Health Care Law and Regulations 8
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You have read about several interesting topics this week related to supply chain management. Select one of interest to you and develop a 250 word summary of the topic and how you would address it as an Administrator having oversight. Think out of the box and be creative.
Chapter 15
Global Supply Chain Management
Global Supply Chain Management
“I cannot say whether things will get better if we change; what I can say is they must change if they are to get better.”
— Georg Christoph Lichtenberg
Lecture Overview
Principles and Applications
Business Process Outsourcing
Offshoring of Health Care Outsourcing
Flattening of the U.S. Health Care System
Supplying Hospital Staff Versus Medical Expertise
Medical Products Outsourcing
Global Drug Manufacturing in China
Early-Stage Medical Products Research in India
Captives and Business Process Organizations
Hybrid Program Offices
Virtual Captives
Privacy Concerns
What Lies Ahead for Outsourcing
Source: Hammaker, D. K., & Knadig, T. M. with Tomlinson, S.J. (2017). Processes for thinking about the U.S. health care system. In Health care management and the law: Principles and applications (pp. 295-312). (2nd Ed.) Burlington, MA: Jones & Bartlett Learning.
Principles and Applications
Leveraging network connectivity (internet of things) is the next frontier for the health care industry.
Efficient supply chains can create value for health care providers by:
Cutting costs
Deploying new delivery system models
Offering new medical products and services
The Food and Drug Administration Safety and Innovation Act of 2012 strengthens the Food and Drug Administration’s (FDA) ability to safeguard and advance public health by enhancing the safety of global supply chains.
Business Process Outsourcing (1 of 2)
Business process outsourcing, the use of outside vendors for the performance of general administrative services, is a critical issue for the health care industry, in:
Accounting
Claims processing
Customer relationship management
Finance
Human resources
Procurement
Business Process Outsourcing (2 of 2)
The need for outsourcing is intensifying as the demand to create value in health care continues to multiply.
As discretionary patient spending expands due to the growth of consumer-directed health care, the demands for cost-effective care and medical products will only increase.
Outsourcing transfers responsibility for ongoing management tasks and execution of business activities, processes, or functional areas in order to improve efficiency and performance.
Offshoring of Health Care Outsourcing
The following specialized medical services are outsourced and sent offshore with growing frequency as hospitals and health plans come under heightened pressure to cut costs and enhance value:
Billing
Collation
Insurance claims processing
Technical information support
Transcription
X-ray analysis
As the cost of telecommunications time falls and cloud technologies and robotic process automation expands, the volume of medicine practiced in cyberspace is steadily increasing.
Flattening of the U.S. Health
Care System (1 of 2)
It is possible to do business nearly instantaneously worldwide with:
Connectivity
Globalization
Technology
The decision to outsource the function allows health care providers to focus their resources on their core competencies, which are:
Clinical care
Medical education
Research
Strategic treatment procedures
Flattening of the U.S. Health
Care System (2 of 2)
Most academic medical centers do not engage in business functions unrelated to their core functions, such as:
Food services
Insurance claim processing
Maintenance
Patient billing
Security staffing
They focus instead on clinical care, medical education, and research.
The outsourcing of American medical jobs will only surge with technological innovations in the fields of telemedicine and cybersurgery.
There are outsourcing specialists for almost every business process who are better at providing the service for many health care providers than any one provider on their own, for instance:
In health care systems integration, outside vendors can integrate data standards for use in electronic medical records, computerized provider order entry systems, and genetic databases, within technical frameworks to clean and integrate quality medical data.
Supplying Hospital Staff Versus
Medical Expertise (3 of 5)
Teleradiology
Statistics show radiological outsourcing growing with a significant number of hospitals currently engaging in such a practice.
Reliable estimates as to the size of this offshore market do not exist since teleradiology is currently provided primarily by a number of private firms that are not obligated to file public reports.
Teleradiology is the largest component of international telemedicine today in terms of complexity and cost.
The hospital no longer tells the physicians and technicians how to analyze patient X-rays; now the hospital and outsourcing firm agree on the outcomes of the analysis andthe hospital pays the outsourcing firm depending on the number of X-rays analyzed.
Supplying Hospital Staff Versus
Medical Expertise (4 of 5)
Telecardiology, Teledermatology, Telepharmacy, Telepathology, Telepsychiatry, Teledermatology, telecardiology, telepathology, and telepsychiatry simply involve videoconferencing
Telesurgery occurs either when a remotely located physician provides video assistance to physicians performing a surgery or when a physician uses a remote robotic arm during surgery.
Supplying Hospital Staff Versus
Medical Expertise (5 of 5)
Outsourcing Centers of Excellence
With health data concentrated into centers of excellence where the best skill sets exist, the economies of scale would cause the net unit cost for radiographic interpretation to fall below the costs currently generated by radiologists interpreting films under exclusive contracts in hospitals.
Centers of excellence could be located in U.S. health care facilities where patient care is offered at an exemplary level on a wide range of measures or in emerging economies in health care facilities with exemplary patient care around the world.
Medical Products Outsourcing (1 of 2)
Nearly 80% of the active ingredients and almost 40% of the finished drugs and medical devices used by U.S. consumers are manufactured abroad.
In the majority of areas of medical products outsourcing, most of the concerns boil down to audit of standardized procedures, including:
Business data analytics, clinical trials, cost and price analyses, early-stage drug development, enterprise resource planning systems, environmental health and safety, manufacturing, production planning, and quality assurance and quality oversight.
FDA guidelines provide a system of business processes to assure that the medical products produced by manufacturers have what they are represented to possess in terms of:
Composition, identity, purity, quality, and strength
Medical Products Outsourcing (2 of 2)
Good manufacturing practice guidelines address operating procedures and documentation requirements for:
Distribution, in-house testing, production and process controls, qualifications of manufacturing personnel, raw materials quality assurance, record-keeping of substances throughout the manufacturing process, standards for cleanliness and safety, and warehousing.
It is advantageous for producers of medical products to use outside vendors for outsourced work.
Medical Products Outsourcing:
Risk Management of Outsourcing Relationships (1 of 2)
Firms incorporate detailed clauses into their outsourcing contracts such as:
Clear deadlines
Database locks that prevent reopening the data after it is finalized
Standards for accuracy.
Information transferred offshore is only protected insofar as the terms of the outsourcing contract provide and as the destination country permits.
Medical Products Outsourcing:
Risk Management of Outsourcing Relationships (2 of 2)
In coming up with outsourcing contracts, firms take into account:
Operational risks
Performance risks
All risks involved in U.S. provider outsourcing can be managed through the right:
Acceptable service-level agreements
Outsourcing delivery model
Clear-cut price negotiation
Proper contractor selection
Medical Products Outsourcing:
Protection of Tacit Knowledge
Concerns about the misuse of residual knowledge can be mitigated by requiring outside vendors to be quarantined after sensitive projects, meaning they cannot work with competitors for a limited period of time.
Corporate epistemology (the branch of philosophy that explains how a person gains and verifies knowledge) must be documented before outsourcing can be successful.
The less tangible the work the more closely strategic activities should be held and not outsourced.
Global Drug Manufacturing in China
The Chinese State Food and Drug Administration (Chinese State FDA) works with its foreign regulatory counterparts to monitor drug-ingredient production to ensure that raw materials are:
Clean
Consistent
Traceable
Safeguarding the legality, quality, and safety of active pharmaceutical ingredients is the ultimate responsibility of the global pharmaceutical and generic manufacturers and the importing countries.
Early-Stage Medical Products Research in India: Patent Protection & Ready Access to Clinical Trial Participants
Patent Protection
Earlier concerns about protection of intellectual property in India diminished significantly after the Indian government introduced patent legislation.
Ready Access to Clinical Trial Participants
Research indicates that conducting clinical trials in India can lower early-stage drug discovery costs by $35 to $50 million per new drug due to:
Rapid enrollment of participants in trials
Shortened enrollment timelines for clinical trials
Producer’s avoidance of fiduciary status with participants in trials
Shifting of liability claims to the clinical research organizations in India that are conducting the clinical trials
Early-Stage Medical Products Research in India: Avoidance of Fiduciary Status & Wage Arbitrage of Educated Workforce
Avoidance Fiduciary Status
Producers of medical products can avoid fiduciary status and some liability claims by designing protocols to comply with FDA regulations and outsourcing their clinical research.
Wage Arbitrage of Educated Workforce
India has some 22 million university graduates, including 6 million science graduates, 1.2 million with engineering degrees, and 600,000 physicians.
Captives and Business Process Organizations
Domestic captive centers are starting to move their information extraction and reporting tasks offshore, which is made possible by:
The convergence in health care computing platforms
The rapid advances in communications technology
Providers in the U.S. health care industry, as a result of the increase in costs for providing accurate and timely personal health information, will need to:
Hire more staff
Increase the expertise levels of existing staff
Hybrid Program Offices
Outside vendors have developed businesses for the delivery of higher end health care services that are a hybrid between captive organizations doing business in house and traditional work outsourced by contractors.
Program offices are centralized centers that monitor, influence, and control projects to make them more efficient.
With the development of health information technology, program offices can work very closely with U.S. health care providers to the point where the outsourcing firm’s employees become almost like the U.S. provider’s employees.
Virtual Captives
Virtual captives are the latest outsourcing model to evolve in the U.S. health care industry, and are like health care providers having their own captive.
The captive obtains the following resources to do the work:
Human resources, management, and administration.
Virtual captives satisfy:
Cost benefits, obtaining the right skill sets, and protecting intellectual property.
Virtual Captives: In-House Outsourcing and Reshoring Versus Offshoring
A significant number of outsourced functions are actually coming back to the United States.
Many health care providers are talking about in-house outsourcing and reshoring as opposed to offshoring.
Health providers also want to participate in outsourcing decisions as opposed to turning over their employees and asking the outside vendors to do specific functions for them.
Virtual Captives: Management of Multiple Supply Chains
Health providers will go to multiple outside vendors to get their non-core job functions done. Outside vendors must show good:
Business processes, which they already have
Domain expertise in the business functions in which they participate
The U.S. health care industry is looking for ways outsourcing can increase:
Their revenue or their patient base
The satisfaction of their customers, the patients
Privacy Concerns
Isolated data security and privacy violations have become high-visibility issues disproportionate to the ground realities of outside vendors.
The FDIC recommends that three general areas be considered when outsourcing offshore:
Privacy risks in the offshore outsourcing firm’s country
Ongoing oversight of all third party contractors
Contract provisions that protect the privacy of patients and their medical data
What Lies Ahead for Outsourcing?
Given the huge risks of failure for medical services and products, health care providers must think about not only the benefit of outsourcing for tomorrow but also about whether they can sustain it.
Independent of the potential for system-wide efficiencies, increased use of outside vendors could:
Create economies of scale
Improve access to care
Improve competition among providers
Reduce medical errors
Chapter 19
Clinical Trials
Clinical Trials
“The history of the last 20 years is one of crises with drugs and medical devices, many approved despite the objections of the FDA’s own scientists.”
— Sidney M. Wolfe
Lecture Overview
Research and Development Investments Fund a Complex Multistage Pathway
Clinical Trials of Generic Drugs
Health Risk Assessments
Expanded Access Protocols
Termination of Clinical Trials
Observational Studies
International Clinical Trials
Informed Consent in General
Transparency and Full Disclosure in Clinical Testing
Financial Conflicts of Interest
Commitment to the Life Sciences
Source: Hammaker, D. K., & Knadig, T. M. with Tomlinson, S.J. (2017). Clinical trials. In Health care management and the law: Principles and applications (pp. 389-412). (2nd Ed.) Burlington, MA: Jones & Bartlett Learning.
Research and Development Investments Fund a Complex Multistage Pathway
Some major expenses are research materials, advanced computers, and other highly sophisticated machines that support research activities, and salaries of scientists. Stage specific activities include:
Drug discovery
Preclinical testing
Clinical trials
Approval by the FDA
Post marketing surveillance
Research and Development Investments Fund a Complex Multistage Pathway
Drug Discovery:
While most compounds will never be approved for use, each one is evaluated to determine its potential value compared to existing therapies, complexity of large scale manufacturing, and other factors.
Preclinical Testing:
Candidate drugs from the discovery stage receive 1 to 3 years of extensive testing to assess safety and show biological activity against a disease.
Chemical tests establish the purity, stability, and shelf life of a compound.
Manufacturing tests determine mass production of the drug.
Pharmaceutical development studies explore dosing, packaging, and formulation of the drug.
Research and Development Investments
Fund a Complex Multistage Pathway: Clinical Trials
For drugs in development, there are low odds of reaching the market.
While Phase I, II, and III of studies are taking place, research investigators are also conducting toxicity tests and other long-term safety evaluations, evaluating dosage forms, planning for mass production, designing packaging, and preparing the extensive application required for FDA approval.
One out of five drugs that enter clinical testing is never approved by the FDA:
20% of the drugs that enter Phase I are approved to enter Phase II
30% of the drugs that enter Phase II are approved to enter Phase III
60% of the drugs that enter Phase III are approved for a new drug application
80% of the new drug applications are approved by the FDA for market entry
Research and Development Investments Fund a Complex Multistage Pathway
Approval by the U.S. Food and Drug Administration
According to the FDA, the documentation required in a new drug application is supposed to tell the whole story of a drug, including what happened during the clinical trial tests, what the ingredients of the drug are, results of the preclinical animal studies, how the drug behaves in the human body, and how the drug is manufactured, processed, and packaged.
Post Marketing Surveillance
Firms are meant to continue to monitor all approved drugs for long-term safety and regularly report results to the FDA.
It is important to note that clinical trials cannot always detect risks that are:
Relatively rare
Have long latency periods
Affect vulnerable populations
Clinical Trials of Generic Drugs
Distinction Between Bioequivalent and Biotherapeutic
Generic versions of branded drugs need not demonstrate their scientific merits by controlled human clinical trials or other testing the brand name pharmaceutical firms conducted.
By definition, generics may be up to 45% less or 25% more efficacious than branded drugs, yet still meet the legal definition of being bioequivalent.
Generics are not required to provide independent proof of their safety or efficacy to be labeled bioequivalent.
Distinction Between Branded Generics and Generics
The pharmaceutical industry also markets authorized branded generics, which are branded drugs that have lost their patent status but are labeled and marketed as generics.
Both empirical and theoretical studies evince that generic entry is inversely related to price: More generics = lower prices.
Health Risk Assessments
Information on Post Phase I Clinical Trials
Congress expanded the requirements for all sponsors and research investigators to share information about post Phase I clinical trials, including selected aspects of trial results, on the U.S. government website, ClinicalTrials.gov.
Balancing Risks and Benefits
Proper health risk assessment is critical for new drug product treatments. Patients, physicians, and the FDA often weigh the pros and cons of one treatment versus another.
An ongoing issue is whether the FDA should do more to ensure the safety of new drug products and expose potential side effects before a drug product comes into widespread use.
Expanded Access Protocols (1 of 2)
An investigational new drug application, or treatment protocol, is a relatively unrestricted study intended to authorize shipment of an unapproved drug product into interstate commerce.
Right to Life Saving Experimental Drugs: Abigail Alliance v. Von Eschenbach
Issue: Does a fundamental right exist under the Fifth Amendment (which contains the Due Process Clause) provide terminally ill patients access to potentially lifesaving experimental drugs?
Holding: No, terminally ill patients do not have a fundamental right to access experimental drugs
Expanded Access Protocols (2 of 2)
Abigail Alliance: Two Tier Approval Proposal
Grants terminally ill patients who have exhausted all FDA approved therapies the autonomy of selecting post Phase I experimental medical products with their physicians.
Lifts the current prohibition of charging any price higher than the cost for experimental products.
Balancing Patient Rights: Access versus Personal Autonomy
The right to personal autonomy affects individual interests in obtaining investigational medical treatments and medical products, while the right to access pertains to the public’s interests in filtering safe and efficacious products through clinical trials.
Termination of Clinical Trials (1 of 3)
Clinical trials usually get halted for one of two reasons:
New drug shows overwhelming promise and it would not be fair to delay its release
Results suggest great risks
The medical products industry will likely avoid fiduciary status and binding agreements with respect to clinical trial participants by:
Designing sponsor protocols to comply with FDA regulations
Outsourcing clinical trial design and administration
Forgoing control over clinical studies
Termination of Clinical Trials (2 of 3)
Monitoring Board Decisions
While each clinical trial is different, for many trials, monitoring boards set numerical thresholds for bad outcomes before the trial begins. When the thresholds are crossed, the trials are stopped.
Relative Risks
Patients taking Lipitor plus in a Pfizer clinical trial were 60% more likely to die. This statistic suggests why Pfizer might have wanted to stop the trial. As in most clinical trials, the difference between stopping and proceeding comes down to just a few deaths.
Termination of Clinical Trials (2 of 3)
Statistical Boundaries
When an imbalance in deaths crosses the statistical boundary set before the trial begins, clinical trials are automatically halted. This statistical boundary is not some arbitrary figure, but rather a single number,
the p value, that is calculated as part of the trial protocol.
Statistical Significance
Thresholds are usually set at 0.05 for statistical significance.
Thresholds are set higher when there are frequent measurements of p, to make sure that too much weight is not given to any single reading.
Christine Freaney (CF) –
Observational Studies
Researchers found breakfast cereals eaten before conception were the most significant food linked with baby boys.
Nature of Nontrivial Chance
Behind the cereal debate is the divide between statisticians and epidemiologists about the nature of nontrivial chance in observational studies where research investigators track clinical trial participants’ habits and look for associations with their health, but do not intervene
Validation
Some want a tougher standard of proof required for investigators looking at large data sets
Bonferroni adjustment method: Requires multiplying the usual mathematical formula by the number of variables; if 100 foods are studied, the link must be 100 times as strong as usual to be considered significant
International Clinical Trials (1 of 2)
Fifty Percent Cost Savings
Late stage clinical trials in lower income countries cost less than half as much as they do in the United States and Europe because of lower salaries for physicians and clinical research personnel.
Patient recruitment is faster in countries such as India, China, and in Eastern Europe, where:
Patients are more willing to enroll in studies because of lack of alternative treatment options
Competition for patients is less intense
Clinical trial participants are far less likely to be taking other medicines
Patient populations are larger
Good Clinical Practices
The FDA has adopted standards used by many countries and organizations known as good clinical practices that encourage postmarket drug access to be discussed during protocol design, mandate that studies be reviewed by international ethics committees, permit placebo controlled trials only under certain circumstances, and require informed consent from all clinical trial participants.
Inconsistent Oversight and Informed Consent
Research suggests oversight and adequate informed consent for clinical trial participants in clinical trials is inconsistent in resource limited countries.
While the medical products industry generally uses the same protocol regardless of where its clinical trials occur, international sites are not routinely monitored and not all research investigators have experience conducting clinical trials.
International Clinical Trials (2 of 2)
Informed Consent in General (1 of 7)
Informed consent:
Protects individual autonomy and the participant’s status as a human being
Helps avoid charges of fraud or duress against clinical trial sites
Encourages research investigators to carefully consider their clinical decisions
Fosters rational decision making by the clinical trial participants
Involves the public generally in medicine
Informed Consent in General (2 of 7)
Informed consent continued
Medical custom dictates that a reasonable physician should disclose what would be reasonable under the circumstances, including:
Diagnosis
Nature and purpose of the proposed treatment
Risks of the treatment
Legitimate treatment alternatives, including doing nothing
Federal regulations govern clinical research protocols and define what information is required to obtain informed consent.
Informed Consent in General (3 of 7)
Placebos
Placebos may be used in order to test the rate of success.
Institutional review boards must continually review the research and determine that: confidentiality is maintained, data collected is monitored, informed consent was obtained, risks are minimized and reasonable, selection of volunteer subjects is equitable.
Declaration of Helsinki
The Declaration of Helsinki sets forth the international ethical principles for medical research involving human subjects.
Research on human subjects who cannot give consent is only permissible if the condition that prevents consent from being given is what is being tested or researched
Informed Consent in General (4 of 7)
Battery Claims
If there was no consent given, clinical trial participants may have a battery claim, which simply requires a showing that there was unconsented contact.
Informed Consent Claims
If there was insufficient consent, clinical trial participants may have an informed consent claim, which is pursued under a theory of negligence.
Informed consent forms are not generally an important part in the decisionmaking process because they are treated as a formality.
Informed Consent in General (5 of 7)
Newborn Screening Programs
The Bearder v. State of Minnesota decision highlights the issues of informed consent in the debates surrounding the genetic privacy of newborn blood samples
Issue: Should states enhance protections for the genetic privacy of newborn blood samples?
Holding: Yes, the genetic information contained in DNA brings newborn blood samples falls within the protection of the genetic privacy law
Informed Consent in General (6 of 7)
Emergency Research Rule
There has been a substantial increase in the use of the Emergency Research Rule, with most of this increase related to studies supported by the National Institutes of Health (NIH)
Currently, NIH is funding emergency research studies, which consider consent waived after institutional review boards sign off on each clinical trial, if:
A physician and an institutional review board agree that the life of a patient is in danger
Proven treatments will not work
Clinical research is necessary to determine what intervention is best
Research could not be done otherwise
Informed Consent in General (7 of 7)
Informed Consent and Participation of Children in Human Subject Research
Children in general are considered vulnerable research subjects
Minors cannot provide informed consent because they are considered incapacitated under the law, meaning that they lack the ability to acquire the knowledge necessary to make a truly informed, voluntary decision
Institutional review boards can approve pediatric research only in three risk-benefit categories:
Greater than minimal risk but with a prospect of direct benefit
Minimal risk
Minor increase over minimal risk without a prospect of direct benefit
Transparency and
Full Disclosure in Clinical Testing
Major shortcoming of the full disclosure requirement (also referred to as the § 801 requirement) is that:
The results of older clinical trials of drugs that were approved before the disclosure requirement became law in 2007 do not need to be made public
Such drugs constitute the vast majority of the drugs currently used by patients
Financial Conflicts of Interest
The increase in financial conflicts of interest is likely a result of the change in federal policy that was designed to expedite the progress of research results from the laboratory to patients.
Concern mainly centers on financial conflicts of interest, particularly regarding the relationship between academic and industry interests.
Commitment to the Life Sciences
First and foremost, the health care industry and the government must renew their commitment to science:
The ability to reach this goal depends heavily upon strict adherence to scientifically motivated decision making
Scientists should be insulated from financial and political pressures when making decisions about which medical treatments and products warrant approval to enter the marketplace and about which measures are appropriate when addressing unforeseen risks to patients.
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