Office of the Inspector General Releases 2011 Work Plan

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On October 1, the Office of the Inspector General (“OIG”) of the U.S. Dept. of Health & Human Services (“HHS”) released its Work Plan for Fiscal Year 2011 (“Work Plan”).  Each year, the OIG briefly outlines activities that OIG “plans to initiate or continue with respect to the programs and operations” of HHS.  Various offices within OIG conduct audit, evaluation, investigation, enforcement, and compliance activities.

Continuing Work Within OIG

Many of the topics outlined in the Work Plan were included in last year’s plan.  Although the repeated inclusion of these areas of focus makes compliance easier for facilities, audits should still be conducted in the following areas:

• Provider-based status
• Observation services (as part of an outpatient visit)
• Part A hospital capital payment
• Critical access hospitals
• Medicare disproportionate share payments
• Duplicate graduate medical education payments
• Hospital readmissions
• Hospital admissions with conditions coded present-on-admission
• Inpatient rehabilitation facility transmission of patient assessment instruments
• Medicare excessive payments

New Issues to be Targeted

“What we’re really looking at are four or five really brand new issues,” said Stephen Miller, JD, chief compliance and privacy officer for Trenton, NJ-based Capital Health System, Inc. for HealthLeadersMedia.com.

• Brachytherapy reimbursement
• Replacement of devices received at no cost or reduced cost
  • According to Debbie Mackaman, RHIA, CHCO, regulatory specialist for HCPro, Inc., in Marblehead, MA, “Since the medical devices replacement issue can be a difficult billing procedure to comply with, facilities should certainly do an in-depth process audit in this area.”
• Safety and quality of intensity-modulated radiation therapy (IMRT) and image-guided radiation therapy (IGRT)
  • Indicates a responsiveness on the part of OIG to headlines regarding quality concerns.  In March, the Nuclear Regulatory Commission fined Philadelphia Veterans Affairs Medical Center $227,500, its second largest fine ever against a medical institution, after “unprecedented number” of radiation errors in treating prostate cancer patients.
• Hospitals’ application of the “three-day rule” and “one-day rule” under the Preservation of Access to Care for Medicare Beneficiaries and Pension Relief Act of 2010
  • Many hospitals have had difficulty in billing under the new rules, which redefined what services are related to the admission, and therefore not eligible for Medicare payment within the defined window.  According to Mackaman, “IPPS facilities should be vigilant about reviewing the current three-day rule, and the non-IPPS hospitals should review the addition of the one-day rule.”  CMS guidance on this topic can be found here.

OIG Review of FDA Administration

As HealthReformWatch previously reported, nine Food & Drug Administration (“FDA”) scientists from the Center for Devices and Radiological Health (“CDRH”) sent a letter to President Obama stating, in relevant part, that:

the scientific review process for medical devices at the FDA has been corrupted and distorted by current FDA managers, thereby placing the American people at risk. Managers with incompatible, discordant and irrelevant scientific and clinical expertise in devices…have ignored serious safety and effectiveness concerns of FDA experts. Managers have ordered, intimidated and coerced FDA experts to modify scientific evaluations, conclusions and recommendations in violation of the laws, rules and regulations, and to accept clinical and technical data that is not scientifically valid.

These scientists also wrote to Congress in 2008, accusing the top FDA officials of “serious misconduct” in ignoring scientist concerns and “approving for sale unsafe or ineffective medical devices,” according to the N.Y. Times.

According to Washington G-2 Reports, OIG also stated on September 29 that “it would re-examine the concerns of those FDA reviewers, and broaden the scope of its inquiry.”

This coming year, OIG intends to investigate CDRH “policies and procedures for resolving scientific disputes about approval of devices.”  The Work Plan states that OIG will:

review a sample of administrative files for disputed device decisions and assess the extent to which regulations, policies, and procedures were followed during the dispute resolution process. We will also assess whether CDRH managers and staff are aware of and trained on policies and procedures for resolving scientific disputes.

Additionally, OIG will continue to review FDA oversight of investigational new drug applications, the process for device approval, and oversight of postmarketing surveillance studies of medical devices.

Clinical Research: When the Compensation Begs the Answer

photo by A.M. Kuchling via Flickr

The New York Times reports that New Jersey Attorney General Anne Milgram announced a settlement agreement with medical device maker, Synthes, for failing to disclose the financial conflicts of interest of doctors researching its products. Synthes is the maker of the ProDisc, an artificial spinal disk.

The settlement agreement with Synthes was described in the AG’s press release, which quoted Ms. Milgram, as “the first of its kind because of its disclosure provisions, as well as its ban on compensating clinical researchers with company stock. She said the latter provision runs counter to widespread industry practice — a practice she called unacceptable.” Notably, the state pursued the case as a matter of consumer fraud. The premise being that the failure to fully disclose such conflicts constituted such for both human trial subjects and the purchasing public.

In a letter to the FDA, critical of the FDA and cc’d to key members of Congress, Ms. Milgram described the results of the AG’s investigation into the business and research practices of Synthes. The letter states:

The investigation revealed that a majority of the physicians who participated in these clinical trials had significant investments in the products -investments that would have been worthless had the product failed to obtain regulatory approval from the FDA. And, the investigation revealed that Synthes, which acquired ProDisc while the clinical trials were underway, failed to disclose these financial conflicts of interest to the FDA.

Yet, despite the fact that Synthes’ failure to adequately disclose these interests should have been obvious from even a cursory review of its FDA submissions, the FDA did nothing to regulate these conflicts. A number of the disclosure forms were signed and dated, but were otherwise left blank. Others indicated that the clinical investigator had a significant equity interest in the product, but did not attach the requisite details. But the FDA approved Synthes’ applications for premarket approval without any delay or further inquiry into this issue.

Leaving aside for the moment the criticism of the FDA (the State of New Jersey joins a long list of increasingly vocal complainants, including the Program on Government Oversight (citing “dramatically reduced inspections of ‘good laboratory practices’ at facilities that do the earliest testing of medical devices. Such inspections declined from 33 in 2005, to seven in 2007, to just one last year”),  and FDA scientists from the Center for Devices and  Radiological Health, who have openly proclaimed that the FDA “is fundamentally broken.”), it’s worth a moment to consider that Synthes has agreed to “stop paying doctors who are conducting clinical trials of its products with stock or stock options,” and that AG Milgram described the compensation of research doctors with stock as being “apparently common” and a “widespread industry practice.”

Compensating a  doctor with stock or stock options financially tied to the results of his research may well be the antithesis of an impetus for objective clinical research.

The basic proposition is this: you, doctor, are charged with investigating whether or not this medical device is safe and fit and shows efficacy for human use. For doing so, we will give you a portion of the company (stock or stock options) which owns the medical device. If the medical device is efficacious and fit for human use, the company will stand to profit. As a holder of stock and/or stock options in the company, you will be paid a portion of that profit and/or the value of your holdings in the company will increase correspondent to your determination of safety for human use and efficacy. If you determine that the device is not safe for human use and/or not efficacious, your holdings in the company will be worth much less, if not worthless. “Is the device safe for human use and efficacious?” Does an answer of “Yes” surprise anyone?

It is also not an answer to say that the doctors may have merely been compensated in cash and then later converted that cash into stock or stock options independently. My guess is that in constructing these compensation packages, as with most securities matters, timing and knowledge is important. That the stock or stock options must be issued or at least contracted for by the researcher simultaneous with the hiring so as to avoid SEC difficulty regarding the particulars of the researchers’ “inside” and “confidential” knowledge regarding the device and the research itself. Researchers who have purchased interested stock (or who have had stock purchased by others) before news of their research has been made public have often paid a price.

And obviously, once the doctor’s research has been made public, any positive results will have been already reflected in the market price of the stock, all but foreclosing the research doctor from reaping profits tied directly to his research determinations.

As part of A.G. Milgram’s “Assurance of Voluntary Compliance agreement (the Synthes case was handled by Deputy Attorney General Megan Lewis, Chief of the Division of Law’s Affirmative Litigation Section, and Deputy Attorney General Michelle T. Weiner) Synthes must disclose any future payments made by the company to physicians conducting clinical trials on its devices, as well as any investments held by such physicians in the devices they test. A $3 billion global company, Synthes has also agreed to stop paying clinical trial physicians with company stock or stock options.”

Attorney General Milgram said that “the Synthes agreement should serve as a template for the entire industry,” and in her letter to the FDA remarked that she was “hopeful the Synthes terms will become “best practices” for disclosure among medical device makers.”

In addition to signifying her hope, Ms. Milgram announced that her office issued subpoenas “to five major medical device manufacturing companies seeking information about their business practices.”

The FDA to Evaluate 25 Medical Devices Marketed Before 1976 Without Premarket Approval

The FDA announced last week that they are requiring the makers of 25 medical devices marketed before 1976 to submit safety and effectiveness information regarding their devices.   These devices were allowed onto the market without undergoing the current FDA testing and classification because they were first manufactured before the Medical Device Amendments to the Food, Drug, and Cosmetic Act of 1976, and include many of the riskiest devices — defibrillators, pacemakers accessories, and heart valves.

Image by Paunami via Wikimedia Commons

The FDA classifies medical devices into three categories, with class III being the riskiest devices– as such, they require premarket approval.  Currently, the 25 pre-amendment devices in question are class III, but based on the 1976 law these devices were not required to undergo premarket approval at the time.

The FDA will use the submitted safety and effectiveness data to review the devices and classify them into what they deem to be the appropriate risk category.  According to the FDA, if a device is found to be a class III device, the manufacturer will need to submit a premarket approval application.  If the device is moved to class I or II, it will not require premarket approval.

The FDA’s announcement comes after the Government Accountability Office reported in January that the FDA was not doing enough to thoroughly evaluate the safety and effectiveness of many medical devices marketed before 1976.  They urged the FDA to review the devices and said that “it is imperative that FDA take immediate steps” to fix this review and approval process for devices.

Daniel G. Schultz, M.D., director of the FDA’s Center for Devices and Radiological Health, said regarding the FDA’s new requirement:

We are taking the necessary steps to complete this very complex process while continuing to protect public health by thoroughly reviewing and evaluating all medical device submissions presented to the agency.  New premarket notification submissions for devices of these 25 types will continue to receive an appropriate level of scrutiny to ensure safety and effectiveness.

This decision to evaluate these devices and further public safety comes after recent criticism of the agency, such as the opinion expressed publicly by a number of  FDA scientists that the “FDA is fundamentally broken.”  We have blogged about the much maligned agency on numerous occasions, with specific emphasis upon the Center for Devices and Radiological Health and a decline in medical device lab inspections.

How the FDA is “Fundamentally Broken”

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AP has run a story on FDA investigatory practices that lends additional credence to the assertions of a number of FDA scientists who have publicly claimed that the FDA is “fundamentally broken.”

The article focuses on a recent report by the Project on Government Oversight (POGO) which exposes a dramatic decrease in medical device lab inspections over the course of the last few years.

AP writes:

“Medical devices are overseen by an FDA division called the Center for Devices and Radiological Health. The center has been shaken by recent complaints from its own scientists that managers squelched debate, leading to the approval of devices that were of questionable effectiveness and perhaps not entirely safe.”

The Center has also been accused of allowing political influence to be a determinate factor in the approval process of medical devices.

The decline in laboratory inspections outlined by the POGO report is both precipitous and alarming. AP writes that the report shows that

“…the Food and Drug Administration has dramatically reduced inspections of “good laboratory practices” at facilities that do the earliest testing of medical devices. Such inspections declined from 33 in 2005, to seven in 2007, to just one last year, according to a report the group was releasing Wednesday. No inspections are planned for this year, the report said.”

Read the full POGO report here.

FDA Scientists Say FDA is “Fundamentally [More] Broken”

Just this last week we posted that a group of nine FDA scientists from the Center for Devices and Radiological Health– which is responsible for medical devices ranging from stents and breast implants to MRIs and other imaging machinery-authored a letter which asserted that “The FDA is “fundamentally broken” and requires reforms.”

We wrote:

With what A.P refers to as an “unusually blunt letter,” the group of federal scientists contacted “John Podesta, head of the transition team, as well as former Senate Majority Leader and HHS Secretary-designate Tom Daschle (D-S.D.); Baltimore Health Commissioner Joshua Sharfstein, who has led a team assembled by Obama to assess FDA; Senate Health, Education, Labor and Pensions Committee Chair Edward Kennedy (D-Mass.); and eight other lawmakers,” according to Kaiser.

In that post, we also called attention to the contention of the scientists that “Managers with incompatible, discordant and irrelevant scientific and clinical expertise in devices…have ignored serious safety and effectiveness concerns of FDA experts.”

Noting that

To say that these managers had “incompatible” and “discordant” scientific and clinical expertise in devices is one thing. One expects a certain degree of disagreement within the scientific community-and to some extent, one reasonably relies upon the crucible of such “discordant” viewpoints in scientific debate to provide tested answers to real problems. But the scientists who wrote this letter added one more word: “irrelevant.” And in this context, that leaves us uncomfortably with the knowledge that in the estimation of these nine scientists, the determining force in these particular scientific inquiries-the managers-lack relevant scientific expertise in the pertinent subject matter-medical devices.

Apparently, the “expertise” at issue in the approval of a breast cancer imaging device is alleged to go somewhat beyond the scientific.

The New York Times reports that it has obtained various FDA emails and internal documents which underlie the scientists’ complaint and are the present subject of both an FDA internal inquiry and a congressional investigation. The emails and documents are said to provide details of the investigations which had not previously been made public.

The New York Times reports that

An official at the Food and Drug Administration overruled front-line agency scientists and approved the sale of an imaging device for breast cancer after receiving a phone call from a Connecticut congressman, according to internal agency documents.

The congressman is Republican Chris Shay, who lost re-election in November. A component of the imaging device was produced by a Fujifilm Medical Systems, which “is based in Stamford, Conn., the heart of Mr. Shays’s former district,” according to the NY Times.

The article also states that

The legislator’s call and its effect on what is supposed to be a science-based approval process is only one of many of accusations in a trove of documents regarding disputes within the agency’s office of device evaluation.
Read more here.

FDA Scientists Say that FDA is “Fundamentally Broken”

“The FDA is “fundamentally broken” and requires reforms, according to a letter sent to the transition team of President-elect Barack Obama by nine agency scientists, Dow Jones reports.” (Kaiser.org 1/8/08).

With what A.P refers to as an “unusually blunt letter,” the group of federal scientists contacted “John Podesta, head of the transition team, as well as former Senate Majority Leader and HHS Secretary-designate Tom Daschle (D-S.D.); Baltimore Health Commissioner Joshua Sharfstein, who has led a team assembled by Obama to assess FDA; Senate Health, Education, Labor and Pensions Committee Chair Edward Kennedy (D-Mass.); and eight other lawmakers,” according to Kaiser.

A.P reports that the letter was written on FDA Center for Devices and Radiological Health letterhead; “the center is responsible for medical devices ranging from stents and breast implants to MRIs and other imaging machinery.”

The letter reads in part as follows:

The purpose of this letter is to inform you that the scientific review process for medical devices at the FDA has been corrupted and distorted by current FDA managers, thereby placing the American people at risk. Managers with incompatible, discordant and irrelevant scientific and clinical expertise in devices…have ignored serious safety and effectiveness concerns of FDA experts. Managers have ordered, intimidated and coerced FDA experts to modify scientific evaluations, conclusions and recommendations in violation of the laws, rules and regulations, and to accept clinical and technical data that is not scientifically valid. (emphasis added)

To say that these managers had “incompatible” and “discordant” scientific and clinical expertise in devices is one thing. One expects a certain degree of disagreement within the scientific community-and to some extent, one reasonably relies upon the crucible of such “discordant” viewpoints in scientific debate to provide tested answers to real problems. But the scientists who wrote this letter added one more word: “irrelevant.” And in this context, that leaves us uncomfortably with the knowledge that in the estimation of these nine scientists, the determining force in these particular scientific inquiries-the managers-lack relevant scientific expertise in the pertinent subject matter-medical devices.

The Wall Street Journal Health Blog reports that earlier today, HHS Secretary-designate Tom Daschle appeared at “a friendly hearing before the Senate’s Health, Education, Labor and Pensions Committee.” Daschle, who was one of the recipients of the FDA scientists’ letter, did not mention it in his prepared speech. Daschle did, however, state the following:

Unfortunately, there is growing concern that the FDA may have lost the confidence of the public and Congress – much to our detriment. When Americans are nervous about eating spinach or tomatoes or cantaloupes, that’s not good for our health and it is terrible for our farmers. When nearly two-thirds of Americans do not trust the FDA’s ability to ensure the safety and effectiveness of pharmaceuticals, the result is Americans may hesitate to take important medications that protect their health. This is unacceptable.