Formulary guidance and transparency from P&T to point of care

Perspectives on Healthcare Regulatory Agencies

Posted by Matt Breese on May 17, 2016

Find me on:


Healthcare is arguably one of the most highly regulated industries in the United States. While antagonists posit that multiple levels of regulations stunt innovation and place heavy-handed and often contradictory restraints on the development of new therapies and the nimble delivery of care, advocates suggest that regulations protect patients and ensure quality.

Regulation exists in every segment of healthcare. State and local agencies, as well as private associations and specialty societies (i.e., The Joint Commission, American Medical Association, the American College of Surgeons, etc.), are primary regulators of providers, practices and hospitals. These entities control such things as medical and dental school requirements, professional licensure, specialty certification and hospital accreditations. Individual state agencies also closely regulate insurance companies, even those participating in the Affordable Care Act (ACA) marketplaces, and the influence of the Centers for Medicare and Medicaid (CMS) reaches beyond Medicare and Medicaid to affect reimbursements in the private sector. The U.S. Food and Drug Administration (FDA) is the primary regulatory agency overseeing the development and marketing of drugs. Although not pure regulatory agents, payers and providers also play a significant role in “regulating” pharma by influencing how and when drugs are included in a formulary, prescribed and reimbursed.

The origin of regulations

State and local oversight of healthcare has its origins in the U.S. Constitution, which is the foundation of the nation’s federalist form of government. The Constitution grants the federal government power over specific things that affect all citizens, regardless of the state in which they live, such as national security, printing money, interstate commerce, establishing treaties and declaring war. The Constitution gives states responsibility over everything that is not expressly granted to the federal government. Over the years, however, that simplistic division of responsibility has morphed. As the government judges more and more issues to have “national” implications, federal regulations add layers of complexity for industries, such as healthcare, that are already functioning under state and local regulations.

While regulations that control the safety and quality of healthcare are essential, complying with regulations established by federal, state and local agencies, as well as professional associations, is potentially both challenging and confusing. Providers, payers and pharma must dedicate an exorbitant amount of limited resources to ensuring they are compliant.

Regulating pharma

Pharma must follow regulatory guidance to:

  • Protect its inventions (U.S. Patent and Trademark Office)
  • Pursue clinical trials (partner Institutional Review Boards and the FDA)
  • Obtain new or generic drug approval (FDA)
  • Contract with plans to negotiate drug position on formularies (plan benefits managers)
  • Include drugs in standards of care (provider organizations and specialty societies)

It is critical for pharmaceutical manufacturers to acquire and appropriately utilize technology, expertise and guidance to ensure adherence to rapidly changing guidelines. Not only are these resources important to initiate the innovation process, but also to gain or maintain a competitive advantage and to avoid significant fines.

Newly issued regulatory guidelines can change practices and processes based on evidence-based medicine, best practices or on an identified need for clarity. For example, the FDA recently published Data Integrity and Compliance with Current Good Manufacturing Practice (CGMP). The FDA issued this guidance on the role of data integrity in CGMP for drug manufacturing, finished pharmaceuticals and positron emission tomography drugs to clarify its expectations and address an increasing amount of data integrity violations. In addition to defining data integrity terminology, the guidance focuses on:

  • Exclusion of CGMP data
  • Workflow validation
  • Data access
  • Audits
  • Electronic records
  • Personnel training
  • Sampling and testing requirements
  • How to address data integrity problems

While this type of guidance may stress administrative resources and validate concerns some people have about the costs of over-regulation, it does provide needed clarity that helps manufacturers avoid compliance issues and fines. It is incumbent on manufactures to weigh their options and possibly turn to out-of-house resources to manage regulatory changes and avoid draining critical resources.

The FDA also regulates generic drugs, albeit it through a less costly and abbreviated regulatory approval process than with new drugs, which lowers the cost of introducing generics to the marketplace. Currently, a generic drug is sold at 80-85 percent average discount when compared to its brand-name counterpart. Recently, the FDA improved the approval process for applications from generic drug manufactures. The latest agency report shows 198 approved applications in the first quarter and only 160 applications pending review, which is down from 211 at the beginning of the year.

Pricing of generic drugs — and drugs in general — is a topic for many candidates during this election cycle as political pressure and negative media attention regarding price increases of several older drugs have put pressure on drug manufactures to control and/or lower prices of generic drugs. One issue, however, that has not received much media coverage is the concern of members of the National Community Pharmacists Association (NCPA) about plan benefit managers for Medicare Part D plans failing to comply with federal requirements that Medicare drug reimbursements reflect the market price of acquiring the drug. In this case, CMS is the regulatory agency that has oversight responsibility and power to enforce the new requirement, which took effect on January 1 of this year in response to concerns regarding below-cost payments that jeopardized the ability of community pharmacies to fill Medicare prescriptions.

Although multiple layers of regulations from local, state and federal agencies, as well as from many different professional organizations and societies, can be challenging, confusing and even onerous, global guidance promotes quality and supports the safe delivery of care. Companies and organizations that are able to identify resources and expertise to help manage regulatory requirements are better able to ensure compliance.

Subscribe to the MMIT blog for more pharma, provider and payer perspectives on key topics that affect the healthcare network.

Subscribe for Weekly Perspectives

Topics: Industry Trends, Market Access, Data & Analytics