Archive for the ‘Healthcare’ Category

PBMs – Goliaths of Healthcare Operating in the Shadows

Friday, July 7th, 2017

The Pharmacy Benefit Management (PBM) industry is the Goliath of healthcare. PBMs have a huge impact on prescription healthcare that is little understood outside of the pharmacy industry. According to a November 2016 report, PBMs in the United States have revenues of $423 billion, they experienced 11-16% growth between 2011 and 2016, and they employ a workforce of at least 30,000. Additionally, Congressional testimony revealed that the top PBMs nearly doubled their profits over the past five years. The breadth and depth of the role that PBMs play in the lifecycle of a prescription drug is unequaled in healthcare. PBMs touch, in one aspect or another, nearly every drug dispensed nationally.  But if you ask the average consumer who their particular PBM is, or even what a PBM does, few could answer those questions.

PBMs are middle men, “third-party administrators” that act as on behalf of private insurers to provide all of the services needed to manage a prescription benefit. PBMs provide drug plan design services, meaning that they assist insurers in designing and maintaining the formulary, which determines what medications are covered under a particular plan. PBMs also negotiate with drug manufacturers to obtain favorable drug prices and related manufacturer rebates. Once a drug program is implemented, PBMs are supposed to assist in controlling these drug costs. Through their mail order and retail pharmacy networks, PBMs determine the drug costs and dispensing fees paid by insurance companies and by beneficiaries through copays. PBMs also process and pay claims for virtually every prescription dispensed across the country every day. Companies that operate some of the largest PBMs (i.e., CVS Health and EnvisionRx), through related entities, also control huge swaths of the specialty, mail order, and retail pharmacy industry. These wholly-integrated PBMs control the entire prescription benefit process – from designing the drug programs to dispensing prescriptions.

Due to their historical involvement in commercial prescription benefit plans, PBMs play a central role in Medicare Part D, Medicaid, and other government-sponsored prescription drug programs. However, PBMs significantly impact both commercial and government-funded prescription programs, including Medicare Part D, Medicaid, prescription programs for state and federal employees, and healthcare benefits for our military, including Tricare.

Government agencies and private insurers are David to the PBM Goliaths. Identifying, quantifying, and controlling fraud, waste, and abuse in government-funded prescription drug programs, particularly as it relates to the PBM industry, is difficult at best. One of the greatest hurdles to prescription benefit oversight is the lack of transparency between the government agencies that fund drug benefits and PBMs that manage them.

Government agencies lack access to the PBM’s relationships with both drug manufacturers and their pharmacy networks, and significant related hidden income streams. One such income stream is related to the PBMs’ negotiations with drug manufactures to set drug prices paid by the PBM, as well as related volume-based rebates that are earned on specific drugs. PBMs share these rebates with drug benefit sponsors. A second income stream for PBMs results from the role PBMs play in setting drug costs and dispensing fees paid to the PBM’s network of retail, mail order and specialty pharmacies. When prescriptions are dispensed to beneficiaries, the PBM profits from the difference or “spread” between the price the PBM negotiates with drug manufactures and the price the PBM charges its network pharmacies.

The government also lacks access to the pharmacy claims data received by the PBM. It is unable to compare the pharmacy data to claims data that PBMs submit to insurance companies. In the Part D program, this same claims data is submitted to the Centers for Medicare and Medicaid Services, (“CMS”). This lack of transparency in PBM operations is an impediment to both identify and control pharmacy benefit overpayments, particularly in Medicare Part D.[1]

Although there is a recognized need for transparency between the government and the public, on one side, and the PBM industry on the other, these efforts have yet to bear fruit. For example, even before the Part D program was added to Medicare in 2006, the General Accounting Office (GAO) highlighted the need for transparency and fairness should the Medicare drug benefit be outsourced to private insurers and PBMs. Ten years later, in January of 2013, the Office of Inspector General (OIG) called for CMS to amend Part D regulations to provide its auditors with direct access to information from pharmacies and PBMs. During September of 2015 hearings before the House Judiciary Committee on the State of Competition in the Pharmacy Benefits Manager and Pharmacy Marketplaces, witnesses addressed the concentration in the PBM industry, the ownership relationships between PBMs and retail pharmacies, and the lack of transparency in PBM operations negatively impacts competition and inures to the detriment of both health insurance plans and the ultimate consumer. One witness highlighted the lack of transparency in both rebates earned by PBMs and in prices that pharmacies were paying PBMs for drugs. Representatives of the PBM industry argued that transparency with regard to drug prices would result in price fixing.

In March of 2017, Senator Ron Wyden (D-Oregon) introduced S-637, “Creating Transparency to Have Drug Rebates Unlocked (C-THRU) Act.” The bill is focused on just one aspect of PBM secrecy – the rebates paid by drug makers to PBMs. In response, the PBM industry has again argued that secrecy in rebate negotiations is essential to allow PBMs to obtain the best prices and to prevent manufacturers and pharmacies from colluding with competitors. Whether the C-THRU Act even makes it out of the Senate Finance Committee is yet to be determined.

The process to create legislation or regulations that require transparency in the PBM industry is a very long and uncertain one.  In the near term, only an industry insider can identify conduct that results in overpayments in Part D and other government-funded prescription programs. Meanwhile, PBMs continue to control the pharmacy industry, operating unchallenged and largely in secret, to create gigantic profits.

 

[1] See The American Consumer Institute’s “Pharmacy Benefit Managers: Market Power and Lack of Transparency.” http://www.theamericanconsumer.org/wp-content/uploads/2017/03/ACI-PBM-CG-Final.pdf

Georgia-based Hospital Group to Pay Over $513 Million to Resolve Civil and Criminal Allegations Related to Illegal Payments for Patient Referrals

Wednesday, October 19th, 2016

On Monday, the DOJ announced the resolution of criminal allegations and a False Claims Act (“FCA”) lawsuit a relating to a scheme to defraud the United States and obtain kickbacks in exchange for patient referrals.  A major U.S. hospital chain, Tenet Healthcare Corporation and two subsidiaries, Atlanta Medical Center, Inc. and North Fulton Medical Center, Inc., will pay over $513 million pursuant to a series of agreements, including a civil settlement agreement, non-prosecution agreement, and plea agreements:

FCA settlement:  Tenet Healthcare and related entities – described in the settlement as “the Tenet Entities – agreed to pay $368 million to the federal government and to Georgia and South Carolina to resolve claims brought by a Georgia whistleblower.  The FCA suit was filed in the Middle District of Georgia and claimed that Tenet Healthcare paid bribes and kickbacks to pre-natal clinics to unlawfully refer Medicare and Medicaid patients to its hospitals.  The whistleblower will receive $84 million under the agreement.  The agreement stated that the Tenet Entities denied any liability regarding the false claims allegations.

Non-prosecution agreement:  Tenet HealthSystem Medical Inc., the corporate parent of Tenet Healthcare, entered into a non-prosecution agreement (“NPA”) with DOJ based on similar allegations to those within the FCA case.  The NPA allows the two companies to avoid criminal prosecution in exchange for following the agreed-upon terms.  The criminal allegations at the heart of the NPA focused on an alleged conspiracy to defraud the United States and to violate the Anti-Kickback Statute, which bars illegal payments that induce patient referrals for services paid for by federal health care programs.  Under the NPA, Tenet HealthSystem and Tenet Healthcare will avoid criminal prosecution if they cooperate with the government’s prosecution and strengthen their internal controls, including their compliance and ethics programs.  The NPA is effective for three years, although it may be extended for an additional year if necessary.

Plea agreements:  Two subsidiaries of Tenet Healthcare, Atlantic Medical Center and North Fulton Medical Center, agreed to plead guilty to a criminal information for their role in the conspiracy, as referenced above, to defraud the United States and violate the Anti-Kickback Statute.  Under the plea agreements, the two healthcare will forfeit over $145 million to the United States, collectively representing the amount paid to the two entities by the federal Medicare and Georgia Medicaid programs for services paid to patients referred as part of the conspiracy.

Additional information, including the FCA settlement agreement, NPA, and criminal information can be found here.

$34.8 Million to be Paid by Respironics for False Claims Related to Sale of Sleep Apnea Masks

Thursday, March 24th, 2016

Respironics is to pay $34.8 million for alleged False Claims Act violations related to the sale of sleep masks designed to treat sleep apnea.  Allegedly Respironics, a Murrysville, PA based company, paid kickbacks in the form of free call center services to durable medical equipment (DME) companies that purchased the masks.  The DME companies; otherwise, would have had to pay a monthly fee based upon the number of patients who used the masks manufactured by a Respironics competitor.  The alleged conduct occurred between April 2012 and November 2015.  Approximately $34.14 million will be paid to the federal government and about $660,000 will be paid to various state governments based on their Medicaid program participation.

Dr. Gibran Ameer initially brought the lawsuit under the False Claims Act qui tam provisions.  Dr. Ameer had worked for different DME companies.  He will receive $5.38 million out of the federal government’s share of the settlement.  The Civil Division’s Commercial Litigation Branch, the U.S. Attorney’s office of the District of South Carolina, and HHS Office of Counsel to the Inspector General and Office of Investigations and the National Association of Medicaid Fraud Control Units all worked together to bring about the settlement in this lawsuit.

https://www.justice.gov/opa/pr/respironics-pay-348-million-allegedly-causing-false-claims-medicare-medicaid-and-tricare

HHS Announces Goal to Tie More Medicare Payments to Quality

Tuesday, March 10th, 2015

On January 26, 2015, the U.S. Department of Health and Human Services (HHS) announced an initiative to base more Medicare provider payments on the quality of care provided.  HHS has set goals for the use of alternative payment models in the next three years.

Medicare payments have traditionally been based on a fee-for-service where providers receive payment for each individual health care service provided.  Some feel this method encourages high volume care rather than high value or coordinated care.  Conversely, alternative payment models such as accountable care organizations (ACOs), primary care medical homes, or bundled payments for episodes of care endeavor to link provider payments to quality of care and encourage providers to be more cost-efficient.

In the announcement, HHS established goals both for alternative payment models and for tying payments to quality or value generally.  HHS’ goal is to 30 percent of fee-for-service Medicare payments to quality or value through alternative payment models by the end of 2016 and to tie 50 percent of fee-for-service payments to alternative payment models by the end of 2018.  Generally, the agency aims to tie 85 percent of all traditional Medicare payments to quality or value by 2016 and to tie 90 percent of all Medicare payments to quality or value through programs such as Hospital-Based Purchasing and Hospital Readiness Reduction Program.

Additionally, the agency is creating a Health Care Payment Learning and Action Network to expand the use of alternative payment models beyond Medicare.  Through this network HHS will work with private payers, employers, consumers, providers, states, state Medicaid programs and other partners.

The announcement came after a meeting with health care leaders including representatives from health insurance companies, CVS health, and organizations such as the AMA, American Hospital Association, and the National Partnership for Women and Families.

The AMA issued its own press release in support of the initiative.  “Patients benefit when physicians have the flexibility and resources to redesign care, and when payers provide new payment models that can support physician efforts to improve patient care and lower health care costs over the long-term” said AMA President Robert M. Wah.

Two current alternative payment models are the Medicare Shared Savings Program and the Bundled Payments for Care Improvement Initiative.  Under the Medicare Shared Savings Program, providers participate by joining an ACO.  ACOs are generally groups of health care providers that share financial incentives to improve the quality and efficiency of care provided to a population of patients.  With Bundled Payments for Care Improvement Initiative, organizations must meet financial and performance goals for episodes of care.

The AMA notes that ACOs incur costs for care management, consultation between different physicians, and other services not reimbursed by Medicare fee-for-service payments.  In order to remove these financial barriers, the AMA recommends that CMS provide monthly care management payments; provide partial capitation payments; and establish low-cost or federally guaranteed loan programs.

Physicians considering involvement with and ACO or any other alternative payment model, should consider the investment required to join and the overall financial and organizational risk of the arrangement.

2014 Whistleblower Recoveries

Tuesday, March 10th, 2015

In 2014, the total whistleblower recoveries amounted to just shy of $3 billion, $2.2 billion (73 percent) of which were in the health care arena.

When the Department of Justice announces a False Claims Act recovery, they put the total recovery into the headline (the total amount that the fraudster is paying as a result of the FCA action), this includes state Medicaid recoveries and Criminal penalties triggered by FCA investigations.  However, when the DoJ announces their recoveries at the end of the year they leave the state and criminal recoveries off the table.

An example may be seen in the Johnson & Johnson matter announced in November 2013.  The Department of Justice initial press release states that $2.2 billion was recovered in this matter, but nearly $500 million of the $2.2 billion was a criminal penalty and over $500 million went to states.  Half of the total recovered is actually counted in the federal FCA statistics.

Ultimately, there is no evidence that the total fraud recoveries in the health care arena are going down.  FCA actions were very high in 2014, almost entirely due to non-qui tam banking cased that are listed in the non-HHD and non-DOD part of the report.  The total FCA number jumped from $422 million (FY 2013) to $3.3 billion (FY 2014), of which $2.6 billion was brought in from non-qui tam cases.

US Settles False Claims Act Allegations Against ev3 for $1.25 Million

Monday, February 9th, 2015

The Justice Department announced that it has reached a $1.25 million settlement with ev3, a medical device manufacturer base in in Minnesota.   Ev3 formerly was known as Fox Hollow Technologies. A lawsuit filed under the whistleblower provision of the False Claims Act alleges that between 2006-2007, Fox Hollow induced 12 hospitals in 9 states to admit patients who were undergoing elective atherectomy procedures.   This minimally invasive procedure removes atherosclerosis and opens up coronary arteries, thereby increasing blood flow.   It is usually performed on an outpatient basis.  At that time, Fox Hollow sold the Silver Hawk Plaque Excision System, a device that was used in these procedures.  In order to increase hospital purchases of this device, Fox Hollow convinced the 12 hospitals to admit the atherectomy patients.  The hospitals subsequently submitted claims for unnecessary admissions and received higher reimbursements from Medicare for procedures that should have been performed in an outpatient facility. For more information, please click here.

Prescriptions for Controlled Substances to Medicare Patients is on the Rise

Tuesday, January 6th, 2015

Even as the abuse of prescription drugs has escalated and the national crackdown on it has occurred, new data suggests that doctors are prescribing even larger numbers of prescriptions for the most potent controlled substances to Medicare patients.

And, along with the increase in the number of prescriptions written, physicians are under increased scrutiny, as well as facing disciplinary action. Twelve of Medicare’s top 20 prescribers of Schedule 2 drugs (those that include powerful narcotic painkillers and stimulants with the highest potential for abuse and dependence) have faced disciplinary actions by their state medical boards or criminal charges related to their medical practices.

The most recent year for which data is available, 2012, Medicare covered nearly 27 million prescriptions for Schedule 2 controlled substances. Within the past year, Medicare has started to use prescribing data to identify potentially problematic doctors, as have some state medical boards as well. Beginning in mid-2015, Medicare will have the authority to kick doctors out of the program if they prescribe in abusive ways.

$6 Million Settlement in Bone Growth Stimulators False Claims Act Suit

Tuesday, November 4th, 2014

In another win for the HEAT (Health Care Fraud Prevention and Enforcement Action Team) initiative, EBI, LLC, a medical device company in Parsippany, New Jersey, doing business as Biomet Spine and Bone Healing Technologies and Biomet, Inc., will pay $6 million to resolve allegations of violations of the federal Anti-Kickback Statute. Yu Yue, a former product manager for EBI, kicked off the investigation when she filed a qui tam suit in federal court in New Jersey. Yue’s share of the $6 million recovery has not yet been determined. The United States alleges that EBI paid staff at doctor’s offices through personal service agreements to influence doctors to order its bone growth simulator, which is used to repair slow to heal fractures. The United States determined the personal services agreements with physicians’ staff violated the Anti-Kickback Act, resulting in false billing to federal healthcare programs. Additionally, the $6 million settlement resolves allegations that EBI received federal reimbursement for bone growth simulators that had been refurbished.

The investigation was coordinated by the Commercial Litigation Branch of the Civil Division of the Department of Justice, the U.S. Attorney’s Office for the District of Massachusetts, HHS-OIG, the U.S. Postal Service Office of Inspector General, the Defense Criminal Investigative Service, the U.S. Department of Veterans Affairs, Office of the Inspector General and the U.S. Food and Drug Administration, Office of Criminal Investigation.

For more information, please click here.

Shire Pharmaceuticals LLC agrees to pay $56.5 million to resolve false claims act allegations regarding drug promotion practices

Monday, September 29th, 2014

Shire Pharmaceuticals, LLC, a pharmaceuticals company based in Pennsylvania, recently signed a settlement agreement with the Department of Justice to resolve False Claims Act allegations related to its promotion practices of several drugs.  Shire, which both manufactures and sells pharmaceuticals used in treating attention deficit hyperactivity disorder (ADHD), was facing allegations that it violated the False Claims Act beginning in 2004.  The allegation part of a series of lawsuits brought by a former Shire executive and three former Shire sales representatives.  As part of the settlement, one of the whistleblowers will receive $5.9 million.

Under the settlement agreement, Shire will pay $56.5 million of which the federal government will receive $35,713,965 and state Medicaid programs will receive $20,786,034.  Shire also executed a separate agreement with HHS – termed a “corporate integrity agreement” – designed to address the company’s future marketing efforts.

The lawsuits alleged misconduct related to Shire’s marketing and promotion practices, including that, from 2004 to 2007, Shire marketed Adderall XR, an ADHD medication, on unsupported claims that it would prevent poor academic performance, loss of employment, criminal behavior, traffic accidents, and sexually transmitted diseases.  Shire also claimed that Adderall XR could be used in the treatment of conduct disorder even though it was not approved by the FDA for such treatment.

Shire had also claimed that another of its ADHD medications, Vyvanse, was less susceptible to drug abuse than similar non-Shire products.  In fact, one Shire medical science liaison allegedly told a state formulary board that Vyvanse provides less abuse liability than “every other long-acting release mechanism” on the market.  However is was the government’s contention that no Shire study had actually concluded that Vyvanse was not abusable; to the contrary, the Vyvanse label included in FDA-mandated warning of its potential for misuse and abuse.  Shire also claimed without support that Vyvanse would prevent car accidents, divorce, arrest, and unemployment.

The full text of the DOJ press release can be found here.

Eighth Circuit takes Step Towards a Less Stringent Standard for Pleading Fraud Under the False Claims Act

Thursday, September 18th, 2014

The Eighth Circuit had previously stated that one who files a lawsuit under the False Claims Act must provide examples of the allegedly fraudulent conduct. Last week, the court seemed to back away from this position in United States ex. rel. Thayer v. Planned Parenthood of the Heartland, No. 13-1654 (8th Cir. August 24, 2014) when it held that such specificity is not required for every complaint brought under the FCA.  Rather, examples do not have to be given if the plaintiff is able to provide reliable indicia from which one could infer that false claims were actually submitted to the government.

The plaintiff in Thayer was the manager of two Planned Parenthood clinics and oversaw the defendant’s billing and claims systems.  The court held that given this position, there was a sufficient indicia of reliability to allow the plaintiff to proceed with allegations that the defendant violated the FCA by filing claims for: 1) unnecessary quantities of birth control pills; 2) birth control pills dispensed without examinations or without or prior to a physician’s order; 3) abortion-related services and 4) the full amount of services for which payment had already been provided.  However, the contention that Planned Parenthood violated the FCA by instructing patients who experienced abortion-related complications to give false information to medical professionals at other hospitals, causing those professionals to unknowingly file claims for services performed in connection with abortions was dismissed because there was no indication in the complaint that the plaintiff had access to the billing systems used by these other hospitals or that she know about their billing practices.  As a result, the plaintiff was only able to speculate that false claims were submitted by these other hospitals and this did not provide a factual basis from which the court could infer that this actually occurred.

It remains to be seen how courts in the Eighth Circuit will apply Thayer.  However, with this decision, the majority of the Circuit courts that have addressed this issue have held that a FCA complaint does not necessarily have to provide examples of the false claims which were submitted to the government in order to survive a motion to dismiss.