FDA’s Robert Califf Calls On Insurers To Help Providers Participate In Critical Clinical Drug Trials

Califf to insurers: Providers need help with clinical trials

Insurers must do more to help providers participate in clinical trials that can confirm the effectiveness of drugs granted accelerated approval, Food and Drug Administration Commissioner Robert Califf, M.D., told a room full of payer executives Thursday.


Califf spoke about how to improve the accelerated approval process during a session at the AHIP 2023 Medicare, Medicaid, Duals & Commercial Markets Forum in Washington, D.C. The remarks come as the FDA has new powers granted by Congress to get drug companies to finish trials for drugs after they reach the market via accelerated approval.


“I am not aware of a major effort by insurance plans to help people get studies done,” Califf said. “What I am hearing from clinicians is that it is hard to do research in the current environment. There are negative incentives to do it.”

The accelerated approval pathway was created to hasten the clearance of new drugs that have the potential to address an unmet medical need. Drug companies must complete a confirmatory trial after the product hits the market, but there isn’t much done to get those trials completed, Califf said.

Congress granted the agency new powers to get such trials done, including giving FDA the authority to require them to get started before an approval decision. FDA also can pull a drug off the market faster if the trial results are negative.


Califf said the hears from doctors that they have no time to participate because of “intense pressure and many, many barriers from the insurance industry.”

He did not specify what those barriers were, but providers have often complained about administrative burdens levied by insurers such as prior authorization. A recent survey from the American Medical Association showed that a wide majority of physicians are devoting more time to prior authorization requests, a cost containment tool that requires insurer approval for certain items or services.

There is a major financial benefit to insurers that work to see these trials to fruition, Califf added.

“If you spend more of your time generating evidence, you can stop paying for a lot of things, because it would be clear that they don’t work, and, ultimately, your cost would go down,” he said.


Confirmatory trials have put the FDA sometimes at odds with the Centers for Medicare & Medicaid Services (CMS).

In 2021, the FDA cleared the controversial Alzheimer’s disease drug Aduhelm via accelerated approval. CMS decided to only cover that class of drugs in Medicare if a beneficiary was in a qualifying clinical trial, which drew swift rebukes from patient groups.

The Center for Medicare and Medicaid Innovation recently proposed a model that would cut Medicare payments to accelerated approval drugs until a confirmatory trial is complete. The goal is to give drugmakers an incentive to finish the trial.

Califf said that the model in general seems like a good idea but cautioned he needs to learn more about how it is done.

“If you do the right follow-up studies and prove the value, there has to be an adjustment in payment based on value,” he said.

Legal Challenges To No Surprises Act Regulations Leave Dispute Resolution Process In Flux

Legal challenges to No Surprises Act regulations leave dispute resolution  process in flux | BenefitsPRO

Enacted at the end of 2020, the federal No Surprises Act (NSA) prohibits certain health care providers and facilities that provide their services outside of health plan provider networks from “balance billing.” As a result, those providers and facilities cannot hold patients responsible for the difference between what the provider or facility charges and what health plans or other third-party payers pay for the services.

Recent court decisions have put the rules for determining how much health plans and insurance companies pay those out-of-network providers who are prohibited from balance billing under the new law in flux, further complicating the already complex system for paying health claims. Because providers continue to file lawsuits challenging portions of the federal regulations governing these provider payments, it is unlikely that providers or payers will have a satisfactory or predictable process in place for determining out-of-network payment rates anytime soon.

There are three types of out-of-network health care services covered by the NSA’s balance billing prohibitions: emergency services, air ambulance services, and certain services provided to patients on an out-of-network basis within an in-network facility, such radiology or anesthesiology services from out-of-network providers within an in-network hospital. The NSA directs how payments to out-of-network providers rendering these services will be determined, and the U.S. Departments of Health and Human Services, Labor, and Treasury have issued regulations and related guidance for making those payment determinations.


Those regulations have been challenged in court by multiple health care provider groups claiming the regulations deviate from the payment methodologies contained in the NSA and that the federal agencies did not follow proper procedures and acted arbitrarily when issuing the regulations. According to the providers bringing these lawsuits, these regulations unlawfully deflate the out-of-network payment rates.

Under the NSA, if out-of-network payment rates are not dictated by state law or an all-payer model agreement under the Social Security Act, and if the providers and payers cannot come to an agreement on the payment rate, either party can opt to have the rate determined through an independent dispute resolution (IDR) arbitration process. The provider lawsuits claim that the federal regulations governing this arbitration process put too much weight on what Congress defined as the Qualified Payment Amount (QPA), the median contracted rate for the service in the geographic region for determining the out-of-network payment rate in arbitration, and not enough weight on other factors set forth in the NSA that they contend should be considered alongside the QPA when determining the rate.

These other factors include, for example, the acuity of the patient receiving the services, the level of training, experience, and quality and outcomes measurements of the provider, and the efforts of the provider and payor to enter into network agreements.


A federal district court in Texas agreed with the providers in several of those cases and struck down portions of the regulations, for example, Texas Medical Ass’n v. U.S. Dept. of Health and Human Servs. (TMA I), No. 6:21-cv-00425 (E. D. Tex. Feb. 23, 2022); and LifeNet, Inc. v. U.S. Department of Health and Human Servs., No. 6:22-cv-00162 (E. D. Tex. Jul. 26, 2022).

TMA I objected to the interim final regulations that the federal agencies issued on an expedited basis in October 2021, which told arbitrators to presume that the QPA was the correct out-of-network payment rate absent credible and clear evidence to the contrary. The provider groups bringing the lawsuits claimed that the regulations impermissibly put a thumb on the scale in favor of the QPA, which they contend lowers how much they are paid. Federal agencies claimed that the regulatory framework for determining payment amounts was a reasonable interpretation of the NSA’s mandates.

After those interim final regulations were vacated by the court in February 2022, the agencies went back to the drawing board and issued a final regulation, which providers subsequently successfully challenged on similar grounds in Texas Medical Ass’n v. U.S. Dept. of Health and Human Servs. (TMA II), No. 6:22-cv-00372 (E. D. Tex. Feb. 6, 2023).


Following that February 2023 court decision, the agencies issued guidance to the IDR arbitrators to halt all further payment determinations. Subsequent guidance then told those arbitrators they could proceed with payment determinations, but only for claims for services furnished before October 25, 2022. The arbitrators were directed that, for those claims, “[t]he standards governing a certified IDR entity’s consideration of information when making payment determinations in these disputes are provided in the October 2021 interim final rules, as revised by the opinions and orders of the U.S. District Court for the Eastern District of Texas.” Payment of claims to providers for services furnished on or after October 25, 2022, must await further guidance. As of early February 2023, there was a backlog of approximately 200,000 payment disputes in the IDR process.

These lawsuits are not the only ones brought by providers challenging the government’s regulations implementing the NSA. In Texas Medical Ass’n v. U.S. Dept. of Health and Human Servs. (TMA III), No. 6:22-cv-00450 (E. D. Tex. Nov. 30, 2022), providers filed a lawsuit in the same court in Texas objecting to the methodology in the regulations for calculating the QPA, which they allege artificially deflates the QPA. According to that complaint, the regulations improperly permit payers to count toward the QPA “ghost rates” — rates included in contracts with providers who do not actually provide the specified item or service and thus have no incentive to negotiate a fair and reasonable reimbursement rate.

The lawsuit also objects to portions of the regulations that allow the QPA to be based on rates of providers who are not in the same or similar specialty, that exclude incentive-based and retrospective payments from factoring into the QPA calculation, and that permit self-insured group health plans to use a QPA based on contracted rates of all self-funded plans serviced by their third-party administrators, instead of one calculated on a plan-by-plan basis.

And in Texas Medical Ass’n v. U.S. Dept. of Health and Human Servs. (TMA IV), No. 6:23-cv-00059 (E. D. Tex. Jan. 30, 2023), providers objected to a December 2022 increase from $50 to $350 in the administrative fee that each party must pay, in addition to the arbitrator’s fee, to participate in the IDR process, and to the portion of the regulations that govern when providers can batch similar or related claims together for IDR payment determinations. The court has not yet addressed the merits of either lawsuit.

The current state of complexity and uncertainty surrounding the payment methodologies and IDR process is certainly consuming the time, attention, and resources of health plans, insurance companies, and other payers, the health care providers and facilities covered by the NSA, and the arbitrators involved in the IDR process. Benefits professionals should anticipate further guidance or even additional rulemaking from the federal agencies as they attempt to develop a workable process for determining out-of-network payment rates that limits transaction costs for all involved but sufficiently tracks the text of the NSA to pass judicial scrutiny. But there likely will not be an efficient system in place for some time and future court rulings may complicate the federal agencies’ work implementing the NSA even more.

As a practical matter, the current delays in payments to providers and uncertainties surrounding the criteria to be used in calculating out-of-network payment rates may work to encourage more provider network participation and overall health care cost reductions for plan sponsors and participants. Whether Congress steps in to amend or clarify the NSA, or engage in further oversight of its implementation, also remains a possibility.

Some Small Businesses Could Face Significantly Higher Taxes This Year

Small businesses may face higher taxes in 2023Taxes are one of the most significant expenses for many small businesses, so when the government changes tax laws, it can have a big impact.

The good news for 2023 is that it seems unlikely that there will be any major tax legislation coming our way. However, thanks to some of the expiring provisions from 2017′s Tax Cuts and Jobs Acts, some small businesses could already be facing a significantly higher tax bill this year for two big reasons.

Research and development expenses are less deductible.

The first has to do with research and development (R&D) expenses. These expenses are generally costs related to a company’s efforts to develop, design, and enhance its products, services, technologies, or processes. Examples of these costs include salaries, contractors, equipment, computer software, materials and overhead expenses. Although more common in such industries as pharmaceuticals and technology, just about any company in any industry can have eligible R&D expenses if it is making a new product or updating an existing one.

Until recently, a business could fully deduct those costs in the year they were incurred. But no more.

Starting in 2022, a business now has to amortize — gradually write off — those expenses over five years and can deduct only 50% of those expenses in the first year. If the research is performed outside of the country, that amortization period is 15 years. New Jersey and Delaware comply with the federal rules. Pennsylvania complies with the federal law, but the calculation is more complicated for calculating personal income taxes.

There were numerous attempts by business groups and professional associations last year urging Congress to delay this change, but none have succeeded. As recently as last month, the American Institute of Certified Public Accountants issued another plea to specific Senate and House representatives, to extend the original provision from the 2017 legislation to 2026 to allow “for simplicity in tax compliance and the minimization of confusion related to identifying costs that should be capitalized versus expensed.”

Nothing has happened yet, and many tax professionals aren’t optimistic.

“The change was a big surprise to some of our clients,” said Mitch Gerstein, a senior tax adviser at Isdaner & Co. in Bala Cynwyd. “And it has a big impact. Because of this change, on $1 million of R&D expenditures, only 10%, or $100,000, will now be tax deductible and taxable income will increase by $900,000.”

Gerstein says the change has created “a level of agita” because of the delay in providing guidance and the added cash flow concerns resulting from unbudgeted additional tax dollars. He’s advising his clients to pay the taxes and extend their tax returns to later this year with the hope that Congress will act sooner and delay the change.

Bill Burns, a partner at accounting firm EisnerAmper in Center City, has the same level of concern.

“The biggest conversation we’re having with our clients is around cash-flow planning,” he said. “A typical company may have profit, and then they reinvest that profit in R&D where they could expense the entire amount. This is a big disincentive.”

Like Gerstein, Burns says he’s also telling his clients to extend their returns even though the odds of Congress changing the rule “aren’t high.”

Depreciation on new purchases is limited.

As if losing out on one significant deduction isn’t tough enough, there’s another popular business tax deduction that will start being phased out this year: “bonus” depreciation. That’s a rule allowing most small businesses to deduct up to 100% of the cost of new assets purchased — equipment, machinery, computers, software and furniture — in the first year they buy it, as long as it’s placed into service that year. Unfortunately, that percentage has dropped to 80% in 2023.

“It means that many of our clients will not be able to deduct as much they did in the past for the purchase of capital items,” said Gerstein. Unfortunately, it gets even worse: The bonus depreciation deduction decreases to 60% of eligible capital expenditures in 2024, then 40% in 2025, and 20% in 2026.

“So even though it’s less this year, we’re telling our clients to take advantage of the deduction before it goes down even more,” said Gerstein.

To help ease the pain of this reduction, many accountants such as Gerstein are also recommending that small-business owners look at the costs they’ve incurred for purchasing a property and segregate those costs between the building costs and the equipment that’s part of a building. This can sometimes help businesses realize tax savings quicker, because the depreciation years for some of that equipment — sprinkler and plumbing systems, for example — may be less than the typical 27 years of a building.

Some good news

Despite being limited on what can be deducted for research and development and capital equipment expenditures, the tax news isn’t all bad for small businesses.

Even though it provides more than $80 billion in funding for the IRS — which some fear will increase the probability of audits — the Inflation Reduction Act, which was passed last August, has some tax incentives for businesses investing in green energy products and purchasing electric vehicles. It also allows more small businesses to use the research and development tax credit (a federal credit on certain research and development expenditures that could possibly be used to offset some of the impact of the above research and development tax deduction) against their employer payroll taxes.

Regardless, the negative impact of the now-limited research and development and “bonus” depreciation deductions could likely outweigh those benefits.

“These changes could result in substantially higher taxes from our clients in the manufacturing, software development, pharmaceutical and other industries and may have a negative impact on the extent of research and development activities in the future,” said Gerstein. “I hope Congress takes action.”

Last Updated 03/29/2023

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