• Orphan drugs to be excluded from the §340B price ceiling
• Malpractice reform would cut federal spending by $48 billion over ten years

• HHS awards three states health insurance exchange grants

• $100 Million in disease prevention grants available to 75 communities

Orphan drugs to be excluded from the §340B price ceiling

Orphan drugs will not be subject to the ceiling prices established by § 340B of the Public Health Services Act if they are used for the rare disease or condition for which they were certified, under a Proposed rule issued by CMS. Covered entities though will be reimbursed at the § 340B ceiling price if the orphan drug is used for an approved purpose other than a rare disease or condition. This exception is being put in place to achieve Congress’ intent to not undermine pricing for drugs used to treat rare diseases.

Covered entities participating in the § 340B program will have to put in place tracking and record-keeping procedures to demonstrate the usage of orphan drugs. The covered entities will have created specific purchasing accounts and improve inventory and auditing capacity. Covered entities will be required to provide auditable records upon the written request of the government or government approved manufacturer. Certain covered entities that meet more than one eligibility criteria will have to choose which type of entity they will be participating as for purposes of the §340B program.

The Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) added children’s hospitals, freestanding cancer hospitals, critical access hospitals, rural referrals and sole community hospitals to the lists of covered entities eligible for the § 340B price ceiling. Prior to PPACA, the list of covered entities primarily consisted of clinics treating specific disease or conditions, specific populations, hospitals that were owned by governments, or hospitals that had a qualifying disproportionate share adjustment percentage. Proposed rule, 76 FR 29183, May 20, 2011.

Malpractice reform would cut federal spending by $48 billion over ten years

A proposed medical malpractice reform act would lower costs for health care both directly and indirectly, according to a recent cost estimate from the Congressional Budget Office (CBO).

The CBO estimate was made for H.R. 5, the Help Efficient, Accessible, Low-cost, Timely Healthcare (HEALTH) Act of 2011, sponsored by Rep. Phil Gingrey (Ga.). On May 23, the House Committee on Energy and Commerce approved H.R. 5, which would establish the following, according to the CBO:

• A three-year statute of limitations for medical malpractice claims, with certain exceptions, from the date of discovery of an injury;
• A cap of $250,000 on awards for noneconomic damages;
• A cap on awards for punitive damages that would be the larger of $250,000 or twice the economic damages, and restrictions on when punitive damages may be awarded;
• Replacement of joint-and-several liability with a fair-share rule, under which a defendant in a lawsuit would be liable only for the percentage of the final award that was equal to his or her share of responsibility for the injury;
• Sliding-scale limits on the contingency fees that lawyers can charge;
• A safe harbor from punitive damages for products that meet applicable FDA safety requirements; and
• Permission to introduce evidence of income from collateral sources (such as life insurance payouts and health insurance) at trial.

The CBO estimates that enacting H.R. 5 would reduce direct spending by about $48 billion and increase federal revenues by almost $10 billion during the 2012-21 period. The combined effect of those changes in direct spending and revenues would reduce federal deficits by $57 billion over that period, with changes in off-budget revenues accounting for about $3 billion of that reduction in deficits.

Enacting H.R. 5 would reduce national health spending by about 0.5%, according to the CBO. That figure comprises a direct reduction in spending for medical liability premiums and an additional indirect reduction from slightly less utilization of health care services. CBO’s estimate takes into account the fact that, because many states have already implemented some elements of H.R. 5, a significant fraction of the potential cost savings has already been realized. Moreover, the estimate assumes that the reduction of about 0.5% would be realized over a period of four years, as providers gradually change their practice patterns.

For more information, visit http://www.cbo.gov/ftpdocs/122xx/doc12209/HR5.pdf.

HHS awards three states health insurance exchange grants

On May 23, the Department of Health and Human Services (HHS) awarded three grants to help states continue their work to implement the Health Insurance Exchanges established under the Patient Protection and Affordable Care Act (ACA).

The HHS announced the availability of the new grants in January, and in October 2010, the HHS awarded the first set of state grants for Health Insurance Exchanges.

The May 23 “Exchange Establishment Grants” have gone to Indiana, Rhode Island, and Washington, as follows:

• Indiana has been awarded $6,895,126 to use ACA resources to strengthen the health information technology systems that will be integral to its Exchange. Additional funding will support project management, legal, actuarial, and financial expertise and general policy support.
• Rhode Island will use its $5,240,668 ACA grant to strengthen health information technology systems, develop an integrated consumer support program to provide support to individuals and small businesses, and strengthen its business operations.
• Washington state has been awarded $22,942,671 to use ACA resources to develop options and recommendations on policy decisions that will have a significant impact on the Exchange. The grant also will provide funds to develop a health information technology system that will support its Exchange.

For more information, visit http://www.healthcare.gov/news/factsheets/esthealthinsurexch.html.

General News: