Senator Klobuchar Introduces Sweeping Omnibus Antitrust Reform Legislation

U.S. Senator Amy Klobuchar (D-MN), the lead Democrat on the Judiciary Subcommittee on Antitrust, Competition Policy and Consumer Rights, recently introduced sweeping proposed legislation targeting antitrust reform. 

According to her office’s release, the Competition and Antitrust Law Enforcement Reform Act  will strengthen regulator oversight tools, reform enforcement and strengthen prohibitions on anticompetitive mergers and conduct. 

Specifically the bill seeks to accomplish the following:

• Increase enforcement resources

• Strengthen prohibitions against anti competitive mergers

• Prevent harmful dominant firm conduct

• Establishes a new, independent FTC division to conduct market studies and merger retrospectives 

• Implement additional reforms to enhance antitrust enforcement

Interestingly, the  The bill also clarifies that the law applies not only to monopoly power, but also to monopsony power, a company's power as a buyer or employer in the market.

There have been several mergers and acquisitions over the years that have raised questions about the long term effects of specific sectors, but the fears of a more aggressive regulator has not been of concern until now. 

Lanton Law is a national boutique law and lobbying firm that focuses on healthcare/life sciences, technology and clean energy. Contact us today to learn about your organization’s options to prepare for additional regulatory antitrust oversight.

Surprise Medical Billing Law Takes Effect January 1, 2022

The No Surprises Act was quietly a part of the omnibus spending bill that was signed into law on December 27, 2020 has caught several people by surprise (no pun intended). The law was created with the goal of shielding patients from receiving surprise medical bills after an emergency room or provider visit. Any disputes would now be left to their plan and provider to resolve via arbitration. 

Prior to the enactment of the No Surprises Act, state balanced billing laws have been debated throughout state legislatures, especially in 2020 when more patients were being admitted to hospitals during the start of the pandemic. According to the Commonwealth Fund: 

“Balance bills” primarily occur in two circumstances: 1) when an enrollee receives emergency care either at an out-of-network facility or from an out-of-network provider, or 2) when an enrollee receives elective nonemergency care at an in-network facility but is inadvertently treated by an out-of-network health care provider. Since the insurer does not have a contract with the out-of-network facility or provider, it may decide not to pay the entirety of the bill. In that case, the out-of-network facility or provider may then bill the enrollee for the balance of the bill. No federal law currently limits this practice, but 32 states have enacted laws to protect enrollees from it.” Click here for more on their analysis. 

If you are an insurer, employer, health system/hospital, physician or air ambulance operator, your interests are definitely impacted by this law. 

Lanton Law is a national boutique law and lobbying firm that focuses on healthcare/life sciences and technology. 

With a law this new and complex, ensuring compliance will be key. Lanton Law is an expert in healthcare regulatory compliance and has tools to help. Contact us today for answers to your questions.

Lanton Law quoted in Bloomberg Law Article

We were quoted in Bloomberg Law’s article titled “States Risk Losing Power to Regulate Pharmacy Drug Middlemen” by Lydia Wheeler. The article discusses the pros and cons of Rutledge v. PCMA, which is currently being debated at the Supreme Court.

For those that have trouble accessing the article we have provided it below.

States are going to have a hard time controlling the cost of prescription drugs if the Supreme Court broadens a federal law prohibiting states from regulating employee benefit plans.

A challenge to an Arkansas law meant to protect independent pharmacies from abusive reimbursement practices of rate-setting pharmacy middlemen is testing the bounds of the Employee Retirement Income Security Act. A decision striking down Arkansas’s law could cripple state efforts to control the cost of prescription drugs and other health-care services. That could lead to a flood of litigation challenging dozens of similar laws in other states, health policy experts say.

“This is really the tip of the iceberg because states are trying to control drug costs in all kinds of different ways,” said Katherine Gudiksen, a senior health policy researcher at the Source on Healthcare Price and Competition, a project of the University of California Hastings College of Law.

The case could be one of the first decided by the Supreme Court this term. Arguments were heard Oct. 6.

Drawing the Line 

Arkansas’s fighting to save its law, which regulates the rates at which pharmacy benefit managers reimburse pharmacies for drugs and gives pharmacies a right to appeal the rates they set.

The U.S. Court of Appeals for the Eighth Circuit held the law was preempted by ERISA, which prohibits states from passing laws that reference an ERISA plan or have an impermissible connection to an ERISA plan. But Arkansas argues pharmacy reimbursement regulation is basic rate regulation, which the Supreme Court has ruled isn’t preempted by ERISA.

“It’s hard to see how a law that directly affects benefits claims processing isn’t central to ERISA plan administration,” said Stacey Cerrone, a principal in the New Orleans office of Jackson Lewis PC.

“The court is struggling on where to draw the line with preemption,” she said.

Patchwork of State Laws

A win for Pharmaceutical Care Management Association (PCMA)—the trade group for PBMs that’s aggressively fighting this law and others—would likely open the door for more legal challenges. Laws regulating PBMs have passed in 36 states.

“There’s no agency that oversees federally a pharmacy benefit manager,” said Ron Lanton, principal at Lanton Law, which helped lobby for some state PBM laws. “That’s the problem, so the states have had to come up with their own solution on how to regulate this problem.”

But PCMA argues Congress set out to create a uniform set of standards in administering ERISA plans, which include most private sector health plans. The trade group said employers will have to spend more money on administrative services and compliance, increasing the cost of care, if laws like the one in Arkansas remain.

“More than 266 million Americans rely on the prescription drug benefits PBMs administer, and now more than ever we’re committed to protecting accessible, affordable health care,” JC Scott, PCMA’s president and CEO, said in a statement after oral arguments in October.

In addition to Arkansas, PCMA has challenged laws in North Dakota, Oklahoma, and Iowa in recent years.

The trade group has been successful in winning challenges in the Eighth Circuit. The appeals court ruled Iowa’s law and two North Dakota lawsare preempted by ERISA. Iowa’s law regulates how PBMs establish generic drug pricing, and requires certain disclosures on their drug pricing methodology. North Dakota’s laws regulate the fees PBMs can charge pharmacies. North Dakota officials have appealed the court’s decision to the Supreme Court.

In July, a federal judge blocked part of Oklahoma’s law. PCMA filed an appeal to the U.S. Court of Appeals for the Tenth Circuit, which it later had dismissed. The case is still playing out in the district court.

Lanton, who represents independent pharmacies, said his clients hope the Supreme Court provides some uniformity to what’s become a patchwork of state laws. He’s also hoping for a clear definition of what a pharmacy benefit manager is and isn’t.

“It comes down to this split in the court of whether or not the court sees a pharmacy benefit manager as an insurer that provides benefits or as an administrator that simply regulates reimbursement and cost.”

Market Power 

The three largest PBM companies are OptumRx, a subsidiary of UnitedHealth Group; CVS Caremark, a subsidiary of CVS Health; and Express Scripts, a subsidiary of Cigna Corp. They control 85% of the market share for PBM services, according to the National Association of Specialty Pharmacy’s brief in support of Arkansas.

That market power gives health plans very little bargaining power, said Erin Fuse Brown, director of the Center for Law, Health and Society at Georgia State University College of Law.

PBMs say they use their size and power to negotiate discounts with the pharmaceutical manufacturers, but it’s not clear they’re passing along those savings to the health plans, she said.

The case is Rutledge v. Pharm. Care Mgmt. Ass’n, U.S., No. 18-540.

To contact the reporter on this story: Lydia Wheeler in Washington at lwheeler@bloomberglaw.com

To contact the editors responsible for this story: Fawn Johnson at fjohnson@bloombergindustry.com; Brent Bierman at bbierman@bloomberglaw.com

Lanton Law Quoted in Law360 Article Titled "High Court PBM Case Could Be Turning Point In 20-Year Fight"

Lanton Law was again quoted in Law360’s article titled “High Court PBM Case Could Be Turning Point in 20-Year Fight.” The article can be found here. For those having trouble finding the article written by Emily Brill we have provided it below:

Law360 (October 13, 2020, 8:47 PM EDT) -- Last week's U.S. Supreme Court arguments over Arkansas' attempt to regulate how much middlemen called pharmacy benefit managers reimburse pharmacies for drugs on insurers' behalf could mark a turning point in a broader legal fight that's been playing out for 20 years.

Here, Law360 brings you up to speed on what led to the pending high court showdown between the Pharmaceutical Care Management Association and the Natural State.

The Laws Come Down

Pharmacy benefit managers have assumed an increasingly large role in the health care landscape since the first PBM arose in 1968.

These companies started as third-party administrators, processing patients' prescription drug claims on behalf of health insurance plans. Over the years, though, PBMs have launched drug formularies, pharmacy networks and their own mail-order pharmacies as the industry has grown, and the largest PBMs have integrated with insurers in multibillion-dollar deals.

"They've always been a partner to the insurer, but now they're a crucial extension of the insurer," said Ron Lanton, an attorney and lobbyist who specializes in health care law. "The PBM has grown to this huge marketplace player — determining who's the provider in their networks, setting the prices for insurance reimbursement."

Today, PBMs have a hand in most aspects of prescription drug dispensing, from how much consumers pay and how much pharmacies are reimbursed to where patients get their drugs and whether they receive name-brand or generic versions.

PBMs have drawn praise for saving consumers and plan sponsors money, but they've also met criticism, particularly from pharmacists, who say PBMs routinely reimburse their own mail-order pharmacies at much higher rates and thus drive local pharmacies out of business.

"PBMs are not only managing benefits for their clients — they're actively competing in the networks they manage," said Linda Clark, a partner at Barclay Damon LLP. "That's the fundamental optical conflict of interest that's in play. And as a result, many states have attempted to even the playing field."

States have been attempting to regulate PBMs since at least 2003, passing laws that primarily target the industry's pricing and reimbursement practices. Today, all but three states have some legislation on the books impacting PBMs, according to the National Community Pharmacists Association.

Much of that legislation has arrived recently. An influential model bill released in December 2018 by the National Council of Insurance Legislators inspired the introduction of between 250 and 300 pieces of PBM reform legislation around the country in 2019, according to the NCPA.

Another model bill from a different insurance regulators group is in the works, with the National Association of Insurance Commissioners releasing a first draft in July after working on the policy for a year. The model bill proposes requiring PBMs to get licensed and banning practices such as self-dealing and retroactive payment reductions to pharmacies.

The Suits Flood In

PBMs have not sat idly by as states have tried to regulate them. They've met lawmakers' bills with aggressive lobbying and sued a half-dozen states that adopted PBM reform legislation.

"A lot of times when there are regulations in states proposed to provide some kind of oversight, the PBM lobby tends to get very aggressive," Lanton said. "I've directly lobbied on a lot of these issues, so I've come face to face with what they've been saying to legislators."

The PBM industry's lobbying group, the Pharmaceutical Care Management Association, began suing states over their PBM laws in the early 2000s. The first suit arose in Maine, a challenge to a law that required PBMs to disclose their payments from pharmaceutical companies and forbade them from switching patients to more expensive drugs.

That law survived the PCMA's challenge, with both a Maine federal judge and the First Circuit handing wins to the state and then the U.S. Supreme Court declining to take up the case in 2006. But other jurisdictions have not fared as well in the years since.

Since Maine's win, Washington, D.C., Iowa and North Dakota have been forced to walk back PBM regulations after the PCMA convinced the D.C. Circuit and Eighth Circuit that the laws tread on territory that could only be regulated by the federal Employee Retirement Income Security Act.

Oklahoma could be next, with a court battle playing out in the Tenth Circuit to determine the viability of a PBM law there. An Oklahoma federal judge blocked part of the law in July, ruling some of its language was likely preempted by Medicare Part D.

High Court Joins the Fray

As the Tenth Circuit weighs the legitimacy of Oklahoma's law, the U.S. Supreme Court is considering whether to strike down an Arkansas law in a case with huge implications for the legal fight between states and PBMs.

On Oct. 6, the high court heard oral arguments in the PCMA's challenge to a 2015 Arkansas law requiring PBMs to reimburse local pharmacies at the same rates as their affiliated pharmacies.

If the high court rules that the law flouts ERISA, other state laws could fall on similar grounds, attorneys say.

"There are implications for other state laws based on what happens in this case," said Ben Conley, a partner at Seyfarth Shaw LLP.

Many states have placed their PBM reform plans on hold while waiting on the outcome of the case, Barclay Damon's Clark said. Other states aren't enforcing their PBM laws but would likely start if the Supreme Court rules in Arkansas' favor, she said.

She said her pharmacist clients also have their eyes trained on the high court, waiting on a decision that could have a huge effect on them.

"The decision in this case is really going to define the scope of permissible state regulation of pharmacy benefit manager practices. It's going to define the contours of what states can and can't do," Clark said. "And there could be a lot of nuances in the decision that could affect the impact on state legislation. That's why everybody's watching it so carefully."

The case is Rutledge v. Pharmaceutical Care Management Association, case number 18-540, in the Supreme Court of the United States.

Amazon Launches U.S. Pharmacy Business

Many supply chain stakeholders have been fearing whether Amazon would ever open a retail pharmacy business. There have been traces of this occurring for years from its sporadic applications of pharmacy licenses in various states, to its June 2018 $753 million acquisition of PillPak. However; no coherent plan had come into focus until now. 

Today (November 17) Amazon has launched Amazon Pharmacy. According to the press release: 

“ Amazon.com, Inc. (NASDAQ: AMZN) today announced two new pharmacy offerings to help customers conveniently purchase their prescription medications. Amazon Pharmacy, a new store on Amazon, allows customers to complete an entire pharmacy transaction on their desktop or mobile device through the Amazon App. Using a secure pharmacy profile, customers can add their insurance information, manage prescriptions, and choose payment options before checking out. Prime members receive unlimited, free two-day delivery on orders from Amazon Pharmacy included with their membership. 

Also new today, Prime members can access savings on medications at Amazon Pharmacy when paying without insurance, as well as at over 50,000 other participating pharmacies nationwide. The Amazon Prime prescription savings benefit saves members up to 80% off generic and 40% off brand name medications when paying without insurance. Prime members will have access to their prescription savings at checkout on Amazon Pharmacy, or can learn more at amazon.com/primerx.

Together the Amazon Prime prescription savings benefit and Amazon Pharmacymake it simple for customers to compare prices and purchase medications for home delivery, all in one place. Now, filling prescriptions is as convenient as any other purchase on Amazon’s online store:

• Research Medications and Order Confidently: The same browsing experience customers are familiar with from Amazon makes it easy to discover what medications – including branded and generic versions, and different forms or dosages – are available through Amazon Pharmacy. Before checking out customers can compare their insurance co-pay, the price without insurance, or the available savings with the new Prime prescription savings benefit to choose their lowest price option.

• Seamless Transactions: Customers can add insurance information and ask their prescriber to send new or existing prescriptions directly to Amazon Pharmacy for fulfilment. Purchase is as simple as confirming the request on the Amazon App or website.

• Access Fully Digital, Personalized Quality Care: Customers have online self-service help options combined with phone access to customer care at any time. Friendly and knowledgeable pharmacists are available 24/7 to answer questions about medications.”

Notwithstanding today’s market moving news, we fully expect that our healthcare supply chain will continue to evolve. New players are moving into the sector and are looking for ways to either disrupt the model or have significant influence on reimbursement. To succeed you need to be in the know and planning ahead. 

Lanton Law is a national boutique law and government affairs firm that closely monitors legislative, regulatory and legal developments in the LTC, CBD/hemp, specialty and retail pharmacy space, as well as manufacturers and suppliers. If you are an industry stakeholder with questions about strategy or simply need advice, contact us today.    

Lanton Law Follow Up Interview with Law360

Lanton Law had a follow up interview with Law360 regarding the Rutledge v. PCMA Supreme Court oral arguments on October 6, 2020. Below is a link to the story titled “Justices Eye Arkansas PBM Law’s Impact on Workers.” The story can be viewed here.

If you have trouble accessing the story we have included Emily Brill’s article below.

Justices Eye Arkansas PBM Law's Impact On Workers

By Emily Brill

Law360 (October 6, 2020, 1:50 PM EDT) -- The U.S. Supreme Court on Tuesday focused on whether an Arkansas law's potential costliness to employee benefit plans is enough to place it in conflict with the Employee Retirement Income Security Act, with two conservative justices questioning whether the statute regulating pharmacy benefit managers would end up hurting workers.

Counsel for the Pharmaceutical Care Management Association, the PBM lobby that challenged Arkansas' Act 900, argued that increased plan costs could cause employers to squeeze benefits. Therefore, laws like Act 900 — which could increase plans' costs by increasing PBMs' costs in the form of compliance burdens — pose enough of a threat to workers' benefits that they should be preempted by ERISA, argued Seth Waxman, a partner at WilmerHale.

"Those additional costs, both in terms of reimbursement obligations and plan administration, would manifestly affect how munificent the pharmacy benefits a plan could offer would be," Waxman said.

Arkansas' solicitor general bucked this argument, claiming PCMA's approach to ERISA preemption would spell the end for far more laws than Congress intended to strike down when it stated that ERISA should be the only law regulating employee benefit plans.

"If you accept their position that anytime a regulation imposes cost, that can lead to preemption because it might affect the benefits calculation, that really has no limiting principle," Arkansas Solicitor General Nicholas Bronni said. "It would, frankly, preempt things like state minimum wage laws that have exactly that same effect."

Justice Brett Kavanaugh questioned why increased costs shouldn't be considered an ERISA preemption issue.

"Why shouldn't ERISA care about costs that are going to be increased and then passed on in the form of worse benefits to Arkansas workers?" Justice Kavanaugh asked the assistant to the U.S. solicitor general, Frederick Liu, who argued in support of Arkansas' position.

Liu responded that "increased costs actually don't affect the basic bargain between the plan and its beneficiaries," which was what Justice Kavanaugh had stated that ERISA was designed to protect.

"I totally agree that ERISA was enacted to protect that relationship, but increased costs don't affect the terms of that relationship," Liu argued.

Justice Samuel Alito Jr. questioned whether Act 900, which regulates how PBMs reimburse local pharmacies, would indeed increase costs for employee benefit plans and workers.

"You said that these laws affect the benefits that employees get, but do we know whether that is in fact true?" Justice Alito said. "Assuming they increase the costs for the PBMs, do we know how much of that increase in cost is passed on to plans and beneficiaries, and how much is absorbed by the PBMs?"

Waxman said he didn't "have specific data on this" but knew that "one way or another, in the very short term or the long term, this is going to cost plans more to administer," which would affect "the munificence of the pharmacy benefits that plans feel they can afford."

Arkansas Takes on PBMs

The case the justices heard Tuesday asks them to decide whether Arkansas was allowed to pass a law regulating the rates at which PBMs reimburse pharmacies for prescription drugs.

Critics of PBMs, which manage health insurance plans' relationships with pharmacies, say they're pushing local pharmacies out of business by regularly shortchanging them on prescription reimbursements, while paying PBM-owned pharmacies higher rates for the same drugs.

Those critics — which include pharmacy groups and a coalition of 46 attorneys general — say Arkansas was within its rights in 2015 to pass a law that purported to protect local pharmacies from unfair treatment by PBMs. Act 900, among other things, required PBMs to reimburse at rates at least equal to what pharmacies pay for drugs.

But supporters of PBMs, which include business and insurance trade groups, say Act 900 violated ERISA. They say Congress intended ERISA to be the only law that regulates matters impacting employee benefit plans, so Arkansas' law cannot stand.

In 2017, an Arkansas federal judge agreed with the law's challengers and struck down Act 900. The Eighth Circuit upheld the lower court's decision in June 2018, and Arkansas petitioned the Supreme Court for review in October 2018. The high court picked up the case in January.

Mulling Travelers

Much of Tuesday's debate on whether a law's costliness to benefit plans could trigger ERISA preemption centered on interpretation of the Supreme Court's 1995 decision in New York State Conference of Blue Cross & Blue Shield Plans v. Travelers Insurance Co .

In the Travelers case, the high court upheld a New York law that required hospitals to impose a surcharge on patients with certain types of insurance, including employer-provided health insurance.

The justices ruled unanimously that the law wasn't preempted by ERISA because "it simply bears on the cost of benefits" without "bind[ing] plan administrators to any particular choice," as now-retired Justice David Souter wrote in the opinion.

Bronni argued Tuesday that the justices' logic in Travelers neatly applies to this case, saying that "for the same reason that New York's rate regulation wasn't preempted in Travelers, Arkansas' is not preempted here."

But Travelers left the door open for a law's costliness to trigger ERISA preemption if that statute produced "such acute, albeit indirect, economic effects as to force an ERISA plan to adopt a certain scheme of coverage," as Justice Souter put it in a footnote.

That's what PCMA is arguing could happen here, said Mark Casciari, a benefits attorney at Seyfarth Shaw LLP who watched Tuesday's oral arguments.

"A plan sponsor has to decide what they're going to cover, and this law could have the effect of forcing its hand on those decisions because of onerous administrative burdens," Casciari said. "By regulating costs, the state law is rearticulating the plan terms."

But PCMA's argument could be weakened by the fact it's choosing to pass on those costs to benefit plans, when it could just absorb those costs, said Ron Lanton, an attorney and lobbyist with 15 years of experience in health care law.

When Waxman referenced the footnote in the Travelers decision, Chief Justice John Roberts pointed out that increasing costs for PBMs doesn't necessarily increase costs for benefit plans; that only happens because PBMs set things up that way.

"If the state law produced economic effects as to force the ERISA plan to adopt a certain scheme of coverage, it would, indeed, be preempted," Waxman said.

"Well, it's not the state or the pharmacy's fault that the PBMs have such Byzantine procedures that affect drug prices," Justice Roberts said.

Lanton said he thinks Justice Roberts was "undermining PCMA's argument" with his comment.

"Where they're saying this affects the plan, I think Justice Roberts is saying, 'Yeah, I hear what you're saying, but we're only here because of the way you guys structured this business.'"

Arkansas Attorney General Leslie Rutledge is represented at oral arguments by Arkansas Solicitor General Nicholas Bronni.

The federal government is represented by Frederick Liu of the U.S. Office of the Solicitor General.

PCMA is represented by Seth Waxman of WilmerHale.

The case is Rutledge v. Pharmaceutical Care Management Association, case number 18-540, in the Supreme Court of the United States.

--Editing by Orlando Lorenzo.

Update: This article has been updated with more details from the hearing and further comment.

Lanton Law Quoted in Law360 Article on Rutledge v. PCMA

Lanton Law was quoted in Law360’s article titled “High Court to Weight States’ Ability to Rein in Drug Middlemen,” which was written in response to current developments around the Rutledge v. PCMA case. This case was heard this morning in the U.S. Supreme Court. The article can be accessed here.

We have included Emily Brill’s article from Law360 below in case you have trouble accessing it.

Analysis High Court To Weigh States' Ability To Rein In Drug Middlemen

By Emily Brill

Law360 (October 5, 2020, 7:45 PM EDT) -- The U.S. Supreme Court will hear arguments Tuesday over whether states can control the rates at which local pharmacies get reimbursed for drugs by health insurance plans, a case that could determine whether states can regulate pharmacy benefit managers without getting waylaid by federal benefits law.

Local pharmacists call the case the most significant health care suit the high court will hear this term aside from the one that threatens the Affordable Care Act. The pharmacists say a loss for their side would give pharmacy benefit managers — the middlemen who reimburse pharmacies for drugs on insurers' behalf — a green light to put pharmacies that lack PBM ties out of business.

"The outcome of the Rutledge case will be the tipping point of whether Americans will continue to have access to their local pharmacist or whether that access will go away," said Michael Hogue, the president of the American Pharmacists Association.

The outcome could also affect how far companies can stretch the Employee Retirement Income Security Act's preemption provision, which is often used in court to strike down state and local laws regulating employee benefit plans and related entities.

Here, Law360 breaks down what's at stake and what's being argued in Rutledge v. Pharmaceutical Care Management Association .

What Are the Arguments?

The Rutledge case concerns the viability of a 2015 Arkansas law that attempted to regulate PBMs. The law arrived after lobbying from local pharmacies, which said they would be forced to close if PBMs' allegedly predatory business practices weren't reined in.

Chief among those practices was PBMs' refusal to pay local pharmacies for drugs at the same rates that they paid their affiliated pharmacies, local pharmacists said. This practice led to local pharmacies consistently getting shortchanged on prescription reimbursements, making it difficult to stay in business, the pharmacists said.

In response to these concerns, Arkansas passed Act 900, which required PBMs to reimburse local pharmacies at the same rates as their affiliated pharmacies. But shortly after the bill became law, the PBM industry slapped the state with a lawsuit alleging that Act 900 was preempted by ERISA.

The suit, filed by the PBM industry lobbying group the Pharmaceutical Care Management Association, argued that Act 900 regulated business dealings that were central to administering benefit plans and that only ERISA is allowed to do that.

An Arkansas federal judge agreed, striking down the law in 2017. The Eighth Circuit upheld the ruling the following year, at which point Arkansas asked the Supreme Court to step in. The justices agreed to take the case in January.

Arkansas has argued that ERISA doesn't stretch as far as PCMA is claiming it does and that the courts are stepping into dangerous territory by accepting the PBM lobby's argument.

"Its approach would ... exempt ERISA plans from any number of generally applicable health-and-safety regulations. And that cannot be the case," Arkansas' attorney general, Leslie Rutledge, wrote in the state's opening brief to the high court.

What's at Stake?

Rutledge v. PCMA has attracted significant attention, drawing amicus briefs from 46 attorneys general and the U.S. solicitor general in support of Arkansas and from a number of employer interest groups in support of PCMA.

The state and federal governments argue that ERISA only preempts health care regulations that have an impermissible reference to employee benefit plans, which the Arkansas law does not.

Allowing PCMA to succeed in its argument could endanger states' ability to regulate health care, which could have dire consequences, the officials argued.

A ruling in favor of PCMA would also allow PBMs to operate essentially free of oversight, continuing business practices that have already bankrupted far too many local pharmacies, the pharmacists' groups argued.

If the Supreme Court upholds the Eighth Circuit ruling, "there's really nothing stopping a PBM from doing whatever it wants," said Ron Lanton, an attorney and lobbyist who specializes in health care law.

"It would be great if the Supreme Court ruled for Rutledge because then we won't have chaos," Lanton said.

But PCMA argues that a ruling in Rutledge's favor would create chaos for the PBM industry, subjecting it to a patchwork of state laws that would complicate the process of working with employee benefit plans that operate across state lines.

This argument gained PCMA the support of groups that represent employers and their benefit plans, such as America's Health Insurance Plans, the Society for Human Resource Management and the American Benefits Council.

"It was delicate for us to weigh in on because oftentimes there's no love lost between employers and PBMs," said Ben Conley, a partner at Seyfarth Shaw LLP who helped author SHRM's amicus brief. "But at the end of the day, employers want to pay less. They want the flexibility to design their plans in a manner that allows them to do so."

A win for Rutledge "could be seen as chipping away at ERISA preemption, which large, multistate employers view as of the utmost importance because it impacts their ability to design a uniform, nationwide plan," Conley said.

PCMA also argued that it has been unfairly vilified by local pharmacists, saying they have overstated the damage PBMs have done.

"The fact is the current state of independent pharmacies in the U.S. is secure," PCMA spokesperson Greg Lopes said in an emailed statement to Law360. He added that by attacking PBMs, local pharmacies are going after "the only entity in the prescription drug supply chain that is fighting to reduce drug costs for patients."

Counsel

Arkansas is represented by Leslie Rutledge, Nicholas Jacob Bronni and Shawn J. Johnson of the Arkansas Attorney General's Office.

The Pharmaceutical Care Management Association is represented by Michael B. Kimberly, Sarah P. Hogarth and Matthew Waring of McDermott Will & Emery LLP and Seth P. Waxman, Catherine M.A. Carroll, Paul R.Q. Wolfson, Justin Baxenberg, Claire H. Chung and Hillary S. Smith of WilmerHale.

The case is Rutledge v. Pharmaceutical Care Management Association, case number 18-540, in the Supreme Court of the United States.

--Additional reporting by Danielle Nichole Smith. Editing by Jill Coffey.

New York Comptroller finds $605 million in unnecessary costs to the Medicaid program

The New York Comptroller recently released the results of an audit titled “Medicaid Program-Cost of Pharmacy Services Under Managed Care.” The audit covered the period January 1, 2016 to December 31, 2019.

The following outline the key findings of the audit;

• The Department missed opportunities to minimize costs on pharmacy services delivered through Medicaid managed care because Department officials did not take steps to ensure the use of the lowest net cost drugs to the Medicaid program. As a result, for the period January 1, 2016 through December 31, 2019, we estimated $605 million in unnecessary costs to the Medicaid program.

• The Department does not require MCOs to use the most cost-effective drugs to the Medicaid program, nor does it provide MCOs with information or assistance to determine the most cost-effective drugs.

• Medicaid-participating MCOs are required to regularly provide their drug formulary information, as well as information on costs and supplemental rebates (which MCOs did not always provide as required) for all drugs delivered under managed care, but the Department does not review this information to determine if MCO formulary preferences result in the use of the most cost-effective drugs.

The audit gave the following recommendation:

• Conduct timely routine analyses to identify the most cost-effective drugs to the Medicaid program and ensure drug utilization is steered toward drugs with the lowest net cost when medically appropriate.

If you are a healthcare stakeholder with an interest in New York state or do business within New York’s insurance system then you should be aware of this type of scrutiny. The legislature has already enacted a bill that will carve pharmacy benefits out of the Medicaid managed care program beginning in April 2021.

Lanton Law is a national boutique law and government affairs firm that focuses on healthcare and technology. If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today!

Lanton Law to Attend 9/14-9/18 2020 NASP Annual Meeting & Expo Virtual Experience

Lanton Law is proud to be attending the 9/14-9/18 2020 NASP Annual Meeting & Expo Virtual Experience.

We will be giving a presentation on the role of “State & Federal Regulations in Payer Contracting” and Ron Lanton will be serving as Vice Chair of Law Day! Additionally, we will be hosting a panel titled “Interoperability of Health Records: Providing Post-Market Data and Other Valuable Information.”

We are very much looking forward to interacting with our specialty colleagues including Sheila Arquette! Register today at https://lnkd.in/eU2VXaB

New Executive Order Aimed at Pharmacy Benefit Managers (PBMs)

The White House has released an Executive Order titled “Executive Order on Lowering Prices for Patients by Eliminating Kickbacks to Middlemen.” 

“One of the reasons pharmaceutical drug prices in the United States are so high is because of the complex mix of payers and negotiators that often separates the consumer from the manufacturer in the drug-purchasing process.  The result is that the prices patients see at the point-of-sale do not reflect the prices that the patient’s insurance companies, and middlemen hired by the insurance companies, actually pay for drugs.  Instead, these middlemen — health plan sponsors and pharmacy benefit managers (PBMs) — negotiate significant discounts off of the list prices, sometimes up to 50 percent of the cost of the drug.” 

This Executive Order advocates for HHS to complete its prior January 2019 proposed rule aimed at “revising the discount safe harbor to explicitly exclude from the definition of a discount eligible for safe harbor protection certain reductions in price or other remuneration from a manufacturer of prescription pharmaceutical products to plan sponsors under Medicare Part D, Medicaid managed care organizations as defined under section 1903(m) of the Act (Medicaid MCOs), or pharmacy benefit managers (PBMs) under contract with them.”  

Not only does this Executive Order state that discounts offered on prescription drugs should be passed on to patients, but that HHS must confirm publicly prior to finalizing its proposed rule that “that the action is not projected to increase Federal spending, Medicare beneficiary premiums, or patients’ total out-of-pocket costs.”

Lanton Law is a national boutique law and government affairs firm that focuses on healthcare/life sciences, technology and finance. If you are an industry stakeholder with questions about the current landscape or if you would like to discuss how your organization’s strategic initiatives might be impacted by either Congress, regulatory agencies or legal decisions, contact us today. 

National Association of Insurance Commissioners release PBM Model Legislation Draft

The National Association of Insurance Commissioners’ (NAIC) Pharmacy Benefit Manager (PBM) Regulatory Issues Subgroup has released a draft of its model PBM legislation. The model is called the [State] Pharmacy Benefit Manager Licensure and Regulation Act and “it seeks to establish the standards and criteria for the licensure and regulation of pharmacy benefit managers providing claims processing services or other prescription drug or device services for health benefit plans.”

The Task Force began discussion on this issue last year as the proposed model seeks to build on state legislative and regulatory efforts surrounding PBMs. The draft model addresses issues such as PBM licensure, the prohibition of gag clauses, state insurance commissioner enforcement, clawbacks, affiliate compensation and spread pricing to name a few.

A conference call is scheduled for July 16th to discuss this issue further.      

Lanton Law is a national boutique law and government affairs firm that focuses on healthcare and technology. If you are an industry stakeholder with questions about the draft or if you would like to discuss how your organization’s strategic initiatives might be impacted by the NAIC’s actions, contact us today.  

Will Immunity Passports Lead to Future Genetic Discrimination?

There is no need to rehash the harsh societal effects that COVID-19 has had not only on our psychological and financial wellbeing, but also on the vulnerable population’s immune system. Those having to deal with underlying health conditions such as diabetes, obesity, hypertension have been especially at risk, including some young and healthy individuals. As we race to understand the rationale behind why such an erratic disease impacts some but not others, the question that frequently comes up is whether a person’s genes has something to do with becoming infected?

While it seems like we have been discussing gene therapy for some time, understanding how to harness the potential of the human genome is still in the “early innings.” According to the National Human Genome Research it was found that there are about 20,500 genes in human DNA. This information had taken 13 years to find and was completed in 2003. There are so many things to learn about our genes in order to be precise enough to fully realize how we can get to the ultimate improvement in patient outcomes. Unfortunately, it seems as though time is not on our side when needing to understand how our genes play a key role in fighting this terrible disease. It seems like the best thing to mitigate our circumstances until we get a vaccine is how to contain it. From social distancing to contact tracing, one idea that has been gaining steam on re-opening the economy is the possibility of immunity passports. 

So what are immunity passports? The World Health Organization (WHO) states “Some governments have suggested that the detection of antibodies to the SARS-CoV-2, the virus that causes COVID-19, could serve as the basis for an ‘immunity passport’ or ‘risk-free certificate’ that would enable individuals to travel or to return to work assuming that they are protected against re-infection. There is currently no evidence that people who have recovered from COVID-19 and have antibodies are protected from a second infection.”

Currently there is so much fear and mistrust regarding information on COVID-19 that in order for this to work in my opinion, we would have to have certainty in antibody testing, as well as a 100% understanding about how long immunity actually lasts. Aside from a vaccine, this would certainly move economies forward as a way to slowly start to recoup the financial losses we have witnessed worldwide. But could well intentioned things like immunity passports lead to something unintended such as genetic discrimination? 

According to the National Institutes of Health (NIH), genetic discrimination occurs when people are treated differently by their employer or insurance company because they have a genetic mutation that causes or increases the risk of an inherited disorder or they have a familial history of a specific health condition. Surprisingly, this issue could determine whether someone gets hired or fired and could mean the difference between receiving comprehensive coverage.

GINA does provide a solution to genetic discrimination. The Genetic Information Nondiscrimination Act (GINA) provides for protection against this type of discrimination. Title I of GINA prohibits genetic discrimination in health insurance, and Title II prohibits genetic discrimination in employment.

Under the first part of the act, it is illegal for health insurance providers to use or require genetic information to determine whether a person is eligible for coverage. The second part prohibits employers from using a person’s genetic information in making decisions about hiring, promotion, and various other terms of employment.

However, GINA and similar laws do not protect individuals from genetic discrimination under every circumstance, such as an instance in which an employer has fewer than 15 employees. The act also does not apply to those serving in the military or those insured under the Veterans Health Administration or Indian Health Service. Furthermore, the act does not protect against genetic discrimination in other forms of insurance, including life, disability, and long-term care, according to the NIH.

While GINA’s development was designed for genetic discrimination, I believe that we have not yet seen how this law could potentially evolve from its original intent, especially in this circumstance. Constantly looking through both a policy and legal lens, I see potential problems with an immunity passport. While I understand how this is designed to get the economy back on track, how will individuals be judged regarding obtaining an immunity passport. Is this something you will be required to have by an employer? Are there privacy issues that will evolve from having to declare whether you have an immunity passport? Will employees be looked at differently if they have a passport versus those that don’t? Will an employee’s cost of insurance increase because they happened to get COVID-19?

COVID-19 has changed our lives in ways that we cannot yet imagine. As we start transitioning back towards living with this complex disease until there is a cure, our minds are currently undergoing small yet lasting changes that will unconsciously shape the way we make decisions going forward. It is very foreseeable that society will try and mitigate risks to businesses, meaning that it is not unforeseeable that companies may try and understand any genetic risks that may exist to employees. Whether this is the new normal, a threat to privacy or something else remains to be seen. 

*Disclaimer: The information provided in this blog post is an opinion and is for informational purposes only and not for the purpose of providing legal advice. Access to this information does not create an attorney client relationship between Lanton Law and the viewer. You should contact your attorney to obtain advice with respect to any particular issue or problem.

PBM U.S. Supreme Court Case Rescheduled for this Fall

We at Lanton Law along with many other pharmacy stakeholders have been closely monitoring the events surrounding the pending U.S. Supreme Court case of Rutledge v. Pharmaceutical Care Management Association.

We released our first blog about this case in December 2019 and are proud to be quoted in the January 2020 Pharmacy Times article regarding Rutledge.

To refresh the U.S. Supreme Court has provided a brief summary of the facts: 

Thirty-six States have enacted legislation to curb abusive prescription drug reimbursement practices by claims-processing middlemen-known as pharmacy benefit managers (PBMs)-who make money on the spread between the rates at which they reimburse pharmacies and the drug prices they charge health plans. In response, Respondent Pharmaceutical Care Management Association (PCMA), a PBM trade association, has launched a barrage of litigation across the country arguing that state regulations of PBMs generally, and state drug-reimbursement regulations specifically, are categorically preempted by the Employee Retirement Income Security Act of 1974 (ERISA). Disregarding this Court's ERISA precedent (and contrary to the First Circuit's conclusion that PBM regulations are categorically not preempted by ERISA), the Eighth Circuit embraced that argument.

The question presented is “Whether the Eighth Circuit erred in holding that Arkansas's statute regulating PBMs' drug-reimbursement rates, which is similar to laws enacted by a substantial majority of States, is preempted by ERISA, in contravention of this Court's precedent that ERISA does not preempt rate regulation.”

Due to COVID-19 the U.S. Supreme Court has rescheduled arguments for this case to its October 2020 term. 

Lanton Law will continue to monitor the developments around Rutledge v. PCMA and will advise our clients accordingly. If you have an issue that we can assist you with please feel free to contact us.    

Pending Antitrust Actions Could Change Biosimilar Dynamics

I have a new article that was published in the Centers for Biosimilars titled Pending Antitrust Actions Could Change Biosimilar Dynamics. If you have trouble accessing the link above we have provided the article text below:

There are 3 major antitrust actions on the biosimilar scene still pending. These have a long way to go before any court resolution, unless the parties involved settle before then. One is a class-action lawsuit attacking the use of patent thickets and pay-for-delay tactics. The other is a claim alleging anticompetitive contract practices to retain market share for an originator product. Related to the latter, an investigation by the Federal Trade Commission (FTC) remains in progress.

Humira (adalimumab) antitrust litigation (1:19-cv-01873)
United Food and Commercial Workers Local 1500 filed a class-action lawsuit against AbbVie, the holder of patents for its blockbuster drug Humira, claiming a monopoly had been created by AbbVie via its use of patent thickets and pay-for-delay tactics to block less-expensive biosimilars of adalimumab and raise prices for indirect purchasers. One of the main allegations is that AbbVie amassed more than 100 patents to prevent biosimilar versions of Humira from reaching market before 2023. Another main argument is that AbbVie colluded with biosimilar makers by using financial inducements to delay the launching of competitors in the United States while allowing them in Europe. AbbVie denies using these tactics to create a monopoly and contends that the lawsuit threatens to “upend the well-settled balancebetween the patent and antitrust laws.” This case is ongoing.

Pfizer versus Johnson & Johnson (J&J; 2:17-cv-04180) 
Pfizer, the maker of the biosimilar Inflectra (infliximab), has sued J&J for alleged anticompetitive sales practices in regard to the infliximab reference product (Remicade). J&J is accused of using exclusionary contracts to keep the biosimilar out of the market. These contracts allegedly “led to the near total foreclosure of Inflectra and other infliximab biosimilars.” Bundling Remicade with other drugs in these contracts for hospitals and infusion centers was also done in order to retain market control, Pfizer alleges. Rebate penalties for payers and providers are also alleged. This case is in the discovery phase and will be well into 2020.

Walgreens/Kroger versus Johnson & Johnson (2-18-cv-02357)
Walgreens and Kroger sued J&J in 2018 for antitrust regarding its contracts with wholesale distributers purchasing Remicade which inflated its price. The case was dismissed for lack of standing or insufficient connection to and harm from the action challenged. Walgreens and Kroger appealed to the Third Circuit stating that the lower court was wrong in dismissing the case because of anti-assignment provisions between the wholesaler and the plaintiffs. The Third Circuit overturned the lower court ruling stating that the case could go forward in spite of the clause because the claim arises out of federal anti-trust law and not the contract itself. This case will now go back to the lower courts and start over from scratch. More cases like this could arise as distribution contract anti-assignment clauses are common and may have prevented many from suing in the past.

FTC Civil Investigation 

The FTC issued a Civil Investigative Demand (CID) to J&J regarding its contracting practices for Remicade, meaning it is investigating J&J’s contracting practices with respect to the reference product. Although the CID was issued in June 2019, J&J has yet to comment on the investigation. Because the inquiry is in its early phase, it remains unclear whether the FTC will lodge an antitrust suit against J&J. They would need to determine if bundling deals and the rebate practices involved constitute antitrust practices. 

All of this litigation may take years to resolve. If the court judgements do not come down in favor of the product originators, the cases could significantly change how biologics are priced, by either eliminating rebates or forcing payers to place both biosimilar and originator products on formularies

Legislation to Play Significant Role in Drug Pricing Across Specialty Pharmacy

Jennifer Nessel of Pharmacy Times has featured Lanton Law in an article titled “Legislation to Play Significant Role in Drug Pricing Across Specialty Pharmacy.” The article can be read here. In case you have difficulty reading the article, we have featured it below. This article appeared in Pharmacy Times on 2/17/20.

As utilization and drug spending continue to rise, health care providers are looking to resolve key questions that address drug pricing and biosimilar implementation in specialty pharmacy.

Hospital and health systems saw nearly 20% growth in the specialty drug market in 2018, according to Becker’s Hospital Review.2 The diversity of specialty pharmacies has resulted in variability across all operational areas, including tracking adherence, educating patients, dispensing medications, and ensuring drug safety.3

However, although the specialty industry has had a positive impact on health systems’ quality and continuity of care initiatives, the administration of specialty drugs is challenging and highly complex given the number of new therapies and payer requirements.

According to Ron Lanton, III, Esq, principal of Lanton Law and biologics committee chair of the New York State Bar Association, policymakers on the federal level understand that the issue of drug pricing needs to be resolved but they are having a hard time coming to an agreement on how this reform should be done.

The Drug Price Conundrum
Due to the fact that the legislative session has recently begun in many states and in Congress and that it is an election year, it is difficult to determine whether there will be a unifying drug-legislative solution for drug prices.

However, California’s Governor Gavin Newsom (D-CA) has recently proposed that California become the first US state to manufacture its own generic prescription label, with a goal of making affordable medications available to the state’s almost 40 million residents. However, the governor’s proposal has yet to pass the California legislature.

According to Lanton, a manufacturer could leverage its influence over smaller states to stop legislation such as Governor Newsom’s from advancing. However, due to its size and the fact that its policies may influence other state legislatures, California may be a harder market for a manufacturer to confront.

“I [have to] question as to whether California’s efforts would further drive down an already deflated generic drug market and whether California would be able to determine how much it will charge for generics once manufacturing costs, such as raw materials, are concerned. Not to mention how much this is going to cost since that remains unknown at this point in time,” Lanton explained to Directions in Specialty PharmacyTM.  

Although the proposal marks the first state-wide attempt to lower prescription drug prices, there have been attempts within federal legislation to corral drug prices. The Trump administration recently attempted to lower drug costs through its Blueprint to Lower Drug Costs, and the FDA has recently been an advocate for greater generic and biosimilar utilization.

“To date, there has been no silver bullet to deal with rising prescription drug costs. Notwithstanding whether I agree with this plan, I applaud California in trying to solve a problem that refuses to go away quietly,” Lanton said.

Biosimilar Implementation
Specialty drugs, with nearly 700 therapies currently under development for treatment areas such as cancer, hepatitis C virus, HIV, autoimmune disorders, and multiple sclerosis, are expected to claim 9 of the top 10 spots among bestselling drugs in 2020.3 Although specialty drugs have been hallmarked as important treatment options for patients with cancer or other complex diseases, there can be issues surrounding access and affordability.

The cost of specialty medications and the increased adoption of high-deductible health plans have placed a higher financial burden on patients. As out-of-pocket costs increase, including insurance denials, patients are more likely to abandon their treatment plans.4

Biosimilars are potentially more affordable specialty medications for patients with complex disease states. According to Managed Health Executive, biosimilars could bring approximately $250 billion in savings by 2024.3

Pending legislation may have a large impact on biosimilar implementation across the specialty pharmacy landscape. There are several bills that Lanton singled out for the 2020 year1:
 

• HR 4597 Acting to Cancel Co-pays and Ensure Substantial Savings for Biosimilars (ACCESS) Act would eliminate a patient’s co-pay for a biosimilar if they normally would pay full cost of a biologic drug under Medicare Part B. The bill seeks to drive down medical costs by increasing access to lower-cost biosimilar drugs and give Americans more treatment options.

• HR 4629 Star Rating for Biosimilar Act would require the Secretary of Health and Human Services to add a new set of measures to the 5-star rating system under the Medicare Advantage program in order to encourage increased access to biosimilar biological products.

• HR 4913 would require Medicare prescription drug plan (PDP) formularies to include covered generic drugs and biosimilars for which the wholesale acquisition cost is less than that of the reference (ie, brand-name) product. PDP sponsors must also establish specific cost-sharing tiers that apply lower cost-sharing requirements for such covered generic drugs and biosimilars as compared to those for brand-name products. The bill also prohibits PDP sponsors from instituting certain requirements relating to access to such covered generic drugs and biosimilars that are more restrictive than those for brand-name products (eg, prior authorization requirements).

• HR 2375 would prohibit prescription drug companies from compensating other prescription drug companies to delay the entry of a generic drug, biosimilar biological product, or interchangeable biological product into the market.

• S 1681 proposes to educate health care providers and the public on biosimilar biological products. Under this bill, the Secretary shall establish, maintain, and operate a website consisting of educational materials regarding the meaning and use of biosimilar biological products and interchangeable biological products.

Affordable Care Act (ACA) Transition 
On March 23, 2020, the life sciences industry will undergo “the transition,” according to Lanton. Currently, the FDA has and will continue to regulate biologics, but historically the agency regulated biologics as drugs under the Food, Drug and Cosmetic Act instead of as products licensed under the Public Health Service (PHS) Act.

“In order to bring all biologics under the same legal and regulatory system, the Biologics Price Competition and Innovation Act of 2009 found in the ACA included the ‘Deemed to be a License’ provision,” Lanton said.

This meant that 10 years after enactment, on March 23, 2020, applicable biologics will automatically be deemed biologics licensed under the PHS Act. Unfortunately, the statute did not provide instructions to the FDA on how to do this, meaning the agency will decide on which products transition and how, according to Lanton.

“This basically means no more new drug applications or abbreviated new drug applications for select biologics, only biologic license applications of the 351(a) and 351(k) varieties. Also, not only will they be categorized as biologic[s], but they will be subject to the biosimilar, not generic competition. Specifically, drugs [to] be transitioned are insulins and other naturally occurring proteins, such as hyaluronidase, human growth hormones, and menotropins,” Lanton said.

Reference

1. Lanton, Ron, III, Esq. Interview with Pharmacy Times [email]. Accessed February 11, 2020.

2. 5 Trends Health System Pharmacies Can Expect in 2020. Becker’s Hospital Review. Published December 9, 2020. https://www.beckershospitalreview.com/pharmacy/5-trends-health-system-pharmacies-can-expect-in-2020.html. Accessed February 12, 2020.

3. Biologics Build Oncology Drug Pipeline. Managed Healthcare Executive. Published November 1, 2019. https://www.managedhealthcareexecutive.com/news/biologics-build-oncology-drug-pipeline. Accessed February 12, 2020.

4. Galante, Dominic. Accreditation Explosion Among Top Specialty Pharmacy Trends. J Clin Pathways. 2018;4(7):35-38. doi:10.25270/JCP.2018.09.00037. Accessed February 12, 2020.

Private Equity Presence Grows in Physician Practices As Well As Congressional Scrutiny

The Changing Market

As the consolidation of independent physician practices continues, one finds that there is a new player in the corporatization of medicine. While hospitals, health systems and insurers continue to make physician practice acquisitions, these entities suddenly find themselves competing against private equity firms.

Several physicians are finding themselves struggling in today’s reimbursement landscape. Whether you are in orthopedics, oncology, dermatology, urology, women’s health and gastroenterology for example, not only are reimbursement pressures much worse than in prior years, but transitioning to value based care has caused these and other physician practices to struggle with acquiring specialized personnel, new workflows and innovative technology.

What is Private Equity?

Private equity firms are backed by money from high net worth individuals, sovereign wealth funds, pensions funds, etc. that seek to invest in specialized sectors for an average return of 20% within 5-7 years. Once these firms take a majority stake in these practices and scale down costs to make the practice efficient, these same firms exit their positions after a short period while the remaining physician owners profit from the resale. The goal is to target a market, region or to create a multi-specialty practice. Besides the goal of financial returns, these firms can use their market clout to negotiate better rates and compete for more contracts with payers. 

To date, there are many questions surrounding private equity firms purchasing physician practices. Do they improve patient outcomes? Do all employees within these new scaled practices work for the private equity firm? What legal liabilities exist for the physicians? Are physicians considered owners or employees in these newly acquired entities? 

Private Equity Transactions Debated by Congress

Transactions such as the ones described above are now being debated by Congress. The House Ways and Means Committee is debating whether transparency is warranted by private equity firm ownership of physician practices. Should these firms have to file disclosures with the Internal Revenue Services (IRS) on Medicare payments, as well as provider rents and mortgages? Additionally, the question of whether an increase in patient surprise billing is the result of private equity ownership is also currently being examined.    

How Can Lanton Law Help?

Lanton Law’s advocacy and legal services  can help physician practices think about your options in this changing marketplace. If your position is not to sell your firm, we can help you with both legal and advocacy options that will assist with better reimbursement and network access. If you are thinking of selling your practice we can help walk you through your strategies. Once you sell, your practice will transition not only operationally, but also how you care for your patients. Not having complete managerial control will likely occur after the transaction so making sure that you sell to the right stakeholder is crucial. Contact us today for more information.  

What Is Medicare for All?

Healthcare Policy Update 

What is Medicare for All? 

As the Democratic primary heats up, we believe it is fitting to examine one of the most discussed topics of the campaign season: healthcare. Since last year, we have witnessed an increased debate on whether the country should move towards Medicare for All. But what is this program? 

The idea of a single national health service began in 1912 with President Roosevelt and has evolved over time. Today, this idea is being championed as Medicare for All by Sanders (D-VT) as he is the primary sponsor for S. 1129 titled the Medicare for All Act of 2019. The House also has a companion bill sponsored by Representative Jayapal (D-WA) also known as H.R. 1384.  

In addition to making healthcare a human right, the proposed bill will create a single national health insurance plan for every American. All public insurance plans such as Medicaid, Medicare, the Children’s Health Insurance Plan (CHIP) individual health insurance plans and employer-sponsored health insurance plans would be phased out. However; some federal programs like the Veterans Health Administration and Indian Health Service would continue.

The plan would cover inpatient and outpatient acute care services, preventative services, emergency services, vision, dental, nursing home, and long term care. Foreseeable out of pocket costs would be for some prescription drugs and elective services. 

Cost-sharing such as copayments, deductibles, and premiums would also go away. It is also foreseeable that taxes will increase depending on individual income levels. Private insurance plans would likely continue to exist offering more specialized options for elective services. Lastly, there would be a four year transition period to the new plan should this be the direction of healthcare.

The Medicare for All bill establishes the following: 

• A national health insurance program that is administered by the Department of Health and Human Services (HHS) 

• Among other requirements, the program must (1) cover all U.S. residents; (2) provide for automatic enrollment of individuals upon birth or residency in the United States; and (3) cover items and services that are medically necessary or appropriate to maintain health or to diagnose, treat, or rehabilitate a health condition, including hospital services, prescription drugs, mental health and substance abuse treatment, dental and vision services, and home- and community-based long-term care.

• The bill prohibits cost-sharing (e.g., deductibles, coinsurance, and copayments) and other charges for covered services, with the exception of prescription drugs. Additionally, private health insurers and employers may only offer coverage that is supplemental to, and not duplicative of, benefits provided under the program.

• Health insurance exchanges and specified federal health programs terminate upon program implementation. However, the program does not affect coverage provided through the Department of Veterans Affairs or the Indian Health Service. Additionally, state Medicaid programs must cover certain institutional long-term care services.

• The bill also establishes a series of implementing provisions relating to (1) health care provider participation; (2) HHS administration; and (3) payments and costs, including the requirement that HHS negotiate prices for prescription drugs and establish a formulary.

• Individuals who are age 18 or younger may enroll in the program starting one year after the enactment of this bill; other individuals may buy into a transitional plan or an expanded Medicare program at this time, depending on age. The bill's program must be fully implemented four years after enactment.
  

What are the risks of this bill? 

At this point, the immediate risks would be to the insurance industry. Companies like CVS Health, Cigna, Centene, Humana, and UnitedHealthcare would face an uncertain reality if Medicare for All actually becomes the law of the land. They would have four years to figure out how they can remain in the market by either moving to coverage for elective services or data services for providers. 

Currently, S. 1129 has 14 co-sponsors while H.R. 1384 has 118 co-sponsors. The House version is a lot stronger than its Senate counterpart, especially since the House usually is less moderate than the Senate regardless of which political party is in power. This law will probably not move forward as the Senate is controlled by the Republicans. This does provide insight into how strong this bill is for 2021, which is especially true depending on if the Democrats are able to hold the House and capture the Senate, the White House or even both. If Bernie Sanders does win the nomination for the Democrats his policy ideas such as Medicare for All will continue to gain momentum. No matter who wins the White House in 2020 there will be changes to the current health system. 

For more information contact:

Ron Lanton III, Esq. 

Principal 

Lanton Law 

rlanton@lantonlaw.com

The materials and information provided in this update is for informational purposes only and not for the purpose of providing legal advice. Use of and access to this article or any of the materials or information contained within this article do not create an attorney-client relationship between Lanton Law and the user or viewer. You should contact an attorney to obtain advice with respect to any particular issue or problem. 

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