Monday Morning Recap: The Previous Week (7.21.14-7.27.14) in Drug & Device Law & Policy

Here’s this week’s Monday Morning Recap, the post where we call out the drug and device law and policy developments that caught our eye and made us think over the previous week.  You can see all of our previous Monday Morning Recap posts here.

1. Last Wednesday, two advocacy groups, the Medicare Rights Center and Social Security Works, released a report calling on Congress to take four concrete steps to reduce the price Medicare pays for prescription drugs: (1) restore the rebates that were lost with the passage of the Medicare Modernization Act; (2) allow Medicare to negotiate drug prices on behalf of Part D enrollees by establishing “Medicare-administered drug plans, with a uniform premium and a vetted benefit design to ensure safety, appropriate use and high value care”; (3) speed up the closure of the Medicare “doughnut hole” by securing additional discounts from drug manufacturers, and (4) “[p]romote cost-effective prescribing for Part B prescription drugs”, which are typically administered in a doctor’s office by injection or infusion, and which tend to be very expensive.

2. As we noted here, concerns have been raised about manufacturers’ use of Risk Evaluation and Mitigation Strategies (REMS) to delay entry of generic drugs. This week the Generic Pharmaceutical Association released a commissioned study that attempts to quantify the impact. The author writes: “This paper estimates lost savings on forty generic small-molecule products whose market entry, according to a survey of generic drug manufacturers, is currently delayed by misuse of REMS or other restricted access programs. Specifically, this paper identifies $5.4 billion in annual pharmaceutical spending that could be saved if generic versions of the forty identified drugs were allowed to come to market.”

3. The Second Circuit decided an important case this week involving the Food and Drug Administration’s (lack of) response to the use of antibiotics to help farm animals grow. At Bill of Health, Diana Winters writes: “This issue has enormous public health consequences, but the consequences of this case extend beyond antibiotic use, to agency practice in general.  The opinion sanctions egregious agency delay and a tremendous lacuna in decision making.”

4. Reuters reported on a new partnership between Britain’s Medical Research Council and seven leading drug manufacturers, under which academic researchers “will gain access to ‘deprioritized’ pharmaceutical compounds. Often these compounds have been dropped from development because they are not sufficiently effective against a particular condition, but they may still be useful against other diseases with shared biological pathways. . . . While drugmakers have traditionally been reluctant to share their compounds, there is a growing recognition that outside experts may be able to unlock value by taking a different approach, resulting in shared profits between companies and academic institutions.”

5. Finally, I recommend the series of posts Richard Cassin published at The FCPA Blog last week (here, here, and here) on the ways in which in-house lawyers, including in-house lawyers at drug and device companies, are “caught between their duty as advocates on the one hand, and the modern concept of ethics and compliance on the other hand.”

John Jacobi in The Record on the Impact of Halbig and King on New Jersey

Last Friday, Seton Hall Law Professor published an opinion piece in The Record on the implications for New Jersey of the D.C. Circuit’s decision in Halbig v. Burwell and of the Fourth Circuit’s decision in King v. Burwell. Professor Jacobi writes:

The good news is that New Jersey has available to it a relatively simple means to protect its consumers from a decision that could threaten their access to insurance. New Jersey could create a state health insurance exchange, thereby guaranteeing, under everyone’s interpretation of the contested language of the ACA, that the subsidies would remain available.

This option is not as far-fetched as it might seem. Sure, Governor Christie vetoed the Legislature’s state exchange bill in December 2012. But he made that decision when everyone agreed that subsidies would be available through a federal exchange. He might well feel differently if blocking a state exchange would throw 160,000 consumers off the insurance rolls. He bucked national pressure, after all, when he expanded Medicaid, allowing more than 200,000 New Jersey consumers to gain Medicaid coverage.

A Myriad of Problems for Myriad: No Patents for Genes, Major Insurer Cuts Back on Genetic Testing

By Layne Feldman

Over the past year, two developments—one legal, and one economic—have hit Myriad Genetics, Inc. hard. These developments could have significant ramifications on the detection and treatment of cancer.

First, last summer, the Supreme Court ruled that Myriad could not patent the isolated BRCA 1 and BRCA 2 genes that the company used to develop tests to uncover mutations in the two genes. The presence of such mutations dramatically increases a woman’s risk of developing breast or ovarian cancer. In the Myriad case, the Court reversed the Federal Circuit, and held that the genetic sequences in question could not be patented because they were naturally occurring segments. To the Court, Myriad’s principal scientific contribution was identifying the precise location of a naturally occurring genetic sequence. Though the Court conceded this was a significant breakthrough, a gene is not patent eligible solely because of its isolation. The underlying principle is that products of nature are precluded from patent eligibility.

In the time since this holding, Myriad’s monopoly over this type of gene-based testing has diminished, as rivals, like Quest Diagnostics and its BRCAdvantage test, have entered the marketplace.

This Spring, the U.S. District Court for the District of Utah denied an injunction Myriad sought against competitor Ambry Genetics Corporation. Ambry had developed similar products to Myriad’s gene based cancer test. In the case before the Utah court, University of Utah Research Foundation et al. v. Ambry Genetics Corporation, Myriad claimed patent infringement and requested a preliminary injunction to prevent Ambry from selling its tests until the court reached its final determination. On March 10, the court held that Myriad was not entitled to the injunction.

Myriad’s shares fell twelve percent in the wake of the court’s holding.

Cigna’s decision in August 2013 to require genetic counseling before it covers genetic testing, including Myriad’s tests for breast cancer indicators, has only exacerbated these legal setbacks.  Cigna is the first U.S. health insurer to require genetic counseling before it pays for hereditary breast and ovarian cancer tests. Cigna officials expressed hope that the policy would decrease the prevalence of unnecessary tests, as many doctors, fearing suit, accede to patient’s requests for testing. Cigna’s policy, which went into effect on September 15, 2013, requires evaluation by a certified counselor from the American Board of Medical Genetics or the American Board of Genetic Counseling before commencing genetic testing. Medical professionals, however, have criticized the policy, asserting that it could result in patients opting out of beneficial testing due to the need for additional referrals. This could ultimately result in less cancer detections, and less treatment.

Only time will tell if these developments will help or hurt cancer patients.  On one hand, permitting Myriad to patent the ability to isolate and work with BRCA DNA sequences would certainly prevent other bioengineers from manipulating these sequences to reach new breakthroughs in the fight against cancer.  Ambry Chief Executive Officer Charles Dunlop has assumed this stance, stating, in response the Utah court’s decision, that “[c]ompetition stemming from a free market drives all of us to improve and ultimately increases patient access to life-changing information.”

But on the other hand, blocking patents could preclude companies from entering into this sphere altogether as the venture might not be economically viable if competitors can flood the marketplace with similar tests. And if the critics of Cigna’s policy are correct, policies like Cigna’s would only aggravate this problem. As patients opt out of genetic testing because of the need for additional referrals, fewer tests would be conducted, and the financial incentives gained from this market could diminish.

Layne Feldman is a third-year law student at Seton Hall University School of Law who is concentrating in Health Law. We are very pleased to welcome Layne to the blog today.

A Tip of the ‘Cap,’ A Wag of the Finger: Ending the Annual Cap on Rehabilitation Services

By Bryan Tiscia

Frank retired, and he’s spent a large part of his life making sure his family had what they need. Recently he noticed his right knee bothered him. He went to a physical therapist, who explained that his knee problem was caused by degeneration in his spine. The degeneration caused him to lean to the right, and Frank over compensated with his right hip and knee.  The physical therapist started a therapy plan that would start with his knee and work to his spine. After weeks of therapy on his knee, Frank’s physical therapist told him that he reached the limit on his Medicare cap for physical therapy. He was told that he could either appeal for an increase in funds, pay for it out of pocket, or be refused the physical therapy treatment he needed.

Frank is not a real person, but the situation described above illustrates a very real problem in the United States. In 1997, Congress passed the Balanced Budget Act, which included an annual cap on physical therapy, and a separate cap on occupational therapy. The therapy caps were designed to be temporary, but they still remain today. (To learn more about the act click here.) However, many have argued that the cap fails to reflect what patients actually need.

Many organizations believe that the cap is arbitrary, and have fought to repeal it. One such opponent of the cap is the American Physical Therapy Association, or APTA. APTA has argued in position papers that this cap was not based on data, quality-of-care concerns, or clinical judgment, but that its sole purpose for existence was to balance the federal budget. APTA argues that various patients are likely to be impacted by the cap, as they are forced to bear 100% of the cost of care once they exceed it. APTA believes the cap is “arbitrary” and prevents beneficiaries from receiving the care they need when they need it.

Congress recognized the flaws associated with the cap, and has acted several times to prevent the implementation of a hard therapy cap. In 2003, Congress authorized the Government Accountability Office to determine whether progress was being made towards correlating outpatient therapy payments to beneficiary needs. The GAO found that the Department of Health and Human Services should allow for exceptions to the cap.

In 2006, Congress passed legislation allowing for exceptions to be made when  a patient’s condition would require medically necessary and clinically appropriate physical therapy above the financial limitation. In 2013, Congress extended the allowance for exceptions, and created an automatic exception process when patients reach the $1,920 threshold, and a manual medical review process where a patient requires treatment over $3,700 threshold. While organizations like the APTA have applauded these exceptions, the problem related to receiving treatment when it’s needed as the cap approaches still remains.

The solution to the problems created by the cap may be on the horizon. Various members of Congress from around the country have introduced the Medicare Access to Rehabilitation Services Act (HR 713/S 367). The Act would permanently repeal the therapy cap. If the physical therapy cap was never pegged to patient needs, it should be repealed. The story above about Frank may have been fiction, but access to timely and appropriate care patients need and a repeal of the cap may soon be reality.

Bryan Tiscia earned his Juris Doctorate from Seton Hall University School of Law in May 2014. We are very pleased to welcome him to the blog today.

Monday Morning Recap: The Previous Week (7.14.14-7.20.14) in Drug & Device Law & Policy

Here’s this week’s Monday Morning Recap, the post where we call out the drug and device law and policy developments that caught our eye and made us think over the previous week.  You can see all of our previous Monday Morning Recap posts here.

1.At Fortune, Ben Geier reports that a federal grand jury in San Francisco has indicted FedEx on drug trafficking charges, with prosecutors alleging that the company has “known for a decade that these illegal businesses were using their services to deliver the drugs, going so far as to set up special credit policies to protect FedEx from losing money if the illegal pharmacies were shut down.” Geier writes: “Couriers for FedEx told federal investigators some pretty scary tales of delivering for the illegal pharmacies, including making deliveries to vacant homes where groups of people would be waiting to collect the parcels.”

2. Generic digoxin was in the news the week before last, and it was in the news again this past week. At the San Francisco Business Times, Ron Leuty reports that the drug “is at the center of an investigation by the Connecticut attorney general’s office over a spike in price. The inquiry . . . is focused on two areas. Authorities will probe if the drug’s price was fixed or if the company violated state antitrust laws by dividing customers or territories for digoxin sales[.]“

3. Turning from the high price of generics to the high price of branded drugs, the Business Standard reports that the Supreme Court of India has “upheld the compulsory licence granted to Hyderabad-based Natco Pharma to manufacture an affordable generic version of Nexavar (sorafenib tosylate), a kidney cancer drug patented by German drug major Bayer AG.“

4. At Bloomberg, Richard Rubin reports on a letter sent by Treasury Secretary Jacob Lew calling on Congress to act “to stop U.S. companies from using cross-border mergers to escape the country’s tax system, the latest trend in corporate deal-making.” As Rubin explains, “[t]he mergers used to legally avoid taxes, known as inversion transactions, have become increasingly popular over the past year, particularly in the pharmaceutical industry. Companies including Minneapolis-based Medtronic Inc. (MDT) and Canonsburg, Pennsylvania-based Mylan Inc. (MYL) have announced plans to move their legal addresses outside the U.S. Pfizer Inc., based in New York, attempted to move its tax address to the U.K. by purchasing London-based AstraZeneca Plc. (AZN).”

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