New California law aims to expand telehealth coverage and payment

On October 13, 2019, California Governor Gavin Newsom signed into law Assembly Bill 744 (AB 744), marking the latest of many state legislative efforts to modernize health care by ensuring that telehealth services are paid and covered, similar to their face-to-face counterparts. Effective January 1, 2021, the statutory language added by AB 744 requires newly created, amended, or renewed commercial payer contracts to reimburse telehealth services at the same levels as when those services are delivered in-person.

Previously existing California law addressed commercial telehealth coverage, namely by prohibiting payors from requiring in-person contact between a provider and patient before reimbursing for telehealth. But until AB 744’s passing, California law did not require reimbursement “parity” between services delivered through telehealth and those furnished in-person.

States have demonstrated two general approaches to payment parity. Whereas some reserve the right for payors and providers to negotiate differences between telehealth and in-person services (for example, see Florida, Kentucky), California chose to follow the more restrictive path of other states (for example, see Delaware, Hawaii) that mandate payment parity. Specifically, the new California law amends the state’s Insurance and Health and Safety Codes to now require a commercial payor to reimburse health care services “on the same basis and to the same extent” that the payor reimburses in-person services. The law does not set or limit actual prices, aiming only to establish price consistency across in-person and telehealth services.

AB 744 also amends the California Welfare and Institutions Code to remove certain Medi-Cal (the state’s Medicaid program) beneficiary notification requirements for asynchronous “store-and-forward” technology, which is an alternative to real-time telehealth that involves the intake and storage of clinical information that is forwarded to another location for evaluation. The law also clarifies that face-to-face contact between a health care provider and patient is not required for any Medi-Cal services furnished using such store-and-forward technology.

With AB 744’s passing, California becomes the latest member of a growing chorus of states to enact “payment parity” laws aimed at expanding telehealth coverage through commercial insurance market regulation. Payment parity laws represent just one of many developing telehealth legislation categories, each of which may be viewed as a step toward bolstering telehealth’s status as a viable and accepted delivery model. As states continue to view telehealth as an opportunity to improve health care outcomes, to reduce costs, and to increase access, industry stakeholders should expect to see similar legislative activity elsewhere in the future.

Join us for a CLE webinar on the current federal and state regulations for Cannabidiol (CBD)

Please join us for the next edition of Reed Smith’s FDA webinar series, “CBD: What now?”, on Wednesday, October 30, 2019 at 12:00 PM ET.

Cori Goldberg, Marc Hauser, and Adam Brownrout will offer a summary of current federal (FDA, USDA) and state regulations for CBD and CBD products, and what they mean for businesses.

This program is presumptively approved for 1.0 general CLE credit in California, Illinois, New Jersey, Pennsylvania, Texas and West Virginia. For lawyers licensed in New York, this course is eligible for 1.0 credit under New York’s Approved Jurisdiction Policy. Please allow four weeks after the program to receive a certificate of attendance.

Please click here to register for the webinar.

The Drug Enforcement Administration amends regulations applicable to registrants ordering certain controlled substances

The Drug Enforcement Administration (“DEA” or the “Administration”) recently published a notice in the Federal Register (volume 84, number 189, pages 51368–51377) that the Administration is amending its regulations and issuing a final rule to implement not only a new single-sheet format for its DEA Form 222, but to improve the corresponding recordkeeping requirements for DEA registrants as well. This final rule will become effective October 30, 2019, and will provide a two-year transition period for registrants to acclimate to the new format and process.

The Administrator of the DEA gets its authority to amend such regulations as a delegation from the Attorney General, and the Attorney General gets this authority from the Controlled Substances Act (“CSA”). Under the CSA, the DEA, via the authority granted to it from the Attorney General, may promulgate rules and regulations relating to, among other things, the registration and control of the manufacture, distribution, and dispensing of controlled substances, as well as the control of importers and exporters of controlled substances.

DEA has been working with industry stakeholders to finalize a rule on the DEA Form 222 and related matters since 2007. The Form 222 is akin to a prescription pad or order form that allows DEA registrants to order and transfer Schedule I and Schedule II controlled substances. In fact, it is the only document that authorizes the distribution of such scheduled substances. It is the registrant’s responsibility to secure the DEA Form 222 and retain both the executed and unexecuted forms and comply with certain record-keeping requirements. In its current state, Form 222 is a triplicate form with interleaved carbon paper.

However, starting October 30, 2019, Form 222 will be a single sheet of paper, which DEA expects will both improve ease of use by registrants and reduce labor burden costs. Notably, among the many amendments to the regulations made in response to stakeholder comments, DEA will now explicitly allow controlled substance purchasers to retain electronic copies of Forms 222 at the registered location. Since the final rule eliminates the requirement that suppliers hand-mail executed Forms 222 to local DEA field offices, the associated cost burden of this activity is also expected to be eliminated.

Other amendments include: a provision that allows Powers of Attorney executed under Section 1305.05 to be signed electronically (but retains the requirement that such documents be signed by two witnesses); clarifying language that ARCOS-reporting suppliers are not required to make a copy of the original Form 222; and revisions to reflect that DEA registrants are not required to sign or date Form 222 requisition requests.

At present, it is unclear how these new Administration regulations and expectations may impact record-keeping requirements that are not being amended. Therefore, we encourage industry stakeholders to remain apprised of DEA’s ongoing evaluation of its regulations and the amendments made to the same. The Administration’s notice in the Federal Register is further indication that DEA is actively engaged in the regulation and control of the manufacture, distribution, and dispensing of controlled substances.

Should you have any questions regarding the notice or any of the issues raised in this alert, please do not hesitate to reach out to Rachael Pontikes, John Kendzior, or Kelly Kearney for further discussion.

Health Care and Life Sciences Industries Still Left in the Dark Following Publication of California Consumer Privacy Act Draft Regulations

Last Thursday, the California Attorney General, Xavier Becerra, released the long-awaited text of the proposed California Consumer Privacy Act (CCPA) regulations. Once finalized, these 24 pages of regulations will govern compliance with the CCPA. While the draft regulations provide insight into how regulated entities must address verification of consumer requests and clarifies aspects of how to notify consumers of their rights, among other things, it notably does not address or provide any guidance regarding the three exemptions most relevant to the health care industry, biotechnology companies, and drug and device manufacturers.

Untouched, unexplained and still ambiguous as ever, were the Health Insurance Portability and Accountability Act (HIPAA), California Medical Information Act (CMIA), and clinical research exemptions. As discussed below, the industry has grappled with interpretation and application of these provisions due to missing definitions and uncertainty in statutory construction.

As set forth in the statute, the HIPAA exemption states that the obligations imposed by the CCPA are not applicable to protected health information (PHI) collected by a “covered entity” or “business associate” governed by the privacy, security and breach notification rules issued pursuant to HIPAA. The exemption also provides that HIPAA-covered entities are not subject to the CCPA to the extent that they “maintain patient information in the same manner as medical information or protected health information.” A primary source of uncertainty that was left unaddressed by the proposed regulations, however, is whether other types of personal information held by these entities remain subject to the CCPA. To this end, the proposed regulations do not define “patient information,” and thus it remains unclear whether the HIPAA exemption would exempt non-PHI held by these types of entities.

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Join us for a webinar covering the roller coaster journey that was the past 12 months in health care law

Reed Smith will be hosting an upcoming webinar, “12 Months in Health Care Law: A Roller Coaster Journey”, on Tuesday, October 15, 2019 at 12:00 PM ET.

The webinar will deliver an informative and entertaining review of many of the key regulatory developments and court rulings in health care law over the past 12 months.

This fast-paced program (you will be amazed at how much we cover in just 60 minutes!) will provide an engaging look at the twists and turns of our industry’s legal developments, including:

  • Continuing adventures in health care reform
  • Fraud and abuse developments, including investigative and enforcement activity, and the Yates and Brand memos
  • Rising reimbursement challenges
  • HIPAA highlights and related state laws looming on the horizon (e.g., CCPA)
  • Pharmaceutical and medical device payment and regulatory developments
  • A variety of intriguing health care items you may have missed

This program is presumptively approved for 1.0 general CLE credit in California, Illinois, New Jersey, Pennsylvania, Texas and West Virginia. For lawyers licensed in New York, this course is eligible for 1.0 credit under New York’s Approved Jurisdiction Policy. Please allow four weeks after the program to receive a certificate of attendance.

Please click here to register for the webinar.

Join us for a webinar covering FDA inspections of health care facilities: How to keep calm and carry on when FDA walks through your door

As part of our FDA series, Reed Smith will be hosting the upcoming webinar, “FDA inspections of health care facilities: How to keep calm and carry on when FDA walks through your door” on Thursday, October 10, 2019 at 12:00 PM ET.

The webinar, presented by partner Rachael Pontikes and associate Emily Hussey, will provide attendees an opportunity to join a conversation on the ins and outs of FDA inspections of health care facilities, including pharmacies, distributors and similarly FDA-regulated health care facilities.

This program is presumptively approved for 1.0 general CLE credit in California, Illinois, New Jersey, Pennsylvania, Texas and West Virginia. For lawyers licensed in New York, this course is eligible for 1.0 credit under New York’s Approved Jurisdiction Policy. Please allow four weeks after the program to receive a certificate of attendance.

Please visit the event page to register for this webinar.

FDA Partners with the National Association of Boards of Pharmacy to Create an Information-Sharing System for Drug Compounding Activities

On October 2, 2019, the United States Food & Drug Administration (FDA) announced that it awarded a cooperative agreement grant to the National Association of Boards of Pharmacy (NABP) to establish an information-sharing system for drug compounding activities conducted in accordance with Section 503A of the Federal Food, Drug, & Cosmetic Act (FDCA). With this three-year pilot project, FDA’s stated hope is that it will improve the information available to federal and state regulators regarding the Agency’s interpretation of the interstate distribution of compounded medications.

While FDA identifies public health and patient safety as its primary motivation for this new information-sharing system with NABP, the Agency has also represented that this system is its attempt to make it easier for States to sign on to the proposed memorandum of understanding agreement (MOU). FDA’s current revised draft MOU limits interstate distribution of compounded drugs and triggers various reporting requirements for regulated State-entities. Many States have indicated that, due to the extensive reporting requirements in the draft MOU, they may choose not to sign on to a finalized MOU, which carries serious restrictions for compounding pharmacies located in States that decline to enter into an MOU.

The Agency has indicated in its announcement that it intends to finalize the MOU this year, so we encourage industry stakeholders to remain apprised of this new information-sharing system and closely watch for the issuance of the finalized MOU. With the year quickly drawing to a close, this pilot project is further indication that the Agency remains actively engaged in the regulation of drug compounding.

Should you have any questions or concerns regarding any of the issues raised in this alert, please do not hesitate to reach out to Rachael Pontikes, Emily Hussey, Kelly Kearney, or Allyson Wilson for further discussion.

Join us for a webinar on the state of the California Consumer Privacy Act and what the latest amendments mean for you.

As part of our Countdown to CCPA Compliance webinar series, Reed Smith will be hosting an upcoming webinar, “Countdown to CCPA compliance: 3 months to go” on Wednesday, October 9, 2019 at 2:00 PM ET.

This program will explore the outcomes stemming from the September 2019 amendments on the CCPA, as well as the AG’s regulations. In addition, the webinar will include a discussion on how to keep your CCPA compliance project on a positive trajectory, with respect to the upcoming change in requirements.

Please visit the event page to read more and register for the webinar.

Note: This program is presumptively approved for 1.0 general CLE credit in California, Illinois, New Jersey, Pennsylvania, Texas and West Virginia. For lawyers licensed in New York, this course is eligible for 1.0 credit under New York’s Approved Jurisdiction Policy. Please allow four weeks after the program to receive a certificate of attendance.

New California ballot initiative would expand protections over health data

Californians may have a new privacy initiative on their November 2020 ballot after the California Privacy Rights and Enforcement Act of 2020 (CPREA) was proposed last week. If enacted, this new law would revise and expand upon the California Consumer Privacy Act (CCPA) – which goes into effect in January – by, among other features, creating heightened standards around the use and disclosure of “sensitive personal information.” Under the newly proposed CPREA, “sensitive personal information” explicitly includes consumer health data and biometric information, as well as other data including social security numbers, government ID numbers, account log-ins, precise geolocation, and sexual orientation information. The CPREA prohibits selling such information without a consumer’s affirmative authorization, and provides consumers with the right to opt out of the use or disclosure of these types of information for advertising or marketing purposes.

The CCPA, as currently enacted, carves out certain data that is already regulated by the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the California Medical Information Act (CMIA), though the law does apply to “biometric data,” which includes “sleep, health, or exercise data that contain identifying information.”  However, the CPREA would apply greater protections around health data and other data traditionally considered more sensitive.

The proposed initiative requires more than 623,000 signatures to qualify for the November 2020 ballot.

You can read more about the CPREA on our Technology Law Dispatch blog.

Outsourcing Facility Athenex Withdraws Appeal of District Court’s Ruling on FDA’s Placement of Bulk Drug Substances on its “Clinical Need” List

On September 23, 2019, New York-based outsourcing facility Athenex, Inc. (Athenex) withdrew its appeal of the U.S. District Court for the District of Columbia’s ruling related to the United States Food & Drug Administration’s (FDA) placement of Vasopressin on the Agency’s “clinical need” list.

As may be recalled from our previous alert, Athenex sued FDA in March 2019, based on allegations that the Agency’s interpretation of key provisions of Section 503B of the Federal Food, Drug, & Cosmetic Act (FDCA) ran afoul of Congress’ desire that FDA not interfere with the practice of medicine.  Specifically, Athenex challenged FDA’s decision to remove bulk drug substance Vasopressin from FDA’s “clinical need” list – that is, a list of bulk drug substances that FDA has approved for compounding by outsourcing facilities.  Without placement on this list, outsourcing facilities cannot compound with the bulk drug substance unless it appears on FDA’s drug shortage list.

In August 2019, the U.S. District Court for the District of Columbia ruled in FDA’s favor and against Athenex, finding that: (1) the Agency’s method of determining whether there is a “clinical need” for a bulk drug substance gives effect to the intent of Congress; and (2) the exclusion of Vasopressin from the 503B Bulks List was not arbitrary and capricious.  Although Athenex previously indicated its plans to appeal the ruling, Athenex recently withdrew its appeal and has ceased compounding with Vasopressin.

The District Court’s decision came out approximately one month before FDA published notice of its intent to exclude nine more bulk drug substances from its “clinical need” list in the Federal Register.  Stakeholders interested in submitting comments to FDA’s notice have until November 4, 2019, to comment.  Should you have any questions regarding the notice or any of the issues raised in this alert, please do not hesitate to reach out to Rachael Pontikes, Emily Hussey, or Kelly Kearney for further discussion.

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