Monday Morning Recap: The Week (3.24.14-3.30.14) in Drug & Device Law & Policy

What follows is a weekly feature here at Health Reform Watch.  Each Monday, we provide a recap of the drug and device law and policy developments over the previous week that caught our eye and made us think.  Credit for the format goes to Seton Hall Law alum Jordan T. Cohen, who used it to great effect in his series of Reform Rodeo posts.

1. This week the Supreme Court held oral argument in two companion cases, Sebelius v. Hobby Lobby Stores and Conestoga Wood Specialties v. Sebelius, challenging the Affordable Care Act’s mandate that insurance plans include coverage for contraceptive drugs and devices. SCOTUSblog provided two recaps of the oral argument, here and here, and rounded-up commentary all week long, here, here, and here.  The Conglomerate hosted a symposium on the cases, which can be accessed here, and Margaux Hall discussed it in a post at Bill of Health and Slate, here.  Hall’s post calls attention to the fact that these cases have arisen because of the “virtually unfettered freedom” employers have to set employees’ health coverage, a theme John Jacobi addressed here at Health Reform Watch.

2. The controversy over the painkiller Zohydro, which we previously referenced here, heated up last week when Governor Deval Patrick of Massachusetts declared a public health emergency and banned the drug’s sale, “until determined that adequate measures are in place to safeguard against the potential for diversion, overdose and misuse.”

3. On March 21st, the Food and Drug Administration issued a proposed rule making changes to the ways that medical devices are classified.  Last week, Allyson Mullen provided a helpful summary at FDA Law Blog, here, and Elizabeth Bierman, Phoebe Mounts, and Michele Buenafe of Morgan Lewis discussed the proposal here.

4. The Employee Benefit Research Institute (EBRI) reported the results of a study it conducted on the effect of a high-deductible health plan with a health savings account on the generic drug dispensing rate (GDR).  GDR, which equals the number of generic prescriptions filled divided by the total number of prescriptions filled, is “a metric routinely used by pharmacy benefit managers (PBMs) to assess plan design effectiveness.”  The EBRI’s study found that while the plan increased the GDR, it only did so because it depressed overall medication utilization.  The study’s authors, Paul Fronstin and Christopher Roebuck, write that “plan designs that raise patient cost-sharing for prescription drugs would seem to be counter-productive, particularly in light of the results presented in this analysis. Instead, value-based insurance designs (VBID) that reduce or eliminate prescription-drug copays in order to bolster adherence may be a more effective and efficient strategy[.]“

5. Finally, on Monday of last week, the New York Times published a fascinating interview with Ricardo E. Dolmetsch, a biochemist who ”has pioneered a major shift in autism research, largely putting aside behavioral questions to focus on cell biology and biochemistry.” Dolmetsch did most of his work at Stanford University but has recently ”taken a leave to join Novartis, where his mission is to organize an international team to develop autism therapies.”  He explains: ““Pharmaceutical companies have financial and organizational resources permitting you to do things you might not be able to do as an academic. I really want to find a drug.”

Consent to Arbitration is Not a Health Care Decision: South Carolina Supreme Court Invalidates Nursing Home Arbitration Agreement Executed by Health Care Surrogate

Nursing homes commonly include arbitration agreements in their admissions materials. These agreements require residents to bring any disputes against the facility to a professional arbitrator, as opposed to a court. Many advocates maintain that arbitration disadvantages nursing home residents, particularly in malpractice cases, and that their use in the admissions process takes advantage of a vulnerable population. Nonetheless, efforts to challenge such agreements have failed in light of the Supreme Court’s decision in AT&T Mobility LLC v. Concepcion, which held that the federal Arbitration Act (FAA) preempts state laws that “prohibit[] outright the arbitration of a particular type of claim.” Following Concepcion, the Supreme Court unanimously overturned a decision by the West Virginia Supreme Court that had found that nursing home arbitration agreements are inherently unconscionable, concluding that “a categorical rule prohibiting arbitration of a particular type of claim … is contrary to the terms and coverage of the FAA.”

Yet, as demonstrated by the South Carolina Supreme Court’s recent decision in Coleman v. Mariner Health Care, Inc., there is still one situation in which nursing home arbitration agreements are open to challenge: when the agreements are signed by a third party appointed to make health care decisions for the patient by operation of law.

Coleman involved a wrongful death suit brought by the surviving sister of a nursing home resident who had been admitted to the facility after already having lost decision-making capacity. The resident’s sister – the plaintiff in the wrongful death lawsuit – signed the admissions forms based on the authority granted to her under South Carolina’s Adult Health Care Consent Act. One of the forms the sister signed was an arbitration agreement.

Denying the nursing home’s motion to compel arbitration, the court concluded that the arbitration agreement was not valid because it exceeded the scope of the sister’s authority under the Adult Health Care Consent Act. According to the Court, the statute specifically limited surrogates’ authority to making health care decisions and associated financial arrangements. Because an agreement to arbitrate was not a health care or related financial decision, it exceeded the scope of the sister’s authority.

The dissent argued that the majority’s decision conflicted with Concepcion because it had the effect of treating a specific type of arbitration agreement – i.e., one entered into by a surrogate decision-maker – as inherently unenforceable. In response, the majority asserted that it was simply recognizing the legislature’s intent to limit the scope of surrogates’ decision-making authority to narrowly defined areas. It other words, the rationale for the majority’s decision was not that arbitration agreements entered into by surrogates are unenforceable because they are specifically disfavored; instead, it was that surrogates may not enter into any agreements that do not directly deal with “health care decisions” or the associated financial costs.

Of course, the majority’s narrow interpretation of the Adult Health Care Consent Act is not the only possible way to read the statute. If the surrogate has the authority to consent to an individual’s admission to a facility, it does not seem like much of a stretch to conclude that this authority implicitly includes all decisions reasonably related to the admission – including those related to how any subsequent disputes with the facility will be resolved. It is true that, in this case, the arbitration agreement was a “separate” document that “concerned neither health care nor payment,” but it could just as easily have been included as a term in the underlying contract for admission. It seems hyper-technical to say that the surrogate’s authority to consent to arbitration depends on whether the agreement is contained in the admissions agreement itself as opposed to a stand-alone document.

Yet, even if the court could have interpreted the scope of the surrogate’s authority more broadly, its decision remains consistent with Concepcion because it does not amount to “a categorical rule prohibiting arbitration of a particular type of claim.” Instead, the court was simply applying the general legal rule that arbitration agreements, like any agreements, must be entered into by an individual with the legal capacity to contract. At least in South Carolina, this means that nursing homes can no longer rely on arbitration agreements for residents who are admitted based on surrogate consent.

Seton Hall Law Awarded Robert Wood Johnson Foundation Grant to Assess ACA Implementation in New Jersey

Yesterday, Seton Hall Law announced that Professor (and Health Reform Watch blogger) John Jacobi has begun work on a two-year Robert Wood Johnson Foundation-funded project that “will use individual advocacy and broad-based information gathering and analysis to call attention to areas in which New Jersey health insurers fall short of the ACA standards and to develop recommendations to bring the plans and services into compliance.”  An excerpt from the press release follows:

“The Sentinel Project is designed to create a ‘feedback loop’ between healthcare providers and patients, on the one hand, and insurance plans, government regulators, and the public, on the other,” stated Professor John V. Jacobi, Dorothea Dix Chair of Health Law & Policy and faculty director of the Seton Hall Law Center for Health & Pharmaceutical Law & Policy, who serves as the Project leader.

…

To date, much of the media focus surrounding the ACA has been on issues and challenges related to enrolling people in health insurance plans. “The ACA’s benefits are achieved not upon enrollment, but upon the connection of enrolled consumers with necessary health benefits,” Professor Jacobi said. He concluded, “It would be a Pyrrhic victory to enroll millions of consumers and fail to connect them to quality care.”

The full press release is here.  New Jersey consumers who believe that they may have been denied coverage by their individual or small group plan can contact the Sentinel Project by email at sentinelproject@appleseednetwork.org, or by leaving a message at 973-991-1190.

Monday Morning Recap: The Week (3.17.14-3.23.14) in Drug & Device Law & Policy

What follows is a weekly feature here at Health Reform Watch.  Each Monday, we provide a recap of the drug and device law and policy developments over the previous week that caught our eye and made us think.  Credit for the format goes to Seton Hall Law alum Jordan T. Cohen, who used it to great effect in his series of Reform Rodeo posts.

1. Last week brought news that the Arkansas Supreme Court vacated a widely-reported $1.2 billion judgment against Johnson & Johnson, holding that Arkansas’ Medicaid fraud statute applies to health care facilities, not drug or device makers.  The New York Times quotes plaintiffs’ lawyer Thomas M. Melsheimer as follows: ’There’s a big question about whether off-label marketing cases are on life support,’ Mr. Melsheimer said, adding that many state laws were primarily designed to police the actions of health care providers like doctors, not necessarily drug companies. ‘If you’re trying to shoehorn off-label claims into a fraud case or a consumer-protection case, that can be really challenging,’ he said. ‘And in Arkansas, it ended up being fatal.’”

2. At Bloomberg Makiko Kitamura reports that GlaxoSmithKline “plans to hire a range of people with medical backgrounds, including doctors and scientists with expertise in specific disease areas” to give promotional talks to doctors.  The news follows GSK’s announcement last December “that it will stop paying [external] doctors for giving speeches and attending medical meetings by early 2016.”  Kitamura writes: ”The corporate ties and a lack of reputation among practicing colleagues may hamper the Glaxo representatives’ sway with physicians, said Erik Gordon, professor at the University of Michigan’s School of Law and Ross School of Business. ‘Doctors aren’t influenced by just any other doctor,’ Gordon said by e-mail. ‘They are influenced by doctors who are sufficiently well known, respected, and seen as key opinion leaders — real experts with lots of experience with patients.’”

3. This week brought news that additional executions, this time in Oklahoma, have been delayed as a result of efforts on the part of pharmaceutical manufacturers and compounding pharmacies to ensure that their products are not used to put people to death. At The Colorado Independent, Katie Fretland reports on a January 2011 email in which ”[i]n response to a request from Texas for advice on how to deal with the scarcity of the lethal injection drug sodium thiopental, … [an Oklahoma Assistant Attorney General] quipped … that Oklahoma might cooperate in exchange for much sought-after 50-yard-line tickets to the Red River Rivalry, a football game between the University of Oklahoma and the University of Texas.”

4.  The Buffalo News ran this scathing editorial by Phillip Zweig, the Executive Director of Physicians Against Drug Shortages, who blames the shortages on “the anticompetitive contracting practices, self-dealing and kickbacks of giant hospital group purchasing organizations, or GPOs.” Zweig writes: ”GPOs control buying for up to $300 billion annually in drugs, devices and supplies for some 5,000 acute care hospitals. Under their ‘pay-to-play’ scheme, these cartels award suppliers exclusive contracts in return for outrageous fees, thereby reducing the number of manufacturers to one or two for many drugs and crippling the ability of others to maintain quality. The result: shuttered plants and skyrocketing prices.”

5. Finally, at Hyman, Phelps & McNamara’s FDA Law Blog Kurt Karst crunches the numbers and concludes that 2013 ”was an across-the-board record breaking year for orphan drugs.”  Also at the FDA Law Blog, this teaser: “Later this week, we’ll be posting an FDA-related crossword puzzle written by Jeffrey N. Gibbs and Etan J. Yeshua as part of a celebration of Hyman, Phelps & McNamara, P.C.’s 34th anniversary earlier this month.  Be prepared!  While it may not be The New York Times Crossword Puzzle, it’s difficult!”

States Tackle Biosimilar Substitution

While the Food and Drug Administration (FDA) and the Federal Trade Commission contemplate the wide-ranging implications of recent legislation creating an abbreviated approval process for biologic products, states are busy tackling issues of pharmacist substitution.  The current implementation debate at the federal level focuses chiefly on the scope of scientific and technical assessments and the impact on market competition.  However, two aspects will prove essential for determinations of access to and costs of the resulting products: how the biologic products are to be named, and whether pharmacist substitution is appropriate.  The FDA has thus far sidestepped the naming question because of the nascent state of the pathway development and lack of tangible products, while states are just beginning to confront the issue of how to extend or adapt their pharmacist substitution laws.  As this abbreviated pathway develops and biosimilar and interchangeable biologics begin to enter the market, product identification and substitutability will have tremendous ramifications for physicians, patients, and payors.  Recognizing these issues, five states have enacted laws governing substitution practices for biologics, and legislation has been considered in over a dozen more. 

The Biologics Price Competition and Innovation Act of 2009, embedded within the Patient Protection and Affordable Care Act, grants the FDA the authority to implement an abbreviated approval pathway to market for new versions of existing biological products that have the same clinical indication, route of administration, dosage form, strength, and mechanism of action. Two tiers of biosimilarity are laid out in the BPCIA: biosimilarity and interchangeability.  Biosimilarity means the biosimilar biological product is “highly similar” to the reference product where no clinically meaningful differences exist in terms of safety, purity, and potency. 

Interchangeability requires that the product is biosimilar and the product can be substituted for the reference product without intervention of a prescribing health care provider.  An applicant must demonstrate the product will provide the same clinical result as the reference product in any given patient and that when “administered more than once to an individual, the risk in terms of safety of diminished efficacy of alternating or switching between use of the biological product and the reference product is not greater than the risk of using the reference product without such alteration or switch.”  The specific provisions can be found here.   This level of interchangeability is where state substitution laws come into play.  The statute leaves it to individual states to determine as a matter of state law whether an interchangeable product will be able to be substituted for a reference biologic and what requirements are associated with that substitution. 

Although all 50 states currently have statutes addressing generic drug substitution, these statutes do not apply to biologics, which are regulated by the FDA under a different federal statute.  Generic status is imparted by the FDA through therapeutic equivalence ratings, which connote that the generic product is bioequivalent, meaning for all purposes the same as, the reference product.  The laws vary state-by-state.  Some states, such as New Jersey, are “positive formulary” laws, where generics that may be substituted are identified in a formulary; other states, such as Minnesota, are “negative formulary” laws, where drugs that cannot be substituted are identified in a formulary.  However, when the physician indicates on the script that the drug is not to be substituted, typically with “may not substitute,” “dispense as written,” or similar language, the pharmacist is not allowed to dispense a generic.  If “brand only” is not indicated by the prescribing physician, thirty-six states have laws framed as allowing generic substitution, while the remaining fourteen are framed as mandating generic substitution.  Many laws also provide that there must be patient notification or consent to the substitution or that the drug dispensed by the pharmacist is less or equal price to the prescribed drug.  For a discussion of these laws, see here.

Legislation regarding substitution of interchangeable biologic products has been introduced in at least 18 states over the last few years and has passed in Florida, North Dakota, Oregon, Utah, and Virginia  Other states considering legislation were Arizona, Arkansas, California, Colorado, Delaware, Illinois, Indiana, Maryland, Massachusetts, Mississippi, Pennsylvania, Texas, and Washington.  California’s bill was initially approved by both the House and Senate and subsequently vetoed by the Governor.  The FDA Law Blog posted a useful state legislation scorecard back in September 2013, though it has not been updated.

Basic elements of the bills include a requirement for pharmacists to notify prescribers and/or patients that the interchangeable biologic has been dispensed within a certain timeframe; record-keeping requirements on the part of prescribers and pharmacists for a certain period of time; the right for the prescriber to prohibit substitution; the right for patients to refuse an interchangeable product; and a requirement that the state Board of Pharmacy will maintain a list of interchangeable biosimilars.  The laws passed in Oregon, Virginia, and Utah also include a sunset clause of two years for the pharmacist notification provision.  A comparison of these five laws is represented in Figure 1; parenthesis within the columns denotes the relevant section of each bill.

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