FDA Law Blog: HHS OIG’s Latest Work Plan: What to Look Out for in FY2017

FDA Law Blog: HHS OIG’s Latest Work Plan: What to Look Out for in FY2017

HHS OIG’s Latest Work Plan: What to Look Out for in FY2017 Posted: 22 Nov 2016 08:22 PM PST By Serra J. Schlanger – The Department of Health & Human Services Office of Inspector General (“HHS OIG”) recently released its work plan for fiscal year 2017.  The annual work plan summarizes what HHS OIG plans to review during the upcoming year as part of its mission to protect the integrity of the Department of Health & Human Services and the Federal health care programs.  It is unclear whether HHS OIG’s priorities will change with the new administration; however, the work plan still provides insight into areas of potential concern.  Although much of the work plan focuses on health care providers (e.g., hospitals and home health agencies), below we’ve highlighted a few areas of interest for other players in the health care industry. Medical Devices HHS OIG is planning to review the “Medicare Costs Associated with Defective Medical Devices” as well as “Payment Credits for Replaced Medical Devices That Were Implanted.” Each of these areas of interest are related to the costs associated with defective or recalled medical devices and whether the Medicare program is properly paying for services associated with the replacement of such devices. Clinical Diagnostic Laboratory Tests Section 216 of the Protecting Access to Medicare Act of 2014 (PAMA) requires CMS to replace the current system of determining payment for Medicare Part B clinical diagnostic laboratory tests. Pursuant to PAMA, HHS OIG plans to conduct an analysis of the top 25 laboratory tests by Medicare payments to monitor the implementation of the new Medicare payment system for these tests. Open Payments Reporting The work plan includes two items related to the Physician Payment Sunshine Act and the Open Payments website. HHS OIG plans to analyze the 2015 data from the Open Payments website to determine the number and nature of financial interests.  Following this analysis, HHS OIG will determine how much Medicare paid for drugs and durable medical equipment ordered by physicians who had financial relationships with manufacturers and group purchasing organizations. In a separate analysis, HHS OIG plans to determine the extent to which data in the Open Payments website is missing or inaccurate, the extent to which CMS oversees manufacturers’ and group purchasing organizations’ compliance with data reporting requirements, and whether the required data for physician and teaching hospital payments are valid. Prescription Drugs HHS OIG has identified a few new areas of interest related to prescription drugs. HHS OIG is concerned about the “Drug Waste of Single-Use Vial Drugs” and hopes to identify examples of single-use-vial drugs where a smaller vial size could significantly reduce waste.  HHS OIG also plans to examine “Potential Savings from Inflation-Based Rebates in Medicare Part B” by determining, for a sample of 50–100 Part B drugs, the amount the Federal Government could potentially collect from pharmaceutical manufacturers if inflation-indexed rebates were required under Medicare Part B as they are under the Medicaid Drug Rebate Program. In the Medicare Part D context, HHS OIG plans to assess “Medicare Part D Rebates Related to Drugs Dispensed by 340B Pharmacies” and billing for topical compounded drugs. HHS OIG also plans to review increases in the prices for brand-name drugs by evaluating the rate of change in pharmacy reimbursement under Part D and the rate of inflation from 2011 to 2015. FDA The HHS OIG work plan also includes a short section for FDA-related reviews. HHS OIG states that “[a]reas of particularly high risk include food safety, drug compounding, a complex drug supply chain, and improper marketing activities.”  New and expanded FDA reviews may include “investigations of fraud and misconduct at FDA facilities; oversight of blood establishments and laboratory-developed diagnostic tests; management of IT modernization initiatives; hospital contracting with compounding pharmacies that have registered with FDA, and prescription drug user fees.”  HHS OIG identified eight FDA-specific reviews for the upcoming year. A new area of HHS OIG review related to “Hospitals’ Reliance on Drug Compounding Facilities” will determine the extent to which hospitals obtain compounded sterile preparations from compounders and the extent to which these compounders have registered with the FDA as outsourcing facilities. HHS OIG identified two revised plans to review networked medical device cybersecurity. In one review HHS OIG will examine FDA’s premarket review of the cybersecurity controls of networked devices.  In a separate analysis, HS OIG will examine FDA’s plans and processes for timely communicating and addressing a networked medical device cybersecurity compromise. HHS OIG also plans to continue its review of FDA related to prescription drug user fees, the registration and listing of tobacco establishments under the Tobacco Control Act, domestic and imported food recalls, inspections of domestic food facilities, and drug traceability and the security of the drug supply chain.

CPSC Magnet Ban/Standard Vacated by 10th Circuit Posted: 22 Nov 2016 04:20 PM PST By Riëtte van Laack – This case concerns small, high-powered magnet sets that users can arrange and rearrange in various geometric shapes. They were once a popular product, marketed as an adult desk toy and for making art works.  The magnet sets consit of 100-200 magnets that have diameters of approximately five millimeters and are unusually powerful. The Consumer Product Safety Commission (CPSC) got involved because of reports of injuries of children swallowing the tiny magnets. (The primary purpose of the CPSC is “to protect the public against unreasonable risks of injury associated with consumer products.”). The CPSC took several actions to remove the product from the market, including recalls and a rule setting a standard that would effectively ban the sale of this type of magnets. Apparently, most of the companies marketing this type of magnets discontinued the sale of the products in the United States. One company, however, Zen Magnets, LLC (“Zen”), refused to do so and challenged CPSC’s standard. On November 22, the Court of Appeals of the 10th Circuit vacated the rule setting the standard. The opinion provides a detailed history of the events surrounding the marketing of these magnets. Briefly, in 2011, the CPSC began evaluating whether this type of magnets complied with a standard by the American Society for Testing and Materials (ASTM) for children’s toys and concluded they did not; the magnet sets marketed by Zen and others were ten times more powerful—or, alternatively, six times smaller—than permissible under the toy standard. In response to notices of noncompliance and a variety of enforcement actions, a number of companies discontinued the marketing of magnet sets that did not meet the ASTM standard. However, the ASTM standard was for products marketed to children younger than 14 years of age. To get at all magnet sets including those marketed to adults, CPSC issued a rule setting a standard for the size and strength of all magnets. The standard was the same as the ASTM standard but was not limited to magnet sets designed or marketed as toys for children under fourteen years of age, but rather applied to all magnet sets that are“[a]ny aggregation of separable magnetic objects that is a consumer product intended, marketed or commonly used as a manipulative or construction item for entertainment” without age limitation. Zen challenged this final rule as not meeting the requirements under the Consumer Product Safety Act (CSPA) for a variety of reasons. Specifically, under the CSPA, 15 U.S.C. § 2058(f), the CPSC may promulgate a safety standard only if it reaches and articulates several conclusions, including: “that the rule . . . is reasonably necessary to eliminate or reduce an unreasonable risk of injury”; that the . . . rule is in the public interest”; “that the benefits expected from the rule bear a reasonable relationship to its costs”; and “that the rule imposes the least burdensome requirement which prevents or adequately reduces the risk of injury for which the rule is being promulgated.” The court concluded that the CPSC lacked substantial evidence demonstrating that the rule is necessary to avoid an unreasonable risk. The court also concluded that the CPSC had failed to address the “public’s need for the sets as scientific and mathematics education and research tools, and the rule’s probable effect on magnet sets’ availability and usefulness for those purposes.” Without such information, it is not possible to do a proper cost benefit analysis. As a result, the court vacated the standard and remanded the case to the CPSC. Judge Bacharach dissented.  In light of the dissent, a CPSC request for a re-hearing (before the same panel and/or rehearing en banc) appears likely.