In what is believed to be the first legal challenge to the HIPAA Omnibus Rule (the “Rule”), a vendor of prescription drug adherence services is seeking an injunction to block certain provisions of the Rule related to drug refill reminders.  In its complaint, Adheris, Inc., an InVentiv Health company, argues that drug adherence communications are free speech protected under the First Amendment of the Constitution and that the Rule imposes unconstitutional limits on those communications.  Adheris also claims that the rule unfairly permits non-profit and government-funded organizations to make communications that are prohibited by for-profit organizations.

HIPAA Rule Limits Compensation for Adherence Communications

By way of background, the Rule, which goes into effect September 23rd, amends HIPAA’s existing (and already complex) marketing provisions to specify that regulated entities may not accept payment for patient information used in marketing activities without first obtaining a patient authorization.  For example, a pharmacy would be required to obtain patient authorization before accepting payment for a list of patients on high blood pressure medication from a pharmaceutical manufacturer whose products might benefit those patients.  The Rule includes exceptions for subsidized communications regarding drugs that have already been prescribed to a patient, including adherence communications intended to help patients stay on therapy.  For example, a pharmacy would not have to obtain patient authorization before accepting payment for providing a list of high blood pressure medication patients to a company that would provide medication adherence services to those patients.  However, coupled with the exception is a limit on the amount of compensation that may be paid to health care providers, or third parties, like Adheris, that facilitate adherence communications.  Under the Rule, any compensation for such communications must be “reasonable in amount” or “reasonably related to the regulated entity’s cost of making the communication,” including labor, supplies and postage (78 Fed. Reg. 5597 (Jan. 25, 2013)). The Office for Civil Rights (OCR) made clear in the Rule that if the entity being paid for the communication generates a profit from the services, it violates the Rule and the adherence communication exception does not apply.  As a result, companies such as Adheris must either obtain patient authorization prior to providing medication adherence services, or limit the payments they receive to an amount equal to their actual costs.  

First Amendment Challenge

Adheris’s suit alleges that the Rule threatens to end refill reminders that serve millions of Americans with chronic diseases and charges the federal government with attempting to restrain speech protected by the First Amendment.  The complaint points to the Supreme Court’s 2011 decision inSorrell vs. IMS Health Inc., in which the Court affirmed that speech in aid of pharmaceutical marketing is a form of expression protected by the First Amendment.  Adheris also claims that the Rule would not apply to it if it operated on a non-profit basis or was funded by the government.  “This rule addresses a non-existent problem with an unconstitutional regulation that is contrary to the best interests of patients and society.  We are hopeful that the court will agree,” states Eric Sherbert, General Counsel for InVentiv Health.

We note that while the Rule may have an adverse effect on for-profit organizations, its provisions apply equally to all covered entities, business associates, and downstream entities subject to HIPAA compliance obligations.  It is critical, therefore, that every regulated entity scrutinize all subsidized marketing communications for compliance with the Rule. 

Broader Implications of the HIPAA Rule for Adherence Programs

Adheris’s motion for preliminary injunction comes in the wake of industry turmoil over the Rule.  In August, the Specialty Pharmacy Association of America (SPAARx) announced that it had sent a letter to OCR requesting clarification and/or revision of the Rule.  On August 16th, Modern Healthcare reported that the World Privacy Forum sent a separate letter to OCR in support of the limitations in the Rule.  In response to the Rule, the drugstore chain CVS chose earlier this year to end its practice of using patient drug records to mail drug refill reminders to customers on behalf of pharmaceutical manufacturers. 

In its statement regarding the lawsuit, Adheris contends that the Rule undermines a valuable service that promotes patient health and is consistent with the Affordable Care Act’s objective to reduce healthcare costs.  Adheris’s complaint cites to a Congressional Budget Office Report that a one percent increase in prescription adherence could lower Medicare spending by one-fifth of one percent.  The Affordable Care Act creates a variety of programs and initiatives that are intended to better coordinate patient care and reduce overall health care costs.  A key element of many of these programs is the potential to reduce costs and save lives through increased medication adherence.

• Accountable Care Organizations (ACOs):  Many of the quality measures to which the newly created Medicare ACOs are accountable relate to safe and effective use of medications.  ACOs are likely to make medication adherence a priority since they are eligible to share in a portion of their generated costs savings for the Medicare program.

• The Hospital Readmissions Reduction Program (HRRP): The HRRP requires CMS to reduce payments to hospitals with excess readmissions of patients hospitalized for acute myocardial infarction, heart failure, or pneumonia.  Hospitals seeking to reduce readmissions will be more likely to invest in post-discharge management that includes a focus on medication adherence.  Just last month, the OIG issued a favorable advisory opinion regarding the proposal by a wholly owned subsidiary of a major pharmaceutical manufacturer to contract with hospitals to provide services to patients (many of which related to medication compliance) following hospital discharge with the goal of reducing preventable hospital readmissions.

• Medicare Advantage Star Ratings:  CMS publicly reports and provides financial bonuses to Medicare Advantage plans based on “Star Ratings” determined by certain quality measures.  Several of the measures used to calculate a plan’s Star Ratings relate to adherence with statin, oral diabetes, and hypertension medications.  Adherence measures are considered “intermediate outcome” measures and are weighted heavily.

Due to these initiatives, the pharmaceutical industry is investing greater amounts in adherence programs and providers, such as pharmacies, hospitals and physicians, and payors are increasingly focused on promoting patient adherence to prescribed drug regimens.  Accordingly, the viability and ultimate success or failure of Adheris’s lawsuit will affect not only implementation of the HIPAA marketing rules, but will likely have implications for many stakeholders in the health care industry.