OIG Warns About Ineligibility of Health Care Program Beneficiaries for Pharmaceutical Coupon Programs

The Office of Inspector General (OIG) of the Department of Health & Human Services issued a Special Advisory Bulletin (SAB) on September 19, 2014 discussing the coupon programs employed by many pharmaceutical manufacturers to reduce or entirely eliminate patient copayments to obtain brand-name drugs. As mentioned on our Health Industry Washington Watch blog, the SAB cautions that there are several risks associated with manufacturers utilizing such coupon programs, and that the manufacturers must make efforts to prevent federal health care program beneficiaries from using the coupons if they wish to avoid these risks. Among the potential issues that can arise from an improperly-regulated coupon program are violations of the Anti-Kickback Statute (when programs – which qualify as remuneration – are purposely paid with the intent to encourage the use of items or services payable by a federal health care program) and False Claims Act (when a claim includes items or services resulting from a kickback violation). While the SAB’s focus is on manufacturer coupon practices, in a footnote, the OIG states that pharmacies accepting coupons for Part D copayments may also be subject to these sanctions.

To read the entire post, click here.

First Amendment, False Claims, and Off-Label Promotion Allegations

The Drug & Device Law blog recently posted an analysis of an interesting case, United States ex rel. Solis v. Millennium Pharmaceuticals, Inc., that takes an issue the government has fought in the past – off-label promotion – and attempts to provide a link between it and the false claims issues that relators bring under the government’s name. Solis asserts that the dissemination of certain published medical articles on the part of the defendant constituted off-label promotion and resulted in the submission of false claims for federal reimbursement.

As Reed Smith partner Jim Beck discusses in his post, False Claims Act (FCA) litigation may provide drug and medical device counsel with ample opportunity to cite the First Amendment as a means of defense. The defense in Solis – supported in an amicus curiae brief filed by the Pharmaceutical Research and Manufacturers of America– argues that the dissemination of the medical articles was not “false” in that it did not present incorrect or misleading information, was protected by First Amendment, and did not lead to the submission of any false claims.

Academic Physician Compensation Plans Take a New "Curve" Towards Performance Incentives

Over the last several years, there has been a trend on the part of Academic Medical Centers (AMCs) to adopt more performance incentive-based faculty compensation plans for their physicians. AMCs must take several items into consideration when designing these plans, particularly in regards to financial allocation. As Reed Smith partner Karl Thallner and Ronald Vance, Managing Director at Navigant Consulting, point out in an American Health Lawyers Association member briefing entitled “Developing Progressive Academic Physician Compensation Plans for an Emerging ‘Curve 2’ Health Care Market,” most AMCs are demonstrating an increased reliance on clinical health care delivery revenue as a result of decreased funding for other pursuits, such as teaching and research. Such constraints present additional challenges for AMCs trying to construct viable financial models that will support incentive-based physician compensation plans.

To read the member briefing, click here.

U.S. Senator Schumer Calls for Increased Regulation of Wearable Electronic Devices to Avoid Data Privacy Issues

Reed Smith’s Global Regulatory Enforcement Law Blog features a post on the recent phenomenon of wearable electronic devices and the legal issues that may arise from these gadgets. "Wearable Device Privacy - A Legislative Priority?," written by Reed Smith attorneys Frederick Lah and Khurram Gore, discusses a recent press release issued by U.S. Senator Chuck Schumer of New York expressing concern that personal health data collected by wearable devices and fitness apps, including medical conditions, sleep patterns, calories burned, GPS locations, blood pressure, weight, and more, will be provided to third parties without the user knowing it. Schumer, citing this as a threat to personal privacy, has urged the Federal Trade Commission to mandate that device and app companies provide users with an explicit “opt-out,” allowing them to block the distribution of this information to any third parties.

As the authors note, with the rising popularity of these types of devices, we expect regulators, legislators, and companies to start paying closer attention to the data security and privacy risks associated with their use.

Recent Data Breaches Serve as Warning for Companies to Assess Their Cybersecurity Insurance Coverage

Earlier this week, numerous media outlets reported on the Russian crime ring which had managed to steal more pieces of Internet data than any other group of hackers in history – a whopping collection of at least 1.2 billion user name and password combinations and over 500 million email addresses. The magnitude of data that this group has managed to accumulate, coupled with several other recent high-profile hacking incidents, is a wake-up call for businesses that cybersecurity has become a major contemporary concern. Data breaches are increasing in frequency, severity, and cost, and the potential consequences for an affected company can be devastating.

This trend and its insurance implications are discussed in a client alert by Reed Smith partners Doug Cameron, David Weiss, Andy Moss, and Cristina Shea, who point out that companies must start being proactive with their cybersecurity efforts. Businesses should take the time to assess their current cybersecurity insurance coverage as well as their coverage needs. Cyber-related insurance is an evolving area, so extensive research and consulting with counsel may be necessary before a company can select an insurance policy that maximizes its coverage.
 

Are You Sure Your Company Is "At Home" In All 50 States?

As Jim Beck (of the Drug and Device Law Blog) and Michelle Cheng explain in a recent Washington Legal Foundation Legal Backgrounder, "The Other Shoe Drops on General Jurisdiction: Making the Most of Supreme Court’s Bauman & Goodyear Rulings," corporate defendants might want to think twice before making a general appearance in new cases filed in states other than the states in which they have incorporated or have located their principal place of business.

In short, doing business in all 50 states no longer necessarily subjects a corporation to suit in all 50 states, and International Shoe v. Washington, 326 U.S. 310 (1945) is not the last word on general jurisdiction. Based on the Supreme Court’s 2011 decision in Goodyear Dunlop Tires Operations, S.A. v. Brown, 131 S. Ct. 2846 (2011), and this term’s Daimler AG v. Bauman, 134 S. Ct. 746 (2014), “general” personal jurisdiction has been limited, and should no longer be assumed to support jurisdiction over a non-resident corporation—even one engaged in substantial, continuous and systematic business. These recent decisions establish that general personal jurisdiction can be asserted against corporations only in three limited circumstances: (1) the corporate defendant’s state of incorporation, (2) its principal place of business, or (3) “in an exceptional case” where the corporation’s in-state activities are “so substantial and of such a nature as to render the corporation at home in that State.”

Specific personal jurisdiction may still exist based on corporate activities related to a particular resident plaintiff, but this newly defined general personal jurisdiction standard bodes well for corporate defendants who would like to limit forum shopping but often are forced to litigate in other states against non-resident plaintiffs, merely because their products or services enter the “stream of commerce” within that state. As a result, when new lawsuits are filed by non-resident plaintiffs in states other than the state of incorporation and the state of the principal place of business, corporate defendants may wish to dust off procedural options many have not used for some time, like FRCP 12(b)(2) motions to dismiss for lack of personal jurisdiction, or state court motions to quash.

For more, click here. You can also read about the implications of the Bauman decision as discussed in Jim’s Drug and Device Law blog post.

Was It Worth the Wait? - FDA Releases Two Social Media Guidance Documents for Drug/Device Industry

Earlier this week, the FDA issued two draft guidances on social media, and in this client alert, attorneys Colleen Davies, Celeste Letourneau, Kevin Madagan, and Jennifer Pike have analyzed them both in detail. The first guidance pertains to product claims and risk information on platforms like Twitter and sponsored links, and the second to correcting third party misinformation that appears in social media, such as in comments on a Facebook page or website.

A key date to keep in mind is that the deadline for comments is September 16, 2014.

To read the client alert, click here.

Law360 Article - U.S. and French Sunshine Laws Present Compliance Challenges for Manufacturers

In “From Sea to Shining Sea: French and US Sunshine Laws,” (Law360 subscription required), Reed Smith attorneys Elizabeth Carder-Thompson and Daniel Kadar discuss recent legislation from both sides of the Atlantic designed to increase the transparency of relationships between drug and medical device manufacturers on one hand and physicians and teaching hospitals on the other. While both the U.S. and French Sunshine Acts are intended to address the same general issue, there are several key differences between the two resulting from the respective environments in which they were passed. In addition to providing an overview of the legislation and its immediate effects, the article also discusses some of the compliance issues that have resulted from these laws, including determination of the extent to which non-U.S. headquartered entities or non-U.S. based physicians are subject to U.S. Sunshine Act requirements, and regulation of the amount, organization, and frequency of data disclosure required under the French Sunshine Act.

French Class Actions: How potentially dangerous will they be?

This post was written by Daniel Kadar

I.
Since the entry into force of the new Law on Consumer Protection 17 March 2014 – also known as “Hamon Law” – France now has its own version of a class action, different by many ways from its American counterpart.

To prevent any of what are considered as abuses on the Eastern side of the Atlantic, the French legislator has framed this legal action in several limits, which in turn seems to call in question the effectiveness of the mechanism.

II.
Pursuant to article L. 423-1 of French Consumer Code, officially recognised national consumer protection associations are now allowed to seek damages before civil courts, in order to obtain compensation for the individual and material losses suffered by consumers placed in a similar or identical situation. The harm must have its common cause in a breach by one or several same professionals of their legal or contractual obligations in the context of a sale of goods or provision of services, or when the harm derives from a breach of competition law.

Therefore, the French class action is restricted by four means:

  1. Only individuals can be provided with some compensation through this action since the Hamon Law, for the first time, also defined the consumer as a natural person acting for non-work-related purposes, excluding legal persons from its scope.
  2. Officially recognised associations of national dimension – only 15 to date – are granted an exclusive right to initiate the proceedings, which puts an important limitation to the role of legal counsels in this field, as opposed to the American class action.
  3. These associations can only seek to obtain damages to compensate losses resulting from material or financial damage suffered by the consumers. Such a limitation excludes moral harm or physical injuries, which may be of particularly great importance in many cases (sale of defective or spoiled goods, for instance). Punitive damages are also excluded so far.
  4. As its place in the French Consumer Code clearly indicates, the scope of this mechanism is limited to consumer claims. The legislator’s purpose here was to avoid class actions in sensitive areas, such as public health and environmental damage. However, the legislator has inserted an unusual provision according to which the exclusion of health and environmental damages shall be reconsidered within 30 months after passing the regulation. In fact, discussions have already started with professional health organisations.

III.
The procedure has been broken down in a three-step process:

  • A judgment must find that the conditions for admissibility are fulfilled, rule on the professional’s liability in relation to the individual cases presented by the association, define the concerned group of consumers, and determine which criteria consumers must meet in order to join the group of consumers to whom the professional is liable.
  • The adhesion of consumers to the class action is based on an “opt-in” system: it is subject to a positive expression of the victim’s will. To make the proceeding operational, the judgment must therefore order publicity measures intended for consumers most likely to belong to the group. The decision also states by which means consumers may join the group (by approaching the professional directly or the association), and in which delay (no less than two months and no more than six months after the publicity measures are taken).
  • Regarding the effective compensation of the consumers, the judgment must fix the timeframe within which the damages have to be paid by the professional and, in the event of a dispute over payment, the judge is required to give its decision in the same ruling.

When “the identity and the number of consumers having suffered harm are known” and “when these consumers have suffered the same loss, or loss of an identical value for a given service or over a given period of time or duration," a simplified procedure is provided, through which the judge may rule on the liability and may order the professional to compensate victims directly and individually, within a fixed delay.

Class actions related to anticompetitive practices suffer a last limitation, since a “follow on” rule is applied in those cases: professionals may only be held liable on the basis of a definitive decision made by competent national or EU authorities or jurisdictions.

Innovative, this class action surely is; its numerous safeguards appear, however, as important obstacles to its success to-date.

An extension to health-related litigation is to be monitored closely.

OIG Advisory Bulletin Addresses Independent Charity Patient Assistance Program Risks

Patient Assistance Programs (PAPs) provide important help to patients of limited means who do not have insurance coverage for drugs and need assistance covering drug costs, often for chronic illnesses. The Office of the Inspector General (OIG) of the Department of Health and Human Services has now issued an advisory bulletin, dated May 21, 2014, intended to expand existing OIG guidelines related to PAPs, which can give rise to anti-kickback statute issues in some circumstances.

The new advisory bulletin, which is summarized in a client alert by Reed Smith partner Joe Metro and summer associate Peter Vogel, focuses specifically on Independent Charity PAPs. Among the issues discussed are the relationship between donors and Independent Charity PAPs, Independent Charity PAPs’ definitions of disease funds and eligible recipients, and the potential illegality of donor actions in relation to support for their own products. The OIG has stated that it will be working with PAPs that previously received advisory opinions to identify potential changes that could provide some clarity to these issues.

China's Medical Device Regulations Receive Notable Revisions

Significant Revisions to China's Regulations on the Supervision and Administration of Medical Devices (State Council Order No. 650)

China’s State Council released its new Administrative Regulation on the Supervision and Administration of Medical Devices March 7, 2014, which will be effective June 1, 2014 (the New Regulation).

The State Council Legislative Affairs Office worked more than six years revising the predecessor of the New Regulation (the Old Regulation), which had been effective since 2000. The revisions are intended to establish a more efficient and scientific regulatory regime for supervision and administration of medical devices. The New Regulation addresses research and development, clinical trials, product approvals, manufacturing, business operations, sales, and advertising. Generally, the New Regulation moderates the oversight of low-risk medical devices and strengthens the supervision on high-risk devices. The New Regulation, summarized in a full client alert written by Reed Smith attorneys Jay Yan, Gordon Schatz, Mao Rong, and Liu Yang, will have a significant impact on all medical device enterprises.

Revised Administrative Measures on Medical Device Quality – CFDA Seeks Comments by June 15

On May 15, CFDA released its Measures on the Supervision and Administration of the Quality of Medical Devices in Use for public comment. Under the measures, medical device operators will be required to establish a quality management system especially for Class III devices. Features of this proposed system cover the purchase of medical devices, an incoming stock inspection and recording system, an inbound and outbound management system, a daily maintenance and recording system, a quality traceability recording system, a management system for disposable medical devices, and a management system for contracts and technical documents for products. Comments are due to CFDA by June 15, 2014 at: 26 Xuanwumen West Street, Beijing, China 100053, and email: xuxy@sda.gov.cn. The proposal can be viewed here.

The French Sunshine Act: Towards simplification and new deadlines?

This post was written by Daniel Kadar

Similar to the U.S. Sunshine Act (as has been explored before on this blog), the French Sunshine Act (“Loi Bertrand”) made mandatory the publication of benefits (in kind or in cash) granted by pharmaceutical laboratories to health professionals, as soon as they reach a certain amount.

An implementing decree published 21 May 2013 has set out in detail its conditions, quickly followed, in December, by a second regulatory text regarding the unique website where those benefits are supposed to be published.

Nevertheless, this body of rules might be amended again soon, with a new draft order released recently by the Ministry of Social Affairs and Healthcare. In view of the modifications it proposes, the regulation of these issues seems to be moving in three different directions:

  1. Simplification in both the form and substance of the applicable regulation, which concerns, essentially, the health care providers (HCPs) whose agreement(s) with a health care company have to be published: the new text shall simply refer to the current article L.1453-1 of the French Public Health Code, which provides a list substantially similar to the existing one. It also plans to remove some pieces of the information the laboratories are required to make public (qualification, title, college register number, event’s schedule…). In other words, same substance but less detail. It is important to keep in mind that the amount of the payments made to HCPs through these agreements does not need to be disclosed under French law.
  2. Regarding the website where the declaration of interests should be made, the Sunshine Act sets forth that personal data of the HCPs (data that would allow, according to EU regulation, the identification of HCPs either directly or indirectly) is to be protected against indexing on search engines. The draft order reduces the scope of such protection, maintaining only protections of the “directly identifying data” against this type of indexing.
  3. Last but not least, the main purpose of the draft is obviously to change the schedule initially set up to declare the benefits and the conventions: it removes the existing 15-day deadline after the signature of the convention, and allows the advent of a biannual schedule. The draft order goes even further by postponing the declarations regarding the benefits granted in 2012 and 2013 to August 2015, and its publication on the unique website to October 2015. In the meantime, rules are drafted to organize a publication on the personal websites of the companies.

Setting up the new transparency requirements in France obviously takes more time than expected…

California AG's Guidance on California Online Privacy Protection Act

The California Attorney General, Kamala D. Harris, has issued a long-awaited guide on how companies can comply with the California Online Privacy Protection Act (CalOPPA). CalOPPA applies to all companies which collect personally identifiable information from California residents online, regardless of whether that information is collected via a commercial website or a mobile application. This far-reaching statute requires virtually every company with an online presence in California, including drug and device companies, to have a company-drafted privacy policy that conforms with its guidelines.

The Attorney General’s guide, entitled “Making Your Privacy Practices Public,” can be found here. It provides specific recommendations on how businesses are to comply with CalOPPA’s requirements to disclose and comply with a company-drafted privacy policy. CalOPPA was recently amended to include information on how the website operator responds to Do Not Track signals or similar mechanisms. The law also requires company privacy policies to state whether third parties can collect personally identifiable information about the site’s users.

Reed Smith attorneys Lisa Kim, Paul Cho, and Divonne Smoyer have written a client alert summarizing the recommendations made by the Attorney General in this guide. To read the alert, click here.

OIG Proposes Amendment of Health Care Program Civil Monetary Penalty Regulations

The Office of Inspector General (OIG) of the Department of Health and Human Services has issued a proposed rule that would institute several changes to the health care program civil monetary penalty (CMP) regulations. Under the proposed rule, which is analyzed in a client alert prepared by Reed Smith lawyers Paul Pitts, Joe Metro, and Susan Edwards, the OIG would have the expanded authority to enforce significant CMPs on providers and suppliers in a variety of scenarios.

In addition, the rule proposes a reorganization and clarification of current CMP regulations, including the methods used to determine when and how a CMP should be issued and how a CMP should be calculated. The OIG estimates that enforcement of the proposed rule would result in an increase in CMP collections by the government. Comments on the rule are due by July 11, 2014.

Closing Time: Considerations and Hurdles in Completing Pennsylvania-Based Health Care Transactions

The health care industry has seen a recent shift towards consolidation, driven in part by legislation such as the Patient Protection and Affordable Care Act which encourages integration within the industry. As a result, health care entities are increasingly considering opportunities to merge with or acquire other companies. While this can be an exciting prospect for many organizations, the health care industry’s high level of both federal and state regulation has resulted in a myriad of potential legal issues that can stand in the way of a successful transaction. In particular, there are a number of regulatory hurdles that must be cleared in the state of Pennsylvania before a health care transaction can take place.

To address many of the potential issues that deal counsel must consider when involved in health care transactions in Pennsylvania, Reed Smith attorneys Karl Thallner and Zach Portin authored “Seal the Deal: Health Care Mergers and Acquisitions in Pennsylvania,” which was published in the April 2014 edition of the Pennsylvania Bar Association Quarterly. The article addresses a wide range of topics, including review by the state attorney general’s office and the Orphans’ Court; regulatory approvals at both the federal and state level; antitrust; the corporate practice of medicine doctrine; fiduciary duties; and other various matters for consideration.