The Debate About Reporting is Over for Two Leading Pharmaceutical Companies After Meeting with CMS.

For some leading pharmaceutical firms the debate over whether Title 42 U.S.C. 1395y(b)(8) of the Medicare Secondary Payer (MSP) law is applicable to Clinical Trials has ended.  They signaled their intention to comply in separate letters and during a meeting with CMS about meeting Medicare’s new MSP law: Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA).  Under Section 111 Medicare can levy civil penalties of $1,000 per day per unreported Medicare beneficiary.

The leading firms’ acceptance of their obligation to report under Section 111 was not immediate and reminiscent of earlier efforts of the industry to seek clarification dating as back as far as April of 2004.  At that time, clinical trials sponsors requested guidance from CMS about the applicability of the MSP law in general.  Mr. Gerald Walters, Director, Financial Services Group, Office of Financial Management for CMS responded in part: “An entity that engages in a business trade or profession shall be deemed to have a self-insured plan if it carries its own risk (whether by failure to obtain insurance, or otherwise) in whole or in part [42 U.S.C. § 1395y(b)(2)(A)(ii)].  The clinical trials sponsor’s agreement with the trial participant that it will pay for medically necessary services related to injuries participants may receive as a result of participation in the trial constitutes a plan or policy of insurance under which payment can be reasonably expected to be made in the event such an injury occurs.  A liability insurance policy or plan must make payment without regard to an individuals’s Medicare eligibility [42 C.F.R. § 411.32(a)(1)].  Therefore, Medicare will not make payment if it is aware of a situation such as you described.”

Mr. Walters may have exhibited a bit of unwarranted optimism, when he closed his letter with an offer to “...work with them (sponsors) to resolve their repayment obligations... ,” but at that time he was relying on § 411.25  Primary payer's notice of mistaken Medicare primary payment.  The regulation requires plans to give notice to Medicare when they were aware of their primary payment responsibility.   Today, CMS uses Section 111 and its potential for civil penalties to enforce sponsors’ obligation to give notice through their formal Mandatory Insurer Reporting process.

In response to the enactment of Section 111 of the Medicare, Medicaid, and SCHIP Extension Act of 2007, Pfizer took the lead in requesting clarification in an October of 2009 letter to the Centers for Medicare and Medicaid Services (CMS), subsequently endorsed by PhRMA in November of that year, asserting that the Section 111 did not apply to Clinical Trials.  The basis of the argument revisited whether or not a Clinical Trial is a “plan” under 1395y(b)(8) and hence required by Section 111 to report.

Unfortunately, most likely due to Mr. Walters statement that a clinical trial was a “liability insurance policy or plan” and subsequent reiteration that a clinical trial was a “liability” plan in the Section 111 NGHP User Guide, sent the wrong message to the attorneys following this issue.

Liability, as used by Medicare in this instance, is meant to encompass the larger meaning of a legal responsibility, duty or obligation. It is a liability that arises from a contract as expressed in the Clinical Trial’s commitment at the outset of a clinical trial to pay the cost of  medical care provided to treat injuries incurred by the study subjects as the result of clinical services received during a clinical trial.

It is not relevant, as some have asserted, in the context of a contractual obligation, whether or not the trial provides treatment in response to any threatened or actual personal injury (e.g., medical claims arising out of a tort).  When the beneficiary seeks medical treatment (e.g., doctor’s visit) in connection with an injury (e.g., Adverse Event) arising from the trial they are making a claim for medical treatment.  Under Section 111 the trial sponsor is responsible for reporting the injury and paying for the treatment under 42 U.S.C. § 1395y(b)(2)(A)(ii).  Liability for ongoing treatment (e.g., payment of medical claims) and reporting is similar another injury-oriented type of insurance -- workers’ compensation.

Some may recall that in June 2000, President Clinton signed a hortatory Presidential Memorandum directing Health and Human Services to change their clinical trial policy of not paying for medical claims they would have otherwise paid if the beneficiary was not enrolled in a clinical trial.  This has been misinterpreted by many to be and Executive Order directing Medicare to pay for injuries arising out the trial.  In fact, during the teleconference, CMS asked what mechanisms are in place to distinguish between when Medicare can be billed and when the clinical trial sponsor should be billed?  CMS stated that Medicare would pay for standard of care associated with the underlying ailment for those beneficiaires enrolled in a clinical trial.  CMS offered as an example that if x-rays where part of the trial protocol, Medicare could be billed for the x-rays as long as the number of x-rays did not exceed the beneficiary’s standard of care annual allotment.  If the beneficiary required more x-rays, then the clinical trial sponsor would have to pay for them.  Except in very limited situation (e.g., Category A devices), Medicare does not pay for diagnostic or medical treatment arising out of a trial.


Highlights of the teleconference

CMS heard the concerns of two major pharmaceutical companies about their difficulties in collecting data from clinical trial sites because either the trial site or IRB was unwilling to release HIPAA and Privacy Act information.  CMS asserts that these entities should supply the data.  To facilitate the release, the companies provided a contact within CMS’s parent organization, HHS, and their sister organization, the FDA, that could help streamline the release of relevant data.  At the behest of the companies, CMS took under consideration as to whether these difficulties warranted some relief in reporting deadlines.

CMS may have left with some sense of the scope of the savings to be gained by reporting to enforce proper billing across clinical trials. CMS demonstrated a sincere interest in learning how a pharmaceutical company managed billing during the trial and payment for medical treatment for chronic problems arising out of the trial after the trial was completed.

Several attorneys from the HHS Office of General Counsel, responsible for filing actions in Federal Court to enforce MSP law were present at the meeting. Clearly, this meeting was intended not only to discuss reporting, but adherence to MSP statues and reimbursement in general.  HHS OGC may file an action under Title 42 U.S.C. 1395y(b)(8) for double damages to recover payments for medical claims they feel should have been paid by the clinical trial sponsor going as far back as December 05, 1980, not to mention $1,000 per day per beneficiary.

Medicare is only aware of two companies that are actively reporting or in the process of preparing to report.  If your firm is not on that list and you are reporting, my advice is to alert CMS to the fact as soon as possible.

Related Piatt Consulting Articles

Is Medicare unknowingly underwriting clinical trials?
CMS holds a meeting at the request of two pharmaceutical companies

David Piatt is the former Medicare Secondary Payer Recovery Contract Program Director, a consultant and frequent speaker on reporting and MSP statue.  He has been an active participant in discussions with CMS and his company Medicare Consul Services provides services to sponsors enabling them to report.