Life Science Compliance Update

May 29, 2015

OIG Releases Mid-Year 2015 Work Plan, Includes New Provisions Related to Open Payments Oversight and Scrutiny into Clinical Laboratory Payments

Oig workplan

Yesterday evening the Department of Health and Human Services (HHS) Office of Inspector General (OIG) released their Work Plan Mid-Year Update for fiscal year (FY) 2015, which summarizes new and ongoing reviews and activities that OIG plans to pursue. A number of new terms find its way into the mid-year plan, including a provision related to OIG’s anticipated oversight of the Open Payments program, as well as a provision stating that OIG will analyze CMS payments to the top 25 clinical diagnostic laboratories.

View the Work Plan here.

The OIG’s job is to detect fraud, waste, and abuse; identify opportunities to improve healthcare program economy; and to hold “accountable those who do not meet program requirements or who violate Federal health care laws.” The OIG conducts audits and investigation, and can impose civil monetary penalties where appropriate, so their Work Plan is often of great interest to those working with Federal healthcare programs. As a summary of some of the OIG’s enforcement initiatives, the Work Plan can serve as a useful resource for companies in planning internal audits and in training. 

We have highlighted two new provisions in this year's plan.

New: Review of financial interests reported under the Open Payments Program

We will determine the number and nature of financial interests that were reported to CMS under the Open Payments Program. We will also determine the extent to which CMS oversees manufacturers’ and group purchasing organizations’ (GPOs’) compliance with data reporting requirements and whether the required data for physician and teaching hospital payments is accurately and completely displayed in the publicly available database. The Affordable Care Act, § 6002, requires that manufacturers disclose to CMS payments made to physicians and teaching hospitals. Manufacturers and GPOs must also report ownership and investment interests held by physicians. The Open Payments Program provides public transparency about provider-industry relationships; it is important that the information be complete and accurate to serve the needs of consumers making educated decisions about their health care choices. (OEI; 03-15-00220; expected issue date: FY 2016).

It will be interesting to follow OIG's oversight of the Open Payments program, and any potential enforcement actions that may follow. Specifically, it will be important to see whether OIG ties reported Open Payments data into other aspects of their oversight, including fraud and abuse laws, and how the agency reconciles potential missing and/or inaccurate data in the system. 

NEW: Annual analysis of Medicare clinical laboratory payments

We will analyze Medicare payments for clinical diagnostic laboratory tests, including the top 25 clinical diagnostic laboratory tests by Medicare expenditures in 2014. Previous OIG work has found that Medicare pays more than other insurers for certain high-volume and high-expenditure laboratory tests. Section 216 of the Protecting Access to Medicare Act of 2014 requires new Medicare payment rates for laboratory tests beginning in 2017 based on private payer rates and establishes processes for determining initial payments for new laboratory tests. Pursuant to a requirement of the Protecting Access to Medicare Act, OIG will conduct an annual analysis and monitor Medicare expenditures and the new payment system for laboratory tests. (OEI; 09-15- 00210; expected issue date: FY 2016)

As we have noted in a number of articles, referral arrangements between laboratories and physicians have received a fair amount of scrutiny in recent months. This includes Health Diagnostics Laboratory paying $47 million and entering a Corporate Integrity Agreement with OIG as a result of alleged kickbacks related to lab referrals. OIG’s inclusion of a new analysis of Medicare clinical laboratory payments in its Work Plan seems to indicate further interest.

OIG added the following new provisions to its Work Plan:

  • Intensity-modulated radiation therapy
  • Hospital preparedness and response to high-risk infectious diseases
  • Access to durable medical equipment in competitive bidding areas
  • Annual analysis of Medicare clinical laboratory payments
  • Inpatient rehabilitation facility payment system requirements
  • Use of electronic health records to support care coordination through ACOs
  • Part D oversight portfolio
  • Billing trends for Part D drugs and commonly abuse opioids
  • Manufacturer rebates - Federal share of rebates
  • Analyses of generic price increases compared to price index
  • Treatment of authorized generic drugs
  • Completeness of data in Transformed Medicaid Statistical Information System: early implementation
  • CDC- Award process for Ebola preparedness and response funding
  • FDA - FDA's monitoring of imported food recalls
  • HRSA - State agency oversight of HRSA Maternal, Infant, and Early Childhood Home Visiting grants
  • A Review of the National Institute of Environmental Health Sciences' Funding for Bisphenol A safety research
  • Grantee's use of President's Emergency Plans for AIDS Relief funds
  • Foster care- monitoring the health and safety of children through the complaint resolution and licensing process
  • States'CCDF payments rates and access to childcare services
  • CCDF-Licensing and oversight of health and safety standards at Federally funded facilities 
  • Review of financial interests reported under the Open Payments Program


View the Mid-Year 2015 Work Plan

View the 2015 Work Plan

View the 2014 Work Plan


May 28, 2015

Supreme Court Passes on Challenge to Alameda's Drug Disposal Ordinance; California Counties Are Lined Up with Similar Initiatives

Dispose unused rx

The Supreme Court has declined to hear a challenge to Alameda County’s Drug Disposal Ordinance. The Court’s decision upholds the Ninth Circuit’s opinion, which found that the Ordinance—requiring pharmaceutical manufacturers to fund drug take-back programs in the County—did not interfere with interstate commerce or discriminate against out-of-state drugmakers. While the Supreme Court’s choice to pass on the decision is not too surprising given that the Ninth Circuit is the first to consider the Ordinance's Constitutionality—and hence there being no Circuit-split—the Ordinance is already in full swing in a number of different places.

For example, San Francisco has been sending reminders to drug wholesalers licensed by the CA Board of Pharmacy about their responsibilities under the San Francisco Safe Drug Disposal Stewardship Ordinance. Specifically, wholesalers must provide the city with a list of manufacturers of drugs. Using these lists, San Francisco will notify the manufacturers about their obligations to fund programs to collect and properly dispose of unwanted medicine.  Download San Francisco Letter to Drug Wholesalers

Four counties including Alameda have adopted drug disposal ordinances, and two more have introduced them.


The California Product Stewardship Council notes that an estimated 10 to 33 percent of prescribed medicines are not consumed. “With a lack of safe and secure disposal options, consumers traditionally have had the option of trashing, flushing or storing these medicines in the home,” they state. “Numerous studies have documented the widespread consequences of improperly stored and disposed medicines, including the impacts on water quality and public health.”

The solution a number of counties have landed on is “Extended Producer Responsibility,” which requires pharmaceutical manufacturers and others in the product chain to “design, manage and fund take-back programs to securely collect unwanted medicines and sometimes their packaging from the public and ensure the collected materials are properly managed.”

On June 24, 2012, Alameda County adopted the Safe Drug Disposal Ordinance and became the first place in the nation to require pharmaceutical companies to fund the collection and disposal of unused medications from the public. Under the Ordinance, manufacturers must set up disposal kiosk sites throughout Alameda, which consist of disposal bins located in areas “convenient and adequate to serve the [disposal] needs of Alameda County residents.” Manufacturers must also promote the stewardship program to the public through educational and outreach materials. After collection, manufacturers must arrange to destroy the unused prescription drugs at medical waste facilities.

Other counties followed suit, including:



Following Alameda’s adoption of the drug take back program, several industry trade groups, including PhRMA, BIO, and GPhA, challenged the ordinance in court, arguing the ordinance burdens interstate commerce and discriminates against out-of-state companies by shifting costs to counties and states outside of Alameda. Chief Counsel with the Washington Legal Foundation, Richard Semp, a strong opponent of the drug disposal law, noted that the ordinance forces others to pay for something that should be paid for locally. “If Alameda County is permitted to evade the cost of collecting unused pharmaceuticals, then other jurisdictions will take similar steps,” he states. “Local governments have little incentive to impose costs prudently on interstate commerce when their citizens will not bear those costs, but enforcing the dormant Commerce Clause prevents such mischief.”

Pharmaceutical companies lost at District Court and again at the Ninth Circuit. Ninth Circuit Judge N.R. Smith held that the Ordinance is not discriminatory because it “applies to all manufacturers that make their drugs available in Alameda County—without respect to the geographic location of the manufacturer.” He notes that “[e]ven if one of the manufacturers represented by Plaintiffs were to close all of its production facilities, open a single production facility in Alameda County, and limit the sale of its products to intra-county commerce, the Ordinance would still apply to that manufacturer.”

View: PhRMA et. al.  v. County of Alameda, 9th Circuit Opinion

Furthermore, Judge Smith rejected the argument that the purpose of the Ordinance is “merely to shift costs away from the county and onto the manufacturers.” PhRMA and the industry groups noted that because Alameda County could run a drug disposal program that “would achieve precisely the same effects” as the program mandated by the Ordinance, the Ordinance “yields no public benefits.”  Judge Smith stated: “The fact that the county could run a similar program does not nullify the program’s benefits… even if the Ordinance did nothing other than save the county money, that is not equivalent to ‘no public benefits.’”

The trade groups appealed the Ninth Circuit decision to the Supreme Court, but on May 26, the Supreme Court denied the petition.

Pending Ordinances

Two more California counties have introduced similar models of pharmaceutical-funded drug disposal programs. View the California Product Stewardship Council's website for comprehensive updates on various take-back programs. 

Santa Barbara County, California

  • Press – County Looks to Big Pharma to Fund Drug Take Back, Kelsey Brugger, Santa Barbara Independent, 5/20/15
  • 5/19/15 – Hearing held at County of Santa Barbara Board of Supervisors Meeting to receive staff report on unused pharmaceuticals and vote on beginning the medicine stakeholder process. The Board voted unanimously to authorize the Director of the Public Health Department to conduct stakeholder outreach, in collaboration with the Third District office and Public Works Department, and return in October 2015 with a recommendation for establishment of a permanent and sustainably funded model to collect and safely dispose of unwanted medications from residents in Santa Barbara County.

Santa Clara County, California

  • 5/19/15 – Ordinance introduced at County of Santa Clara Board of Supervisors Meeting and passed by a 3-0 vote with two Supervisors recusing themselves due to pharmaceutical investments.
  • County of Santa Clara Board of Supervisors Meeting 5/19/15 – Meeting video, County of Santa Clara Board of Supervisors, 5/19/15 (Ordinance discussion begins at 3:47:20)


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