On November 20, 2020, in a joint effort, the Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”) and the Centers for Medicare & Medicaid Services (“CMS”) issued final rules to revise and modernize the Physician Self-Referral Law (“Stark Law”), Anti-Kickback Statute (“AKS”) and Civil Monetary Penalties Law (“CMP”). CMS’ final rule (the “Stark Final Rule”) was issued to update the Stark Law, in an effort to continue the push towards a national value-based healthcare system. The Stark Final Rule will be published on December 2, 2020, but you may access the unpublished version here.
The OIG issued two final rules on the AKS/CMP. The first rule (the “AKS/CMP Final Rule”) revises the safe harbor protections under the AKS, by adding several new safe harbors pertaining to value-based arrangements. The AKS/CMP Final Rule will be published on December 2, 2020, but you may access the unpublished version here. The second OIG rule (the “Pharmaceutical Rebate Final Rule”) focuses primarily on shifting rebates from certain “middlemen” (i.e., pharmaceutical benefit managers (“PBMs”)) to patients via point-of-sale discounts. The Pharmaceutical Rebate Final Rule is scheduled to be published on November 30, 2020, but you may access the unpublished version here.
Below is a brief overview of the final rules. Please note that in the weeks to come, we will post additional analyses and informational blogs as we review these final rules in depth. In the interim, providers/suppliers should contact their counsel to determine how the rule changes affect their existing arrangements, and how they may impact future transactions.
Stark Final Rule
The Stark Final Rule signifies CMS’ continued push to shift the U.S. healthcare system from a fee-for-service (“FFS”) system to a value-based system. The Stark Law Final Rule creates a number of new exceptions to Stark Law for various value-based arrangements. As noted in CMS’ Stark Final Rule Fact Sheet, until this point, many providers have been hesitant to develop innovative value-based arrangements due to fear of potentially violating Stark Law. Accordingly, CMS drafted the Stark Final Rule with the intention to relieve such fears and anxieties, and to encourage providers to develop and enter into legitimate value-based arrangements, which CMS believes can improve a patient’s quality of care. The Stark Final Rule also establishes a new exception permitting the donation of certain cybersecurity technology.
The Stark Final Rule also contains provisions that will impact physician group practices’ DHS pods/pools under the In-Office Ancillary Services Exception. All physician groups should have their profit distribution methodologies evaluated in light of the new rule.
AKS/CMP Final Rule
The OIG issued the AKS/CMP Final Rule as part of HHS’ Regulatory Sprint to Coordinate Care, which seeks to reduce regulatory barriers to care coordination and aid the shift towards a value-based healthcare system in the United States. Significantly, the AKS/CMP Final Rule implements seven new safe harbors (including several safe harbors for value-based agreements) and modifies four existing safe harbors (including the personal services, warranties and transportation safe harbors). This final rule also revises the definition of “remuneration” in the CMP to include a new exception for certain telehealth technologies provided by a healthcare provider to a patient in certain circumstances.
Several of the revisions to existing safe harbors will have major impacts on existing arrangements – in particular, the changes to the personal services safe harbor will provide flexibility and protections that were unavailable previously. Existing transactions should be reviewed and potentially amended/changed to utilize the protections afforded.
Pharmaceutical Rebate Final Rule
The Pharmaceutical Rebate Final Rule revises the AKS to remove safe harbor protection for pharmaceutical rebates paid to PBMs and Part D plans. Instead, it adds safe harbor protection for pharmaceutical rebates paid to patients at the point-of-sale. The predominant purpose of the Pharmaceutical Rebate Final Rule is to shift pharmaceutical cost savings and rebates away from PBMs and to the patients, directly. Previously, PBMs served as a middleman negotiator for drug prices between drug manufacturers and pharmacies. Not only would PBMs negotiate the purchase price of drugs from drug manufacturers, but they would often receive rebates and incentives to purchase certain drugs from certain manufacturers. The OIG issued this final rule in an effort to cut out these kickbacks to the PBMs and lower the out-of-pocket costs for patients using high price prescription drugs. To that end, the AKS safe harbor now protects rebates applied at the point-of-sale of a prescription drug to a patient rather than to PBMs. This final rule also creates a new safe harbor for certain fixed-fee service arrangements between drug manufacturers and PBMs, which further demonstrates the OIG’s intent to limit financial incentives paid directly to PBMs.
Again, The Health Law Partners will be issuing additional content, webinars, and learning materials based on the new rules. Stay tuned, and contact your HLP attorney. Also, please note that we have prepared redline versions of these final rules for the ABA Health Law Section. The redline for the Stark Final Rule may be accessed here. The redline for the AKS/CMP Final Rule (which is combined with revisions from the Pharmaceutical Rebate Final Rule) may be accessed here.
For any questions regarding CMS’ or the OIG’s final rules, please contact Adrienne Dresevic, Esq. at email@example.com, or Clinton Mikel, Esq., at firstname.lastname@example.org, or Partners@thehlp.com, or call (248) 996-8510 or (212) 734-0128.