Health Care

California’s health omnibus trailer bill SB-184 and the final cost and market impact review (CMIR) regulations (CMIR Regulations), which went into effect on December 18, 2023, have ushered in a significant change in California’s health care regulatory landscape with the creation of the Office of Health Care Affordability (OHCA). On January 2, 2024, OHCA began accepting notices of covered transactions through its notice of material change transaction submission portal.

In this edition of the Mintz IRA Update, we cover the status of the negotiations underway between CMS and manufacturers pursuant to the Medicare Drug Price Negotiation Program and current legal challenges to the program, other drug pricing–related IRA initiatives, the IRA’s small biotech exemption, implications associated with removing the average manufacturer price cap on Medicaid rebates, and the Biden administration’s proposed draft guidance on patent “march-in” rights.

Read about the small biotech exception exempting certain drugs from the  Medicare Drug Price Negotiation Program for the years 2026, 2027, and 2028.

New Mexico recently became the latest state to receive Centers for Medicare & Medicaid Services (CMS) approval to expand the state’s behavioral health service offerings through mobile crisis intervention teams. Under its new state plan amendment, among other items, New Mexico will make available mobile (i.e., outside of a hospital or other facility setting) crisis and mobile response and stabilization services for individuals at the location in which they are experiencing a crisis, 24 hours a day, 7 days a week, 365 days per year. Mobile crisis services include stabilization of the person in crisis, prevention of further deterioration, and provision of immediate treatment and intervention but may also include telephonic follow-up interventions, such as additional intervention and de-escalation services and coordination with other supports and community partners, for up to 72 hours after the initial mobile response. New Mexico also will offer children’s mobile response and stabilization services (MRSS), which are mobile crisis services but specific to child, youth, and families and include up to 56 days of stabilization services.

Read about key Inflation Reduction Act provisions taking effect this year related to the Medicare Drug Price Negotiation Program, Medicare Part D benefits, and more.

Read about the Biden administration’s backing of draft guidance to government agencies weighing the enforcement of march-in rights, which can allow federal agencies to require patent licenses to be given to third parties if a product was developed or conceived with federal funding assistance.

Read about recent developments related to the IRA’s Medicare Drug Price Negotiation Program, including a judge’s rejection of a Motion for Preliminary Injunction to stop the program and the selected drug manufacturers’ agreements to negotiate with CMS.

Read about how the removal of the average manufacturer price (AMP) cap on Medicaid rebates prompted manufacturers to cut insulin prices to avoid significant payments to Medicaid.

After a long wait, the U.S. Food and Drug Administration (FDA) recently published a Final Rule to harmonize the Quality System Regulation (QSR) codified at 21 C.F.R. Part 820 with the internationally accepted standard for medical device quality management systems established by the International Organization for Standardization, the 2016 edition of ISO 13485, “Medical devices - Quality management systems - Requirements for regulatory purposes” (known as “ISO 13485:2016”). We previously mentioned back in January 2021 that FDA had plans to initiate notice-and-comment rulemaking to describe the harmonization process sometime in 2021, plans that the agency had been discussing for years prior. FDA finally published a Notice of Proposed Rulemaking for the harmonization in February 2022 and, then, following the agency’s consideration of stakeholders’ submitted comments, it issued the Final Rule on February 2, 2024.

Keeping pace with the ever-evolving landscape of health care enforcement can prove challenging. In the latest EnforceMintz newsletter, Mintz’s Health Care Enforcement Defense practice group highlights emerging enforcement trends and developments in FCA investigations, and provides predictions for 2024, offering helpful guidance through the complexities of health care enforcement.

In 2023, DOJ announced significant updates to the Criminal Division’s Corporate Enforcement Policy, the agency’s Voluntary Self-Disclosure Policy for corporate criminal enforcement, and a new safe harbor for voluntary self-disclosures made in connection with M&A deals, all aimed at incentivizing companies to self-disclose their misconduct.

Since May 2023, federal legislators have introduced more than 50 bills focused on issues related to AI technologies, with patient privacy, the role of clinicians, and health equity emerging as areas of focus. In addition, the Biden administration released an Executive Order focused on promoting AI safety in October 2023.

In the past year, DOJ obtained some of its largest recoveries in cases where violations of the Stark Law, which bars physicians from profiting from self-referrals for certain services payable by Medicare or Medicaid, served as a predicate offense for FCA claims. These included cases against Community Health Network, Covenant Healthcare System, Cardiac Imaging, and Steward Health entities.

An uptick in DOJ cybersecurity enforcement in 2023, includes two FCA settlements, an unsealed qui tam complaint, and significant regulatory activity that could pose future enforcement risk.

The government continued to dedicate enormous resources to investigating and prosecuting fraud against COVID-19 pandemic relief programs in 2023. In addition to civil False Claims Act settlements, there were a number of criminal enforcement matters, including some involving politicians, government employees, and those with connections to gangs and transnational crime networks.

Several case dispositions from this past year, both criminal and civil, reaffirm DOJ’s policy of ensuring individual accountability in resolving allegations of wrongdoing and underscore the importance of considering that issue in the resolution of any FCA case.

Health care companies using algorithms and AI applications face increased compliance risks. Previous technology-related enforcement suggests how relators and enforcement agencies might use AI to detect potential fraud and develop allegations based on how the technology is being used.

In 2023, the Supreme Court and the US Courts of Appeals published a number of significant decisions involving FCA issues with implications for health care and life science entities, including a deepening circuit split on the causation standard applicable to FCA cases based on theories under the Anti-Kickback Statute.

After growing significantly over the last decade, private equity health care deal activity nevertheless remained robust last year, with an estimated deal volume of about $29 billion in North America.

In 2023, the DOJ amplified compliance-related incentives for companies under criminal investigation (including health care companies), while the OIG has substantially revised and modernized previously issued compliance guidance and resources applicable to health care companies and providers.