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 Elizabeth O’Brien and Joseph W. Metro.

On March 5, 2010, the Office of Pharmacy Affairs published a Final Notice allowing covered entities to use multiple contract pharmacies in order to supplement “in-house” pharmacy services or to increase patient access to 340B drugs. This Final Notice replaces “Notice Regarding Section 602 of the Veterans Health Care Act of 1992; Contract Pharmacy Services (61 Fed. Reg. 43,549) and all other previous 340B Program guidance regarding non-network contract pharmacy services.

Under the Public Health Service Act’s Section 340B drug pricing program, manufacturers who sell covered outpatient drugs to specific federal grantees, federally-qualified health center look-alikes and qualified disproportionate share hospitals (“covered entities”) must agree to charge less than the statutorily-prescribed maximum price for those drugs, which results in significant savings on drugs for the covered entities. Previously, the Health Resources and Services Administration ("HRSA") Office of Pharmacy Affairs had specified procedures under which discounts could be made available to covered entities engaging a single contract pharmacy, and had conducted an Alternative Methods Demonstration Project program in which HRSA approved a limited number of covered entities using multiple contract pharmacies.

Effective April 5, 2010, the Final Notice permits all covered entities to use multiple contract pharmacies. The guidelines in the Final Notice give covered entities and contract pharmacies a great deal of freedom in structuring their contract pharmacy services agreements, so long as they implement and maintain mechanisms to ensure compliance with 340B Program rules, especially against diversion of drugs. To learn more about the Final Notice, including compliance guidelines, potential alternatives to the single location/single pharmacy model and suggested contract provisions, read the full alert. 

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This post was written by Elizabeth B. Carder-Thompson and Debra A. McCurdy.

The Centers for Medicare & Medicaid Services (CMS) has issued new "Telemarketing FAQs" to supplement the Office of Inspector General's (OIG) recent revisions to its Special Fraud Alert on Telemarketing by Durable Medical Equipment Suppliers. As you may recall, in January 2010, the OIG amended the Special Fraud Alert to add a warning about suppliers contacting a beneficiary before the supplier receives written beneficiary consent, as it may violate the statutory provision that prohibits Durable Medical Equipment (DME) suppliers from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a Medicare-covered item. Specifically, the OIG stated that it "has also been made aware of instances when DME suppliers, notwithstanding the clear statutory prohibition, contact Medicare beneficiaries by telephone based solely on treating physicians’ preliminary written or verbal orders prescribing DME for the beneficiaries." According to the OIG, the "physician’s preliminary written or verbal order is not a substitute for the requisite written consent of a Medicare beneficiary."

In response to this new language, Reed Smith contacted the OIG to discuss the adverse impact this policy would have on timely beneficiary access to medically necessary equipment ordered by a physician, since some suppliers call a beneficiary to arrange for equipment deliveries upon receiving an initial physician verbal order. The OIG has just sent us a copy of new CMS Telemarketing FAQs that seek to clarify certain aspects of the revised Special Fraud Alert. Notably, CMS clarifies that there are circumstances in which a supplier may contact a beneficiary based on receipt of a physicians' order if the physician contacts the supplier with the beneficiary's knowledge:

Question 3: Is a supplier contacting the beneficiary based on the receipt of a physician order considered an “unsolicited” contact?

Answer 3: If a physician contacts a supplier on behalf of a beneficiary with the beneficiary’s knowledge, and then a supplier contacts the beneficiary to confirm or gather information needed to provide that particular covered item (including delivery and billing information), then that contact would not be considered “unsolicited.” Please note that the beneficiary need only be aware that a supplier will be contacting him/her regarding the prescribed covered item, recognizing that the appropriate supplier may not have been identified at the time of consultation.

On the other hand, if the beneficiary is not aware that the physician would be contacting the supplier on the beneficiary's behalf, the contact may be prohibited.

Question 4: What if a supplier contacts the beneficiary based solely on the physician order (and therefore the contact is without the beneficiary’s knowledge that the physician would be contacting a supplier on the beneficiary’s behalf)?

Answer 4: Then that contact would be considered “unsolicited” and, depending on the facts and circumstances of the particular case, may be prohibited.

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This post was written by Rachel Cutler Shim, John D. Martini, Dennis R. Bonessa, William H. Nichols and Laurie S. DuChateau.

On January 29, 2010, the U.S. Departments of Labor, Health and Human Services and the Treasury jointly issued interim final regulations implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 ("MHPAEA"). The MHPAEA, as implemented by the interim final regulations, greatly expands the parity standards of its predecessor, the Mental Health Parity Act of 1996 ("MHPA 1996").

The MHPAEA, as implemented by the interim final regulations, expands on the requirements of the MHPA 1996 and introduces new rules that prohibit group health plans from creating disparities between medical/surgical benefits and mental health benefits, as well as substance-use disorder benefits. To learn more about how MHPAEA impacts group health plans, read our full alert.

For more information, please contact one of the authors: Rachel Cutler Shim, John D. Martini, Dennis R. Bonessa, William H. Nichols and Laurie S. DuChateau.

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This post was written by Elizabeth Carder-Thompson.

Last week, in my capacity as president of the American Health Lawyers Association, I attended the first National Summit on Health Care Fraud, a joint undertaking by the U.S. Department of Health and Human Services and the U.S. Department of Justice. The conference brought together private sector leaders, law enforcement personnel, and health care experts as part of the Obama Administration’s coordinated effort to fight health care fraud. This was the first national gathering on health care fraud between law enforcement and the private and public sectors.

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This post was written by Robert H. Jackson.

The Federal Communications Commission (“FCC”) has proposed changes to its Telephone Consumer Protection Act (“TCPA”) rules that would conform to the Federal Trade Commission’s Telemarketing Sales Rule (“TSR”). The primary change in the regulations would affect the sending of prerecorded messages (a/k/a “robocalls”) by barring them even to existing customers without first obtaining prior written consent. At first blush, this seems routine, but because of differences in the FCC’s and FTC’s statutory jurisdiction, there are complicated implementation issues that could trap unsuspecting companies. Other key issues for the health care industry is whether the FCC should create an exemption for prerecorded messages that are subject to Health Insurance Portability and Accountability Act (“HIPAA”) and, if so, how such exemption should be implemented. For more information about these changes, please read our client alert written by Robert Jackson.

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As noted in our September 2009 post discussing China’s new National Essential Drug System (NEDS), China continues to make progress in its healthcare reform efforts. However, new national drug lists and price caps designed to provide low-cost drugs to the masses, have at the same time raised questions about the program’s economic impact on local and multinational pharmaceutical manufacturers.

To learn more about how China’s healthcare reform package and how it may affect your company, we invite you to read Reed Smith Life Sciences Partner Gordon Schatz and ZS Associates Inc. consultant Patrick Nowlin’s “Drugs for the Masses,” recently published by China Business Review.

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This post was written by Daniel A. Cody, Paul W. Pitts and Alison B. Riddell.

Although California legislators devoted a significant amount of time and resources to addressing the state’s budget shortfall and the economic recession, the 2009 legislature debated and passed a surprising number of bills related to health care, many of which will become effective January 1, 2010. New laws impacting California health care providers include:

• Amendments to the 2008 law requiring certain health care providers to disclose unlawful and unauthorized uses or disclosure of medical information
• Laws requiring the Department of Public Health [www.cdph.ca.gov] to more timely process and approve applications for new or modified hospital outpatient services
• Provisions impacting the delivery of radiologic and diagnostic imaging services, such as permitting physician assistants to provide fluoroscopy services under the supervision of a physician
• Amendments to California’s False Claim Act that expand the types of claims subject to the law, extend the state’s prosecutorial authority, and increase the penalties for violating the statute
• Laws stating that long-term care providers will be subject to new ownership disclosure requirements
• Passing Assembly Bill 215, which makes California one of the first states to recognize and incorporate the controversial Five-Star Quality Rating for nursing facilities as created by the Centers for Medicare & Medicaid Services

For the full summary of major legislation impacting California physicians, hospitals, nursing facilities, and other licensed health care facilities, read our client alert.

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Ralph Tyler has been appointed the new FDA General Counsel. The announcement was made today by FDA Commissioner, Dr. Margaret A. Hamburg. Mr. Tyler will join the Office of the Chief Counsel in Rockville, MD on January 19, 2010. Stepping down will be Acting Chief Counsel Michael Landa, who will return to the Center for Food Safety and Nutrition (CFSAN) as Deputy Director for Regulatory Affairs.

Mr. Tyler is currently the Insurance Commissioner of the State of Maryland. Previously he served as Chief Legal Counsel to Maryland Governor Martin O’Malley. Prior to that, Mr. Tyler served as the Deputy Attorney General, the Chief of Litigation, and Assistant Attorney General in the Maryland Attorney General’s office between 1982 and 1996. Mr. Tyler also spent several years as a partner at Hogan & Hartson, LLP. He holds a B.A. from the University of Illinois, a J.D. from Case Western Reserve University, and a LL.M. from Harvard University. 

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This post was authored by Karl A. Thallner, Jr., Amie E. Schaadt and Jacqueline B. Penrod.

On December 12, 2009, the Pennsylvania Department of Health published final regulations governing home care agencies and registries operating in the Commonwealth. The regulations, which became effective on December 12, 2009, require home care agencies and registries to obtain a license to operate. They also address the qualifications and competence of home care workers. Read our full alert to learn more about Pennsylvania's new licensing and consumer protection regulations as well as the new requirements for hiring home care personnel.

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This post was written by Dana Blanton.

On November 12 and 13, 2009, the FDA hosted public hearings to vet the potential need for regulation of prescription pharmaceutical and medical device marketing on social media outlets such as YouTube, Wikipedia, Facebook, and Twitter. The FDA specifically sought input on these five questions: (1) For what online communications are manufacturers, packers or distributors accountable? (2) How can manufacturers, packers, or distributors fulfill regulatory requirements in their Internet and social media promotion, particularly when using tools that are associated with space limitations and tools that allow for real-time communications? (3) What parameters should apply to the posting of corrective information on Web sites controlled by third parties? (4) When is the use of links appropriate? and (5) Questions specific to Internet adverse event reporting.

The hearings attracted both internet and ethical drug and device industry giants, as well as nonprofit organizations seeking to gain a better understanding of what will certainly be a new frontier for advertising these regulated products. The FDA's existing regulations for print and television advertising are widely considered unsuitable for social media outlets, some of which allow for no more than 140 characters per post--far too few to include FDA-mandated safety information--and most of which allow for uncensored layperson commentary sometimes indistinguishable from manufacturer content. As a result, pharma and medical device representatives reported, drug and device companies have been reluctant to venture into the social media advertising field. Meanwhile, media and marketing firms offered pre-packaged advertising solutions and industry critics suggested that the FDA and pharmaceutical and device companies should bear the burden of correcting misinformation on third party websites and blogs. The FDA will consider the commentary and determine whether guidelines should be promulgated.

Information on the hearing, including background, further information regarding the five issues presented, a link to transcripts of the FDA's 1996 hearing on internet advertising and other information may be found in the Federal Register Notice for the hearing and transcripts of the November 12 and 13, 2009 hearings will be available by approximately December 13, 2009.

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Across the country, plaintiffs’ attorneys are targeting health care facilities over their alleged failure to comply with meal break rules. These suits claim that employers have automatically deducted 30 to 60 minutes of time for employees’ meal periods, even if employees never took the breaks. Because employees can recover for violations that took place as many as three years before suit is filed, damages in these cases can be substantial.

For more information, including steps you can take to minimize exposure to these types of lawsuits, please see Reed Smith’s Employment Watch Blog.

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While Congress continues to debate the “big picture” issues of broad-scale health care reform, pending bills in both the House of Representatives and Senate contain proposals to amend federal prescription drug price regulation programs such as the Medicaid rebate statute, the Public Health Service Act’s Section 340B program, and Medicare Part D.

For an overview of current proposals in this area and highlights of important issues for prescription drug manufacturers, distributors and dispensers, read the full alert, which also includes a chart comparing the drug pricing provisions in the key current bills.

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This post was written by Kevin Madagan and Paul Sheives.

On October 24, 2009, President Obama signed a proclamation declaring the 2009 H1N1 influenza pandemic a National Emergency to facilitate the nations ability to respond to the H1N1 pandemic by enabling – if warranted – the waiver of certain statutory federal requirements for medical treatment facilities.  

This proclamation provided Kathleen Sebelius, the Secretary of the U.S. Department of Health & Human Services, the ability under section 1135 of the Social Security Act [42 U.S.C. § 1320b–5] to waive certain legal requirements that could otherwise limit the ability of the nation’s healthcare system to respond to the surge of patients with the 2009 H1N1 influenza virus. 

Secretary Sebelius recently issued a Section 1135 waiver that becomes effective at 5:00 p.m. today but is retroactive to October 23, 2009.  

Accordingly, healthcare facilities may now petition the Department for 1135 waivers to ensure that sufficient healthcare items and services are available to meet the needs of Medicare, Medicaid, and CHIP beneficiaries. Listed below are a few examples of when 1135 waivers may be necessary:

• Hospitals request to set up an alternative screening location for patients away from the hospital’s main campus (requiring waiver of sanctions for certain directions, relocations or transfers under EMTALA).
• Hospitals request to facilitate transfer of patients from ERs and inpatient wards between hospitals (requiring waiver of sanctions under EMTALA regulations).
• Critical Access Hospitals requesting waiver of 42 C.F.R. § 485.620, which requires a 25-bed limit and average patient stays less than 96 hours.
• Skilled Nursing Facilities requesting a waiver of 42 C.F.R. § 483.5, which requires CMS approval prior to increasing the number of the facility’s certified beds.

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On September 17, 2009, the White House released a “Patient Safety and Medical Liability Reform Demonstration” Fact Sheet, which outlines a new $25 million Department of Health and Human Services initiative designed to help states and health care systems identify new models for managing medical liability claims. The three-pronged initiative will support competitive grants to states and health systems with a focus on the development, implementation and evaluation of alternatives to improve health care quality and patient safety while reducing medical liability.

The Funding Opportunity Announcement will be available within 30 days. The Agency for Healthcare Research and Quality will review applications and make award decisions in early 2010.

The evaluation of the initiative will be released publicly within 18 months of the end of the initiative. The evaluation will focus on short-term improvements in both patient safety and medical liability systems with an allowance for long-term assessment of improvements as well.

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A recent study suggests that exposure to nanoparticles may have caused the death of two female workers and the illnesses of five others in China. Life science health industry companies that manufacture, integrate, sell or buy products that contain nanomaterials may want to monitor reaction to this report, which may garner attention from media outlets, scientists, regulators and the plaintiffs' bar. For a full discussion of these issues, review the full Client Alert written by Reed Smith attorneys Antony Klapper, Jesse Ash and David Wagner.

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Health care companies interested in doing business in Cuba may want to learn more about recent regulatory changes to U.S. economic sanctions promulgated by the U.S. government. Due to the difficult political situation on the island, doing business in Cuba remains challenging; however, U.S. sanctions have traditionally allowed for food, medicine, and other forms of humanitarian travel. The new regulations, in part, allow U.S. persons to travel to the island for "transactions that are directly incident to the commercial marketing, sales negotiation, accompanied delivery, or servicing in Cuba" of medicine and medical devices. Finally, U.S. companies interested in engaging the Cuba market should also assess the U.S. domestic political considerations that may come with Cuba sales.

To read the full Client Alert, written by Reed Smith attorneys Leigh T. Hansson and Jason I. Poblete, please click here.

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The American Health Lawyers Association released a white paper on August 10, 2009, which analyzes the problems and benefits of the Stark Law and challenges amidst pending health care reform. In light of these significant policy discussions, many are wondering whether Congress will take action. Reed Smith's Karl Thallner was quoted in BNA's Health Law Reporter article discussing difficulties of the Stark law and the proposed improvements suggested by AHLA Committee. The article, "AHLA Stark Reform Proposals Welcome, Have Little Chance of Success, Attorneys Say" is reproduced with permission from BNA's Health Law Reporter, 18 HLR 1105 (Aug. 20, 2009). Copyright 2009 by The Bureau of National Affairs,Inc. (800-372-1033).

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As as an update to our last post on the Stark Law changes adopted in the 2009 Hospital Inpatient Prospective Payment System final rule, additional changes to the Stark Law regulations will go into effect on October 1, 2009, causing many “under arrangements” relationships between hospitals and physician-owned, third party service providers to fall out of compliance. In addition, new rules governing the compensation terms of lease agreements involving physicians will become effective on the same date. As existing arrangements will not be grandfathered, the final rule’s new restrictions will force many arrangements between physicians and hospitals, particularly hospital/physician joint ventures, to be restructured or noncompliant arrangements abandoned. Parties are encouraged to revise potentially noncompliant arrangements. To read the full alert written by Reed Smith attorneys Daniel Cody and Paul Pitts, click here.

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CMS is preparing to re-launch its controversial competitive bidding program for Medicare suppliers of certain types of durable medical equipment, prosthetics, orthotics, and supplies (DMEPOS). Under competitive bidding, only suppliers who are successful bidders will be eligible to furnish certain categories of DMEPOS to Medicare beneficiaries in certain geographic areas (with very limited exception). Under competitive bidding, successful bidders will be paid based on the median of the winning suppliers’ bids for each of the selected items in the region, rather than the Medicare fee schedule or supplier bid amount. This will be CMS’s second attempt to institute DMEPOS competitive bidding, after the first round of bidding was blocked by Congress last year because of widespread concerns about how the program was implemented. Reed Smith’s Life Sciences Health Industry Alert, “CMS Prepares to Re-Launch Medicare DMEPOS Competitive Bidding—Tips for Potential Bidders,” highlights seven steps suppliers can take now to prepare for the coming bidding period based on the lessons learned during the first round of bidding.

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On April 20, 2009, Senate Finance Committee Chairman Senator Max Baucus and Senate Health, Education, Labor, and Pensions Committee Chairman Edward M. Kennedy reaffirmed their intention to move forward on major health care reform this year. In a letter to President Barack Obama, Baucus and Kennedy announced that their committees will mark-up comprehensive health care reform legislation in early June. 

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This post was written by Carolyn D. Duronio and Kristen M. Gurdin.

On February 12, 2009, the Internal Revenue Service (the “Service”) released its long–awaited Hospital Compliance Project Final Report (the “Report”). The Service commenced the Hospital Compliance Project in 2006 by sending out comprehensive questionnaires to 544 tax-exempt hospitals. The questionnaires focused primarily on hospitals’ current practices with respect to community benefits and executive compensation. The Report details the data the Service compiled from the 487 respondent hospitals and the 20 hospitals selected for examination from that group. The Report did not provide any conclusions on whether the federal tax rules regarding community benefits and executive compensation should be changed. IRS officials’ and lawmakers’ initial interpretation of the Report and its findings, however, suggests that exempt hospitals should expect significant scrutiny of the community benefit and compensation information that they provide on the revised IRS Form 990 and that stricter requirements may be forthcoming.

For additional information, please see Reed Smith's full alert.

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This post was written by Joseph W. Metro and Lorraine Mullings Campos.

On March 17, 2009, the Department of Defense (DoD) issued a final rule to implement a provision of the 2008 National Defense Authorization Act (NDAA). In the final rule, the DoD takes the position that the NDAA requires pharmaceutical manufacturers to provide discounted drug prices based on the Veterans Health Care Act’s (VHCA’s) Federal Ceiling Price (FCP), for covered drugs sold by retail pharmacies to TRICARE beneficiaries on or after Jan. 28, 2008 (the date of enactment of the NDAA). DoD further establishes a process whereby manufacturers’ satisfaction of this obligation will be a condition to a product’s continued Tier 2 status on the TRICARE uniform formulary. Finally, however, DoD indicates that it will consider, pursuant to its authority under the Federal Debt Collection Act, proposals to settle outstanding "refund" claims for periods prior to the effective date of the rule.

Further discussion and commentary by the authors is included after the jump. For additional background information, please see Reed Smith’s full alert.

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This post was written by Judith L. Harris and Amy S. Mushahwar.

The Federal Communications Commission (“FCC”) recently released an Order allocating 2 MHz of new spectrum for advanced wireless implanted devices, which may enable the certification of new devices by the FCC’s Office of Engineering and Technology.

The FCC also seeks comment on a proposal to allocate up to 20 MHz of spectrum for implanted neuromuscular micro stimulators. This additional allotment for electronic stimulation technologies could be used to develop devices for the medical treatment for millions of people living with brain and spinal cord injuries and neuromuscular disorders.

Parties interested in registering new devices under the FCC’s Order or in commenting on the additional spectrum allotment for electronic stimulation technologies are encouraged to contact Judith L. Harris or Amy S. Mushahwar.

For additional information, please see Reed Smith's full alert.

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This post was written by Sharon J. Mann, Hugh Scogin, Gordon B. Schatz and Amanda Yang.

At the 2nd Session of the 11th National People’s Congress (NPC) convened on March 5, 2009, China’ Premier Wen Jiabao confirmed the major contents of the healthcare reform in the 2009 Government Work Report. On January 21, 2009, the State Council approved the Opinions on Advancing Healthcare Reform and the Implementation Plan on Advancing Healthcare Reform 2009-2011 in principle. The opinions and the plan are expected to be published after the NPC session, with the Government Work Report representing the first government document that confirms work focuses in the coming healthcare reform program.

According to the Work Report, the Chinese government will spend US$124 billion (850 billion RMB) on healthcare reform between 2009 and 2011, including 331.8 billion RMB from the central government. The funds will be used in five primary areas 1) medical insurance, 2) essential medications, 3) basic healthcare service systems, 4) equal access to basic public health services, and 5) reform of public hospitals.

For additional information, please see Reed Smith’s full alert.

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This post was written by Karl A. Thallner, Jr., Carol C. Loepere, Debra A. McCurdy, Brad M. Rostolsky, Jacqueline B. Penrod, and Amie E. Schaadt.

On February 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act (the “ARRA”). The sweeping $790 billion economic stimulus package includes a number of health care policy provisions. Reed Smith's Health Care Memorandum summarizes the major health policy provisions of the Act.

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This post was written by Brad M. Rostolsky, Gina M. Cavalier, Debra L. Hutchings, Kerry A. Kearney, and Mark S. Melodia.

On Feb. 17, 2009, President Obama signed into law H.R. 1, the American Recovery and Reinvestment Act (the “ARRA”).1 This memorandum outlines significant changes and additions to the landscape of federal privacy and security law set forth in Subtitle D of the ARRA. In general, the privacy and security portions of the ARRA become effective 12 months after the enactment of the ARRA, which is approximately February 2010. It is also important to note that the ARRA directs the Secretary of the U.S. Department of Health & Human Services (“HHS”) to amend the HIPAA Privacy and Security Rules to implement the legislative changes. As such, the effective dates associated with the rulemaking process will vary.

Click here to read the full alert.

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This post was written by Jason M. Healy.

Centers for Medicare & Medicaid Services ("CMS") states that on February 4, 2009 the parties involved in the protest of the award of the Recovery Audit Contractor ("RAC") contracts settled the protests filed with the GAO.

The settlement means that the stop work order has been lifted and CMS will now continue with the implementation of the RAC program.

Under the program, the four RACs will contract with subcontractors to supplement their efforts. PRG-Schultz, Inc. will serve as a subcontractor to HDI, DCS and CGI in regions A, B and D. Viant Payment Systems, Inc. will serve as a subcontractor to Connolly Consulting in region C. Each subcontractor has negotiated different responsibilities in each region, including some claim review.

According to the CMS Notice, the RAC in each jurisdiction is as follows:

Region A: Diversified Collection Services (DCS)
Region B: CGI
Region C: Connolly Consulting, Inc.
Region D: HealthDataInsights, Inc.

All correspondence, websites and call centers will be in the name of the RACs listed above. 

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This post was written by Paule Droualt-Gardrat, Juliette Peterka and Julie Gottenberg.

On December 10, 2008, the European Commission published a series of political measures and legislative proposals, the so-called “Pharmaceutical Package.” This series included the “Communication on a renewed vision for the pharmaceutical sector,” which reflected on ways to improve market access and develop initiatives to boost European Union (“EU”) pharmaceutical research. Through the Pharmaceutical Package, the European Commission aims to make pricing and reimbursement more transparent, increase the development of pharmaceutical research within the EU, improve the safety of medicines worldwide, and reinforce cooperation with international partners.

The European Commission has published three separate sets of proposals amending Directive 2001/83/EC on the Community Code of medicinal products and Regulation 726/2004 on medicinal products obtained through centralized procedures:

1.  A proposal amending Directive 2001/83 as “regards information to the general public on medicinal products subject to medical prescription” (Information to patient);
2.  A proposal amending Directive 2001/83 and a proposal amending Regulation 726/2004 as “regards pharmacovigilance” (The EU pharmacovigilance system); and,
3.  A proposal amending Directive 2001/83 as “regards the prevention of the entry into the legal supply chain of medicinal products which are falsified in relation to their identity, history or source” (Counterfeit Medicines).

Read Reed Smith's full alert outlining proposed amendments to Directive 2001/83/EC and Regulation 726/2004.

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This post was written by Jason M. Healy.

By now, most Medicare providers have heard about the Medicare Recovery Audit Contractor (RAC) demonstration and that it is currently being rolled out nationwide as a permanent program. On November 4, 2008, however, CMS imposed an automatic stay on the RAC program after two unsuccessful bidders for RAC contracts filed protests with the Government Accountability Office (GAO). GAO has 100 days to issue its decision, which means that all RAC program work is on hold until early February 2009.

Because the three-year demonstration program that ended in March of last year was limited to six states (New York, Florida, California, Massachusetts, South Carolina, and Arizona), it may not be obvious to all providers and suppliers that RACs pose a threat when the RAC program resumes. To understand that threat and how best to address it, it is important to understand where RACs will operate; what RAC auditors are designed to do and how they audit; where your claims fit within a RAC’s set of priorities; and your rights as a Medicare provider or supplier to challenge RAC overpayment determinations through appeal.

Read Reed Smith’s full alert, "What Every Medicare Provider and Supplier Should Know About RAC Audits and Appeals."

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This post was written by Diane Green-Kelly and Karl A. Thallner.

In a time of economic crisis, when hospitals, like most other businesses, are struggling to operate within a constrained budget, Memorial Hermann Healthcare System (“Memorial Hermann”) agreed Jan. 26, 2009 to pay $700,000 to settle claims of the Texas Attorney General alleging that Memorial Hermann orchestrated an agreement among health plans not to do business with a new competitor, Town and County Hospital (“Town and Country”).  According to the complaint, Memorial Hermann, which owns and operates acute care hospitals furnishing inpatient care, is the largest hospital system in the Houston area.  Town and County, a physician-owned hospital, opened in November 2005.  Before opening, Town and County approached insurers to enter into contracts to be included in those insurers’ hospital networks.  Memorial Hermann allegedly took steps to discourage insurers from entering into contracts with Town and Country, including sending notification of an intent to terminate its contract with one insurer as to all Memorial Hermann facilities, and subsequently renegotiating a contract with the insurer for substantially higher rates. 

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This post was written by Lorraine Mullings Campos and Steven D. Tibbets.

On December 12, 2008 the Federal Acquisition Regulation (“FAR”) Council’s Final Rule – which applies to all federal government contracts in amounts greater than $5 million and more than 120 days in duration, including small business and commercial item contracts -- went into effect, requiring all federal contractors to disclose wrongdoing to the federal government, including certain violations of federal law, and violations of the False Claims Act. Specifically, contractors must “timely” disclose, in writing and to the Inspector General and the contracting officer (in that order), whenever, in connection with the award, performance, or closeout of a contract, the contractor has “credible evidence” that a principal, employee, agent, or subcontractor has committed a violation of federal criminal law involving fraud, conflict of interest, bribery or gratuity violations under Title 18 of the U.S. Code, or a violation of the False Claims Act.

In addition, the rule requires contractors to establish a “business ethics awareness and compliance program,” as well as an “internal control system” with certain attributes. In addition, significant overpayments by the government must be disclosed to the contracting officer. Failure to disclose violations of federal criminal law or violations of the False Claims Act may lead to criminal sanctions, civil penalties, suspension, or debarment.

Click here to view an an alert highlighting this and other major issues likely to impact government contracts businesses in the coming months and years.

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This post was written by Elizabeth Carder-Thompson and Andrew L. Hurst.

A dizzying array of civil and criminal provisions address false or fraudulent representations made to, and false claims filed with, Medicare, Medicaid, and state and federal health care programs. This attached article, first published by the American Health Lawyers Association, briefly identifies relevant criminal and civil provisions relating to these issues, and then focuses more closely on recent uses of the civil False Claims Act (“FCA”) in government investigations of health care providers, suppliers, and manufacturers, including a section on state false claims legislation. Finally, it discusses the issue of distinguishing overpayments from false claims and provide information on the voluntary disclosure program of the Office of the Inspector General (“OIG”) of the Department of Health and Human Services (HHS).

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This post was written by Lorraine M. Campos, Gregory S. Jacobs and Brett D. Gerson.

On November 12, 2008, the Civilian Agency Acquisition Council and the Defense Acquisition Regulations Council issued an amendment to the Federal Acquisition Regulation (“FAR”) to establish: (1) mandatory disclosure requirements for certain violations of federal criminal law and the False Claims Act; (2) requirements for contractors to establish and maintain specific internal controls to detect, prevent, and disclose improper conduct in connection with the award or performance of any government contract or subcontract; and (3) new causes for suspension and debarment. See 73 Fed. Reg. 219, 67,064 (Nov. 12, 2008). The final rule went into effect December 12, 2008, and applies to all federal government contracts in amounts greater than $5 million and more than 120 days in duration, including small business and commercial item contracts. Certain exceptions are discussed in the attached.

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The Food and Drug Administration Amendments Act of 2007 (FDAAA) expanded the public reporting requirements for “applicable clinical trials” involving certain drugs, biologicals, and devices. In December 2008, the Food and Drug Administration (FDA) issued a draft guidance document proposing, among other things, definitions that would affect who would be required to register certain clinical trials under the FDAAA. In some cases, FDA's proposal would require manufacturers who make grants to investigators to be the responsible party required to register. In addition, FDA elaborates on the circumstances under which clinical investigations designed to demonstrate bioequivalency would be subject to reporting. Additional background information is available at the clinicaltrials.gov web site. Reed Smith is reviewing the draft guidance. Please contact Areta Kupchyk at akupchyk@reedsmith.com for more information.

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The FDA has released final guidance on “Substantiation for Dietary Supplement Claims Made Under Section 403(r)(6) of the Federal Food, Drug, and Cosmetic Act,” which discusses the amount, type, and quality of evidence that FDA recommends a dietary supplement manufacturer have to substantiate a nutritional deficiency, structure/function, or general well-being claim. FDA has adopted the FTC standard for substantiation and, among other things, will expect statistically significant clinical studies to support structure/function claims. For more information, contact Areta Kupchyk at akupchyk@reedsmith.com.

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The FDA has issued final guidance on “Labeling OTC Human Drug Products—Questions and Answers.” This document is intended to assist manufacturers, packers, and distributors of over-the-counter (OTC) drug products in complying with the agency’s regulation on standardized content and format requirements for the labeling of OTC drug products, including the use of toll-free numbers and compliance with adverse event reporting requirements.

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The FDA has released draft guidance entitled “Assay Migration Studies for In Vitro Diagnostic Devices,” which is designed to present a least burdensome regulatory approach to gaining FDA approval of Class III or certain licensed in vitro diagnostic devices in cases when a previously-approved assay is migrating to a new system for which the assay has not been previously approved or licensed. FDA will accept comments on the draft guidance until April 6, 2009. 

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The FDA is inviting pharmaceutical companies to participate in the FDA’s Regulatory Project Management Site Tours and Regulatory Interaction Program, through which FDA personnel observe operations of pharmaceutical manufacturing and/or packaging facilities, pathology/toxicology laboratories, and regulatory affairs operations. The goals of the program are to provide FDA regulatory project managers with first-hand exposure to industry’s drug development processes, and to offer a venue for sharing information about project management procedures (but not drug-specific information) with industry representatives.  Interested companies may submit proposed agendas to FDA by March 6, 2009. 

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FDA is soliciting comments on the paperwork burden associated with its plan to require drug establishment registration and drug listing submissions in electronic format. Comments will be accepted until February 9, 2009. 

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The Reed Smith Health Industry Washington Watch blog has been updated to discuss a variety of regulatory and other developments impacting health policy, including the following:

• Regulatory Developments -- CMS has published regulations regarding Medicaid disproportionate share hospital payments, Medicaid non-emergency medical transportation services, and Medicare home health agency rates. HHS has published a final rule designed to protect the conscience rights of health care providers. The OIG has published its annual solicitation of ideas for new anti-kickback safe harbor provisions. The FDA is seeking comments on a planned study regarding coupons used in direct-to-consumer prescription drug print advertisements, and it has announced grants to support the clinical development of “orphan products.” Finally, and IRS proposed rule would require government entities to withhold income tax when making certain payments, including certain Medicare payments.
• Other CMS Developments -- CMS has posted first quarter 2009 Medicare Part B drug and biological average sales price amounts; released details on the 2009 Physician Quality Reporting Initiative; posted nursing home quality ratings; and announced medical necessity reviews of long term care hospital stays. CMS also has provided guidance on accreditation of durable medical equipment suppliers, requirements for entities providing mobile diagnostic testing services; and how the HIPAA Privacy Rule can facilitate electronic health information exchange in a networked environment.
• FDA Guidance Documents -- The FDA has issued a number of guidance documents dealing with such issues as labeling of nonprescription human drug products and dietary supplements, genotoxic and carcinogenic impurities in drugs, modification of devices subject to premarket approval, and orally disintegrating tablets.
• Obama Transition -- President-elect Barack Obama has nominated former Senator Tom Daschle as HHS Secretary and Director of a new White House Office on Health Care Reform. Obama’s transition team also is calling on individuals to hold “Health Care Community Discussions” this month to make recommendations on health care policy. In addition, President-elect Obama has named Eric Holder as his Attorney General.
• OIG & GAO Reports -- The HHS OIG has issued reports on adverse events in hospitals, Medicare drug prices, and special needs plans. The GAO has reported on Medicare Part D enrollment issues, Medicare Advantage plan profits and expenses, and characteristics of private fee-for-service plans.
• Odds & Ends -- The Congressional Budget Office has released major reports on health care system reform and insurance reform. Congress has approved technical corrections to the new mental health parity law. The Agency for Healthcare Research and Quality (AHRQ) is seeking participation in a symposium on clinical and comparative effectiveness research methods.
• Looking Ahead -- CMS is hosting meetings in February on applications for Medicare inpatient prospective payment system new technology add-on payments, hospital outpatient ambulatory payment classification groups, and genomic testing.

For details on these and other health industry developments, please visit healthindustrywashingtonwatch.com.
 

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This post was written by Daniel A. Cody, Paul W. Pitts, and Rachel M. Golick.

During 2008, the California legislature passed numerous bills impacting health care providers and debated several high-profile bills touting universal health insurance. In this memorandum, we bring to your attention four new laws (each becoming effective Jan. 1, 2009) impacting hospitals and other licensed health care facilities. These laws address patient privacy, diagnostic imaging services, infection control and health care reporting.

Click here to read the full Client Alert.

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This post was written by Elizabeth Carder-Thompson, Gina M. Cavalier, Matthew E. Wetzel.

On December 18, 2008, the Advanced Medical Technology Association (“AdvaMed”), the national trade association of medical technology manufacturers, issued a revised Code of Ethics on Interactions with Health Care Professionals (the “AdvaMed Code” or “Code”). The revised AdvaMed Code, which becomes effective July 1, 2009, contains several changes that will significantly impact the medical device industry. These include:

• The addition of guidelines for the payment of royalties to health care professionals;
• The inclusion of a new section on the provision of evaluation and demonstration products to customers at no charge;
• More comprehensive guidelines for furnishing reimbursement and health economics information to health care professionals;
• A prohibition on the provision of entertainment and recreation;
• A prohibition on the provision of non-educational branded promotional items such as pens, notepads, mugs and similar items; and
• Increased restrictions on the provision of restaurant meals or meals at other off-site venues.

The Client Alert discusses the principal changes to the AdvaMed Code, highlights several compliance considerations that medical device companies should consider when implementing the revised Code and includes a chart detailing the original and revised AdvaMed Codes and highlighting the new provisions that will become effective in July 2009.

Reed Smith was honored to serve as outside counsel to AdvaMed in connection with drafting both the current and the revised Code and would be pleased to answer any questions or provide additional information.

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Reed Smith partner Karl Thallner just published "Health Care Reform During the Obama Presidency: The Impact on Hospitals" in BNA's Health Care Policy. Karl discusses several aspects of the Obama plan, including access to coverage, individual mandates, delivery and payment, and transparency. As the article notes, "[t]o the extent that health care reform reduces the uninsured population, hospitals could benefit through a reduction in uncompensated care and bad debts. In addition, hospitals may see increases in patient volumes with the reduction in the uninsured."

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The Reed Smith Health Industry Washington Watch blog has been updated to discuss a variety of regulatory and other developments impacting health policy, including the following:

• Regulatory Developments. CMS has issued rules providing states with increased flexibility to define the scope of covered Medicaid services and revising Medicare hospital wage indices. HHS has published the federal medical assistance percentages and enhanced federal medical assistance percentages for FY 2010. In addition, HHS is requesting public comments on its draft “Guidance on Important Considerations for When Participation of Human Subjects in Research is Discontinued,” and the FDA has issued related guidance on “Data Retention When Subjects Withdraw from FDA-Regulated Clinical Trials.” The FDA also is accepting comments on a planned FDA study examining consumer comprehension of inclusion of a toll-free number to report side effects in direct-to-consumer prescription drug television advertisements.
• Other CMS Developments. CMS has released an “Issues Paper” on its Medicare value-based purchasing program for physician and other professional services; proposed three national coverage determinations to ensure that Medicare does not cover certain types of preventable surgical errors; announced the technical specifications for a new incentive program to promote electronic prescribing; updated physicians on the suspension of the Medicare Part B drug competitive acquisition program for 2009; and released the 2009 Medicare durable medical equipment, prosthetics, orthotics, and supplies fee schedule.
• Other FDA Developments. The FDA has released guidance documents on “Cooperative Manufacturing Arrangements for Licensed Biologics” and “Submission of Patent Information for Certain Old Antibiotics.” In addition, the FDA has announced that it is teaming with WebMD to expand consumer access to FDA safety alerts and other public health information.
• OIG Developments. The HHS OIG has released the Health Care Fraud and Abuse Control (HCFAC) Program Annual Report for FY 2007 and its Semiannual Report to Congress for the second half of FY 2008. The OIG also has issued an “early alert memo” on “Payments to Medicare Suppliers and Home Health Agencies Associated With ‘Currently Not Collectible’ Overpayments.”
• Health Industry Events. CMS is hosting listening sessions on electronic prescribing, the Physician Quality Reporting Initiative, hospital-acquired conditions, and Medicare inpatient PPS add-on payments for new medical services and technologies. AHRQ is hosting a meeting on kidney disease education.

For details on these and other health industry developments, please visit healthindustrywashingtonwatch.com.

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The Reed Smith Health Industry Washington Watch blog has been updated to discuss a variety of legislative and regulatory developments, including the following:

• Regulatory Developments. HHS has published a final rule to implement certain aspects of the Patient Safety and Quality Improvement Act of 2005 (Patient Safety Act). In addition, HHS has published its semiannual regulatory agenda, outlining planned regulatory initiatives in a number of health policy areas. CMS has issued an interim final rule with comment period making technical changes to the methodology used to compute each state's preliminary and final allotments available to pay the Medicare Part B premiums for qualifying individuals, along with a separate final rule on Medicaid premiums and cost sharing requirements. The FDA has published draft guidance documents on “Contents of a Complete Submission for the Evaluation of Proprietary Names” and “Process Validation: General Principles and Practices.”
• Legislative Developments. Key lawmakers have released for public comment a discussion draft of legislation that would establish a value-based purchasing program for Medicare inpatient hospital care. In addition, the Senate Finance Committee has held a hearing on health care reform, and the Senate has approved technical corrections to the new mental health parity law.
• Other CMS & DOJ Developments. CMS is accepting comments on a preliminary set of outpatient imaging efficiency measures. CMS also has released a document entitled “Medicare’s Practical Guide to the E-Prescribing Incentive Program.” In addition, CMS has announced the improper payment rate for the Medicare, Medicaid and SCHIP for FY 2008. The U.S. Department of Justice also has released updated statistics on federal False Claims Act recoveries, including a discussion of significant health care fraud enforcement activities.
• Health Care Industry Events. CMS is holding forums on the Part B drug competitive acquisition program, value-based purchasing for physician and other professional services, hospital-acquired conditions, and IPPS new technology applications. The HHS Secretary's Advisory Committee on Genetics, Health, and Society is meeting to discuss whether gene patents and certain licensing practices are affecting patient access to genetic tests, and the Practicing Physicians Advisory Council is holding its quarterly meeting to discuss Medicare policy changes related to physicians’ services. AHRQ is hosting a meeting on kidney disease education.

For details on these and other health industry developments, please visit healthindustrywashingtonwatch.com.

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This post was written by Matt Wetzel and Katie Hurley.

On Nov. 10, 2008, a bill was introduced in the Texas Senate that would require drug companies to provide annual disclosures of gifts, payments and other economic benefits to health care providers. If passed, Texas would join the ranks of other jurisdictions (the District of Columbia, Maine, Minnesota, Vermont, West Virginia, and, most recently, Massachusetts), to require such disclosure.

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The Reed Smith Health Industry Washington Watch blog has been updated to discuss a variety of legislative and regulatory developments, including the following: 

• Legislative Developments. Senate Finance Committee Chairman Max Baucus has released a white paper entitled "Call to Action: Health Reform 2009," which details Senator Baucus’ goals for health care reform in the broad areas of coverage, quality, and cost. The broad scope of the Baucus white paper suggests that Congress intends to focus beyond access to insurance or the immediate problem of fixing the Medicare physician fee schedule and examine fundamental policy questions concerning how to promote quality and value throughout the health system at a time of limited federal resources.
• Regulatory Developments.   CMS has published an interim final rule with comment period revising marketing requirements for Medicare Advantage plans and Medicare Part D prescription drug plans in order to limit incentives for brokers to switch beneficiaries between plans. CMS also has published a final rule clarifying the definition of outpatient hospital services under Medicaid to align it more closely with the Medicare definition of such services. The FDA has issued regulations to adjust for inflation the maximum civil money penalty amounts under certain FDA authorities, and it has published a notice regarding nonvoting industry representatives on Center for Biologics Evaluation and Research public advisory committees.  
• Other HHS Developments. CMS has announced the chronic conditions certain Medicare Advantage special needs plans must use to identify the beneficiary populations eligible for enrollment, beginning in 2010. CMS also has released the 2009 update of the Healthcare Common Procedure Coding System (HCPCS) code set, and has updated the Medicare Benefit Policy Manual to reflect CMS policy regarding medically-accepted indications of drugs and biologicals used off-label in an anti-cancer chemotherapeutic regimen. In addition, CMS has released information for state officials regarding the refunding of the federal share of state Medicaid recoveries under state False Claims Acts, and regarding the upcoming “Medicare Nursing Home Value-Based Purchasing" demonstration. Moreover, the HHS Secretary has submitted to Congress the Department's annual report on national Medicare coverage determinations.
• GAO & OIG Reports.  The HHS OIG has issued reports on CMS enforcement of the HIPAA security rule, and appeals of DME supplier revocations. Both the OIG and GAO also have issued reports regarding the Medicare Part D drug program. 
• Health Care Industry Events. CMS is holding forums on electronic prescribing, the Part B drug competitive acquisition program, value-based purchasing for physician and other professional services, and hospital-acquired conditions. The HHS Secretary's Advisory Committee on Genetics, Health, and Society is meeting to discuss whether gene patents and certain licensing practices are affecting patient access to genetic tests, and the Practicing Physicians Advisory Council is holding its quarterly meeting to discuss Medicare policy changes related to physicians’ services.

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On October 28, 2008, the Food and Drug Administration (FDA) published a final rule requiring a statement to be included on certain human drug product labeling that provides a toll-free number for reporting side effects and specifies that the number is not intended to be used for medical advice. The rule, which confirms a January 3, 2008 interim final rule on this issue, implements provisions of the Best Pharmaceuticals for Children Act and the Food and Drug Administration Amendments Act of 2007. The compliance date for the final rule is July 1, 2009 (rather than the January 1, 2009 compliance date anticipated under the interim final rule). 

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This post was written by Matthew E. Wetzel.

In early 2008, the District of Columbia City Council passed the SafeRX Amendment Act (the “Act”), introduced by Council Member David Catania.¹ The Act requires pharmaceutical “detailers,” which includes both employees and independent contractors of pharmaceutical manufacturers, to be licensed by the District of Columbia Board of Pharmacy (the “Board”) by April 1, 2009. Pursuant to the Act and regulations issued by the Board Aug. 29, 2008,² once a pharmaceutical detailer has been licensed by the Board, he or she must, among other things, (1) comply with the PhRMA Code on Interactions with Healthcare Professionals (“the PhRMA Code”), as well as additional requirements; (2) earn continuing education credits; and (3) follow stringent document retention requirements. This Client Alert summarizes the Act and the Board’s regulations, and includes a list of considerations for manufacturers whose employees and independent contractors must be licensed to work in the District of Columbia.

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This post was written by Matthew E. Wetzel.

On Oct. 11, 2008, the Wisconsin Medical Society (WMS)--an association of more than 11,000 medical doctors in the state of Wisconsin--implemented a full ban on gifts to physicians. Specifically, the WMS policy prohibits physicians from accepting gifts from any provider of products that they prescribe to their patients. This includes personal items, office supplies, food, travel and time costs, or payment for participation in online continuing medical education (CME).

According to WMS, the goal is to restore patient trust in physicians' unbiased decision-making by eliminating any actual or potential conflicts between a physician' s medical judgment and a physician's interest in continuing to receive gifts from manufacturers and wholesalers. According to WMS President Steven Bergin, MD, the new policy establishes the principle that "individual physicians should take a bright line approach to accepting items from companies that make products or drugs that the physician might end of prescribing or recommending to his or her patients." He further states that "physicians have the responsibility to make sure nothing gets in the way of [the physician-patient] relationship--or even appears to get in the way."

In addition to the gift ban, the new Wisconsin policy includes the following items:

• The direct provision of drug samples to patients should be limited. (The policy also suggests that samples should be replaced by vouchers.)
• Physicians serving on formulary committees must disclose any commercial relationship with a "health product company," and recuse themselves from the formulary process.
• CME providers cannot accept support directly from health product companies. Rather, the policy suggests that CME providers should create a medical education fund to accept unrestricted donations that would be dispersed according to the CME provider's policies. CME contributions would be required to be disclosed as public information by the CME provider on the Internet.
• Physicians are prohibited from serving on speaker bureaus for health product companies, and from "ghostwriting" (e.g., the practice whereby physicians permit their names to be listed as authors for articles actually written by manufacturers).
• Consulting arrangements must be subject to contracts that require physicians to provide specific "deliverables" in exchange for compensation.

These new rules can be found in WMS Policy ETH-004, "The Relationship of the Profession to the Health Product Industry."

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The Reed Smith Health Industry Washington Watch blog has been updated to discuss a variety of regulatory and legislative developments of interest to the life sciences and health industry, including the following:

• Legislative Developments: President Bush signed into law mental health parity legislation and funding for HHS and other federal agency programs through March 6, 2009. Congress also has cleared online pharmacy and organ transplant bills that now await the President's signature.
• CMS Developments: A new CMS initiative to combat Medicare DMEPOS and home health fraud and abuse; CMS guidance on Medicare payment of certain routine costs associated with clinical trials; CMS release of “Medically Unlikely Edits” used by Medicare contractors to prevent payment for excessive services; and waiver of certain hospital quality reporting requirements in hurricane areas.
• Regulatory Developments: Revised FY 2008 Medicare hospital inpatient PPS rates; solicitation of members for the DMEPOS competitive bidding advisory committee; a final rule on Medicaid self-directed personal assistance services; a final rule revising the Medicaid definition of "multiple source drug"; and FDA reporting requirements for authorized generics.
• OIG and GAO Developments: The OIG has released its FY 2009 Work Plan, supplemental compliance program guidance for nursing facilities, and reports on nursing home deficiencies. The GAO has issued reports on trends in Medicare imaging services and hospital-associated infections.
• Upcoming Events: CMS is hosting a conference on DMEPOS supplier accreditation and provider calls on adoption of the ICD-10 coding system.

For details on these and other health industry developments, please visit healthindustrywashingtonwatch.com.

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We previously wrote about how the Department of Justice (DOJ) revised its Principles of Federal Prosecution of Business Organizations, which govern how federal prosecutors investigate, charge, and prosecute corporate crimes, including health care fraud. Reed Smith's Matthew R. Sheldon, Alexander “Sandy” Y. Thomas, and Richard D. Kelley have written more on the subject.

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On September 17, 2008, the House Energy and Commerce Committee unanimously approved more than 7 health policy bills addressing such issues as FDA drug and device approvals, internet pharmacy regulation, health care workforce issues, insurance coverage, and medical treatment, including:

• H.R. 1014, the "Heart Disease Education, Analysis Research, and Treatment (HEART) for Women Act"; would require new drug, biologics, and device applications submitted to FDA to include specific data on the drug's safety and effectiveness by gender, age and race. This information would be posted on the internet. The bill as amended also would authorize research and public health activities to reduce cardiovascular disease in women.
• H.R. 6353, the “Ryan Haight Online Pharmacy Consumer Protection Act of 2008,” would prohibit the sale of controlled substances over the Internet without a valid prescription and subject on-line pharmacies to a series of new restrictions.
• H.R. 758, the “Breast Cancer Patient Protection Act,” would require health insurers to cover minimum lengths of stay and secondary consultations for patients undergoing procedures to treat and diagnose breast cancer.
• H.R. 2994, the “National Pain Care Policy Act of 2007,” would direct the Department of Health and Human Services to establish a national pain care education outreach and awareness campaign.
• H.R. 5265 the “Paul D. Wellstone Muscular Dystrophy Community Assistance, Research, and Education Amendments of 2008,” would promote research into the causes and treatments of various forms of Muscular Dystrophy.
• H.R. 2583, the “Physician Workforce and Graduate Medical Education Enhancement Act of 2007,” would authorize a loan repayment program for hospitals to start a residency training program.
• H.R. 6908, the “HIPAA Recreational Injury Technical Correction Act,” would require timely disclosure of limitations and restrictions on coverage under group health plans.

The legislation now moves to the full House for further consideration.

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The Department of Justice (DOJ) has revised its Principles of Federal Prosecution of Business Organizations, which govern how federal prosecutors investigate, charge, and prosecute corporate crimes, including health care fraud. A number of the revisions address the area of cooperation credit, including providing that credit for cooperation will not depend on a corporation’s waiver of attorney-client privilege or work product protection, but rather on the disclosure of relevant facts. The guidelines also instruct prosecutors not to consider a corporation’s advancement of attorneys’ fees to employees when evaluating cooperativeness, and specify that the mere participation in a joint defense agreement will not render a corporation ineligible for cooperation credit. Moreover, prosecutors may not consider whether a corporation has sanctioned or retained culpable employees in evaluating whether to assign cooperation credit to the corporation.

Reed Smith's Health Industry Washington Watch blog has new posts about these guidelines as well as new FDA initiatives; Medicare DMEPOS accreditation requirements; the Medicare Part B drug CAP program; Congressional hearings and markups; OIG and GAO reports; upcoming health care industry events; and other policy developments.

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In-house lawyers in many industries--including life sciences and health care--repeatedly confront hard questions about the attorney-client privilege. As Reed Smith lawyers Matthew Sheldon and Sandy Thomas explain in the PrivilEdge Newsletter, a number of recent developments warrant attention. These include "The Attorney-Client Privilege Protection Act of 2007"--pending legislation that would curb demands for waiver of the privilege during corporate investigations and a recent case addressing attorney-client privilege issues such as the "joint client" exception, protection for tax advice and internal audits, and corporate ratification of a lower-level employee's disclosure of privileged information. Their article also discusses proposed Rule of Evidence 502 (S. 2450) regarding inadvertent disclosure of privileged information. As of Monday, that bill is awaiting the President's signature.

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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 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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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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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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This post was written by Debra A. McCurdy, Carol Loepere, Elizabeth Carder-Thompson, Robert J. Hill and Kathleen McGuan.

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  Among many other things, MIPPA delays and reforms the Centers for Medicare & Medicaid Services’ (“CMS”) controversial competitive bidding program for certain categories of durable medical equipment, prosthetics, orthotics and supplies (“DMEPOS”), which had already gone into effect in 10 geographic areas on July 1, 2008. 

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This post was written by Paule Drouault-Gardrat and Julie Gottenberg.

Under French Law, pharmacies benefit from a monopoly on the sale of medicinal products. This monopoly covers reimbursed and non-reimbursed pharmaceutical products. Once they are de-reimbursed, the price setting is free. This is indeed a very important market for the approximately 23,000 French pharmacies, as the current government follows a policy of dereimbursement.

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This post was written by Christine E. Bloomquist, Gina M. Cavalier, and Matthew E. Wetzel.

INTRODUCTION

On July 10, 2008, the Pharmaceutical Research and Manufacturers of America (“PhRMA”) issued a revised Code on Interactions with Healthcare Professionals (“HCPs”) (the “PhRMA Code”). The revised PhRMA Code, which becomes effective January 2009, contains several key changes that will impact significantly the sales and marketing efforts of pharmaceutical companies that choose to comply. The most important revisions are those relating to sales representatives’ ability to provide meals and logo items to HCPs. Specifically, the revised Code prohibits sales representatives from paying for off-site or restaurant meals for HCPs and their staff and prohibits the use of branded “reminder” items, such as mugs, notepads or pens. The following memorandum contains a description of these and other revisions and also details the potential impact of the revised Code on the pharmaceutical industry. In addition, attached to this memorandum is a chart summarizing the original and revised PhRMA Codes and highlighting the new provisions that will become effective next year.

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Articles in This Issue:

• Provider Networks and Joint Ventures: Avoiding Antitrust Scrutiny Through Clinical Integration
• Stark II, Phase III Final Rule
• In the Spotlight:  Fraud and Abuse
• Health Law 101:  Fraud and Abuse
• Recent Reed Smith Publications

Click here to read the Spring 2008 issue of Health Law Monitor.

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This post was written by Karl A. Thallner, Jr., Gina M. Cavalier, Daniel A. Cody, Heather M. Zimmerman, and Suzanne K. Yurk.

I. INTRODUCTION

On April 30, 2008, the Centers for Medicare & Medicaid Services (“CMS”) published a proposed rule to implement the Fiscal Year 2009 Hospital Inpatient Prospective Payment System (the “IPPS proposed rule”). 73 Fed. Reg. 23528. The IPPS proposed rule includes possible changes to certain provisions of 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. A DHS entity is prohibited from seeking or keeping payment for services furnished as a result of a prohibited referral. The IPPS proposed rule’s changes to the Stark Law regulations come on the heels of two other significant Stark Law regulatory developments – the July 2007 proposed Stark Law changes contained in the proposed 2008 Medicare Physician Fee Schedule (“2008 proposed MPFS”) regulations and the September 2007 final Phase III Stark Law regulations¹. CMS will accept comments from the public on these proposed regulations until June 13, 2008.

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Calendar year 2008 has begun where 2007 ended, by presenting us with a number of legal developments impacting the provision of outpatient surgical care. Keeping up with such developments is a challenge for those of us whose careers revolve around representing outpatient surgical facilities. Keeping up for those who actually own and/or operate such facilities as part of their practices may simply be impossible.

Accordingly, this post details our discussion of selected recent developments in the outpatient surgery arena to be useful. This alert and others that we will forward do not purport to be exhaustive accounts of legal developments impacting ASCs or physician-owned hospitals nationally. Rather, we have identified developments that we found particularly interesting in that they address common themes or questions that we frequently encounter.

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President Bush has signed into law S. 2499, the “Medicare, Medicaid, and SCHIP Extension Act of 2007." Most notably, the legislation postpones for six months a 10.1% across-the-board cut in Medicare physician payments that was scheduled to go into effect January 1, 2008.

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This post was written by Debra McCurdy, Carol Loepere, and Elizabeth Carder-Thompson.

I. INTRODUCTION

On January 8, 2008, CMS announced the second phase of Medicare competitive bidding for durable medical equipment (“DME”), prosthetics, orthotics, and supplies (“DMEPOS”). In this second round, competitive bidding will be implemented in 70 areas, including the nation’s largest cities. The complete list of areas can be found at Appendix 1. With very limited exception, only suppliers who are successful bidders in these regions and who meet program standards (including accreditation) will be eligible to furnish eight categories of DMEPOS to Medicare beneficiaries beginning next year. Successful bidders will be paid based on the median of the winning suppliers’ bids for each of the selected items in the region, rather than the Medicare fee schedule or supplier bid amount.

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