NewYorkUniversity
LawReview

Issues

Topic

Health Law

Results

The Medicare Innovation Subsidy

Mark A. Lemley, Lisa Larrimore Ouellette, Rachel E. Sachs

Policymakers on both ends of the political spectrum have been looking for ways to reduce prescription drug prices. Democrats have also been working on expanding healthcare coverage, including different versions of Medicare for All. All these proposals have been framed as issues of access and spending. If innovation incentives come up at all, it has primarily been because pharmaceutical companies claim that reducing drug prices will threaten innovation by lowering the returns from their patents. 

In fact, however, pharmaceutical access and innovation incentives are intimately related. Health insurance can change the structure of market demand. And Medicare in particular does so in a way that gives a very large subsidy to patented drugs, such that current U.S. pharmaceutical profits are often higher than they would be in an unsubsidized market. Medicare reimbursement rules thus can lead to greater-than-monopoly pricing of patented drugs, dramatically expanding the incentive U.S. policy provides to pharmaceutical companies. By not recognizing the Medicare innovation subsidy, policymakers have ignored one of the largest sources of innovation incentives. That extra incentive might be a good thing or a bad thing, depending on how much incentive pharmaceutical developers need. It may well be good for some classes of drugs and bad for others. But it is important for policymakers to understand how access policies like Medicare also serve as innovation incentives. This extra innovation subsidy may open the policy space for hybrid proposals that combine expanded government insurance like Medicare for All with lower drug prices while preserving or even increasing current returns to innovation. 

The False Promise of Health Data Ownership

Jorge L. Contreras

In recent years there have been increasing calls by patient advocates, health law scholars, and would-be data intermediaries to recognize personal property interests in individual health information (IHI). While the propertization of IHI appeals to notions of individual autonomy, privacy, and distributive justice, the implementation of a workable property system for IHI presents significant challenges. This Article addresses the issues surrounding the propertization of IHI from a property law perspective. It first observes that IHI does not fit recognized judicial criteria for recognition as personal property, as IHI defies convenient definition, is difficult to possess exclusively, and lacks justifications for exclusive control. Second, it argues that if IHI property were structured along the lines of traditional common law property, as suggested by some propertization advocates, prohibitive costs could be imposed on socially valuable research and public health activity and IHI itself could become mired in unanticipated administrative complexities. Third, it discusses potential limitations and exceptions on the scope, duration, and enforceability of IHI property, both borrowed from intellectual property law and created de novo for IHI.

Yet even with these limitations, inherent risks arise when a new form of property is created. When owners are given broad rights of control, subject only to enumerated exceptions that seek to mitigate the worst effects of that control, constitutional constraints on governmental takings make the subsequent refinement of those rights difficult if not impossible, especially when rights are distributed broadly across the entire population. Moreover, embedding a host of limitations and exceptions into a new property system simply to avoid the worst effects of propertization begs the question whether a property system is needed at all, particularly when existing contract, privacy, and anti-discrimination rules already exist to protect individual privacy and autonomy in this area. It may be that one of the principal results of propertizing IHI is enriching would-be data intermediaries with little net benefit to individuals or public health. This Article concludes by recommending that the propertization of IHI be rejected in favor of sensible governmental regulation of IHI research coupled with existing liability rules to compensate individuals for violations of their privacy and abusive conduct by data handlers.

Incentivizing Pharmaceutical Testing in an Age of Off-Label Promotion

Ryan Sila

In 2012, the Second Circuit held that under the First Amendment, pharmaceutical manufacturers have a right to promote their drugs for uses for which that they have neither been clinically tested nor FDA-approved. Weighing heavily in the Second Circuit’s analysis was the argument that the FDA’s prohibition on so-called “off-label speech” inhibited physicians’ access to complete information, thereby harming public health. That line of reasoning has also created skepticism within Congress of the FDA’s policy. Others argue that the prohibition on off-label speech is necessary in order to incentivize manufacturers to clinically test their drugs for all intended uses—a process that not only allows the FDA to certify the drug as safe and effective in each of its uses, but also creates a larger data set about a drug’s effects before it begins to be marketed and prescribed. If manufacturers can market their pharmaceutical products for unapproved uses, they have reduced incentives to seek FDA approval, especially because the required clinical tests are extremely costly. Whatever one believes about a policy of permitting off-label promotion, it is clear that it not only creates benefits, but it also creates costs. This Note considers regulatory and common-law tools to reduce those costs. It rejects available regulatory tools, because either they are too weak to change manufacturers’ incentives to conduct clinical tests, or they suffer from the same constitutional questions that troubled the Second Circuit. Instead, this Note argues that courts can hold manufacturers to a common-law duty to test their drugs for each use for which they market them, and it outlines what such a duty might entail. Such a solution, if properly implemented, would not only mitigate the concerns about the liberalization of off-label promotion, but it would also be supported by modern products liability doctrine.

Deterring Fraud: Mandatory Disclosure and the FDA Drug Approval Process

Liora Sukhatme

The valuation of a pharmaceutical company often depends on its ability to bring a drug to market, making information about the likelihood of Food and Drug Administration (FDA) approval critical to investors and a highly sensitive issue for the company. Since the FDA drug approval process is not public, investors must rely on company disclosures to evaluate the likelihood of FDA approval. Currently, the FDA will not disclose the content of action letters sent to sponsor companies, giving company executives dangerous discretion over whether to disclose the information and how to present it. This discretion, coupled with a lack of oversight over the content of the disclosures, has resulted in several recent cases of fraud among pharmaceutical companies. As a way to curb such company discretion and prevent future fraud, this Note proposes mandatory public disclosure of action letters sent by the FDA to sponsor companies.

A Child’s Expertise: Establishing Statutory Protection for Intersexed Children Who Reject Their Gender Assignment

Emily A. Bishop

Intersexed children are born with genitalia and/or reproductive organs that do not look like those of most biological males or females. Doctors and parents usually assign an intersexed child a gender at birth or during early childhood. Occasionally, an individual will reject his or her gender of assignment and will want to take on a different gender role. Some clinicians and intersex advocates instruct parents to accept an intersexed child’s expressions of gender identity and to support the child’s gender role change. There is a risk, however, that parents may resist or prevent a child’s gender transition due to their own discomfort with the idea or based on a physician’s recommendation. A statutory framework that allowed intersexed minors to complete a “social gender transition,” coupled with a provision equating parental interference with this transition with actionable neglect, would protect intersexed children’s autonomy and prevent the trauma that can result from a forced existence in a gender role with which a child does not identify. The proposed framework would likely survive a constitutional challenge by the parents of an intersexed child because the harm caused by the parental decision to interfere with a child’s gender expression removes such interference from the realm of constitutionally protected parental decisionmaking.

Unintended Side Effects: Arbitration and the Deterrence of Medical Error

David Shieh

As many as 98,000 people die each year as a result of medical error. According to law and economics scholars, the solution to this problem is straightforward: When calibrated correctly, medical malpractice liability will force healthcare providers to internalize the cost of their negligence, incentivizing improvements to patient safety that will reduce medical error. Debate has raged for decades over the coherence of deterrence theory, but little attention has been paid to the erosion of one of its bedrock assumptions: that the procedural mechanism through which claims are to be resolved is litigation. Arbitration has become pervasive in the healthcare context, but its effects on medical malpractice liability’s ability to deter medical error have been largely overlooked by public health and legal scholars. This Note argues that the adoption of arbitration will not, as law and economics scholars assume, improve the medical malpractice regime’s ability to deter error. In addition to drawing on existing law and economics and public health scholarship to advance this descriptive claim, this Note studies the experience of Kaiser Permanente, the nation’s largest integrated healthcare consortium, in using arbitration to resolve medical malpractice disputes with its seven million members in California.

Prison Health Care after the Affordable Care Act: Envisioning an End to the Policy of Neglect

Evelyn Lia Malave

Inadequate prison health care has created a health crisis for reentering prisoners and their communities—a crisis that is exacerbated by barriers to employment and other collateral consequences of release. This Note will first examine how current Eighth Amendment doctrine has failed to sufficiently regulate prison health care so as to have any significant effect on the crisis. Next, it will argue that the Affordable Care Act (ACA) alters the Eighth Amendment analysis by triggering a change in the “evolving standards of decency” that guide the doctrine. Specifically, this Note will argue that, after the passage of the ACA, releasing sick, Medicaid-eligible prisoners without enrolling them in the federal benefits program violates the Eighth Amendment.

An Adverse Reaction: FDA Regulation of Generic Drug Labeleing

Mitchell Russell Stern

Thanks to a streamlined approval process under the 1984 Hatch-Waxman Act, generic drugs have largely helped make prescription medications in the United States more affordable by providing an essentially identical product at a lower price. While generics may appear to be a perfect substitute for brand-name pharmaceuticals, consumers injured by prescription drugs may encounter an unexpected difference: because federal regulations severely restrict the ability of generic manufacturers to unilaterally update their warning labels, the Supreme Court has held that many products liability claims against generic manufacturers are pre-empted. At the same time, the Court has held that identical claims against brand name manufacturers remain viable. In response, the Federal Food and Drug Administration (FDA) has recently proposed a rule that would purportedly “fix” this asymmetry by allowing generic manufacturers to make labeling changes without prior FDA approval, even if it results in a brand-name drug and its generic “equivalent” bearing different warning labels.

This Note argues that the FDA’s response, while well intentioned, loses the forest for the trees by overvaluing compensation for injured consumers at the expense of low-cost generic drugs and accurate, consistent information for consumers. Instead, both the Agency and consumers injured by generic drugs should focus on discrepancies that already exist—that violate FDA regulations—between generic and brand name labels. Such cases not only present an information problem that should be corrected, but they may also provide a viable avenue for litigating products liability claims. While there is currently a circuit split on the issue, this Note explains why these failure-to-update claims should not be preempted. Moreover, given that such differences may occur in a majority of generic drug labels, these claims offer the possibility of recovery for a significant number of consumers.

Good for the Gander, Good for the Goose

Gabriel Ascher

Extending the Affordable Care Act Under Equal Protection Law to Cover Male Sterilization

The Affordable Care Act requires coverage for female but not male sterilization, a disparity that this Note refers to as the Sterilization Gap. Although female sterilization is more dangerous, more expensive, and less effective than male sterilization, the Sterilization Gap incentivizes women to be sterilized rather than men. This Note argues that sterilization coverage should be extended to men. Because courts are empowered to extend underinclusive laws—like that which creates the Sterilization Gap—if they find them unconstitutional, litigation may be the best method of extending coverage. This Note presents a comprehensive argument for why the Sterilization Gap is unconstitutional and coverage should be extended. First, it argues that the Sterilization Gap is a facial sex classification because both sexes can be sterilized, even though the procedure is sex specific. Next, it argues that the classification violates constitutional equal protection law, because it is not based on a biological difference and does not remedy discrimination against women. Then, it argues that the classification was created either through impermissible oversight or gender stereotypes, and that it will perpetuate the stereotype that contraception is a woman’s responsibility, to the detriment of both sexes. Finally, it concludes by asserting that had Congress known that the Sterilization Gap was unconstitutional, it would likely have chosen to extend coverage to men rather than nullify the law, because extension would further its goals while causing comparatively little disruption to the statutory scheme.

Rule of Reason Without a Rhyme

Shaun E. Werbelow

Using “Big Data” to Better Analyze Accountable Care Organizations Under the Medicare Shared Savings Program

Accountable Care Organizations (ACOs), a major component of the Affordable Care Act, seek to provide patients with better quality health care at a lower cost and have been praised for their ability to help repair our country’s broken health care system. Despite their potential benefits, however, ACOs also raise significant antitrust concerns—concerns that may pit consumer surplus and total surplus against one another. In an attempt to address these concerns, the Department of Justice and Fair Trade Commission announced that they will use market share screens and rule of reason treatment to evaluate ACOs participating in the Medicare Shared Savings Program. The use of market share screens and rule of reason treatment allows the antitrust agencies to avoid prioritizing either consumer surplus or total surplus in the first instance but leaves open two critical questions: What will the rule of reason treatment afforded to ACOs look like? And how will the antitrust agencies ultimately determine whether ACOs benefit or harm consumers? In order to address these questions, this Note proposes that the antitrust agencies use the “big data” collected under the Affordable Care Act to conduct a structured rule of reason review of ACOs that takes into account both the consumer surplus and total surplus through a burden-shifting framework.