The Debate About Clinical Trials Reporting is Over

 

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

 

For 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.