Of Drug and Device and a Lack of Personal Jurisdiction

As much as I write about medical malpractice, it seems only fair that I devote a post and direct our fair readers to the other side of the bar: The Drug and Device blog put out by a number of Dechert, LLP attorneys involved in pharmaceutical and medical device product liability litigation– from the defense side– And  Writing in Their Individual Capacities (yes, I read the disclaimer– which is itself a piece of art).

I don’t know that our non-law-based readers would find the site of much interest, but for those of you who do have a legal background– it’s really quite good– and rather funny (though it doesn’t hurt if you have a taste for the acerbic). And I’m not just saying this because today’s post I so enjoyed turned out to have a hat tip to former classmate and worthy opponent Lincoln Wilson at the bottom of it. The blog is good. And if you’re a lawyer– or a law professor– today’s post should be disquieting for you.

The post, entitled “Another Homework Failure By Plaintiffs,” is about a suit against Endo Pharmaceuticals  re: Darvocet and how the plaintiffs cause of action burst into flames when it saw the light of a federal judge– for lack of personal jurisdiction. The article points out (pointedly) that the court notes that although the burden of showing jurisdiction is “relatively slight,” plaintiff’s offered no facts. None. Plaintiffs asserted that Endo, which purchased three entities (which still now exist) that had formerly produced the drug in question, “may have assumed responsibility for the acts…” and claimed the court needed to find personal jurisdiction based on the facts. The court:

But what “facts”? The portion of the complaint relied upon by the plaintiffs merely implies that the Endo Defendants “may have” somehow assumed the liabilities of their subsidiaries; the only factual assertion [plaintiff's allegation] contains is that the plaintiffs do not have the information they need to establish personal jurisdiction.  Thus, even if the plaintiffs were permitted to stand on their pleadings, they would fall woefully short of the necessary prima facie showing.

I think that’s going to leave a mark.

I said above that if you were a law professor or a lawyer you would find the Drug and Device post disquieting. But maybe I was hasty with regard to other lawyers. Although there is great value in a learned bar, the value of an unprepared opponent is, I suppose, inestimable. At least in the short run.

Having said that, if you have a few minutes, check out the Drug and Device blog article– and the slip opinion of the case they’ve conveniently provided. It’s worth it. From a stand point of pedagogy, it may not be as useful as the numerous Texas appeals filed late resulting in execution, but it could certainly function as a cautionary tale.

First Circuit Finds Generic Drugmaker Had State Law Duty to Stop Selling Unsafe Drug

Earlier this month, the First Circuit surprised observers when it held, in Bartlett v. Mutual Pharmaceutical, that a state law product liability suit founded on the claim that a generic drug was unreasonably dangerous due to a design defect was not preempted by the Federal Food, Drug, and Cosmetic Act (FDCA).  In coming to its decision, the First Circuit distinguished Pliva v. Mensing, in which the Supreme Court held that the FDCA does preempt a state law product liability suit founded on the claim that a generic drug was unreasonably dangerous due to a label that failed to warn of the drug’s dangers.

Pliva hinged on the fact that the FDCA and its implementing regulations “require that the warning labels of a brand-name drug and its generic copy must always be the same– thus, generic drug manufacturers have an ongoing federal duty of ’sameness.’”  Because the defendant in Pliva could not fulfill its alleged state law duty to add stronger warnings to its label without violating the federal duty of sameness, the Supreme Court held that the state law product liability suits at issue could not go forward.  As the First Circuit put it in Bartlett, “Congress cannot have wanted the generic to pay damages under state law for a label that the FDA required.”

The defendant in Bartlett argued that, because generic manufacturers cannot alter the composition of a drug, “[Pliva's] policy of encouraging generics by preempting state tort claims should extend to design defect as well as claims based on inadequate warning.”  The First Circuit rejected this argument, finding that

“…although Mutual cannot legally make [the drug at issue] in another composition (nor is it apparent how it could alter a one-molecule drug anyway), it certainly can choose not to make the drug at all; and the FDCA might permit states to tell Mutual it ought not be doing so if risk-benefit analysis weights against the drug, despite what the Supreme Court made of similar arguments in the labeling context.”

James M. Beck, at the defense-oriented blog Drug and Device Law calls this result “startling[,]” pointing out that “before Bartlett the post-[Pliva] precedents had universally rejected arguments that supposed state-law duties (no state high court has ever recognized such a duty) to remove generic drugs from the market altogether could survive preemption.”  Beck argues that

“[a]nybody could always avoid liability by not selling any products at all — but that would make preemption ‘illusory,’ and also totally defeat the purpose of the Hatch-Waxman Amendments to encourage production of generic drugs. Sooner or later, one plaintiff or another will argue that every generic drug ever approved should be removed from the market.”

While plaintiffs may argue that generic drugs have design defects and should be removed, their arguments are unlikely to succeed.  As the First Circuit explains, many state courts refuse to review claims that FDA-approved prescription drugs are defectively designed.  Even where such claims are permitted, manufacturers can defend against them by showing that a drug “was unavoidably unsafe but was highly useful and had an adequate safety warning[.]“  For unknown reasons, the defendant in Bartlett “abandoned that defense on the eve of trial.”

That said, Bartlett highlights a number of important questions.  Should generic manufacturers, as the First Circuit decision suggests, have a duty to perform their own continuous risk-benefit analysis of the drugs that the FDA has approved them to sell?  They may be in the best position to do so, although monitoring is likely to be more complicated the more manufacturers of a single drug there are.  Should they have a duty to stop selling a drug as soon as the risk-benefit balance — in their sole estimation — tips?  Maybe, maybe not.  Drugs are, after all, “highly useful” and there are inevitably winners as well as losers when manufacturing is discontinued.  Such a decision might be better entrusted to the FDA.

Legislation is pending in Congress that would overturn Pliva by giving generic manufacturers the same authority that branded manufacturers have to add warnings to their labels.  Perhaps Congress should also clarify manufacturers’ obligations (or lack thereof) with regard to removing drugs from the market.

Benefit Concert for Africa Surgery in Morristown, NJ

Dicey Riley Band

To present a BENEFIT concert for Surgical Efforts in Sierra Leone, West Africa

Featuring Traditional Irish and Celtic Music and Song, Plus the

Bethel AME and Assumption Children’s Choirs

Singing selected choral works

Refreshments donated by parishioners

Saturday, May 12, 2012, 7:30-9:30 pm

Assumption Church

91 Maple Ave., Morristown, NJ 07960

Suggested donation: $15 per adult, Children Free

All proceeds go directly to procuring badly needed medical care and surgical

Treatment for poor farmers and villagers in Sierra Leone.

For more information call, 973-539-2141

[Ed. Note: I've said it before and I'll say it again: Africa Surgery does God's work. They accomplish a great deal with very little.]

Lower Cost, But at What Cost?

Late last month, Essex County Mental Health Association director Bob Davison went undercover to experience the current conditions at Dover Woods, a residential psychiatric facility in Toms River, New Jersey.  His subsequent report was published in the Newark Star-Ledger.  It paints a bleak and jarring account of life within the large mental health care facility, as the state continues to remove individuals from state-run hospitals and places them in residential health care facilities like Dover Woods.

Davison spent just over 48 hours in the facility.  He reported his room was “small” - featuring cigarette burns, rips in the bed spread and sheet, and broken dressers and closets.   However, more disturbing was what Davison experienced while interacting with other residents — he was sexually propositioned by an “actively psychotic” woman, had “no heat on a chilly night,” heard individuals “actively hallucinating” and “up all night screaming,” and broke up a fight between two individuals when officials were nowhere to be found.

In addition to what he saw inside the facility, Davison was disturbed by what he saw outside of it.  Averaging 275 police calls per year, Dover Woods is located near two major state highways, and the area lacks safe sidewalks — even though residents are free to come and go as they wish.  During his stay, Davison nearly witnessed a resident get hit by a car while crossing Route 9, one of the highways near the facility, something that is apparently not uncommon.  In fact, just a week before Davison’s undercover visit to the facility, Dover Woods resident Edward Braden was struck and killed while trying to cross Route 70 at 11pm on a Monday night.

Davison’s interactions with Dover Woods officials seemed surprisingly infrequent:  when checking in, officials quizzed him about his criminal history (and took him at his word).  Further, three days after he left the facility, Dover Woods officials finally called his emergency contact in search of him.

Davison’s experience highlights the worst of the residential health care facilities for the mentally ill — which cost the state around $68,000 per year per resident (compared to $301,000 per patient per year in a state-run psychiatric hospital).  He hopes his experience will bring more attention to the residential facilities and will lead to long-term changes.  And with many states cutting funding for mental health services previously mentioned here, investigations like Davison’s that draw attention the plight of the severely mentally disordered continue to be invaluable.

Models of Patient Safety

If one jumbo jet crashed in the US each day for a week, we’d expect the FAA to shut down the industry until the problem was figured out. But in our health care system, roughly 250 people die each day due to preventable error. A vice president at a health care quality company says that “If we could focus our efforts on just four key areas — failure to rescue, bed sores, postoperative sepsis, and postoperative pulmonary embolism — and reduce these incidents by just 20 percent, we could save 39,000 people from dying every year.” The aviation analogy has caught on in the system, as patient safety advocate Lucian Leape noted in his classic 1994 JAMA article, Error in Medicine. Leape notes that airlines have become far safer by adopting redundant system designs, standardized procedures, checklists, rigid and frequently reinforced certification and testing of pilots, and extensive reporting systems. Advocates like Leape and Peter Provonost have been advocating for adoption of similar methods in health care for some time, and have scored some remarkable successes.

But the aviation model has its critics. The very thoughtful finance blogger Ashwin Parameswaran argues that, “by protecting system performance against single faults, redundancies allow the latent buildup of multiple faults.” While human expertise depends on an intuitive grasp, or mapping, of a situation, perhaps built up over decades of experience, technologized control systems privilege algorithms that are supposed to aggregate the best that has been thought and calculated. The technology is supposed to be the distilled essence of the insights of thousands, fixed in software. But the persons operating in the midst of it are denied the feedback that is a cornerstone of intuitive learning. Parameswaram offers several passages from James Reason’s book Human Error to document the resulting tension between our ability to accurately model systems and an intuitive understanding of them. Reason states:

[C]omplex, tightly-coupled and highly defended systems have become increasingly opaque to the people who manage, maintain and operate them. This opacity has two aspects: not knowing what is happening and not understanding what the system can do. As we have seen, automation has wrought a fundamental change in the roles people play within certain high-risk technologies. Instead of having ‘hands on’ contact with the process, people have been promoted “to higher-level supervisory tasks and to long-term maintenance and planning tasks.” In all cases, these are far removed from the immediate processing. What direct information they have is filtered through the computer-based interface. And, as many accidents have demonstrated, they often cannot find what they need to know while, at the same time, being deluged with information they do not want nor know how to interpret.

A stark choice emerges. We can either double down on redundant, tech-driven systems, or we can try to restore smaller scale scenarios where human judgment actually stands a chance of comprehending the situation. We will need to begin to recognize this regulatory apparatus as a “process of integrating human intelligence with artificial intelligence.” (For more on that front, the recent “We, Robot” conference at U. Miami is also of great interest.)

Another recent story emphasized the importance of filters in an era of information overload, and the need to develop better ways of processing complex information. Kerry Grens’s article “Data Diving” emphasizes that “what lies untapped beneath the surface of published clinical trial analyses could rock the world of independent review.”

[F]or the most part, [analysts] rely simply on publications in peer-reviewed journals. Such reviews are valuable to clinicians and health agencies for recommending treatment. But as several recent studies illustrate, they can be grossly limited and misleading. . . . [There is] an entire world of data that never sees the light of publication. “I have an evidence crisis,” [says Tom Jefferson of the Cochrane Collaboration]. “I’m not sure what to make of what I see in journals.” He offers an example: one publication of a Tamiflu trial was seven pages long. The corresponding clinical study report was 8,545 pages. . . .

Clinical study reports . . . are the most comprehensive descriptions of trials’ methodology and results . . . . They include details that might not make it into a published paper, such as the composition of the placebo used, the original protocol and any deviations from it, and descriptions of all the measures that were collected.  But even clinical study reports include some level of synthesis. At the finest level of resolution are the raw, unabridged, patient-level data. Getting access to either set of results, outside of being trial sponsors or drug regulators, is a rarity. Robert Gibbons, the director of the Center for Health Statistics at the University of Chicago, had never seen a reanalysis of raw data by an independent team until a few years ago, when he himself was staring at the full results from Eli Lilly’s clinical trials of the blockbuster antidepressant Prozac.

There will be a growing imperative to open up all of the data as concerns about the reliability of publications continue to grow.

Tara Ragone on Medical Loss Ratio Rebates in New Jersey

Seton Hall Law Research Fellow & Lecturer in Law, Tara Ragone, appeared in the award winning business publication NJBIZ regarding rebates to consumers from health insurers who have failed to meet their Medical Loss Ratio requirements under the ACA.

NJBIZ notes:

New Jersey consumers will receive an estimated $106 million in health insurance rebates from insurance companies that fail to comply with the Medical Loss Ratio provision of the Affordable Care Act, according to a Kaiser Family Foundation report based on insurer filings to the National Association of Insurance Commissioners.

But health care experts said that amount could change dramatically when final calculations are submitted to the state Department of Banking and Insurance in June, since the state’s MLR calculations differ from those of the federal government — which require individual and small group insurers to reimburse consumers if their annual administrative expenses exceed the governments’ 20 percent cap on their total premium income.

Regarding the differences in which the federal government and State of New Jersey calculate Medical Loss Ratios and the effect that might have on any net distribution to consumers, NJBIZ noted:

According to Tara Adams Ragone, a research fellow at Seton Hall University School of Law’s Center for Health & Pharmaceutical Law & Policy, in the individual and small-group markets, both the federal and state government cap an insurer’s administrative expenses at 20 percent of its premium income, leaving the rest for health care claims and quality improvement activities. But Ragone said the way in which the state calculates its ratio is not the same as the federal government’s formula.

According to Ragone, the federal government allows insurers to include quality improvements, like physician training, within the 80 percent threshold for premium income spending on health care claims, and they also can deduct taxes and fees from their administrative expenses. In New Jersey, quality improvements and taxes are not included in the MLR calculation, so it is harder for an insurer to satisfy state MLR requirements. Ragone said if the state requires an insurer to issue a larger rebate to consumers, it will have to take into account the amount of rebates the insurer had already distributed under federal law.

The new federal provision requires rebates to be issued by Aug. 1, 2012, while New Jersey currently requires insurers to issue reimbursements by Dec. 31, 2012.

You can read the full article here below:

“Value of health insurance hard to determine, experts say“

Recommended Reading: The FDA on Its Post-2007 Safety Ramp-Up and Barbara Evans on the Ethics of FDA-Mandated Postmarketing Studies

The FDA has released a report — Advances in FDA’s Safety Program for Marketed Drugs — in which the agency declares that, as a result of reforms implemented following the passage of the Food and Drug Administration Amendments Act (FDAAA) in 2007, it “now oversees the safety of both innovator and generic marketed drugs with the same rigor and focus as for premarket drug review.”  The FDA is likely engaging in a bit of hyperbole, given the vast disparity in resources allocated to pre- and postmarket review and its previous representation to Congress that “postmarket surveillance will ultimately require a level of staffing and organizational structure similar to that used for premarket review.”  As Professor Barbara Evans points out in her most recent article, The Ethics of Postmarketing Observational Studies of Drug Safety under Section 505(o)(3) of the Food, Drug, and Cosmetic Act (forthcoming in the American Journal of Law & Medicine), the FDA spends upwards of $500 million a year on pre-market review while Congress authorized expenditures of just $25 million a year for the years 2008 to 2012 to implement FDAAA’s various provisions related to post-market safety.

Still, the FDA does marshal some impressive facts and figures in its report.  Among the changes the FDA highlights, the Office of Surveillance and Epidemiology, which is “primarily responsible for monitoring postmarket drug safety data[,]” grew in size from 123 employees in 2007 to 245 employees today.  New safety positions have also been established within each of the 18 divisions of the Office of New Drugs, to ensure that “postmarket safety issues that arise related to the drugs approved in their division are handled effectively[,]” and within the Office of Generic Drugs’ Division of Clinical Review, to “evaluate[] and track[] reports of potential inferior generic product quality, adverse events, and reports of different therapeutic effect compared to the relevant reference listed drug.”   In addition, the FDA now has “a team of biostatisticians dedicated exclusively to postmarket safety evaluation.”

Since 2008, the FDA has used its new powers under FDAAA to require manufacturers (1) to conduct more than 385 postmarket drug safety studies, (2) to adopt “new safety labeling 65 times … generally for whole classes of drugs,” and (3) to implement 64 risk evaluation and mitigation strategies (REMS).  The agency receives many more adverse event reports today than in the past — the number more than doubled between 2005 and 2010, from 323,384 to 673,259 reports — and it has developed new data mining algorithms to identify patterns that might indicate new or increased drug safety risks.  The FDA has also “carried through on its commitment to communicate early and often about new drug safety issues[,]” issuing 68 Drug Safety Communications (DSCs) in 2011, up from 39 DSCs in 2010.  The FDA notes that “[t]he DSC webpage has now become one of the most visited pages on the FDA’s website, receiving more than 8  million page views in 2011.”

On top of all of the above-described activity, the FDA has been working to develop the  FDAAA-authorized Sentinel System, which will be “a national electronic system for securely accessing health care data [such as insurance claims and clinical records] to monitor the safety of drugs and other FDA-regulated medical products.”  The FDA explains in its report that it has developed a “Mini-Sentinel” pilot program that provides the agency with access to the “electronic health information of more than 125 million patients, provided by 17 data partners nationwide.”  The agency has therefore met the target set in FDAAA that it have access to the information of 100 million patients by July 2012.

In her interesting and important article, Professor Evans addresses a potential intersection between the Sentinel System and the observational studies that FDAAA authorizes FDA to require manufacturers to conduct.  A key concern about these studies is that personal health information that is disclosed to a drug or device company that is unrelated to one of that company’s products “may be subject to no federal regulatory protections whatsoever: not HIPAA, not the Common Rule, and arguably not even FDA’s human subject protections.”  As a result, institutional review boards “understandably may conclude that privacy risks are not minimal and refuse to approve [a HIPAA] waiver” allowing the data to be disclosed.  If this data access problem is not solved, the FDA could be forced to order companies to conduct randomized controlled trials “to answer questions that could have been answered using observational approaches[,]” which “is troubling since, by their nature, postmarketing [randomized controlled trials] of drug safety are ethically dubious affairs that pose special risks for human subjects.”  Based on a careful analysis of the language of FDAAA, Professor Evans concludes that the data access problem is not insolvable, because the FDA can enter into collaborative agreements pursuant to which manufacturers cover the cost of performing studies using the Sentinel System.  She cautions, though, that protecting patient interests will require, in addition to “a strong set of contractual provisions[,]” “an open, transparent public process for deciding the content of those provisions and for ensuring their careful, ongoing enforcement.”

CIAs: OIG’s Favorite Enforcement Tool

In an attempt to stem health care fraud, the government’s use of Corporate Integrity Agreements (CIAs) is growing. In Professor Zack Buck’s Health Care Fraud and Abuse class here at Seton Hall Law, students were given the benefit of  a discussion on the topic by two industry veterans, Tim Grimes and Brett Bissey.  Grimes is the Health Care Compliance Officer for the North American Pharmaceuticals branch of Johnson & Johnson, where he oversees the development, improvement and management of health care compliance and government contract compliance systems.  Bissey is Senior Vice President, Chief Ethics and Compliance Officer at the University of Medicine and Dentistry of New Jersey (UMDNJ), where he is responsible for the management and direction of all compliance and ethics related programs.

Grimes and Bissey spoke on the proliferation of, and challenges associated with, the use of CIAs in the health care industry.  A CIA is a restrictive agreement, usually lasting five years, entered into by the Office of Inspector General of the U.S. Department of Health & Human Services (OIG) and a health care entity alleged to have engaged in fraudulent or abusive practices.  CIAs impose numerous compliance obligations, which are intended to stop fraudulent behavior from occurring in the future.  These compliance obligations range from requiring employee training, to mandating the appointment of a compliance officer, to implementing a communications hotline.  Both Grimes and Bissey have personal experience working under a CIA, as Johnson & Johnson and UMDNJ, like many others in the industry, have or are currently operating under such integrity agreements.

Grimes and Bissey explained that CIAs can be cumbersome because the terms of the agreements are often unclear and the costs of compliance obligations, such as employee training, can be immense.  For example, CIAs generally require proper compliance training for any “relevant covered person” within the organization.  However, what defines such persons is generally unclear, and the costs and logistics of implementing a training program for all employees who come in contact with a medication, from local pharmaceutical representatives to researchers working in another country, can be expensive and complex.

To help address such issues, Grimes participated in the Pharmaceutical Compliance Roundtable hosted by the OIG in February 2012, which brought together compliance professionals from 23 pharmaceutical manufacturers currently operating under a CIA.  By establishing the Roundtable, the OIG sought to foster an open dialogue between private industry and government addressing the implementation and operational challenges of CIAs.

While the difficulties of working under CIAs were mentioned, Grimes and Bissey also acknowledged the benefits that companies can reap by their use.  CIAs can also, it was said,  be extremely beneficial because they increase the individual responsibility on corporate officers and board members, grabbing the attention of upper-level management who may have previously been less responsive to compliance concerns.  Further, the proliferation of CIAs is said to have changed the attitude of some company officers toward compliance initiatives–bringing a level of enthusiasm which may have been absent in the past.

On a parting note, Grimes and Bissey agreed that the government shows no signs of slowing down on its use and enforcement of CIAs in the health care industry.  Commenting about the state of the industry, they said the question is not “Who is under a CIA?”  Rather, it’s “Who isn’t?”

Photo Credit by Hedwig Storch

Online Graduate Certificate Programs in Pharmaceutical & Medical Device Law and Health & Hospital Law

The next sessions for the Seton Hall Law Online Graduate Certificate Programs will commence in June, 2012. These 8-week non-degree programs are designed for individuals who seek a greater understanding of key aspects of the health care field.

The Pharmaceutical & Medical Device Law & Compliance Program will begin on June 10, addressing the legal, regulatory and ethical issues related to the pharmaceutical and medical device industries. Priority application deadline is May 24.

The Health & Hospital Law Program will commence online on June 24 and offers an exploration of the legal, regulatory and ethical issues regarding health care delivery. Priority application deadline is June 2.

Click here to learn more about the Pharmaceutical & Medical Device Program and to apply; here to learn more about the Health & Hospital Law Program and apply. For further information, please contact Helen Cummings, Assistant Dean for Graduate Programs, at helen.cummings@shu.edu or call 973-642-8380.

Risperdal: Low Hanging Fruit for States with Medicaid Deficits?

Think of it as a clarion call, a shot across the bow, or even the smell of carrion wafting towards the nostrils of bean counters and state administrators everywhere–but any way you look at it, be sure that the Risperdal verdict of $1.2 billion dollars against Johnson & Johnson and its subsidiary, Janssen Pharmaceuticals, Inc., has states across America checking the terms of their own False Claims Act and counting how many prescriptions of the drug were filled through Medicaid.

It is no secret that states face shortfalls; it is no secret that Arkansas was awarded $1.2 billion, $5,000 per prescription plus a relatively minor amount for deceptive practices.  Think back to the tobacco litigation of the 90s for an apt analogy–states across the country plugged their deficits with tobacco money to the tune of billions. Make no mistake, the Risperdal verdict is a game changer–from the perspective of the litigation itself, the Risperdal litigation to come, and what that litigation signals– especially from  a Pharma and Healthcare legal compliance perspective going forward: because you can rest assure that after states have finished counting Risperdal prescriptions filled through Medicaid and prepped the requisite paperwork,  they will then commence their search for “the next Risperdal.”

In case you missed it, here’s a snippet from Zack Buck’s superb article on the verdict and the “rigid and severe” penalties associated with the False Claims Act.  Reading the rest of it is time well spent (link below).

News of the $1.2 billion verdict against Johnson & Johnson and its subsidiary Janssen Pharmaceuticals Inc. for their roles in marketing Risperdal during the middle of last decade sent reverberations through the industry earlier this week.  The award resolved Arkansas’ claims that the companies fraudulently marketed the “second generation” antipsychotic, misleading doctors and deceiving the state’s Medicaid program into paying for 239,000 prescriptions of the drug.  Specifically, the state claimed the companies minimized Risperdal’s dangerous side effects by not disclosing the risks on its label, marketed the drug for unapproved uses, and characterized it as more effective than competitors’ drugs.

After the jury found that the companies had misled doctors about the risks associated with Risperdal, Judge Tim Fox awarded $11 million for the violation of the state deceptive trade practices act. Further, Judge Fox turned to the Arkansas’ False Claims Act (FCA) - which carries a minimum $5,000 civil penalty for each violation of the Act (the federal FCA requires a minimum civil penalty of $5,500) - and applied Arkansas’ statutory penalty to the 239,000 prescriptions of Risperdal paid for by Arkansas Medicaid between 2002 and 2006, totaling $1.195 billion in damages.  According to Janssen, the state paid only $8.1 million for Risperdal during the 3½ year time period, which amounts to less than 1% of the damages amount.  The companies plan to appeal.

http://www.healthreformwatch.com/2012/04/15/rigid-severe-penalties-of-fcas-on-full-display/

Rigid, Severe Penalties of FCAs On Full Display

News of the $1.2 billion verdict against Johnson & Johnson and its subsidiary Janssen Pharmaceuticals Inc. for their roles in marketing Risperdal during the middle of last decade sent reverberations through the industry earlier this week.  The award resolved Arkansas’ claims that the companies fraudulently marketed the “second generation” antipsychotic, misleading doctors and deceiving the state’s Medicaid program into paying for 239,000 prescriptions of the drug.  Specifically, the state claimed the companies minimized Risperdal’s dangerous side effects by not disclosing the risks on its label, marketed the drug for unapproved uses, and characterized it as more effective than competitors’ drugs.

After the jury found that the companies had misled doctors about the risks associated with Risperdal, Judge Tim Fox awarded $11 million for the violation of the state deceptive trade practices act. Further, Judge Fox turned to the Arkansas’ False Claims Act (FCA) – which carries a minimum $5,000 civil penalty for each violation of the Act (the federal FCA requires a minimum civil penalty of $5,500) – and applied Arkansas’ statutory penalty to the 239,000 prescriptions of Risperdal paid for by Arkansas Medicaid between 2002 and 2006, totaling $1.195 billion in damages.  According to Janssen, the state paid only $8.1 million for Risperdal during the 3½ year time period, which amounts to less than 1% of the damages amount.  The companies plan to appeal.

Arkansas adds itself to a growing list of states taking legal action relating to Risperdal’s marketing – trials in Louisiana and South Carolina have already resulted in damage awards of $258 million and $327 million, respectively.  Earlier this year, the state of Texas settled its allegations for $158 million.  And the federal government is also pursuing the companies, reportedly seeking between $1.3 and $1.8 billion to resolve its claims.

The Arkansas award provides an opportunity to engage in serious “Monday morning quarterbacking” as to why the companies did not settle the case, with a settlement estimate perhaps as low as $30 million.  In addition to providing an opportunity to second-guess the trial strategy, the court’s award also places the mandatory and stark penalties of state and the federal FCAs – blunt, severe governmental tools – into public discussion.  Due to the statutes’ structures, the damages amounts often far exceed the amounts of monetary damages the government initially suffers.  Further, as in federal fraud recoveries, the award amount does not go to those who may have been personally harmed by the Risperdal marketing tactics (notably, however, at trial, the state failed to show any patient harm, according to Janssen).  Instead, the recovery goes into the Arkansas Medicaid program (which, as pointed out by the Associated Press, is facing a $400 million shortfall for 2013).

The huge damage amount required by the federal FCA prompted one court in a widely publicized non-health-related fraud case in February to refuse rewarding any damages after finding FCA liability.  See U.S. ex rel. Bunk v. Birkart Globistics GMBH & Co., 2012 WL 488256 (E.D. Va. Feb. 14, 2012).  In Bunk, qui tam relators had brought a lawsuit (in which the government eventually partially intervened) alleging that bidders to a contract with the U.S. military had engaged in price collusion.  After the bidder had certified to the government they had independently arrived at their prices and denied collusion, the parties entered into a contract relating to transporting goods belonging to U.S. military members and their families.  Once relators found that the bidders had in fact colluded in setting the price, they brought suit.  The court found the defendants liable under the federal FCA, and proceeded to determine damages.

The defendants had filed 9,136 invoices under the contract, mandating damages under the FCA of at least $50 million (at least $5,500 per violation).  However, the court concluded that the prices under the contract – even if not independently reached – were fair and reasonable.  Further, the court found that the government was not financially harmed, and as such, the statutory penalty constituted an excessive penalty under the Eighth Amendment.  After finding that it lacked discretion to reduce the statutory penalty, the court refused to award any damages to the relators.

Both cases demonstrate the seriousness and rigidity mandated by both the federal and Arkansas FCAs.  Where the Risperdal settlement is staggering in its amount, the Bunk court’s failure to impose any damages is equally stunning.  As the government continues to rely on big FCA penalties to combat and deter healthcare fraud, defendants are incentivized to settle before trial, and more courts may be forced into a Bunk-like analysis.

Professor Ani Satz on ‘Making Health and Disability Law More Responsive to Lived Experience’

Recently, the Center for Health & Pharmaceutical Law & Policy hosted a fascinating talk by visiting scholar Professor Ani Satz regarding the treatment of disability within American society. Satz is a regulatory health lawyer and philosopher who is an Associate Professor at Emory University School of Law and holds a faculty appointment at the Rollins School of Public Health and the Center for Ethics.  She served as 2009-10 chair of the Disability Law Section of the Association of American Law Schools and continues to serve as a member of the executive board of the section.

Professor Satz focused on the fragmentation inherent in health and disability law.  She first addressed the current implementation of the Americans with Disabilities Act (ADA), the primary piece of legislation dealing with discrimination against those with disabilities.  She noted that while the ADA sought to protect those with disabilities from employment discrimination and unemployment, the employment statics of those who are disabled show that their employment today is at a lower or same level as that since before the passage of the Act.  The primary problem according to Professor Satz is the lack of true protection afforded by the Act; despite your disability, if you cannot do the job as well as anyone else, you can be terminated.  Further, a problem arises in that although the ADA requires an employer to provide those disabled with “reasonable accommodations,” what accounts for reasonable is largely left to the employer themselves.

Stepping back from the ADA, Professor Satz believes that the problem goes deeper, and stems directly from the way society views disability.  Traditionally, America has viewed disability as only affecting individuals or smaller pockets of people.  Professor Satz believes that a more appropriate perspective would consider that all people are constantly vulnerable to disability and illness– making us each, in a sense, potentially disabled, and the position of the disabled in American society ours but for a single debilitating event.   Essentially, what Professor Satz espouses as the more appropriate societal response to disability may be seen as a function of Rawl’s famous veil of ignorance: If you were forced to come up with rules for a society, and you knew not your own status– gender, race, size, intelligence or (dis)ability, what then would the law look like?

She cited natural disasters, toxins, poverty, and war as a few of the problems to which all Americans are constantly vulnerable, with a lifetime of disability waiting on the other side.  But because of our failure to take into account the very real potentiality, there is the assumption that disability only affects the few, and Professor Satz posits that the law fragments or breaks apart our experiences and thus does  little to protect those with disabilities.

At the heart of this fragmentation is the lack of coordinated care.  Neither federal nor state health agencies address this issue, and can even create barriers to the coordination of care.  At the macro level, fragmentation stems from statutes and regulations and the case law interpreting them.  Again, while the original goal of the ADA was to decrease barriers to employment, in effect, it has provided little protection.  At the micro level, individuals with disabilities often lose, largely due to the way in which courts are constructing the “environment.”  Looking at the person’s abilities as a whole, rather than in the workplace, Professor Satz believes that the courts find many people to be non-disabled because they can do routine daily tasks, such as cook for themselves, while in reality they are unable to perform within the rigors of the workplace.

As a solution, Professor Satz suggests that we must take a more holistic view of disability, acknowledging that we are all constantly vulnerable.   Viewed through the lenses that we are all thus equally affected, we can try to protect ourselves from the detrimental effects of disability should they strike us.  Further, Professor Satz thinks that the reasonable accommodation mandate of the ADA needs to be expanded.  She would like to see federal mandates in place outlining exactly how employers must accommodate employees.  Acknowledging concerns that greater accommodations will lead to greater burdens on private employers, she suggests the possibility of the federal government setting up a fund through which these accommodations could be paid for.   In the end, she thinks that changing societal views towards the concept of disability, and in turn the laws driven by those views, will be a hard but necessary task if a real difference is to be made.

photo by Mikhail Evstafiev

At Last, HHS Releases the Affordable Health Insurance Exchanges Rule

On March 12, 2012, HHS finally released the long-awaited Affordable Health Insurance Exchanges final rule that was published in the Federal Register on March 27. The Affordable Care Act (ACA) mandates that all states set up a state-run insurance exchange to be ready to go live in January 2014 or else the federal government, through HHS, will step in and implement an exchange pursuant to its discretion. The states have until January 1, 2013 to prove to HHS that they have taken the steps to create an operable exchange pursuant to the standards and that they will be ready to go live in January 2014. If HHS finds that the state is unprepared or not complying with the minimum standards, HHS will step in and create the exchange under its own direction.

The exchange is designed to allow consumers and small businesses the option to choose a private health insurance policy through a web-based platform. Kathleen Sebelius, the Secretary of HHS, states in a news release that the new exchange policies will “give states the flexibility they need to design an exchange that works for them,” and the exchanges will provide a marketplace for Americans for “one-stop shopping for health insurance,” which the federal government hopes will drive down costs for consumers by increasing competition among insurers and improving access to health care. Individuals that purchase a qualified health plan through an exchange may be eligible for a tax credit according to a recently released regulation by the IRS, known as the health insurance premium tax credit.

According to HHS’s news release, the final rules provides guidance to the states on how to structure the exchanges in two keys areas: (1) setting standards for establishing Exchanges, setting up a Small Business Health Options Program (SHOP), performing the basic functions of an Exchange, and certifying health plans for participation in the Exchange; and (2) establishing a streamlined, web-based system for consumers to apply for and enroll in qualified health plans and insurance affordability programs. The final rule also provides details on the roles of agents and brokers in the exchange and provides for privacy protections for enrollee data. The private insurance industry is pleased that the final rule also allows enrollees of the exchange to purchase insurance through private entities and still have access to the subsidies. Essentially, the final rule tasks the states with setting up an acceptable exchange and provides the standards and framework for doing so. Future rules by HHS will have to address how HHS will establish exchanges in states that do not implement one since this is not dealt with in this final rule.

To date, HHS has issued nearly $670 million to thirty three states and the District of Columbia to get them started on setting up an exchange. HHS announced, as of March 2012, that the “majority of the states have taken significant steps in building Exchanges.”

HHS’s new release fails to mention the backlash among a number of states (mainly Republican-led) and in general, from opponents of the ACA, that view the Act as unconstitutional and an abuse of federal power. Most recently, the Republican governor of Wisconsin, Scott Walker, has reportedly turned down $37 million in federal funding to set up the state’s exchange. Governor Walker stated that he will not begin implementing an exchange until the Supreme Court has issued a decision on the constitutionality of the ACA. Walker, like many Republicans, opposes the ACA and the creation of an exchange on the grounds that it is an “encroachment of Obamacare in our state, which has the potential to have a devastating impact on Wisconsin’s economy.” In defense of his position, Walker refers to Wisconsin’s reputation as a health care innovator and its success in achieving a high level of health insurance coverage, without the involvement of the federal government.

For Wisconsin and the several other states that have refused federal funding, including Kansas and Oklahoma, the regulations provide that HHS will step in and set up an exchange if the states refuse to take such action. Given the continued opposition across the country surrounding the ACA’s provisions, the backlash among the states is not surprising and will certainly continue until the Supreme Court makes its ruling on the constitutionality of the individual mandate and the Medicaid expansion provision in the upcoming months. If the Supreme Court rules that the individual mandate is unconstitutional and that the provision is not severable from the remainder of the Act, then the entire Act including the state exchange provisions will be struck down.

Whether you align yourself with the Republicans or Democrats, or another political party of choice, it is important to remember — politics aside — that 17.7 percent of Americans in December 2011 were uninsured. Even if the Supreme Court strikes down the whole Act or parts of the ACA, future action and legislation will be necessary to remedy the sad state of health care coverage in America and improve the quality and delivery of health care services.

EMTALA and the Free Rider Problem

This tragic case may interest those who teach EMTALA:

[Anna Brown] yelled from a wheelchair at St. Mary’s Health Center security personnel and Richmond Heights police officers that her legs hurt so badly she couldn’t stand. She had already been to two other hospitals that week in September, complaining of leg pain after spraining her ankle. This time, she refused to leave.

A police officer arrested Brown for trespassing. He wheeled her out in handcuffs after a doctor said she was healthy enough to be locked up. . . . She told officers she couldn’t get out of the police car, so they dragged her by her arms into the station. They left her lying on the concrete floor of a jail cell, moaning and struggling to breathe. Just 15 minutes later, a jail worker found her cold to the touch.

For some context, here is an excerpt from a column from Steven Pearlstein on a far more notable battle last week:

[T]he solicitor general and several justices tried to make the obvious point that one reason so many Americans lack health insurance is that the market is inherently unlike any other in that we don’t deny medical care to sick people who can’t pay for it. It is from this anomaly that springs the “individual mandate,” a requirement that all citizens buy health insurance, to prevent them from becoming free-riders on a system paid for by others.

Rather than wrestling with this obvious anomaly, however, Scalia and Alito simply [blamed] the government for creating the problem in the first place by obligating hospitals to treat the sick even if they are uninsured and cannot pay for the care.

As the case of Anna Brown shows, there are many ways to “solve” the free rider problem.

Recommended Reading

As proof that the only news in health law does not involve the Supreme Court’s consideration of the challenge to the Affordable Care Act, here are some interesting recent articles that are worth a read:

1.      Frank McClellan and others recently released the results of their study, “Do Poor People Sue Doctors More Frequently? Confronting Unconscious Bias and the Role of Cultural Competency.” Some doctors perceive that socioeconomically disadvantaged patients tend to sue their doctors more frequently, which has influenced them not to provide care or to provide care in different ways to this population. For example, 57 percent of physicians polled in California in 1995 cited this belief as important in their decision not to treat Medicaid patients.  Yet McClellan and his co-authors review studies showing that, to the contrary, poor patients tend to sue their physicians less often than other groups.   Indeed, there is evidence that patients in lower socioeconomic groups are also less likely to file nonmeritorious malpractice claims.  One possible explanation that the authors of this project offer to explain this disconnect between physician perception and fact is unconscious or implicit bias, which “describes thinking and decision making affected by stereotypes without one being aware of it” that “can explain why people may consciously believe in a truth, whereas their behavior, affected by subconscious prejudices, is contrary to that truth.”  For example, physicians unconsciously concerned that poor patients will not adequately compensate them for their care “might consciously or unconsciously presume poor patients are more likely to sue as an excuse or way of avoiding the presumed difficulty associated with collections from such patients.” The authors of this study make recommendations to confront unconscious bias and provide culturally competent care (”CCC”), including increasing diversity, educating providers about CCC, improving provider communication skills, and enhancing patient health literacy.  CCC educational efforts are especially valuable in specialties like orthopaedic surgery, where approximately 84 to 89 percent of providers are white males.   It is thought that these efforts will improve medical care to lower socioeconomic groups and reduce the risk of malpractice claims.

2.      In “Diversion of Offenders with Mental Health Disorders: Mental Health Courts,” Sarah Ryan and Dr. Darius Whelan review the use of mental health courts in the United States, Canada, England, and Wales and consider whether these courts should be established in Ireland.  The article first reviews Therapeutic Jurisprudence (”TJ”), a foundational theory underlying problem-solving courts like mental health and drug courts that “promotes the employment of a ‘problem-solving pro-active and results oriented posture that is responsive to the current emotional and social problems of legal consumers.’”  While advocating its strengths, the authors also warn of the danger that paternalistic applications of TJ can water down due process and rule of law values.  They then identify and compare features of mental health courts that have developed in the United States, Canada, England, and Wales since the pioneer court started operating in Broward County, Florida in 1987.   After evaluating the main merits (e.g., more appropriate treatment and potentially reduced recidivism and costs) and criticisms (e.g., concerns about coercion, waiver of due process rights, stigmatization and segregation of the mentally ill, diversion of resources, and lack of empirical data that they are effective) of these courts, the authors conclude that mental health courts could offer a partial solution to the challenges facing Ireland’s criminal justice system.  Not surprisingly, they urge policymakers to select the best features of the programs that have evolved to date and to apply TJ “in a careful manner, to avoid interference with defendants['] constitutional rights.”  For example, the authors recommend that a solicitor be appointed at the first indication an offender could be eligible to participate.  Further, they believe that Ireland should not require offenders to plead guilty as a pre-condition to participate in the program because such a requirement is “antithetical to the goal of decriminalising the mentally ill.”  They warn, however, that for the program to be viable, Ireland would have to allocate substantial funding to develop community mental health treatment facilities.

3.      Recent Harvard Law School graduate Maggie Francis has written, “Forty Years of ‘Testing, Testing’: The Past and Future Role of Policy Experimentation in Healthcare Reform,” which reviews the federal government’s use of pilot projects and demonstration projects over the past forty years to test innovative health reform ideas.   As Ms. Francis describes, her article is the “first . . . in the legal literature to analyze the use of systemic policy experimentation by the federal government to reform the healthcare system.”  She describes the number and types of problems facing the healthcare system and why policymakers have chosen pilots as a means of addressing these problems.   The article then evaluates whether pilot projects are a useful tool in healthcare reform.  Ms. Francis identifies numerous advantages to pilots, including that they provide some cover to controversial innovations from political pressures and permit government to try multiple theories in different pilots to assess what works better in different populations, locations, etc. and to make adjustments based on experience that should make large-scale implementation smoother.  She also warns of some possible roadblocks, including lack of adequate information and competence to select the right pilots and then to oversee their implementation and evaluation.  A common criticism of these programs is that they take too long to test new ideas and expand those that are successful.  Securing consistent funding has also been a challenge.  In addition, political interference and gamesmanship can undermine efforts to innovate.  Ms. Francis concludes that, despite their limitations, pilot projects satisfy policy makers’ need for information about reform ideas and their consequences and offer the most promise where “organizational challenges, rather than stakeholder opposition and distributional problems, are the primary obstacle to reform.”  As a result, she posits that pilots might be more successful at encouraging widespread adoption of less controversial innovations, such as medical homes, than with contributing “significantly to the goal of cost control, which necessarily raises contentious distributional issues among powerful stakeholders in the healthcare industry and is likely to trigger rent-seeking behavior by interest groups.”  Ms. Francis’s observations are not merely historically interesting but rather offer important insights given the variety of pilot projects included in the ACA to help identify a politically viable way to bend the healthcare cost curve while improving quality.  Ms. Francis reviews the diverse medley of pilots in the ACA, including, but far from limited to, the creation of the Center for Medicare and Medicaid Innovation, reminding us all how much more there is to the ACA than just the mandate and how much we will learn from its implementation.

Happy reading!

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