Drug, Device Makers Shut Out on AKS Draft Rule

Despite months of anticipation, makers of drugs and devices found they were excluded from a draft rule for the Anti-Kickback Statute that would have allowed industry to take part in value-based arrangements. The news comes as a blow to manufacturers hoping to carve out additional market share, but the issue for one of the affected government agencies was that any such provisions could prove anticompetitive.

The Office of Inspector General at HHS unveiled the AKS rule on Oct. 9, the same day the Centers for Medicare & Medicaid Services posted its draft rule pertaining to Stark self-referral law. Both draft rules are part of the Trump administration’s Regulatory Sprint to Coordinated Care, which encompasses not just health care delivery reform, but also access to telehealth and other services seen as underutilized to the detriment of Medicare beneficiaries.

The proposed modifications to the regulations for Stark law would ease the restrictions around a hospital’s donations of cybersecurity software to physician practices, among other things. CMS said in an accompanying statement that this cybersecurity exception would hold regardless of whether the provider was still billing Medicare under fee-for-service (FFS) care.

Perhaps the most surprising aspect of either draft rule, however, was that the OIG’s draft said makers of drugs and devices would be excluded from taking part in value-based arrangements with hospitals and physician practices over concerns that such agreements would “tether clinicians or patients” to a specific product.

The Advanced Medical Technology Association posted an Oct. 9 response to the drafts, stating that the proposed updates to Stark and AKS regulations are “crucial steps” toward value-based care. However, AdvaMed also said it would review the rules in more detail with an eye toward “finding additional ways to strengthen value-based care across the health care system.”

Device tax topical again

The news about the Trump administration’s moves on Stark and AKS regulations were not the only issues for device makers in October as the current suspension of the 2.3% medical device tax will expire Dec. 31. Industry is imploring Congress and the White House to permanently repeal rather than suspend the tax yet again, and a recent statement by AdvaMed sheds light on the question of a legislative vehicle for that repeal.

The release of the latest report on the purchasing manager’s index served as a point of concern in an Oct. 17 statement by AdvaMed, which said the index for September 2019 came in at 47.8. That level is the lowest since 2009 and is seen as a sign that the economy may be slowing. AdvaMed argued that the reimposition of the device tax would add more drag to the economic outlook for device makers.

In a separate press release, AdvaMed’s president/CEO, Scott Whitaker, said AdvaMed had sent a letter to President Trump, urging the administration to aid the effort to repeal the tax. Whitaker said in the letter that Treasury Secretary Steve Mnuchin had floated the idea of another tax reform package, although Whitaker came up short of citing another tax reform push as a legislative vehicle for repeal of the device tax.

Still, the AdvaMed letter states that the administration could incentivize economic activity by “preventing a tax increase on health care as you and your administration decrease taxes in 2020.”

This was no isolated push to put an end to the device tax, however, as AdvaMed, the Medical Device Manufacturers Association and roughly 600 other organizations signed a letter to the House and Senate leadership making the case for full repeal of the tax. Several medical societies backed this appeal as well, including the American College of Radiology.