Health Law Daily HHS ordered to assign temporary Medicare billing code to Relizorb™
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Thursday, December 6, 2018

HHS ordered to assign temporary Medicare billing code to Relizorb™

By Rebecca Mayo, J.D.

In a Per Curium opinion, a district court ordered HHS to assign a new medical device, Relizorb™, a temporary Medicare billing code that is not encumbered by coverage indicators that treat it as component of the enteral feeding supply kit and not separately priced or payable. The court found that HHS’s coding determination acted as an absolute barrier to meaningful reimbursement and prevented patients from having access to Relizorb (Alcresta Therapeutics, Inc. v. Azar, December 3, 2018, Per Curiam).

Billing code. Alcresta developed and manufactured a medical device, Relizorb, designed to be used for improved enteral feeding via stomach tube. Relizorb consists of a cartridge containing an enzyme that predigests fats in enteral formula before they enter the stomach, thereby facilitating their absorption for people with cystic fibrosis and other illnesses whose pancreatic function is inadequate to enable them to digest and absorb essential fats. Alcresta sought a unique Medicare billing code for Relizorb from HHS. HHS denied the request, claiming that Relizorb was adequately described by an existing billing code that sets an all-inclusive daily price for certain generic enteral feeding supplies such as tubing, claims, and tape, which is sometimes referred to as the enteral feeding supply kit.

Challenge to code. Alcresta and a cystic fibrosis patient who needs Relizorb, filed a complaint in district court challenging HHS’s coding decision, arguing that Relizorb should have a unique billing code because it is distinct from other products included in the preexisting code for the enteral feeding supply kit. Alcresta and the patient requested a preliminary injunction directing HHS to issue a unique billing code for Relizorb to allow it to be separately identified and priced. While the motion was pending, HHS issued a separate billing code but attached two coverage indicators to the code which indicated that it was not payable by Medicare and not separately priced. The court denied the preliminary injunction, finding that a new billing code would not change the underlying reimbursement rate decision and would not redress the patient’s injuries and he therefore lacked standing. Alcresta and the patient then moved for an emergency injunction directing HHS to issue a temporary billing code for Relizorb that is not encumbered with the Medicare-coverage indicator.

Standing. The court noted that the heart of the dispute, both on standing and the merits, was whether a new billing code could afford Alcresta and the patient the relief they seek. While HHS contends that coding and pricing are two separate processes, the court found that it was a coding determination that dictated the Medicare reimbursement rate for Relizorb. According to the court, HHS was unable to point to any process or decision, apart from coding Relizorb as part of the enteral feeding supply kit, by which HHS determined the cartridge’s reimbursement rate. Although a new billing code, unencumbered by the Medicare coverage indicators that bundle Relizorb into the pre-priced enteral feeding supply kit, would not guarantee any particular reimbursement rate, it would open the way the agency to establish a reimbursement rate for Relizorb. The court held that Alcresta and the patient didn’t need to demonstrate that they would actually receive the reimbursement rate they desired, but that there was an absolute barrier to relief that if removed could establish redressability.

Irreparable harm. The court noted that the patient benefits from Relizorb as part of his treatment but cannot afford to buy it without insurance coverage. HHS does not dispute that a lack of coverage for a medically necessary item constitutes irreparable harm. The court also found that Alcresta demonstrated irreparable harm by showing that HHS’s coding of Relizorb prevents its use by patients who need it because they cannot get insurance reimbursement for its cost. According to Alcresta, it has lost an estimated $15.3 million from forgone sales in 2017 alone and expects even greater losses in 2018. Economic loss in and of itself doesn’t necessarily constitute irreparable harm, however loss of profits that could never be recaptured are and it is unlikely that Alcresta would be able to recover its lost revenues from the government. The court concluded that Alcresta and the patient both demonstrated a sufficient causal nexus between their encumbered billing code and their injuries and that success on the merits would meaningfully redress those injuries.

The case is No. 18-5192.

Attorneys: Stephanie A. Webster (Akin Gump Strauss Hauer & Feld LLP) for Alcresta Therapeutics, Inc. Courtney Dixon, U.S. Department of Justice, for Alex Michael Azar, II.

Companies: Alcresta Therapeutics, Inc.

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