New Evidence on Smoking Marijuana and Lung Function; Update on New Jersey’s Nascent Medical Marijuana Program

This week’s JAMA includes an article reporting on new evidence that smoking marijuana does not negatively affect lung function. Smoking tobacco has long been known to harm the lungs and to increase the risk of developing chronic obstructive pulmonary disease and lung cancer, both leading causes of death. The risks posed by smoking marijuana, on the other hand, have largely been assumed, based on the fact that “[m]arijuana smoke contains many of the same constituents as tobacco smoke[.]”

The authors of the JAMA article analyzed data from a 20-year longitudinal study of 5,115 people in 4 American cities who “comprise a broad cross-section of typical tobacco and marijuana use patterns” and found that “[w]ith up to 7 joint-years of lifetime exposure (e.g., 1 joint [a day] for 7 years or 1 joint [a week] for 49 years)” there was no evidence of an adverse effect on the lungs. Very heavy marijuana use in excess of 7 joint-years of lifetime exposure could prove harmful, but there were not enough heavy users in the study to demonstrate this.

High-quality epidemiological evidence like this latest JAMA study will be key to filling in the gaps in our knowledge about marijuana’s safety profile. While double-blinded randomized controlled trials are considered the gold standard for evaluating the safety and efficacy of drugs, they are not always an option, particularly where the goal is to gather data over many years. Marijuana’s classification as a Schedule 1 controlled substance adds to the difficulty of mounting clinical trials. Given this, it is (or will be) a very good thing that New Jersey’s still-nascent medical marijuana program will include a registry of de-identified patient treatment and outcomes data that will allow researchers to learn more about the drug’s safety and efficacy.

The statute authorizing New Jersey’s medical marijuana program was passed two full years ago, in January 2010, but the road to implantation has been a long and rocky one. (My previous posts on the subject are here, here, here, and here.) While the Christie Administration is now on board, local towns have proved resistant to efforts to site alternative treatment centers that would grow and/or dispense marijuana there. In the Associated Press earlier this week, Geoff Mulvihill writes that “[s]o far, only one [of the six groups authorized by the state to operate alternative treatment centers] has announced that it has secured local approvals. … Three others have been shut out of their chosen locations by local government bodies, despite assurances that security at the dispensaries would be tight and that pot would be given only to patients who are truly sick.”

The state may be fighting back. Nina Rizzo reports in the Asbury Park Press that Assemblyman Declan O’Scanlon has announced “that he will introduce legislation next week that would prohibit counties and municipalities from interfering with the development of medical marijuana cultivation and distribution centers by extending their protections under the Right to Farm Act.”

Such a heavy-handed approach may be necessary in the short term, to ensure that all six authorized alternative treatment centers can get off the ground. If the New Jersey Compassionate Use Medical Marijuana Act and its regulations work as they are intended to, however, public confidence in the program should grow.

Venture Capitalists Complain of ‘Regulatory Challenges,’ FDA Responds

Writing in this month’s Fortune, Dan Primack is the latest to raise the alarm about indications that venture capital funding of life sciences startups is on the decline.  The decline in funding is cause for concern because venture capital-funded startups are, in the words of Tracy Lefteroff of PricewaterhouseCoopers, “where all the drugs are coming from[.]“  “[L]arge pharma[,]” Lefteroff explains, has “been extremely ineffective at developing pipeline drugs internally.”

While there are still “plenty of venture dollars … going into the [life sciences] sector,” Primack reports, they are going to mature companies.  Startups, on the other hand, “are having a much tougher go of it, with 17% fewer raising venture capital during the first three quarters of 2011 than during the same period in 2010.”  According to Primack, “a number of veteran VC firms are formally ending their pursuit of pharma startups.”

What explains the increasing reluctance to invest in the life sciences sector?  The venture capitalists blame “regulatory challenges,” primarily “the hostile FDA.”   Primack quotes Kate Mitchell, co-founder and Managing Director of Scale Venture Partners, a venture capital firm which recently announced that it will make no new healthcare investments, as follows: “It just takes a lot longer now to get approval than it used to, or to even know what the [Food & Drug Administration] is thinking.  One of our companies, Prestwick Pharmaceuticals, supposedly was put on a ‘fast track,’ but it still took another three years before receiving FDA approval.  It’s incredibly frustrating and means we need to invest more to keep the companies running.”

The Medical Innovation and Competitiveness (MedIC) Coalition, a group of “life science investors, innovators and entrepreneurs,” has been lobbying hard for the FDA to approve more drugs and devices more quickly, that is, without the careful review of efficacy and safety that it currently undertakes.  Specifically, they have prioritized “[r]ebalancing benefit-risk assessments in the drug and device approval processes to appropriately reflect the value of new therapies to patients in need” and “[e]xpanding the accelerated approval pathway into a progressive approval system for drugs, diagnostics and medical devices.”  MedIC also believes that the FDA’s conflict of interest policy threatens to “hinder[] patient access to new treatments.”  It argues for increased “utilization of non-government outside experts to facilitate and strengthen the FDA review and approval process,” presumably experts who would be barred from serving by the FDA’s current conflicts policy.

Not all of MedIC’s priorities are so extreme.  They have also called for more timely, consistent, and transparent decision-making at FDA, while acknowledging that to achieve these ends the agency must be “well resourced and endowed with state-of-the-art scientific tools, clinical input, processes and procedures.”  With this, even the most ardent consumer advocate can agree, and the FDA has recently acted to improve its decision-making in ways that do not risk sacrificing health and safety.  This is a promising development.  The results of a recent survey of venture capitalists suggests that increasing the predictability and speed of the FDA’s decision-making would have a higher impact on their willingness to invest in the life sciences sector than would “rebalancing” the agency’s weighing of safety and efficacy.

A Call for Improved Guidance on Research with Pregnant Women

This month, the thoughts of Christians around the world turn to a laboring mother in “a stable at midnight in Bethlehem in the piercing cold.” It seems an appropriate time to direct your attention to the work of the Second Wave Initiative, “a collaborative academic effort to advocate for, and help find, ethically and scientifically responsible solutions for increasing our knowledge base for the treatment of pregnant women who face medical illness.”

At the end of October, the Initiative submitted comments on the Department of Health and Human Services’ Advance Notice of Proposed Rulemaking (ANPRM) regarding revisions to the regulations governing human participation in federally-funded research, known as the Common Rule.  The Initiative’s comments, of which I am a co-signatory, call attention to the fact that the ANPRM fails to address “vagaries and constraints” in the current regulations “that make it difficult for researchers to feel comfortable understanding the parameters of responsible research with pregnant women.”

The Initiative recommends that HHS take the following five steps.

First, amend the Common Rule to allow for research in pregnant women, fetuses, and neonates that creates a minor increase over a minimal risk of harm, as is already permitted in children. The Initiative’s comments explain that the regulations currently provide that “any research that does not carry the potential for direct health benefit to pregnant woman or fetus is disallowed unless it involves ‘no more than minimal risk.’”  Some government officials have concluded from this that even pharmacokinetic studies — which involve nothing more risky than drawing blood and which are vital to determining dosing in pregnancy — are ruled out.

Second, eliminate the requirement that, with certain delineated exceptions, fathers must consent to research that “holds out the prospect of direct benefit solely to the fetus.” The current regulations do not require paternal consent where there is a prospect of direct benefit to the pregnant woman or, oddly, where there is no prospect of direct benefit to the pregnant woman or the fetus.  The regulations governing pediatric research seem more sensible, requiring that both parents give consent where the research involves greater than minimal risk and holds out no prospect of directly benefitting the child.

Third, amend the regulations so that they no longer label pregnant women as “vulnerable.” As Seton Hall Law’s Carl Coleman has explained, the Common Rule does not define vulnerability and the examples it gives of vulnerable populations are diverse.  With regard to pregnant women, “it is not clear why any special issues related to capacity or coercion would necessarily arise.”  The Initiative recommends changing the word “vulnerable” to “population meriting special regulation.”

Fourth, confirm that HHS’ proposed changes with regard to research that is excused from ethics review and research that is eligible for expedited review encompass research with pregnant women. The Initiative contends that explicit confirmation is necessary “to avoid inappropriate exceptionalism about pregnancy on the part of researchers and institutional review boards.”

Finally, “establish and formally charge a working group to propose new model language for the special regulation of clinical research with pregnant women that strikes a more appropriate and more just balance of rights, needs, and interests.” As I explained here, “[w]e lack data on the efficacy or safety or both of most drugs when used by pregnant women. … Without denying or dismissing the real moral conundrums that arise in maternal-fetal medicine, the information gap is deeper and wider than that.”  To the extent that the Common Rule creates unjustified barriers to desperately-needed, ethically-appropriate research, revisions must be made.

Recommended Reading: Recent Scholarship on Drug and Device Regulation

In Patients Over Politics: Addressing Legislative Failure in the Regulation of Medical Products (forthcoming in the 2011 volume of the Wisconsin Law Review and available on SSRN), Efthimios Parasidis proposes a significant expansion of drug and device companies’ responsibility to engage in “active post-market analysis” of drugs and devices, to be coupled with a new rule that only companies that conducted such analysis would benefit from preemption of state tort claims.  Professor Parasidis’ article includes a nuanced and revealing analysis of the historical and other reasons for the Food and Drug Administration’s heavy focus on pre-market review of drugs at the expense of post-market surveillance, as well as useful updates on both the caselaw regarding the preemption of claims involving branded drugs, generic drugs, devices, and vaccines and the ongoing efforts to use health information technology to glean information about the safety and efficacy of marketed products.  Most notable, though, is the article’s thorough explication of Professor Parasidis’ interesting proposal that “preemption laws, which often are enacted pursuant to industry lobbying efforts [be linked to] protocols that further the public health.”

In Enforcing Integrity (forthcoming in the 2011 volume of the Indiana Law Journal and available on SSRN), Katrice Bridges Copeland makes a strong case for her conclusion that neither the exclusion of pharmaceutical manufacturers from Medicare and Medicaid — a punishment which the government is reluctant to impose because it would spell the end for the company — nor the use of corporate integrity agreements coupled with large fines — which manufacturers agree to in order to avoid exclusion — works to deter illegal marketing activities.  As Professor Copeland notes, numerous companies have learned that “the punishment for multiple offenses is simply another CIA and another fine.”  She recommends that the government consider a number of alternative penalties for repeat offenders, including (1) requiring that manufacturers fund clinical trials studying the off-label uses for which they promoted their products, (2) requiring that they license the product or products at issue to other manufacturers, (3) holding high-level individuals criminally liable under the responsible corporate officer doctrine, and (4) amending the Social Security Act to allow for the exclusion of particular drugs (as opposed to entire companies) from Medicare and Medicaid.

Finally, I recommend Seton Hall Law’s own Jordan Paradise’s fascinating article, Claiming Nanotechnology: Improving USPTO Efforts at Classification of Emerging Nano-Enabled Pharmaceutical Technologies (forthcoming in the 2011 volume of the Northwestern Journal of Technology and Intellectual Property and available on SSRN), in which she argues that the United States Patent and Trademark Office’s system for classifying patents on nanotechnology-related inventions, “[w]hile undoubtedly helpful for internal purposes,” cedes too much to the courts.  Reviewing the facts of the recent case Elan Pharma International v. Abraxis Bioscience, which involved a dispute over two patents describing nano or near-nano scale versions of the same existing cancer-fighting agent and was tried to a jury verdict, Professor Paradise points out several ways in which the patents’ claims potentially overlap.  She argues that the courts are “a clumsy forum” for sorting out the “complex patent law issues that arise based on scale, size, and interactions at the nanoscale that transcend previously envisioned physical and chemical boundaries[,]” and offers concrete recommendations for steps the USPTO can take to improve its classification efforts to reduce the number of patents with potentially overlapping claims thereby making court involvement less necessary.

The Global Burden of Stillbirth

As a teenager in the late 1980s, I was a huge fan of the model Christy Turlington Burns.  As I’ve blogged about before, in 2011 there’s much more to admire about her than her enduring beauty.  Over the weekend, Turlington Burns and others representing her advocacy organization, Every Mother Counts, ran the ING New York City Marathon to, in her words, “make the vital connection for people that so many pregnant women live far from health services around the world and that distance does make a difference [in the prevention of maternal mortality]. Simply put, we want to run so that others don’t have to…”

Just as distance makes a difference in the prevention of maternal mortality, it also makes a difference in the prevention of stillbirth.[1] In the introduction to a special series of articles that ran in The Lancet in April of this year, Zoe Mullan and Richard Horton note that 98% of the estimated 2.64 million stillbirths each year, “occur in low-income and middle-income countries, and in places such as south Asia and sub-Saharan Africa, at least half of them take place during labour or birth.”  In addition to reducing maternal and newborn mortality rates, then, closing the literal and figurative distance between pregnant women and childbirth care would prevent many stillbirths from occurring.

In a pair of important articles - Stillbirths: What Difference Can We Make and At What Cost? and Stillbirths: How Can Health Systems Deliver for Mothers and Babies — The Lancet’s Stillbirths Series Steering Committee delves into the prevention question in detail.  The Steering Committee systematically assessed 35 potential interventions to determine (1) whether they were effective at reducing the stillbirth rate and (2) “whether they are affordable and implementable in low-income and middle-income countries.”   The following ten interventions passed the Committee’s test and were strongly recommended for implementation: “periconceptional folic acid fortification, insecticide-treated bednets or intermittent preventive treatment for malaria prevention, syphilis detection and treatment, detection and management of hypertensive disease of pregnancy, detection and management of diabetes of pregnancy, detection and management of fetal growth restriction, routine induction to prevent post-term pregnancies, skilled care at birth, basic emergency obstetric care, and comprehensive emergency obstetric care.”  Of these, the Committee recommended that skilled care at birth and emergency obstetric care take priority, both because they were the most effective at reducing the number of stillbirths and because they additionally benefit women and newborn babies.

The Stillbirths Series Committee estimated that “[i]n 68 countries accounting for 92% of the worldwide burden of stillbirths in 2008, universal coverage of care (99%) with intervention packages in 2015 could save up to 1.1 million (45%) third-trimester stillbirths, 201,000 (54%) maternal deaths, and 1.4 million (43%) neonatal deaths at an additional cost of US $2.32 per person, which is well below the WHO and World Bank criteria for cost-effectiveness.”  While it seems only fair to consider this “triple return for every dollar invested” in determining funding priorities, the tragedy of stillbirth does not always “count.”

The World Health Organization’s Global Burden of Disease analysis, for example, which aims to “provide[] a comprehensive and comparable assessment of mortality and loss of health due to diseases, injuries and risk factors for all regions of the world[,]” does not factor in stillbirths.  The WHO explains on its website that “[p]erinatal mortality, defined as number of stillbirths and deaths in the first week of life per 1,000 live births, is a useful additional indicator, and work is ongoing to improve estimates of stillbirth rates, a major component of perinatal mortality.”  The United Nations’ Millennium Development Goals similarly fail to include reducing the rate of stillbirths.  This should change.  In the words of Mullan and Horton in The Lancet, “stillbirths matter to people” and “stillbirth prevention should be placed as highly on global and national health agendas as prevention of maternal and neonatal deaths.”

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[1] I thank Catherine Finizio, the Administrator of Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy, for keeping me focused on this important issue.  (My prior posts are here and here.)  Cathy’s grandson, Colin Joseph Mahoney, was stillborn at 39 weeks gestation on November 10, 2008.

Does the Ban on Off-Label Promotion Bar On-Label Promotion?: The Case of Call Plans

As predicted, in the wake of the Supreme Court’s decision in Sorrell v. IMS Health pharmaceutical companies have raised First Amendment challenges to the ban on off-label promotion on a number of fronts.  Most recently, Par Pharmaceutical sued to invalidate the ban to the extent that it “criminalize[s] Par’s truthful and non-misleading speech to healthcare professionals concerning the FDA-approved use of its FDA-approved prescription drug.”  How is it that the ban on off-label promotion could be interpreted to bar the on-label promotion in which Par wishes to engage?  At the heart of Par’s dispute with the government are the “call plans” that pharmaceutical companies develop using the prescriber-specific prescription data at issue in Sorrell.

Call plans set forth which physicians pharmaceutical sales representatives should visit and how often.  In an article in the current issue of Next Generation Pharmaceutical magazine, Matthew Linkewich and Jay Margolis of IMS Health explain that a “properly conceived and configured … call plan directs reps to those physicians whose practice characteristics, constellation of prescribing behaviors and attitudes are conducive to supporting the brand goals.”  Because call plans embody “brand goals,” the government has focused on them as evidencing companies’ intent to engage in off-label promotion.

For example, in a December 15, 2010 press release announcing a $214.5 million settlement with Elan Corporation, the Department of Justice highlighted the fact that Elan’s “off-label marketing efforts” for its anti-epilepsy drug Zonegran “targeted non-epilepsy prescribers.”   A January 28, 2011 press release announcing the formal sentencing of Novartis in a case involving off-label promotion of its anti-epilepsy drug, Trileptal, similarly noted that the company “decided to market and promote Trileptal as a treatment for [two off-label indications, bipolar disease and neuropathic disease] and directed its sales force to visit doctors who would not normally prescribe Trileptal due to the nature of their practice.” Novartis’ plea agreement explains that while epilepsy is treated by epileptologists and neurologists, the company’s call plan included psychiatrists and pain doctors.

The corporate integrity agreement that Novartis entered into as part of the settlement of the Trileptal-related claims against it provides for independent review of “the bases upon which [health care providers] and [health care institutions] belonging to specified medical specialties are included in, or excluded from, the Call Plans based on, among other factors, expected utilization of Government Reimbursed Products for FDA-approved uses or non-FDA-approved uses[.]“  The corporate integrity agreement requires a similar review of the company’s sampling strategy and goes so far as to bar the company from delivering samples to health care providers identified by the company as “belong[ing] to a specialty group that is unlikely to prescribe” the sampled product on-label.

Currently, Par Pharmaceutical’s call plan for its appetite stimulant Megace, which is FDA-approved for the treatment of AIDS-related wasting, does not include oncology practices or long-term care facilities.  With the help of an outside consultant, Par determined that physicians in those settings “reasonably may encounter patients suffering from AIDS-related wasting, and thus may have occasion to prescribe [Megace] for its on-label use,” but all agree that they would be much more likely to prescribe the drug off-label to treat wasting in cancer and geriatric patients.  In the concluding paragraphs of Par’s complaint, it explains that the U.S. Attorney’s Office for the District of New Jersey, which is investigating the company’s marketing practices, has informed the company that before it promotes a drug for its on-label use to doctors who prescribe the drug off-label it must “confirm that there are presently a sufficient number of patients being treated for whom the drug could be prescribed on-label.”

As Par points out, the government has offered no guidance regarding the number of on-label patients that a doctor must treat before he or she can be included in a company’s call plan.  On the one hand, this is to be expected because the call plan is only one factor that the government considers in determining a company’s intent.  On the other hand, it leaves companies like Par without a clear course to follow and, after Sorrell, likely to sue.

The CareMore Model and the Need to Better Coordinate Care for Dual Eligibles

In The Quiet Health-Care Revolution, an article by Adrian Slywotzky and Tom Main in the November issue of The Atlantic, the authors tell the story of CareMore, a for-profit company serving more than 50,000 elderly patients through 26 care centers located in Arizona, California, and Nevada.  Founded by Sheldon Zinberg, a gastroenterologist, CareMore was originally a group physician practice but it has since become a Medicare Advantage managed care plan.  As such, it is paid a capitated, risk-adjusted rate for each patient it serves, giving it a financial incentive to hold down costs.  Slywotzky and Main report that, through an emphasis on care coordination and creative “upstream” interventions, CareMore has improved outcomes, held down costs, and stayed in the black.

Each CareMore patient has a personal physician, called an “extensivist,” who ensures, with the help of an electronic medical record, that all of the members of the patient’s care team are communicating and coordinating with one another.  The extensivist is also charged with ensuring that the patient understands and is able to comply with his or her treatment plan.  One of Dr. Zinberg’s early decisions was that “noncompliance is our problem, not the patient’s.”  As a result, among other things, CareMore provides its patients with free-to-them transportation to medical appointments.

Going hand-in-hand with CareMore’s emphasis on coordination is a focus on “upstream” interventions. For a patient with congestive heart failure, a wireless scale transmits the results of her daily weigh-in to a clinic allowing fluid build-up to be caught early.  For a frail patient, “light muscle-training sessions and periodic toenail clipping” reduce the risk of falls.  And for a diabetic patient, aggressive treatment of a cut foot reduces the risk of infection and amputation.

How does all of this impact quality and cost?  Slywotzky and Main report that:

“CareMore, through its unique approach to caring for the elderly, is routinely achieving patient outcomes that other providers can only dream about: a hospitalization rate 24 percent below average; hospital stays 38 percent shorter; an amputation rate among diabetics 60 percent lower than average.  Perhaps most remarkable of all, these improved outcomes have come without increased total cost. …  CareMore’s overall member costs are actually 18 percent below the industry average.”

As with other, better known providers like the Mayo Clinic, whether the CareMore model is scalable is a question, one that may be answered in coming years because the company is growing and is likely to grow more after its purchase in August by WellPoint.

In a recently-released study conducted for AHIP–the industry group representing health plans–Kenneth Thorpe makes the financial case for enrolling more individuals, in particular those who are eligible for both Medicare and Medicaid, into health plans like CareMore that employ a coordinated, team-based approach to care.  As Thorpe explains, so-called “dual eligibles” are among the most chronically ill and therefore expensive of all patients, accounting, despite their relatively small numbers, for “36 percent of total Medicare spending and 39 percent of Medicaid spending.” In 2011, Thorpe writes, “the federal government–through Medicare and Medicaid–will spend over $230 billion on dual eligibles.” Currently, “[f]ewer than 2 percent of dual eligibles are enrolled in a coordinated care program that managed all Medicare and Medicaid covered benefits.”  Thorpe projects that if all dual eligibles were required to enroll in such a program, the federal government would save up to $125 billion and the states up to $34 billion over the next ten years.

Achieving better alignment of Medicare and Medicaid for the benefit of dual eligibles is not without its complications, of course.  Yesterday, AHIP issued a proposal reviewing key differences between the programs-including the nature and scope of covered services, eligibility and enrollment rules and procedures, provider networks and access requirements, and beneficiaries’ right to information and to appeal-and recommending ways to eliminate or work around them.  Among AHIP’s recommendations is that “States be given opportunities to share with the Federal government and with health plans, as appropriate, in savings generated through increased integration.”  As it stands, “it may be difficult for States to justify State investment in efforts to generate such savings, for example through programs intended to decrease acute hospitalizations or increase reliance on Medicaid-covered [i.e. partially State-funded] services.”

Recommended Reading: Joan Krause’s “Skilling and the Pursuit of Healthcare Fraud”

In her latest article, Skilling and the Pursuit of Healthcare Fraud, which is forthcoming in the University of Miami Law Review, Joan Krause suggests that the Supreme Court’s decision in Skilling v. United States could have a paradoxical effect on health care fraud prosecutions.  In Skilling, the Supreme Court rejected Jeffrey Skilling’s argument that 18 U.S.C. §1346, which criminalizes frauds designed “to deprive another of the intangible right to honest services,” is unconstitutionally vague.  In so doing, the Court strictly cabined the scope of Section 1346, holding that it only applies to “offenders who, in violation of a fiduciary duty, participated in bribery or kickback schemes.”  While the Skilling decision is expected to lead to fewer honest services prosecutions overall, Professor Krause believes that it may lead to an increase in honest services prosecutions founded on health care kickbacks.  Professor Krause notes that “bribery or kickback schemes” are activities that “have particular salience in health care.”  She also points out that there are strategic advantages to prosecuting healthcare fraud cases pursuant to Section 1346, including a “focus on the physician-patient relationship as the locus of the misbehavior” that may appeal to juries and the fact that violations of Section 1346 carry longer maximum prison terms than violations of the Anti-Kickback Statute.

In the conclusion to Professor Krause’s article, she acknowledges that “the broader use of the honest services theory in health care kickback cases would raise a host of analytical issues” and then provides a fascinating elaboration.  According to Professor Krause, “the characterization of the physician-patient relationship as a fiduciary one is, perhaps surprisingly, far more complex than first appears.”  The physician is not a typical fiduciary.  For one, the physician’s duty is not all-encompassing — his or her duty of honesty does not extend beyond the provision of medical diagnosis and treatment — and, for another, unlike a traditional fiduciary, a physician has no control over his or her patient’s money.  Moreover, and of central relevance for the prosecution of health care fraud as honest services fraud,  “the physician’s duty to disclose information to patients generally is handled through the state-based law of informed consent rather than through broad federalized notions of fiduciary duty, and few informed consent cases or statutes require the disclosure of financial rather than treatment-related information.”  (For an in-depth discussion of whether disclosure of financial information should be required, see Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy’s December 2010 white paper The Limits of Disclosure as a Response to Financial Conflicts of Interest in Clinical Research and June 2011 Journal of Health & Life Sciences Law article An Argument Against Embedding Conflicts of Interest Disclosures in Informed Consent).

If physicians are not legally obligated to disclose financial information to their patients, in what sense do they deprive those patients of their honest services by accepting a kickback?  Professor Krause sets forth a number of possibilities, including (1) that kickbacks are per se deceptive, (2) that kickbacks are deceptive unless proved otherwise, and (3) that “in the absence of a clear duty to disclose a kickback under fiduciary law or informed consent” kickbacks are not deceptive and there can be no honest services prosecution without “additional evidence of harm to the patient — if not tangible harm, at least proof that the physician’s decisionmaking (i.e., the services owed), was in fact influenced in a way that could have affected the patient’s treatment.”  While the third option is arguably “a truer reading of the doctrine,” Professor Krause predicts that it “likely will be found wanting by jurists who believe the disclosure duties imposed under current health law are incomplete.”

I highly recommend Professor Krause’s article for its comprehensive and insightful analysis of the Skilling case’s potential paradoxical effect on health care fraud cases, but also for its thought-provoking concluding section and the numerous timely questions it raises about the relationship between physicians’ duties to their patients and the federal duty to provide honest services.

Distinguished Guest Practitioner Mark Swearingen Lectures on Trends in Healthcare Law Enforcement

On Wednesday, September 21, 2011, Distinguished Guest Practitioner Mark Swearingen spoke at Seton Hall Law School on a number of healthcare law enforcement topics that were of keen interest to the audience of health lawyers and health lawyers-in-training.  Mr. Swearingen, who graduated from Seton Hall Law in 1998, is a shareholder at Hall, Render, Killian, Heath & Lyman, P.C., a large  healthcare law boutique based in Indianapolis, Indiana.

Among other things, Mr. Swearingen discussed two recent Stark Law cases: United States v. Tuomey Healthcare System, in which a jury award of $49.4 million is currently on review in the Fourth Circuit Court of Appeals, and United States v. Bradford, a summary judgment decision from the Western District of Pennsylvania that also largely favors the government.

As the court in Bradford explains, the case involved two physicians, Kamran Saleh and Peter Vaccaro, who leased a nuclear camera so that they would no longer have to refer their patients to the local hospital, Bradford Regional Medical Center, for nuclear imaging.  Faced with the prospect of losing over a third of its $2,274,094 in annual gross nuclear medicine revenues, the hospital responded by threatening to revoke the doctors’ admitting privileges.  Lengthy negotiations ensued, at the end of which the hospital agreed to sublease the camera from the two physicians; the camera remained at the physicians’ offices but other physicians with privileges at the hospital could use it.

Four local physicians who “provide[d] the same or similar services to patients as Drs. Saleh and Vaccaro” brought a qui tam action alleging that the sublease violated the Anti-Kickback and Stark Acts and that the defendants falsely certified compliance with those laws in connection with claims submitted to Medicare in violation of the False Claims Act.  The court agreed that the defendants violated the Stark Act, because the amounts the hospital paid under the sublease were inflated to account for the referrals the hospital lost as a result of Drs. Saleh and Vaccaro’s decision to lease their own camera.  The court deferred on the Anti-Kickback and False Claims Act charges, because it was unable to conclude at the summary judgment stage that the defendants acted knowingly.

As Mr. Swearingen commented, even if the sublease arrangement in Bradford was, on paper, above approach, the facts leading up to it were not good for BRMC and Drs. Saleh and Vaccaro.  That the hospital responded to losing business to the two physicians by first threatening to revoke their privileges and then entering into a financial arrangement that brought them back into the fold suggests that the sublease was about more than the use of a camera.  The facts in Tuomey were in several key respects similar to those in Bradford.  Tuomey, too, involved a hospital faced with the prospect of a group of physicians performing outpatient procedures elsewhere, which would have meant a loss to the hospital of $6-9 million in annual revenues.  To keep the physicians in the fold, the hospital entered into part-time employment contracts with them.  The government alleged– and the jury presumably found–that the contracts would have been money-losers for the hospital but for the associated facility and other fees that the hospital was able to bill in connection with the physicians’ services.

Mr. Swearingen also highlighted the fact that the hospital in Bradford lost the case despite having obtained an expert opinion that the amount it paid for the camera under the sublease was fair market value.  The defendant hospital in Tuomey similarly lost despite having obtained not one but two valuation analyses and multiple legal opinions.  The hospital in Tuomey relied on an advice of counsel defense and, notably, attorney-client privileged communications were entered into evidence at trial.  Going forward, Mr. Swearingen emphasized, fair market value and legal opinions “will be scrutinized” and “may not be dispositive.”

Recommended Reading: Recent Scholarship with Implications for Pharmaceutical Pricing and Access

Bundles in the Pharmaceutical Industry: A Case Study of Pediatric Vaccines, by Kevin W. Caves and Hal J. Singer of Navigant Economics, provides a technical but still accessible analysis of the anticompetitive effects of vaccine manufacturers’ practice of conditioning price discounts on physician buying groups agreeing to purchase the manufacturers’ vaccines in a bundle and agreeing not to purchase other manufacturers’ products.  The article begins with an interesting overview of the characteristics of the vaccine market, an introduction to the physician buying groups that purchase vaccines and to the anti-kickback concerns they raise, and a summary of the (somewhat up in the air) legal standard for when bundled discounting becomes an antitrust violation.

The authors then present their analysis of the uphill battle Novartis (a source of funding for the article) will have to fight to induce physicians to “break the bundle” and buy its new meningitis vaccine.  The authors conclude that even if Novartis were to give away its meningitis vaccine for free, “buyers defecting from [Sanofi Pasteur's bundle of vaccines, which includes Sanofi's meningitis vaccine,] would still lose $14.05 per patient in expected value.”  They present data indicating “that buyers unencumbered by … Sanofi’s loyalty contracts are over three times as likely to purchase [Novartis' vaccine], relative to encumbered buyers…” and conclude that enough of the market is foreclosed to Novartis to establish a presumption of anticompetitive effects and concomitant harm to consumers.  Per the authors, “[i]n an industry served almost exclusively by large, multi-product incumbents, with no prospects for generic competition and extremely limited entry by competitive rivals of any kind, these findings have significant implications for public policy and antitrust enforcement.”

Somewhat less accessible (due to a plethora of equations) but still well worth reading is Tort Liability and the Market for Prescription Drugs by Eric Helland, Darius Lakdawalla, Anup Malani, and Seth Seabury.  Helland and his co-authors present the results of an empirical study of the relationship between product liability rules and drug price and utilization.  While the effect of a liability rule can often be studied by comparing a state that makes a change to the rule with one that does not, the authors had to modify this approach because drugs are sold nationally.  They determined the exposure to punitive damages caps of each of nearly 16,000 drugs by first determining each drug’s geographic distribution of sales, a figure which varies from drug to drug due to geographic variation in the prevalence of disease.  The authors found that the degree of exposure to caps was correlated with an increase in drug prices but also with an increase in drug utilization.  Tighter liability standards also correlate with a reduction in adverse drug reactions.  The authors write that their numbers “imply that if every remaining state adopted some reform, there would be a 23% increase in all [adverse] events and a 25% increase in serious [adverse] events … among branded drugs.”  They conclude that “on balance, liability improves consumer and social welfare.”

The NIH’s Amended Conflict of Interest Regulations: A New, Weaker Approach to Intellectual Property Interests?

Yesterday, at long last, the National Institutes of Health released the final revisions to its regulations governing financial conflicts of interest on the part of applicants for federal research funds.  And there is good news.  The rule’s sunshine provisions have not, as was feared, been “gutted.”  Grant recipients will have to make their investigators’ financial conflicts of interest publicly accessible.  While an institution will not have to post the details of each conflict on its website, as was provided in the proposed regulations, if it does not it will instead have to provide the information in writing to anyone who asks for it.  Academics, advocates, federal and state prosecutors, other regulators, and members of the news media will have the access they need.  For sure, prospective patients or research participants will be less likely to come across information about investigator conflicts, but, as Kathleen Boozang explains here, it is far from clear that they would find such information helpful.

Of potentially more significance than the weakened sunshine provisions, the final regulations diverge from the proposed regulations with regard to the treatment of intellectual property.  Under the prior regulations, investigators were required to inform their institutions about relevant intellectual property rights, including copyrights, patents, and royalties in excess of $10,000.  The proposed regulations modified the definition to require disclosure of copyrights, patents, and royalties (and agreements to share in royalties) regardless of amount.  Under the final regulations, investigators do not need to tell their institutions about their intellectual property rights and interests unless and until they are in “receipt of income related to such rights and interests.”

The preamble to the final regulations is somewhat confusing.  For example, while the final regulations define significant financial interest to exclude intellectual property rights and interests that do not produce income, the agency states in the preamble that it “would expect institutional policies to require disclosure upon the filing of a patent application or the receipt of income related to the intellectual property interest, whichever is earlier.”  The preamble also contradicts itself with regard to the applicability of the rule’s $5,000 threshold, stating at one point that the threshold “applies to licensed intellectual property rights (e.g., patents, copyrights), royalties from such rights, and agreements to share in royalties related to licensed intellectual property rights,” while explaining (correctly, I think) at another point that “the $5,000 threshold would apply to equity interests and ‘payment for services,’ which would include salary but not royalties.”

The NIH’s explanation of its addition of the “receipt of income related to such rights and interests” qualifier to the definition of a significant intellectual property right or interest is especially confusing.  The agency writes that its intent was to exclude from the definition

“the rare cases when unlicensed intellectual property is held by the Investigator instead of flowing through the Institution,” because “it is difficult to determine the value of such interests.”  The agency’s point about valuation may be true, but that is an argument in favor of disclosure not against it.  With regard to equity interests, the final regulation requires investigators to disclose any equity interest in a non-publicly traded entity; the Food and Drug Administration similarly requires disclosure of equity interests “whose value cannot be readily determined through reference to public prices[.]“  The FDA also requires disclosure of any “[p]roprietary interest in the tested product,” without regard to value.

When an investigator has a proprietary interest in a product under study the potential exists for a serious conflict regardless of the interest’s current value or whether it is currently income-generating.  Seton Hall Law’s Center for Health & Pharmaceutical Law & Policy and others have recommended a near-total ban on serving as an investigator in that case.  Such a ban cannot, of course, be implemented unless investigators are required to tell their institutions about their proprietary interests.

Generic Drugs, Cost-Effectiveness, and Confidence

Smarter prescribing and better medication management are linchpins of current efforts to care for those with chronic medical conditions in a more consistent, coordinated, and, it is hoped, affordable manner.  A study reported in last month’s Health Affairs found that using medication to control patients’ blood sugar levels and lower their blood pressure and cholesterol is not just cost-effective, it can actually save money by reducing “downstream complications and the use of health services that outweigh the cost of the medications themselves.”  Notably, these cost savings can only be achieved if the medications in question are generics.  The authors conclude that “in a health care system strapped for resources, physicians will increasingly use generics, and patients will have to expect that most of their medications will be generic.”

As the authors also note, resistance to generics, on the part of both patients and their doctors, is longstanding and persistent.  Some of this can be chalked up to the intense and wide-ranging marketing campaigns that innovator companies mount on behalf of branded drugs.  Branded medications used to treat chronic conditions are especially heavily marketed, including through the use of free samples.  Numerous studies (here’s a recent one out of Vermont) show that physicians with sample closets in their offices are less likely than those without sample closets to prescribe generics where appropriate.

Interestingly, the Centers for Medicare and Medicaid Services announced earlier this year that Medicaid Part D prescription drug plans “may incur expenses related to distribution of and reporting on generic drug samples, provided to members within a physician’s office setting, under the plan’s administrative cost structure if doing so is consistent with a cost effective drug utilization management program.”  CMS explained that generic samples have the potential to reduce the government’s overall costs and to promote compliance with drug therapies by reducing enrollees’ current and future cost sharing expenses.  (George Van Antwerp argues here that CMS overstates the benefits of generic samples, but only because generic fill rates are rising so fast without them.)

Marketing is not the whole story behind lingering resistance to generics, though.  As the New York Times recently reported, most generic drugs are manufactured in “a shadowy network of facilities in China and India that are rarely visited by government inspectors, who sometimes cannot even find the plants.”  While plants in the United States are inspected at least once every two years, the Food and Drug Administration has historically lacked the resources to provide the same level of oversight to foreign facilities.  An “epoch-making” agreement between the FDA and generic drug manufacturers will, assuming it is approved by Congress, change this.  The manufacturers have agreed to pay $299 million in annual fees to, among other things, fund inspections of foreign plants on the same schedule that applies to domestic plants.  As the Times notes: “[T]he generic drug industry is no longer a motley collection of struggling mom-and-pop companies.  Years of consolidation have created giants like Israel-based Teva Pharmaceuticals that understand that their businesses depend on winning the confidence of patients and regulators alike, and they can afford to pay the fees needed to achieve that confidence.”

The Ban on Off-Label Promotion after Sorrell v. IMS Health

In the wake of Sorrell v. IMS Health, in which the Supreme Court invalidated on First Amendment grounds a Vermont law barring drug companies from using physician-specific prescribing data to craft physician-specific sales pitches, lawyers on both sides of the case have weighed in on the opinion’s implications for the Food & Drug Administration’s ban on off-label promotion.  In doing so, they build upon an exchange between the dissent and the majority in Sorrell.  Writing in dissent, Justice Breyer argued that the fact that the Vermont ban is “speaker-based” (i.e., that it only applies to drug companies) should not mean that it is subject to heightened scrutiny, because in the regulatory context it is not unusual for rules to apply only to regulated entities.  By way of example, Justice Breyer cites the ban on off-label promotion, which limits what manufacturers but not others can say to doctors about unapproved uses.  In response, the majority suggests that the government “might defend” the ban on the ground that it “will prevent false or misleading speech.”  The majority then reiterates that Vermont’s interest in banning data mining “instead turns on nothing more than a difference of opinion” between the state and the companies about the truthful marketing messages to which doctors should be exposed.

In an article for BNA’s Pharmaceutical Law & Industry Report, Lisa Blatt and colleagues (who represented PhRMA, one of the respondents in the case) contend that: “Sorrell builds on prior Supreme Court precedent in establishing a strong foundation to argue that a pharmaceutical company’s truthful, non-misleading information about its products cannot be subjected to content-based and speaker-based restrictions.”  And they predict (correctly) that “[t]he implications of Sorrell for the FDA’s off-label promotion regulatory regime may be tested in litigation, as well as in new regulations, in the months ahead.”  On July 14, 2011, as reported here, the Second Circuit ordered supplemental briefing on the implications of Sorrell for its pending decision in United States v. Caronia, a criminal case in which a sales representative was convicted of conspiring to misbrand the sleep aid Xyrem by promoting it for a number of off-label uses.  On the regulatory front, on July 5, 2011, seven leading pharmaceutical companies filed a citizen petition asking “the Commissioner of Food and Drugs to clarify FDA regulations and policies with respect to manufacturer dissemination of information relating to new uses of marketed drugs and medical devices.”

In a very provocative blog post at The Incidental Economist, Kevin Outterson (who wrote an amicus brief on the side of the petitioner in Sorrell on behalf of, among others, the New England Journal of Medicine) appears to concur with Blatt that “[i]n the wake of Sorrell … we can expect the FDA to relax rules against off-label promotion.”  Professor Outterson characterizes the Supreme Court’s decision as a radical adjustment of the regulatory balance between the FDA and the companies it regulates.  Under our current system, data on the safety and efficacy of drugs is largely generated privately, as a condition of marketing approval.  The ban on off-label promotion is a key component of the system, because it provides manufacturers with a powerful push to continue to study their products after they are initially approved for sale.  Without it (or, even more radically, without any requirement that a manufacturer establish that a drug is efficacious before marketing it), we’ll either need to find other ways to incentivize private sector research or spend more public money on the study of drugs, both easier said than done.  Professor Outterson suggests a third way, that: “the US could simply free ride off the studies produced to satisfy Europe’s Phase III approval process.”  As he points out, however, “[t]hat would work only so long as the EU didn’t make the same changes.”

Perhaps naively, I am hopeful that the ban on off-label promotion will survive the coming wave of legal challenges largely intact.  In addition to its role in incentivizing research (a neutral function which distinguishes it from the data mining law at issue in Sorrell), I think that the ban serves as an important prophylactic against false and misleading product promotion.  (I elaborate on this argument here.)  This preventive role further distinguishes the ban on off-label promotion from the law invalidated in Sorrell.

Recommended Reading: Recent Legal Scholarship on Decision-Making about Health and Healthcare

In Health Choices: Regulatory Design and Processing Modes of Health Decisions, Orly Lobel and On Amir briefly summarize a fascinating series of experiments they have conducted with the support of the Robert Wood Johnson Foundation that test individuals’ ability to make decisions about their health in the face of cognitive depletion or overload.  A longer version will be available in September, but the summary is well worth reading.  Lobel and Amir begin by reviewing a line of research demonstrating, perhaps unsurprisingly, that “psychological depletion caused by a prior task” — in one study it was eating radishes while resisting cookies–leads to a reduced ability to exercise “executive control” and “persist in demanding cognitive activities.”  As the authors note, applying this research to the context of health related decision-making is important because patients and providers alike are frequently asked to process information about relative risk and make reasoned, reasonable decisions under conditions of cognitive depletion or overload.

To test their hypothesis that “absent sufficient resources for executive functions individuals will take more risk in their [health-related] decisions,” Lobel and Amir conducted a lab experiment with approximately 700 participants and a web-based one with over 3000 participants, including 300 medical doctors.   The findings from their studies support the conclusion that depletion affects people’s ability to process risk, albeit not in entirely intuitive or predictable ways.  For example, when parents are cognitively depleted, they become more risk averse regarding vaccinating their children, but when policymakers are cognitively depleted, they become less risk averse regarding population-wide vaccination.  When consumers are in a state of attention and focus, a long list of potential side effects will deter them from using a new drug.  When cognitively overloaded, though, they paid “less attention to warning lists the longer they were.”  The implications of Lobel and Amir’s work are many, varied, and vast; I am looking forward to reading the full paper when it comes out in September.

I also highly recommend Christopher Tarver Robertson’s Biased Advice, which was published in the Emory Law Journal earlier this year.  Robertson conducted a series of experiments that built on the groundbreaking 2005 study by Daylian M. Cain, George Loewenstein & Don A. Moore evaluating the effect of a conflict of interest, and of disclosure of the conflict, on the quality of advice given by advisors regarding the number of coins in a jar and on the accuracy of advisees’ estimation of the number of coins in the jar.  Cain and his colleagues’ most surprising finding was that when a conflict existed, disclosing it caused the accuracy of advisees’ estimates to decline, in part because advisors gave more biased advice when their conflicts were disclosed than when they were not disclosed.

Among other questions, Robertson examined whether a more concrete disclosure about an advisor’s bias–that is, that “prior research has shown that advisors paid in this way tend to give advice that is $7.68 higher on average than the advice of advisors who are paid based on accuracy”–would aid advisees.  It did not, because advisees did not do what “one would hope and expect” and simply subtract $7.68 from the advisor’s estimate.  Rather, it appears that they “used the bias disclosure not as a mechanism of calibrating their reliance more precisely, but rather as a strengthened warning suggesting that the advice is altogether worthless.”

On the other hand, disclosing to advisees that an advisor was paid based on the accuracy of the advisee’s estimate–i.e. that the advisor’s financial interest aligned with that of the advisee–led advisees to rely more heavily on the expert’s advice and, as a result, to more accurately estimate the number of coins in the jar.  Disclosure of a conflict of interest is also likely to be valuable where advisees can seek out another advisor; a second, unconflicted, opinion dramatically increased the accuracy of advisees’ estimates.

Robertson’s research is important and interesting.  As he observes, one of the reasons that it is so difficult to rein in health care costs is that “[t]he health care industry is characterized by radically distributed decision making, with each patient deciding upon her own course of treatment within the range of treatments offered by providers and covered by public and private insurers.”  Improving individual decisions may be key to bending the cost curve.  Robertson’s research suggests that a disclosure mandate could help under certain circumstances, where, for example, there is “epistemic charlatanism” and a physician’s disclosure of a financial conflict of interest would lead a patient to reject the physician’s not-so-expert recommendations.  Robertson emphasizes, however, that disclosure does not improve layperson decision-making nearly as much as unbiased advice does.

Distribution Controls: A Potentially Powerful Weapon Against Inappropriate or Dangerous Off-Label Use

When supplies of sodium thiopental dried up earlier this year, states turned to other drugs to carry out executions by lethal injection.  The anti-seizure drug pentobarbital, marketed as Nembutal, is one such drug.  An estimated two-thirds of the thirty-four states with the death penalty have switched or considered switching to Nembutal; states that have made the switch include Georgia, Ohio, Oklahoma, South Carolina, and Texas.  As of earlier this month, Nembutal had been used in eighteen executions this year.

Like sodium thiopental, Nembutal is an off-patent drug that serves a relatively small market.  The sole company licensed to manufacture Nembutal in the United States, the Danish firm Lundbeck Inc., has been the target of a public relations and investment campaign by human rights activists calling for the end to the use of the drug in executions.  Lundbeck has never sold Nembutal directly to prisons, however, and initially the company said that there was nothing it could do to control the drug’s re-sale.  As a spokesperson explained:

We can’t withdraw the product because it is used for treating severe epilepsy and sometimes it’s the only treatment option.  All we can do is write to the prisons urging them to stop misusing using our product which was designed to help sick people.  It’s a really unfortunate situation.

Earlier this month, Lundbeck announced that it had determined that there were steps it could take beyond letter writing.  The company considered ceasing production of the drug altogether–it represents less than one percent of the company’s sales and is, in the company’s words, “economically insignificant”–but decided against doing so in light of survey evidence that the fifty million doses of the drug it sells in the United States each year are important for treating epilepsy that is severe and refractory (that is, unresponsive to other drugs).

Lundbeck decided instead to distribute Nembutal through Cardinal Health’s Specialty Pharmaceutical Services on a “drop-ship” basis, directly to hospitals.  Less than ten percent of drugs are distributed directly to end-user customers in this way, typically “cancer treatments that are expensive, difficult to make, or not in high demand.”  Lundbeck will review each Nembutal order and deny those from “from prisons in states currently active in carrying out death penalty sentences.”  Every purchaser will be required to represent in writing “that the purchase of [Nembutal] is for its own use and that it will not redistribute any purchased product without the express written authorization of Lundbeck.”  Lundbeck’s CEO has warned that the company will take unspecified “legal action” against any purchaser who violates these terms.

Lundbeck’s decision to use a drop-ship program and purchaser agreements to take responsibility for the off-label uses to which its product is put once it leaves the company’s control raises the question whether other companies could or should be asked to do the same.  In some cases, issues of scale will foreclose such an approach.  In other cases, a company and/or regulators may have concerns about inappropriate or dangerous off-label use but not be able to link it to an easily identified class of would-be purchasers like “prisons in states currently active in carrying out death penalty sentences.”  (Note that even in Lundbeck’s case the agreements are overbroad to the extent that they deny access to Nembutal to prisoners in death penalty states who need the drug to treat severe, refractory epilepsy.)  In still other cases, however, taking control of distribution will be a feasible, and powerful, compliance tool.  The Risk Evaluation and Mitigation Strategy (REMS) for Lazanda (fentanyl) Nasal Spray, recently posted to the Food and Drug Administration website, which provides that would-be distributors enroll in the REMS program and agree to limit their distribution to specially-certified pharmacies which are also enrolled in the program, is just one example.

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