When 2020 started, COVID-19 was just a news story unfolding on the other side of the globe in China. The novelty of the pathogen meant that there were no tests specifically targeting the virus on the market or in the pipeline. The biggest story of lab regulation and compliance in 2020 was how all of that suddenly and dramatically changed. As the imperative to develop and deliver COVID-19 tests became a national priority of paramount importance, kickback, privacy and other laws were temporarily set aside and new, improvised regulatory regimes sprang into existence. As 2020 comes to a close and the U.S. faces a deadly new surge of cases, here are what we believe were the biggest stories of the year—in a chronological narrative.
- The Feds Temporarily Waive the Kickback and HIPAA Laws
January 30: HHS declares COVID-19 a public health emergency (PHE), thereby activating the HHS Secretary’s authority under the
Public Health Service Act to take broad response measures to deal with coronavirus. One of these powers is to temporarily waive or modify Medicare, Medicaid, State Children’s Health Insurance Program and HIPAA requirements under Section 1135 of the
Social Security Act (SSA). During the next two months, HHS and the OIG issue Section 1135 Blanket Waivers covering the Stark Law and Anti-Kickback Statute, as well as pre-approval requirements and restrictions on telemedicine.
The message: Right now, delivering COVID-19 diagnosis and treatment is more important than the need to avoid arrangements offering remuneration in exchange for Medicare and other federal referrals.
- The CDC Releases the First COVID-19 Test
February 4: Less than a week after the PHE is declared, the FDA issues the first Emergency Use Authorization (EUA) for a COVID-19 diagnostic test, a real-time reverse transcription polymerase chain reaction panel known as the 2019-nCoV Real-Time RT-PCR Diagnostic Panel developed by the U.S. Centers for Disease Control and Prevention (CDC) using sequencing information made public by Chinese authorities. The test can be used in the U.S. only by CDC-designated labs certified to perform high-complexity testing in accordance with agency protocol.
The plan calls for the CDC to create test kits for distribution to state health departments and public health labs in all 50 states. Things immediately go wrong. The early feedback suggests that a negative result can’t be counted on to rule out infection. The CDC acknowledges that it has to remanufacture one of the kit reagents to address the test quality results issues. Precious time is lost.
A “root cause” analysis performed later in the year reveals that a scientist in an infectious disease lab on the CDC’s Atlanta campus discovered the assay’s high failure rate while putting the test kit through its final paces. Normally, a failure rate of that magnitude would have precluded releasing the test. But the CDC apparently caved to the intense pressure and proceeded to distribute the test. And, so, the federal government testing response gets off to a shaky start.
- Relief Legislation Ensures Free COVID-19 Testing—Or Does It?
March 18: Congress enacts the
Families First Coronavirus Response Act (FFCRA) requiring group health plans and health insurers) to provide COVID-19 testing coverage without cost-sharing requirements like deductibles, copayments and coinsurance and without imposing prior authorization and other medical utilization requirements. The
Coronavirus Aid, Relief, and Economic Security Act (CARES) passed less than two weeks later amends FFCRA to cover a broader range of diagnostic items and services that plans and issuers must cover without cost-sharing or prior authorization requirements. CARES also requires plans and issuers to reimburse providers of COVID-19 diagnostic testing an amount equal to its negotiated rate with the provider; if there is no negotiated rate, reimbursement must be at the cash price for such service listed by the provider on a public website.
Once again, things veer off track. In June, HHS issues regulatory guidance suggesting that the free testing mandate doesn’t apply to “testing conducted to screen for general workplace health and safety (such as employee “return to work” programs), for public surveillance or any other purpose not primarily intended for individualized diagnosis or treatment of COVID-19.” By year’s end, labs are accusing health plans and insurers of exploiting this loophole to evade their FFCRA and CARES reimbursement obligations, while insurers are accusing labs of price gouging for COVID-19 tests.
- FDA Approves the First COVID-19 Antigen Test
May 8: The Quidel Sofia 2 SARS Antigen FIA assay becomes the first antigen assay to receive EUA for SARS-CoV-2 use. The product is a point of care test designed for use with the firm’s Sofia 2 fluorescent immunoassay analyzer to detect SARS-CoV-2 protein fragments in nasal or nasopharyngeal samples. Its reported sensitivity of 85 percent definitely puts false negatives into play. The agency reportedly cleared the test within 24 hours of receiving Quidel’s application. In the coming months, the FDA will grant EUA to nearly a dozen other antigen tests.
- HHS Hits Labs with Unprecedented COVID-19 Test Data Reporting Duties
June 4: As labs scramble to meet the historic demand for COVID-19 testing, HHS imposes new rules requiring the reporting of not only test results but detailed information about how the test was ordered and performed and for whom, including demographic information about patients. Specifically, labs must complete daily reports for all testing they complete and for each individual they test within 24 hours of knowing or determining the results and send it to state and local public health departments for ultimate transmission to the CDC. And the deadline to comply is Aug. 1.
- FDA Greenlights Sample Pooling
June 16: Facing continuing shortages of reagents, swabs, PPE and other testing supplies, the FDA issues new guidance to pave the way for sample pooling in which sub-samples extracted from individual samples go into a pool or “batch” that can be tested with a single test. If the entire pool returns a positive result, the individual samples are retested to locate the source of the positive; if the batch tests negative, all of the constituent samples are also deemed negative.
On July 18, Quest Diagnostics’ SARS-CoV-2 RNA test becomes the first coronavirus test cleared by the FDA for pooled sampling. Over the course of the next few months, more than a dozen other tests receive expanded EUA for use with pooling.
As the year closes, pooling seems to have been a modest success at best. Initially, it provided a measure of needed relief to the overtaxed testing supplies pipeline. However, the new surge of COVID-19 cases that began in November took the wind out of the pooling sails to the extent the technique works best in low-risk populations. Higher case rates mean higher positive rates which, in turn, result in the need to go back and retest all of the individual samples in the pool.
- Controversy Over FDA Regulation of LDTs
August 19: The biggest story in lab regulation in 2020 involved an issue that has been contentious for decades: FDA authority to regulate laboratory developed tests (LDTs). In March, Congress re-tabled a bill called the
Verifying Accurate Leading-edge IVCT Development Act (VALID), that would create a risk-based framework for IVCT regulation, with high-risk tests, like novel assays, required to go through premarket review and allowing lower-risk tests could go to market after passing through technological certification.
But the spotlight would shift from the legislative to the regulatory arena where the COVID-19 crisis would bring the LDTs issue to a dramatic and surprising head. When the chips were down, universities, academic centers and commercial labs came through with some of the earliest and most innovative COVID-19 tests to receive EUA. It was a noteworthy accomplishment that seemed to vindicate the lab industry’s long-running contention that FDA overregulation of LDTs was thwarting progress and innovation.
Then things got weird. On Aug. 19, HHS announced that the FDA would no longer require premarket review for LDTs but that labs could still seek EUA voluntarily. In addition, the FDA would now have to use the notice and rulemaking process to create new rules and could no longer regulate LDTs via website notices and other informal methods. On Oct. 7, the FDA turned the tables by announcing that it was bowing out of EUA review for any LDTs to “make the best use” of its review resources. And without EUA, labs would no longer be able to rely on the liability protections of the
Public Readiness and Emergency Preparedness Act (PREP) providing immunity to producers of tests and other medical products in response to a PHE.
But HHS would have the last laugh. On Nov. 16 the agency ordered the FDA to resume EUA review of COVID-19 LDTs and do it within 14 days or the National Cancer Institute (NCI) would step in to help. And that’s where things currently stand with a new president set to take office.
- The Telemedicine Crackdown
September 30: Like labs, fraudsters were able to pivot their business in response to the pandemic. So did the enforcement community, unveiling “Operation Rubber Stamp,” the largest “takedown” in Justice Department history involving 51 federal districts, 345 defendants, including over 100 doctors, nurses and other licensed medical professionals, and $6 billion in false claims. And, while telemedicine providers were the primary target, medical labs got pulled into the dragnet. Many of the defendants in Operation Rubber Stamp are labs and telemedicine operators charged with paying kickbacks to doctors to order medically unnecessary tests for patients with whom they never actually had tele-visits.
- New Kickback Rules Exclude Labs from Value-Based Care, Cybersecurity Safe Harbors
November 20: It wasn’t all just about COVID-19. One of the biggest stories in 2020 compliance was the finalization of the new Stark and AKS regulations. First the bad news: The rules designed to facilitate value-based care arrangements largely exclude labs, as well as pharmaceutical manufacturers and manufacturers, distributors or suppliers of durable medical equipment, prosthetics, orthotics or supplies (DMEPOS). Some labs “which are heavily dependent upon practitioner referrals, might misuse the proposed safe harbors primarily as a means of offering remuneration to practitioners and patients to market their products,” CMS explained. The agency also excluded the same group of its usual suspects from its new cybersecurity donations and beneficiary incentives exceptions and safe harbors.
The good news is that labs weren’t cut out from other parts of the final rule, including the clarification of key definitions like “commercially reasonable compensation,” the elimination of the Stark “Period of Disallowance” waiting period and the new 90-day grace period for Stark exceptions, among other things.
