Federal Regulations Aim to Further Reduce Pharmaceutical Drug Prices, CMS Releases Outpatient Prospective Payment System and Ambulatory Surgical Center Final Rule, New Measures Taken to Combat COVID 19 During the Upcoming Winter Months, and More

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New Pharmacy Rules and Regulations Aimed to Reduce Pricing

The United States Department of Health and Human Services (“HHS”) and the Centers for Medicare & Medicaid Services (“CMS”) recently issued a series of proposed and final rules aimed at impacting pharmaceutical drug prices and availability.  Specifically, HHS and CMS jointly issued an interim final rule, effective November 27, 2020, that implements the Most Favored Nation Model (the “Model”).   The Model aims to lower prescription drug costs by paying no more for high‑cost Medicare Part B drugs and biologicals than the lowest price that drug manufacturers receive in other countries.  Additionally, HHS issued a final rule, effective January 21, 2021, that creates protections under the federal Anti‑Kickback Statute safe harbor rules for point‑of‑sale reductions in prices for prescription pharmaceutical products.  The final rule also eliminates the safe harbor protection for reduction in prices related to the sale or purchase of prescription pharmaceutical products from manufacturers to plan sponsors under Part D, distinguishing between lawful upfront discounts and unlawful after‑sale rebates. 

Also, HHS and CMS jointly issued a proposed rule that introduces a series of changes to the Exchanges under the Affordable Care Act.  One such change was to the medical loss ratio (“MLR”) program.  The rule proposes to define the prescription drug rebates and other price concessions that insurers must deduct from incurred claims for MLR reporting and rebate calculation purposes beginning with the 2022 MLR reporting year. The definitions would fill a gap in the recently amended MLR rules, which require insurers to deduct these items from incurred claims when they are received and retained by the insurer or a pharmacy benefit manager (“PBM”) or other entity providing PBM services to the insurer.

Finally, the FDA announced that it is ending the Unapproved Drugs Initiative, which was originally created in 2006 to reduce the number of drugs on the market that have not successfully completed the FDA approval process.  Ending the initiative is expected to reduce drug costs and decrease the risk of drug shortages.

CMS Finalizes Outpatient Prospective Payment System and Ambulatory Surgical Center Final Rule

CMS has released its Outpatient Prospective Payment System (“OPPS”) and Ambulatory Surgical Center (“ASC”) final rule with comment period.  The following items are some of the major changes of the final rule.

Under the final rule, CMS will begin eliminating the Inpatient Only (“IPO”) list, which consists of 1,700 procedures that Medicare will only pay for when performed in a hospital inpatient setting.  Starting with approximately 300 primarily musculoskeletal‑related services, the IPO list will be completely phased out by 2024.  This does not mean that these procedures can be performed in ambulatory surgery centers (“ASC”), but it is expected that CMS will move some of these procedures to the ASC covered procedures list (“CPL”) in the future.

Following the D.C. Circuit Court of Appeals’ July 31, 2020 decision upholding Medicare payment cuts to certain hospitals participating in the 340B drug pricing program, CMS will continue its current policy of paying for 340B-acquired drugs at Average Sales Price (“ASP”) minus 22.5%.

The final rules increase OPPS and ASC payment rates by 2.4 percent for 2021.  CMS is also adding eleven procedures to the ASC CPL under CMS’s standard review process.  Moreover, CMS has revised the criteria it uses to add surgical procedures to the ASC CPL and, under the revised criteria, will be adding 267 surgical procedures to the list.  The updated list will be effective January 1, 2021.

With respect to physician‑owned hospitals, the final rule seeks to ease some of the expansion limits.  Under the Affordable Care Act, a physician‑owned hospital that increases the number of operating rooms, procedure rooms, and beds cannot qualify for the rural provider or whole hospital exceptions under the physician self‑referral law (the “Stark Law”), unless CMS grants an exception.  The final rule eliminates certain non‑mandated provisions in the exception process applicable to hospitals that qualify as “high Medicaid facilities.”  In particular, CMS removed: (1) the cap on the number of additional operating rooms, procedure rooms, and beds that can be approved in an exception and (2) the restriction that the expansion must occur only in facilities on the hospital’s main campus.  The final rule also increases flexibility to these high Medicaid facilities by including all licensed beds in determining the hospital’s baseline bed count, regardless of the specific number of beds identified on the physical license issued to the hospital by the State.

The final rule has not been published in the Federal Register, but comments will be due 30 days from the date of publication.  The final rule is effective January 1, 2021.

CMS Announces New Model to Advance Regional Value-Based Care in Medicare

CMS announced a new voluntary payment model, the Geographic Direct Contracting Model (the “Model”).  This new Model will test an approach to reducing costs across multiple regions. Through the Model, Direct Contracting Entities (“DCEs”) will take responsibility for beneficiaries’ health outcomes across entire geographic regions.  DCEs will be required to implement region wide care delivery and value-based payment systems.  Beneficiaries in the model will maintain all of their existing original Medicare benefits.  Organizations that are potentially interested in participating in the Model should submit a non-binding Letter of Interest to CMS by 11:59pm PT, on December 21, 2020, through this link: Geographic Direct Contracting Model Letter of Interest.

CMS To Implement 21 New ICD-10 Procedure Codes For COVID-19 Starting January 1, 2021

Starting January 1, 2021, CMS will implement 21 new ICD‑10 procedure codes for COVID‑19 vaccines and therapeutics for the novel coronavirus, including baricitinib and monoclonal antibody treatments.  The FDA recently approved baricitinib, a rheumatoid arthritis drug sold under the brand name Olumiant, for the treatment of patients with COVID‑19 when used in conjunction with remdesivir.  The new ICD‑10 procedure codes will allow healthcare providers to document the use of the drug.  CMS also assigned Medicare Severity‑Diagnosis‑Related Groups (MS‑DRGs) to six new ICD‑10 diagnosis codes for conditions related to COVID‑19, according to the latest announcement on the agency’s MS-DRG Classifications and Software webpage.  The codes that received MS-DRGs were for pneumonia due to COVID‑19, multisystem inflammatory syndrome, other systemic involvement of connective tissue, encounter for COVID-19 screening, suspected exposure to COVID-19, and personal history of COVID‑19.  Providers will be able to report the ICD‑10 diagnosis codes on medical claims on January 1, 2021.  CMS also noted in the announcement that Medicare will pay for the COVID‑19 vaccines and their administration separately from the Diagnosis-Related Group rate.  Providers will be able to bill for the COVID‑19 vaccine on single claims for shot administration, CMS added in a toolkit for providers.

CMS Issues New Guidance Regarding Waivers for Hospitals Without Walls and Ambulatory Surgery Centers.

CMS issued new guidance to expand the flexibilities offered under its waiver program regarding its Hospitals Without Walls initiative to further combat COVID‑19.  These flexibilities include allowances for safe hospital care for eligible Medicare patients in their homes.  CMS also expanded the flexibilities offered under the waiver program for those Ambulatory Surgical Centers that applied to serve as inpatient care centers during COVID‑19.  CMS believes that this will help healthcare systems create capacity to care for the surge of COVID‑19 patients during the winter months.

CMS Finalizes Coverage Expansion for Artificial Hearts and Ventricular Assist Devices

On December 1, 2020, CMS issued its finalized guidance regarding expanding coverage for Artificial Hearts and Ventricular Assist Devices.  Previously, CMS only covered artificial hearts under the “coverage with evidence development” standard which required that the beneficiary be enrolled in a clinical study.  This condition was removed under the new guidance.  In its place, CMS will allow a more standard coverage determination process where coverage decisions are made by local Medicare Administrative Contractors (“MACs”).  This final guidance took effect on December 1, 2020.