Article by David McIntosh and Sheila Dearybury Walcoff.

Medicare reimbursements - Show me the money!

CMS continues to feel the heat from Capitol Hill over its failure to expedite rules allowing hospital outpatient departments to receive reimbursement for drug therapies as soon as they win FDA approval. Last fall’s Medicare Modernization Act (MMA) required CMS to reimburse at 95 percent of a drug’s average wholesale price until the drug receives its own billing code. Although CMS has implemented other reimbursement provisions, it has stalled reimbursement prior to CMS assignment of a billing code.

CMS considers adding a "supplying fee" for some drugs. Responding to criticism that the MMA cut reimbursement rates below acquisition costs for immuno-suppressant drugs for transplant patients, CMS may consider paying a supplying fee to pharmacies. CMS officials have acknowledged the financial difficulties facing specialty pharmacies. Industry groups research whether CMS has the authority to expedite additional payments without the formal rulemaking process CMS claims is necessary to address the problem.

Increased Reimbursement for Part B Drugs sought—CMS officials and physicians have joined an AMA-sponsored workgroup to prepare recommendations for coding changes for drugs under Medicare Part B. Although the target date for completing the recommendations is August, oncologists have already begun to lobby Congress for changes that will increase reimbursement for chemotherapy and ancillary services.

Medicare Discount Drug Card to debut rapidly—CMS Administrator Mark B. McClellan announced that CMS may work with states that have senior drug assistance programs to register participants automatically in the new discount drug card program to expedite enrollment of Medicare beneficiaries.

Health Savings Accounts (HSAs) slide past COBRA and HIPAA regulations

The Department of Labor (DOL) rescued HSAs from becoming "employee welfare benefit plans" subject to costly ERISA regulation— such as privacy rules under HIPAA and mandatory benefits under COBRA. HSAs are designed to help eligible individuals save money tax free to pay for current and future health care expenses. They have to be covered by a High Deductible Healthcare Plan. DOL issued a Field Assistance Bulletin (#2004-1) ruling that as long as the Health Savings Account is controlled by the individual, it can be coupled with an employer’s High Deductible Healthcare Plan without triggering ERISA regulations. The DOL action is expected to boost the market for HSAs.

Medical Malpractice Reform - Physician Heal Thyself

Well-organized and wellfunded physician groups have launched an all-out effort to pass medical malpractice reform in the Senate. So far they have run into a brick wall of opposition from equally well-funded and organized trial lawyers. April 7 saw the second attempt to break the filibuster on S. 2207 (capping damages in some medical lawsuits) go down in flames again. Look for Republican leadership to schedule multiple votes in 2004 to try to break the logjam preventing consideration of medical tort reform legislation supported by a growing coalition of physicians raising political capital.

Drug Reimportation— O Canada! O Canada!

Apowerful Senate Chairman has introduced a bill to allow Americans to buy prescription drugs from Canada. Sen. Judd Gregg (R-NH), Chairman of the Senate Health Committee, introduced the "GOP" version of this controversial legislation on June 2. Majority Leader Frist has designated jurisdiction to Sen. Gregg’s committee, so his bill will be the key legislation to watch. Senator Chuck Grassley (R-IA), Chairman of the Senate Health Committee, introduced a bill earlier this year allowing importation in limited circumstances, but failed to gain the support of key Democrats or the Senate leadership.

Democrats have their own plan. The Grassley bill failed to attract bi-partisan support when Sen. Edward Kennedy (D-MA), with whom Sen. Grassley had been negotiating, pulled out. Senate Democratic leader, Sen. Tom Daschle (D-SD), says he wants a separate bill. Watch for the political infighting to get hot and heavy on this one. Rumor in D.C. has it that the Democratic committees have polling showing that reimportation helps them. Two Republican senators have switched— Trent Lott (R-MS) and John Cornyn (R-TX), who formerly opposed reimportation, say they now support importation.

Food Fights on Animal Biologic Regs

Conflicting requirements and uncertainty regarding which agency should regulate emerging products has prompted the FDA to begin revising its memorandum of understanding with the USDA on the regulation of animal biologics.

Medical Device Reform

Medical device reform legislation that would modify current requirements for both device and device-reprocessing companies to mark products with their company name or logo and other possible device reforms are being considered in the Senate as part of an effort to save the device user fee program. However, FDAActing Commissioner Lester Crawford told the Hill that passage of a Continuing Resolution in lieu of an FY 05 budget would kill the new user fee program unless the agency secured a special funding exemption from OMB, which is thought to be unlikely.

Patient Safety Bill on Hold

Sen. Judd Gregg (R-NH), Chairman of the Senate Health Committee tried again unsuccessfully to advance the long-stalled patient safety legislation (S. 720) to the Senate floor for debate. The bill seeks to reduce medical errors through a new voluntary reporting system. Although it passed out of committee unanimously in July, Sen. Edward Kennedy’s (D-MA) doesn’t like the privilege provisions to protect doctors who report on themselves from additional lawsuits….The Senator worries the privilege could be manipulated to shield providers who have negligently or intentionally caused injury to patients. The House passed its version of the patient safety bill, H.R. 663, in a March 2003 vote of 418-6. Both bills establish a system where a number of private and public "patient safety organizations" (PSOs) analyze data on medical errors. They report the aggregate information to providers to help improve patient safety. 

Copyright © 2007, Mayer, Brown, Rowe & Maw LLP. and/or Mayer Brown International LLP. This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.

Mayer Brown is a combination of two limited liability partnerships: one named Mayer Brown LLP, established in Illinois, USA; and one named Mayer Brown International LLP, incorporated in England.