Life Sciences Legal Update : Life Sciences Lawyers & Attorneys : Reed Smith Law Firm : Healthcare, Food and Drug Law, Biotechnology, Privacy, Product Liability

This post was written by Michelle Lyu.

The plaintiff in Hearn v. Advanced Bionics Corporation, No. 06cv114-KS-MTP, 2008 WL 3896431 (S.D. Miss. Aug. 19, 2008) attempted to win a do-over of a straightforward defense preemption win.  

The district court had granted in part and denied in part the defendant's motion for summary judgment based on preemption as a result of the Class III PMA approval of the medical device in question, a cochlear implant that malfunctioned and was replaced with surgery. After the court's ruling, the parties settled and the court entered judgment of dismissal. Id. at p. 2. 

Approximately five months later, plaintiff moved for a relief from judgment, arguing that after the settlement, she discovered that the manufacturer had "knowingly misrepresented the true facts of the status of the FDA approval" to induce a settlement. Id. Having relied on such representations and "discovery fraud," plaintiff did not seek a rescindment of the settlement agreement (in fact, she kept the settlement proceeds!), but sought sanctions and damages under various claims for relief. Id. Essentially, the plaintiff argued that the defendant "knowingly misrepresented" that an FDA investigation was commenced post-approval, "at the conclusion of which the FDA would challenge Advanced Bionics' compliance with the pre-market approval process." Id. at p. 5. 

Based on these allegations, the plaintiff unsuccessfully sought to have the judgment vacated using Rule 11, Rule 60 and the court's inherent powers. On denying these requests, the court made clear that even if the plaintiff were to succeed in establishing misconduct, the court's ruling on the motion for summary would be unchanged. That is, even if the plaintiff's claims were accurate, "the Defendant would still be protected by the preemption defense for items that received and complied with pre-market approval from the FDA." Id. at p. 6. Further, the court's order granting the summary judgment did not detail which state law claims were preempted, but only stated a point of law; thus, had the case continued and the evidence demonstrated either non-compliance with the federal requirements or the manufacturer failed to properly obtain the premarket approval for the device, the preemption argument might have "presumably fail[ed]." Id. at p. 8. However, given the procedural status of the case, the court denied the plaintiff's motion and advised that her recourse--if any--was to file a new action against the manufacturer for fraudulent misrepresentation or to seek other similar relief.

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In a significant--and likely to be controversial--decision, the Ninth Circuit yesterday reinstated a putative class action filed by Santa Clara County, Calif., against more than 10 pharmaceutical manufacturers for allegedly overcharging hospitals for their medications. 

In County of Santa Clara v. Astra USA, Inc., __ F.3d __, 2008 WL 3916268 (9th Cir. Aug. 27, 2008), the question addressed was whether "Section 340B covered entities"--certain federally funded medical clinics--were intended direct beneficiaries of drug discount pricing agreements between the federal government and manufacturers. Section 602 of the Veterans Health Care Act of 1992, Pub. L. No. 102-585, 106 Stat. 4943, 4967, entitled “Limitations on Prices of Drugs Purchased by Covered Entities,” directs the Secretary of Health and Human Services to enter agreements with pharmaceutical manufacturers capping the price at the "average manufacturer price," as defined. 42 U.S.C. § 256b(a)(1). Pursuant to that statute, the Secretary entered into a standard Pharmaceutical Pricing Agreement ("PPA") with several manufacturers. The putative class action alleged, under federal contract law, that the County and several of its federally funded medical clinics were charged more than the PPAs allowed. The Ninth Circuit panel concluded that Section 340B covered entities are intended third-party beneficiaries of the PPAs with enforceable rights (even in the absence of a contractual right to sue, and the absence of a statutory private right of action), and rejected the argument that the primary jurisdiction doctrine required referral of the matter to the Secretary for agency resolution.

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This post was written by Michelle Lyu.

Earlier this week, in Uhm v. Humana, Inc., --- F.3d --- , 2008 WL 3891592, No. 06-35672 (9th Cir. Aug. 25, 2008), the Ninth Circuit upheld a lower court ruling that the express preemption provision of the Medicare Prescription Drug Improvement and Modernization Act preempted state law claims arising from the plaintiffs' prescription drug benefits provided by a Medicare supplement insurer. 

On behalf of a putative class, plaintiffs asserted claims for breach of contract, violation of state consumer protection statutes, unjust enrichment, and fraud arising from allegations that the class enrolled in a plan for prescription drug coverage but the insurer failed to cover their prescription medication purchases as promised. But the Act specifies that for Medicare prescription drug plans and sponsors, "[t]he standards established under this part shall supercede any State law or regulation (other than State licensing laws or State laws relating to plan solvency) with respect to MA ["Medicare Advantage"] plans which are offered by MA organizations under this part." 42 U.S.C. § 1395w-26(b)(3). 

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This post was written by Heather M. Zimmerman, Karl A. Thallner, Jr, Thomas W. Greeson, Gina M. Cavalier, Daniel A. Cody, Brad Rostolsky, and Paul Pitts.

I.  INTRODUCTION

On Aug. 19, 2008, the Centers for Medicare & Medicaid Services (“CMS”) published a final rule to implement the Fiscal Year 2009 Hospital Inpatient Prospective Payment System (the “2009 IPPS final rule”). 73 Fed. Reg 48433. The IPPS final rule includes significant changes to the federal Physician Self-Referral Law, or “Stark Law,” regulations. Under the Stark Law, if a physician or a member of a physician’s immediate family has a financial relationship with an entity, the physician may not make referrals to that entity for the furnishing of certain “designated health services” (“DHS”) under Medicare, unless an exception applies. If a physician makes a prohibited referral for DHS, the entity is prohibited from seeking or keeping payment from Medicare for the DHS. The IPPS final rule adopts as final, numerous changes to the Stark Law regulations that were proposed in the 2009 Hospital Inpatient Prospective Payment System proposed rule (“2009 IPPS proposed rule”), as well as changes that were proposed in the 2008 Medicare Physician Fee Schedule proposed rule (“2008 MPFS proposed rule”) and adopted as final in the September 2007 Stark Law, Phase III regulations (“Phase III”).

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This post was written by Louis A. Naugle and Mark A. Mustian.

On Aug. 12, 2008, EPA announced its intention to submit an Information Collection Request (“ICR”) to the Office of Management and Budget, for collection of information from the Health Services Industry. 73 FR 46903 This ICR is the first step by EPA toward possible regulation of the disposal of unused pharmaceuticals, and the implementation of effluent limitations for disposal of unused pharmaceuticals to sanitary sewer systems.

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This post was written by Michelle Lyu.

This case provides an interesting glimpse of what could happen if the plaintiffs are successful in persuading Congress to change the import of Riegel v. Medtronic, Inc.'s, (552 U.S. ___, 128 S.Ct. 999, (Feb. 20, 2008)) holding through legislation. 

In Lundeen v. Canadian Pacific Railway Company, 532 F.3d 682 (8th Cir. July 2, 2008), the Eighth Circuit addresses the retroactive effect of an amendment to the Federal Railroad Safety Act, which removed the Act's preemptive effect over state law claims.  When plaintiffs first brought this case for personal injuries and property damage from a freight train derailment in state court against railroads, the case was first removed and then later dismissed on the basis of preemption under the Federal Railroad Safety Act.  While the cases were pending on appeal, Congress amended FRSA, "clarifying" that the state law causes of action seeking damages for personal injury, death, or property cases were not preempted.  Congress made the amendment retroactive to the day of the derailment at issue, and effectively removed the basis of the court's former holding on preemption.  The Eighth Circuit majority panel held that the amendment was constitutional despite arguments re separation of powers doctrine, due process, equal protection, and the Ex Post Facto Clause, and remanded the case. 

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On July 9, 2008, The Joint Commission, the nation's standards-setting and health care accreditation body, issued a Sentinel Event Alert, which warns that intimidating and disruptive behavior can result in medical errors and adverse outcomes for patients. As a result of these findings, The Joint Commission is introducing new standards, which require accredited health care organizations to create codes of conduct that define acceptable, disruptive and inappropriate behaviors, and to create and implement procedures for managing disruptive and inappropriate behaviors. The new standards, which apply to hospitals, nursing homes, home health agencies, laboratories, ambulatory care facilities, and behavioral health care facilities in the United States, take effect Jan. 1, 2009.

Reed Smith's Bethany A. Pelliconi has written an informative article discussing these new standards.

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This post was written by Karl A. Thallner, Jacqueline B. Penrod, Amie E. Schaadt and Brad M. Rostolsky.

I.  INTRODUCTION

On Aug. 9, 2008, the Pennsylvania Department of Public Welfare (“DPW”) published its proposed regulations for assisted living facilities operating within the Commonwealth. (Pennsylvania Bulletin, Vol. 38, No. 32, Aug. 9, 2008.)  The proposed regulations were drafted in response to the Pennsylvania General Assembly’s enactment of Act 56 on July 25, 2007. Act 56 amended the statute regulating and licensing personal care homes by creating, defining, and providing for the regulation of a new form of facility to provide long-term care services within the state: the assisted living facility. 

The development of the assisted living facility is a significant change in the current continuum of care and should be of interest to all owners, developers, and administrators of personal care homes and nursing homes operating within the Commonwealth. By obtaining licensure for assisted living, both nursing homes and personal care homes will have the ability to attract a greater range of individuals who wish to remain in a single facility and avoid undergoing transfers when their conditions improve or worsen. The change is also relevant to continuing care retirement communities (“CCRC”) that wish to provide, and advertise that they provide, the full continuum of care. Furthermore, the change is relevant to hospitals because assisted living facilities may provide a new option for discharging patients who need a higher level of residential care, but who do not require around-the-clock skilled nursing care. Of course, the alternative of assisted living is significant to patients and prospective patients who may require residential care. Parties interested in submitting comments, questions, and suggestions to the DPW must do so by Sept. 15, 2008. 

As noted above, the newly enacted legislation and its implementing regulations represent a significant change in the Commonwealth with regard to the provision of long-term care services. The central focus of the Act is the concept of “aging in place,” which is defined as the receipt of “care and services at a licensed assisted living residence to accommodate changing needs and preferences in order to remain in the assisted living residence.” Under the Act, the assisted living facility is defined as “any premises in which food, shelter, personal care, assistance or supervision and supplemental health care services are provided for a period exceeding twenty-four hours for four or more adults.” Thus, an assisted living facility essentially functions as a natural extension of the personal care home setting, and thereby allows an individual to remain in one place while receiving a heightened level of service and care as physical needs increase.

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This post was written by Debra A. McCurdy, Robert J. Hill, Jacqueline B. Penrod, Catherine Durkin, Jamie L. Schreiber, and Nancy A. Sheliga.

I.  Introduction

On July 15, 2008, the House and Senate overrode President Bush’s veto of H.R. 6331, the “Medicare Improvements for Patients and Providers Act of 2008” (“MIPPA”). [1] MIPPA rescinds a 10.6 percent cut in Medicare physician payments, delays a controversial medical equipment competitive bidding program, and makes numerous other Medicare and Medicaid policy changes. Highlights of the new law include the following:

• Physician Fee Schedule: MIPPA repeals a 10.6 percent cut in Medicare physician fee schedule rates that was briefly triggered on July 1, 2008, and provides a 1.1 percent increase for 2009 (rather than the forecasted 5.4 percent cut). The law also expands the Physician Quality Reporting Initiative (“PQRI”), promotes electronic prescribing, and requires non-hospital advanced imaging providers to be accredited by 2012.
• DMEPOS Competitive Bidding. MIPPA delays and reforms the Centers for Medicare & Medicaid Services’ (“CMS”) competitive bidding program for certain categories of durable medical equipment, prosthetics, orthotics and supplies (“DMEPOS”). The delay is financed by cutting fee schedule payments for items included in round one by 9.5 percent nationwide beginning January 1, 2009, followed by a 2 percent increase in 2014 (with certain exceptions).
• Therapy Caps Exception Process. MIPPA extends through December 31, 2009 the exceptions process relative to the annual per-beneficiary limitations on outpatient therapy services.
• Clinical Laboratory Services. The act repeals the competitive bidding demonstration project for clinical laboratory services and instead reduces the fee schedule update for lab services by 0.5 percent in each of the next five years.
• Medicare Advantage (“MA”) Provisions. MIPPA makes a series of payment and policy changes affecting MA plans, including a $1.8 billion cut in the MA stabilization fund for regional preferred provider organizations in 2012 and a phase-out of the adjustment for indirect medical education.
• Medicare Part D Drug Plans. MIPPA establishes timeframes for plan payments to pharmacies and long-term care pharmacy submission of claims; codifies coverage of certain “protected classes” of drugs; limits certain sales and marketing activities; and makes other Part D reforms.
• End-Stage Renal Disease Provisions. The law provides a 1.0 percent update to the composite rate for renal dialysis services for 2009 and 2010, requires the establishment of a fully-bundled ESRD payment system by January 1, 2011, and establishes a quality incentive payment program for ESRD providers.
• Medicaid Drug Reimbursement.  MIPPA delays the adoption of Medicaid payment based on average manufacturer price (“AMP”) for multiple source drugs and prevents publication of AMP data until October 1, 2009.

The following is a summary of the major provisions of the new law.  We would be pleased to provide additional information upon request.

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A lesser-known provision in the Medicare Program allows payment for "reasonable and necessary" items or services provided through clinical trials. At the same time, even for traditional reimbursement, the Centers for Medicare & Medicaid Services (CMS) increasingly is demanding evidence of effectiveness in the Medicare population, rather than simply in the general population, to support a coverage decision. The federal government has sought, often without much success, to increase participation by Medicare recipients in clinical trials, because Medicare recipients traditionally have been underrepresented in research populations--meaning the very evidence CMS seeks for traditional reimbursement often does not exist. Developments regarding these reimbursement policies by CMS are the subject of an informative and timely article for the FDLI UPDATE by Reed Smith attorney Kathleen McGuan.

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