AKAO 2017 Annual Report

34 entity no longer needs to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation. In addition, ACA provides that the government may assert that a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute, which imposes penalties against any person who is determined to have presented or caused to be presented a claim to a federal health program that the person knows or should know is for an item or service that was not provided as claimed or is false or fraudulent. There has also been a recent trend of increased federal and state regulation of payments made to physicians and other healthcare providers. ACA created new federal requirements for reporting, by applicable manufacturers of covered drugs, payments and other transfers of value to physicians and teaching hospitals. Applicable manufacturers are also required to report annually to the government certain ownership and investment interests held by physicians and their immediate family members. In addition, certain states require implementation of commercial compliance programs and compliance with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, impose restrictions on marketing practices, and/or require the tracking and reporting of marketing expenditures and pricing information as well as gifts, compensation and other remuneration or items of value provided to physicians and other healthcare professionals and entities. We may also be subject to data privacy and security regulation by both the federal government and the states in which we conduct our business. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act (“HITECH”), and its implementing regulations, imposes specified requirements relating to the privacy, security and transmission of individually identifiable health information. Among other things, HITECH makes HIPAA’s privacy and security standards directly applicable to “business associates,” defined as independent contractors or agents of covered entities that create, receive, maintain or transmit protected health information in connection with providing a service on behalf of a covered entity. HITECH also increased the civil and criminal penalties that may be imposed against covered entities, business associates and possibly other persons, and gave state attorneys general new authority to file civil actions for damages or injunctions in federal courts to enforce the federal HIPAA laws and seek attorney’s fees and costs associated with pursuing federal civil actions. In addition, state laws govern the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and may not have the same requirements, thus complicating compliance efforts. To the extent that any of our product candidates, once approved, are sold in a foreign country, we may be subject to similar foreign laws and regulations, which may include, for instance, applicable post-marketing requirements, including safety surveillance, anti-fraud and abuse laws, and implementation of corporate compliance programs and reporting of payments or other transfers of value to healthcare professionals. Coverage and Reimbursement At launch we expect plazomicin to be utilized within the hospital environment and therefore, our customers to be reimbursed under a prospective payment system, or a predetermined payment amount that is based on the diagnosis related groups (“DRGs”) for Medicare patients and under a bundled payment for commercially insured patients. These payment amounts differ by type of diagnoses, procedures and the severity of the patient’s condition, among other things. Typically, the cost of treatment for hospital acquired infections, for which plazomicin would be used, is included in the DRG or bundled payment and not eligible for any separate payment. For catastrophic cases where costs greatly exceed the bundled payment amount, the hospital may be eligible for an outlier that is intended to cover part of the expense above the standard payment. We have submitted a New Technology Add-On Payment (“NTAP”) application to the Centers for Medicare and Medicaid Services (“CMS”). In creating the NTAP program, Congress established a process of identifying and ensuring adequate payment for new medical services and technologies (collectively referred to as new technologies). The NTAP program is meant to partially compensate hospitals for using new products that are not reflected already in Medicare’s bundled payment calculations. For NTAP technologies, Medicare will make an add-on payment equal to the lesser of (i) 50 percent of the estimated costs of the new technology (if the estimated costs for the case including the new technology exceed Medicare’s payment), or (ii) 50 percent of the difference between the full DRG payment and the hospital’s estimated cost for the case. For NTAP payment eligibility, we were required to submit an application to CMS on or before October 20, 2017, satisfy NTAP criteria for newness, substantial clinical improvement relative to existing therapies and specific cost thresholds, and have FDA approval by July 1, 2018. We have received confirmation that CMS is currently evaluating our application. We expect a decision will be published