Medical Device Daily Washington Editor

Two members of the U.S. Senate have reintroduced a bill from last year that would boost FDA's ability to inspect foreign drug and device plants by imposing inspection fees on the inspected plants. The wild card in all this – and a potential boon to third-party inspection companies – is that the bill gives nothing more than an elementary rubric for determining those fees.

The Drug and Device Accountability Act of 2009, co-sponsored by Sen. Ted Kennedy (D-Massachusetts), chairman of the Senate Health, Education, Labor and Pensions Committee and Sen. Chuck Grassley (R-Iowa), the ranking member of the Senate Finance Committee, says that companies that require inspections more than once every two years will be hit with higher fees, hence providing an incentive to get operations under control prior to an FDA inspection. Companies that will require inspections less frequently than biennially will find their rates reduced proportionally. However, firms making high-risk devices might argue that this presents them with an undue burden.

In an April 23 statement, Grassley said the bill would also call on the Institute of Medicine to conduct an examination of "FDA's system for clearing and approving devices for marketing," but the bill would also give the agency the power to issue subpoenas. Grassley also said that he found it "troubling that the FDA is grossly under-resourced at a time when foreign production of drugs and active pharmaceutical ingredients is growing at record rates." However, Grassley makes no offer regarding FDA's finances from the federal budget.

Fee schedule proposed for SNFs, LTCHs

The Centers for Medicare & Medicaid Services published a fee schedule last week for skilled nursing facilities (SNFs) and long-term care hospitals (LTCHs), and the proposed rates did not win any fans in industry.

The rule for SNFs would reduce overall payments by $390 million, which comes to a drop of 1.2% compared to payments for the current fiscal year. CMS explains in its May 1 statement that the "adjustment to nursing facility payments is an effort to rebalance an earlier adjustment to the case-mix indexes," which CMS says "was intended to ensure that there would be no change in overall spending levels." However, the change in the case-mix index, which was implemented in 2006, "resulted in a significant increase in Medicare expenditures because" SNFs classified patients into the new, higher-paying groups "more than 30% of the time (as compared to 19% projected by CMS)."

In its March 2009 report to Congress, the Medicare Payment Advisory Commission noted that SNFs enjoyed profit margins of 14.5% in 2007 and recommended that Congress revise the payment schedule for this category of providers and hence "remove the incentive to furnish therapy services for financial rather than clinical reasons." MedPAC recommended no payment update for FY 2010.

Susan Feeney, VP public affairs for the American Health Care Association (AHCA; Washington) told Medical Device Daily that the association's members are "obviously very concerned" about the proposal for skilled nursing facility reimbursement, and she added that the reduction "is not aligned with improved care quality and improved outcomes" that the Obama administration is seeking in healthcare reform.

As for acute care and long-term acute care hospitals, the corresponding CMS statement notes that the agency is proposing an update to acute care hospitals of 2.1% after which it will back out 1.9% to adjust for hospital coding practices describing patient severity that do not reflect actual patient severity. Citing a similar set of practices at acute long-term care hospitals, the agency indicates it will offer a boost of 2.4% offset by a 1.8% adjustment made for coding and severity. MedPAC's March 2009 report to Congress recommended an update of 2.9% less a productivity offset of 1.3% for a net boost of 1.6%.

CMS says it "is not proposing to change the list of hospital-acquired conditions" for which it will not pay for FY 2010, but the agency states an intent to add four more quality measures to the mix for hospitals. Two of these measures are described as structural measures, namely nursing-sensitive care and stroke care, and the data in question will be forwarded to registries set up for those purposes. The other two measures deal with specific care and address perioperative patient temperature management and infections associated with the use of urinary catheters. CMS noted that 99% of all hospitals participate in this program and that 97% receive the full payment update of 2% for reporting.

CMS says in both notices that it is accepting comments until June 30.

Pediatric device grants coming online

The Food and Drug Amendments Act of 2007 contained provisions for encouraging the development of medical devices for pediatric patients, and FDA announced in yesterday's edition of the Federal Register that it has opened the program for proposals.

The announcement notes that $2 million in total awards will be made available to any consortia that offer a winning proposal, but will split the total award by no more than four. The Pediatric Device Consortia Grant Program, which FDA's Office of Orphan Products Development will oversee, will start accepting proposals May 1 and no later than June 15. FDA states it can start releasing funds as early as Sept. 9.