2021 Trends and Opportunities for Healthcare Providers, Digital Health, and Life Sciences Innovators
2020 was the year that showed us all that you can’t truly predict what lays ahead. But, for all the surprises of the last year, the industry didn’t collapse, it accelerated along familiar trend lines. So, after a year like 2020, should we even attempt to predict what will happen in 2021?
We say yes. And here’s why:
Knowing the trends will help you better respond to opportunities and mitigate risks, no matter what else happens along the way.
Our clients rose to the challenges of 2020 in part because they kept their fingers on the pulse of emerging technologies, market demand, and regulatory changes.
Many were already in the process of creating or embracing health innovations when the pandemic hit, and they quickly ramped up or pivoted in response to the needs and demands of a shifting environment.
And we were right beside them.
A great deal of the value we bring to Life Sciences, Provider, Digital Health, and Investor clients stems from knowing what’s on the horizon, even in times of great uncertainty and churn, and understanding how to use it for business growth, protection, and market visibility.
We’re lawyers, yes, but we think like the innovators we serve. And that goes way beyond compliance and contracts.
The inspiration for our 2021 predictions?
Working with hundreds of innovative leaders, founders and investors in these spaces every year, including multiple technology accelerators, healthcare associations, and industry task forces
Monitoring and analysis of proposed regulatory changes (we’re the ones who spent December analyzing thousands of pages of regulations released by HHS just before the holiday instead of bingeing Netflix like everyone else)
Wearing our lawyer hats but walking in our client’s shoes. We keep it top of mind that our clients are looking to scale fast and generate revenue in addition to mitigating risks.
While we can’t tell you exactly how to prepare you and your business to make the most of these trends in a single blog post, we can reveal valuable insights regarding what to expect at an industry level in 2021.
Keep reading for our predictions, or skip to specific predictions using these links:
Trends for Digital Health Innovators in 2021 and Beyond
Unprecedented Consumer Demand for and Reimbursement of Digital Health Technologies and Telemedicine
Reimagining of Care in “One-Stop-Shop” Virtual Settings
Increased Scrutiny of Telehealth and Virtual Care Companies
Broader acceptance of Artificial Intelligence and Machine Learning in clinical decision-making
Exponential Improvements in our ability to derive meaning from healthcare data
The Quantified Self and Hyper-personalized Healthcare
The Rise of “Value-Based Enterprises” among Health Care Providers and Digital Health Companies
An End to Federal Marijuana Prohibition
Trends for Life Sciences Innovators in 2021
Higher MDRP Payments Following Changes to AMP Calculation
New Rules for Drug Rebate Value-Based Agreements
Likely Enforcement Discretion or Roll-Back of AKS Drug Rebate Safe Harbors
Canadian Drug Import Rules Will Fail to Deliver on Promise of Lower Prices
Expiration of Emergency Use Authorizations may Disrupt Business Continuity
Ramp up of Domestic Manufacturing of Medical Products
New Regulatory “Legos” for FDA Regulation of Digital Technologies
Trends for Digital Health Innovators in 2021 and Beyond
Unprecedented Consumer Demand for and Reimbursement of Digital Health Technologies and Telemedicine
This is happening right here, right now. The public is ravenous for wearables and on-demand virtual care services to promote better health, and they won’t settle for the limited options that existed just one year ago. Nixon Gwilt Law Partner Rebecca Gwilt says continued development and adoption of telehealth and RPM technologies by companies and medical practices to meet consumer demand is essential to support this trend. Managing Partner Carrie Nixon predicts that Congress will finally act to make permanent the broader reimbursement for telehealth services that CMS permitted during the COVID-19 Public Health Emergency.
Reimagining of Care in “One-Stop-Shop” Virtual Settings
To this point, telemedicine has looked very much like a replication of a traditional office visit conducted via webcam. The possibilities and opportunities to improve care using virtual tools along with the massive increase in public demand for a better way to access clinical care will lead to richer, more personalized, and more effective care delivery models--a true reimagination Nixon and Senior Counsel Kaitlyn O’Connor expect to see virtual care platforms that integrate telehealth services with Remote Patient Monitoring (RPM), Chronic Care Management (CCM), and Behavioral Health Integration (BHI) services in addition to at-home diagnostics, retail pharmacy/telepharmacy, and consumer and non-consumer devices. Where many virtual care platforms were previously limited to treatment of minor acute conditions like bronchitis or ear aches, Nixon predicts that we will see more comprehensive care platforms that integrate specialist physicians, specialty devices, and treatment of more complex long-term conditions, while O’Connor is looking for more specialized applications of RPM for specific disease states related to, for instance, neurology, behavioral health, and endocrinology.
Increased Scrutiny of Telehealth and Virtual Care Companies
With increased demand and adoption comes increased scrutiny. Nixon expects digital health companies and healthcare providers who are skating the line on compliance and billing practices to attract the attention of the Office of the Inspector General and/or the Department of Justice. Now is the time to ensure that all contractual arrangements, customer agreements, and business practices are compliant.
Broader acceptance of Artificial Intelligence and Machine Learning in clinical decision-making
Following the Centers for Medicare and Medicaid Services’ first approval of reimbursement for AI-augmented medical care through Medicare’s New Technology Add-on Payment (NTAP) for artificial intelligence software this past Fall, Nixon expects additional pathways to reimbursement for digital health tools that use artificial intelligence (AI) algorithms in healthcare as well as continuing improvements in AI and machine learning (ML). The first NTAP reimbursement was awarded under the hospital Inpatient Prospective Payment system for demonstrating reduced time to treatment and improved outcomes for stroke victims. Look for CMS to award reimbursement for more AI algorithms that can similarly demonstrate value.
Exponential Improvements in our ability to derive meaning from healthcare data
Gwilt and O’Connor predict monumental improvements in data analytics brought about by the spike in virtual care, maturation of AI/ML capabilities at an enterprise scale, and harmonization of traditional and non-traditional healthcare data sets (e.g., linking SBDoH data sets to insurance claims). These improvements will put better tools in the hands of clinical decision-makers and healthcare payers (and the entities that are varying combinations of both of these), enabling the strategic delivery of care and care-adjacent resources. We’re likely to see increased investment in data accumulation and analytics to improve efficiencies and patient outcomes. We are just as likely to see greater scrutiny of healthcare data analytics companies as the law tries to keep up with innovation. With the realization that even de-identified data sets can be re-identified, companies that aggregate data will continue to face privacy challenges.
The Quantified Self and Hyper-personalized Healthcare
As more people have access to sensors that gather and transmit personal health information, the analysis of that data and its use by researchers and clinicians will move us another step closer to truly personalized healthcare. Technology and services geared toward specific groups, such as women, the elderly, or even those with particular types of jobs will become more common, according to Gwilt. Companies like Maven and Everlywell will continue to proliferate, focusing on specific demographics or conditions and providing more personalized care recommendations for products and services.
The Rise of “Value-Based Enterprises” among Health Care Providers and Digital Health Companies
New Final Rules issued by CMS and OIG at the end of 2020 have significantly loosened the Stark Law and Anti-Kickback Statute constraints that created a barrier to healthcare innovation. Digital health companies and healthcare providers across the spectrum of care will come together to form contractual arrangements called Value-Based Enterprises (“VBEs”) that allow for innovative new business models previously prohibited by the fraud and abuse laws. Nixon says that these new business models will align incentives among all participants and should actually move the needle on improving outcomes and reducing costs. O’Connor goes so far as to predict the start of a renaissance in the US healthcare system, where valued-based delivery and payment models finally become the norm.
An End to Federal Marijuana Prohibition
With the House of Representatives’ passage of the Marijuana Opportunity, Reinvestment, and Expungement (MORE) Act proposing to remove marijuana from the Controlled Substances Act, it is now clear that ending federal marijuana prohibition is gaining momentum in Congress. O’Connor believes we could see full federal legalization as early as this year, opening the door for more FDA-approved therapeutic applications of medical marijuana and even potential prescriptive authority for providers under their DEA license. This is likely to open up cannabis research, uncovering more clinical applications and education for clinicians around dosage, contraindications, and applications.
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Trends for Life Sciences Innovators in 2021
Higher MDRP Payments Following Changes to AMP Calculation
If manufacturers haven’t started looking at separating out Authorized Generic (AG) and branded drug pricing metrics yet, Nixon Gwilt Law Life Sciences Practice Lead, Tommy Miller recommends doing so immediately. Over 1200 Authorized Generics currently help manufacturers keep an edge over generic competitors and reduce Medicaid Drug Rebate Program (MDRP) rebate liability. Miller says that CMS’ Medicaid final rule related to Revising Medicaid Drug Rebate and Third Party Liability (TPL) Requirements, will likely increase MDRP liability for a large number of drug manufacturers in 2022. Beginning in 2021, CMS will no longer consider authorized generic pricing in branded “Average Manufacturer Price” (AMP) calculation which is used to establish “Best Price” (BP) for purposes of Medicare reimbursement and Medicaid Drug Rebate Program (MDRP) rebate liability. Rather authorized generics will be calculated separately under its own AMP. This change will result in immediately higher AMP and related MDRP rebate liability for any branded drug that included authorized generics in its AMP calculation. Miller sees this as one of the more pressing rule changes made at the end of 2020, with the greatest likelihood of remaining in place.
New Rules for Drug Rebate Value-Based Agreements
Miller expects to see a new round of proposed rules from the OIG in 2021, specifically aimed at drug manufacturer value-based contractual arrangements. CMS has made it clear in 2020 that it will continue to work with states to approve plan amendments that include the ability to use value-based payment terms in supplemental rebate agreements. However, OIG continues to decline to issue specific safe harbor protection or guidance on value-based drug rebate arrangements – and instead, continues to push manufacturers to piece-meal combination of warranty, management and services, and discount safe harbors. Because of this, Miller thinks that we will continue to see some push for value-based arrangements in pharmaceutical pricing in 2021 —but a wholesome approach to these arrangements will continue to lag until the OIG and CMS can work together to advance a clear position on how the rebates and discounts will be treated under laws like the AKS. Anti-Kickback Statute Safe Harbors
Likely Enforcement Discretion or Roll-Back of AKS Drug Rebate Safe Harbors
Miller says he would not be surprised if the new Biden administration either rolls back changes to the AKS drug rebate safe harbors - or places them on enforcement hold - until more work can be done to smooth out the transition process. The OIG’s AKS Discount Safe Harbor Final Rule made three important changes to the safe harbors that pharmaceutical companies use to negotiate drug contracts with Medicare Part D insurance plans and the pharmacy benefit managers
Removal of safe harbor protection of pre-sale rebates paid by pharmaceutical manufacturers to Medicare Part D plans and PBMs.
Added safe harbor that protects pharmaceutical rebates that are fully reflected in the price that a Medicare beneficiary pays at the point of sale.
Added safe harbor that protects the fees paid by pharmaceutical manufacturers to PBMs for the services provided by the PBM to the manufacturer—so long as they meet the safe harbor conditions which includes fixed price (not percentage based) fee arrangements.
Miller understands that these changes are a huge shift for industry and the technical implementation will require incoming administrative officials at CMS to build systems to account for how these changes will be managed. With changes to the discount safe harbor slated to take effect January 1, 2022, this leaves very little time for industry and CMS to work out how these changes are going to really operate - especially as pharmaceutical companies are preparing bid preparations for 2022 formularies this spring – with final contracts to be executed usually by October.
Canadian Drug Import Rules Will Fail to Deliver on Promise of Lower Prices
While touted as a Trump Administration win, Miller sees the FDA final rules for the Importation of Prescription Drugs as dead on arrival since the program is not likely to offer any meaningful path to lower drug costs here in the US. Miller, along with others, including experts at the Drug Channel Institute, question the program’s viability through 2021 and beyond. The main issues that Miller sees: 1) limitations on the type of drugs that are subject to importation, 2) the complicated import process, and 3) imported drugs are excluded from BP and AMP calculations – meaning lower cost imported drugs will not be factored into prices that programs like Medicaid and Medicare pay. Miller believes that states will still rely on existing mechanisms, like Medicaid and 340(b) programs as the main source for low-cost drugs.
Expiration of Emergency Use Authorizations may Disrupt Business Continuity
Miller recommends that any company relying on EUA authorized products in their business look at their supply chain contracts and regulatory status and begin to assess the need for any changes that will arise when the Public Health Emergency (PHE) ends. The Emergency Use Authorization (EUA) regulation of products during a PHE ends when the PHE ends. With two vaccines currently on the market under an EUA, and another candidate on the way, it is likely that we’ll get to a place in 2021 that we start talking about the end of the PHE. When that day comes, the ability to market products under an EUA also ends. Any product that has not been reviewed for FDA approval or clearance at that time, must be pulled from the market. Hundreds of diagnostic tests, and thousands of products covered by blanket EUAs ranging from PPE, wireless/connectivity enhancements to approved devices, and imports of unapproved devices are subject to being withdrawn from the market if regulatory processes are not waived or expedited when the PHE ends. Miller thinks specifically about companies that added Bluetooth technology to their devices or used an EUA to launch a device under one of the other blanket approvals, which may not be prepared to maintain use of these products at the end of the PHE.
Ramp up of Domestic Manufacturing of Medical Products
Miller believes that given the vulnerability in the medical product supply chain, which was highlighted by the COVID-19 pandemic, more companies will have an interest in domesticating manufacturing of drugs and devices (like PPE and other essential supplies). This issue was so glaring that the US government issued edicts, and appropriated significant resources, to private/public partnerships to increase US production of drug starter compounds, API, finished fill products, and other essential supplies. While these efforts were certainly a start, Miller believes that to maintain long-term viability, the government must continue to make efforts to subsidize these efforts so that US companies can compete on finished product costs.
New Regulatory “Legos” for FDA Regulation of Digital Technologies
In speaking with CDRH officials, Miller believes that the FDA’s approach to digital health in 2021 will continue to focus on expedited approval pathways for digital technologies - and perhaps some new regulatory “lego blocks” that will update the FDA’s framework related to clearance and approvals of digital therapies. The FDA has been working on regulation pathways for digital devices, software as a medical device and digital therapeutics for a number of years. In the last quarter of 2020, the FDA launched the Digital Health Center of Excellence with the CDRH, signaling to industry that it will be dedicating resources to ensuring that the FDA is able to keep up with the demand for digital health innovation. Nevertheless, Miller is hopeful, but skeptical, that the FDA will be able to put the necessary resources in place to fully tackle the regulatory current underlying the digital health wave.
What these trends mean for healthcare innovators in 2021
As with other times of great challenge and crisis, the period immediately following is often one of great inspiration, disruption, and innovation. We expect no less as our country emerges from this pandemic and economic upset.
As with everything in our world, we are becoming more connected to and reliant on each other for success. The lines are blurring, and it’s more important than ever to keep your finger on what’s happening in the entire industry, not just your corner of it.
That’s why relying on Nixon Gwilt Law is the smarter choice for innovative healthcare businesses. We’re always looking for trends, opportunities, and risks for our clients. More than legal experts, our clients depend on us to contribute market data and insights to power business decisions.
Maybe you could use a team like that in your corner?
Whether you engage with us right now or not, we hope you’ll keep checking back for more actionable insights for your healthcare or life sciences business in 2021. We’ve got a lot to share with you.
Happy new year!