Virtual and Digital Health Digest

This digest covers key virtual and digital health regulatory and public policy developments during July and early August 2024 from the United States, United Kingdom, and European Union.

In this issue, you will find the following:

U.S. News

• FDA Regulatory Updates
• Health Care Fraud and Abuse Updates
• Corporate Transactions Updates
• Provider Reimbursement Updates
• Policy Updates
• Privacy and AI Updates

U.S. Featured Content

Health care technology company Commure announced its plans to buy Augmedix, a health-care software company whose products utilize artificial intelligence to extract and automate the creation and population of electronic medical record systems (EMRs) with medical notes, documentation, and other structured data from natural language conversations. The deal, which is scheduled to close in late Q3 or early Q4 of 2024 will create one of the “largest, most comprehensive, and fastest-growing artificial intelligence software suites in healthcare.” Augmedix shareholders are anticipated to receive $2.35 per share upon closing.

EU and UK News

• Regulatory Updates
• IP Updates

EU/UK Featured Content

Following the UK national elections on July 4, 2024, which brought in a new government, the King delivered a speech to Parliament setting out the government’s key legislative and policy agenda. Of particular importance to the life sciences sector are the Product Safety and Metrology Bill and the Digital Information and Smart Data Bill. Although the scope and content of each bill is currently unknown, they could impact medical devices and innovative scientific research. Further, there was no artificial intelligence bill in the agenda, although the government will “seek to establish the appropriate legislation” in the future.

U.S. News

FDA Regulatory Updates

FDA Announces the Roster of the Digital Health Advisory Committee. On August 1, 2024, the Food and Drug Administration (FDA) announced the roster of the Digital Health Advisory Committee (DHAC). As FDA previously explained, the DHAC’s role will be to provide advice and recommendations on new approaches to develop and evaluate digital health technologies, as well as identify risks, barriers, or unintended consequences that could result from proposed or established FDA policy or regulation. The DHAC will be chaired by Dr. Ami Bhatt, Chief Innovation Officer of the American College of Radiology, and includes nine other members. Committee member expertise includes digital health, telemedicine, emergency medicine, clinical informatics, machine learning, psychology, chronic disease, health care innovation, biomedical informatics, and human system integration. Among the panel members are a consumer representative (Dr. Melissa Clarkson) and a federal representative (James Swink of the Center for Devices and Radiological Health’s Office of Management).

FDA will hold the inaugural meeting of the DHAC on November 20-21, 2024, in hybrid format. The meeting will address total product lifecycle considerations for generative Artificial Intelligence (AI)-enabled devices, including how the use of generative AI may impact the safety and effectiveness of medical devices enabled with this technology. FDA is seeking expert recommendations to help assess the potential risks and benefits of these devices.

FDA Held a Public Workshop on AI in Drug and Biological Product Development. On August 6, 2024, FDA, along with the Clinical Trials Transformative Initiative, held a hybrid public workshop on AI in drug and biological product development. The workshop covered guiding principles on the responsible use of AI in drug development, including discussions of real case examples.

FDA Issues New Educational Materials To Accompany the Digital Health Technologies for Remote Data Acquisition in Clinical Investigations Guidance Document. In July 2024, FDA issued new educational materials to accompany the Digital Health Technologies for Remote Data Acquisition in Clinical Investigations guidance document. These materials include a guidance snapshot, which highlights key points in the guidance, and a podcast, which addresses the background, intent, and other key recommendations of the guidance.

For more information about the Digital Health Technologies for Remote Data Acquisition in Clinical Investigations guidance document, see the January 2024 issue of Arnold & Porter’s Virtual and Digital Health Digest.

Health Care Fraud and Abuse Updates

DOJ Charges Montana Doctor in Durable Medical Equipment Fraud Scheme. On July 18, 2024, Ronald David Dean, a licensed physician, admitted to falsely billing Medicare and other health care programs in a durable medical equipment (DME) telemedicine scheme. The government alleged that from January 2022 to July 2023, Dean was paid by a telemedicine company to sign orders for medically unnecessary DME. Dean allegedly would charge health care programs such as Medicare, CHAMPVA, and the Railroad Retirement Board programs for telemedicine office visits that did not occur. Dean’s information also was purportedly utilized by the telemedicine company to prescribe unnecessary COVID tests for patients. Dean’s orders consequently resulted in false billing to government health care programs in excess of $39 million.

These charges are a part of the Department of Justice’s 2024 National Health Care Fraud Enforcement Action, as described in further detail in our July 2024 digest.

Corporate Transactions Updates

Commure Secures Spot in AI Medical Scribe Market in $139 Million Deal to Acquire Augmedix. On July 19, 2024, health care technology company Commure announced its plans to buy Augmedix, a health care software company whose products utilize artificial intelligence to extract and automate the creation and population of EMRs with medical notes, documentation, and other structured data from natural language conversations. The deal is anticipated to further bolster Commure’s spot in the AI medical scribe market. In a blog post, Tanay Tandon, CEO of Commure, stated that the deal, which is scheduled to close in late Q3 or early Q4 of 2024, will create one of the “largest, most comprehensive, and fastest-growing artificial intelligence software suites in healthcare.” Augmedix shareholders are anticipated to receive $2.35 per share upon closing.

Demand is increasing for AI medical scribe technology, largely in part because it alleviates administrative burden, which is a significant driver of burnout among doctors, nurses, and medical scribes. The latest update of STAT’s Generative AI Tracker found that nearly 90 health systems are currently experimenting with ambient scribes, some even committing to full implementation. Ochsner Health system is one such example, which has recently gone all-in on ambient AI, tapping DeepScribe to deploy AI technology for 4,700 physicians.

This acquisition shows Commure’s focus on continued growth and expansion of markets following its merger with remote patient monitoring startup Athelas last year in a $6 billion deal. After Commure’s announcement of the deal with Augmedix, Augmedix shares more than doubled in trading, jumping 150%.

Provider Reimbursement Updates

Transitional Coverage for Emerging Technologies. On August 12, 2024, the Centers for Medicare & Medicaid Services (CMS) finalized the Medicare Transitional Coverage for Emerging Technologies (TCET) pathway, which is intended to deliver “transparent, predictable, and expedited national coverage” through the National Coverage Determination (NCD) process for certain eligible FDA-designated Breakthrough Devices. 89 Fed. Reg. 65,724. CMS anticipates only accepting up to five candidates into the TCET pathway each year and plans to prioritize requests based on their “potential impact on the Medicare program and its beneficiaries.” Id. at 65,744. The agency does, however, suggest it may consider expansion in the future if resources are available and as it gains experience with TCET.

In the final notice, CMS maintains that the TCET pathway is limited to devices that fall within an existing Medicare benefit category — likely a disappointment to many advocates of digital therapeutics, which do not fit easily into Medicare’s benefit category scheme. Additionally, CMS anticipates that many NCDs conducted under the TCET pathway will involve “coverage with evidence development” (CED) and that the duration of the transitional coverage could be five or more years as evidence is developed. In tandem with the TCET final notice, CMS also released an updated guidance document on CED. As for benefit category determinations, coding, and payment reviews, CMS indicates that it expects improved coordination efforts as a result of the TCET pathway, but does not provide specific detail about how this will be accomplished. For additional information about the TCET process, please see our August 2024 Advisory.

Policy Updates

Senator Shaheen Applauds CMS’ Decision To Expand Medicare Coverage for Digital Mental Health Treatment Devices. On July 17, 2024, Senator Jeanne Shaheen (D-NH) published a press release in support of CMS’ proposed rule to expand Medicare beneficiaries’ coverage of Digital Mental Health Treatment devices, which incorporates policies from the Access to Prescription Digital Therapeutics Act (S. 723/H.R. 1458). Senators Shaheen and Shelley Moore Capito (R-WV) champion the bill in the Senate, and Representatives Kevin Hern (R-OK) and Mike Thompson (D-CA) lead in the House.

Privacy and AI Updates

HHS Proposes Health Information Technology Rule To Improve Patient Engagement, Information Sharing, and Public Health Interoperability. On July 10, 2024, the HHS Office of the National Coordinator for Health Information Technology (ONC) released a proposed rule titled “Health Data, Technology, and Interoperability: Patient Engagement, Information Sharing, and Public Health Interoperability” (the HTI-2 Proposal). The HTI-2 Proposal is a new step in ONC’s efforts to advance interoperability and improve information sharing among patients, providers, payers, and public health authorities.

The HTI-2 Proposal is part of ONC’s implementation of Congress’ mandate in the 21st Century Cures Act of 2016 (Cures Act) to establish the Electronic Health Records Reporting Program to provide transparent reporting on certified health IT. In a final rule published in January 2024 (HTI-1 Rule), ONC established the Insights Condition and Maintenance of Certification within the ONC Health IT Certification Program¹ to provide transparent reporting on certified health IT. As an update to the standards set forth in the HTI-1 Rule, the proposal would establish updated technology standards, such as the capability to exchange clinical images (e.g., X-rays) and the addition of multi-factor authentication support. The HTI-2 Proposal also includes a new, real-time prescription benefit tool certification criterion designed to help patients and their providers to make more informed decisions about prescription drug choices, based on information comparing the patient-specific cost of drugs and suitable alternatives.

The HTI-2 Proposal would also create new exceptions to the ONC “information-blocking” rules, which prohibit certain impediments to the sharing of health information. For example, the HTI-2 Proposal would broaden the scope of the information-blocking rules’ “Privacy Exception,” which generally permits an information-holder to deny a request for access, exchange, or use of electronic health information (EHI) in order to protect an individual’s privacy, provided certain conditions are met. The HTI-2 Proposal would also clarify and expand the information-blocking rules’ “Infeasibility Exception”² and create a new “Protecting Care Access” exception to address concerns about the information-blocking rules’ implications for limiting disclosures of a patient’s reproductive health care information in certain circumstances.

The HTI-2 Proposal was published in the Federal Register on August 5, 2024 and ONC is soliciting public comments on the proposal through October 4, 2024.

EU and UK News

Regulatory Updates

The King’s Speech to Parliament Sets Out Upcoming Legislation. In his speech to the UK Parliament on July 17, 2024, King Charles set out the key legislative and policy agenda as directed by the UK government, which came into office following the national election on July 4, 2024.

The Product Safety and Metrology Bill is listed on this agenda. Although it is unclear exactly what will be included in the bill, it seems that it will have a wide scope and cover “nearly all manufactured products.” As no reference is made to medical devices, it is unlikely that the bill will seek to specifically address such products, but could include powers to amend medical device legislation. Further, it remains to be seen whether the government will align itself with the EU products legislation due to come into force, namely the EU General Product Safety Regulation (Regulation (EU) 2023/988) and the revised EU Product Liability Directive. While it is clear that the UK’s regime needs to be updated to reflect technological progress, it is crucial that industry considers its position carefully in order to provide comments on any forthcoming proposals. You can read more about this on Arnold & Porter’s BioSlice blog.

In addition, the Digital Information and Smart Data Bill is included in the agenda. It is intended to enable scientists to harness the full potential of data in innovative research, for example by ensuring that data subjects are able to provide valid broad consent for wide areas of scientific research.

Despite speculation from commentators, there was no AI bill in the agenda. Instead, the government will “seek to establish the appropriate legislation to place requirements on those working to develop the most powerful artificial intelligence models.” We will continue to monitor the new government’s plans in this area.

German Court Rules on Classification of Telemedicine Software Under the Medical Devices Regulation. A German court of appeal (OLG Hamburg) recently handed down a decision that considered the status of a dermatologic telemedicine app under the Medical Devices Regulation (Regulation (EU) 2017/745) (MDR). The court found that the app was a Class IIa medical device under the MDR, as opposed to its initial Class I classification.

The software at issue in this case was an app that allowed patients to submit pictures of their skin and fill out a questionnaire, which was then forwarded to HCPs for assessment and diagnosis. The app was initially categorized under the MDR as Class I, the lowest risk classification that can be placed on the market following a self-certification by the manufacturer. The claimant, a competitor provider, argued that the software should be a higher risk classification, namely Class IIa. This means that a notified body must be involved in the conformity assessment of the device.

The court agreed with the claimant. It held that the app was a “software intended to provide information which is used to take decisions with diagnosis or therapeutic purposes,” in accordance with rule 11 of Annex VIII of the MDR. It found that “to provide information” included the transfer of information, and the fact that the app was transferring patient information to HCPs constituted provision of information, notwithstanding that the app itself was not making decisions with respect to diagnosis or therapeutic purposes.

This decision has been criticized as it is not in line with guidance from the European Commission and does not focus on the functionality of the software (rather than the decisions taken by those using the software). The court’s risk-averse approach will have implications on how telemedicine providers consider the risk classification of their device.

Publication of the EU AI Act at the Official Journal as Regulation (EU) 2024/1689. On July 12, 2024, the EU regulation laying down the first harmonized rules on AI (referred to as the EU AI Act) was published in the Official Journal, setting in motion the implementation of this new regulatory framework. The EU AI Act entered into force on August 1, 2024, with a staggered implementation of different parts of the regulation. The EU AI Act will apply to AI systems placed on the market or put into service in the EU.

The focus of the EU AI Act is the new regulatory regime for High Risk AI Systems, which applies in addition to any sector-specific regulatory regime, such as the MDR or In Vitro Diagnostic Regulation (Regulation (EU) 2017/746) (IVDR) for medical devices. Like these two regulations, the regulatory framework for High Risk AI Systems set out in the EU AI Act is largely based on the New Legislative Framework approach, meaning many of the concepts will be familiar to medical device manufacturers. However, in many respects, these obligations duplicate, and overlap with, the requirements of the MDR and IVDR. Key areas of overlap include pre-market conformity assessment; CE marking; risk management; obligations on the “provider” who is placing the AI system on the market to establish and maintain a quality management system; and post-market surveillance.

The regulatory framework for High Risk AI Systems will become applicable on August 2, 2027, meaning that from this date, only AI systems that have undergone the necessary conformity assessment procedure can be placed on the market. Certain AI systems are “grandfathered” and not subject to the High Risk AI Systems regulatory regime. However, this only applies to AI systems placed on the market or put into service before August 2, 2026, provided they are not subject to any “significant change” in their design after that date.

You can read more about the impact of the EU AI Act on medical devices in our expert chapter in The International Comparative Legal Guide.

Transition Periods Under the IVDR Extended. The new regulation (Regulation (EU) 2024/1860) introducing changes to the transitional periods for certain in vitro diagnostic devices (IVDs) under the IVDR was published on the Official Journal of the EU on July 9, 2024.

As a reminder, the European Parliament and Council adopted a staggered extension of the IVDR transitional periods back in January 2022. The transitional periods have now been extended once again, in light of the limited capacity of Notified Bodies to undertake conformity assessments and an on-going concern that there will be a shortage of essential high-risk IVDs. Under the new regulation, transitional periods have been extended as late as December 2029 for some products, although the precise date depends on the risk classification of the IVD. You can read more about this on Arnold & Porter’s BioSlice Blog.

ABHI Published Its Report on How HealthTech Can Improve Outcomes Across the Whole Patient Pathway. The UK Association of British HealthTech Industries (ABHI) published its report which explores how HealthTech can improve outcomes across the whole patient pathway. The report considers the challenges faced by the National Health Service (NHS), such as financial strains and worker shortages, and highlights how HealthTech (including digital health technologies) could be used to alleviate and address those challenges. This is in the context of increased focus from the UK government in recent years on the possibilities presented by digital health technologies, including committing £2 billion to implement electronic patient records across all NHS trusts.

The report puts forward the case for how digital health technologies can be used to assist with and increase efficiency in diagnosis, patient safety, surgery, and patient management. It highlights the importance of diagnosing patients as early as possible, using a ratio test for preterm preeclampsia as an example to show that greater accuracy can be achieved alongside a more streamlined process which would also reduce the burden on the NHS. The report calls on the NHS to harness the benefits of HealthTech and to ensure its adoption. It remains to be seen whether the calls will be heard.

IP Updates

UPC Invalidates Dexcom’s CGM Patent in Ongoing Dispute With Abbott in Second Substantive Decision. In the July 2024 digest, we reported on the ongoing global dispute between Abbott and other manufacturers and distributors of continuous glucose monitoring (CGM) devices and technology and summarized decisions relating to the same from the UK Patents Court and The Hague local division of the Unified Patent Court (UPC).

In infringement and invalidity proceedings between Abbott and Dexcom before the Paris local division of the UPC, on July 4, 2024, the Court of First Instance held that Dexcom’s patent EP3435866, which relates to systems and methods of communication between the sensor electronics unit and the display device of an analyte monitoring system (of which CGM systems are an example), was invalid for lack of inventive step. Specifically, the court concluded that the notional skilled person would consider it obvious, on the basis of the prior art put in evidence and common general knowledge, to use Bluetooth to transmit the first portion of data collected by the sensor electronics unit and to use near field communication to transmit the second portion of data in response to a data request command. It is expected that Dexcom will appeal to the Court of Appeal of the UPC.

*The following individuals contributed to this Newsletter:

Amanda Cassidy is employed as a senior health policy advisor at Arnold & Porter’s Washington, D.C. office. Amanda is not admitted to the practice of law.
Eugenia Pierson is employed as a senior health policy advisor at Arnold & Porter’s Washington, D.C. office. Eugenia is not admitted to the practice of law.
Sonja Nesbit is employed as a senior policy advisor at Arnold & Porter’s Washington, D.C. office. Sonja is not admitted to the practice of law.
Mickayla Stogsdill is employed as a senior policy specialist at Arnold & Porter’s Washington, D.C. office. Mickayla is not admitted to the practice of law.
Katie Brown is employed as a policy advisor at Arnold & Porter’s Washington, D.C. office. Katie is not admitted to the practice of law.

© Arnold & Porter Kaye Scholer LLP 2024 All Rights Reserved. This Newsletter is intended to be a general summary of the law and does not constitute legal advice. You should consult with counsel to determine applicable legal requirements in a specific fact situation.