Life Science Compliance Update

April 20, 2018

Physician Specialty Groups Caution Against Proposed Drug Pricing Changes

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Nine of the nation’s leading physician groups – including the American College of Rheumatology, American Academy of Neurology, American Academy of Ophthalmology, and American Urological Association – joined together this week to urge the Trump Administration to reconsider some of the policy changes suggested in recent drug pricing proposals that would have negative effects on patient care.

In a letter sent to U.S. Department of Health and Human Services Secretary Alex Azar, the groups cautioned that the Administration’s proposal to consolidate certain physician-administered drugs covered under Medicare Part B into the Part D program while reducing physician reimbursements for new drugs below the current payment rates would create access issues and force patients to seek treatment in higher-cost sites of care.

“While are we are supportive of some concepts recently presented, we do have serious concerns regarding other policy suggestions,” stated the letter, “We believe HHS should make policy proposals designed to reflect the needs of complex care patients, reduce administrative burdens, and increase access to care.”

In the letter, the groups note that Medicare Part B and D are different programs with differing formulary structures and that cost sharing would be difficult to consolidate without significantly increasing out-of-pocket costs for patients – especially those who have no choice but to rely on biologics. And because Medicare Part D does not allow for supplemental coverage, patients would be on the hook for larger portions of these expensive biologic therapies.

The groups also warned that changing Medicare Part D formulary standards to require a minimum of only one drug per class rather than the current two could limit patient’s access to the medical therapies judged to be the most effective choice by their physician.

Additional concerns centered on how the Administration’s proposal to reduce physician reimbursements for in-office treatment from the current ASP +6% (which is 4.3% due to sequestration) to Average Sales Price (ASP) +3% would be damaging to patient access. By reducing physician reimbursements below the cost of obtaining and providing these complex therapies, many practices – especially small and rural practices that are unable to negotiate bulk discounts from manufacturers – may be forced to stop administering biologic therapies to Medicare patients altogether, the specialty groups warn. This would drive patients into more expensive and less convenient settings to receive needed therapies – if such alternatives even exist.

In their letter, the groups are supportive of policies that would lower drug prices while at the same time increasing access to vital medications, including:

  • Requiring Medicare Part D plans to apply a substantial portion of rebates at the point of sale;
  • Establishing a beneficiary out-of-pocket maximum in the Medicare Part D catastrophic phase providing beneficiaries with better protection against high drug costs;
  • Decreasing the concentration in the pharmacy benefit manager (PBM) market and other segments of the supply chain; and
  • Providing guidance from CMS on how drug-related value-based contracts and price reporting would affect other price regulations.

“Our organizations are dedicated to ensuring that physicians have the resources they need to provide patients with high-quality care,” the letter concludes. “We look forward to being a resource to you and we welcome the opportunity to meet with HHS to discuss our concerns and positions in more detail.”

The Escobar Hurdle – False Claims, Materiality, and Dismissal

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U.S. ex rel. Ruckh v. CMC II LLC et al. (“Ruckh”) was a closely followed False Claims Act case, because a Florida Federal Court opted to vacate a nearly $350 Million FCA verdict involving a nursing home operator. The case is significant because it demonstrates the ongoing impact of a party’s failure to meet the Escobar materiality standard.

For many months, we have followed the U.S. Supreme Court decision in case of Universal Health Services, Inc. v. United States ex rel. Escobar (“Escobar”). Back in August 2016, we noted that it appeared neither side won a decisive victory, but time would tell.

Starting with a case involving Genentech, we have seen the Escobar standards used to curtail false claims liability. Fast forward to 2018 and we can now say with some authority that Escobar and its progeny have created a significant hurdle restricting what up to now seemed to be the unlimited reach of the Federal False Claims Act (“FCA”) in the healthcare context. Most recently, the case of United States ex. rel. Ruckh v. CMC II LLC et al. in the U.S. District Court in Florida’s middle district involving a nursing home operator continues the trend.

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April 19, 2018

The Insys Net Gets Wider

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In mid-March 2018, five New York City doctors were arrested and charged with accepting bribes and kickbacks from Insys Therapeutics to prescribe high volumes of Subsys, a fentanyl-based cancer pain medicated spray. The five doctors – Gordon Freedman, 57, of Mount Kisco; Jeffrey Goldstein, 48, of New Rochelle; Todd Schlifstein, 49, of Manhattan; Dialecti Voudouris, 47, of Long Island City and Alexandru Burducea, 41, of Little Neck – all practiced in Manhattan and pled not guilty in federal court to an unsealed indictment charging them with several charges, including conspiracy.

The five doctors allegedly collected tens of thousands of dollars working for Insys’ “Speakers Bureau” from August 2012 through 2016. According to prosecutors, the Bureau was originally created to educate doctors and other practitioners about Subsys, but in practice, it was used to induce doctors to prescribe large volumes of the spray by paying them speaker program fees. As has been typical in these situations, the speakers did not conduct any speeches, but the events were typically social affairs with no actual educational program.

For their participation in these events, the doctors earned kickbacks anywhere from $68,000 to $308,000 and all five were – at some point – among the top twenty prescribers of Subsys nationwide. However, prior to joining the Bureau, all five of the doctors rarely (if at all) prescribed the drug.

In addition, it is alleged that in 2013, Goldstein and Schlifstein went to a strip club with Roper, an Insys sales manager; Serrano, an Insys sales representative; and an unnamed Insys executive, and Insys covered the $4,100 bill, which included lap dances.

Manhattan U.S. Attorney Geoffrey S. Berman said the doctors reneged on their oath as doctors to put the care of their patients above all else. He said they accepted bribes in the form of speaking fees in exchange for prescribing millions of dollars’ worth of a potent fentanyl-based spray that is 50 to 100 times more potent than morphine and used their patients as an “instrument for profit.” 

While all five are out on personal recognizance bail, the only one that has returned to work is Alexandru Burducea, who is required to provide weekly reports detailing the prescriptions he writes to federal investigators. The other four surrendered their licenses to prescribe controlled substances.

Insys released a statement,

“The company continues striving to take responsibility for inappropriate actions of some former employees and has invested significant resources over the last several years to establish an effective compliance program and build an organizational culture of high ethical standards. Intending to learn from past events, we also continue working with relevant authorities to resolve issue related to inappropriate actions taken by former employees.” 

This case is in addition to the federal case pending in Boston where seven former Insys executives and managers have pled not guilty to charges related to participating in a scheme to bribe doctors to prescribe Subsys and defraud insurers into paying for it.

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