Virtual and Digital Health Digest

This digest covers key virtual and digital health regulatory and public policy developments during August and early September 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

U.S. Featured Content

Last month, FDA’s Center for Drug Evaluation and Research (CDER) announced it created an Artificial Intelligence Council to help CDER comply with the Biden administration’s Artificial Intelligence (AI) executive order. The council aims to promote consistency on considerations related to AI when evaluating drug safety, effectiveness, and quality. The council will be co-led by Sri Mantha of FDA’s Office of Strategic Programs, Tala Fakhouri of the Office of Medical Policy, and Qi Liu of the Office of Translational Sciences, and will include representation from all CDER offices.

EU and UK News

• Regulatory Updates
• Reimbursement Updates
• IP Updates

EU/UK Featured Content

There have been some important reimbursement updates this month. In France, the French health regulator has issued a negative opinion on the first digital therapeutic that sought reimbursement through the PECAN pathway. This opinion suggests that while PECAN provides a more streamlined process by not requiring formal clinical trials, the regulator still expects robust data to show that the digital therapeutic is worthy of reimbursement. In the UK, the National Institute for Health and Care Excellence has published a position paper that highlights the risks of using AI for generating and reporting evidence for health technology assessments. It sets out that the use of AI in this context should be limited to situations where the value of doing so can be clearly demonstrated, and sets out guidance for companies on how to present such data and to justify the use of AI. Health technology assessment seems to be an area where AI has more readily been accepted, and industry will welcome guidance on the parameters around such use.

U.S. News

FDA Regulatory Updates

FDA’s CDER Establishes Artificial Intelligence Council. On August 29, 2024, CDER announced that it had created an Artificial Intelligence Council, which will consolidate work currently handled by the CDER AI Steering Committee, AI Policy Working Group, and CDER AI Community of Practice. The council will help CDER comply with the Biden administration’s AI executive order. Among other things, the council aims to promote consistency on considerations related to AI when evaluating drug safety, effectiveness, and quality. It will conduct an inventory of all CDER AI projects, expand tracking of AI efforts in CDER, and establish a centralized process through which offices will be required to seek consultation and support for deployment of all future AI projects. The council will be co-led by Sri Mantha of FDA’s Office of Strategic Programs, Tala Fakhouri of the Office of Medical Policy, and Qi Liu of the Office of Translational Sciences, and will include representation from all CDER offices.

FDA Issues Warning Letter Involving Algorithm Used in a Clinical Trial. On August 20, 2024, FDA issued a Warning Letter to a clinical investigator, where one of the findings relates to use of an algorithm that may have resulted in a patient receiving the wrong dose of study drug. Under the study protocol, patients were to be dosed by weight following a titration schedule. One of the patients (15 years old) was erroneously given a dose of 120 mg/day for seven days instead of the per protocol 12 mg/day. As a result, the patient “received approximately 10 times the maximum daily dose and was exposed to an increased risk of adverse events, such as Drug Reaction with Eosinophilia and Systemic Symptoms syndrome.”

The Warning Letter suggests the incorrect dose may have been the result of an algorithm error, with the investigator informing FDA that “at the time of the occurrence, no electronic dose calculator was provided by the sponsor, and the electronic dispensing algorithm lacked safety guards to prevent errors.”

Health Care Fraud and Abuse Updates

DOJ Continues Pursuing Durable Medical Equipment Fraud Schemes. On August 21, 2024, Jesse Foote admitted to participating in a durable medical equipment (DME) telemedicine scheme. Foote allegedly conspired with telemedicine companies, overseas telemarketing call centers, DME suppliers, and doctors between December 2017 and March 2021 to submit fraudulent claims to various health care benefit programs. Foote engaged in a circular scheme of kickbacks and bribes, controlling a marketing company that was used to purchase patient “leads” from overseas telemarketing companies. The telemarketing call centers would target Medicare beneficiaries and those with health insurance to spur them into accepting medically unnecessary DME. In order to obtain doctors’ orders for DME based on the leads, Foote paid bribes and kickbacks to telemedicine companies that inevitably paid bribes and kickbacks to the doctors. The doctors would frequently approve the DME orders without speaking to or having any prior contact with a beneficiary or assessing whether or not the DME was medically necessary. Foote would then sell the signed doctors’ orders to other individuals he had kickback arrangements with, and these orders would then be submitted to DME suppliers, including DME suppliers controlled by Foote. These suppliers would submit fraudulent claims for reimbursement to health care benefit companies including Medicare, TRICARE, and other private insurance companies. Foote and his co-conspirators ultimately submitted false billing to government health care programs in excess of $7.8 million.

Corporate Transactions Updates

Better Together? Digital Health Companies Continue Consolidating. On September 5, 2024, private equity firm New Mountain Capital merged three of its portfolio companies in a multibillion-dollar deal designed to further enhance health plan payment accuracy using artificial intelligence and other technology capabilities. The new company, which has not yet announced its name, will combine The Rawlings Group, Apixio’s Payment Integrity business, and VARIS.

The Rawlings Group is a 40-year-old company with an extensive history of working with health insurance companies to identify third parties responsible for paying medical claims. VARIS specializes in identifying overpayments on medical bills and offering recovery solutions on identified overpayments. Apixio’s Payment Integrity business offers a tech-enabled engagement model to promote payment accuracy using artificial intelligence. The combined entity will have nearly 2,000 employees and is well-positioned to leverage its size, scale, and technological capabilities in the payment integrity market.

Investing to Deploy — Health Systems Look to Receive Immediate Gains. On September 10, 2024, Pieces Technology, a digital health company focused on utilizing AI to optimize clinical workflows and reduce provider burden in health systems, secured $25 million in growth financing from eight investors including Dallas-based Children’s Health and Illinois-based OSF HealthCare. In addition to capturing real-time working summaries and generating progress notes, Pieces Technology also offers an AI quality oversight solution that is designed to work with clinicians to minimize errors through predictive analytic models. This continues the trend of direct investment by health systems in digital health technology capable of being immediately deployed in their environments.

Provider Reimbursement Updates

CMS Releases Fiscal Year 2025 IPPS Final Rule. On August 28, 2024, the Centers for Medicare & Medicaid Services (CMS) published a final rule on the Medicare Inpatient Prospective Payment System (IPPS) for fiscal year 2025. 89 Fed. Reg. 68986. Among other updates, CMS finalized a new mandatory episode-based alternative payment model, titled the Transforming Episode Accountability Model (TEAM), for selected acute care hospitals that would coordinate care for beneficiaries undergoing certain surgical procedures.

As we detailed in the May 2024 digest, CMS proposed to waive certain statutory telehealth restrictions for services provided to TEAM beneficiaries, as the agency anticipated the model would lead to greater interest among hospitals in using telehealth for post-discharge care. CMS adopts this proposal in full in the final rule, stating that the telehealth waivers will “support care coordination” and increase “timely access to high quality care for all TEAM beneficiaries.” Id. at 69830.

Biden Administration Releases Mental Health Parity Final Rules. On September 9, 2024, the U.S. Departments of Health and Human Services, Labor, and the Treasury (collectively, the Departments) released final rules implementing the Mental Health Parity and Addition Equity Act. Among other changes, these final rules require insurers to evaluate and revise their non-quantitative treatment limitations (NQTLs), such as prior authorization requirements and network composition standards, to ensure that such limitations on mental health or substance use disorder (MH/SUD) benefits are no more restrictive than the limitations applicable to medical or surgical benefits.

If an insurer determines that their NQTLs are contributing to access challenges for MH/SUD benefits as compared to medical/surgical benefits, the final rules require the insurer to take “reasonable action,” as necessary, to address the material differences in access. The Departments explain that one way plans can take reasonable action is by expanding the availability of telehealth arrangements. The final rules cite research showing that telehealth can help address MH/SUD network limitations in rural areas, improve care retention, and save patients time and money. However, the Departments also caution that while telehealth may “contribute significantly” to the alleviation of MH/SUD provider shortages, it is not a “perfect solution” for all patients, especially for those with limited English proficiency or without access to computers or the internet.

Policy Updates

Industry Calls for Congress to Enhance Digital Health Technology Coverage. On August 15, 2024, AdvaMed reportedly sent a letter to House Energy & Commerce Committee members Larry Bucshon (R-IN) and Diana DeGette (D-CO) responding to the lawmakers’ request for information to build upon policies passed in the 21st Century Cures Act. AdvaMed supports robust funding for CMS to allow for coverage of AI-enabled digital technologies and to extend telehealth flexibilities.

EU and UK News

Regulatory Updates

EMA and HMA Publish General Principles for Staff Within the European Medicines Regulatory Network Regarding the Use of Large Language Models. The European Medicines Agency (EMA) and the European Heads of Medicines Agencies (HMA) have set out guiding principles and general recommendations for staff within the European medicines regulatory network when using large language models (LLMs). This is focused on the use of LLMs by the authorities, rather than the assessment of data provided by companies, although companies will hope to better understand the EMA and HMA’s approach when considering these principles.

It explains that many of the uses of LLMs, including assistance with writing, translation, and summarizing information, can support work in the medicines regulatory system. However, the paper points out specific risks of using LLMs, including potential hallucinations and inaccuracies. The paper also notes that, due to the nature of the work carried out by regulators, LLMs may not previously have been used to answer specific regulatory and scientific questions. Further, due to the lack of control over the datasets used to train the LLM, additional concerns arise regarding data protection and intellectual property. The principles therefore set out guidance on the use of LLMs while seeking to avoid pitfalls and risks.

Further information can be found in our BioSlice Blog.

Medtech Europe Issues Statement on the EU AI Act. On August 1, 2024, the European trade association for the medical technology industry, MedTech Europe, issued the statement on the industry perspective on the final AI Act. In the statement, MedTech Europe welcomes the AI Act but calls for:

• Further alignment with the EU MDR/IVDR: MedTech Europe calls for consistency with regard to AI-enabled medical technologies, which are regulated as software under the EU Medical Devices Regulation (MDR)/EU In Vitro Diagnostic Regulation (IVDR) and are now subject to both sets of regulations.
• A single conformity assessment and technical documentation: MedTech Europe appreciates the effort to align high-risk AI system assessments with existing conformity procedures under MDR/IVDR and emphasizes the importance of maintaining legal certainty. A single set of technical documentation should suffice for compliance with both regulations.
• Clear pathway for clinical and performance evaluation of medical technologies: The AI Act should not disrupt existing procedures for clinical investigations and performance studies required under MDR/IVDR. MedTech Europe emphasizes that investigational devices and performance study devices should not require AI Act conformity assessment before evaluation, following the MDR/IVDR pre-market testing approach.

Reimbursement Updates

French Health Authority Publishes Negative Opinion on Reimbursement of First Digital Therapeutic Through PECAN. As discussed in our May 2024 digest, in March 2023, the French health regulator (Haute Autorité de Santé, HAS) introduced an accelerated pathway for reimbursement of digital therapeutics (DTx) including health apps, known as PECAN (La prise en charge anticipée numérique).

In an opinion issued on July 23, 2024, HAS set out its view on HelloBetter Insomnia, a prescription-only application that is used as a cognitive behavioral therapy for chronic insomnia and which is the first dossier submitted through the PECAN pathway. The opinion concludes that the available data did not support the app as an effective treatment for the specified indications. The ongoing study, conducted in the general population as opposed to a controlled clinical trial, would not provide sufficient data to justify a favorable opinion within the timeframe given. Further, it was not conducted in relation to the claimed indication (chronic insomnia). The regulator considered that the studies presented did not demonstrate a clinical benefit compared to other available cognitive behavioral therapies. Although this is only the first opinion issued by HAS through PECAN, it suggests that while PECAN provides a more streamlined process by not requiring formal clinical trials, HAS still expects robust data to show that the DTx is worthy of reimbursement. It is worth noting that HelloBetter has secured six approvals through the equivalent German DiGA process.

UK NICE Published Its Position Paper Highlighting Concerns With the Use of AI in Health Technology Assessments. On August 15, 2024, the National Institute for Health and Care Excellence (NICE) set out its position on the use of AI for generating and reporting evidence for health technology assessments. It stresses that the use of AI introduces various risks, such as bias, transparency concerns, and cybersecurity. On the other hand, NICE also recognizes the benefits that AI can bring in this context, including its ability to process and analyze large volumes of data. Therefore, NICE concludes that AI must only be used “where there is demonstrable value from doing so.”

Where an organization makes a submission to NICE, any use of AI in the generation of evidence must be supported by clear justifications and details of the assumptions that have been used. In addition, it is important that organizations contact NICE at an early stage, where possible, to discuss any potential use of AI in evidence generation.

IP Updates

UK Court of Appeal Weighs in on Patentability of Inventions Involving Artificial Neural Networks. In a significant ruling, the UK Court of Appeal handed down its judgment in Comptroller-General of Patents, Designs and Trade Marks v. Emotional Perception AI Ltd [2024] EWCA Civ 825, reversing the High Court’s decision reported in our December 2023 digest.

The key questions before the Court of Appeal were to determine what a computer program is and whether there is a computer program in an Artificial Neural Network (ANN). If an ANN was deemed to be a computer program with no technical contribution, the computer program exclusion to patentability would apply on the basis that the invention was to “a program for a computer … as such” under section 1(2)(c) of the Patents Act 1977.

The Court of Appeal defined a computer as “a machine which processes information” and a computer program as “a set of instructions for a computer to do something” before concluding that an ANN, whether implemented via hardware or software, was a computer. It added that the weights applied to an ANN were a computer program and therefore the computer program exclusion to patentability applied if the invention did not include a technical contribution unrelated to the computer program.

In this instance, the improved file recommendations in Emotional Perception’s invention were semantic in nature and did not provide a technical contribution to make the invention patent eligible.

Following this judgment, the UK Intellectual Property Office (UKIPO) has published statutory guidance titled “Examining patent applications involving artificial neural networks,” making an immediate change to their practice for the examination of ANNs. Readers of the Virtual & Digital Health Digest and virtual and digital health companies considering filing patent applications for inventions involving ANNs should note that the UKIPO confirms that “patent examiners should treat ANN implemented inventions like any other computer implemented invention.” Accordingly, a technical contribution will be required for such inventions to be patentable.

Unified Patent Court’s Paris Local Division Invalidates Dexcom’s 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 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 further infringement and invalidity proceedings between Abbott and Dexcom, before the Paris local division of the UPC, the Court of First Instance held that Dexcom’s patent, EP3435866, was invalid for lack of inventive step. Dexcom’s patent 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).

Upon considering if the invention set out in claim 1 of Dexcom’s patent involved an inventive step (a requirement for patent eligibility and one of Abbott’s grounds for the revocation of Dexcom’s patent), the court concluded that it would be obvious to the notional skilled person to use the relevant protocol in claim 1 of the patent, i.e., to use second near-field communication to transmit the second portion of the analyte measurement data resulting in an effect of the well-known advantages of lower power consumption and security due to low range.

Dexcom attempted to avoid revocation of their patent by amending claim 1. Abbott objected to this amendment and the court found it to be not allowable on the grounds of added subject-matter. Further, Dexcom did not submit specific arguments in support of why the remaining patent claims were novel and inventive. Consequently, the court concluded that Dexcom’s patent was invalid, as granted and as amended. Dexcom’s patent was accordingly revoked and the infringement action against Abbott was dismissed.

This decision represents the UPC Paris local division’s first substantive infringement decision on the merits. It was handed down just 24 hours after the first infringement decision on the merits from the Düsseldorf local division. This judgment exemplifies one of the UPC’s key aims — efficiency. The decision was handed down within a year of the proceedings’ commencing, which is in line with the expected timeline provided in the preamble of the Rules of Procedure 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.