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


FDA Regulatory Updates

GAO Report Addresses Needs for Additional FDA AI Authorities. On January 25, the Government Accountability Office (GAO) issued a report titled "Selected Emerging Technologies Highlight the Need for Legislative Analysis and Enhanced Coordination" (GAO Report). GAO was tasked with reviewing how federal agencies regulate emerging technologies, including challenges and opportunities they report facing in regulating emerging technologies, their collaboration and cooperation activities, and lessons they can learn from other governments' experiences. GAO reports that Food and Drug Administration (FDA) officials stated updated authorities would help FDA regulate medical devices enabled with artificial intelligence (AI). While Congress is considering enhancing AI oversight, according to GAO, "FDA has not clearly identified, documented, and communicated to Congress the specific legislative changes that would help it address these challenges." As a result, GAO warns that Congress may not be able to appropriately update FDA's authorities, and FDA may miss opportunities to fully realize the public health benefits of such technology. The GAO Report recommends FDA identify and document the specific changes to its statutory authorities that would enable FDA to take the actions it determines best to oversee devices that employ AI and machine learning (ML), and then communicate those potential legislative changes to Congress.

FDA Officials Author Article on AI/ML-Enabled Medical Devices. Officials from FDA's Center for Devices and Radiological Health (CDRH) recently authored an article in npj Digital Medicine (a Nature partner journal) on the transparency of AI/ML-enabled devices. The article presents key takeaways from a public workshop CDRH held on the topic in October 2021. As further detailed in the article, workshop participants agreed on the need for transparency of AI/ML devices to more clearly communicate how a device works for an intended population, the presence and management of potential bias, and the role of a device in the clinical workflow. One interesting perspective addressed in the article is that of payors who participated in the workshop. As further detailed in the article, given the potential for AI/ML devices to evolve, payors expressed concern with the coverage of "unlocked" or learning algorithms.

FDA Commissioner Comments on Regulation of Medical Device Algorithms. On January 10, FDA Commissioner Robert Califf discussed digital health technologies during an interview at the Consumer Technology Association's CES Conference. As reported by InsideHealthPolicy, Califf emphasized that the FDA will likely need to work with third parties to assist with evaluating algorithms because the agency, on its own, does not have the capacity to continuously evaluate algorithms. Califf also stated that technological development should not be inhibited by requirements for algorithms to remain static.

FDA Issues AI-Related Grant Notice. On January 15, FDA issued a grant notice for "Utilizing Real-World Data and Algorithmic Analyses to Assess Post-Market Clinical Outcomes in Patients Switching Amongst Therapeutically Equivalent Complex Generic Drug Products and Reference Listed Drugs." The purpose of the funding opportunity is to develop and test an AI- or ML-based algorithmic real world data model for post-market surveillance of complex generic drug products. The closing date for applications is March 31, 2024.

Healthcare Fraud and Abuse Updates

DOJ Enforcement of Telemedicine/Telehealth Cases Persists. There seems to be no end to the U.S. Department of Justice's (DOJ's) laser focus on alleged telehealth and telemedicine schemes resulting in medically unnecessary services tainted by kickbacks being billed to federal health care programs. On December 14, 2023, Robert Leon Smith III — owner and operator of a network of durable medical equipment (DME) companies in Florida, Texas, and Maryland — was charged for his alleged role in a US$60 million health care fraud, wire fraud, and kickback scheme. Smith allegedly submitted false and fraudulent claims to Medicare for genetic tests, DME, and foot bath medication; paid kickbacks and bribes to offshore call centers operated by his co-conspirators to obtain Medicare beneficiary information; and falsified doctors' orders obtained by telemedicine companies, which were signed by practitioners who did not examine or treat the beneficiary. In separate matters, Elizabeth Hernandez was sentenced on December 21, 2023, for her role in a fraud to scam Medicare by submitting over US$192 million in claims for genetic tests and DME that patients did not need and telemedicine visits that never occurred. Hernandez was sentenced to 20 years in prison for her participation in the scheme. See further coverage of the Hernandez case in the October 2023 Digest. Jeffrey Brooks was sentenced on January 18 to more than seven years in federal prison due to his involvement in a scheme to defraud Medicare and CHAMPVA. Brooks operated at least eight DME companies around May 2019 and was charged with plotting to submit or causing the submission of US$29 million in false and fraudulent claims to Medicare and CHAMPVA for medically unnecessary braces, which were eligible for reimbursement and/or obtained through the payment of kickbacks and bribes. And, Dr. Daniel Case agreed to pay US$95,000 to resolve allegations that he engaged in a kickback scheme and ordered medically unnecessary durable medical equipment that was billed to Medicare, Medicaid, and other federal health care programs.

Corporate Transactions Updates

GE HealthCare Strengthens Its Digital-Health Capabilities With AI-Imaging Analysis and At-Home Pregnancy Monitoring Device. On January 11, Chicago-based GE HealthCare announced an agreement to acquire MIM Software, a Cleveland-based artificial intelligence imaging analysis and software company. MIM Software provides AI-based software for radiation oncology, molecular radiotherapy, diagnostic imaging, and urology practices to imaging centers, hospitals, specialty clinics, and research organizations. The merger will enhance GE Healthcare's imaging products' ability to detect and treat diseases using AI-based software and imaging analysis. GE Healthcare says it plans to finance the acquisition with cash on hand.

GE HealthCare also announced on February 1 that it received 510(k) clearance from the FDA for Novii"+ Wireless Patch Solution, a wearable and wireless sensor enabling the noninvasive measurement of fetal heart rate, maternal heart rate, and uterine activity for pregnant patients at or beyond 34 weeks. Novii"+ Wireless Patch Solution, which is expected to be available in the U.S. later this year, will enable at-home monitoring for patients with high-risk pregnancies.

Digital Healthcare Companies May Choose To Remain in Pre-Initial Public Offering (IPO) Purgatory After Underwhelming IPO From BrightSpring Health. Louisville, Kentucky-based and KKR & Co.-backed BrightSpring Health Services Inc., which advertises itself as a "leader in innovation with electronic health record solutions, signature programs, data analytics, and reporting," went public on January 26. A little over a week before its initial public offering, BrightSpring Health announced it planned to sell 53.3 million shares of its common stock at a price of $15-$18 each, hoping to raise a total of US$800 million to US$960 million, which will be used to retire debt.

When BrightSpring Health went public on January 26, its shares initially sold for a price of $13, below the company's $15 to $18 target. At the end of its first day of trading, the price per share slumped to $11. The public offering is largely considered to have underperformed, with the worst drop for a US$250 million-plus U.S. listing since 2021, according to data compiled by Bloomberg. BrightSpring Health's lackluster offering will certainly be noticed by other pre-IPO digital health companies and will likely impact the digital health IPO market this year. For example, Waystar previously indicated that it plans to go public this year, but may be more timid after seeing BrightSpring Health's results.

Provider Reimbursement Updates

Biden Administration Expands Telehealth Use by Opioid Treatment Programs. On February 2, the Substance Abuse and Mental Health Services Administration (SAMHSA) issued a final rule that adopts greater flexibilities for the use of telehealth for treatment of opioid use disorders (OUD) in opioid treatment programs (OTPs). 89 Fed. Reg. 7528. The rule marks the latest example of the expanding role of telehealth in federal programs.

OTPs provide medication-assisted treatment for people diagnosed with OUD. The treatment programs, which must be certified by SAMHSA and registered with the Drug Enforcement Administration (DEA), are authorized to administer and dispense narcotic maintenance and detoxification medications, such as methadone and buprenorphine, to patients with OUD. 21 U.S.C. § 823(h)(1).

During the COVID-19 public health emergency (PHE), SAMHSA temporarily exempted OTPs from the requirement to perform an in-person evaluation prior to beginning buprenorphine treatment, provided that an adequate evaluation could be accomplished via telehealth. However, the in-person evaluation requirement remained in force for the initiation of methadone treatment. On May 9, 2023, noting the "overwhelmingly positive" response to the change, SAMHSA issued guidance extending the buprenorphine telehealth flexibility for one year past the end of the PHE (i.e., May 11, 2024) or until the agency issued this final rule.

The final rule now permanently authorizes use of telehealth evaluations in OTPs — including audio-only or audio-visual interactions — prior to the initiation of buprenorphine treatment. 89 Fed. Reg. at 7533. The rule also newly enables the use of telehealth evaluations prior to beginning methadone treatment in OTPs, but requires such evaluations to be accomplished via an audio-visual telehealth platform and that the program physician (or an authorized healthcare provider under the physician's supervision) determine that adequate evaluation can be accomplished via such a platform. According to SAMHSA, methadone holds a higher risk profile than buprenorphine, making audio-visual telehealth a more suitable platform for identifying risks in certain patients. Therefore, the agency declined to permit audio-only interactions for methadone treatment evaluations. Id.

The final rule only applies to the dispensing of OUD medications by OTPs and does not authorize the telehealth prescription of methadone. As we covered in the December 2023 Digest, the DEA is expected to issue new rules governing the prescription of controlled substances via telehealth in 2024.

Lawmakers Call for Permanent Access to Telehealth for Medicare Beneficiaries. On January 19, a group of bipartisan lawmakers sent a letter to the U.S. Department of Health and Human Services (HHS) urging the agency to work with Congress to ensure Medicare beneficiaries have permanent access to telehealth services.

As we covered in our November 2023 Digest, many flexibilities established during the PHE that expanded telehealth access for Medicare beneficiaries will expire at the end of 2024. These flexibilities include waiving in-person visit requirements for mental health telehealth services and allowing beneficiaries to use telehealth without geographic restrictions. Noting the upcoming expiration of these flexibilities, a bipartisan group of lawmakers described 2024 as a "pivotal year for telehealth policy" and encouraged HHS to collaborate in their effort to enact permanent telehealth legislation. The letter signatories are cosponsors of the CONNECT for Health Act, legislation that would expand Medicare coverage of telehealth services and make flexibilities established during the PHE permanent.

Policy Updates

House Member Urges FDA Commissioner To Prepare for AI Uptake. On January 3, Rep. Greg Murphy (R-NC) sent a letter to FDA Commissioner Robert Califf suggesting "unclear liability guidance and overlapping regulatory governance responsibility" is limiting innovation among AI-enabled medical devices. Rep. Murphy urged the FDA to prepare for a rapid increase in premarket approval requests for AI devices and requested information on the FDA's ongoing efforts to evaluate AI-enabled medical devices.

HHS' ONC Regulations Face Delay After Procedural Mistake. On January 9, HHS' Office of the National Coordinator for Health Information Technology (ONC) published a final rule outlining sweeping regulations for physicians using HHS-certified decision support software, including stricter requirements around the use of AI-enabled technologies. While the final rule was set to become effective by the end of 2024, the U.S. Government Accountability Office reported that ONC violated federal law requiring agencies to allow Congress a period of 60 days to review a final rule before publishing. ONC finalized the rule about a month too soon, so the rule was sent back to the Office of Management and Budget, and it's unclear whether the procedural delays will affect timing of implementation.

Members Introduce Bicameral Legislation To Curb Medicare Fraud and Abuse Using AI. On January 24, Senate HELP Committee Ranking Member Bill Cassidy (R-LA), Sen. Mike Braun (R-IN), and Rep. David Schweikert (R-AZ) introduced the "Medicare Transaction Fraud Prevention Act" (H.R. 7147/S. 3630), which would create a Centers for Medicare & Medicaid Services (CMS) pilot program utilizing an AI-based algorithm targeting "irregular billing activity" related to Medicare-covered purchasing of DME and other diagnostic testing related products. In a press release, Sen. Braun commented that, "An annual loss of $60 billion is unacceptable. It's time for CMS to strengthen their fraud detection process in order to stop the hemorrhaging of the Medicare trust fund."

House Members Launch Congressional Digital Health Caucus. On February 1, Reps. Robin Kelly (D-IL) and Troy Balderson (R-OH) announced the creation of a Congressional Digital Health Caucus, which will raise awareness on the advancements in digital health innovation, examine potential impacts on patients and health providers, and work together toward bipartisan proposals to improve access to new digital technologies.

Senate Committee Examines AI in Healthcare. On February 8, the Senate Finance Committee held a hearing on "Artificial Intelligence and Health Care: Promise and Pitfalls." Witnesses included professors from Stanford, the University of Chicago, and the University of California-Berkeley, in addition to the co-lead of the Health AI Partnership and Head of Digital and Automation at Siemens Healthineers.

Privacy and AI Updates

DOJ Reportedly Probing AI Use in Medical Records. The promising options for using artificial intelligence to improve and facilitate the delivery of health care are not without risk. Compromises to patient privacy and bias in relation to particular patient populations are just two of the potential risks AI tools can present when used in the health care context. Reportedly, the DOJ is investigating potential legal violations in the use of AI algorithms to analyze patient electronic medical records (EMRs) for signs of conditions that might suggest the need for medical screenings or certain treatments. The algorithms can allegedly trigger alerts to treating physicians or others with access to a patient's EMR that would prompt them to order tests or prescribe certain therapies and/or medications for the patient.

The DOJ's apparent concern is that there may be incentives behind the use of these tools that lead to excessive screenings and unnecessary treatments, raising potential False Claims Act and Anti-Kickback Statute (AKS) concerns, among other fraud and abuse issues. The DOJ is probing the possibility that diagnostic technology companies, pharmaceutical companies, and medical device companies may be promoting the use of AI algorithms in order to identify patients that could benefit from screenings and/or treatments with these companies' products.

The DOJ's reported investigation bears similarities to the DOJ's inquiry into Purdue Pharma's payments to Practice Fusion, an EMR vendor, for designing algorithms that prompted automated pop-up alerts for physicians indicating that patients would benefit if they were prescribed certain opioid painkillers. The AKS, which prohibits the exchange (or offer to exchange) of anything of value to induce (or reward) the referral of business reimbursable by federal health care programs, was the legal underpinning of the DOJ's investigation. In that matter, in relevant part, the DOJ alleged that Practice Fusion allegedly solicited and received improper remuneration to implement the alerts intended to increase sales of manufacturer products, in violation of the AKS.

As discussed in our January 2024 Digest, the new regulations promulgated by the ONC on "Health Data, Technology, and Interoperability: Certification Program Updates, Algorithm Transparency, and Information Sharing" (the Final Rule), include provisions designed to prevent bias, inaccuracy, and other flaws in the use of predictive decision support interventions, which include AI tools such as the types of EMR prompts reportedly under scrutiny by the DOJ.


Regulatory Updates

Publication of a Roadmap for the Future Regulation of Medical Devices in the UK. On January 9, the Medicines and Healthcare products Regulatory Agency (MHRA) published its roadmap for the future regulation of medical devices, which includes the regulation of new technologies with software and AI components. The new regulations are intended to prioritize patient safety and provide faster access of innovative technologies to patients. They will be delivered through four statutory instruments (SIs), with post-market surveillance (PMS) measures put in place early in 2024 and will be applicable towards the end of 2024, followed by core elements of the new framework in 2025.

The draft PMS SI includes requirements for what a PMS system should include and enhanced obligations on the reporting of serious incidents and periodic review of PMS data. The SIs on the core regulations will be developed over 2024 through several key stakeholder discussions. The core provisions are expected to include new requirements on clinical investigations and claims made about devices, clarification on conformity assessments and approved bodies, and introduce the international recognition framework, as well as much more.

In addition, the roadmap sets out where we can expect new guidance. Over 2024, the MHRA aims to publish guidance on (1) good machine learning practice for medical device development mapping; (2) AI as a Medical Device development and deployment best practice; and (3) data-driven Software as a Medical Device research, development, and governance. Finally, the roadmap states that the AI Airlock regulatory sandbox, for innovators to test their technologies within a safe environment, will launch towards the middle of 2024.

Commission Adopts Measures To Support the Development of AI in Europe. On January 24, the European Commission (EC) launched a package of measures to support European start-ups and small and medium-size enterprises in the development of artificial intelligence compliant with EU legislation. The package includes:

  • A proposal for amendments to Regulation (EU) 2021/1173 regarding a European High-Performance Computing (EuroHPC) initiative for start-ups to boost European leadership in trustworthy artificial intelligence (EuroHPC Regulation) to set up AI factories in the EU in order to support the development and adoption of AI solutions
  • Establishing a European AI Office within the EC to ensure coordination of AI policy at the EU level, support the accelerated development, roll-out and use of trustworthy AI systems and applications, and supervise the implementation and enforcement of the AI Act
  • An EU AI Start-Up and Innovation Communication, setting up a strategic investment framework in trustworthy AI to foster an innovative EU AI ecosystem. Among the actions it introduces are accelerating the development of Common European data spaces and launching "GenAI4EU," which aims to support the development of novel use cases and emerging applications in sectors like health or biotech

Commission Proposes Extension to IVDR Transition Periods and Accelerated Launch of Eudamed. On January 23, the European Commission announced proposals to amend the Medical Device Regulations (EU) 2017/745 (MDR) and the In Vitro Diagnostic Medical Device Regulations (EU) 2017/746 (IVDR), as applicable, to:

  • Extend the transition provisions for certain in vitro diagnostic medical devices (IVDs) under the IVDR
  • Allow for a gradual roll-out of Eudamed so that certain modules will be mandatory beginning in late 2025
  • Include a notification obligation in case of interruption of supply

Under the proposal, the transition period in the IVDR for certain IVDs will be extended to:

  • December 2027 for Class D high individual and public health risk devices (e.g., HIV or hepatitis tests)
  • December 2028 for Class C high individual and/or moderate public health risk devices (e.g., cancer tests)
  • December 2029 for Class B lower risk devices (e.g., sterile devices such as blood collection tubes)

The above extensions apply to IVDs for which a conformity assessment procedure pursuant to the IVDD did not require the involvement of a notified body, but where a conformity assessment procedure pursuant to the IVDR requires the involvement of a notified body. There is also an extension to December 31, 2027 where certificates have been issued by a notified body, including where these have expired, if certain criteria are met.

The proposal will now need to be adopted by the European Parliament and Council before it enters into force. However, as the proposal follows a similar structure to the recent amendments to the MDR, we do not anticipate significant changes during the legislative process. You can read more in our blog post.

Privacy Updates

ICO Consultation Series on Generative AI and Data Protection. On January 15, the Information Commissioner's Office (ICO) launched a consultation series on how UK data protection laws should apply to the development and use of generative AI models. While not directly relevant to the life sciences sector, the consultations may be important where AI is used to analyze and generate output from health data. The first chapter has been published and seeks to gather the views of stakeholders on the lawful basis for web-scraping to train generative AI models. The ICO believes that the only available lawful basis for the collection of personal data in the context of training will be legitimate interests. To establish legitimate interests, a developer must demonstrate that (1) the purpose of the processing is legitimate; (2) the processing is necessary for that purpose; and (3) the individual's interests do not override the interest being pursued. The ICO identifies several ways to mitigate potential risks and meet the third element of the test. The deadline to submit views on the first chapter is March 1, 2024, with publication of the further chapters over the coming months. Read our Advisory for more information.

EFPIA Calls for Legal Certainty and Harmonization in the EHDS. On January 31, the European Federation of Pharmaceutical Industries and Associations (EFPIA) called for the European Parliament and the Council to make certain changes in the regulation on the European Health Data Space (EHDS) to truly foster EU competitiveness and innovation and to achieve the harmonization and representativeness of data. See our January 2024 Digest for more information on the EHDS.

The EHDS regulation is currently under negotiation by the EU legislators, and as we set out in our previous Digest, in December, the Council of the European Union and European Parliament adopted their positions on the text of the regulation. With this call, EFPIA hopes the institutions consider the following when finalizing the text of the regulation:

Intellectual Property Updates

Patents for Glucose Monitoring Devices Invalidated by UK High Court. On January 15, the UK High Court invalidated four patents relating to Continuous Glucose Monitoring (CGM) devices, though the judge noted that the patents would have been infringed if they had been found to be valid. Abbott and Dexcom each held two patents relating to features and options on smartphone user interfaces for their CGM devices. This included a two-stage notification system that does not interrupt a mobile phone user's actions and installation checks to ensure the monitoring app is not affected by the phone's malfunctions.

The High Court Judge (James Mellor) noted the importance of preventing hindsight from infiltrating the problem which the skilled addressee is deemed to be dealing with when they consider the prior art, explaining that a "signal" becomes easy to extract from "noise" when the circumstances which led up to the event are viewed with hindsight. Justice Mellor further explained that if the invention involved a significant departure from the prior art, and if hindsight has to be used to get to the invention, that is determinative of the invention not being obvious.

The dispute between Abbott and Dexcom is far from over with further trials in the UK in November 2024 and January 2025 relating to other Abbott and Dexcom patents, as well as related proceedings in Spain and Germany and hearings before the European Patent Organisation and the Unified Patent Court.

Patentability of AI-Related Inventions To Be Considered by the UK Court of Appeal. In our December 2023 Digest, we reported on the landmark UK High Court decision in Emotional Perception, which concluded that emulated artificial neural networks (ANNs) did not operate as a computer program and therefore Emotional Perception's patent application could not be rejected on the grounds that the invention relates to a "computer program as such." This was promptly followed by an update to the UK Intellectual Property Office (UKIPO) Manual of Patent Practice (MPP) to ensure that examiners do not reject ANNs under the "program for a computer" exclusion to patentability. The UKIPO has now filed an appeal on the following grounds:

  • The judge's decision that the computer program exception to patentability had not been engaged was wrong
  • The judge should not have relied on the UKIPO's "concession" that hardware ANN did not operate as a computer program to conclude that software implemented ANN also did not operate as a computer program
  • The judge was wrong to exclude from consideration the mathematical exclusion model
  • The judge was wrong in deciding that the claimed invention involves a substantive technical contribution.

This appeal will be a good opportunity for the Court of Appeal to provide updated guidance on patentability of computer-generated inventions and inventions involving algorithms or mathematical models, and to confirm the extent to which the UK is aligned with the approach at the European Patent Office. Any developer of digital health products utilizing ANNs should be wary of relying on the updated UKIPO MPP guidance on ANNs when filing and prosecuting patents as the change in practice may be short-lived.

*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.
Heba Jalil is employed as a Trainee Solicitor at Arnold & Porter's London office. Heba is not admitted to the practice of law.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.