Supreme Court ruling affirms that HHS violated the Medicare Act for adjusting the reimbursement formula affecting DSHs without going through public notice-and-comment rule-making.

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June 7, 2019


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Policy 101: Administrative Procedure Act (APA) (And It’s Kind of a Big Deal)


On Monday, the Supreme Court ruled (7-1) that the Medicare program wrongfully omitted a public notice and comment period before implementing changes to the payment calculation for disproportionate-share hospitals (DSHs), which serve low-income patients.

The case, Azar v. Allina Health Services, questioned the “Medicare fraction” of Medicare patients who make up a hospital’s DSH patient percentage. This calculation is used to determine payments for DSHs. Back in 2004, Medicare proposed adding Medicare Advantage (Part C) patients to the denominator of the “Medicare fraction,” thus ultimately leading to lesser payments. After being met with legal challenges, Medicare did not implement the new payment calculation. Fast forward a decade, and Medicare released a 2013 proposed rule to prospectively implement the payment change. However, in 2014, Medicare retrospectively applied the changes to the 2012 Medicare calculations without providing the public a chance to comment, igniting the Azar v. Allina Health Services case.

The hospitals disputed that the payment change met the condition of a “rule, requirement, or other statement of policy...that establishes or changes a substantive legal standard governing...the payment for services,” which would require a public notice-and-comment period. Medicare argued that it was not a “substantive legal standard” change but rather an “interpretative” change of an already-standing rule. The Supreme Court did not agree and sided with the hospitals that the change was substantial enough to warrant a notice and a chance for the public to provide comments.

The American Hospital Association released a statement supporting the ruling, stating that “more public participation in policymaking, including by hospitals and health systems, leads to better-thought-out policies with a deeper understanding of their direct impact on health care providers and those they serve.” While this change occurred under the Obama Administration, it provides lessons for the current Administration whose track record on violating the administrative procedure act (APA) is impressive. With the Trump Administration running full steam ahead on many initiatives, due process that allows for public involvement is required.


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Crab Cakes, Football, and Drug Affordability. That’s What Maryland Does.


Recently, Maryland Gov. Larry Hogan (R) allowed a state law (HR 768) establishing a board to cap payments for expensive medications to take effect without his signature. The Prescription Drug Affordability Board is the first in the country.

The Affordability Board will review new brand name drugs that cost at least $30,000 per year, existing brand drugs with a price increase over $3,000 per year, generic drugs with price increases over 200% per year, and any drug deemed to create an affordability challenge. For those targeted drugs, the board can establish upper price limits for state and local insurance plans, including prisons, once the state legislature approves the limits.

Even though the limits will not go into effect until 2022, the board will begin work this July. The board is to be composed of 26 appointed members, each with a 3-year term, from a variety of stakeholders including providers, brand and generic corporations, and employers.

The board must study Maryland’s pharmaceutical distribution and payment system, as well as policy options used in other states and countries to lower list prices of drugs, including establishing upper payment limits, using reverse-auction marketplaces, and implementing bulk-purchasing processes. The study findings and recommendations must be reported by December 31, 2020.

The board must also identify states that require reporting on drug costs and initiate a process to collaborate with these states to collect drug cost data and determine how to collect additional data needed. The board will then use these data to identify products that may represent an affordability challenge and investigate the product’s pricing further. If the board cannot obtain publicly available cost data on certain drugs, it will request the information from other entities, such as drug manufacturers, payers, wholesale distributors, and pharmacy benefit managers.

The legislation outlines implementation actions in 6-month intervals, with the culmination of upper payment limits for drugs purchased by state, local, and county governments to go into effect on or before December 1, 2023.

Xcenda will continue to monitor the evolution of Maryland’s board and any litigation emanating from the legislation, which is almost certainly guaranteed, as courts struck down the state’s 2017 anti-price gouging law.


Legislative Byte


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Huh. ICER Finds $2M Drug Is Cost-Effective + Other ICER Developments


In response to the Food and Drug Administration (FDA) approval of ZOLGENSMA (onasemnogene abeparvovec) for the treatment of spinal muscular atrophy (SMA), the Institute for Clinical and Economic Review (ICER) announced the release of an addendum to the Final Evidence Report on May 24 (originally published on April 3). The update, which incorporates newly available efficacy data for patients with presymptomatic SMA, found that ZOLGENSMA achieves cost-effectiveness within the upper bound of the organization’s threshold range of $100,000–$150,000 per life-year gained (LYG), even with a drug price of $2.125 million. This is a crucial milestone for patients who suffer from SMA as it goes beyond the eye-popping price tag to demonstrate the overall value of ZOLGENSMA.

Last Tuesday, ICER also announced the release of its Evidence Report on treatments for peanut allergy, including VIASKIN, AR101, and non-commercialized oral immunotherapy. Although there are currently no FDA-approved treatments for patients with peanut allergy, ICER’s Chief Medical Officer David Rind, MD, noted that while VIASKIN and AR101 have the potential to effectively desensitize patients to the allergen, these therapies are not without risks of serious side effects that may outweigh the benefits. This assessment will be discussed in a public meeting of the California Technology Assessment Forum (CTAF), one of ICER’s 3 independent evidence-appraisal committees, on June 11 in Oakland, CA. The Final Evidence Report, which will include the voting results from the meeting, will be posted on or about July 3.

ICER also released a Revised Scoping Document for its evaluation of oral semaglutide for type 2 diabetes. The Draft Evidence Report is scheduled to be posted for public review on September 11 and will be open for comment through October 8.

As always, if you need assistance with all things ICER or value-related, please contact

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Maybe Someone Got the APA Message? Increased Oversight of Rule-Making Process


In late May, the White House announced that the Office of Management and Budget (OMB) would expand its oversight of federal agency rule-making processes to other non-binding documents. OMB stated that the Congressional Review Act (CRA) applies not just to rules but also “encompasses a wide range of regulatory actions, including, inter alia, guidance documents, general statements of policy and interpretive rules.”

The announcement could have a big impact on the FDA, which expects to issue almost 100 guidance documents just from the Center for Drug Evaluation and Research (CDER). The FDA has been criticized by Congress and stakeholders alike for several reasons. They do not like how the FDA seems to use draft guidances in lieu of finalized policy to execute its regulatory work. Earlier this year, in fact, Sen. Rand Paul (R-KY) even reintroduced legislation to increase accountability of the federal regulatory process. Another criticism is that the FDA’s guidances do not go through the regular public comment period.

Under the CRA’s process, once OMB’s Office of Information and Regulatory Affairs (OIRA) reviews the documents, the agency would determine whether the document is “major” or “minor.” A major document will be considered when the impact has resulted in or is likely to result in any of the following:

  • $100 million or more annual effect on the economy
  • A “major increase” (not further defined) in costs or prices for consumers, individual industries, federal, state, or local government agencies, or geographic regions
  • “Significant adverse effects” (also not further defined) on competition, employment, investment, productivity, or innovation

The guidelines note that federal agencies must submit a “rule” and the proposed effective date to Congress along with the report determining the rule to be “major.” A federal agency is then required to wait at least 60 days after submission of the report for implementation, or the rule is published in the Federal Register, whichever is later.

Perhaps this is a reason why several rules in the Administration’s spring agenda are delayed.


Magellan Exploring New Ways to Manage Biosimilars. Ferdinand Would Be Proud.


Earlier this week, Magellan Rx Management announced the launch of a medical pharmacy solution targeting oncology therapeutic biosimilars. The solution is intended to educate customers, members, and providers through the execution of individualized strategies that consider clinical, financial, and regulatory factors for the expected 2019 market entry of oncology biosimilars.

Kristen Reimers, RPh, Senior Vice President, Specialty Clinical Solutions, said, “Our oncology biosimilar initiative takes a multi-pronged approach, including the establishment of plan-specific goals, robust provider education and outreach, and partnership with our customers with the goal to maximize potential savings, minimize disruption, and improve outcomes for patients.”

Magellan is building on the success of its similar program for biosimilar versions of REMICADE (infliximab), an autoimmune therapy. The expanded medical pharmacy solution is designed for oncology biosimilars and involves 3 key components:

  • Proactive Management: Developing clinical protocols while educating network oncologists
  • Medical Pharmacy Execution: Incorporating biosimilars into key utilization management programs such as medical prior authorization and provider reimbursement/fee schedule management
  • Expert Opinion: Continuously gaining insights from its oncology advisory board and Expert Clinical Network of key opinion leaders

If successful, Magellan’s plan could result in maintaining or expanding member access to clinically effective treatments. The added benefit of the program is cost savings for Magellan and drug spend savings they may pass on to participating customers.


Information Buffet (AKA, Other Stuff That Caught Our Attention)


We kept running into stories we wanted to bring to your attention, so here’s a quick hit list of other news we thought you should know:

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Historical and Third Quarter 2019 ASP Amounts


This week, we’re posting our tracking of average sales price (ASP) for reference products and their biosimilars, as we are as interested as you in understanding how the introduction of biosimilars impacts the prices of their reference products.

Below, we have included graphs tracking the ASP payment amounts, including the third quarter of 2019, for the available biosimilars and their reference products. Contact us if you have questions or would like more information.


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Today’s RFI provides an opportunity to share new ideas not conveyed during the first Patients over Paperwork RFI in 2017 and continue the national conversation on improving healthcare delivery. CMS is especially seeking innovative ideas that broaden perspectives on potential solutions to relieve burden and ways to improve:

  • Reporting and documentation requirements
  • Coding and documentation requirements for Medicare or Medicaid payment
  • Prior authorization procedures
  • Policies and requirements for rural providers, clinicians, and beneficiaries
  • Policies and requirements for dually enrolled (ie, Medicare and Medicaid) beneficiaries
  • Beneficiary enrollment and eligibility determination
  • CMS processes for issuing regulations and policies

Source: “CMS Seeks Public Input on Patients over Paperwork Initiative to Further Reduce Administrative, Regulatory Burden to Lower Healthcare Costs,” CMS, June 6



68% and 21%


Based on an online survey of more than 1,000 adults, Kaiser Permanente found 68% of respondents experienced at least 1 unmet non-medical but basic social need during the past year, and 21% reported having to prioritize paying for food or rent over seeing a doctor or filling a prescription.

Source: “Americans See Unmet Needs in Housing, Food, Social Connection as a Growing Concern and Significant Barrier to Health,” Kaiser Permanente, June 4


AMCP Webinar | Pre-Approval Products: Supporting Payer Needs and the Information Exchange

Thursday, June 13 | 2:00–3:00 PM ET
Xcenda’s Amy Duhig, PhD, Vice President of Strategic Market Access and Intelligence, will join Dymaxium colleagues Elizabeth Sampsel, Vice President of Payer Strategy and Relations, and Laurie Fazio, Senior Vice President of Market Access Technologies, to discuss the current pre-approval product support features for payers within®, the home of the AMCP eDossier System. They will also share insights from the active community. In addition, the team will provide case examples and manufacturer considerations regarding pre-approval support for payers. Register now


Count on Health Policy Weekly for an at-a-glance view of legislative and regulatory developments and news that impacts the healthcare industry.


Jennifer Snow
Vice President,
Reimbursement and
Policy Insights,

Scott Shields
Associate Director,
Health Policy



Doug Cook
President | Commercialization Services & Animal Health

Kristine Flemister, PharmD
President | Xcenda

Tommy Bramley, PhD, RPh
President | Lash Group

Stacie Heller
Vice President | Government Policy | AmerisourceBergen Corporation

Rita Norton
Senior Vice President | Government and Public Policy | AmerisourceBergen Corporation

Ana Stojanovska
Vice President | Commercial Consulting | Xcenda


Dan Cadle | Jenna Kappel | Jennifer Le | Anne Loos | Scott Shields | Diane Smith


Laurie Kozbelt | Ellen Olson | Olivia Ziebarth


June 7, 2019


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