July 1, 2011 (Vol. 31, No. 13)

Dept. of Health and Human Services’ Influence Extends Beyond FDA and Will Affect Field’s Future

In the United States, the most influential single player in healthcare design and development is the federal Department of Health and Human Services (HHS). HHS’ budget represents almost a quarter of all federal outlays, and it administers more grant dollars than all other federal agencies combined.

The Medicare program, which HHS administers through the Centers for Medicare and Medicaid Services (CMS), is the nation’s largest health insurer, handling more than one billion claims per year. Medicare and Medicaid (which consists of individual state-operated programs which CMS also administers and funds at the federal level) together provide healthcare insurance for one in four Americans.

As the parent agency of the Food and Drug Administration (FDA), HHS will have an impact on personalized medicine. In addition to the FDA, however, other organizational components of HHS will also shape the future of personalized medicine, particularly in the critical areas of reimbursement, controls on the collection and use of personal health information, and consumer advertising of healthcare products.

Judith A. Waltz

In 2010, legislation was introduced that would establish an Office of Personalized Healthcare within the Office of the HHS Secretary to coordinate the activities related to genomics and personalized medicine of HHS and other relevant federal agencies, as well as private and other public entities.

As envisioned by its sponsors, this office would oversee selected initiatives to realize the overall goals of the legislation, such as the development of a long-term strategic plan to advance personalized medicine. While that legislation remains pending, the centralized leadership role it contemplated seems to be a natural evolution of the roles that HHS already performs through its multiple organizational components.

One key question in product development, and one that must be addressed at an early phase, is how the product will ultimately be reimbursed by payers. The likelihood that a product can easily secure coverage and reimbursement (and conversely the associated risks) can provide the basis for decisions regarding venture capital and longer term financing.

Medicare coverage for a product is often viewed as a necessary pursuit because of the large numbers of Medicare beneficiaries, and because some private payers follow Medicare coverage determinations, making the stakes incrementally higher.

Medicare beneficiaries are by definition the aged and/or disabled, often receiving treatment for multiple medical conditions and using twice as many prescription drugs as those who are not covered by Medicare. These demographics can make it difficult to prove clinical efficacy.

CMS establishes coverage and reimbursement policies for Medicare beneficiaries and also establishes some basic parameters for coverage and reimbursement in the Medicaid programs. CMS, through its Council on Technology and Innovation, has developed the Innovators’ Guide to Navigating Medicare as a 50-page summary overview of the complicated processes used to determine coverage, coding, and payment for new technologies under the Medicare fee-for-service program.

Not surprisingly, these processes are not a perfect fit for personalized medicine, where products are in some respects conceptually different from more traditional diagnostic and therapy models. While Medicare does, in fact, already cover some personalized healthcare products, it seems clear that its coverage standards may serve as a market barrier for some other products.

Healthcare reform and other recent changes to the Medicare program may provide additional challenges and opportunities. Beneficial trends include that HHS has received legal and monetary support for Medicare innovations, demonstration projects, comparative effectiveness studies, and outcomes research, all of which should allow alternative and creative approaches to better healthcare delivery, including personalized healthcare.

The HHS Office for Civil Rights enforces privacy and security rules with respect to Protected Health Information (PHI). PHI is information that is individually identifiable and maintained by a covered healthcare provider, health plan, or healthcare clearinghouse.

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act provide for the privacy and security of PHI. HHS considers genetic information to be health information protected by the privacy rule.

Family medical history information may also become PHI. Consents, business associate agreements, and security protections must be carefully addressed to avoid potentially costly violations of HIPAA, HITECH, and similar state provisions.

Another challenge for personalized medicine in which HHS will play a critical role is the regulation of direct-to-consumer (DTC) marketing of genetic tests. DTC is of particular concern because the products are, as the name implies, directly marketed to the consumer without the involvement of an independent healthcare provider.

DTC testing is a growth industry capturing a wide variety of indications such as cystic fibrosis, depression, cardiovascular disease, and Alzheimer disease. In addition to providing the tests, some companies also make recommendations regarding lifestyle changes. The absence of a healthcare provider to review and interpret the results and the lack of premarket review of the underlying tests has raised concerns that consumers will be unduly injured by these products and services.

How, by whom, and to what degree these tests should be regulated are issues yet to be resolved. In early March of this year, the FDA held an open meeting to gather information from interested persons on:

  • the risks and benefits of DTC genetic tests,
  • the different types of DTC tests and the regulation for each type of test or category of test, and
  • the risks of and possible mitigations for incorrect or misunderstood test results and the level and type of scientific evidence for supporting DTC genetic testing claims, including whether they should be different than those required to support similar claims for prescription-use clinical genetic tests.

In May 2011, FDA’s Center for Devices and Radiological Health issued enforcement letters to the manufacturers of three DTC genetic tests inquiring about the FDA approval or clearance status of the tests, or reasons why that approval or clearance was considered unnecessary. It seems clear that DTC scrutiny will be an area of increasing focus for government enforcement efforts.

Antoinette F. Konski


The multiple organizational components of HHS will continue to play a critical role in shaping the future of personalized medicine. It is critical for all those in the personalized medicine sector to be familiar with the multiple roles that HHS plays. HHS will best serve its constituencies by further coordination of these multiple roles in the future, ideally with a directed focus on the realization and maximization of the potential benefits of personalized medicine.

Judith A.Waltz ([email protected]) is a partner with Foley & Lardner, co-chair of the life science industry team, and a member of the firm’s healthcare industry team. Antoinette F. Konski ([email protected]) is also a partner with Foley & Lardner, and a member of the firm’s chemical, biotechnology and pharmaceutical practice.

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