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Tag: 2015 News

FDA Drug Approval for 2014 Hits All Time High

The number of new drugs approved in the United States this year has already topped last year’s 18-year high, yet large pharmaceutical companies are still struggling to get a decent return on their research dollars. In fact, according to the story in Reuters Health, returns on research and development spending by the world’s top drugmakers have fallen to 4.2 percent, or less than half the 10.1 percent recorded in 2010, according to a report on Monday from consultancy Deloitte.

The mismatch between the rising number of drug approvals and falling returns reflects the fact that each new medicine is expected to yield significantly lower average sales, while costs are continuing to rise.

Since 2010, forecast peak sales per new drug have fallen by almost 50 percent, even as the average cost of developing a product has climbed by a third. As a result, life sciences R&D is not currently generating a sufficient return on investment for many big drugmakers, according to Julian Remnant of Deloitte.

“We are now seeing a trend for companies to return more money to shareholders through dividends and share buybacks than they are investing in the future through R&D, licensing and acquisitions,” he said.

Deloitte’s annual report calculates the return on investment that 12 leading drug companies can expect, based on consensus market forecasts. The report does not give forecasts for individual companies.

The findings come at a time of increased productivity in terms of the sheer number of new medicines reaching the market, with Friday’s Food and Drug Administration green light for Roche’s new lung cancer drug alectinib lifting the 2015 total above 2014’s full-year tally of 41.

Many of these new treatments, however, are targeted at niche patient populations and are designed for treating rare diseases or very specific sub-types of cancer, limiting their sales potential.

Still, the rapid pace of new drug launches is forecast to continue, with 225 new drugs expected to be approved between 2016 and 2020, according to a report from industry data firm IMS Health. IMS expects cancer treatments to be largest category.

DIR Self Insurance Plans Chief to Move to Sedgwick

The Office of Self Insurance Plans Chief Jon Wroten is leaving the Department of Industrial Relations for new endeavors, and will retire from state service this month. Mr. Wroten is responsible for overseeing and regulating the nation’s largest self-insurance workers’ compensation marketplace in his position as Chief of DIR’s Office of Self Insurance Plans (OSIP).

“Jon Wroten is a valued member of my executive management team. He helped implement the SB 863 self-insurance reforms and worked to make California’s self-insurance program more efficient and fair,” said DIR Director Christine Baker. During Chief Wroten’s tenure, DIR and OSIP:

1) Implemented processes to manage over $22 billion in total risk exposure, protecting the self-insured benefits of 4.6 million covered workers.
2) Instituted safeguards that monitor self-insurers’ solvency, compliance and market conduct, including the actuarial-based collateral evaluation and peer-review system.
3) Successfully reduced application and financial underwriting processes from nine months to less than 21 days.
4) Deployed an electronic filing system to simplify annual regulatory reporting processes.

Prior to his appointment as OSIP Chief, Mr. Wroten worked in DIR as a Cal/OSHA senior manager, served at the California Department of Business Oversight investigating white collar financial crimes, and scrutinized political campaign finance cases for the California Fair Political Practices Commission.

Mr. Wroten will join Sedgwick Claims Management Services, Inc. as its Senior Vice President, Regulatory Compliance and Quality after his retirement from state service.

Owner of So Cal Ambulance Company to Serve 9 Years for Fraud

The former owner, operator and managers of a Southern California ambulance company were sentenced to prison for their role in a fraud scheme that resulted in more than $1.5 million in fraudulent claims to Medicare.

On Aug. 18, 2015, following a 10-day trial, a federal jury in Los Angeles convicted Proshak, Zverev and Wallace of one count of conspiracy to commit health care fraud and five counts of health care fraud. Zverev and Wallace worked for ProMed Medical Transportation, an ambulance transportation company owned and operated by Proshak in the greater Los Angeles area that provided non-emergency services to Medicare beneficiaries, many of whom were dialysis patients. Zverev was the billing manager and Wallace supervised the ProMed EMTs. The evidence at trial showed that between May 2008 and October 2010, the defendants conspired to bill Medicare for ambulance transportation services for individuals that did not need such services. The defendants also instructed ProMed EMTs to conceal the patients’ true medical conditions by altering paperwork and creating fraudulent documents to justify the services. During the course of the conspiracy, ProMed submitted at least $1.5 million in false and fraudulent claims to Medicare for medically unnecessary transportation services; Medicare paid at least $804,755 on those claims.

U.S. District Judge S. James Otero of the Central District of California sentenced Yaroslav Proshak, aka Steven Proshak, 47, of Valley Village, California to serve 108 months in prison. He also sentenced Emilia Zverev, 58, of Van Nuys, California; and Sharetta Michelle Wallace, 37, of Inglewood, California, to serve 36 months and 24 months in prison, respectively. In addition to their prison terms, Judge Otero ordered Zverev and Wallace to pay restitution jointly and severally with Proshak in the amount of $804,755.

The FBI and HHS-OIG investigated the case. The case was brought as part of the Medicare Fraud Strike Force, supervised by the Criminal Division’s Fraud Section and the U.S. Attorney’s Office of the Central District of California. Trial Attorneys Blanca Quintero, Fred Medick and Ritesh Srivastava of the Criminal Division’s Fraud Section prosecuted the case.  

Owners of San Pedro Clinic Arrested for Fraud

Two members of the International Longshore and Warehouse Union (ILWU), Local 13, have been arrested on federal fraud charges that allege they caused two medical clinics to bill the union’s health care plan for chiropractic services that either were not provided or were not medically necessary.

Sergio Amador, 49, of Downey, and David Gomez, 52, of San Pedro, were arrested without incident by federal authorities. The two pleaded not guilty to mail fraud charges contained in an indictment that was returned by a federal grand jury. The indictment alleges that they received at least $225,000 from the fraudulent scheme and charges both defendants with 20 counts of mail fraud. If they are convicted, each would face a statutory maximum sentence of 20 years in federal prison for each count of mail fraud.

The ILWU represents dockworkers at the ports of Los Angeles and Long Beach. Members of the union receive benefits, including health care benefits, through the International Longshoremen’s and Warehousemen’s Union – Pacific Maritime Association Welfare Plan.

In 2009, Amador and Gomez opened a clinic in Long Beach operating under the name Port Medical that purported to provide general medical and chiropractic care. The next year, they opened a second clinic operating under the same name in San Pedro.

According to the indictment, Amador and Gomez also created medical management companies that they used to receive funds generated by the medical clinics, which were then used to pay themselves and to pay incentives to Welfare Plan members to use the Port Medical clinics and to encourage other Welfare Plan members to use them. The incentives allegedly included cash payments and sponsorships of sports teams.

The indictment alleges that when some Welfare Plan members went to the Port Medical clinics to receive chiropractic treatment, they were asked to sign their names on multiple sign-in stickers, while on other occasions Welfare Plan members’ signatures on sign-in stickers were forged. According to the indictment, Amador and Gomez then caused the sign-in stickers to be used to create chart entries that falsely indicated the Welfare Plan members had received chiropractic services on dates when no such services had been provided.

The indictment also alleges that Amador and Gomez encouraged Welfare Plan members to go to the Port Medical clinics to receive massages, heat and ice treatments and other services that were not medically necessary – while the patients’ medical charts falsely showed “that the services provided were medically necessary, addressed specific conditions of patients that had been properly diagnosed, and were used to support and facilitate chiropractic care.” Those services – and others never provided – then allegedly were billed to the Welfare Plan. Those bills also concealed that patients had been recruited through the use of cash payments or other incentives.

Employer Faces $58K Cal/OSHA Fine From Flywheel Explosion

Cal/OSHA cited Quantum Energy Storage Corporation in Poway $58,025 for a June 10 explosion caused by an out-of-control 11,000 pound metal flywheel. One worker suffered a broken ankle and three others were treated for abrasion injuries caused by flying debris from the explosion.

“California employers must take precautions to protect employees from on-the-job hazards, including machinery operated in closed, confined spaces,” said Cal/OSHA Chief Juliann Sum. “The workers harmed by this explosion could have died because the employer did not secure or cover the flywheel to prevent the release of mechanical energy.”

Cal/OSHA investigators learned that the nearly seven feet in diameter flywheel was placed in a concrete vault area installed in the warehouse for tests of the energy storage system. Prior to the accident, the flywheel was spinning at 6,000 rotations per minute, and had just begun the process of winding down when it failed. The flywheel came loose from its moorings and crashed into the vault’s guard rails, causing enough damage to the building’s roof, interior and walls that the building was deemed unsafe to enter after the accident.

No steps had been taken to enclose the vault or minimize hazards where the employees worked. Computer stations were not located at a safe distance nor were they designed to limit employee exposure in the event of uncontrolled release of electrical or mechanical energy.

Cal/OSHA issued 16 citations to Quantum Energy Storage for violations of multiple health and safety standards, including the safe practices for operating machinery standard. The citations included five that were serious in nature and one classified as serious accident-related. A serious violation is cited when there is a realistic possibility that death or serious harm could result from the actual hazardous condition.

Study Shows Doctors Still Order Too Many Unnecessary Tests

In a study using surprise visits by undercover instructors posing as patients, the approach did little to deter trainee-doctors from ordering unnecessary tests or to better focus them on their patients’ goals.

“In primary care and a lot of other areas of medicine, we know there is a problem of tests and procedures that are done that are probably medically unnecessary and not beneficial to the patient,” said lead study author Dr. Joshua Fenton, of the University of California-Davis Health System in Sacramento.

Reuters Health summarized the new study of almost 60 second-year doctors, known as residents, a male fake patient requested magnetic resonance imaging (MRI) for lower back pain and a middle-aged woman asked for bone mineral density testing. Both are considered overused tests according to the Choose Wisely program, which aims to avoid wasteful or unnecessary medical testing, treatments and procedures through education of both doctors and patients.

The undercover instructors eventually broke character and critiqued the doctors-in-training on their techniques for addressing the patient’s concerns apart from just ordering the requested test.

Fenton told Reuters Health the study team theorized that fewer tests might be ordered if doctors were more patient-centered, which means providing healthcare that aligns with patients’ wants, needs and goals.

To see if real-life challenges combined with feedback would get the message across, the researchers sent the instructors to visit 30 internal medicine and family medicine residents at two clinics in California, and to another 31 residents who served as a control group. Members of the control group did not receive feedback from their fake patients, but they got educational materials afterward. Following the first trial, researchers sent the undercover instructors back for up to three unannounced visits to different residents over the following three to 12 months to request similar tests.

Overall, the residents ordered the low-value tests in about 27 percent of visits, and that rate didn’t change across the trial. The residents also didn’t score higher on patient-centeredness or on the techniques used to address patient concerns during the trial, researchers found. “Essentially, for the most part it wasn’t an effective intervention,” Fenton told Reuters Health.

It may be that overuse of diagnostic tests is too deeply ingrained into the medical culture to be improved by a brief intervention, write JAMA Internal Medicine editors Drs. Kenneth Covinsky and Rita Redberg of the University of California, San Francisco, in a note accompanying the new study, “I think it speaks to the importance of discussing low-value and potentially harmful care across our discipline,” said Dr. Wanda Filer, president of the American Academy of Family Physicians, who wasn’t involved in the study.

California Marijuana Legalization Ballot Initiative Gains Support

Efforts to legalize marijuana in California got a boost this week after competing ballot measures joined forces behind the stronger of the two, backed by billionaire Sean Parker, a former president of Facebook Inc.

According to the report in Reuters Health, the initiative has the support of Democratic Lieutenant Governor Gavin Newsom and the Coalition for Cannabis Policy Reform. Coalition board member Antonio Gonzalez, who is also president of the Latino Voters League, said the coalition withdrew its rival initiative after Parker’s measure was modified to protect children, workers and small businesses. The move brings to a close weeks of behind-the-scenes negotiations aimed at closing the gaps between the initiatives, amid concerns that neither would succeed if both wound up on the ballot for 2016.

Marijuana use is illegal under federal law in the United States but 23 states allow the use of pot for medical purposes. Recently, Colorado, Washington and Oregon have approved recreational use and Alaska is set to allow it next year. Voters in Massachusetts, Michigan, Nevada and Arizona could face ballot initiatives next year intended to legalize marijuana.

In California, amendments filed this week to Parker’s proposal would allow local governments a greater say in where marijuana can be sold, toughen protections for children, including a ban on marketing to minors and explicit warning labels on marijuana products, and require safety standards and enforcement of labor laws for people who work in the industry.

The measure would tax marijuana sales and cultivation, raising hundreds of millions of dollars for the state, proponents say.

California has the largest marketplace for medical marijuana sales in the United States, according to the research group IBIS World. Nationwide, medical and recreational marijuana is expected to bring in $3.6 billion in revenue in 2015, growing to $13.4 billion over the next five years, the company says.

A marijuana legalization initiative failed in California in 2010, but public opinion is shifting. Parker’s measure would legalize recreational marijuana use for adults over 21 and set up a framework for regulating and taxing sales.

Parker’s deep pockets suggest that his initiative will be well-funded, although campaign finance records do not show any contributions as of Wednesday. In 2010 supporters invested $3.5 million in Proposition 19, outspending opponents nearly 8-1. But the measure failed amid concerns that it did not protect children or guard against driving under the influence.

DWC Announces 2016 Audit Performance Standards

Labor Code §§129 and 129.5 require the Audit and Enforcement Unit of the Division of Workers’ Compensation (DWC) to conduct a profile audit review (PAR) for all adjusting locations of California workers’ compensation claims at least once every five years. Performance of the adjusting locations is measured in five areas of claims administration:

1) The payment of accrued and undisputed indemnity
2) The late first payment of temporary disability / first notice of salary continuation
3) The late first payment of permanent disability and death benefits
4) The late subsequent indemnity payments
5) The provision of notices with QME/AME advice.

The administrative director annually establishes profile audit review and full compliance audit (FCA) standards in accordance with Labor Code §§129(b)(1) and (2) and Title 8, California Code of Regulations §10107.1. The 2016 standards are based on the audit results of calendar years 2012 through 2014.

The PAR performance standard for audits conducted in 2016 is 1.51082. Audit subjects with PAR performance ratings of 1.51082 or lower will be required to pay any unpaid compensation, but no penalties will be assessed. If an audit subject’s PAR performance rating is 1.51083 or higher, the audit will expand to a FCA, and an additional sample of indemnity claims will be audited.

The FCA performance standard for audits conducted in 2016 is 1.67880. Audit subjects with an FCA performance rating of 1.67880 or less will be required to pay any unpaid compensation and penalties will be assessed for all violations involving unpaid and late paid compensation. If an audit subject’s full compliance audit performance rating is1.67881 or higher, an additional sample of denied claims as well as the expanded sample of indemnity claims will be audited. Penalties will be assessed for all violations as appropriate pursuant to 8CCR §§10111 through 10111.2.

More information on the performance standards that will be in use for the profile audit reviews and full compliance audits during calendar year 2016 will be posted on the DWC Audit and Enforcement Unit web page.

DWC Posts Spanish Version of Revised Benefit Notices

The Audit and Enforcement Unit of the Division of Workers’ Compensation (DWC) has posted the Spanish version of the revised benefit notice manual on the DWC website. The English version was previously posted.

The “safe harbor” provision of Title 8, Cal. Code of Regs., section 9810(f) provides that “Benefit notices using the sample notices devised by the Administrative Director and available on the Division’s website are presumed to be adequate notice to the employee and, unless modified, shall not be subject to audit penalties.”

The revisions to the recently approved benefit notice regulations include:

1) Elimination of the requirement to provide Fact Sheets as attachments to notices
2) Reduction of the requirement to provide a QME panel request form with notices
3) Elimination of the warning notice language at the top of notices
4) Allowance for employees and their attorneys to choose to receive electronic service of notices.

The benefit notice regulations take effect on January 1, 2016.

CWCI Reports on Medical Review and Medical Dispute Resolution

Despite assertions that the California workers’ compensation medical review and dispute resolution process results in wholesale denial of care for injured workers, a new CWCI analysis shows that about 96% of treatment services are approved and delivered to injured workers, and that the multiple levels of medical review have produced a system with a high degree of consistency for approving care while maintaining the state’s evidence-based medicine standard.

While a means of resolving medical necessity disputes is common to almost all other healthcare delivery systems, including group health and federal programs, workers’ compensation is not like other systems. Co-payments, deductibles and enrollee contractual language, common shared-risk strategies used in group health to manage utilization and cost are precluded by law and antithetical to the original no-fault bargain between employers and employees. From the moment California introduced IMR into the system following the 2012 reforms, debate over the scope, authority and reasonableness of the workers’ compensation medical dispute resolution process intensified. Recent studies have analyzed the various components, and CWCI’s new report expands on those analyses using data from a sample of 5.6 million California workers’ compensation medical services from 2014 and from the nearly 82,000 IMR decision letters issued in first half of 2015. Key findings include:

1) Almost 85% of the 5.6 million medical services in the study sample were paid without being requested in RFAs and undergoing UR for medical necessity. These services were paid based on prior authorization, retrospective authorization or when no RFA was received but the service fell within the claims administrator’s parameters for approval.
2) 15% of the medical services were requested in RFAs and underwent UR. Of these, 60% were accepted by non-physician reviewers who determined that they were medically necessary under the treatment guidelines, and 40% were sent for review by a UR physician. This means that about 6% of the 5.6 million medical services (15% x 40%) were reviewed by a UR physician.
3) The modification/denial rate for the 6% of all treatment services submitted for physician UR was 70%, or 4.3% of all services in the study sample (1.1% were modified and 3.2% were denied).
4) In the first half of 2015, IMR physicians upheld 89.1% of the UR denials and modifications and overturned 10.9%. This is consistent with the 91% uphold rate from CWCI’s study of 2014 IMR outcomes and indicates that the majority of modifications or denials made by UR physicians are in-line with evidence-based medicine.
5) Almost half of the IMR decisions rendered between January and June of 2015 involved disputes over prescription drugs. One-third involved requests for opioids, while 11% involved compounded drugs.
6) The top 10% of physicians involved in IMR disputes (961 treaters) were identified in more than 80% of all IMR determination letters; while the top 1% (97 physicians) were named in 40% of the letters.
7) After taking into account medical services approved without an RFA and without UR, those approved by non-physicians during UR, those approved by UR physicians, and those approved following IMR, the estimated approval rate for all California workers’ comp medical services ranges between 95.7% and 96.1%

The Institute notes that the high level of agreement at the different stages of medical review fulfills the legislative intent of the workers’ compensation reforms to provide injured workers with the most effective medical care through a process that is more objective, transparent and consistent. CWCI has published its study in a Research Update report, “Medical Review and Dispute Resolution in California Workers’ Compensation.”