Articles Posted in Health Law

California has joined a number of other states, including Vermont and Washington, in requiring pharmacy benefit managers (PBMs) to register with a state department. Assembly Bill 315 (AB 315), Pharmacy Benefit Management was signed by California Governor Jerry Brown on September 29, 2018 and became effective January 1, 2019. The bill includes several new requirements detailed below. A complete list of legislation affecting PBMs across the country can be found here.

Pharmacy benefit managers ostensibly exist as middlemen seeking to reduce prescription drug prices and to negotiate contracts on behalf of their clients. PBMs are now responsible, among other things, for administering the various pharmacy benefits for health plans, conducting drug utilization reviews, and negotiating rebates and reimbursement amounts. Although professionals in PBM positions, as the California Assembly analysis writes (available as PDF download here), “have one of the most prominent roles in determining coverage and payment for drug products, despite never taking physical possession of the drug”, they have largely “escaped scrutiny of regulation and licensure.” With the large purchasing power they wield, their arguably conflicting interests, and the increasingly aggressive stance of PBMs when dealing with those they interact with, it is important that the business dealings of PBMs are transparent and that the managers are held accountable.

This new bill now requires PBMs to register with the California Department of Managed Health Care (DMHC) and to “exercise good faith and fair dealing” by requiring PBMs to provide quarterly disclosures to the purchasers of their services, including revealing both direct and indirect conflicts of interest. Additional disclosures containing certain information can be requested by the purchaser at any time. These disclosures can include information such as rates negotiated with pharmacies, drug acquisition cost, and rebates received from pharmaceutical manufacturers.

In response to the current opioid crisis sweeping across the country, Congress passed the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (commonly referred to as the SUPPORT Act). President Trump signed the Act on October 24, 2018, which will take full effect on January 1, 2022.

The Act included over 120 provisions. One of these provisions, Section 6111 (“Fighting the Opioid Epidemic with Sunshine”), expands the reporting obligations that are required as part of the Physician Payments Sunshine Act. The Sunshine Act, which the Center for Medicare and Medicaid Services (CMS) refers to as the Open Payments Program, was passed in 2010 as part of the Patient Protection and Affordable Care Act. This made it mandatory for pharmaceutical and medical device manufacturers to disclose to CMS any payments or other transfers of value, such as consulting fees or research grants, made to physicians or teaching hospitals. This payment information is then made publicly available in a searchable online database.

The SUPPORT Act extends the Sunshine Act to now include additional health professional affiliates – physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, and certified registered nurse anesthetists. In addition, CMS is now authorized to post National Provider Identifier numbers (NPIs) on the public database, something that was previously barred by the Sunshine Act.

Established in 1986, the National Practitioner Data Bank (“NPDB”) is a “repository of reports that contain information on medical malpractice payments and certain adverse actions related to health care practitioners, providers, and suppliers.” NPDB website. Under the NPDB, hospitals and other entities with peer review committees, health plans, and numerous others are required to report certain adverse actions to the centralized database. Reporting to the NPDB (or failing to report) has serious consequences to both mandatory report entities and practitioners that are reported. Entities that report improperly (or properly), may face lawsuits from reported practitioners. Conversely, reported practitioners who appear on the NPDB (properly or improperly) may have lasting career and reputational effects.

The NPDB Guidebook provides interpretation of NPDB requirements for mandatory report entities. On October 26, 2018, the Guidebook was updated for the first time since April 2015. While many of the October 2018 updates to the NPDB are editorial changes, there were also modifications made regarding what is considered a reportable surrender of privileges, as well as other reporting descriptions. These changes will likely lead to more reporting events.

These changes occurred predominately in Chapter E: Reports, Reporting Adverse Clinical Privileges Actions, with the addition of a new section entitled “Length of Restriction”. This section clarifies that, regardless of how a restriction order is written, if a professional review action affects the privileges of a practitioner in a negative way for longer than 30 days, it is reportable. This update appears to be a response to a 2017 federal court ruling that found that a proctoring restriction was not reportable because it was not clear that the restriction would take more than 30 days.