The newest chapter in the legal drama involving Johnson & Johnson, Inc. (“J&J”) and its subsidiary Janssen Pharmaceutical, Inc. (and a subsidiary previously known as Ortho-McNeil-Janssen Pharmaceuticals, Inc.) (“Janssen”) was written late last month. Specifically at issue was whether or not the alleged off-label marketing of its blockbuster antipsychotic Risperdal violated state anti-fraud and consumer protection statutes. In late February, the South Carolina Supreme Court upheld a jury verdict finding for the state under the South Carolina Unfair Trade Practices Act (“SCUTPA”), but reduced the damages award from $327 million to $136 million. In a series of cases at the state level involving the marketing of Risperdal, this is the first time that a jury verdict against J&J/Janssen has been upheld by a state supreme court. Cases in Pennsylvania, Arkansas, West Virginia, and Louisiana have ended with verdicts for the pharmaceutical company.
I’ve been following these cases for years and have undertaken further analysis on the topic here. Of course, news headlines have been dominated by the startling penalty amounts states had sought—and, in some states, had been initially imposed. Most noteworthy, an Arkansas jury imposed a $1.2 billion fine before the Arkansas Supreme Court reversed the finding; in Louisiana, the fine was $330 million before its state supreme court did the same. Indeed, these litigated claims are in addition to settled claims—the largest of which were entered into by J&J with the federal government and various states for $2.2 billion in 2013.
Yesterday, the Supreme Court heard oral arguments in King v. Burwell, and the Justices seemed split on the central issue of whether the Affordable Care Act (ACA) permits health insurance subsidies to flow to citizens of states that have chosen not to establish their own insurance exchanges. Trying to predict the outcome of a case like this is notoriously difficult, but I do want to highlight briefly an important difference between the Court three years ago, when it decided NFIB v. Sebelius, and the Court yesterday.
In NFIB, seven Justices declared that the ACA’s Medicaid expansion was unconstitutionally coercive, concluding that the Secretary of Health and Human Services could not condition existing Medicaid funds on a state’s failure to expand Medicaid. However, the Secretary was instead permitted to offer additional funds to states choosing to expand Medicaid, effectively making the expansion optional. The Court at the time understood that this outcome could result in a national patchwork, in which certain states would adopt the Medicaid expansion and others would not. Continue reading →
Liran Einav is Professor in the Department of Economics at Stanford University. His current research focuses on empirical work in insurance and credit markets. Other interests include industrial organization, micro-economic theory, and applied econometrics.
Whereas “allocation of scarce resources” is a buzz phrase that inspires a great deal of distress and desire for good ethical argument, “waste avoidance” strikes us as a relatively uncontroversial method for containing health care spending. Perhaps this is because rationing implies a trade-off between two individuals, each of whom have the potential to benefit from a possible intervention, whereas waste avoidance, on the other hand, implies a trade-off between two services – one of which has the capacity to benefit an individual, and the other which does not. Surely the latter trade-off is preferable, and perhaps even imperative, to make before we take up the former. This week U.S. Secretary of Health and Human Services Sylvia Burwell signaled a commitment to making the latter trade-off in her announcement on a complex area of health care financing: Medicare payment & payment reform. Medicare payment is one of the few levers that the federal government has relatively direct control over when it comes to controlling health care spending, and Burwell’s announcement was a welcome change in the policy discourse from the oft-lamented “doc fix”/SGR debacle (a fix for which was just bypassed again).
In her announcement and this perspectives piece in NEJM, Burwell set goals to (1) move 50% of Medicare payments to alternative payment models such as Alternative Care Organizations (ACOs) and bundled payment arrangements by 2018, and (2) tie 90% of all Medicare payments made under the traditional fee-for-service model to quality or value, through programs such as the Hospital Value Based Purchasing and the Hospital Readmissions Reduction Programs, by 2018. Notably, these are the first explicit goals for transitioning to alternative payment models and value-based payments that have been set in the history of the Medicare program – though it remains to be seen how these goals will be pursued.
Thomas L. Greaney is Chester A. Myers Professor of Law and Co-Director of the Center for Health Law Studies at St. Louis University School of Law. Greaney joined the faculty at SLU LAW in 1987 after completing two fellowships and a visiting professorship at Yale Law School. He became Chester A. Myers Professor of Law in 2004 and was named Health Law Teacher of the Year by the American Society of Law, Medicine and Ethics in 2007. His academic writing has been recognized six times by the Thompson Coburn Award for SLU Faculty scholarship.
Greaney’s extensive body of scholarly writing on health care and antitrust laws encompasses articles published in some of the country’s most prestigious legal and health policy journals. He has authored or co-authored several books, including the leading health care casebook, Health Law. A frequent speaker in academia and the media, Greaney has also offered expert testimony at hearings sponsored by the Federal Trade Commission on the issues of applying competition law and policy to health care, and submitted invited testimony to the U.S. Senate on competition policy and health care reform.
Last month, NPR and ProPublica reported a story that would be shocking if it weren’t sadly familiar about how nonprofit hospitals like Heartland Regional Medical Center in Missouri are suing their patients and garnishing their wages for unpaid bills. A few days later, on December 31, 2014, the IRS issued final rules for tax-exempt hospitals that ostensibly will make these practices more difficult, if not illegal.
The IRS rules implement the requirements of Section 501(r) of the Internal Revenue Code added by the Affordable Care Act in 2010. Despite characterizations that these are “sweeping new rules” that protect financially vulnerable patients from excessive charges and aggressive debt collection by nonprofit hospitals, the rules provide fairly thin and spotty levels of protection for patients. Continue reading →
In announcing the federal government’s approval of Indiana’s Medicaid expansion, Governor Mike Pence invoked common sense in defending his insistence that beneficiaries shoulder a share of their health care premiums. According to Pence, “It’s just common sense that when people take greater ownership of their health care, they make better choices.”
But relying on common sense is not a good way to make health policy. Common sense leads people to incorrectly believe that they are more likely to catch a cold by going out in cold weather or to take megadoses of vitamins that provide no additional health benefit and can be toxic. Common sense also leads physicians down the wrong path. Because lowering blood sugar has been good for the health of diabetics, medical experts recommended tight control of blood sugar levels. But that resulted in an increased risk of death for many patients. Continue reading →
Last week, the First Circuit Court of Appeals upheld the ACA’s maintenance-of-effort provision against a constitutional challenge brought by the Maine Department of Health and Human Services. The court’s opinion has received relatively little media attention, but it should be of interest to all in the health policy space. Its post-NFIB v. SebeliusSpending Clause analysis will be relevant to scholars who are interested in King v. Burwell, challenging the grant of subsidies on health insurance exchanges run by the federal government. Its procedural posture will fascinate those who are interested in plural executive systems. And its fulsome discussion of the Medicaid program and its history will be of broader interest to health policy scholars.
States participating in Medicaid must agree to cover certain groups of people up to certain income thresholds, but states may choose to expand these groups in various ways. Relevant to this case, most states have increased the income thresholds for covering children or pregnant women through the SCHIP program (sometimes quite substantially), and some have extended SCHIP to include low-income 19- and 20-year-olds. Maine had done both, providing coverage to 19- and 20-year-olds since 1991. The ACA subsequently included a maintenance-of-effort provision (42 U.S.C. § 1396a(gg)), requiring states participating in Medicaid to maintain their eligibility standards through 2019. As such, in 2012 HHS denied Maine’s request to stop providing coverage to 19- and 20-year-olds.
Maine’s Department of Health and Human Services sought review in federal court. Maine’s executive branch was not united in this choice: the Attorney General declined to represent the state and even intervened on the side of HHS Secretary Burwell. This mirrors a phenomenon that was often observed in the context of the Medicaid expansion, in which several states whose Attorneys General joined the legal fight against the expansion in NFIB subsequently expanded anyway, as that separate power was exercised by Governors and legislatures. Continue reading →
The 50th Anniversary of Medicare and Medicaid offers an opportunity to reflect on how U.S. social policy has conceived of the problem of long-term care.
Social insurance programs aim to create greater security—typically financial security—for American families (See Note 1). Programs for long-term care, however, have had mixed results. The most recent attempt at reform, which Ted Kennedy ushered through as a part of the Patient Protection and Affordable Care Act (ACA), called the CLASS Act, was actuarially unsound and later repealed. Medicare and especially Medicaid, the two primary government programs to address long-term care needs, are criticized for failing to meet the needs of people with a disability or illness, who need long-term services or supports. These critiques are valid.
Even more troublesome, however, long-term care policy, especially in its most recent evolution toward home-based care, has intensified a second type of insecurity for Americans. Continue reading →
As the backlog of Medicare appeals indicates, Medicare claimants are seeking many more hearings than we can currently provide. The mismatch makes a fundamental question particularly acute: Why do we hold hearings to review Medicare coverage decisions in the first place?
It’s a question worth asking. The Affordable Care Act mandated that denials of private health insurance coverage be reviewed by external, contract medical specialists, without a hearing. (See here.) If we are comfortable with private, sometimes profit-motivated coverage decisions obtaining external review review by someone other than an Administrative Law Judge (ALJ), without a hearing, why do we feel differently about Medicare coverage decisions? Continue reading →
One option for dealing with the backlog of Medicare claims waiting for a hearing is to settle them. That’s up to the Centers for Medicare and Medicaid Services, not the Office of Medicare Hearings and Appeals that actually oversees the process, so it’s not an administrative fix that the Office of Medicare Hearings and Appeals could actually implement alone. But it is worth considering, and the CMS has shown an openness to it by going along with the proposal for facilitated settlement and by offering to settle a big chunk of pending inpatient hospital admission disputes for 68 cents on the dollar. (See Nick Bagley’s post at the incidental economist.)
These settlement efforts have received some high-level scrutiny, however. Last month Representative Brady, Chair of the House Ways and Means Committee, Subcommittee on Health, sent the HHS a strongly-worded letter after the inpatient hospital settlement was announced, arguing that the settlement may exceed CMS’s statutory authority, among other problems. (See the letter linked here (“I question whether HHS has statutory authority for this settlement process.”)
Next week (on October 29) Medicare’s Office of Medicare Hearings and Appeals (OMHA) is holding another appellant forum to discuss the ongoing backlog of Medicare claims waiting for a hearing. In one sense, a lot has happened since the last forum in February (I covered that here): OMHA announced pilot projects to try statistical sampling and facilitated settlement in some cases (see here and here); CMS (effectively the “defendant” for settlement purposes in these appeals; functionally independent from OMHA) announced a willingness to settle a subset of pending inpatient hospital billing claims for 68 cents on the dollar (see Nick Bagley’s post at the incidental economist); the backlog came up at a couple congressional hearings; and two lawsuits were filed to challenge it, one by providers (see here) and another by beneficiaries (see here).
In another sense, not that much has happened. Unless Thursday’s forum brings big news—and I know that OMHA and CMS have been working hard on reforms so perhaps it will—there is still a big backlog of Medicare appeals, there is still not a resource fix in sight, and the influx of Medicare appeals seems to still far outstrip OMHA’s capacity to hold hearings.
In advance of the forum, I’m planning a series of posts offering my thoughts, such as they are, on where we are and where we are going. I invite anyone who disagrees or thinks I’ve gotten something wrong to post their own views in the comments. Or you can email me and I will look into sharing your thoughts as an independent posting. You can get all my posts on this subject, including new ones as they come in, by clicking here.
A caveat: I’m approaching these as blog posts—trying to get my educated thoughts based on everything I have read out in a timely way—but I might be missing something. If the upcoming forum or comments reveal that I am–I won’t be there in person but will be watching remotely–I will either post a general update or go add particular updates in the text of my posts as necessary.
And a disclosure: I’ve said this before but want to do it once more again before pontificating—I worked in government until a little over a year ago, so my views on these matters may be biased. (And of course I will not discuss anything I worked on.) But I’ve done my best to be objective.
For all those who have been following the ongoing fight between pharmaceutical companies and HHS over the 340B Program’s coverage of orphan drugs (I know you’re out there), last week PhRMA filed a new complaint challenging HRSA’s interpretive rule on the subject under the APA. For all those who are not (but should be) paying attention to this battle, here’s what’s happening.
The 340B Program allows certain health care organizations (such as disproportionate share hospitals) to purchase drugs for their patients at significant discounts. The Affordable Care Act expanded the number and kind of organizations that can participate in the 340B Program, but it also added an exception stating that most of the covered organizations could not obtain 340B discounts for orphan drugs — or, as the statute puts it, for “a drug designated … for a rare disease or condition.” 42 U.S.C. § 256b(e).
The battle between PhRMA and HHS is over is whether this statutory exclusion applies to orphan drugs or orphan indications. There are many drugs which have received an orphan designation for certain indications but are also FDA-approved and prescribed more generally for non-orphan indications. In such a case, can a 340B facility purchase the drug at a discount if it is being prescribed for a non-orphan indication? Continue reading →
For all those who are interested in issues of global health, access to medicines, and drug pricing, yesterday Gilead formally announced its access program for enabling many developing countries to purchase its new Hepatitis C drug, Sovaldi, at low prices. This announcement is particularly noteworthy because Sovaldi represents a significant improvement over the current standard of care for Hepatitis C, as it can cure a much greater percentage of sufferers than could standard therapies, and it does so with many fewer negative side effects. Gilead’s partnership-based program will permit seven Indian generic drug companies to produce and sell the drug in 91 developing countries. The discounts are significant: although Gilead formally charges $1,000 a pill (or $84,000 for a course of treatment) for Sovaldi in the United States, it will charge just 1% of that, or $10 a pill, in India (the total cost there is estimated at $1,800, given the difference in strain prevalence).
The global health community has reacted to the announcement with mixed reviews. The 91 countries in the program include more than half of the world’s Hepatitis C patients. But tens of millions of other patients in large nations like China, Brazil, Mexico, and Thailand are left out of the program. Going forward, some of the excluded nations may seek to issue compulsory licenses in an effort to expand access to Sovaldi.
Gilead has also drawn fire in the United States for Sovaldi’s $84,000 sticker price (which, for various reasons, very few if any will actually pay), to the degree that members of both houses of Congress haveasked Gilead to justify the price of the drug. Those opposing Sovaldi’s price have generally not come out publicly against the high price of many orphan drugs, which can cost $250,000-$350,000 per year. But because Hepatitis C afflicts about 2.7 million people in the US, as compared to the few thousand people with one of the relevant orphan diseases, its impact on insurers (both public and private) is likely to be much larger (as this very blog has previously noted). Continue reading →
I have blogged a few times about the current backlog in Medicare’s coverage appeals process, including observations about a lawsuit by providers challenging the backlog in federal court in the District of Columbia. (See here.) Yesterday a new lawsuit was filed, this one a class action lawsuit by beneficiaries represented by the Center for Medicare Advocacy. (See their press release here.) The case is Lessler et al. v. Burwell, 3:14-CV-1230 (D.Conn.). I am blocked from accessing the complaint on PACER but am working on getting a copy.
Without access to the complaint it is dangerous to speculate, but I wonder whether this suit may be subject to many of the exhaustion-based arguments that I thought could lead to dismissal of the provider suit. But the Center for Medicare Advocacy has had success pursuing class action suits on behalf of Medicare beneficiaries before, most notably the Jimmo case that led to a significant change in the standard of qualification for skilled nursing care. (See here.)
One thing about this suit that may only be interesting to administrative law buffs is the choice of forum. This case was filed in Connecticut, not the District of Columbia (where the providers filed their suit). As I have written about elsewhere, there are pros and cons to channeling administrative law cases through DC, among them DC’s expertise in exhaustion and other administrative law issues.
I can’t say whether the Center for Medicare Advocacy chose to file in Connecticut rather than the District solely because that is their home forum, or whether they thought they’d get a more sympathetic judge/more plaintiff-friendly exhaustion doctrine. And the same goes for the providers’ choice to file in the District rather than some other state. I can say from experience, though, that the choice can really matter; DC judges’ familiarity with administrative law issues just makes them perceive these cases differently from the start. So it would not surprise me at all if there are considerations beyond mere location at play here. (Not that there’s anything wrong with that!)
Much attention has been paid recently to the contradicting decisions issued on the Halbig and King cases, which challenged the Obamacare subsidies offered to individuals purchasing insurance on federal exchanges. In a piece for Politico Magazine, Abbe R. Gluck finds a weakness in the Halbig plaintiffs’ arguments, in their own words. As Gluck writes:
What’s less known, however, is that in the 2012 constitutional case, these same challengers filed briefs describing Obamacare to the court in precisely the way they now say the statute cannot possibly be read. Namely, they assumed that the subsidies were available on the federal exchanges and went so far as to argue that the entire statute could not function as written without the subsidies. That’s a far cry from their argument now that the statute makes crystal clear that Congress intended to deny subsidies on the federal exchanges.
I am not a fan of the “gotcha” flavor that some aspects of this case have taken on, but the challengers’ 2012 statements are relevant as a legal matter because what the government has to prove to win—as a matter of black-letter law under the Chevron doctrine—is that the statute is ambiguous. (Chevron says that federal courts defer to the relevant agency’s reading of the statute when a federal statute is unclear—here, that agency is the IRS.)
The challengers have spent more than a year arguing that no reasonable reader of text could construe the statute in any way other than denying federal subsidies to insurance purchasers on exchanges operated by the federal government. But what about their statements from 2012—statements then echoed by Justices Scalia, Kennedy, Thomas and Alito in their joint dissent to the Supreme Court’s ruling in the constituitional challenge, NFIB v. Sebelius?
You can read more, including the relevant passages from the NFIB v. Sebelius briefs, here.
Few people know that new prescription drugs have a 1 in 5 chance of causing serious reactions after they have been approved. That is why expert physicians recommend not taking new drugs for at least five years unless patients have first tried better-established options and need to. Faster reviews advocated by the industry-funded public regulators increase the risk of serious harm to 1 in 3. Yet most drugs they approve are found to have few offsetting clinical advantages over existing ones.
Systematic reviews of hospital charts by expert teams have found that even properly prescribed drugs (aside from misprescribing, overdosing, or self-prescribing) cause about 1.9 million hospitalizations a year. Another 840,000 hospitalized patients given drugs have serious adverse reactions for a total of 2.74 million. Further, the expert teams attributed as many deaths to the drugs as people who die from stroke. A policy review done at the Edmond J. Safra Center for Ethics at Harvard University concluded that prescription drugs are tied with stroke as the 4th leading cause of death in the United States. The European Commission estimates that adverse reactions from prescription drugs cause 200,000 deaths; so together, about 328,000 patients in the US and Europe die from prescription drugs each year. The FDA does not acknowledge these facts and instead gathers a small fraction of the cases.
Perhaps this is “the price of progress”? For example, about 170 million Americans take prescription drugs, and many benefit from them. For some, drugs keep them alive. If we suppose they all benefit, then 2.7 million people have a severe reactions, it’s only about 1.5 percent – the price of progress?
However, independent reviews over the past 35 years have found that only 11-15 percent of newly approved drugs have significant clinical advantages over existing, better-known drugs. While these contribute to the large medicine chest of effective drugs developed over the decades, the 85-89 percent with little or no clinical advantage flood the market. Of the additional $70 billion spent on drugs since 2000 in the U.S. (and another $70 billion abroad), about four-fifths has been spent on purchasing these minor new variations rather than on the really innovative drugs.
In a recent decade, independent reviewers concluded that only 8 percent of 946 new products were clinically superior, down from 11-15 percent in previous decades. (See Figure) Only 2 were breakthroughs and another 13 represented a real therapeutic advance.
After last week’s foray into patents and pharmaceutical policy, which is perhaps the most technical and specialized area of pharmaceutical policy, I will return to the never-ending story of pharmaceutical prices and the controversy over Sovaldi, Gilead’s break-through Hepatitis C drug. Sovaldi has a “sticker price” of $84,000 for a 12-week course of treatment, at the end of which 90% or more of patients would be expected to be cured. Since Sovaldi is a pill that is given once a day, the 12-weeks of treatment means that there are 84 daily doses. The math is easy, even if the price, unlike the pill, is hard to swallow–$1,000 per pill. The drug has been a huge financial success for Gilead, which reported $2.274 billion in sales in just the first quarter of 2014. However, the backlash has been equally huge. In a rare display of bipartisanship in Washington, Senator Ron Wyden (D.-Ore), the Chair of the Senate Finance Committee and Senator Chuck Grassley (R.-Iowa), the Ranking Member of the Finance Committee, sent a demand for information concerning the development costs of Sovaldi and Gilead’s pricing decision. However, even more than the investigation by two senior senators, the impetus for today’s post came from the blog RxObserver, which featured a post entitled Sovaldi: A Poster Child for Predatory Pricing [sic]. Before discussing the epithet “predatory pricing,” the perspective of RxObserver requires a bit of explanation. RxObserver is a site that primarily provides the views of pharmaceutical benefit managers (PBMs), or as the blog itself states its purpose: “the Clearinghouse of the Future for Pharmacy Benefits.” It is, in general, a very high-quality blog, with an editorial staff composed primarily of well-recognized academic and government experts in health care policy. I regularly read it and find it useful, although I was taken aback by that “predatory” epithet. Continue reading →
Several months ago, I promised to post my thoughts on the viability of the American Hospital Association’s threatened lawsuit against the Secretary of Health and Human Services challenging the growing backlog of coverage appeals. (See my post here). That issue has become timely, because the AHA and several providers filed suit in May in the District of Columbia, and a few days ago filed a motion for summary judgment. (See here). There has been some coverage of the suit. (See here and here.) In short, their argument is that the statute says that a hearing must be held in 90 days and Medicare officials admit that the plaintiffs will not get a hearing for years, so therefore the court should order “mandamus,” forcing compliance with the 90 day deadline.
When I was in practice before moving to academia, I represented the Secretary in cases like this, so keep in mind my view might be biased. But the government’s response to the complaint is due (by my calculation) Monday, July 28, so I wanted to offer my quick reactions about the case and what sort of response we might hear from the government. I’ve just read over the AHA’s motion for summary judgment and I think that in a case like this, with an admitted violation of a statutory requirement, you have to start with the presumption that things could go bad for the government. But with that said, I don’t think that the government’s case is as gloomy as it might at first appear, so this could be an interesting case to watch going forward.
As mentioned in co-blogger Matthew Lawrence‘s prior posts (here) and (here), Medicare’s Departmental Appeals Board (DAB) recently vacated a decades-old National Coverage Determination (NCD) precluding coverage for sex change therapy. That opens the door for Medicare coverage for sex change therapy, but does not guarantee coverage.
In this second blog of a two-part post, we will discuss how we got here: the somewhat unique process taken by the Centers for Medicare & Medicare Services (CMS) to invalidate its old coverage decision.
The decision has a somewhat odd procedural history. On the morning of March 29, 2013, the CMS announced that it was reconsidering the NCD through the formal process for doing so, and sought public comment on what it should do. (See enthusiastic coverage here.) The statutory, public process for reconsideration of an NCD includes the opportunity for comment and so on, analogous to notice and comment rulemaking. And the ultimate decision is subject to judicial review. (See here for more on the NCD process.) The NCD reconsideration process could have not only vacated the old standard, but offered specific standards to govern coverage across claimants (and thereby avoided some of the limbo discussed in our last post).
But on the night of March 29, 2013, the CMS rescinded its call for public comment, saying that it would instead allow a “just filed” appeal challenging the NCD before the DAB to proceed. (See here.) The DAB process is more adversarial and pits a single beneficiary challenging CMS policy in his or her case against the CMS. (Although there are opportunities for amici to participate. In this case, six amici participated, and all of them argued that the ban was unlawful.) The CMS went on to decline to defend the policy, which made the ultimate DAB decision vacating the (undefended) policy unsurprising.
We can’t say why the CMS chose to rescind the reconsideration process rather than push for the individual appeal before the DAB to be held in abeyance pending the outcome of the reconsideration. (In federal court, the doctrine of “ripeness” would have made the pendency of the NCD reconsideration grounds for dismissal of the individual appeal.) And for transgender persons seeking coverage, the process by which their cause was furthered is surely of little moment. But we can’t help but note that, for better or worse, proceeding through the DAB rather than the formal NCD reconsideration process meant less public attention on the proceeding, and less opportunity for comment by interested groups.