Vital Signs: Digital Health Law Update | Summer 2020
Note From the Editors
With this Summer 2020 issue of Vital Signs, we take a moment to again applaud the remarkable actions of all the health care and life science organizations around the globe working tirelessly on our collective response to COVID-19. Thank you, and we hope this collection of "must know" updates and resources on digital health law since our last issue assists with your ongoing efforts.
Regulatory and legal actions in the past quarter highlight the increased importance of digital health as a policy and clinical tool currently and, as many increasingly voice, going forward. This issue of Vital Signs highlights digital health's predominance in the dealmaking spotlight, while noting unique trends and strategies for considering digital health transactions. On the U.S. front, the last quarter's Food and Drug Administration actions continue an expansionary trend in novel areas, as states encourage reimbursement of telehealth services even while increased regulatory scrutiny of digital health looms. As demonstrated in this issue, Europe appears to be fully embracing digital health, with new regulatory actions on the EU and country level supporting a variety of telehealth services and digital tech advancements. Not to be overshadowed, the Asia region also took policy actions encouraging digital health capabilities, even while some caution that telehealth should be limited to existing provider relationships. Jones Day's digital health team will undoubtedly be closely involved, integrated, and ready to help clients with these varied and nuanced digital health law topics.
We highlight that Cristiana Spontoni, Jörg Hladjk, and Liming Yuan are now serving as editors for Vital Signs to deepen the digital health content and coordination from Europe and Asia. As consistent with our "One Firm Worldwide" mission at Jones Day, this publication is a broad effort by our global digital health team who is tracking all things digital health. We hope you find this Summer 2020 issue to be a thoughtful and curated one-stop resource for the latest developments in digital health law.
Digital Health Dealmaking: Challenges and Opportunities
By Christopher Anderson, Joshua Berick, Ben Maida, and Aarthi Belani
Although the long-term effects of COVID-19 on the U.S. economy remain unclear, the short-term negative impact on U.S. dealmaking has posed significant challenges for market participants in most sectors. The health care sector, however, has demonstrated significant promise for dealmaking activity even in the wake of the public health crisis due to the rapid proliferation of, and investments in, digital health technologies to serve patients across the country (and world). Although the public health crisis may result in challenging deal term structures and due diligence processes, many experts predict substantial dealmaking activity in the digital health sector in the final months of 2020.
Since the World Health Organization declared a pandemic on March 11, 2020, reports indicate that deal volumes have declined precipitously overall. For example, while Pitchbook North American M&A Report Q1 2020 reported a 2.6% year-on-year increase in deal volume from January 2020 through March 2020, a recent Bain & Company report describes a 60% decline in global buyout transactions from January 2020 through April 2020, with transaction levels trending at roughly 33% of the five-year monthly average. This data signifies that other than the completion of transactions initiated prior to the onset of the pandemic, deal activity largely ground to a halt during the first few months of the lockdown. Market participants are now left wondering which sectors will show the greatest promise for a return to dealmaking activity in the wake of the pandemic.
As indicated by significant upticks in investment activity, one of the few bright spots is the digital health sector. Investors largely agree that the pandemic has accelerated the adoption of telemedicine (both for physical and mental health), diagnostic testing, remote patient monitoring, clinical insight generation and analytics, and cloud-based clinical trials. Some commentators even suggest that the sector is having its "watershed moment." This, combined with a relaxation of certain legal and regulatory requirements to enable easier deployment of and greater reimbursement for telehealth services and related devices, may result in record volumes for digital health investments. According to a report prepared by Startup Health, total health innovation funding (including accelerator, venture, and private equity) hit $9.1 billion in the first two quarters of 2020, up nearly 19% compared to the same period in 2019. And though investments dropped in March and April (as fund managers likely paused activity to stabilize existing portfolios in response to the public health crisis), the positive upward trend in health sector investing resurfaced in May and June with total monthly funding of $1.7 billion and $1.6 billion, respectively, resulting in the second and third best months of the year so far.
While digital health companies are benefitting from these positive investment trends, they are also facing unique challenges in dealmaking as a result of the public health crisis. One such challenge includes a return to more investor-friendly terms for both venture capital investments and private equity investments. According to the PitchBook US VC Valuations Report released in May, seed-stage valuations are down 6.3%, late-stage valuations continue to contract, "down rounds" are rising in frequency, and investor-favorable terms (such as liquidation preference and higher dividends) are appearing more frequently in deals. It is also probable that, as a reflection of the uncertainty of the COVID-19 environment, deal terms that operate to delay or even to bridge valuation gaps between buyers and sellers will increase in frequency. This includes deal terms such as earn-out structures, under which a portion of the deal consideration is either delayed or even contingent upon future milestones. Greater use of equity (including preferred equity) may also supplement or supplant the historic use of substantial third party debt to finance transactions in the near term.
In addition to deal structure considerations, the public health crisis will likely impose greater diligence hurdles. Investors will conduct more extensive due diligence on the impact of COVID-19 on operations and risk management, including in areas such as insurance claims and coverage, supply chain issues, and compliance with employment, health, and safety laws (especially given novel and evolving digital health specific regulations). Digital health companies, on the other hand, will want more flexibility to operate their businesses outside of the "ordinary course" in order to respond prudently to public health conditions. Additional considerations will arise for companies that received support under the various CARES Act financial assistance programs, as investors will seek to confirm the accuracy of borrower certifications in loan applications and understand the impact of operating restrictions (including with respect to stock buybacks, dividends, and executive compensation) that survive the repayment or forgiveness of the loans. And, finally, "pandemics" will inevitably join the laundry list of standard carve-outs from "material adverse effect" closing conditions and termination rights in M&A transactions.
Despite the new challenges for dealmaking resulting from the pandemic, forecasts for dealmaking in the digital health sector are promising. Couple the rather bullish investor sentiment in the digital health space with the new and innovative treatment modalities required to respond to COVID-19 and the $2.6 trillion of unspent capital funds, or "dry powder," at the disposal of private equity and venture capital firms, it is no surprise that many industry experts foresee the potential for substantial deal activity in the digital health sector for the balance of 2020.
United States Developments
HHS Continuation of Emergency Declaration Critical for Ongoing Federal COVID-19 Telehealth Waivers
In our Spring 2020 issue of Vital Signs, we highlighted various actions taken by the federal government to temporarily authorize and increase the use of telehealth tools and remote technologies to expand access to care in response to the COVID-19 pandemic while limiting in-person interactions. The Centers for Medicare & Medicaid Services ("CMS"), in particular, temporarily waived Medicare conditions of participation and payment for many virtual care services and expanded the types of Medicare-covered services that can be provided remotely, including telehealth services, virtual check-ins, telephone services, e-visits, and remote monitoring services. While the expanded Medicare coverage has been a relief for many providers, the relief is temporary, and providers should monitor the expiration of waivers closely. For now, the CMS waivers remain in effect for the duration of the COVID-19 "public health emergency" declared by the secretary of the U.S. Department of Health and Human Services ("HHS") and any renewal of such declaration. The secretary's current renewal declares an emergency "nationwide" and remains in effect until July 25, 2020. On June 29, 2020, HHS spokesperson Michael Caputo tweeted that the HHS intends to extend the COVID-19 public health emergency that is set to expire on July 25, 2020, for an additional 90 days.
FDA Authorizes First Therapeutic Video Game
In a landmark decision, the Food and Drug Administration ("FDA")―for the first time ever―has authorized the marketing of a video game intended to serve a therapeutic purpose. On June 15, 2020, the FDA granted marketing authorization of Akili Interactive's EndeavorRx through the de novo marketing pathway for novel low- to moderate-risk medical devices. EndeavorRx is a first-of-its-kind, prescription-only video game intended to improve symptoms associated with attention deficit hyperactivity disorder ("ADHD") for pediatric patients ages eight to 12 years old. In the FDA's press release, Jeff Shuren, director of the FDA's Center for Devices and Radiological Health, explained that "[t]he EndeavorRx device offers a non-drug option for improving symptoms associated with ADHD in children and is an important example of the growing field of digital therapy and digital therapeutics." By granting Akili Interactive's de novo request, the FDA has created a new regulatory classification for this product type, which means that subsequent devices of the same type may seek marketing authorization through the less stringent 510(k) premarket notification process.
FDA Facilitates Predictive Analytics to Combat COVID-19
On May 26, 2020, the FDA issued an Emergency Use Authorization ("EUA") for the CLEWICU System. CLEWICU is a predictive screening software tool used by health care providers in intensive care units ("ICUs") to help identify critically ill patients who are likely to develop respiratory failure or hemodynamic instability (common features of COVID-19) in the near term. CLEWICU utilizes machine learning models on ICU patient data to predict these clinical events and automatically notifies the health care providers if respiratory failure or hemodynamic instability is predicted within the next eight hours for a particular patient. This early prediction system may allow for targeted evaluation of the patient and, if applicable, early intervention. Though only temporarily authorized through an EUA, such real-world use and data generation could lead to a permanent authorization, opening the door for other machine-learning devices.
FDA Initiates Review of Orange Book Listing of Patents Associated With Digital Applications
The FDA has initiated a review of the submission and listing of certain patent information in the "Approved Drug Products With Therapeutic Equivalence Evaluations," commonly referred to as the Orange Book. FDA has established a docket and is soliciting comments with the stated goal of modernizing the Orange Book. While the FDA is interested in any pertinent information, it is specifically requesting comments on the submission and listing of certain patent information, including the listing of patents associated with digital applications (e.g., clinical decision support software, software as a medical device). Any evolution of Orange Book patent listing practices has the potential to fundamentally change existing regulatory protections and the state of Hatch-Waxman litigation. For more information on the FDA's initiative, see our Alert on the topic.
FTC Reviews the Health Breach Notification Rule
As part of its periodic rule review, the Federal Trade Commission ("FTC") is seeking comment on whether proposed changes should be made to the Health Breach Notification Rule (the "Rule") to make it apply more broadly. The FTC announced its review of the Rule on May 8, 2020, and opened the comment period on May 22, 2020. Currently, the Rule's breach notification obligations extend only to the unauthorized acquisition of personal health records handled by certain businesses not subject to the Health Insurance Portability and Accountability Act of 1996. As part of this review, the FTC may seek to expand the Rule's reach beyond what is currently considered a "personal health record" by, for example, interpreting the term more broadly. Specifically, the FTC could expand the Rule's coverage to other direct-to-consumer technologies and services such as mobile health apps, virtual assistants, and platforms' health tools. The FTC has already signaled a desire to protect its jurisdiction over health data privacy and security issues in the context of third-party applications that consumers use to access the health data, as evidenced by FTC correspondence with the HHS over the HHS's recent rulemaking on interoperability and information blocking for electronic health record platforms. Interestingly, however, the FTC has never brought an enforcement action against a personal health record vendor for failing to issue a breach notification. The FTC's review of the Rule is an opportunity for the agency to assert a more forceful presence in the consumer health data arena. The review is significant in light of the explosion in consumer use of cloud-based personal health records to help manage individual health conditions. The comment period closes on August 20, 2020.
Federal Enforcement Update―Increased Scrutiny of CARES Act Funding Allocations
Through the CARES Act, Congress appropriated $200 million in funding for the COVID-19 Telehealth Program administered by the Federal Communications Commission ("FCC") to help providers provide telehealth services to patients while the patients are at home or in mobile locations. The funding covers three categories of items and services: (1) telecommunication and broadband connectivity services (including voice services and internet connectivity services for either health care providers, their patients, or both); (2) information services (including items and services that allow for the storing or exchange of information between provider and patient); and (3) connected devices and equipment. Funding may not be used for personnel costs (including but not limited to costs for IT staff, project managers, or medical professionals), marketing costs, administrative expenses, or training costs, although the FCC stated that vendors and service providers can elect to provide training and other IT support at no cost to health care providers participating in the program. Eligible entities are limited to the specific list of nonprofit and public health care providers described under section 254(h)(7)(B) of the 1996 Telecommunications Act, as well as non-rural health clinics. These include, for example, post-secondary educational institutions offering health care instruction, teaching hospitals, and medical schools; community health centers; not-for-profit hospitals; skilled nursing facilities; and consortia of eligible provider entities. The FCC stopped accepting applications on June 25, 2020, because the applications received already exceeded the funding available. As of July 1, 2020, the FCC has paid out more than $189 million to more than 500 entities, based on those entities' applications detailing the amount of money needed and how they intended to use it. The awards ranged from $1,468 to $1 million.
The Telehealth Program funding has already drawn scrutiny from Congress. The whistleblowers bar has expressed its intentions to vigorously look for fraud in all COVID-19 relief funding. We therefore strongly encourage providers who received funding to engage their accounting or finance departments in helping to scrupulously document how the funds are spent and to ensure that the funds are used exactly as set forth in the application. If the provider receives telehealth-related money from more than one source (e.g., also receives funding through the USDA Distance Learning and Telemedicine Grant program, the HHS/HRSA Telehealth Program under the CARES Act, or even the CARES Act Provider Relief Fund), it should be careful to allocate each expenditure to the applicable funding source. Government regulators and the whistleblower bar will be looking for opportunities to bring False Claims Act cases against providers who claim the same expense against two different sources and thereby double-dip. No provider wants to find itself in the middle of a fraud investigation because of sloppy recordkeeping.
MEDHOST Obtains Dismissal of Qui Tam Action Relating to Alleged False Claims Under HITECH Act
Jones Day recently obtained a dismissal on behalf of MEDHOST, Inc. (a developer of electronic health record ("EHR") software) in a False Claims Act action. The relators alleged that the defendants either submitted, or caused the submission of, hundreds of millions of dollars in false claims to the Department of Health and Human Services for federal incentive payments under the Meaningful Use provisions of the Health Information Technology for Economic and Clinical Health Act (the "HITECH Act"). Specifically, the plaintiffs alleged that MEDHOST made misrepresentations to obtain the certification of its software, which was sold to the hospital defendants, who in turn relied on those certifications to obtain payments from the CMS for "meaningfully using" EHR software, all in violation of the False Claims Act. The allegations also included claims that MEDHOST violated the Anti-Kickback Statute by providing free software to the defendant hospitals to encourage the purchase of other EHR software.
After a lengthy investigation, the U.S. Department of Justice did not intervene in the case, but the relators pursued the case anyway. Jones Day secured a complete victory on a motion to dismiss. In dismissing the claims against MEDHOST and other defendants with prejudice, Judge Robert N. Scola, Jr. of the Southern District of Florida ruled that "even when construing the universe of facts presented in light most favorable to the relators, the court is unable to reasonably infer that the defendants have engaged in the alleged misconduct." In doing so, the court made clear that it will take more than a high volume of general allegations to tag a company with potential liability in a False Claims Act case. The court's holding also demonstrates that software defects alone do not suggest that an underlying software certification is fraudulent, and that instead specific factual allegations of misconduct will be required for cases like these to proceed.
Take Care to Monitor Expiration of U.S. State COVID-19 Telehealth Waivers
As we observed in our Spring 2020 issue of Vital Signs, many states enacted temporary legislation and emergency waivers of state-specific telehealth requirements in response to the COVID-19 pandemic. These include, among others, legislation and waivers applicable to physician and other practitioner licensure requirements, telehealth technology requirements, controlled substances prescribing via telehealth, and expanded coverage for telehealth services under the state Medicaid program and by private payors. While many states have extended deadlines for expiration of the temporary legislation and waivers, the expiration dates and scope of the provisions vary significantly from state to state. Health care providers that have modified operations based upon these temporary actions are advised to stay abreast of the varying sunset dates and transition operations to conform to longer-term solutions.
New Jersey Proposes to Operationalize Telemedicine Organization Registration Process
A recently proposed regulation from the New Jersey Department of Health would operationalize mandatory annual registration of telemedicine organizations, which is required under the New Jersey Telemedicine and Telehealth Act (the "Act"). The Act, which became effective July 21, 2017, requires each telemedicine or telehealth organization operating in New Jersey to register with the New Jersey Department of Health (the "Department") prior to commencing services and to issue an annual report. N.J. Stat. Ann. § 45:1-64. With no implementing regulations to date, however, the statutory requirements had little effect. In April 2020, the Department finally published proposed regulations to address the first requirement: that each telemedicine or telehealth organization register with the Department. The proposed regulations state that the Department is in the process of drafting a separate notice of proposal to effectuate the annual reporting requirements. The proposed rules authorize the Department to impose monetary penalties and/or suspend or refuse to issue or renew a registration of a telemedicine or telehealth organization if the organization fails to comply with the requirements of the Act or if the Department determines that the organization poses a threat to the public health, safety, or welfare. Comments on the proposed rules were due June 19, 2020.
States Require Private Insurers and Medicaid to Cover Telehealth Services in Wake of Public Health Crisis
To build upon temporary legislative efforts to address telehealth coverage for COVID-19, multiple states have recently passed or proposed permanent legislation to require broader telehealth reimbursement by both private and public payers to extend beyond the public health emergency. State actions have varied widely in scope and duration, but a major focus of legislation has been to remove barriers to care including restrictions on originating sites. New York, for example, has passed legislation (Senate Bill S8416) that, in part, expands reimbursement for audio-only telephone communications. Vermont has proposed legislation (H.723) that would require all insurers to cover and reimburse health care and dental services delivered via telemedicine to the same extent as in-person services, including by store-and-forward means. Rhode Island has similarly introduced legislation (Senate Bill No. 2525 SUB A) to require insurers to permanently cover telehealth services, expand telehealth services to include audio-only telephone conversations, and reimburse telemedicine services at rates not lower than in-person services. Michigan (House Bill 5412) passed legislation to require both Medicaid and private insurers to cover telemedicine and remote patient monitoring services, both during the COVID emergency and after for patients located at any originating site. It is likely that many states in the coming months will revisit private insurance mandates and state Medicaid plan coverage for telemedicine services, which will open the doors to reimbursement for digital health providers across the entire sector.
Strategies for Successful Post-COVID-19 Telehealth Payer Contract Negotiations
The spread of the COVID-19 pandemic has significantly impacted the delivery of health care services. In particular, it has significantly increased the demand for telehealth services and encouraged commercial payers to contract for telehealth services. However, many health care providers traditionally have little experience with telehealth or other remote care services, or lack properly trained personnel and the proper tools to provide and bill for such services. At the same time, many telehealth providers that have traditionally operated on a cash-only, direct-to-consumer model find themselves needing payer contracts. While payers are now more willing to cover telehealth services, providers do not necessarily have adequate strategies for negotiating with payers for telehealth services.
Prior to engaging payers in contract negotiations for telehealth services, providers should carefully develop their contracting strategies. Strategies must address both preparation for negotiations and for the actual negotiations, including defining the service offering, determining payer reimbursement opportunities, ensuring regulatory compliance, and crafting contractual terms tailored to a telehealth service offering. A well-defined contracting strategy will increase providers' likelihood of successfully negotiating payer contracts that are appropriate and equitable for telehealth services. For more information on payer contracting strategies for telehealth providers, please see our full Commentary.
European Medicines Agency Publishes Q&As on the Use of Digital Technologies for Approval of Medicinal Products
On May 27, 2020, the European Medicines Agency ("EMA") published questions and answers ("the Q&As") on the use of digital technologies for approval of medicinal products. The Q&As highlight the importance of complying with EU data protection requirements in light of the sensitivity of health-related data processed by the device used in combination with the medicinal product. In addition, the Q&As cover the application of data protection rules (e.g., security of data processing; consent of data subject; developing a risk management plan) when clinical trials are performed based on "bring your own device" methods (i.e., health-related personal data is collected directly from the patient's device).
European Data Protection Board Adopts Guidelines on the Use of Location Data and Contact Tracing Apps Related to the COVID-19 Outbreak
On April 21, 2020, the European Data Protection Board ("EDPB") adopted guidelines on the use of location data and contact tracing tools in the context of the COVID-19 pandemic (the "Guidelines"). The EDPB recalled that location data processed by electronic communication and/or information society service providers must comply with the e-Privacy Directive principles. The EDPB also emphasized that as far as location data is used "preference should always be given to the processing of anonymized data rather than personal data." In addition, the Guidelines recalled the General Data Protection Regulation ("GDPR") key principles (e.g., purpose limitation and data minimization).
EU Commission Publishes Guidance on COVID-19 Apps
On April 16, 2020, the EU Commission published guidance on apps supporting the fight against COVID-19 pandemic in relation to data protection (the "Guidance"). The Guidance recommended that national health authorities should act as data controllers when personal data is processed through the apps and that users should remain in full control of their personal data. Moreover, the use and storage of personal data should be strictly limited, processing of personal data should be secured, and personal data must be accurate.
Cybersecurity Advice in the Health Care Sector During COVID-19 Pandemic
On May 11, 2020, the European Union Agency for Cybersecurity ("ENISA") issued advice to support hospitals and the health care sector in combatting phishing campaigns and ransomware attacks during the COVID-19 crisis. The ENISA recommended to share information and raise awareness amongst staff members (e.g., inform staff not to open suspicious emails). Moreover, in the event that systems are compromised, hospitals should freeze any activity in the system, disconnect infected machines from any external drive or medical device, and immediately contact the national computer security incident response team.
European Commission's Communication on "Europe's moment: Repair and Prepare for the Next Generation"
On May 27, 2020, the European Commission published a communication on Europe's moment: Repair and Prepare for the Next Generation, which proposes a new €1.85 trillion recovery plan to emerge from the COVID-19 crisis. Aimed at alleviating the economic and social damage caused by the pandemic and fostering EU's financial recovery, the expansive proposed plan is built on three pillars, namely: (i) support to Member States for investments and reforms; (ii) incentives for private investment; and (iii) the creation of a €9.4 billion standalone EU4Health Programme (detailed below) for investment in prevention, crisis preparedness, and procurement of essential medicines and equipment. For additional information, see the White Paper on the "Proposed €1.85 Trillion EU Recovery Plan to Overcome COVID‑19 Crisis."
On May 28, 2020, in the context of the Recovery Plan, the European Commission published a proposed regulation on the establishment of the EU4Health Programme for the period 2021-2027. The new proposal includes initiatives specifically aimed at supporting digital tools and services. Specifically, the proposed Programme's wide-reaching general objectives (Article 3) include, among others, protecting persons from serious cross-border health threats, increasing the prompt availability of medical products, reinforcing technological innovation of medical products, and promoting digital transformation. Specific proposed actions (Article 4) aim at implementing the above-referred general objectives, including boosting digital transformation of both medical products and health care services and the uptake of digital tools and services. The overarching goal is to support clinicians by using computer-based tools, artificial intelligence ("AI"), and systems for more efficient data analysis, as well as expanding the development and use of telehealth in the Member States. Once approved, the regulation must be implemented through specific actions. Member States and organizations will be able to apply for funding in the form of grants, prizes, and procurement.
The proposed Programme is intended to work in tandem with other EU initiatives. For example, the Digital Europe Programme, or DEP, supports the deployment of digital infrastructure underpinning the broad use of digital technologies in areas of public interest. Building on those infrastructures, the proposed Programme will focus on delivering data sharing and citizen platform applications covering areas such as the secure and effective cross-border management of personal health data, improved data for research, disease prevention, personalized health care, use of digital tools for citizen empowerment, and person-centered care. Similarly, the Connecting Europe Facility Programme 2 Digital, or CEF Digital, seeks to fund highly resilient networks to connect, inter alia, hospitals and medical centers, in areas where no such networks exist or where deployment is planned in the near future. These networks are extremely important for enabling critical applications such as tele-surgery or medical and clinical data sharing. Other applications could include developing connectivity systems for households to enable secure remote patient monitoring.
Pharmaceutical Strategy for Europe
On June 16, 2020, the European Commission launched a public consultation, open until September 15, 2020, on the Roadmap on Pharmaceutical Strategy for Europe―Timely patient access to affordable medicines. The Roadmap acknowledges that innovative technologies such as AI, as well as accessing and analyzing data collected from clinical experience―so-called "real world data" ("RWD")―are changing the way that medical products are developed. Furthermore, the Roadmap predicts that technological development will disruptively transform therapeutic approaches and business models. Existing rules may be insufficiently equipped to keep pace with technological developments, therefore potentially becoming a barrier to the timely access of patients to state-of-the-art products.
With these concerns in mind, the Roadmap's public consultation seeks feedback from stakeholders (e.g., industry players, associations patients, and regulators) on, inter alia, risks and opportunities arising from the use of digital technologies and RWD. In particular, the Roadmap plans to assess a review of the regulatory framework to enable it to assimilate the most recent developments and, specifically, gene and personalized therapies, smart health applications, medical technologies systems such as self-learning AI, etc. The Roadmap outlined in the consultation addresses long-standing challenges and is linked to other Commission initiatives, including the priorities set out in the European Digital Strategy. Adoption of the Pharmaceutical Strategy is expected by the end of 2020.
European Medicines Agencies Network Strategy to 2025
On July 6, 2020, the Heads of Medicine Authorities ("HMA") and the European Medicines Agency ("EMA") presented the new European medicines agencies network strategy to 2025 ("Network Strategy"). The document presents the overall structure and direction that EU regulators will follow in tackling the health care challenges that will largely define the regulatory landscape from now until 2025. The Network Strategy covers six main areas, including "Data analytics, digital tools, and digital transformation," in alignment with the priorities set under the Pharmaceutical Strategy. The Network Strategy also intends to address specific issues of concern. These include, above all, the lack of regulatory standards, guidance, and validation for use of patient-level health care data, AI, and machine learning. The Network Strategy further indicates the need for mechanisms to enhance access to, and wider sharing and re-use of, existing data and decisions to achieve more consistent regulatory outputs. The EU regulators also aim at, inter alia, attaining improved access to electronic health records, claims data, patient registries, and other data sources, as well as supporting innovation and digitalization in clinical trials by strengthening the Network Strategy's expertise in handling more complex designs, including the use of data analytics and RWD.
EU Member States: Reimbursements in Telehealth―Pandemic-Induced Reforms and Future Prospects
For years, regulatory barriers have hindered the development of digital health in Europe. Now, COVID-19 has unleashed new impetus for innovation in regulation and technology. In an effort to limit health care-acquired COVID-19 infections, while preserving continuity of care, health care systems across Europe are replacing in-person treatment with virtual solutions. An array of recent regulatory waivers and rules have emerged to strengthen market access, security, efficacy, and affordability of these initiatives. In the new digital care ecosystem, reimbursement mechanisms are playing a key role in mediating patient demand and incentivizing physician provision of care, which will shape investments in digital infrastructure in the years to come. As Jones Day is committed to providing a one-stop digital health law resource, this issue of Vital Signs provides an overview of widespread legal transformations in European tele-health, with a particular focus on teleconsultation access and reimbursement in a number of selected European jurisdictions.
Belgium: Reimbursement of Mobile Health Apps and Teleconsultations
In 2015, Belgium initiated a three-step system to enable mHealth apps with access to reimbursement. The first step requires manufacturers of mHealth apps to draft a Declaration of Conformity and notify the CE-marked app to Belgium's Federal Agency for Medicines and Health Products. Under the second step, activated in May 2020, manufacturers must demonstrate compliance of their mHealth apps with specific technical authentication criteria, as well as security and data privacy rules (i.e., GDPR) for the use of e-health services. The third step is actual reimbursement by Belgium's National Institute for Health and Disability Insurance ("INAMI"), which can be granted to mHealth apps reflecting specific socio-economic added value. Currently, only two apps have attained second-step validation. One enables patients and health care providers to communicate and exchange data with one other. The other monitors and supports patients who have undergone, or are awaiting, knee or hip surgery. Three more apps are completing the validation procedure.
The Belgian government has also introduced a specific scheme under Royal Decree No. 20/2020, which enables patients to seek reimbursement from their social security providers for teleconsultations with health care professionals ("HCPs"). The list of HCPs includes physicians, as well as dentists, nutritionists, and other health care providers. The Decree also indicates the maximum cost that can be charged to the social security provider or to the patient. This scheme is intended as temporary and applicable until the end of the pandemic. Still, the INAMI is contemplating a survey to assess whether to maintain the scheme postpandemic.
France: Simplifying and Strengthening Existing Telemedicine Systems
Since 2014, France has explored telehealth and created nascent programs across the
country. This paved the way for the 2018 authorization enabling doctors, nurses, and medical specialists to offer teleconsultations to patients with whom they have a pre-established medical relationship. COVID-19 has pushed reforms in recent months for teleconsultations. In particular, under Decree No. 2020-227, patients with suspected or confirmed COVID-19 may seek virtual care from any physician, if such individuals cannot consult with their primary care physician or do not have one. The Decree also authorizes suspected and confirmed COVID-19 patients to bypass primary physician referrals in order to seek specialist care. Similarly, midwives, as well as speech, occupational, and physio-therapists, have been authorized to develop telemedicine practices.
Since 2018, the French national health insurance covers virtual consultations on par with in-person visits, according to private practice billing practices. In March 2020, reimbursement mechanisms were further streamlined for the duration of the COVID-19 emergency. The national health insurance fund covered the full expense of virtual consultations, at no out-of-pocket cost for patients, until July 10, 2020 (i.e., the end of the health emergency period), after which virtual consultations have reverted to a 70% reimbursement except for certain COVID-19-related consultations. The billing portal ADRi has facilitated the reimbursement of remote teleconsultations by providing physicians with online access to their patients' national health insurance information, as well as electronic invoicing that is synced with the national health insurance fund.
Germany: Reimbursing Digital Health Applications
Germany has introduced the reimbursement of "digital health applications" ("digitale Gesundheitsanwendungen"). The regime applies to digital applications in the outpatient setting, as prescribed by a physician. Reimbursement is applicable to software that qualifies as a medical device. The app must be used by a patient or jointly by a patient and a health care professional, thus excluding tools solely aimed for health care professionals. The app's primary therapeutic, diagnostic, or health care-supporting function must be digital. Therefore, it is key that an mHealth app serves as a stand-alone application, rather than simply qualifying as an "accessory" to a hardware device (e.g., an app drawing on input from a hardware device).
The app reimbursement procedure follows a two-step process: (i) online registration with the German health regulator BfArM for confirmation of the app's health benefit and compliance with medical device regulatory requirements (including cybersecurity); and (ii) where the health benefit must still be demonstrated, a fast track is available that allows for preliminary registration, with follow-up data to be submitted. The reimbursement procedure requires the submission of comparative data. Once approved, negotiations with the German payor representation must occur within 12 months of the mHealth app's launch to determine a reimbursement rate based on the demonstrated health benefit.
Spain: New Strategies to Support Rapid Deployment of Telemedicine
A number of projects/strategies to support telemedicine have been undertaken in Spain as part of the Assistance Programs of Autonomous Health Services, such as the Quality Plan of the Andalusian Health Service (Plan de Calidad del Servicio Andaluz de Salud) (2010-2014) or the Strategic telemedicine plan of the Madrid Health Service (Plan estratégico de telemedicina del Servicio Madrileño de Salud) (2014-2018). While these tools did have an effect on the take-up of digital care solutions, as a result of COVID-19, providers of health care services have registered a spectacular increase of tele-consultations, with the Sanitas group of hospitals reporting about 5,000 video consultations daily as opposed to an average of 300 before the pandemic breakout. Before the pandemic, teleconsultations were often limited to specific circumstances of patients with mobility issues; COVID-19 has significantly broadened the patient population benefitting from such arrangements. A number of existing or developing tools are being considered for expansion of telemedicine take-up, including the SARA network (System of Applications and Networks for Administrations or Sistema de Aplicaciones y Redes para las Administraciones in Spanish), a Spanish public network allowing public health care providers to share documents including patients health records.
The Netherlands: Developing Telehealth Through Government Initiatives
The Dutch health care system provides for universal compulsory health insurance. The basic benefits package, as determined by the Minister of Health, Welfare and Sport, does not yet include most telehealth services. To include telemedicine services in the basic benefits package, this would likely need the support of the Board for Health Insurance ("CVZ"), which advises the Minister of Health each year on the scope of the basic benefits package. CVZ's advice is based on the four principles of necessity, effectiveness, cost-effectiveness, and feasibility. Since January 1, 2018, however, teleconsultations are covered by private insurers, up to the same amount as a face-to-face consultation.
The Dutch government has signaled its support for more widely available telehealth and is encouraging its further development by the health care sector. The government has introduced various initiatives, including the platform www.zorgvoorinnoveren.nl to support the advancement of startups and innovations (including in e-health) through knowledge-sharing between health care innovators and governmental bodies. Parties seeking to develop, implement, or upscale a health care innovation can apply for funding and support for their idea. Additionally, on February 1, 2019, a grant scheme for promising health care treatments (Subsidieregeling veelbelovende zorg) entered into force for a period of five years, with an annual €69 million grant budget. The scheme aims at accelerating patient access to potentially promising health care treatments and innovation by including these in the basic benefits package. Telehealth innovations are expected to benefit from this scheme.
In addition, to boost remote care, in March 2020, the Minister of Health established an emergency fund (Scheme for E-health at Home COVID-19) to support care and welfare organizations in need of remote digital health care services. This concerns, for example, providers of neighborhood nursing, mental health care providers, and hospitals. The emergency fund will support, in particular, digital applications for remote support and care for vulnerable elderly populations residing at home and for persons with a chronic illness or disability. The scheme grants up to €50,000 per request.
United Kingdom: Accelerating Digital Care Transformation
The United Kingdom's lack of telemedicine-specific legislation can create difficulties for digital health providers seeking to ensure compliance with the law. COVID-19 has increased the number of remote services provided both by private providers and the National Health Service ("NHS"), the United Kingdom's largest customer for health care products. Many of these services fall within the NHS's digital care transformation division, NHSX, as part of its long-term plan and digital transformation strategy. This is thought to be the world's largest digital health care transformation scheme, with national investment of more than £1 billion. NHSX has taken a leading role in much of the COVID-19 response, including its involvement in a 48-hour tender evaluation process for a £12.6 procurement for online consultation technologies to support the wholesale move of general practitioners (and the vast majority of wider primary health care) to virtual consultations. NHSX was also involved in the aborted development of a national contact tracing app (based on a centralized model) in favor of the more well-established path of a decentralized model in partnership with Apple and Google.
While the UK system for reimbursement of health care products remains far from streamlined, in 2019, the National Institute of Health and Care Excellence ("NICE") launched HealthTech Connect. This database enables innovators to submit details of their technology to a number of governmental and quasi-governmental bodies to review and offer support. The NICE carry out appraisals of such submitted health technologies for potential use by the NHS on a national basis in England. Furthermore, other bodies, such as the Department for International Trade, offer export and import advice for technologies submitted to HealthTech Connect.
While COVID-19 has clearly accelerated the United Kingdom's move toward an increasingly digital health care service, telemedicine in the United Kingfom is not a new phenomenon. Current initiatives are building on previous efforts to accelerate innovation in the NHS (often as part of cost-saving exercises). In 2015, the NHS launched the "Innovation Accelerator," a support program for impactful innovations across NHS England, including tele-health initiatives. The program has raised more than £150 million in external funding and provides mentoring to developers seeking to scale up and implement their innovations for the NHS. The program has supported a number of digital technology and AI initiatives in the United Kingdom (e.g., MediShout).
China Promotes Online Communications for Initial Health Consultations
In China, on April 7, 2020, the Chinese central government issued an administrative notice directing local government authorities and health care institutions to explore and promote initial consultation performed online. Under current Chinese regulations, most Chinese online doctors are permitted to handle only repeat prescription and follow-up consultations. Further to a recent regulation in March which encouraged hospitals to expand the scope of online medical consultations and reimbursement of qualified online medical expenses related to COVID-19, this notice in April is viewed another sign of the Chinese government's positive view on internet hospitals and digital health care in general. China likely will continue to lift restrictions on digital health. Details about how to distinguish initial consultation versus follow-up consultation and what kind of initial consultation may be performed online remain unclear. It is expected that reforms related to online initial consultation will start with state-owned hospitals and be limited to a few common diseases.
Australia Poised to Expand Use of and Reimbursement for Telehealth in the Wake of COVID-19
Prior to the COVID-19 pandemic, telehealth services in Australia (outside select specialty areas, such as psychology) was largely nonexistent due to significant policy, clinical, and reimbursement barriers. As has happened in so many jurisdictions throughout the developed world, the unique challenges posed by COVID-19 precipitated widespread adoption of these clinical systems throughout Australia―at least temporarily. For example, whereas the Federal Medicare system and private insurance sector did not provide reimbursement for most telehealth services prior to the pandemic, various legal and regulatory reforms have resulted in temporarily expanded coverage under both payor systems until September 2020. In March 2020, at the height of Australia's first wave of the COVID-19 pandemic, the Federal Government introduced universal coverage for telehealth services. These sweeping reforms resulted in pushback from the medical community, who cited concerns about the rise in low-value pop-up services. In response, the Federal Government announced that the expanded telehealth coverage would be confined to telehealth sessions conducted by a patient's regular general practitioner, effective from July 20, 2020. As the expiration date for these temporary changes looms closer, technology companies, advocacy organizations for vulnerable people, and other stakeholders are lobbying for the Federal Government to permanently retain reimbursement expansion for telehealth services. In the coming months, Australia may find itself adopting permanent legal and regulatory structures to support telehealth services despite the existence of nearly insurmountable barriers less than a year prior. The COVID-19 pandemic is, yet again, proving to be a potent catalyst for the long-overdue adoption of telehealth systems to provide care for patients throughout the world.
Recent and Upcoming Speaking Engagements
Crain's Webcast―Health Care After COVID-19: Telemedicine, Virtual Program (May 2020). Jones Day Speaker: Kimberly Rockwell.
Jones Day-DHG Telehealth Webinar Series, Virtual Program (May 2020). Recordings available here.
Pittsburgh Speaker Series―Artificial Intelligence, Machine Learning, and Big Data: What You and Your Organization Should Know, Virtual Program (June 2020). Jones Day Speaker: Ann Hollenbeck.
Nat'l Assn of Certified Valuators & Analysts Annual Conference―Regulatory Overview for Valuation Professionals and The Valuation of Healthcare Enterprises in a Changing Reimbursement Environment, Virtual Program (June 2020). Jones Day Speakers: John Kirsner and Lisa Han.
9th Annual EU Medical Device & Diagnostic Reimbursement & Market Access Conference, Virtual Program (June 2020). Jones Day Speaker: Christian Fulda.
ATA2020―Direct-to-Consumer Virtual Care: When Regulation, Patient Preference, and Innovation Collide, Virtual Program (June 2020). Jones Day Speaker: Alexis Gilroy.
ATA2020―Telemedicine and Law: What you Need to Know, Virtual Program (June 2020). Jones Day Speaker: Laura Laemmle-Weidenfeld.
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