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A chance for pharmacies to showcase health care services

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Christopher Smith

On October 17, 2019, the Department of Health and Human Services Office of Inspector General (OIG), published a Proposed Rule providing for new safe harbors under the Anti-Kickback Statute and civil monetary penalty (CMP) law for certain value-based arrangements between various health care stakeholders. The comment period closed on December 31, 2019, and OIG received 332 comments. Although the Proposed Rule would protect the participation of many types of providers, payors and other health care industry stakeholders in value-based arrangements, OIG proposed to exclude certain types of entities from such protection, including manufacturers, distributors, and suppliers of durable medical equipment, prosthetics, orthotics or supplies (DMEPOS); drug manufacturers; and laboratories. In addition, OIG questioned whether pharmacies, pharmacy benefit managers, and drug wholesalers/distributors also should be excluded from protection under the new value-based safe harbors. Stakeholders who did not submit comments on the Proposed Rule or in response to OIG’s Solicitation of New Safe Harbors and Special Fraud Alerts may wish to look for alternative ways to engage with OIG, and to educate OIG about the services they provide and the contributions they can make in connection with value-based arrangements.

Proposed value-based safe harbors

Jennifer Michael

In the Proposed Rule, OIG proposed several new safe harbors, including three for value-based enterprises (VBEs). The general concept behind all of the value-based safe harbors is for VBE participants to collaborate and develop arrangements to provide value-based activities to target patient populations. Value-based activities include providing items or services that are reasonably designed to coordinate and manage the care of a target patient population, improve the quality of care for a target patient population, reduce costs without compromising quality, or transition health care delivery mechanisms based on volume to mechanisms based on value. VBE participants are those who are part of a VBE and provide at least one value-based activity.

The VBE safe harbor that potentially is the most salient to pharmacies is the Care Coordination Arrangements to Improve Quality, Health Outcomes, and Efficiency Safe Harbor, 42 C.F.R. 1001.952(ee), (the Care Coordination safe harbor). This proposed safe harbor would allow VBE participants to exchange “in-kind remuneration” pursuant to a value-based arrangement, without the requirement to share any downside financial risk. To qualify for protection under the Care Coordination safe harbor, participants would have to establish specific evidence-based, valid outcome measures that likely would advance the coordination and management of care of a target patient population. The value-based arrangement would also be required to have a direct connection to such care.

Alan Arville

The Care Coordination safe harbor would protect only in-kind, non-monetary remuneration, such as the provision of a care coordinator, and the party receiving the remuneration would have to reimburse the offeror for at least 15% of its costs. The remuneration must be funded by a VBE participant, and the value-based arrangement would have to be commercially reasonable and not take into account the volume or value of referrals outside of the arrangement.

The other two proposed safe harbors are the Substantial Downside Financial Risk safe harbor and the Full Financial Risk safe harbor. The former would protect both cash payments and in-kind remuneration exchanged between a VBE and a VBE participant pursuant to a value-based arrangement in cases where the VBE has assumed “substantial downside financial risk,” and the VBE participant “meaningfully shares” in the VBE’s substantial downside financial risk. The latter would protect both cash payments and in-kind remuneration exchanged between a VBE and a VBE participant in cases in which the VBE has assumed “full financial risk,” which OIG has proposed to mean that the VBE is financially responsible for the cost of all items and services covered by the applicable payor for each patient in the target patient population and is prospectively paid by the payor.

OIG noted in the Proposed Rule that an accountable care organization (ACO) could constitute a VBE. To the extent that pharmacies are not excluded as VBE participants in the final rule, the proposed protection under the Substantial Downside Financial Risk and Full Financial Risk safe harbors may incentivize a more active role for pharmacies in ACOs and similar ventures, since shared savings to pharmacies, as VBE participants, could be protected.

Patient engagement
safe harbor

In an effort to promote patient engagement tools that encourage adherence to care protocols, OIG proposed a new “patient engagement and support” safe harbor (the Patient Engagement safe harbor). Under this proposed safe harbor, a VBE participant could provide an in-kind preventive item directly to a patient in a target patient population to advance a treatment or drug regimen, promote adherence to a follow-up care plan, manage a disease or condition, improve health outcomes, or ensure patient safety. This safe harbor would impose a $500 annual aggregate cap, as well as a requirement that the offeror did not know or should not have known that the item would be diverted for other uses than the intended use.

The Patient Engagement safe harbor would allow pharmacies to provide items, such as smartwatches, to patients to help them manage a disease or condition. Current smartwatches can monitor for atrial fibrillation, monitor blood pressure, and transmit patient health data directly to physicians or electronic medical records. This safe harbor would provide pharmacies with an alternative to the CMP “nominal gift” exception, which imposes a more restrictive monetary cap, or the “promotes access to care” exception, which requires that the item provided be tied to a narrowly defined purpose.

Pharmacy participation in VBEs

As discussed above, in the preamble to the Proposed Rule, OIG expressed that it is considering excluding pharmacies as VBE participants. OIG raised concerns that pharmacies, like drug manufacturers, “primarily provide items,” and stated that it is concerned that pharmacies’ participation in value-based arrangements “may not further the care coordination purposes of this rulemaking.” With those concerns in mind, OIG sought comments regarding “beneficial arrangements pharmacies may want to undertake … and any safeguards [OIG] could implement” if pharmacies were included in the definition of a VBE participant.

Alternatively, OIG is considering including certain types of pharmacies as VBE participants, while excluding other types. OIG is particularly concerned with compounding pharmacies, as they believe, based on their enforcement experience, that such pharmacies “may pose a heightened risk of fraud and abuse … and would not play a direct role in patient care coordination.”

OIG’s concerns, and its possible exclusion of pharmacies from the value-based arrangements safe harbors, suggests that pharmacies have an opportunity to educate the OIG regarding the services they provide and the contributions they can make as VBE participants. In addition to dispensing drugs, pharmacies provide significant (and expanding) clinical and medical optimization services that have an essential role in minimizing costs, improving outcomes and reducing adverse events for target populations. For example, pharmacies provide medication therapy management services that involve individualized counseling on the patient’s drug regimens and advising on alternative medications available. To this end, pharmacies play an essential role in managing the care for diabetes, hypertension, cardiovascular disease, asthma, high cholesterol, and other diseases of the chronically ill who take multiple medications.

One example of how pharmacy services fit within a value-based arrangement is through pharmacy networks that coordinate patient care. Such networks offer enhanced pharmacy services as part of a medical home care team through a coordinated care model. The pharmacies within these networks work with doctors and other members of a patient’s health care team to offer coordinated services such as the ones outlined above, with the goal of improving patient health outcomes and reducing health care spending. Pharmacists often are the front line of defense for patients against dangerous medication combinations and battling chronic diseases.

Drug manufacturer proposed exclusion from VBE participation

OIG also proposes to exclude drug manufacturers from the definition of VBE participants in the Proposed Rule, citing concerns that drug manufacturers might misuse the proposed safe harbors to offer remuneration to prescribers to market their specific drug products. Drug manufacturers and the managed care industry had hoped that the Proposed Rule would provide protection for value-based contracting for pharmaceuticals, such as outcomes-based contracts where the cost of a drug is tied to patient outcomes. In the preamble to the Proposed Rule, OIG recognized that pharmaceutical manufacturers, in response to an earlier OIG Request for Information, had requested safe harbor protection for outcomes-based and other value-based contracting practices, as well as for medication adherence and similar programs. OIG also acknowledged “that some pharmaceutical manufacturers may help facilitate care coordination and management of care.” Accordingly, OIG noted in the preamble to the Proposed Rule that it may consider safe harbor protection for manufacturer outcomes-based and value-based contracting in future rulemaking.

PBM and wholesaler/distributors participation in VBEs

As with pharmacies, and with little explanation, OIG is also considering excluding PBMs and wholesalers/distributors as VBE participants. The exclusion of PBMs may prove problematic for, and unpopular with, managed care organizations, which contract with PBMs to administer their pharmacy benefits. Despite considering the exclusion of PBMs as VBE participants, OIG recognizes that “PBMs are increasingly providing services related to the coordination of care for patients.” Accordingly, OIG indicated that it may consider the role of PBMs and wholesalers/distributors in care coordination and management in future rulemaking.

Proposed protection for outcomes-based arrangements

Pharmacies wishing to participate in shared savings arrangements also may look to OIG’s proposed modifications to the personal services and management contracts safe harbor, 42 C.F.R. 1001.952(d). OIG’s proposed modifications to this safe harbor would protect outcomes-based payments made among parties that are collaborating to improve patient quality of care, or to reduce costs to payors while maintaining or improving patient quality of care. As with the proposed value-based safe harbors, the proposed protection would exclude any payments made, directly or indirectly, by manufacturers, distributors or suppliers of DMEPOS, drug manufacturers, and laboratories.

In the preamble discussion, OIG stated that it believed protected outcomes-based payments arrangements largely would mirror the arrangements used in various models operated by the Center for Medicare and Medicaid Innovation, and specifically would encompass examples such as ACO shared savings arrangements, among others. Unlike the Care Coordination safe harbor, the proposed modifications to this safe harbor would require the satisfaction of an outcome measure to receive an outcomes-based payment. The proposed modifications to this safe harbor also would require that the methodology for determining the aggregate compensation (including any outcomes-based payments) paid between the parties be consistent with fair market value and not be determined in a manner that directly takes into account the volume or value of referrals or other business generated between the parties.

Conclusion

As we await the publication of the Final Rule, pharmacies should consider potential opportunities to create value-based arrangements with other health care providers, which may garner protection under the final safe harbors, should pharmacies be included. We recommend that pharmacies reach out to fellow stakeholders to explore possible financial arrangements that will allow pharmacies to promote themselves and grow as recognized service providers, while improving patient care and outcomes. Moreover, should begin thinking about next steps and opportunities to engage with and influence the OIG in the event the Final Rule is unfavorable to pharmacies.

Christopher Smith is a senior counsel in the Health Care and Life Sciences and Litigation & Business Disputes practices in the Washington, D.C., office of Epstein Becker Green. Jennifer Michael is a member of the firm in the Health Care and Life Sciences practice in the Washington, D.C., office of Epstein Becker Green. Alan Arville is a member of the firm in the Health Care and Life Sciences practice in the Washington, D.C., office of Epstein Becker Green.


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