CMS Clarifies Insurance Coverage for COVID-19 Testing, DOJ Finalizes Vertical Merger Guidance, and CMS Proposes New Value Based Purchasing Rule

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CMS Releases Updated COVID-19 Coverage FAQs

CMS has released updated FAQs regarding COVID-19 coverage issues under the Families First Coronavirus Response Act (“FFCRA”) and the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”).  Under FFCRA, insurers are required to cover COVID‑19 tests without patient cost-sharing.  Among other things, the new guidance clarifies that the requirement for coverage does not extend to COVID-19 tests that are a part of workplace safety, such as employee “return to work” programs, or for any other purpose not primarily intended for individualized diagnosis or treatment of COVID‑19 or another health condition.

FTC and DOJ Guidance on Vertical Mergers 

On June 30, 2020, the Federal Trade Commission (“FTC”) and the United States Department of Justice (“DOJ”)(collectively with FTC “antitrust agencies”) issued a final version of their January 10, 2020 Vertical Merger Guidelines, which outline how the federal antitrust agencies will evaluate the competitive impact of vertical mergers and whether those mergers comply with U.S. antitrust law.  Vertical mergers combine two or more companies that operate at different levels in the same supply chain.  Vertical mergers have become increasingly common in the healthcare industry where payors are purchasing providers at a rapid rate, or alternatively, where pharmaceutical companies are merging with payors.  As previously noted in our February 4, 2020 update, the DOJ has not drafted merge guidelines in approximately 36 years, which may indicate that vertical mergers will receive heightened scrutiny in the near future. 

A total of 70 comments were submitted after issuance of the draft Vertical Merger Guidelines on January 10, 2020.  A major concern noted in the comments was the enumerated 20% market share threshold, above which the federal antitrust agencies would likely raise some concern about the potential vertical merger.  As a result, FTC and DOJ removed this 20% market threshold from the final guidelines and replaced it with a much more detailed set of "unilateral effects" that the DOJ and FTC will be looking at when assessing the competitive prospects of a vertical merger. These unilateral effects include, but are not limited to,  the potential of the merged firm to raise a rival’s costs of an upstream good or product and the potential of the merged firm to foreclose its rivals from procuring an upstream good or product. 

CMS Proposes New Value Based Purchasing Rule for State Medicaid Programs 

CMS released a proposed rule, 85 FR 37286, that would allow states to enter into value based purchasing (VBP) arrangements with Medicaid payers specifically to permit manufacturers to work directly with payers to purchase drugs through VBP arrangements, while continuing to preserve the intent and integrity of the Medicaid Drug Rebate Program (MDRP).  This proposed rule would also revise the regulations regarding authorized generic sales when manufacturers calculate the average manufacturer price (APM), pharmacy benefit manager (PBM) accumulator programs and their impact on AMP and best price, state and manufacturer reporting requirements to the MDRP, and implement new Medicaid Drug Utilization Review (DUR) programs designed to address the opioid crisis. Additionally, the proposed rule suggests various revisions to current regulations related to coordination of benefits and third-party liability in the special treatment of certain types of care and payment under Medicaid and the Children’s Health Insurance Program (CHIP). Among the changes is a requirement that states collect information on third party liability before making payments. Comments can be submitted until 5 p.m. on July 20, 2020. 

Please visit Riker Danzig’s COVID-19 Resource Center to stay up to date on all related legal issues.