Senate Scrutinizes MA Payment Denials, Including Use Of Algorithms

Impossible' Medicare Advantage denials decried during Senate hearing

Medicare Advantage plans’ use of third-party algorithms for coverage determinations is facing some scrutiny in the Senate.

Lawmakers in a Wednesday hearing argued something must be done to pare back burdensome prior authorization requirements allowing payers to delay or deny medical care that would be covered under traditional Medicare — including the use of artificial intelligence — as insurer profits continue to rise.

“Insurers are in effect denying Americans necessary care in order to fatten and pad their bottom lines, and that phenomenon is unacceptable,” said Sen. Richard Blumenthal, D-Conn., chair of the Permanent Subcommittee on Investigations, which held the hearing.

“I want to put these companies on notice. If you deny lifesaving coverage to seniors, we’re watching, we will expose you, we will demand better, we will pass legislation if necessary, but action will be forthcoming,” Blumenthal said.

The subcommittee on Wednesday sent bipartisan letters to some of the biggest MA payers, including UnitedHealth, Humana and CVS, which collectively cover more than 50% of MA beneficiaries. The letters asked for internal documents showing how decisions are made to grant or deny access to care, including the use of AI in coverage determinations, Blumenthal said.

Payment denials

Although the majority of requests for services are approved, it’s not uncommon for private MA plans to wrongly deny medically necessary care that would be covered under traditional Medicare, according to an HHS Office of Inspector General report from last April.

Federal investigators found 13% of prior authorization requests and 18% of payment denials were wrongly denied and should have been approved under Medicare coverage rules.

In addition, a 2018 government audit found MA plans ultimately approved 75% of appealed requests that were originally denied.

MA plans, which can offer more benefits than traditional Medicare, continue to grow in popularity. Currently, 30 million Americans, or roughly half of all Medicare enrollees, are in the privately run Medicare plans. And the number of plans has grown, with the average beneficiary choosing between 43 plans offered by nine different insurers as payers flood into the lucrative market.

“Fast growth has increased vulnerabilities and the need for robust program integrity measures,” testified Megan Tinker, HHS OIG chief of staff, during the hearing.

AI determinations

To cut costs, MA insurers are routinely using algorithms from third-party companies like NaviHealth for coverage determinations, sparking many of the inappropriate denials, according to a STAT investigation earlier this year.

Insurers’ use of the unregulated technology was a major focus of the hearing with senators arguing the need for more oversight.

“Insurers may refer to these algorithms as tools used for guidance, but the denials they generate are too systematic to ignore,” said Blumenthal. “Insurance companies insist those AI mechanisms are proprietary, but part of what needs to happen is to make them more transparent so patients and providers know along with the public how they are being used.”

Gloria Bent, an MA enrollee, shared her husband’s experience with melanoma and how NaviHealth, which is owned by payer giant UnitedHealth, frequently denied care prescribed by his clinician. That resulted in a stressful cycle of coverage denials and appeals and his premature departure from a skilled nursing facility.

“The reappearance of melanoma in 2022 pulled a rug out from under my husband and my family. Then came the added trauma which piled on steadily of having to fight to keep him receiving the care he needed,” Bent testified. “This should not be happening to families and patients. It’s cruel.”

Still, utilization management tools like prior authorization can be valuable for cost containment, testified Lisa Grabert, a visiting research professor at the Marquette College of Nursing. Insurers argue prior authorization is necessary to curb waste and unnecessary medical expense.

Earlier this year, the Biden administration finalized a rule reiterating that MA plans are required to comply with coverage rules in traditional Medicare. Where there isn’t a Medicare coverage determination, MA plans can establish their own internal coverage criteria. That criteria must follow widely accepted available clinical guidelines and be reviewed annually by a clinical committee, the final rule says.

In addition, if a utilization management policy like a prior authorization could lead to a partial or full denial of care, it needs to be reviewed by a clinician. CMS plans to enforce the rule through audits.

Large private health insurers, like UnitedHealthcare, have been paring back their prior authorization requirements in advance of the regulation.

Senator Roger Marshall, R-Kans., asked witnesses if it would be valuable to force plans to report more detailed information on prior authorization delays, denials and appeals by CPT code or individual service level, as the new CMS rule only requires MA payers to share aggregate data.

Witnesses said more data is always helpful for research, oversight and beneficiary shopping between plans.

“The information that is available right now, you have to dig very, very, very deep to get any information on whether a prior authorization may or may not be required, and certainly not at the service level,” testified Jeannie Fuglesten Biniek, associate director of Medicare policy for KFF. “It would be a step in a direction that would help.”

Kaiser Permanente Discloses Timeline, Financial Commitments For Its VBC Megadeal With Geisinger Health

Regulatory filing sheds new light on Kaiser-Geisinger megadealDisclosures included in Kaiser Permanente’s quarterly financial statements offer new details on the timeline for its major value-based care deal with Geisinger Health, as well as the upper and lower limits of its investment commitments toward the new entity and expanding Geisinger’s Pennsylvania market presence.

The statements, released late Monday, recap the definitive agreement announced by the integrated health systems in late April—Kaiser will create a separate non-profit called Risant Health, that would then acquire Geisinger and become its sole member.

Risant would, according to the statements, strategically aim to “expand and accelerate the adoption of value-based care in diverse, multi-payer, multi-provider and community-based health system environments.” Kaiser leadership has also said that Risant would accomplish those goals with “five or six” additional health system acquisitions.

Monday’s filing, however, shares that Kaiser doesn’t expect its deal to close until some time in 2024.

Additionally, the system’s financial commitments into Risant are slated to be made “over the five-year period following closing,” while committed investments and support by Risant into Geisinger will be made through Dec. 31, 2028, according to the filing.

As for the investments themselves, Kaiser leadership previously said it planned to shift $5 billion of the system’s funds into support for the new entity. Per the filing, that $5 billion toward “core Risant Health capabilities, technologies, tools and future investments” represents the upper limit of Kaiser’s potential support, with Kaiser also committing to a minimum investment of $400 million over five years “inclusive of funds generated by Risant Health.”

Risant would then be on the hook to make available to Geisinger a minimum of $2 billion (inclusive of funds generated internally by Geisinger and Risant) through the end of 2028 to “support necessary hospital, ambulatory facility, technology and other strategic and routine capital,” Kaiser wrote.

Further, Risant must assure funding “of no less than $100 million” through 2028 to support expansions of Geisinger’s health plan and care delivery services into bordering Pennsylvania communities (again inclusive of internally generated funds), according to the statements.

Finally, Kaiser wrote that the agreement requires Risant to keep a minimum of $115 million available annually (inclusive of internally generated funds, and adjusted for inflation and other factors) to fund Geisinger’s research and education efforts for at least 10 years after the deal’s close, the system wrote.

Kaiser and Geisinger’s deal is still subject to regulatory approvals, though antitrust agencies have so far been hesitant to challenge deals involving healthcare entities operating in different markets.

Monday’s disclosures came alongside a more fleshed-out report of Kaiser’s first-quarter financials. The integrated giant said it brought in $1.2 billion in net income and $233 in operating income, a welcome turnaround after it lost $4.5 billion across 2022.

The Oakland, California-based nonprofit reports over $95 billion in annual operating revenues and spanned 624 medical offices, 39 hospitals and 43 retail and employee clinics as of March 31. It counted a total of 12.7 million members as of March 31.

Danville, Pennsylvania-based Geisinger reported $6.9 billion in revenue, a $239 million operating loss and a $842 million net loss across 2022. Its 133 care locations, including 10 hospital campuses, are primarily focused in central and northeastern Pennsylvania. It counted roughly 612,050 members as of Dec. 31 and had cared for nearly 1.2 million people across 2022.

House Panel Advances Transparency And PBM Bills

House panel advances bill to promote PBM transparency

A House Energy and Commerce Committee health markup on Wednesday offered more evidence that price transparency and pharmacy benefit manager regulation are two issues that have enough bipartisan support to move ahead in this Congress.

Among the measures the panel advanced on a unanimous 27-0 vote:

  • Codifying and strengthening Trump-era rules for hospitals and insurers to make health care prices available and more transparent.
  • Imposing new transparency requirements on PBMs and banning “spread pricing” in Medicaid, where PBMs charge more than they pay for a drug and keep the difference.

Yes, but: The committee took a pass on major measures to provide for site neutral payment reforms in Medicare that address the way hospitals charge more for outpatient services that can be done in less-expensive settings.

  • In a sign the issue is not dead, Chair Cathy McMorris Rodgers (R-Wash.) offered and withdrew an amendment, saying there is “more work to do” on the measures.
  • “It’s not a secret that hospitals have concerns with these proposals,” she said, but argued that there should be other ways to support hospitals than overpaying for certain services.

The bottom line: Versions of transparency and PBM bills could end up in a broader legislative package later this year, given the need to reauthorize programs like community health centers.

  • PBM measures have particular momentum, given that the Senate HELP Committee also advanced measures aimed at providing drug savings.

Progressives Reintroduce ‘Medicare For All’ Bill

Progressive Lawmakers Revive Medicare for All Bill

Key progressives in the House and Senate have revived the fight in Congress over “Medicare for All,” a single-payer health system based on the Medicare program.

Sen. Bernie Sanders, I-Vermont, and Reps. Pramila Jayapal, D-Washington, and Debbie Dingell, D-Michigan, reintroduced the Medicare for All Act, with 14 Senate Democrats and 110 House Democrats on board with the measure.

The legislation would roll out the Medicare for All model over four years, expanding health coverage to each American. Under the bill, that coverage would come with no premiums, deductibles or copayments and would cover a wide array of services from primary care to vision care to mental health.

Sanders said in a news release that the COVID-19 pandemic threw into stark relief how critical it is to ensure that everyone has access to affordable healthcare.

“As we speak, there are millions of people who would like to go to a doctor but cannot afford to do so,” Sanders said. “That is an outrage. In America, your health and your longevity should not be dependent on your bank account or your stock portfolio.”

The legislators noted that the Congressional Budget Office previously projected that Medicare for All would save the healthcare system $650 billion per year.

“Sadly, the number of people struggling to afford care continues to skyrocket as millions of people lose their current health insurance as pandemic-era programs end,” Jayapal said. “Breaking a bone or getting sick shouldn’t be a reason that people in the richest country in the world go broke.”

Medicare for All faces strong opposition from all corners of the industry. In a statement, the Partnership for America’s Health Care Future, which represents payers and providers, urged legislators to take a more “common sense approach” to ensuring coverage is accessible to everyone.

“Every American deserves access to affordable, high-quality health coverage and care—however one-size-fits-all proposals like Medicare for All that result in government-controlled health care won’t help us get there,” said Executive Director Lauren Crawford Shaver. “With more and more states seeing failed public option approaches, it is more important than ever that Americans have access to quality and affordable health care—not a system that would force them to pay more and wait longer for worse care. ”

A More Aggressive FTC Is Starting to Target Drug Mergers and Industry Middlemen

FTC sues Amgen-Horizon, raising questions about PBM role in drug costsUnder the leadership of an aggressive opponent of anti-competitive business practices, the Federal Trade Commission is moving against drug companies and industry middlemen as part of the Biden administration’s push for lower drug prices at the pharmacy counter.

On May 16, the FTC sued to block the merger of drugmakers Amgen and Horizon Therapeutics, saying the tangled web of drug industry deal-making would enable Amgen to leverage the monopoly power of two top Horizon drugs that have no rivals.

In its lawsuit, the FTC said that if it allowed Amgen’s $27.8 billion purchase to go through, Amgen could pressure the companies that manage access to prescription drugs — pharmacy benefit managers, or PBMs — to boost the two extremely expensive Horizon products in a way that would inhibit any competition.

The suit, the first time since 2009 that the FTC has tried to block a drug company merger, reflects Chair Lina Khan’s strong interest in antitrust action. In announcing the suit, the agency said that by fighting monopoly powers it aimed to tame prices and improve patients’ access to cheaper products.

The FTC’s action is a “shot across the bow for the pharmaceutical industry,” said Robin Feldman, a professor and drug industry expert at the University of California College of the Law-San Francisco. David Balto, a former FTC official and attorney who fought the 2019 Bristol-Myers Squibb-Celgene and 2020 AbbVie-Allergan mergers, said FTC’s action was long overdue.

The Horizon-Amgen merger would “cost consumers in higher prices, less choice, and innovation,” he said. “The merger would have given Amgen even more tools to exploit consumers and harm competition.”

The FTC also announced an expansion of a yearlong investigation of the PBMs, saying it was looking at two giant drug-purchasing companies, Ascent Health Services and Zinc Health Services. Critics claim the PBMs set up these companies to conceal profits.

When Amgen announced its purchase of Horizon in December — the biggest biopharma transaction in 2022 — it showed particular interest in Horizon’s drugs for thyroid eye disease (Tepezza) and severe gout (Krystexxa), for which the company was charging up to $350,000 and $650,000, respectively, for a year of treatment. The complaint said the merger would disadvantage biotech rivals that have similar products in advanced clinical testing.

Amgen could promote the Horizon drugs through “cross-market bundling,” the FTC said. That means requiring PBMs to promote some of Amgen’s less popular drugs — the Horizon products, in this case — in exchange for Amgen offering the PBMs large rebates for its blockbusters. Amgen has nine drugs that each earned more than $1 billion last year, according to the complaint, the most popular being Enbrel, which treats rheumatoid arthritis and other diseases.

The three biggest PBMs negotiate prices and access to 80% of prescription drugs in the U.S., giving them enormous bargaining power. Their ability to influence which drugs Americans can get, and at what price, enables the PBMs to obtain billions in rebates from drug manufacturers.

“The prospect that Amgen could leverage its portfolio of blockbuster drugs to gain advantages over potential rivals is not hypothetical,” the FTC complaint states. “Amgen has deployed this very strategy to extract favorable terms from payers to protect sales of Amgen’s struggling drugs.”

The complaint noted that biotech Regeneron last year sued Amgen, alleging that the latter’s rebating strategy harmed Regeneron’s ability to sell its competing cholesterol drug, Praluent. Amgen’s Repatha generated $1.3 billion in global revenue in 2022.

It “may be effectively impossible” for smaller rivals to “match the value of bundled rebates that Amgen would be able to offer” as it leverages placement of the Horizon drugs on health plan formularies, the complaint states.

Business analysts were skeptical that the FTC action would succeed. Until now the commission and the Department of Justice have shied away from challenging pharmaceutical mergers, a precedent that will be hard to overcome.

Research on the impact of mergers has shown that they often benefit shareholders by increasing stock prices, but hurt innovation in drug development by trimming research projects and staffing.

Waves of consolidation shrank the field of leading pharma companies from 60 to 10 from 1995 to 2015. Most of the mergers in recent years have involved “big fish buying up lots of little fish,” such as biotech companies with promising drugs, Feldman said.

The giant Amgen-Horizon merger is an obvious exception, and therefore a good opportunity for the FTC to demonstrate a “theory of harm” around drug industry bundling maneuvers with PBMs, said Aaron Glick, a mergers analyst with Cowen & Co.

But that doesn’t mean the FTC will win.

Amgen may or may not engage in anti-competitive practices, but “a separate question is, how does this lawsuit fit under current antitrust laws and precedent?” Glick said. “The way the law is set up today, it seems unlikely it will hold up in court.”

The FTC’s argument about Amgen’s behavior with Horizon products is hypothetical. The pending Regeneron suit against Amgen, as well as other, successful lawsuits, suggests that rules are in place to suppress this kind of anti-competitive behavior when it occurs, Glick said.

The judge presiding over the case in U.S. District Court in Illinois is John Kness, who was appointed by then-President Donald Trump and is a former member of the Federalist Society, whose membership tends to be skeptical of antitrust efforts. The case is likely to be settled by Dec. 12, the deadline for the merger to go through under current terms.

Amgen sought to undercut the government’s case by agreeing not to bundle Horizon products in future negotiations with pharmacy benefit managers. That promise, while hard to enforce, might get a sympathetic hearing in court, Glick said.

Still, even a loss would enable the FTC to shed light on a problem in the industry and what it sees as a deficiency in antitrust laws that it wants Congress to correct, he said.

The day after suing to stop the merger, the FTC announced it was pushing further into an investigation of pharmacy benefit managers that it began last June. The agency demanded information from Ascent and Zinc, the two so-called rebate aggregators — drug purchasing organizations set up by PBMs Express Scripts and CVS Caremark.

At a May 10 hearing, Eli Lilly & Co. CEO Dave Ricks said that most of the $8 billion in rebate checks his company paid last year went to rebate aggregators, rather than to the PBMs directly. A “big chunk” of the $8 billion went overseas, he said. Ascent is based in Switzerland, while Emisar Pharma Services, an aggregator established by PBM OptumRx, is headquartered in Ireland. Zinc Health Services is registered in the U.S.

Critics say the aggregators enable PBMs to obscure the size and destination of rebates and other fees they charge as intermediaries in the drug business.

The PBMs say their efforts reduce prices at the pharmaceutical counter. Testimony in Congress and in FTC hearings over the past year indicate that, at least in some instances, they actually increase them.

Private Insurers Estimated To Pay $1.1B in Rebates in 2023

Insurers set to pay $1.1B in premium rebates this year: KFF

Private insurers are expected to pay about $1.1 billion in medical loss ratio rebates in 2023, a new analysis found.

The report, published Wednesday by the Kaiser Family Foundation (KFF), relied on preliminary data reported by insurers to state regulators. Some insurers haven’t reported their rebate estimates for this year yet, but final data will be released later in the year.

Under the Affordable Care Act, insurers are limited in how much of premium income they can keep for administration, marketing and profits. Insurers in the individual and small group markets must use 80% of premium income on healthcare claims and quality improvement efforts, while those in large markets must use at least 85%. The rest they can use for administration, marketing and profits. Medical Loss Ratio rebates are based on 3-year averages, so 2023’s rebates are based on 2020, 2021 and 2022 insurer financial data.

“Insurers that fail to meet the applicable [medical loss ratio] threshold are required to pay back excess profits or margins in the form of rebates to their enrollees,” KFF said.

Individual market insurers are estimated to owe about $500 million to enrollees. This includes enrollees in ACA marketplace plans. Small group market insurers are anticipated to owe about $330 million. Large group market insurers are expected to owe about $250 million.

This year’s total rebates are similar to last year’s, which were at $1 billion. Rebates in 2022 were given to 2.4 million people with individual coverage and 3.8 million people with employer coverage. The average rebate was $205 per person for those in the individual market, $169 per person for those in the small group market and $110 per person for those in the large group market. Employees only receive a portion of this rebate, however, because it is shared with the employer.

While the $1.1 billion in rebates this year is higher than last year, it’s still significantly lower than 2020 and 2021, the analysis showed. A record $2.5 billion were paid in rebates in 2020 and $2 billion were paid in 2021.

The rebates in 2023 are reflective of challenges felt during the Covid-19 pandemic, which led to lower medical loss ratios from people skipping care.

“Hospitals and providers canceled elective care early in the pandemic and during spikes in COVID-19 cases in order to free up hospital capacity, preserve supplies, and mitigate the spread of the virus,” KFF stated. “Many consumers also chose to forego routine care in 2020 due to social distancing requirements or similar concerns. As insurers had already set their 2020 premiums ahead of the pandemic, many turned out to be over-priced relative to the amount of care their enrollees were using. Some insurers offered premium holidays and many temporarily waived certain out-of-pocket costs, which had a downward effect on their rebates.”

Superior Court Upholds CMA Legislation Mandating Reimbursement For COVID-19 Testing And Vaccination

Man receiving vaccination

In a ruling issued this week, the Los Angeles Superior Court upheld the constitutionality of a state law requiring health plans to fairly reimburse health care providers for the costs of COVID-19 testing during the COVID-19 state of emergency.

Senate Bill 510, which the California Medical Association (CMA) sponsored, mandates that health plans and health insurers reimburse health care providers, regardless of network status, for COVID-19 testing and vaccination services. The law requires that health plans and insurers cover testing and vaccination without any cost-sharing or prior authorization requirements. SB 510 extended those provisions retroactively to March 4, 2020, the date Governor Gavin Newsom declared a state of emergency for the pandemic.

In his ruling, Judge Mitchell L. Beckloff dismissed the arguments made by the California Association of Health Plans (CAHP) challenging the constitutionality of SB 510’s requirement that CAHP’s health plan members pay health care providers for COVID-19 testing rendered during the period from the March 4, 2020, state of emergency declaration through December 31, 2021. Recognizing that health plans do not operate as a matter of right, but rather must comply with state law, the court found it improper for those health plans to force health care providers to shoulder the responsibility for the cost of COVID-19 diagnostic testing through unfair contracting practices.

Judge Beckloff found that SB 510 was passed “to combat COVID-19 and its community spread by ensuring access to and encouragement for…screening and testing [and to] protect access to COVID-19 diagnostic and screening testing by ensuring the overall financial stability of the healthcare system.” His order further states that the health plans’ attempt to impose unreasonable contract terms on health care providers could frustrate this purpose by “diminish[ing] access to quality care.”

“CMA was proud to sponsor SB 510 when it was introduced by then-Senator Richard Pan, M.D., and we’re thrilled to see it’s been rightly upheld in court,” said CMA President Donaldo Hernandez, M.D. “SB 510 is a vital, life-saving bill that ensured all Californians were able to access COVID-19 testing throughout the duration of the pandemic and will require coverage for testing and vaccination during future public health emergencies.”

Prior to the passage of SB 510, CMA asked the California Department of Managed Care and the California Department of Insurance to investigate concerns that certain payors were illegally impeding patients’ access to COVID-19 testing and profiting at the expense of treating physicians.

CMA sponsored SB 510 to ensure that those barriers to testing were removed, physicians were reimbursed fairly by health plans, and patients did not have to incur out-of-pocket expenses for testing.

Trial For Universal Flu Vaccine Based On mRNA Tech Begins Enrolling Volunteers

Trial for universal flu vaccine based on mRNA tech begins enrolling  volunteers | The HillResearchers for a universal flu vaccine based on mRNA technology are beginning to enroll volunteers in an early-stage clinical trial.

The National Institute of Allergy and Infectious Diseases Vaccine Research Center has started to enroll volunteers at the Duke University for its Phase 1 trial of the mRNA-based vaccine, which uses the same technology as the COVID-19 vaccines. The study will have 50 “healthy volunteers” ages 18 to 49 enrolled in the trial who will receive check ups up to one year after their vaccination.

The trial will divide 30 of the participants into three groups of 10 people. Each group will be vaccinated with a different dosage — 10, 25 or 50 micrograms — of the experimental vaccine. After researchers review the data to determine an “optimum dosage,” 10 more participants will receive the vaccine, according to the National Institutes of Health (NIH).

The trial will also have a group of participants who receive a seasonal flu vaccine that is already available on the market to compare the two vaccines.

The NIH press release noted that scientific experts predict which strains of the flu will be most prevalent in the country every year to determine which strains of the flu should be included in the vaccine. A universal flu vaccine would cover all the different kinds of strains of the influenza virus, as opposed to the seasonal flu vaccines on the market now.

“A universal influenza vaccine would be a major public health achievement and could eliminate the need for both annual development of seasonal influenza vaccines, as well as the need for patients to get a flu shot each year,” acting National Institute of Allergy and Infectious Diseases Director Hugh Auchincloss said in a statement.

“Moreover, some strains of influenza virus have significant pandemic potential,” he added. “A universal flu vaccine could serve as an important line of defense against the spread of a future flu pandemic.”

Sorry, The Government’s Not Paying For Your Therapy App

Sorry, the government's not paying for your therapy app - POLITICO

New treatments for chronic conditions like opioid addiction, ADHD and insomnia are here and they’re on your smartphone — not in a pill bottle.

But the government won’t pay for them, even as tech entrepreneurs insist to Congress and the Biden administration that their digital therapeutics are the next big thing.

Though the Food and Drug Administration has cleared dozens of these software-based medicines — which include apps and even video games — the Centers for Medicare and Medicaid Services can’t reimburse providers, in part because Congress hasn’t approved new billing codes that describe the therapy. Because private insurers often take their cues from the government, the companies behind these new ideas are struggling to gain traction.

Now there’s a bipartisan push to change that, but it comes as many of the firms are in a race to survive. Their plight underscores the quandary facing regulators who must balance the need for new treatments with the expense, especially when there’s limited evidence the treatments work and health care costs are spiraling.

Rep. Mike Thompson (D-Calif.) said it’s crucial to let the experiment in digital therapy proceed. “Providing alternative ways to access care is essential in the increasingly modern times in which we live,” said Thompson, who with Kevin Hern (R-Okla.) is leading the effort in the House. Jeanne Shaheen (D-N.H.) and Shelley Moore Capito (R-W.Va.) have a Senate companion bill.

Shaheen said it’s lamentable that “prescription digital therapeutics can help treat a range of diseases, including substance use disorders and mental health challenges, but many who need this treatment currently lack access.”

Capito said that the status quo is “preventing more insurers from reimbursing for the devices and more patients from being able to efficiently access the care and support they deserve.” She sees the technology as a way to better reach patients with conditions like substance use disorder in rural and other hard-to-reach areas.

Their effort comes too late for Pear Therapeutics. As recently as January, the Boston-based firm seemed to be on the cutting edge of health care as it touted interest from leading providers and state governments in its products melding smartphones with addiction therapy.

It all fell apart last month when Pear said it was filing for bankruptcy and selling its assets: online apps that the FDA has cleared to help people addicted to opioids or other drugs.

“Pear filing for bankruptcy was a direct consequence of Congress’ failure to pass legislation,” said Kevin Brennan, a former Pear lobbyist and onetime aide to Connecticut Rep. Rosa DeLauro, the ranking Democrat on the Appropriations Committee.

If Congress doesn’t act, “patients are going to be denied the next generation of innovative care. And it’s going to be particularly problematic for people in underserved communities,” Brennan added.

Others in the industry are making similar arguments.

“I think it’s really important to recognize how far the U.S. is, frankly, falling behind other countries in terms of these products,” said Will Robinson, head of policy at Big Health, which makes insomnia and anxiety therapeutics. Robinson noted that Germany and France have accelerated reimbursement for digital therapeutics.

A CMS spokesperson whom POLITICO granted anonymity to discuss its reviews of digital therapeutics said that it had considered Pear’s products and determined that they did not fit into the Medicare benefit category for “durable medical equipment, prosthetics, orthotics and supplies” and that the agency had denied coverage for that reason.

Even if it could cover the software, there’s no guarantee it would.

The spokesperson said that CMS could consider whether the apps fit into a different category. If the agency determined that they did, it would still need to find that they were “reasonable and necessary” for Medicare beneficiaries before paying for them.

Cost may also be an impediment to government reimbursement for Pear’s apps, since they add about $300 to a typical 12-week treatment protocol for opioid use disorder, according to one analysis. Pear didn’t respond to requests for comment.

While there is some evidence the protocol is cost-effective, it may not convince insurers.

Critics say the companies behind these innovative treatments may have taken a flawed approach to building an entirely new category of medicine.

“As a digital therapeutics company, you have to go to the FDA, go to the insurers, then you actually have to go and get people to use it to get revenue,” said Keith Figlioli of the investment firm LRV Health Ventures. “That is so much friction to get a company off the ground.”

Video games, breathing techniques and more

Winning FDA authorization and proving a product is cost effective are two different things.

Some say they want to see more data.

“We shouldn’t begin to change health systems and payment based on evidence that doesn’t yet exist,” said John Torous, director of the digital psychiatry division at Beth Israel Deaconess Medical Center in Boston. “I don’t think we’ve seen anything present that level of robust evidence yet.”

But others argue that insurers could benefit if these novel therapies prove to be money-savers.

In contrast to manufactured goods, such as pills, software can be relatively cheap to scale once it’s built.

The field of digital therapeutics aims to harness the utility of the smartphone to boost the effectiveness of traditional cognitive behavioral therapy: coping skills to combat illnesses.

The category is ill-defined, but it’s thought that the FDA has authorized three dozen digital therapeutics.

Akili Interactive makes EndeavorRX, a video game that helps ADHD patients learn to focus, multitask and ignore distractions.

Then there’s AppliedVR’s virtual reality chronic pain treatment EaseVRx, which teaches breathing techniques, among other things, to alleviate back aches.

Besides its addiction apps, Pear Therapeutics made an insomnia product, Somryst, which offers lessons to help people train their brain to rest. It markets it as a “long-term fix” to replace the “Band-Aid” that is sleeping pills.

There’s good cause to encourage this innovation, the companies say, given the limits of existing drug therapies. Mental illness and substance use disorder are ripe targets.

After a drop in 2019 and 2020, the number of suicides nearly returned in 2021 to the 48,344 of 2018, the most in American history (though the rate still lags the Great Depression).

Meanwhile, fatal drug overdoses are also at peak levels and rising. According to the CDC’s most recent statistics, they hit 107,622 in 2021, up 15 percent from 2000.

In announcing the agency’s clearance, FDA official Christopher M. Loftus touted EaseVRx as “a treatment option for pain reduction that does not include opioid pain medications,” which are at the root of America’s overdose epidemic.

Proponents of these novel therapies argue that they not only could be more effective than traditional ones, but also could expand the availability of care given their ease of use — if only insurers would pay for them.

“There was a belief that if you get FDA clearance, reimbursement will follow,” said Jenna Carl, chief medical officer at Big Health.

Carl’s company has long been skeptical of this approach and instead focused on building up robust data proving its interventions work.

That strategy has borne dividends. Scotland’s National Health Service provides both of the company’s apps for free. In the U.S., Big Health has inked deals with CVS Health to make its products available to employers and plan sponsors via its pharmacy benefit manager Caremark.

Wheels of bureaucracy

Even as the FDA has authorized digital therapeutic products, the lack of a definition of what one is has held up CMS.

The agency doesn’t have a benefit category for digital therapeutics or software that’s a medical device and Congress has to approve new reimbursement categories.

“This is just another example of the law is not quite catching up with where innovation is,” said Rachel Goodman, a partner at law firm Foley and Lardner.

The bicameral, bipartisan Access to Prescription Digital Therapeutics Act would define them as FDA-cleared or approved devices, products, internet applications or other tech that “primarily uses software.”

Shaheen told POLITICO she’s hopeful about her legislation’s prospects and believes it will prove a money-saver.

In the meantime, the companies are coordinating their efforts.

Led by the Consumer Technology Association, industry groups have developed proposed standards aimed at eliminating confusion and boosting adoption by giving more structure to evidence generation.

Proponents hope that getting devices into lawmakers’ hands will help. Jennifer Mathieu, senior vice president of professional and government affairs at the Academy of Managed Care Pharmacy, said her group plans to host demo days for staffers, representatives and senators.

Some companies are essentially giving their products away, said Vaile Wright, a psychologist and senior director of health care innovation at the American Psychological Association.

Others are trying workarounds. AppliedVR got FDA authorization for its low-back pain program RelieVRx as a software and medical device combo — a CMS reimbursement category.

This spring, CMS approved coding so Medicare can reimburse for it.

AppliedVR has also had success contracting with the Veterans Affairs Department.

Others, like Pear, do the painstaking work of contracting with individual Medicaid programs.

For Pear, at least, that wasn’t enough.

“It’s the real problem of health care,” said René Quashie, vice president of digital health at the Consumer Technology Association. “If you develop an innovative solution, how is it going to be adopted by clinicians and how is it going to be covered and paid for? I don’t think digital therapeutics are any different than a lot of other emerging health tech areas.”

Medicare Spending Could Increase $2 To $5 Billion If Coverage Expands For Lecanemab

Lecanemab could drive up Medicare spending by $5B a year: studyThe anti-dementia medication lecanemab, and its ancillary costs, could add $2 to $5 billion in annual Medicare spending if the Centers for Medicare and Medicaid Services revises its coverage decision, according to a research letter in JAMA Internal Medicine.

Currently, the medication is covered only for patients who are enrolled in clinical trials.

Medicare fee-for-service spending was $37 billion in 2019 for drugs such as lecanemab that are administered in outpatient settings. In addition to higher Medicare spending, lecanemab’s medication and ancillary out-of-pocket costs for patients lacking supplemental coverage could reach $6,600 per year, which is approximately one fifth of the median income of a U.S. Medicare beneficiary, data showed.

Medicare annual spending on lecanemab’s medication costs alone would place it among the most expensive Part B medications delivered in outpatient facilities, authors said.


Lecanemab is currently available as a treatment for mild cognitive impairment and mild dementia under the Food and Drug Administration’s accelerated approval program.

The FDA is expected to grant lecanemab traditional approval later this year, prompting Medicare to reconsider its coverage restrictions and potentially enabling widespread use. Clinical trials have shown that the drug has modest clinical benefit.

Moreover, because of its risk of brain swelling and brain bleeding, also known as amyloid-related imaging abnormalities, or ARIA, the treatment requires frequent monitoring via neurology visits and MRI scans.

The researchers performed a cost analysis using data from the nationally representative 2018 Health and Retirement study (HRS), incorporating both the direct drug costs as well as the indirect ancillary costs for associated health services such as MRIs, neurology visits and other related care.

Limitations to the study include use of plaque rates derived from population studies rather than from HRS participants’ scans, possible misclassification of some cases of dementia prevalence and stage, and responses from participants with cognitive impairment which may not be reliable, although proxies can respond on their behalf.


According to Optum, there’s a high unmet need for treatments for Alzheimer’s disease, since it’s a leading cause of illness and death among the elderly. Existing treatment options have been ineffective.

In June 2021, the FDA approved Aduhelm (aducanumab), the first amyloid beta-directed antibody, via the accelerated approval pathway based on reductions in amyloid beta plaques. Subsequently, a CMS National Coverage Determination limited Medicare coverage for Aduhelm and other beta-amyloid targeted therapies to patients enrolled in clinical trials because of unknown clinical benefit.

Lecanemab would be the second drug in the class with FDA approval through the accelerated approval pathway that was followed to approve Aduhelm, based on the surrogate of reductions in beta-amyloid plaques.

In January, CMS released a proposed National Coverage Determination decision memorandum that said the NCD would cover FDA-approved monoclonal antibodies that target amyloid for the treatment of Alzheimer’s disease through coverage with evidence development, meaning for Medicare recipients enrolled in qualifying clinical trials.

Last Updated 05/24/2023

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