable Care Act (ACA). Section 1557 applies the Rehabilitation Act of 1973 to the ACA so that a covered entity cannot discriminate against an individual on the basis of a disability in any health program or activity. The proposed rule clarified how OCR intended to enforce and interpret section 1557’s nondiscrimination provision.

As Timothy Jost and other commentators have noted, the government’s proposed interpretation of section 1557 significantly expands the number of health entities that need to meet the Rehabilitation Act’s nondiscrimination requirements. The regulation proposes to encompass all entities that operate a health program or activity, any part of which receives federal financial assistance. The regulation then broadly interprets “federal financial assistance” to include “subsidies and contracts of insurance.” Thus, an insurer receiving premium tax credits or cost-sharing reduction payments through participating in a health insurance Marketplace would need to ensure that all its health plans meet the Rehabilitation Act’s nondiscrimination requirements, regardless of whether the plans are sold through the Marketplace, outside the Marketplace, or through an employee benefit plan. This broad interpretation means that the Rehabilitation Act’s nondiscrimination provisions will now apply to a number of previously excluded plans.

Expanding the number of plans needing to meet section 1557’s nondiscrimination requirements will provide greater protection to more individuals with disabilities. In the United States, the Rehabilitation Act and the Americans with Disabilities Act (ADA) prohibit discrimination against individuals with disabilities. Both acts protect disabled individuals, but courts have consistently interpreted only the Rehabilitation Act as prohibiting insurers from designing their health plans to discriminate against individuals with disabilities. On the other hand, courts have held that the ADA provides a safe harbor for insurers when designing their benefit plans. Thus, some insurers under the ADA may be able to exclude all drugs treating HIV/AIDS from their formulary or place all drugs treating HIV/AIDS on the highest cost-sharing tier, benefit designs that the Rehabilitation Act would likely prohibit. See also Kelsey Berry’s post on this topic.  Read More

Doubling Down on Prosecutorial Discretion

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By Zack Buck

Health care entities should be “on high alert” following the Southern District of New York’s decision in Kane v. Continuum Health Partners that I blogged about here earlier this month.

The case, which serves as the first and most consequential interpretation of when an overpayment is “identified” for purposes of False Claims Act (FCA) liability, provides a measure of much-needed guidance for attorneys and compliance officers in an area that is rife with confusion. But not too much.

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Clarity for an “Unforgiving” and “Potentially Unworkable” Rule

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By Zack Buck

In a case previously blogged about here, last week, the Southern District of New York denied Defendants’ motion to dismiss in U.S. ex rel. Kane v. Continuum Health Partners, No. 11-2325, in a major decision for health care entities unclear on the parameters of overpayment liability under the False Claims Act (FCA).

The case centers on Continuum Health Partners, Inc. (Continuum)—which operated three New York City area hospitals—and its erroneous receipt of overpayments from the New York Medicaid program based on a software glitch. The overpayments began in 2009; by September 2010, the New York State Comptroller had notified Continuum. Continuum tapped Robert Kane, an employee, to review the billing data and identify all claims that were incorrect. On February 4, 2011, Kane emailed a spreadsheet to superiors that contained 900 claims that may have been erroneously billed. The spreadsheet was “overly inclusive” and “approximately half of the claims listed therein were never actually overpaid.” On February 8, Kane was terminated.

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Medical Device Tax: Back in the News Post-King

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By Gregory Curfman

Just when the Affordable Care Act (ACA) has won a second major Supreme Court victory in King v. Burwell, conservative critics of the ACA are back on the attack, this time directing their ire towards the medical device tax. Having lost the battle on subsidies, they are now focusing on the device tax as the prime target in their attempt to overturn parts of the ACA. This 2.3% excise tax levied on the medical device industry is stipulated as one of the tax provisions in the ACA. The rationale is that since the ACA provides coverage for many more people, thus bringing more business to the industry, it is reasonable to ask the industry to pay something back to support the programmatic mission of the ACA.

From the beginning, the medical device industry has strongly objected to the excise tax, claiming it will stifle innovation by taking away funds that would otherwise be used for new product research and development. For example, Dr. Thomas Stossel of Harvard Medical School, a conservative voice on health issues, recently wrote: “A 2.3 percent tax on sales can easily mean the difference between commercial success and bankruptcy: borderline profits become losses and investors flee to less risky ventures. Brute force taxes destabilize the fragile innovation ecosystem.” Read More

Happy about the Supreme Court’s ACA decision? Thank a law professor

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By Rachel Sachs

[Originally published on The Conversation].

The core of the Affordable Care Act (ACA) has now survived its second trip to the Supreme Court.

Chief Justice John Roberts wrote for the majority in King v Burwell, holding that the federal government may provide subsidies for citizens to purchase health insurance on exchanges that were established by the federal government, rather than by their own state.

A ruling for the challengers (the “King” in King v Burwell) would not only have stopped the flow of subsidies to 6.4 million people currently receiving them, but it would also have disrupted the functioning of the individual insurance markets in the 34 states that have not established their own exchanges. Read More

King v. Burwell And A Right To Health Care

The Petrie-Flom Center Staff Leave a comment

By Gregory Curfman

Bill of Health contributor Gregory Curfman has a new piece up at the Health Affairs Blog discussing the Supreme Court’s decision in King v. Burwell in the broader context of Americans’ right to care. From the piece:

Do Americans have a fundamental right to health care? This oft-debated question is timely given the Supreme Court’s stunning ruling yesterday in King v. Burwell, in which health insurance subsidies on the federal exchange were upheld in a 6-3 decision.

Here I will place the King v. Burwell opinion in the larger context of to what extent Americans are provided a right to care. The Constitution itself does not stipulate a general right to health care, but a patchwork of rights to certain aspects of health care have emerged over time from both constitutional and statutory law.

Read the full piece at the Health Affairs Blog!

Affordable Care, the Supreme Court, and the Wisdom of Crowds

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By David Orentlicher

[cross-posted at HealthLawProfs blog and orentlicher.tumblr.com]

How will the Supreme Court rule on the challenge to the Affordable Care Act’s subsidies that help millions of lower- and middle-income Americans afford their health care coverage? According to FantasySCOTUS’s court watchers, who have correctly predicted more than 70 percent of Supreme Court decisions so far this year, Obamacare should remain intact.

This result is not surprising. The arguments in favor of the government are much stronger than are those for the challenger. To be sure, the challengers cite to two lines in the Affordable Care Act (ACA) that authorize subsidies for insurance bought on state-operated health insurance exchanges, without mentioning federally-operated state exchanges. Hence, argue the challengers, subsidies should be provided only for insurance purchased on state-operated exchanges, which means in only about 1/3 of states. But other language in ACA indicates that the subsidies are available for insurance purchased on all exchanges. When a statute’s language is ambiguous and there are reasonable alternative interpretations, courts are supposed to defer to the executive branch’s interpretation, not substitute their own interpretation. Read More