Healthcare Compliance Certification Program at Seton Hall Law School

June 10-13, 2013, Newark, New Jersey

NY/NJ CLE credits available

Program Overview

This four-day educational program, held twice a year, immerses attendees in the statutes, regulations, and other guidance that comprise the body of law known as “fraud and abuse law,” as well as other healthcare-related laws and regulations, to help them understand the legal underpinnings of the compliance programs they develop and enforce.

Who Should Attend

Pharmaceutical and medical device professionals in compliance, legal, regulatory and medical affairs, sales, marketing, grants and related areas, as well as outside counsel who represent healthcare companies.

Cost & Registration

Tuition for the Program: $2,400. To register, go to http://law.shu.edu/hccp.

Program Details

1. Program faculty include high-level government and private lawyers who are experts in pharmaceutical and medical device fraud and abuse issues.
2. Session topics include Federal and State False Claims Acts, Federal Anti-Kickback Statute, the Food, Drug & Cosmetic Act (FDCA), Data Privacy (HIPAA, HITECH, and others), Food & Drug Administration Amendment Act of 2007 (FDAAA), Foreign Corrupt Practices Act (FCPA), Prescription Drug Marketing Act of 1987 (PDMA), PhRMA Code and AdvaMed Code, The Federal Sunshine Law, federal and state marketing and disclosure laws, OIG compliance guidance, and much more.
3. Attendees receive extensive resource materials which will aid them in their ongoing compliance efforts.
4. Attendees will receive a certificate issued by Seton Hall Law School upon completion of the Program, and may apply for approximately 26 CEUs for HCCA and SCCE certification and/or NY and NJ CLE credit.

More Information

For more information regarding the Program, please contact Sara Simon at sara.simon@shu.edu or call 973-642-8190.

Sterilization Matters

When patients undergo surgical or other medical procedures, they hope to receive optimal care provided by experienced physicians. They are rarely concerned about proper sterilization of surgical instruments and other medical equipment as it is likely assumed that the health care facility has applied this standard precaution. Unfortunately, however, not every medical center is adequately sterilizing its equipment, yet this is a crucial element of successful medical care.

According to a report by The Center for Public Integrity, a patient who underwent a routine rotator cuff repair surgery at a Texas hospital in 2009 was readmitted weeks later due to an infection from the deadly bacteria known as P. aeruginosa.[1] An investigation conducted by the Centers for Disease Control and Prevention (CDC) and the hospital revealed that the arthroscopic shaver utilized for the surgery contained the deadly bacteria even after the sterilization process. [2] A more recent incident occurred in March of this year where a routine inspection at an oral surgeon’s office in Tulsa, Oklahoma exposed sterilization issues, including cross-contamination problems.[3] The Department of Health stated, “more than 60 former patients [of the oral surgeon] tested positive for hepatitis and HIV.”[4]

Medical device manufacturers originally sold “single-use” devices because of the demand for disposable equipment.[5] In the late 1970s, hospitals began reusing medical devices intended for or labeled as “single-use” as a cost control measure.[6] The FDA explains that “single-use” devices are to be used once or on one patient during a single procedure whereas reusable medical devices are those that can be reused to treat several patients.[7]

Contaminated reusable medical devises can lead to infections but a method known as “reprocessing” involves meticulous sterilization intended to prevent infections.[8] Reprocessing generally includes the following steps: 1) preliminary decontamination and cleaning in the area of use such as the operating room to inhibit drying of blood and other contaminants on the devises; 2) transfer of the devise to the reprocessing area where careful cleaning occurs and 3) final disinfection or sterilization to allow the devise to be reused.[9] The FDA further explains that problems arise for reprocessing when sterilization instructions by the manufacturer are “unclear, incomplete, difficult to obtain from the manufacturer, or impractical for the clinical environment.” [10] Manufacturer designs that render proper cleaning difficult in addition to scantily paid sterilization technicians are other sources of concern.[11]

There are some diseases that preclude the reuse of medical devices, specifically Creutzfeldt-Jakob Disease (CJD).[12] CJD is a neurodegenerative disorder that causes rapidly advancing dementia, deteriorating memory, drastic changes in behavior, and coordination and visual issues.[13] It is 100% fatal; patients with CJD usually die within one year of disease symptom onset.[14] CJD results when normal brain proteins are transformed into abnormal and infectious forms known as prions.[15] Infected pituitary hormones, dura mater transplants, cornea grafts, and neurosurgical instruments are some examples of materials that can transmit the disease to patients.[16] Most disinfectant and sterilization procedures do not eliminate the infected prions.[17] Importantly, although fatality normally occurs within one year of symptom onset, the disease has an incubation period of up to 50 years, it is not readily detectable until symptoms occur, and is seemingly capable of transmission to others during the incubation period.[18]

The World Health Organization (WHO) released infection control guidelines for health facilities handling patients with CJD.[19] Essentially, any reusable surgical instruments that come into contact with “high infectivity areas” including the brain, spinal cord, and eye should be disposed of and incinerated.[20] But the difficulty, of course, is knowing who is infected with this infectious fatal disease with the disturbingly long incubation period.                                                                                                              Ensuring that hospitals follow proper sterilization is integral, but technician certification is also an important aspect of the overall sterilization scheme.[21] As the director of sterilization at a healthcare facility in New York so accurately stated, “The people who do your nails, they have to take an infection control course before they can apply for a license …Yet the people who deal with lifesaving equipment, they are required to have zero education.”[22] Currently, New Jersey is the only state that makes certification mandatory for sterilization technicians.[23]

As the provision of health care becomes more transparent, patients not only have the ability to choose where to obtain services based on price and reputation of a facility, but they are also, presumably, able to learn about various quality measures. By filtering a search based on location or hospital name, the Centers for Medicare & Medicaid Services’ (CMS) Hospital Compare Website enables patients to view quality measures such as readmission, complication, and mortality rates.[24] There, patients are able to examine the facility’s rates in comparison to the national average.[25] Therefore, improper sterilization leading to increased infection rates will likely be exposed to the public, however attenuated, which could cause patients to seek care elsewhere—at least in time, among consumers able to bring choice to the equation (non-emergency, non-insurance dictated) and who have the ability to comprehend the data. But seemingly, more direct measures can be taken to ensure patient safety.

Managing Whistleblower Risk and Liability

Last week, the Jersey Journal reported that a jury recently awarded a former employee of Bayonne Medical Center over $2.1 million in his whistleblower suit against the hospital.  The employee, Ceferino Doculan, alleged that the hospital violated New Jersey’s whistleblower statute, the Conscientious Employee Protection Act (CEPA), by terminating his employment as a technician in the hospital’s blood bank because he had complained to hospital personnel that his new supervisor was not qualified to hold that position under New Jersey law.

Although the hospital argued it had terminated Doculan for other reasons, the jury apparently accepted Doculan’s view of the predominant reason for his firing.  According to the article, the jury awarded him about $120,000 in compensatory damages (lost wages and pain and suffering) and $2 million in punitive damages.  The hospital intends to appeal.

The case offers several lessons regarding whistleblower liability risks for hospitals and other healthcare providers.   One broad takeaway is that management of whistleblower risks cannot be disentangled from other compliance matters.   So, in addition to the concerns about how to respond to a whistleblower appropriately, Bayonne Hospital had an actual legal problem – the supervisor was not qualified under New Jersey law.   CEPA and most other whistleblower laws do not limit protection to complaining employees who are correct about the law; typically, the employee’s report must merely be made in good faith.    Yet, intuitively, if the employer has in fact broken the law,  the employee may have an easier time establishing her wrongful termination claim, in part because the existence of the legal violation will potentially make the whistleblower more credible in her lawsuit.  Thus, vigilance about compliance with the law in the employer’s operations in general – in this case, on a human resources-related matter – is a key component in reducing whistleblower liability risks.

Second, keep in mind that, with rare exception, whistleblower laws protect only reports of illegal conduct or conduct that poses some kind of direct and serious risk to the public.  Whistleblower laws do not protect employee reports of violations of employer policies, nonlegal disputes with the employer, or other purely internal matters.   But, in highly regulated industries like healthcare, actions that might not otherwise implicate the law often do.  For example, in most industries, the law does not require a license, special training, or other credentials to serve as a supervisor; in healthcare, things are different.   Compliance personnel in the healthcare context therefore should know that whistleblower liability risks linger in the background of many human resources and other kinds of decisions.  Employee complaints and reports regarding such decisions – even those that might seem standard or run-of-the-mill – therefore should be taken seriously and treated like those that obviously involve legal mandates.

Finally, hospitals and other healthcare providers potentially confront multiple whistleblower regimes.  High-profile whistleblower litigation in this area often involves federal law, most notably, the False Claims Act (including “qui tam” actions for alleged overbilling of the government).  See examples here and here.   And the new whistleblower provisions found in the Affordable Care Act are garnering much attention.  But, as the CEPA claim in this case suggests, many states provide statutory and common-law whistleblower protections that sweep more broadly, potentially protecting employees who report a wide variety of alleged legal violations.   Each of these federal and state regimes has its own set of legal requirements, limitations, and remedies.  A working familiarity with these various regimes can enhance compliance and risk management.

For those interested in learning more about federal and state whistleblower regimes, Seton Hall Law School now offers an eight week online course on managing whistleblower risks.  The course is designed to introduce human resources and compliance personnel to the laws protecting employees who report alleged misconduct of their employers.  If you would like more information, please visit the course website  or call 973-642-8482.

Memorial Day, Remembering our Veterans With Treatment

It is Memorial Day, and like in past years I will ask that we take a moment here to consider the sacrifices at the heart  of this holiday—we remember our fallen, we memorialize our dead. At present, the Veterans Administration is having great difficulty in treating and compensating our war wounded.

Number of Veterans Affected, Multiple Deployments

Since the U.S. went to war in Afghanistan in 2001 and Iraq in 2003, about 2.5 million service members have been deployed in the Afghanistan and Iraq wars, according to Department of Defense data. Of those, more than 800,000 were deployed more than once; 400,000 have done three or more deployments, and nearly 37,000 were deployed more than five times.[1] Obviously, multiple deployments increase the likelihood of service related injuries.

Wounded & Injured

It is worth noting that although considered the longest wars in U.S. history, Iraq and Afghanistan have produced relatively few U.S. service member deaths: 6,648 (as of March, 2013), but have produced a large number of wounded in action (roughly 50,000). According to reports such as Modern Warfare, by Alec C. Beekley, MD, FACS, LTC, MC, US Army, Harold Bohman, MD, CAPT, MC, US Navy, and Danielle Schindler, MD,[2] compared to Vietnam, the mortality rate of combat wounded in Afghanistan and Iraq has decreased by nearly half. New medical procedures, protective gear such as body armor and faster medical evacuation are saving more than 90 percent of all those who fall in battle, many of whom would have died on the battlefield just a generation ago. They live, but they are compromised substantially.

Type of Injuries

Notably, according to Modern Warfare, prior wars “had a higher proportion of thoracic injuries and fewer head and neck injuries. There has been a decreased incidence of wounds to the abdomen since the Persian Gulf War. The percentage of blast-related injuries is now higher.”

The number of injured are estimated by many to be ten and twenty times the number wounded in action.[3]

As would be expected with the dominance of “blast related injuries,” hearing loss, traumatic brain injury (TBI), PTSD and clinical depression, are leading injuries, with hearing loss first.[4] A 2005 Department of Veterans Affairs research paper found that one third of returning soldiers were referred to audiologists due to exposure to blasts, and 72% of them were identified as having hearing loss;[5] a 2013 report by the U.S. Congressional Research Service estimates that 255,330 members of the military suffer from TBI;[6] a 2008 study by the Rand Corp found that 14% of Iraq and Afghanistan Veterans screened positive for PTSD, 14% for major depression, and 19% had a probable traumatic brain injury.[7]

And notably, the VA reports that 37% of the claims it has backlogged at present are from Vietnam Veterans, a great influx of which (260,000) occurred after the VA finally expanded the number of illnesses presumed to be associated with Agent Orange.[8]

VA Backlog

The Center for Investigative Reporting recently released a report[9] (featured on NPR)[10] which found:

• Despite assurances from the Obama Administration that the VA would be streamlined, “the internal documents show the VA expects the number of veterans waiting – currently about 900,000 – to continue to increase throughout 2013 and top a million by the end of this month [March, 2013].
• The VA’s internal documents “show that the average wait time for veterans filing disability claims fell by more than a third under President George W. Bush, even as more than 320,000 Iraq and Afghanistan veterans filed disability claims.
• The documents show delays escalated only after Obama took office and have more than doubled since, as 455,000 more returning veterans filed their claims.”
• Pointedly, under President Obama “the ranks of veterans waiting more than a year for their benefits grew from 11,000 in 2009, the first year of Obama’s presidency, to 245,000 in December – an increase of more than 2,000 percent.”
• Although the VA tracks and widely publishes the avg. number of days it takes to process a claim (273 days), that number pointedly does not refer to new claims. The average number of days to process a new claim in Newark is 371.6 days[11]

That amounts to roughly a year and a week for an initial claim in Newark, New Jersey– a very long time to live for a disabled veteran without much needed payments.

And importantly, if a veteran fails to characterize the claim correctly, the appeals process can literally take 2 and 3 years.

 

Professor John Jacobi In NJ BIZ & NJ Spotlight on New Jersey Health Reform

Professor John Jacobi took part in the Council on State Public Affairs’ “New Jersey State of Health” symposium, covered by NJ BIZ and NJ Spotlight. The symposium brought together the state’s leading health policy experts to discuss and formulate responses to the challenges wrought by the implementation of the ACA.

NJ Spotlight reports that:

The discussion on the future of long-term future of healthcare followed panel discussions on the implementation of the health benefit exchange and Medicaid eligibility expansion, key features of the 2010 Affordable Care Act that are both scheduled to beginning covering more New Jersey residents on January 1, 2014.

Seton Hall health law professor John V. Jacobi noted the challenge involved in informing uninsured residents about the new options. The exchange will be an online marketplace in which uninsured people can buy coverage and learn whether they are eligible for federal subsidies.

NJ Biz notes that:

Seton Hall Law School Professor John V. Jacobi said that between Medicaid expansion and the subsidized health plans to be sold on the exchange, “there will certainly be hundreds of thousands of people covered,” among New Jersey’s nearly 1 million uninsured.

“There are several barriers to getting those people covered, and one is the information deficit,” Jacobi said. “People who are uninsured are typically very busy people who struggle to make their rent and put food on the table, and they are not engaged in the rollout of the ACA. So getting navigators and health educators and information to those people is going to be very important.”

The federal Department of Health and Human Services has allocated $1.5 million to fund navigators in New Jersey, which health care experts have said won’t be adequate.

[Assemblyman Herb Conaway Jr. (D-Delran), chair of the Assembly health committee] said outreach to the public will be crucial. The state Department of Banking and Insurance still has an unspent federal grant of nearly $7.6 million it received to help plan a state-run exchange; the state opted instead for HHS to build the exchange for New Jersey. DOBI is talking to HHS about how that money can be used, and Conaway said it’s key that navigators get that money.

“It’s really going to be those community-based organizations that know how to reach and communicate with (the uninsured) that are going to be so important for reaching the people who need to be in the exchange,” he said. “That certainly would be an appropriate use for that money.”

Jacobi said the uninsured in New Jersey, “are mostly people associated with the workplace. Most are in families with workers, full-time or part-time workers, and dependents of workers,” who either can’t afford to buy insurance at their workplace, or their employer doesn’t offer it.

Read the NJ BIZ article, “Health panel reveals concerns about Obamacare rollout, future”

Read the NJ Spotlight article, “Healthcare Leaders Envision a Shared Future”

PPACA’s Expansion of ERISA: External Review Processes

The Patient Protection and Affordable Care Act (PPACA) has, in large part,  overhauled the American health care system— and the national dialogue that has resulted from PPACA’s enactment is seemingly infinite.  The focus of this post, however, is one particular topic that has not often been a part of the national dialogue.  It addresses PPACA’s expansion of the Employee Retirement Income and Security Act (ERISA) by requiring that external reviews be incorporated into employee benefits plans claim procedures.[1]

First, it is important to understand ERISA’s requirements prior to PPACA’s expansion of the statute.  The purpose of ERISA is to protect the rights of individuals participating in employee benefit plans.[2]  Among the types of employee benefit plans that ERISA regulates are group health plans.[3] To effectuate its purpose, ERISA mandates that if an employer chooses to establish an employee benefits plan, such a plan will fulfill certain requirements.[4]  One requirement is that plan participants who receive an adverse determination of benefits are afforded the opportunity to have such a determination reviewed:

            In accordance with regulations of the Secretary, every employee benefit plan shall—

            (1) provide adequate notice in writing to any participant or beneficiary whose claim for benefits under the plan has been denied, setting forth the specific reasons for such denial, written in a manner calculated to be understood by the participant, and

            (2) afford a reasonable opportunity to any participant whose claim for benefits has been denied for a full and fair review by the appropriate named fiduciary of the  decision denying the claim.

ERISA § 503, 29 U.S.C § 1133.[5]  Essentially, Section 503 requires that an employee benefits plan make available to plan participants claim procedures that enable a challenge to an adverse benefit determination.[6]  Pre-PPACA, the review of adverse benefit determinations was an internal process, without any independent, external review of the determination.[7]

As previously mentioned, the enactment of PPACA expanded upon ERISA’s claim procedures requirement. [8]  PPACA’s addition of external review processes aligns ERISA with the spirit of health care reform, which is to provide access to affordable health care to as many Americans possible.    Since only an internal review process of an adverse benefit determination was formerly required for purposes of ERISA, the concern was that many Americans were, and would be, denied essential medical coverage.[9]  Under the new requirement, the external review process provides that an independent review organization will make a final determination of the plan participant’s determination upon the exhaustion of the employee benefits plan internal claims process.[10]  Thus, the external review process serves as a check on internal review processes and is the final, binding determination regarding health care coverage.[11]  But it is important to note that in keeping with PPACA’s goal to cut health care costs, such an external review process may also result in the denial of health care coverage where the independent review organization deems medical treatment unnecessary.[12]  In addition, PPACA’s modifications of ERISA do not extend to grandfathered health plans, which are plans instituted on or before March 23, 2010.[13]

Recommended Reading: New Legal Scholarship from Ryan Abbott and Jennifer Herbst on Pharmacovigilance Topics

In his article Big Data and Pharmacovigilance: Using Health Information Exchanges to Revolutionize Drug Safety, which is forthcoming in the Iowa Law Review, Ryan Abbott argues that third parties, including academics, insurance companies, and rival drug companies, should be incentivized via an “administrative bounty proceeding” to analyze the large and rich datasets that will be generated by health information exchanges.  Should a third party’s original statistical analysis reveal safety or efficacy concerns about a drug, Abbott suggests, it could submit the results to the Food and Drug Administration and be paid a taxpayer-funded bounty, the amount of which would be based on the value of the new information to the government in terms of health care dollars saved.  If a drug’s manufacturer knew or should have known about the concerns brought to light by the third party, Abbott proposes that the manufacturer fund the bounty, the amount of which would be based on the drug’s sales; depending on its degree of culpability, a manufacturer could even be liable to both the third party and the government for damages.

Abbott believes that the bounty system he proposes would level the pharmacovigilance playing field in a way that would redound to the benefit of consumers.  In his words: “The public deserves an advocate as equally committed to challenging the safety and efficacy of approved drugs as product sponsors are to maintaining these drugs on the market.”  Writing about Abbott’s proposal at the Bill of Health blog, Dov Fox distills it down to the following provocative question: Are we “better off evaluating medicines under an inquisitorial system or an adversarial system”?

I also recommend Jennifer Herbst’s article How Medicare Part D, Medicaid, Electronic Prescribing and ICD-10 Could Improve Public Health (but Only if CMS Lets Them), which is forthcoming in Health Matrix: Journal of Law-Medicine.  While the title might seem daunting, the article itself brings clarity to a murky, highly-technical area of the law with enormous significance for public policy.  As Herbst explains, although both Medicare Part D and Medicaid limit reimbursement to drugs prescribed for “medically accepted indications,” this limitation is not enforced, at least not at the time of payment.  And, while the government’s attempts to enforce it retroactively have led to headline-making settlements with pharmaceutical companies, they have not resulted in a significant dent in the rate of unscientifically-supported prescribing.

Herbst recommends that the government take advantage of the inroads made by electronic prescribing and require that patient diagnosis codes be made a condition of payment for outpatient prescription drugs.  Linking drugs to diagnoses in this way would allow pharmacists to do a more thorough safety review of the prescriptions they fill and it would give the government a powerful pharmacovigilance tool.  Of course, it would also allow the government to decline to provide reimbursement for drugs prescribed for indications that are not “medically accepted.”  Herbst argues that this would be a mistake because it could lead to widespread miscoding – there’s a disconnect between what the government deems medically accepted and what providers consider sound medical practice – which would undermine the value of the data being collected.  I wonder, however, whether it would be politically feasible for the Centers for Medicare & Medicaid Services “to continue its current policy of paying for all outpatient prescriptions not subject to prior authorization (contrary to the letter of the Medicare Part D and Medicaid statutes)” in the face of the data Herbst’s proposal would generate.

Online Health Law Graduate Certificate Programs

Transplants and the Dilemma of Increased Suicide Risk

Bone marrow transplant recipients have been found to commit suicide at more than twice the rate of the general population, according to a recent European study. With a sample of almost 300,000 bone marrow transplant recipients, the rate of suicide was 21 per 100,000 people, as compared with 9 per 100,000 in the general population.[1] While the signs of depression that often coincide with the diseases that create the need for transplants may be a cause, this increased rate in suicide may also be attributable to the physical and mental toll of the transplant process. Irrespective of the precise cause, serious implications may result in the transplant allocation process if this study is given weight.

The scarcity of organs that we continue to struggle with in the United States and abroad justifies the goal of allocating organs to individuals who will best take care of them. In doing so, we create requirements for individuals who, for example, are in need of a liver transplant due to their alcohol abuse. It would be counterintuitive to give a liver to someone who, by his or her own volition, will abuse the anatomical gift. Among these requirements, alcoholic candidates are given their position on priority lists only after they can establish that they have abstained from alcohol for a given period of time. There are countless additional measures employed to attempt to ensure that the limited available organs are not wasted. This goal of distributing organs intelligently to avoid waste is critical to the United States’ system of allocation.

The moral principles behind the various methods of organ allocation create this intention of maximum preservation. This goal of saving the most lives creates an immediate dilemma when taking this study into consideration.

Depression has been found in greater rates among those in need of transplants when compared with the general population, and this fact is entirely unsurprising. But should an individual’s psychological reaction to his or her medical misfortune be a factor for consideration when allocating organs? It would seem to be in direct contrast to other allocation principles and criteria to ignore this fact when the goal is to save the most people—especially when the potential deaths after receipt are entirely caused by the individual. In terms of saving the most lives, taking into account the risk of suicide after receipt of an incredibly scarce resource may be a mandatory consideration.

However, this then demands that antidiscrimination be taken into account in organ allocation. While California has included antidiscrimination provisions in their Uniform Anatomical Gift Act,[2] New Jersey has proposed similar provisions that prohibit discrimination against potential organ transplant recipients on the basis of physical or mental disability. Depression appears to be the cause of this increased rate of suicide, and what is depression if not mental disability? The Americans With Disabilities Act (ADA) covers individuals who have a physical or mental impairment that substantially limits one or more major life activities. Therefore, candidates with depression that suffer from substantial limitations in their lives may be entitled to an ADA claim if they are discriminated against on the basis of their depression.

1.

Actavis and the FTC — What it Means and Might Mean

On March 25, 2013, oral arguments were given before the Supreme Court for FTC v. Actavis, in what the government is calling a “pay to delay” case.  This potentially very important case could have a deep impact on the way brand-name and generic drug companies settle patent disputes– and on the cost of drugs to consumers.

A little background…

The protection of patents given to inventors originates in the Constitution in Art. I Sec. 8.  Patents are given to novel, non-obvious inventions, and a term of a patent lasts 20 years from the earliest filing date.  A patent gives the holder an exclusive right to develop, market, produce and sell their product (or not to).  The patent also allows the holder to sell or license these rights to others.

Patents and their protections existed before the Federal Trade Commission (FTC) was created and the Federal Antitrust laws were passed, and are a complete exception to the competition laws.  Antitrust seeks to prevent companies from engaging in anticompetitive conduct– those actions that lead to “fewer choices, less innovation, and higher prices.” (FTC website)

Typically the Government protects scientific patents with the justification that this maintains the incentive for companies to do the expensive research and development for new drugs and therapies.  However, Congress tried to strike a balance when it passed the Hatch-Waxman act, which encourages generic companies to challenge brand-name patents.  This was in the hope of giving generics the opportunity to enter the market earlier to manufacture and sell the “identical or acceptable bioequivalent” at a lower cost to consumers.

How this case began…

This case, FTC v. Actavis, began like many other drug company challenges — with the brand name drug company (Solvay Chemicals Inc.) on one side of litigation and the generic company (Actavis, Inc.) on the other.  Solvay held the patent for a topical testosterone gel drug, granted until the year 2020, which Actavis later began to develop a generic for before the patent had expired.  Solvay Chemicals notified Actavis that they were challenging their actions and were preparing to bring a patent infringement lawsuit.  Actavis responded by claiming that Solvay’s patent on this particular testosterone gel should not have been granted in the first place because it was not novel (too similar to it’s previous patent for a very similar drug).  So, the two companies began the song and dance of litigation, which continued for several years.

In 2006 the FDA granted its approval to Actavis for its generic version.  Later that year, and before a court could rule on the infringement case, the two companies met and entered into a settlement agreement.  The agreement stipulated that the companies would split the remaining patent term, allowing the generic to come to market 5 years before the brand-name patent was set to expire. In addition, Actavis agreed to assist Solvay with some marketing in exchange for annual payments between $20 and $30 million dollars.

You say “pay-to-delay,” we say “reverse-settlement”…

Now the brand name and generic companies find themselves on the same side, this time facing suit against the government.  Though this practice of “reverse settlements” has been around for a little over a decade, the FTC pursued the case to settle a circuit split over whether these payments were unlawful.  The FTC claims that this agreement is not a “bona-fide,” “good-faith” settlement as the companies argue, but rather a presumptively illegal agreement between two competitors not to compete.  The FTC alleges that if the companies had continued with the initial lawsuit and the brand-name drug patent found to be wrongfully granted, then Actavis would have had the right to begin distribution of its generic in 2006 when it received FDA approval.  The FTC calls this a “pay-to-delay” agreement and wants the Court to adopt the Third Circuit approach from In re K-Dur Antitrust Litigation, 686 F.3d 197 (2012), which held that these specific types of agreements should be reviewed with heightened scrutiny (the quick-look test).

The drug companies argue that the Eleventh Circuit is the one which got it right, and that these are simply “reverse settlement” agreements and should be validly upheld as “independent business transactions.”

Before the Supreme Court…

Before an eight member court, as Justice Alito has recused himself, the possibility of a split decision and the perpetuated circuit split remains.  The Justices primarily questioned the two sides on why either the Rule of Reason approach or the Per Se approach to addressing whether these agreements were antitrust violations were appropriate.  Though there seemed to be some agreement that these types of agreements might be anticompetitive, there was no seeming majority as to which approach the court should take in their analysis.  The Justices seemed to lean toward allowing federal district court judges the flexibility to analyze these cases on an individual basis as to the underlying intentions of the parties.

The Justices also asked many questions regarding the unintended consequences and “loop-holes” that were created by the Hatch-Waxman act.  They acknowledged that the act and its subsequent amendments were intended to encourage generic companies to challenge brand-name patents, but they also noted that there were no real requirements on the generic companies to bring these challenges and there was an incentive to bring them with no real monetary loss if they did not prevail.

The government argued that if these were merely settlements regarding the patents that the agreement should only be allowed to include a splitting of the exclusive period, and no payment.   The government added that their analysis of these payments as presumptively illegal could be rebutted by various justifications by the drug companies such as precompetitive reasons, or payment for wholly separate reasons.

The defendant drug companies argued that these are not anticompetitive agreements, and even the Rule of Reason analysis is not appropriate because the prima facie element of “anticompetitive effect” cannot be shown unless the underlying patent infringement case went all the way to judgment — with the generic company prevailing.  Though the drug companies stated that there is nothing in Hatch-Waxman that encourages or requires patent litigation to go to judgment, or discouraging settlement, Congressman Waxman (sponsor of the bill) filed an Amicus brief in which he wrote that upholding these types of “reverse settlement” payments would “turn [the legislation] on its head.”

What it might mean for consumers…

If the Supreme Court decides on a rule of reasons analysis, it will be very difficult for the government to bring their antitrust case.  In these circumstances, the government must show either anticompetitive effect, or go through the often long and difficult process of defining the market and demonstrating market power.  If they decide on the “Quick Look” approach, the government does not have to go through this market definition so long as there is some basic reasonable demonstration of anticompetitive effect, and the burden would shift to the drug companies to argue some precompetitive justification.  Finally, if the court decides on per se illegality, this type of agreement would always be unlawful (though it seems unlikely the court will choose this path).

Under either the rule of reason or Quick Look approach these types of settlements will continue.  Perhaps the effect may be that generic companies will only bring Hatch-Waxman patent challenges when they believe they have a stronger case, or believe that the patent is very weak.

If the Supreme Court sides with the FTC, then perhaps Hatch-Waxman litigation will continue to judgment more often, but this could have both positive and negative effects.  If these suits go to judgment and the generic companies win, more products will enter the market at generic prices sooner — a positive for the consumer.  However, if generic companies lose and brand-name companies have to continue to take on these suits (where generic companies may not risk much), and bear the costs of expensive litigation, these costs may be passed on to the consumer in the form of even higher brand name drug prices.

One interesting point of the oral arguments was when Justice Kennedy attempted to pry into the underlying premise that these monopoly protections for brand name patents help cover the very high cost of research and development.  Justice Kennedy pressed the respondant counsel four times over whether there was any evidence in the record as to the actual cost of development of drugs.  The answer was vague, and perhaps intentionally so.  There are many skeptics who criticize that there is no transparency as to the real cost of drug development, and perhaps that drug companies keep it that way so as to avoid challenge of their high cost of drugs to consumers.   For now these questions remain unanswered, and we will have to wait for the Supreme Court’s decision later this year to see if they issue a decisive opinion.

What will New York Court of Appeals protect: your Medical Records from Disclosure or Hospitals from Liability?

Doctors and other healthcare providers are charged with an ethical duty to maintain patient confidentiality and protect sensitive medical information from an unnecessary disclosure.

Such duty is based on an individual’s right to privacy and on the general principle that people seeking medical help should not be hindered or inhibited by fear that their medical conditions will become known to others. Such assurance is necessary in order for the doctor to provide proper treatment.

AMA’s Code of Medical Ethics states that the information disclosed to a physician during the course of the patient-physician relationship is confidential. Hippocratic oath states “I will respect the privacy of my patients, for their problems are not disclosed to me that the world may know.”

Neither AMA’s ethical guidelines nor Hippocratic oath, however, is binding by law.

So to what extent can we really trust that out private information will not be shared with the rest of the world? Under the existing law such assurance seems to be quite vague.

HIPAA, for example, prohibits healthcare providers from disclosing personal health information. Healthcare providers seem to strictly adhere to the Act (sometimes overzealously). Similarly, New York Public Health Law § 4410 imposes a duty upon healthcare providers to maintain confidentiality of patient treatment records.

These statues, however, do not create a private cause of action, which means that if your health information was improperly disclosed to third parties you can’t go to court and sue a healthcare provider for a violation of the statute. Both statues mainly provide a standard under which doctors and hospitals should operate.

Therefore, if you are in New York and your medical information has been disclosed, your only remedy is a common-law claim of breach of fiduciary duty of confidentiality, which springs from the implied covenant of trust and confidence that is inherent in the physician patient relationship, and the breach of which is actionable as a tort.

But in an unexpected twist, which the Court Of Appeals  is scheduled to address, these common law protections could soon be effectively eviscerated.

Under the common law doctrine of respondeat superior an employer is vicariously liable for the actions of its employees, but only when they commit a negligent act within the scope of their employment and in furtherance of an employer’s business. Thus, if a hospital employee accidentally sends your medical records to your neighbor, the hospital will be liable for this act. But what would happen if a nurse looked into your medical chart, learned that you have an STD and called your girlfriend to inform her about it? In this scenario she does not act within the scope of her employment; she commits a willful wrong motivated by personal interest. Will the hospital be liable and should it?

The Appellate Division, Third Department recognized that a reliance on the traditional doctrine on respondeat superior in such a case will render protection of medical information a nullity because in most cases wrongful disclosure would be made outside of employee’s scope of employment. In Doe v. Cmty Health Plan-Kaiser Corp. (709 N.Y.S.2d 215 (3d Dep’t 2000)) the  court has explained that a corporation always acts through its agents, servants and employees and should be directly responsible if patient’s confidences are breached.

The Second Circuit recently declined to follow this one precedent in Doe v. Guthrie Clinic, LTD. and on March 25, 2013, certified the issue to the New York Court of Appeals.

If the Court of Appeals rules that the corporation should be liable, the ruling will dramatically expand the doctrine of respondeat superior. Such an expansion may very well be justified in the light of the high sensitivity of medical information, but when the law creates one exception there is always the risk of going down the slippery slope.

If the Court, on the other hand, adheres to the traditional doctrine, the protections afforded to patients’ healthcare information will continue to be limited, and if our medical information that the hospital is under the duty to protect appears on facebook the hospital may simply wash its hands of any responsibility.

USPTO Patent Post-Issuance Proceedings Under the American Invents Act — A New Frontier

Featuring Robert E. Rudnick and Thomas J. Bean, Directors in the Gibbons P.C. Intellectual Property Department, and Kenneth Corsello of IBM, along with industry, regulatory and academic leaders, this program will address post-grant proceedings under the American Invents Act (AIA), from both the patent owner’s and challenger’s perspectives as well as discovery and other new rules of practice before the Patent Trial and Appeal Board (PTAB).

Presented by
The Gibbons Institute of Law, Science & Technology
Seton Hall University School of Law

APRIL 23, 2013 | 5:30p.m.-7:30 p.m. | 2.0 NY/NJ CLE credit hours | CLE Financial Assistance available – click here | Cost: $30 (includes CLE credits, parking and reception)
(Free to Seton Hall Law Students & Faculty) (+ refund policy)

Location: The event will take place at Seton Hall Law School. For further information about the event, please contact Teresa Rizzo at teresa.rizzo@shu.edu.

Or Register here.

Recommended Reading: Recent Legal Scholarship on Workplace Wellness Programs

Since its release last month, Sheryl Sandberg’s bestseller Lean In has attracted seemingly continuous attention and controversy.  Critics charge that the book encourages women to “lean in” to their outside-of-the-home work without fully addressing the barriers that might be impeding women’s advancement.  They express concern that too intense a focus on what individual women can do to address the persistent achievement gap between women and men will only result in women blaming themselves for structural, societal problems.  Similar concerns underlie the controversy over workplace wellness programs.  While almost no one is against “wellness,” there is concern that emphasizing what individuals should do to achieve it, potentially on pain of losing their jobs, could be ineffective and even counterproductive.

Workplace wellness programs run the gamut from providing more nutritious food in the office cafeteria, to building an on-site gym, to providing counseling and other supportive services, to positive financial incentives keyed to achieving goals such as blood pressure control or smoking cessation, to negative incentives including hiring bans, health insurance surcharges, and, ultimately, termination.  With regard to variations in the price of health insurance, Tara Ragone has explained that “[a]lthough the [Patient Protection and Affordable Care Act] prohibits issuers in the individual and small group markets from basing premium variations on health status or claims experience, Federal law permits insurers to offer premium discounts to enrollees in the small and large group markets based on participation in certain wellness programs.”  The statute provides for wellness rewards of up to 30 percent of the cost of coverage, and the Secretaries of Labor, Health and Human Services, and the Treasury have discretion to increase the rewards to up to 50 percent.

In Jessica Roberts’ latest article, Healthism and The Law of Employment Discrimination, which is available on SSRN, she explains that while “issues of income, insurance, and health” seem discrete, in fact they are “intimately intertwined.”  Wellness programs could exacerbate existing health disparities by restricting relatively unhealthy individuals’ access to wages, wellness programs, and employer-provided health insurance.  Moreover, while “using tobacco and being overweight are conduct-based statuses”—and thus not fully protected under the federal statutes that outlaw trait-based employment discrimination—“the underlying choices are not simple ones.”  As Roberts notes, “[t]he lack of access to healthy foods and time to work out or a longstanding addiction to tobacco may be difficult obstacles to overcome without some help.”  Roberts recommends that Congress, or the substantial number of state legislatures that have not already done so, pass legislation shielding employees from discrimination not just on the basis of their health-related traits, but also on the basis of their health-related conduct.  She recommends that such legislation permit employers “to promote the healthy lifestyle choices of their employees through rewards programs that do not relate directly to employment status or compensation.”  I recommend Roberts’ article for its helpful (and thought-provoking) overview of the intersection between employment discrimination law, insurance regulation, and workplace wellness programs and for its nuanced legislative proposal.

I also recommend Wendy Mariner’s article, The Affordable Care Act and Health Promotion: The Role of Insurance in Defining Responsibility for Health Risks and Costs, published last year in the Duquesne Law Review.  In it, Mariner argues, pithily, that “wellness program incentive systems range from minor and marginally effective, to major and possibly coercive.”  She believes that the wellness rewards that PPACA permits “are likely to be too crude to significantly improve the population’s health or save money, and they pose an unnecessary threat to the [statute’s] underlying goals[.]”  By fostering the idea that the unhealthy are at fault for their condition, such rewards may increase resistance to the “public programs to provide preventive services, safer social and built environments, research and education” for which Mariner advocates.  She calls for the elimination of PPACA’s wellness program exception to the ban on basing the price of health insurance on health status or claims experience.  With the projected cost of premiums in the new health insurance exchanges widely-reported and much decried, elimination of the wellness program exception is unlikely.  Mariner’s article nonetheless offers a valuable note of caution as 2014 approaches.

Department of Justice’s Historic FCA and AKS Settlement

In February 2013, a historic $26.1 million settlement was reached under the False Claims Act and Anti-Kickback Statute in a qui tam action against Florida dermatologist Steven Wasserman. U.S. ex rel. Freedman v. SuarezHoyos et al., No. 04-933 (M.D. Fla. 2012).

False Claims Act

The False Claims Act (FCA) is written to protect against physicians and hospitals presenting false claims to Medicare and Medicaid for reimbursement.  The FCA imposes civil liability for an individual or entity that “knowingly presents or causes to be presented, a false or fraudulent claim for payment or approval” to the federal government.  31 U.S.C. § 3729.  This includes, but is not limited to, presenting claims for reimbursement of medically unnecessary services as well as reimbursement of claims for services that were never performed.  Violation of the FCA carries high civil penalties of not less than $5,500 and not more than $11,000 for each claim filed plus three times the damage sustained by the government.  § 3729(a)(1).

Anti-Kickback Statute

The Anti-Kickback Statute (AKS) is written to protect against physicians and hospitals receiving anything of value in exchange for their referrals.  The AKS imposes criminal liability for an individual or entity that knowingly and willfully solicits, receives, offers or pays any remuneration (including any kickback, bribe or rebate) directly or indirectly, overtly or covertly, in cash or in kind – (A) in return for referring an individual for the furnishing or arranging of furnishing any item or service for which payment may be made…” 42 U.S.C. § 1320(b)(1).  Violations of the AKS also carry high penalties, which can be monetary, up to $25,000 and, unlike FCA liability, can also include imprisonment for up to five years. § 1320(b).

Allegations

Alan Freedman, a former employee of Suarez and Tampa Pathology Laboratory (TPL), brought this qui tam action.  A qui tam action is one in which an individual brings a suit under the FCA on behalf of the government.   31 U.S.C. § 3730(b).  Within sixty days of the filing of a qui tam action, the government has the option to intervene and conduct the action.  § 3730(b)(4)(A).  In this case, the government intervened and proceeded with the action.  The government alleged that beginning in 1997 Steven Wasserman, a Florida dermatologist, entered into a kickback arrangement with SuarezHoyos, a pathologist and the owner of TPL.  DOJ Report Feb. 11, 2013. According to the DOJ Report: in order to increase lab referrals Wasserman would send biopsy specimens to TPL for testing. Id.  The biopsy specimens sent to TPL were taken from Medicare beneficiaries. Id. TPL would return the specimens to Wasserman in a report that included space for Wasserman to sign his name indicating that he performed the test, even though it was TPL that performed the test. Id.  In passing this work off as his own, Wasserman was able to bill Medicare for the biopsies, receiving around $6 million in Medicare payments for services he did not perform.  Id. In addition to this, Wasserman allegedly “substantially increased the number of skin biopsies” he performed in order to increase referral business for TPL.  Lastly, Wasserman allegedly performed thousands of medically unnecessary skin surgeries in order to receive Medicare reimbursement for them.  Id.

If each of the government’s allegations is true, Wasserman’s arrangement with TPL violates both the Anti-Kickback Statute and the False Claims Act.  Wasserman was receiving a kickback in the form of Medicare reimbursements for increasing the referrals to TPL, in violation of the AKS.  In return for increasing the number of referrals to TPL, Wasserman was sent the results from TPL with space for him to sign his name indicating that he had personally performed the test. In turn he presented these results to the government and received Medicare reimbursement.  Thus, in return for referrals to TPL, Wasserman indirectly received remuneration in the form of Medicare reimbursements, made possible by the signature line on the report from TPL.  This violation is also linked to the alleged FCA violation. By presenting claims for reimbursement for the biopsies, and representing that he had performed them when he had not, Wasserman violated the FCA.  Further, by performing medically unnecessary surgeries and presenting claims for reimbursement by Medicare, Wasserman has violated the FCA.

The Settlement

However, Wasserman has not plead guilty to these charges, and this settlement is not an admission of liability to any charge.  Wasserman settled with the government for more than $26 million and has also agreed to be excluded from treating patients and being reimbursed by Medicare, Medicaid or any other federally funded healthcare program. Id. The government also settled the same allegations with TPL and SuarezHoyos for $950,000.  Robert O’Neill, the U.S. Attorney for the Middle District of Florida hailed this settlement as a “watershed achievement in [the] district’s civil health care fraud enforcement program,” and stated that “[s]chemes of this magnitude require extraordinary remedies, and [the district is] proud to have reached such an outstanding resolution for the taxpayers and their health programs.” Id.  “The settlement is the largest ever with an individual under the False Claims Act in the Middle District of Florida and one of the largest with an individual under the False Claims Act in U.S. history.” Id.

Professor O. Carter Snead on Bioethics and Responsible Discussion

“Embryos are living members of the human species,” declared Professor O. Carter Snead of Notre Dame Law School during a presentation to Professor Jordan Paradise’s Law and Genetics class at Seton Hall Law School. Professor Snead, former General Counsel to The President’s Council on Bioethics under President George W. Bush, lectured and met with students  during his residence as Visiting Health Law Scholar  at Seton Hall Law School. Professor Snead presented a lecture to the Law and Genetics class that compared embryonic stem cell patenting in the United States and Europe.

In an interview with Health Reform Watch before his presentation, Professor Snead reflected on his career in bioethics, the role bioethics plays in politics, and the current need for bioethical input.

Regarding what informs his beliefs as a lawyer practicing in bioethics, Professor Snead said before serving as General Council member he “didn’t have settled opinions” and decided his opinions by “listening to debates” and following the teachings of bioethicists such as Michael Sandel, Robert George, Leon Kass, and George Annas. However, he noted that he has always had one main concern: self-governance.  As such, he disapproves of an “enclave of elite thinkers telling everybody what to do and think.”  In order to better democratize bioethical issues, Professor Snead emphasized the importance of recognizing “We all have standing to debate and discuss.  There’s no special expertise necessary to reflect on normative questions.”

In promoting the need for debate on bioethical issues, Professor Snead used physician-assisted suicide as an example to explain the shortfallings of a purely normative approach.  In setting-up a situation where physician-assisted suicide may seem reasonable to many, or “in a vacuum” as Professor Snead referred to it, moral dispute may be limited.  However, he stressed looking at the issue and its “collateral” effects— including “exploitation of the poor, abuse of the disabled, and fraud and abuse.” Professor Snead contended that in order to avoid the collateral consequences, “We have to sacrifice [the] liberty of the small sliver of people who might be able to autonomously choose to end their own lives free from coercion, fraud, and abuse.” Which is to say that those most vulnerable— the poor, the disabled and those most readily susceptible to fraud and abuse—are not necessarily best situated to advocate for themselves. If these most vulnerable are to be properly considered, “the vacuum,” and those who construct it, must be left behind and the actuality—in its broader sense—considered.

This example led Professor Snead to advocate for responsible discussion on bioethical issues and criticism for politicians who inappropriately use the issue on their campaign platform.  ”Politicians I.D. wedge issues and try to spin the issues.  We end-up with a dishonest discussion,” stated Professor Snead.

In answering a question on what role American bioethical principles play in the global community, Professor Snead said he disfavors “exporting our bioethical approach,” noting that bioethics and moral anthropology closely coincide.  He stated, “Who you think human beings are, what are our relations to each other” is what informs a nation’s bioethical beliefs and that there is “no formulaic way.” However, Professor Snead did note, “Bioethics is an application of deeper human principles across a variety of factual and cultural contexts.”  As a law professor, he uses this philosophy and teaches “by exposing students to competing views in a neutral fashion, exploring the strengths and weaknesses of the various approaches.”

On the topic he presented to the Law and Genetics class, Professor Snead’s bioethical standpoint is that embryos are human subjects entitled to “A baseline of inalienable rights,” and further noted that, “Embryonic stem cells are not yet capable of producing therapies.”  He pointed to the potential therapeutic value of induced pluripotent stem (iPS) cells, a type of adult stem cell, and described the cells: “easier to work with, less ethically contentious, and seems to be doing the same as embryos.”  Addressing concerns of other nations conducting research with embryonic stem cells, Professor Snead stated: “The best researchers are in the US.  I’m not worried about falling behind in any area of scientific inquiry.”

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