Recent clarifications by Arizona state officials seemingly relaxed restrictions for certain physician practices adhering to the March 21, 2020 executive order prohibiting all non-essential or elective surgeries. Such direction from the governor’s office should give physician groups much needed relief in continuing certain elective procedures, such as those related to pain management services, in outpatient settings.
COVID-19 FAQs for Assisted Living Communities
The CDC’s latest Morbidity and Mortality Weekly Report released Wednesday, March 18, 2020, reiterated that both residents and the workforce of long term care facilities remain most vulnerable to the exposure and spread of COVID-19. According to the Report, “[s]ubstantial morbidity and mortality might be averted if all long-term care facilities take steps now to prevent exposure of their residents to COVID-19. The underlying health conditions and advanced age of many long-term care facility residents and the shared location of patients in one facility places these persons at risk for severe morbidity and death.”
Private Equity in Behavioral Health: Clinical Due Diligence Requires Consideration of EKRA, the New Anti-Kickback Law Applicable to All Payors
Recently enacted federal law expanding criminal liability for kickbacks related to all payors, and increased government enforcement activity in behavioral health (see press release), has heightened the importance of clinical due diligence for private equity investors targeting deals and acquisitions in the emerging behavioral health space. PE firms continue to target behavioral health opportunities as federal and commercial insurance coverage expands for mental health, including substance abuse treatment and telehealth services. Such commercial coverage will only become more commonplace after a federal court this month found United Behavioral Health improperly denied benefits for treatment of mental health and substance use disorders to plan participants because United’s guidelines did not comply with the terms of its own insurance plans and state law.[1] PE firms entering the behavioral health market, though, particularly opportunities related to substance abuse treatment and laboratory services, should carefully review a company’s compliance with the Eliminating Kickbacks in Recovery Act of 2018 (“EKRA”).
HHS Targets PBMs But May Exceed Its Legal Authority in Proposed Rule Eliminating AKS Protection for Drug Rebates
The Trump Administration’s latest effort to limit the power of pharmacy benefit managers (“PBMs”) is marred by economic uncertainty and looming legal scrutiny. The Office of Inspector General (“OIG”) within the Department of Health and Human Services (“HHS”) recently released a proposed rule (“proposed rule”) removing safe harbor protection under the Anti-Kickback Statute (“AKS”) for prescription drug rebates (“drug rebates) paid by a manufacturer to Medicare Part D plan sponsors and Medicaid managed care organizations (“MCOs”) or their PBMs. The rule also creates new safe harbor protections for point-of-sale reductions in price and certain PBM services fees.[1] The long-awaited proposed rule follows months of anticipation after the Trump Administration released its May 2018 Blueprint to reduce prescription drug costs.[2]
PBMs in Brief
PBMs, on behalf of health plans, employers, and other entities, negotiate and contract with drug manufacturers to obtain rebates on prescription drugs dispensed to health plan members. By aggregating their collective scale and purchasing power of all health plan or employer group clients, PBMs can negotiate better deals with the manufacturer than any one plan or group operating independently. Rebates are typically negotiated on brand-name drugs that compete with therapeutically-similar brands and generics. These retroactive rebates (after point-of-sale) are based on a multitude of factors, including a drug’s placement in a plan formulary designed by the PBM, and the PBM’s power to increase a manufacturer’s market share for specific drugs by inclusion on a formulary. A manufacturer may provide a greater rebate if its product is included in a “preferred” position on the PBM formulary.