a glimpse into the future: predicting the health care landscape in 2009 february 26, 2009 san diego,...

A Glimpse Into the Future:Predicting the Health Care Landscape

In 2009

February 26, 2009

San Diego, CACopyright © 2008 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C .

This presentation may be considered attorney advertising under the rules of some states. The information and materials contained herein have been provided as a service by the law firm of Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C. ; however, the information and materials do not, and are not intended to, constitute legal advice. Neither transmission nor receipt of such information and materials will create an attorney-client relationship between the sender and receiver. The hiring of an attorney is an important decision that should not be based solely upon advertisements or solicitations. Users are advised not to take, or refrain from taking, any action based upon the information and materials contained herein without consulting legal counsel engaged for a particular matter. Furthermore, prior results do not guarantee a similar outcome.

Copyright © 2009 Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C .

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What to Expect Today

Obama Initiatives - “New Face of Change” Congressional Initiatives - “What’s In the Pipeline?” Health IT - “A Brave New World” Federal Oversight - “No Pain, No Gain”

FDA Pharma guidance Transparency of drug/device manufacturers

State Oversight - “Will the Feds Follow the Leader?”


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President Barack Obama

"Our health care is too costly; our schools fail too many; and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet."

"We will restore science to its rightful place, and wield technology's wonders to raise health care's quality and lower its cost."

- January 20, 2009 - Presidential Inaugural Speech


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Test Your Knowledge! Today, there are 38 million seniors in the United

States; by 2030, that number will rise to:

a) 25 million

b) 39 million

c) 75 million

d) 100 million

Correct answer is (c)

Source: ASCP Fact Sheet (http://www.ascp.com/about/ascpfactsheet.cfm)


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Test Your Knowledge!

Of the following demographic groups, which is more apt to NOT have health insurance?

a) Women over the age of 65

b) Children under the age of 18

c) Males between the ages of 18 and 24

d) Men and women between the ages of 50 and 65

Correct answer is (c)Source: Graziadio Business Report (Pepperdine University), 2004,

Volume 7, Number 3


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Test Your Knowledge!

According to the U.S. Census Bureau, in 2007, __ persons of all ages were uninsured.

a) 0 million

b) 24 million

c) 10 million

d) 45.7 million

Correct answer is (d)


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Obama Health Policy

What We Know Now Future Implications


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Obama Health Policy - What We Know Now

Invest $10 billion a year over the next five years in electronic health information technology systems. This will translate into $77 billion of savings each year

for the health care system because of increased efficiency.

Improve access to preventive services and disease management programs. Maintain disease management programs. Coordinate and integrate care. Require transparency regarding quality and costs.


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Obama Health Policy - What We Know Now Lower costs by eliminating anti-competitive actions in the

insurance and drug industries. Prevent unjustified price increases and force insurers to pay out a

reasonable share of their premiums for patient care instead of multi-million dollar bonuses to CEOs.

Prevent private insurance waste and abuse in Medicare by eliminating excessive subsidies to Medicare Advantage (MA) plans.

• According to CMS, the government currently pays 12% more to MA plans than it costs to treat comparable beneficiaries through traditional Medicare.

• With the recent announcement of only a 0.5% proposed increase for 2010, questions arise about the program’s growth prospect - insurers may cut benefits or increase premiums to maintain their profit margins, which could lead beneficiaries leaving the Medicare Advantage plans for government-run programs.

• Eliminating this overpayment would save the government $54 billion over five years.


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Lower costs by eliminating anti-competitive actions in the insurance and drug industries, cont. Allow consumers to import safe drugs from other countries.

• Two bills introduced on January 6, 2009:• H.R. 163: provides for an application process for would-be importers,

and would expressly permit certain drug sales via the Internet.• S. 80, the Pharmaceutical Market Access Act of 2009: sets forth a

detailed registration process for exporters, imposes inspection and education requirements on the FDA, and includes provisions regarding patent infringement, pricing discrimination, and penalties related thereto.


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Lower costs by eliminating anti-competitive actions in the insurance and drug industries, cont. Prevent brand name drug companies from blocking generic

drugs from consumers through compensation agreements with generic drug companies.

• Senator Herb Kohl re-introduced a bill on February 3, 2009: the Preserve Access to Affordable Generics Act.

• This bill is similar to legislation previously introduced by Sen. Kohl but would also permit the FTC to exempt from the ban an agreement that would benefit consumers.


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Lower costs by eliminating anti-competitive actions in the insurance and drug industries, cont. Allow the Secretary of Health and Human Services (HHS) to

negotiate for cheaper drug prices by repealing the 2003 Medicare Prescription Drug Improvement and Modernization Act (MMA) ban that prohibits the government from interfering in the negotiation of prescription drug prices and discounts for Medicare.


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Affordable and accessible coverage for all Americans. Require insurance companies to cover preexisting

conditions. Create a National Health Insurance Exchange to help

individuals find and purchase health insurance.• Serve as a “watch dog” on insurance plans• Create rules and standards for participating insurance plans• Implement the National Health Plan


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Institute a government-run insurance plan (the National Health Plan) modeled after the Federal Employee Health Benefits Program (FEHBP).

• Available to all uninsured, underinsured, and small employers that do not offer their own plan to employees.

• Provide a comprehensive benefits package covering all essential medical services including preventive, maternity, and mental health care.

• Affordable premiums, co-pays and deductibles.• Simplify paperwork for providers which will increase savings

to the entire health care system.• Easy enrollment and ready access to coverage.


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National Health Plan, cont.• Participants may change jobs without changing their health

insurance coverage.• Require participating hospitals and providers to collect and

report quality and efficiency data.

Tax credits to purchase insurance.• Provide small businesses with a refundable tax credit of up

to 50% on premiums paid to purchase health insurance for employees.


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“Play or Pay” Requirement• Require large employers that do not offer adequate health

insurance benefits to employees to contribute a percentage of payroll toward the costs of the National Health Insurance Exchange.

• Small businesses are exempt from this requirement.

Require health care coverage for all children. Expand eligibility for Medicaid and State Children's

Health Insurance Program (SCHIP). Allow states to continue to experiment with health

care reform.


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Obama Health Policy - Future Implications

Reduce the number of uninsured by 18 million at a cost of $86 billion in the first year.

Cover 34 million of the nation’s projected 67 million uninsured at a cost of $1.6 trillion over 10 years.

Close to 100% of children will be insured. The “play or pay” requirement may expand employer-

sponsored insurance, but it depends on the extent that large employers choose to “play” rather than “pay.”

Source: The Commonwealth Fund, The 2008 Presidential Candidates’ Health Reform Proposals: Choices for America (October 2008)


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The plan has the potential to: Provide everyone with comprehensive and affordable health

insurance.• However, in the absence of a requirement that everyone have

health insurance, the proposal will likely fall short of achieving universal coverage.

Achieve greater equity in access to care by offering everyone affordable health insurance that covers preexisting conditions.

Achieve efficiencies and cost savings by reducing administrative burdens on health care providers and insurers.

Source: The Commonwealth Fund, Envisioning the Future: The 2008 Candidates’ Health Reform Proposals (January 2008)


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Obama Health Policy - Future Implications With Tom Daschle withdrawing his nomination as the

Secretary of Health and Human Services (HHS), the immediate opportunity for healthcare reform may be at a standstill Current frontrunner for the nomination is Kathy Sebelius

(Governor of Kansas). Daschle’s coauthor of the book entitled “Critical: What We Can

Do About the Health Care Crisis”, Jeanne Lambrew, has started as the White House Office of Health Reform’s deputy director.

Important concepts in the book:• Move forward quickly on health care reform but in a step-by-

step approach.• Not get “bogged down” in the details as happened with the

Clinton health care reform plan.


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Daschle Recommendations for Moving Forward Encourage Congress to create a National Health Board:

• To oversee and set policy for all health care (including Medicare, Medicaid, and private insurance) in the United States, much like the Federal Reserve Board manages banks.

• That has the independence to make difficult and “politically dangerous” decisions.

Create an insurance purchasing pool similar to the Federal Employees’ Health Benefits Program so individuals and small businesses can purchase health insurance plans with a defined set of benefits from competing insurers.

Reform that builds on the existing health care system of employer-based insurance as well as Medicare and Medicaid.


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“I have a feeling that if you look at what’s happened with prescription drugs, with children’s health insurance, with bipartisan support, that the notion of making health care less of a public responsibility doesn’t feel like the direction that our country is likely to go in.”

- Lawrence Summers, newly-appointed White House Lead Economic Advisor and former U.S. Treasury Secretary


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Congressional Initiatives

2009 Stimulus Package SCHIP Health Care Reform Proposals CBO Reports Medicare and Medicaid Initiatives

• As the cost of health care continues to rise at the same time as quality and effectiveness decreases, health care reform has returned to the national stage.


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Happenings on Capitol Hill 2009 Stimulus Package

On February 17, 2009, President Obama signed into law a $787 billion economic stimulus package that includes:

• $87 billion to boost federal contributions to states for Medicaid and the State Children's Health Insurance Program.

• $25 billion to help pay premiums for workers who have lost their jobs and want to keep their employer-sponsored health insurance.

• $19 billion to promote adoption of health information technology.• $2 billion “start-up” funding to promote adoption of health information

technology. • $17 billion for Medicaid and Medicare incentives to providers for

adopting certified electronic health records. • Establishes a timeframe for the use electronic health records by each

person in the U.S. by 2014.


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Happenings on Capitol Hill 2009 Stimulus Package cont.

On February 17, 2009, President Obama signed into law a $787 billion economic stimulus package that includes:

• $10 billion to increase medical research funding through NIH and to renovate research facilities.

• $1.1 billion for comparative effectiveness research to compare drugs, medical devices, and other treatments to determine which are the most effective.


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Health Information Technology for Economic and Clinical Health Act (“HITECH Act”)• Health IT provisions of the Stimulus Package

• Establishes a collaborative process led by the Office of the National Coordinator for Health Information Technology (ONCHIT) in developing standards by 2010 that allow for secure nationwide electronic exchange of health information.

• Establishes the HIT Policy and Standards Committees to recommend standards, implementation specifications, and certification criteria for electronic exchange and use of health information.


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HITECH Act cont.• Health IT provisions of the Stimulus Package

• Improves and expands upon current federal privacy and security protections for health information such as requiring that an individual be notified if there is an unauthorized disclosure or use of their health information and requiring a patient’s permission to use their personal health information for marketing purposes.

• Establishes Regional Extension Centers, which would provide technical assistance and disseminate best practices to support and accelerate efforts to adopt, implement, and effectively utilize health information technology.


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Other appropriations for health information technology• National Telecommunications and Information Administration

• $4.7 billion for the "Broadband Technology Opportunities Program" to remain available until expended

• At least $4.35 billion spent on grants for expanding public computer center capacity (community colleges and public libraries); grants for innovative programs to encourage sustainable adoption of broadband service; for audits and oversight of the funds provided; and to develop a broadband inventory map.

• Indian Health Service• $85 million for the Indian Health Services for health information

technology activities such as telehealth services development and related infrastructure requirements.


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Happenings on Capitol Hill

2009 Stimulus Package cont. Other appropriations for health information technology cont.

• Health Resources and Services Administration• $2.5 billion for grants to health centers; grants for construction,

renovation and equipment, and for the acquisition of health information technology systems, for health centers; to address health professions workforce shortages; and for the National Health Service Corps to provide scholarships, loan repayment, and grants to training programs for equipment, and grants.

• Rural Utilities Service• $2.5 billion for the cost of grants, broadband loans, and loan

guarantees and for grants for broadband infrastructure in any area of the United States.

• At least 75% of the area to be served must be in a rural area without sufficient access to high speed broadband service to facilitate rural economic development, as determined by the Secretary of Agriculture.


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Appropriations for Science and Technology • National Institutes of Health (NIH)

• $1.3 billion for the National Center for Research Resources for grants to construct, renovate, or repair existing non-Federal research facilities and to provide shared instrumentation and other capital research equipment to recipients of grants.

• NIH Office of the Director

• $8.2 billion to support scientific research, including entering into transactions (other than contracts, cooperative agreements, or grants) to carry out research.


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2009 Stimulus Package cont. Appropriations for Science and Technology

• Agency for Healthcare Research and Quality

• $700 million for comparative effectiveness research, including acceleration in the development and dissemination of research assessing the comparative effectiveness of health care treatments and strategies.

• National Institute of Standards and Technology

• $580 million for scientific and technical research and construction of research facilities.

• National Science Foundation

• $2.5 billion for research and related activities.


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State Children’s Health Insurance Program On January 14, 2009, the House voted 289-139 to

extend SCHIP for four-and-a-half years following a one-hour debate.

The bill would expand coverage to more than 11 million children at a projected cost of $31.5 billion.


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Proposals For Health Care Reform Wyden (D-OR)-Bennett (R-UT) Bill - The Healthy Americans Act

(HAA) -- Bipartisan legislation introduced in January 2007 - likely to reemerge in 2009

• Seeks to provide universal coverage by creating a new private insurance system involving state-based purchasing pools

• All Americans will be required to enroll in the private insurance plan • Employer-based coverage reduced over time• Medicaid and SCHIP converted into supplemental insurance programs

• Referred to Senate Finance Committee with no further action.


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Proposals For Health Care Reform Senate Finance Chair, Max Baucus (D-MT) - “Call to

Action” White Paper (11/12/08)• Call to Action has three important “legs”:

• 1) A policy that ensures meaningful coverage and care to all Americans;

• 2) An insistence on higher quality and greater value, which would result in less costly care;

• 3) A commitment to weed out waste, eliminate overpayments, and a financing structure that works for taxpayers as well as health care recipients and providers.


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Proposals For Health Care Reform Senate Finance Chair, Max Baucus - “Call to Action”

White Paper (11/12/08) cont.• The Baucus Plan would, among other things:

• Ensure that every individual can access affordable coverage by creating nationwide insurance pool called the Health Insurance Exchange.

• Provide for a Medicare buy-in and expanded SCHIP coverage.• Strengthen the role of primary care and chronic management.• Refocus and realign payment incentives towards quality and value.• Improve infrastructure by investing in research and health IT.


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Proposals For Health Care Reform On November 17, 2008, Senator Ted Kennedy (D-MA) said he

plans to advance a bill in early 2009 that would call for universal health care, however, has also indicated he would defer to the Obama Administration.

Joins Baucus and Wyden as leading participants in the effort to establish universal health care.

Kennedy, however, has a head start - Despite his illness, he directed his staff in mid-2008 to begin work on legislation that would vastly expand health coverage, a career-long goal of his.


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Happenings on Capitol Hill Proposals For Health Care Reform

Senator Kennedy has set up four subcommittees under the Health, Education, Labor, and Pensions (HELP) Committee to hold hearings on different aspects of health reform.

• A way to brainstorm and bring in new ideas to a public forum.

• Allows the committee to work in Kennedy’s absence.


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Proposals For Health Care Reform Henry Waxman (D-CA), Chairman of the House Committee on

Oversight and Government Reform defeats John Dingell (D-MI), longest serving member of the House, for Chair of the House Energy and Commerce Committee.

Dingell taking on role as “Chairman Emeritus” May indicate:

• A potential shift in Committee focus.

• A potential restructuring of subcommittees. Has requested information from CMS Acting Administrator,

Kerry Weems regarding Medicare Part D plan pricing.


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As Congress debates the best way to implement health care reform, the Congressional Budget Office (CBO) is actively seeking answers to control the cost of health care. Expanded the number of staff analyzing health care

issues from 30 in 2007 to 50 in 2008. Established a panel of health advisers from

academia, industry, and independent research organizations to analyze health policy research and advise the CBO.


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Happenings on Capitol Hill In December 2008, the CBO released two reports:

“Key Issues in Analyzing Major Health Insurance Proposals”• Projects that federal spending on Medicare and Medicaid will rise from

about 4 percent of gross domestic product (GDP) in 2009 to nearly 6 percent in 2019 and 12 percent by 2050.

• Estimates that the average number of nonelderly people who are uninsured will rise from at least 45 million in 2009 to about 54 million in 2019.

• By themselves, premium subsidies or mandates to obtain health insurance would not achieve universal coverage. Proposals could, however, achieve near-universal coverage using a combination of approaches.

• Other approaches—such as the wider adoption of health information technology or greater use of preventive medical care—could improve people’s health but would probably generate either modest reductions in the overall costs of health care or increases in such spending within a 10-year budgetary window.

- Robert A. Sunshine, CBO, Acting Director


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Medicare and Medicaid Initiatives On September 11, 2008, a hearing was held before the House

Ways and Means Subcommittee on Health regarding reform of the Medicare physician payment system.

• Without changes to the current system, physicians face a 20% payment reduction by 2010.

• Recommendations• Congress should ask the Medicare Payment Advisory

Commission (MedPAC) and the Government Accountability Office (GAO) to consider the development of alternative coding systems for physician services.


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Happenings on Capitol Hill Medicare and Medicaid Initiatives

• Recommendations, cont.• Repeal the current fee-for-service system and adopt a

bundled payment system for physicians starting in 2010.• Adopt a capitated payment system to encourage

providers to work within a budget and to invest in systems and infrastructures that reduce costs and improve efficiencies.

• Congress is still considering the different options.• Promote prevention and detection, not procedures


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Health IT - A Brave New World While the President, Congress, federal agencies and

states grapple with the best way to reform and regulate health care, the world is moving forward into a technologically advanced age and dragging the health care industry with it. New technological advances creating more cost-effective mechanisms

for prescribing, monitoring and tracking prescription drugs and utilization.

Keeping up with and meeting new regulatory requirements, as well as the challenges created by the new technology.

The billions of dollars in grants and payments for health information technology that is available in the Stimulus Bill should encourage the industry to step up to the plate and adopt and implement health information technology.


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Health IT - A Brave New World

The Health Care Industry’s Reluctant Adoption of Information Technology Health care providers have been quick to adopt

breakthrough technology in medical procedures, but slow to accept innovations in networking and communications.

• Concern about breaches in security and patient privacy• Health care services traditionally performed locally and in

person


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According to the science and technology experts, as reported by the Wall Street Journal, future technological advances may allow outsourcing and offshoring of medical services. Systems integrations will allow medical records to be

transferred swiftly and securely all over the world. Creation of a global database to monitor the safety of

prescription drugs from every part of the world. Professionals and patients will find authoritative up-to-date

information on every specialty on the Internet.


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These technological advances will not happen overnight. There are many obstacles which need to be addressed.

• Likely differences in laws and regulations across borders may necessitate the need for international laws governing medical services.

• Possible differences in technical standards between different countries could create conflicts and call for global standards.


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E-Prescribing Section 132 of MIPPA added to the e-prescribing provisions of the MMA.

It authorizes a new incentive program to encourage e-prescribing by establishing physician bonus payments for e-prescribing and penalties for failing to e-prescribe.

Prescribers qualify for the incentive if:• They report applicable electronic prescribing measures established

under the Physician Quality Reporting Initiative (PQRI); OR

• They electronically submit prescriptions under Medicare Part D at a level determined by CMS

The incentive payment program began on January 1, 2009.


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Health IT - A Brave New World E-Prescribing, cont.

CMS held a conference on October 6-7, 2008, to encourage adoption of e-prescribing technology as a way to improve the health care system.

• Physicians have electronic access to each patient’s prescription history which helps them to:

• Avoid prescribing drugs that may result in harmful drug interactions.

• Prescribe drugs that are covered and affordable resulting in fewer patient trips to the pharmacy.

• Eliminates the possibility of medication errors caused by illegible handwriting.

• Reduces confusion and miscommunication.


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State Initiatives Electronic Monitoring and Internet Prescribing

• In 2008, fifteen states (CA, GA, HI, KS, IL, MA, MN, NH, NY, OH, PA, SC, TN, VT, WA) proposed or enacted laws on e-prescribing

• Develop and regulate the electronic transmission of prescription drug orders.

• Establish Internet prescribing practices to provide increased protection for consumers who purchase prescription drugs over the Internet.


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Personal Health Records An electronic record of health-related information on

an individual that conforms to nationally recognized standards and that can be drawn from multiple sources while being managed, shared and controlled by the individual.

As people move from state to state, they leave a trail of fragmented or partial medical records behind.


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Personal Health Records cont. Currently, in a world of decentralized record keeping where

records are maintained by multiple entities and in multiple locations – makes the system duplicative and sometimes creates conflicting information.

New world would be filled with personal health information networks (PHINs), regional health information organizations (RHIOs), or national health information exchanges (HIEs) – a very centralized system.


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Electronic Health/Medical Records Not the same as PHRs Controlled by physicians or hospitals Benefits of EHRs

• Reduce medical errors• Improve efficiency of care• Incentive payments for meaningful use of certified EHR

technology


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Health IT - A Brave New World Fraud and Abuse Safe Harbor

In August 2006, CMS and OIG published final rules with an exception to the physician self-referral prohibition and a safe harbor under the anti-kickback statute, for arrangements involving donation of interoperable EHR technology to physicians and other health care practitioners or entities from businesses with whom they work.


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Health IT - A Brave New World Fraud and Abuse Safe Harbor

The exception and safe harbor establish the conditions under which:

• Entities furnishing designated health services (and certain other entities under the safe harbor) may donate to physicians (and certain other recipients under the safe harbor) interoperable electronic health records software, information technology and training services.

• Hospitals and certain other entities may provide physicians (and certain other recipients under the safe harbor) with hardware, software, or information technology and training services necessary and used solely for electronic prescribing.


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Federal Agency Initiatives

In the last 2 years, Congress, with the Democrats in power, has introduced new laws governing reimbursement policies for healthcare providers.

These laws, as well as various enforcement initiatives, have spawned new federal regulations and guidelines promulgated to implement them.

In addition, the contaminated heparin scare (January 2008) has initiated a renewed interest in monitoring prescription drugs.


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Food and Drug Administration (FDA) Commissioner Who will it be? FDA is responsible for, among other things, ensuring human

and veterinary drugs, biological products, and medical devices are safe and effective.

Recently, Representative Dingell has identified health care reform and FDA legislation as top priorities for Congress.

Recently, Dr. Sidney Wolfe, head of the health research group at Public Citizen, was appointed to a four-year term on the FDA’s Drug Safety and Risk Management Committee, which advises the FDA on drug safety issues.


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Federal Agency Initiatives Food and Drug Administration (FDA) -- In light of the

recent reports of contaminated drugs coming from outside of the U.S., as well as initiatives to reduce drug costs, Congress has a renewed interest in drug pedigree laws. Prescription Drug Pedigree Laws

• Provide participants in the drug distribution system with a history of the drug’s source to prevent adulterated products from reaching consumers.

• Federal Prescription Drug Marketing Act of 1988 • Required the FDA to promulgate implementing regulations for the

pedigree provisions.• FDA has delayed implementation and indicated that it will not initiate

enforcement actions for failing to provide a pedigree.


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Food and Drug Administration (FDA) Prescription Drug Pedigree Laws

• Compliance issues• The lack of clear federal criteria for prescription drug pedigrees

has created the opportunity for states to pass their own pedigree laws.

• As of 2007, 10 states (AZ, CA, FL, HI, IN, NJ, NM, NV, OK, VA) have enacted pedigree laws regulating drug importation or re-importation.

• MA, NY, TN proposed similar legislation in 2008.

• Drug distributors find it difficult to comply with the myriad of state laws.


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Food and Drug Administration (FDA) Prescription Drug Pedigree Laws, cont.

• Introduction of bipartisan pedigree legislation in the House by Steve Buyer (R-IN) and Jim Matheson (D-UT) in April 2008 - no similar bill in 2009 yet

• Serialization for “at-risk” drugs at a time determined by the FDA

• Pedigree traced back to the original distributor

• Preemption of conflicting state pedigree laws

• Bonding requirements


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Proposals For Health Care Reform Representative Frank Pallone, current Chair of the House

Energy and Commerce Committee’s Subcommittee on Health cont.

• Importation• Address the public crisis in which the FDA does not have

resources or authorities it needs to properly ensure safety of goods being imported from abroad.

• Better equip public health agencies to handle growing mandates to ensure safety of Americans.


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Food and Drug Administration (FDA) On January 12, FDA issued guidance on reprint practices,

making it easier for drug and medical device manufacturers to disseminate information on unapproved uses of their products using medical journal articles.

The guidance described certain conditions where drug or device manufacturers could provide information about unapproved uses for approved products.

• FDA regulations prohibit manufacturers of new drugs and devices from advertising their products to doctors for any use that FDA has not determined to be "safe and effective."


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Food and Drug Administration (FDA) Recently, the FDA announced a two-year pilot

program aimed at improving drug safety. “The Secure Supply Chain” program seeks to enlist

100 drugmakers that would help demonstrate the feasibility of a system for guaranteeing the safety of foreign-produced drugs and active ingredients.


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Food and Drug Administration (FDA) In November 2008, the FDA, under fire for not having

resources to protect consumers at home, deployed staff abroad to work directly with importers and foreign regulatory agencies

On November 19, 2008, the FDA opened its first overseas office in China.

• Eight employees in three offices (Beijing, Shanghai, and Guangzhou) to certify inspections of U.S.-bound Chinese exports.


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Food and Drug Administration (FDA) In November 2008, the House Energy and Commerce

Committee launched an investigation after receiving a letter from 9 FDA scientists within the agency’s device division about device approval methods and other issues at the FDA’s Office of Device Evaluation.

Recently, the same group of nine scientists sent a letter to the Obama transition team and Tom Daschle, calling the FDA "fundamentally broken" and expressing the need for agency reforms.


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Food and Drug Administration (FDA) Recent developments

• As a result of the investigation into the allegations of the scientists, recently obtained internal documents by the Times show that in 2007, 41 medical devices underwent the most rigorous approval process, compared with 3,052 other devices that only received abbreviated reviews.

• According to the Times, an internal memo noted that FDA managers pushed agency reviewers to use the abbreviated process on complex or novel medical devices that likely should have been reviewed more extensively.

What this may mean• Increased regulatory action.• Longer approval process for many medical devices.


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Federal Agency Initiatives Food and Drug Administration (FDA)

Recent developments• On January 15, GAO released report recommending that

the agency fulfill the promises it made 14 years ago to fix its system for approving complex medical devices.

• The report recommended that the FDA issue regulations either reclassifying devices into a lower class, or keeping the device in class III. The regulations should then require that all class III devices go through the more stringent PMA process for approval and marketing.

• The FDA has acknowledged the importance of promulgating such regulations, but have not agreed to provide a time frame for doing so.

• The report, mandated by Congress in legislation passed in 2007 to reform the FDA, comes in the midst of the near-rebellion by the 9 scientists within the agency’s device division.


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Food and Drug Administration (FDA) Follow-On Biologics (“Biosimiliars”)

• Need for abbreviated regulatory pathway• In June 2008, CBO estimated that between 2009-2018, an abbreviated

pathway could reduce expenditures on biologics by $25 billion.

• Major sticking points remain:• Safety/comparability: Biologics are complex medicines manufactured using

living organisms, but many assert that current technology allows for comparison of follow-on biologics to previously approved (reference) biologic drug product.

• Patent/Data exclusivity protection: Need to balance innovation with competition.


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• Generic supporters have rallied behind a bill from Rep. Waxman that grants no exclusivity period, though recent indications by the Congressman that he is willing to offer some period for patent protections suggest that a compromise may be reached.

• A bill from Senators Kennedy and Enzi that provides 12 years of data exclusivity will likely re-emerge as the leading vehicle to establish a pathway for follow-on biologics.

• First favorable markup of a biogenerics bill out of committee in 2008 tees up the issue for 2009.


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• European Union (EU) Model• EU passed legislation and implemented guidelines for an

abbreviated approval pathway for follow-on biologics.

• Level of review is determined on a case-by-case basis with some classes requiring more intense review than others.

• Typically, 10 years of market exclusivity.


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Federal Trade Commission (FTC) Pay for Delay

• FTC filed suit in federal court to block a manufacturer of a brand-name drug from paying competitors to delay selling the cheaper generic versions.

• Under these "pay-for-delay" deals, both parties benefit because the generic companies are paid to do nothing and brand name drugmakers make more money for longer periods of time by having the only drug of that type in commerce.

• In early February, Sens. Kohl and Grassley reintroduced legislation that would prohibit such deals. House Energy and Commerce Chair Waxman will likely reintroduce the House version of the legislation soon.


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Other Pharma Insight PhRMA Voluntary Guidance Document Amendments

Includes input from and given deference by federal agencies such as CMS and the OIG.

• Imposes new restrictions on meals• Prohibits entertainment and recreation to any healthcare professional who is not

an employee of the company.• Prohibits financial support for continuing medical education (CME) that could be

considered an inducement to prescribe a particular medicine.• New disclosure requirement• Contains new guidelines regarding the use of prescriber data.• Establishes an annual certification process to promote compliance with the

PhRMA Code.

Became effective January 1, 2009.


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Other Pharma Insight AdvaMed Code of Ethics (Code) - Effective July 1,

2009 - Generally: AdvaMed will publish on its website a list of all companies that

have submitted an annual certification that they have adopted the Code.

Companies can enter into royalty arrangements in exchange for contributions that improve medical technologies.

Companies cannot provide or pay for any activity or recreation for any health care professional who is not an employee of the Company.

Meals must be incidental to the bona fide presentation of scientific, educational, or business information and should not be part of an entertainment or recreational event.


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Other Pharma Insight AdvaMed Code of Ethics (Code) - Effective July 1,

2009 cont. Other than medical textbooks or anatomical models used for

educational purposes, items that benefit patients or serve a genuine educational function should have a fair market value of less than $100.

Certain activities involving the provision of coverage, reimbursement and health economic information are permissible.

Provide research and educational grants and charitable donations, unless for an unlawful inducement.

Pursuant to guidelines, provide products for education on newer and improved technologies.


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Other Federal Agency Initiatives

Office of the Inspector General (OIG) Work Plan 2009 - Identifies priority areas for OIG

review/investigation. Centers for Medicare & Medicaid Services

New Marketing Standards Broker Compensation and Oversight


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Federal and State Oversight Initiatives Pharmaceutical Industry

Physician Payment Sunshine Act of 2009• “To shine light” on payments by drug, device and biologic makers to

health care providers.• In January 2009, Senators Grassley and Kohl introduced a new version

with “sharper teeth”• Requires manufacturers and group purchasing organizations to disclose all

payments or transfers of value worth $100 or more.• Requires disclosure of physician investments in and ownership of

manufacturers (knowing failure to do so can result in fines of up to $1M/company).

• Beginning April 2011, required to report payments/transfers of value for consulting fees, compensation for other services, honoraria, gifts, entertainment, food, travel, education, research, charitable donations; royalty/license fees, ownership of investment interests, CME speaker fees/grants, and anything else HHS requires.


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Federal and State Oversight Initiatives

Pharmaceutical Industry Physician Payment Sunshine Act of 2009 cont.

• Several states have enacted laws similar to the 2007 version of the bill. However, the 2009 version, if enacted, would NOT preempt state laws that mandate more reporting requirements.

• The pharmaceutical industry (e.g., PhRMA and AdvaMed) has generally come out in support of the legislation, but has advocated for a higher threshold reporting requirement.


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Federal and State Oversight Initiatives State Oversight Initiatives

In August 2008, Massachusetts passed a sweeping law targeted at pharmaceutical and medical device manufacturing companies.

• Requires pharmaceutical and medical device companies to adopt the voluntary PhRMA guidelines.

• Prohibits companies from paying for a physician’s meal unless the meal is part of an informational presentation made by the company, and is consumed within the physician’s office or a hospital setting.

• Prohibits companies from giving a physician any item of recreational or entertainment value, or paying for travel, lodging, or other personal expenses for a physician to attend a CME event.

• Mandatory disclosure requirement for all pharmaceutical or medical device manufacturers that confer any economic benefits on a health care provider.

• Imposes a fine of not more than $5,000 for violations of the law.


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Federal and State Oversight Initiatives

State Oversight Initiatives In 2008, nine states (CA, HI, IL, NE, NH, NJ, NY,

WA, WI) proposed legislation similar to the Massachusetts law. The District of Columbia passed such legislation in 2008.


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Possible Trends in State Initiatives Privacy and "Data Mining"

Thirteen states (AZ, CA, DC, HI, IL, KS, MD, MA, MO, NC, RI, SC, WA) proposed legislation to restrict or prohibit the sale or redistribution of prescription sales record information that

identified patients or prescribers. NH, ME, and VT already passed such legislation in 2007.

• NH law contains prohibition on the sale or transfer of prescriber-identifiable prescription data that may be used for commercial purposes.

• Although the NH law was recently upheld, the court limited the scope of the law to in-state transactions, therefore, if data is transferred out of NH for a permissible purpose, then the sale of such data from the other state is not a violation.


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Possible Trends in State Initiatives

Generic Carve-Outs Another growing trend in state legislatures in the past few years

involves a new version of the old argument that generic drugs are not the same as brand name drugs.

Generic carve-outs prohibit pharmacists from substituting generic drugs for certain classes of prescription drugs (e.g., anti-epileptics, immunosuppressants, and mental health drugs) without notification to both the physician and the patient, even when the physician has not indicated any problems with generic substitution.


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Possible Trends in State Initiatives

Generic Carve-Outs - Growing trend in state legislatures in 2007-2008 Twenty-four states proposed legislation to prohibit

generic substitution of anti-epileptic drugs without physician consent.

Twenty-nine states proposed such legislation for immunosuppressant drugs.

4 states (HI, IL, TN, UT) have already passed this type of legislation for anti-epileptic drugs.


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Possible Trends in State Initiatives Generic Carve-Outs

Necessity or Not?• FDA allows for a 20% variation in effectiveness between

brand name drugs and generics, thus carve-out legislation may be needed to protect patients most sensitive to small changes.

• On the other hand, the Pharmacy Care Management Association (PCMA) made the following findings:

• Carve-out legislation runs counter to the opinion of the FDA

• Increased cost for everyone without increased quality of care.

NOTE: There is no proposed federal generic carve-out legislation at this time.


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So Where Are We At?

Several key legislative and regulatory proposals would create more “transparency” throughout the health care industry

With the new President, we should expect that health reform is on the horizon

Federal and state oversight becoming more evident through enforcement initiatives

Efficacy matters Technological advancements leading to more

efficient health care delivery

a glimpse into the future: predicting the health care landscape in 2009 february 26, 2009 san diego,...

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