The draft rules for the Stark and Anti-Kickback statutes (AKS) seem to have excluded makers of devices, but Meena Datta of Sidley Austin told BioWorld MedTech that while these agencies have plenty of reasons to rethink that notion, the final rules are unlikely to emerge in 2020 simply because of the complexity of the undertaking.

The two agencies of the U.S. Department of Health and Human Services posted the draft rules pertaining to value-based care in October 2019, following an August 2018 request for information from stakeholders. While the final rules may reverse the drafts’ exclusion of makers of devices and diagnostics, device makers were upbeat at the prospect that they could engage in value-based payment arrangements with providers.

WLF says exclusion of device makers not well supported

Among those who sounded off on the rules by the Centers for Medicare and Medicaid Services and the Office of Inspector General (OIG) was the Washington Legal Foundation (WLF), which said in a Dec. 30, 2019, submission to the docket that the exclusion of makers of drugs and devices from the Office of Inspector General draft rule “undermines the proposal’s goal” of shifting to value-based care. WLF’s Glenn Lammi and Richard Samp said the fact that makers of durable medical equipment and pharmaceuticals might abuse any new safe harbors “is an extremely thin reed on which to base” such exclusions.

Samp and Lammi noted that the State of Oklahoma has conducted a value-based program for drug makers and the state’s Medicaid program since 2018, and that two other states have received waivers for similar programs. They also said the OIG rule is self-contradictory in claiming that manufacturers of durable medical equipment (DME) are not involved in the coordination and treatment patients when makers of continuous glucose monitors often provide management services for those patients.

The WLF response noted that while “health technology companies” are eligible under the OIG rule, the draft seemed to distinguish between digital health offerings, which would be eligible, and makers of traditional devices, which could be excluded. Samp and Lammi said the case for excluding all device makers “is as weak, if not weaker,” than the explanation for excluding makers of DME. The argument that makers of devices used for invasive procedures have had to enter into large False Claims Act settlements lacks details, they said, adding that the claim that makers of these devices are not involved in patient care is likewise faulty.

That argument received little support from the Medicare Payment Advisory Commission (MedPAC), which touched on these exclusions only briefly. MedPAC chairman Francis Crosson said the commission had detailed its concerns in a June 2018 report to Congress in which physician-owned distributorships were a source of concern. However, Crosson also alleged that relationships between DME suppliers “and other actors … resulted in widespread beneficiary harassment and substantial increases in Medicare spending for off-the-shelf orthotics.”

‘Traditional’ devices not necessarily non-digital

Datta, the global co-leader of the health care practice at Sidley Austin LLP, told BioWorld MedTech that device makers have provided a substantial number of offerings that would improve care coordination, including telehealth products such as heart monitors. However, Datta said the distinction between makers of “traditional” medical devices and others, such as digital products, is a little ambiguous, given that many hardware devices have digital devices encoded.

Despite the anticipation surrounding the CMS and OIG rules, Datta said, “I’m somewhat doubtful” that the final rules will emerge this year. She pointed out that the rules address two complicated and complex statutes and are closer to novel regulatory frameworks than mere updates to existing regulatory frameworks. The problems with Stark and AKS law touch upon a wide range of stakeholders, too, and thus there may be no practical way to sort through all the different priorities before the election in November, even if the department’s ambition were limited to the posting of an interim final rule, she said.

The need for new rules regarding Stark law could conceivably be eased if CMS more frequently issued advisory opinions, but Datta said CMS has issued fewer than 15 such opinions since 1998. She pointed out that Stark law is a strict liability statute and thus “there is no wiggle room” in many instances when False Claims Act allegations are made. She said that while a low volume of requests is likely one cause of the small volume of Stark opinions, it may be that the petitioners are withdrawing those requests as well, although this is uncertain.

“Since 1998, there are fewer than 15 opinions” from CMS regarding Stark law and care coordination arrangements, Datta said. She said that OIG may be wary of allowing providers and device makers to piggy-back onto an opinion regarding an arrangement due to concerns that these other parties may slip into a state of non-compliance.

However, Datta pointed out that another source of drag on this notion is that the OIG advisory opinions are highly fact-specific and thus cannot be readily copied and pasted to another arrangement. OIG leadership may be concerned “that this is a get out of jail free card in a me-too arrangement,” she said.

Datta said it is difficult to conceive that drug makers, in particular, would ultimately be left out, given the pay-for-performance mindset that now accompanies the FDA approval of many of the high-cost biotech therapies. The case for including devices may call for a greater effort by device makers to educate policymakers at the Department of Health and Human Services, although small device makers won’t necessarily suffer for lack of size when it comes to obtaining value-based contracts with providers.

“The way you show yourself as a market differentiator is through showing proof of value of your product,” Datta said, adding that providers have little choice but to listen to a device maker’s argument, given that providers are obliged to be rational about the impact of their decisions on both clinical outcomes and costs.

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