In This Issue...

OIG Recommends Lab Cuts

The Office of the Inspector General (OIG) recently issued a report entitled, “Comparing Lab Test Payment Rates: Medicare Could Achieve Substantial Savings,” which recommended cuts in federal reimbursement for laboratory tests.   Using 2010 as the base year, the investigative office compared Medicare reimbursement for 20 high volume/expenditure tests to what was paid by Medicaid and a number of private plans participating in the Federal Employees Health Benefits (FEHB) program.  

The OIG found that Medicare paid fees approximately 18-30 percent higher than other insurers.  The agency estimates that if the government had received the ‘best price’ it would have saved $910 million—more than 10 percent of Medicare’s total outlay for laboratory testing for that year.  The OIG is recommending that CMS:

  • Conduct a demonstration project on competitively bidding laboratory services;
  • Seek ‘best price’ agreements from providers; and
  • Pursue legislation permitting laboratory co-payments and deductibles.

CMS has not indicated how it plans to respond to the OIG recommendations.  AACC opposes the agency’s suggestions.  A copy of the report is available on the OIG website. 

Senate Finance Explores Transparency in Health Care Pricing

On June 18th, the Senate Finance Committee conducted a hearing to explore the hidden costs of health care in the United States.  The hearing featured journalist Steven Brill, who wrote an article in the March 4th edition of Time, “Bitter Pill: Why Medical Bills Are Killing Us,” which captured the attention of policymakers and the health care community.  In his article, Mr. Brill discussed how health care providers charge vastly different amounts for the same procedures in the some locality.

Testifying before the panel, Mr. Brill suggested a number changes to the health care system to make it more transparent and efficient, including the publication of more hospital cost data, the enactment of malpractice reform to eliminate unnecessary testing and the establishment of price controls on medical devices to reduce costs.  Senator Baucus picked up on the later point in his opening statement, urging the committee to “look at the medical device sector and how it often reaps record high profits, including gross margins approaching 75 percent.” He did not elaborate on how he would do this, nor if the committee plans further action in this area.  GAU will continue to monitor and report on this issue.

Supreme Court Rules against Gene Patents

The Supreme Court recently released its long-awaited ruling on whether human genes can be patented.  The Court, in a unanimous decision, held that “a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring.”  This decision will have far-reaching implications given that the US Patent Office has granted patents on “isolated” genes for over 30 years. 

According to the ACLU, which played a major behind-the-scenes role in advancing the case, the decision will lift “a major barrier to progress in further understanding how we can better treat and prevent diseases.”  BIO, representing the biotechnology industry, countered, stating that the decision “represents a troubling departure from decades of judicial…precedent” and “could unnecessarily create business uncertainty for a broader range of biotechnology inventions.” 

GAU will continue to report on this issue as the full implications of this decision become more apparent.  A copy of the decision is available on the Supreme Court website.

ACLA Challenges FDA Oversight of LDTs

The American Clinical Laboratory Association (ACLA) has filed a Citizen’s Petition with the Food and Drug Administration (FDA) urging the agency not to issue any guidance or regulation affecting laboratory developed tests (LDTs).  The trade association asserts that LDTs are not medical devices and therefore not subject to FDA oversight.  This petition came less than a week after FDA Commissioner Margaret Hamburg called for greater agency oversight of LDTs. 

In its petition, ACLA identified four reasons for its request:

  1. The FDA lacks statutory authority to regulate LDTs;
  2. The agency’s regulation of LDTs would be contrary to public health;
  3. LDT oversight would have unintended consequences with significant economic repercussions for the lab industry; and
  4. Any additional oversight should be through CMS and CLIA’88, not an additional layer of oversight by the FDA. 

The FDA frequently does not respond to Citizen Petitions.   In 2006, the Washington Legal Foundation filed a similar notice with the agency.  There has been no response to date.  A copy of the ACLA petition is available on its website.