World Stem Cell Summit panel cautions over stepped up HCT/P enforcement, reimbursement issues

Speaking at the World Stem Cell Summit hosted by the Regenerative Medicine Foundation last week, Hogan Lovells partners Mike Druckman, Stuart Langbein, and Thomas Beimers discussed evolving government reimbursement issues for regenerative medicine firms, as well as compliance issues for manufacturers and distributors of human cells, tissues and cellular and tissue-based products (HCT/Ps). Attorneys Sally Gu, Sarah Thompson Schick, and James Huang also discussed best practices for early government engagement. The panel discussion spotlighted increasing scrutiny from the Food and Drug Administration (FDA) over regenerative medicines, and provided advice for companies operating in the space on how to avoid government enforcement actions while advocating for the Centers for Medicare & Medicaid Services (CMS) to reimburse their products.

This article is the eighth in our 2022 series, “Trends in Cell, Tissue, and Gene Therapies,” which aims to help you stay informed about the broad array of legal and regulatory issues affecting companies operating in the regenerative medicine space.

Approval pathways for HCT/Ps

Teeing up the Summit’s discussion of best practices for early government engagement, Sally Gu, associate in the Hogan Lovells Pharmaceuticals and Biotechnology regulatory practice group, outlined the various FDA regulatory review pathways that are available to sponsors of biological products and HCT/Ps, focusing on the potential benefits and downsides to each pathway. For example, pursuing a Biologics License Application (BLA) means significant postmarket compliance obligations for a sponsor. On the other hand, Ms. Gu explained, obtaining a BLA could confer significant competitive market advantages, including potential market exclusivity.

Ms. Gu also summarized FDA’s various expedited review pathways available to sponsors of drugs and biologics, which include Breakthrough Therapy Designation (BTD), Fast Track and priority review, Regenerative Medicine Advanced Therapy (RMAT) designation, and Accelerated Approval. Discussing the requirements and potential benefits of each program, Ms. Gu noted that forthcoming Congressional action may impact the regulatory requirements for therapies in the Accelerated Approval program.

Center for Biologics Evaluation and Research (CBER) Director Peter Marks, PhD, also recently said CBER intends to explore potentially intermediate pathways for certain cellular therapy products that do not fall clearly into FDA’s tissue rules as not requiring premarket authorization, but that also should not be required to receive a full BLA to go to market, according to Mike Druckman, partner in the Hogan Lovells Pharmaceuticals and Biotechnology regulatory practice group. Yet, Mr. Druckman forecast, the likelihood of a new pathway being formalized anytime soon is low.

Compliance concerns for regenerative medicine sponsors

Regardless of the FDA approval pathway they choose to pursue, sponsors of regenerative medicines must consider certain compliance issues in the clinical development phase, cautioned Sarah Thompson Schick, senior associate in the Hogan Lovells Pharmaceuticals and Biotechnology regulatory practice group. She explained how early stage drug and biologic sponsors should ensure their infrastructure complies with Good Clinical Practice (GCP) standards, including standards for vendor/investigator qualification and selection, data management, statistical analyses, and study monitoring, among other issues. Ms. Schick offered examples of early stage compliance pitfalls, warning that gaps in compliance may trigger an internal investigation, which can lead to a slowdown of clinical development programs, dismissal of clinical operations management, or even a CEO departure.

Thomas Beimers, partner in the Hogan Lovells Health practice group, outlined the risks of government enforcement against companies operating in the regenerative medicine space, including the recent federal investigations into the sales of amniotic fluids products. One risk for health care providers and clinics relates to “overpayments,” Mr. Beimers explained, where CMS has taken the position that claims were either not reimbursable, or that there was insufficient evidence/documentation of “medical necessity” to merit CMS paying for the therapy. Mr. Beimers noted that appeals with the agency are rarely successful; and even in successful appeals, clinics have had to provide very detailed documentation showing that particular uses of the therapy were supported.

The second main risk of enforcement against companies operating in the regenerative medicine space are False Claims Act (FCA) investigations, where the Department of Justice may prosecute manufacturers, billing companies, distributors, and clinics: any party who may have caused a false claim to be submitted to the government. Mr. Beimers pointed out that these cases may arise where FDA’s view of acceptable indications may be narrower than the use of that medical product that is being promoted; he said this is often the case for injections into joints to treat pain or inflammatory conditions.

Ms. Schick also presented on the early stage compliance concern of ensuring appropriate communications about clinical stage data, while noting that it may be acceptable to discuss early stage data as part of the “scientific exchange” safe harbor. Ms. Schick listed “best practices” for scientific exchange in this early stage, emphasizing the need for sponsors to add disclaimers, and to avoid characterizations or conclusions regarding safety and efficacy of the therapy that they are sponsoring. Walking through examples of communications in press releases and investor conferences, Ms. Schick described how even when FDA may not have jurisdiction, SEC rules will apply.

Reimbursement concerns for regenerative medicine sponsors

Shifting the focus to CMS, James Huang, counsel in the Hogan Lovells Health practice group, outlined coverage and reimbursement issues pertinent to sponsors of regenerative medicines. Mr. Huang spotlighted how Medicare often sets the benchmark for how other U.S. payers will cover and pay for a given therapy. As such, Mr. Huang cautioned that providers may be unable or unwilling to furnish a technology until there is a clear and adequate route to coverage and reimbursement under Medicare, making it all the more important for sponsors to ensure there is a sound Medicare pathway available for their novel technologies.

Mr. Huang emphasized the complexity of the reimbursement process, outlining how Medicare’s reimbursement of a regenerative medicine therapy varies based on a variety factors including the “site of service” (e.g., inpatient hospital setting vs. outpatient hospital setting) and “class of therapy” (e.g., “biologic” vs. “procedure”). Adding to this complexity, Medicare rules regarding coverage and reimbursement are constantly changing, especially in the regenerative medicine space; to underscore this evolving regulatory regime, Mr. Huang highlighted some of Medicare’s shifting policies surrounding coding and reimbursement rules for skin substitutes, including HCT/Ps.

Stuart Langbein, partner in the Hogan Lovells Health practice group, summarized how Medicare pays for skin substitute products differently depending on the hospital outpatient or physician office setting, and how recent coding changes for skin substitute products have led to some confusion in the industry, which may be clarified by upcoming Medicare payment rules; Mr. Huang also forecast there would be additional policy changes – or at least new CMS clarifications – in this space as early as this summer. Mr. Langbein explained that there is no National Coverage Determination (NCD) addressing coverage for skin substitute products, but that Local Coverage Determinations (LCDs) may clarify the scope of coverage for these products.

Mr. Langbein noted that over the past eight months, Medicare Administrative Contractors (MACs) have taken steps that have resulted in impediments to the processing and paying of claims for skin substitute products, including denying claims for exosome products. He explained that CMS has expressed concerns over whether HCT/P products are lawfully marketed as such, and has insisted that manufacturers of these products secure letters from FDA’s Tissue Reference Group (TRG) to show that the products are being lawfully marketed. Mr. Beimers said he anticipates greater clarity regarding MAC claims processing when the Regenative Labs case is decided, which relates to CMS’ technical direction letters that had instructed blanket denials of Q-code claims for amniotic fluid products.

Asked about the tension between reimbursement under CMS’ Q-codes and statements from Dr. Marks about classification as HCT/Ps, Mr. Druckman described how FDA has offered nonbinding recommendations to companies on whether a product is likely to be regulated as an HCT/P, which CMS has used in their reimbursement decisions. Regardless, CMS’ view on coding and reimbursement will not be affected by Dr. Marks’ informal statements, as the agency wants FDA (and not CMS) to adjudicate whether a product is lawfully on the market, Mr. Langbein added.

Next steps

CMS acts through notice-and-comment rulemaking, and so Mr. Langbein advised companies operating in the regenerative medicine space to be on the lookout to comment on LCDs and Medicare payment rules that could have a significant impact on reimbursement for their products. Mr. Huang concluded by emphasizing that developers of all types of regenerative medicines should be thinking about coverage and reimbursement issues early, and all throughout the process of their technology’s development.

Mr. Beimers emphasized the importance of health care providers maintaining thorough documentation of medical necessity for use of regenerative medicine therapies, including amniotic fluid products. On the manufacturers side, there needs to be care taken in marketing and promotional activities that may suggest certain billing codes should be used for their products, Mr. Beimers warned; he explained that such promotional materials could be viewed by the Department of Justice (DOJ) as suggesting to providers that a certain use of a therapy is reimbursable, when CMS may decide it is not, meaning the manufacturer had caused a false claim to be submitted in violation of the FCA.



This article is the eighth in our 2022 series, “Trends in Cell, Tissue, and Gene Therapies,” which aims to help you stay informed about the broad array of legal and regulatory issues affecting companies operating in the regenerative medicine space. From clinical studies, to obtaining patents, to scaling up manufacturing, our global team will discuss novel issues arising in all parts of the world, including unique deal-making, litigation, and inspections concerns for CTGT companies. Ensure you are subscribed to Hogan Lovells Engage to receive these new insights weekly!


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