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 Catherine A. Hurley.

The Centers for Medicare & Medicaid Services (CMS) has recently updated the information on its website with respect to the Medicare, Medicaid, and SCHIP Extension Act of 2007 (MMSEA), Section 111 “Mandatory Insurer Reporting” requirements. The recent updates cover (1) a revised implementation timeline for certain liability insurance (including self-insurance) total payment obligation to claimant settlements, (2) revised guidance on claims involving exposure, ingestion, and implantation issues, (3) upcoming improvements to the Medicare Secondary Payer (MSP) program, (4) a new exception for certain settlements paid into a qualified settlement fund and (5) a new way for certain injured Medicare beneficiaries to satisfy their past and future MSP obligations.

Revised Implementation Dates

First, CMS has delayed Section 111 reporting for certain liability insurance (including self-insurance) total payment obligation to claimant (TPOC) settlements, judgments, awards, or other payments. The revised implementation date for reporting will be based on the TPOC amount. A schedule of the new dates is provided here.

Exposure, Ingestion, and Implantation – Revised Guidance

Second, CMS has posted revised guidance pertaining to liability insurance (including self-insurance) responsible reporting entities (RREs) where the claims involve exposure, ingestion, and implantation issues. In the guidance, CMS explains its policies for claims involving exposure, ingestion, and implantation. Specifically, CMS discusses when Medicare will, and will not, assert a recovery claim against the settlement, judgment, award, or other payment, and when the MMSEA, Section 111 mandatory reporting rules must (or need not) be followed. CMS also provides examples of various factual scenarios involving exposure, ingestion, and implantation, and discusses how its policies will be applied to each. 

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This post was written by Susan A. Edwards, Elizabeth B. Carder-Thompson, Gail L. Daubert and Celeste A. Letourneau.

Notably absent from last month’s Department of Health and Human Services Semiannual Regulatory Agenda was any indication of where the Centers for Medicare and Medicaid Services ("CMS") and the Food and Drug Administration ("FDA") stand with respect to their notice with request for comments, issued last fall, on the proposed parallel review process for medical products. While CMS and FDA officials confirmed that they are currently reviewing comments submitted during the review period, they declined to speculate on when they intend to act. The comments submitted, however, provide insight into industry views on this important issue, including widespread discontent with the approval mechanisms currently available. We have undertaken a review of all of the comments submitted and extracted the eight main concerns cited in the following analysis.

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On July 8, 2011, Centers for Medicare & Medicaid Services (CMS) announced that it had awarded Myers and Stauffer, LC a contract to prepare a monthly survey of retail community pharmacy ("RCP") prescription drug prices. The contract is in furtherance of CMS’s commitment to develop and publish “Average Acquisition Cost” ("AAC") data reflecting RCPs’ purchase costs for all covered outpatient drugs, for potential use by State Medicaid agencies in rate-setting. The details regarding how AAC will be collected, calculated and reported could be significant for pharmacies, manufacturers and other industry participants. 

To learn more about this development regarding AAC, please see the full post written by Bob Hill, Joe Metro, Dan Cody, Vicky Gormanly on Reed Smith's Health Industry Washington Watch.
 

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This post was written by Gina M. Cavalier, Vicky G. Gormanly and Brad M. Rostolsky.

On May 16, 2011, the Office of Inspector General (“OIG”) published a report with the results from its nationwide review of the Centers for Medicare and Medicaid Services (“CMS’”) oversight of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”). In its review, the OIG sought to determine the sufficiency of CMS’ oversight and enforcement actions pertaining to hospitals’ implementation of the HIPAA Security Rule. Pursuant to the Security Rule, covered entities, such as hospitals, must implement technical, physical, and administrative safeguards for the protection of electronic protected health information (“ePHI”). According to the OIG, CMS’ oversight and enforcement actions were “not sufficient,” leaving limited assurance of the security of hospitals’ ePHI.

The report details the results from the OIG’s audits of seven hospitals. The audits disclosed “numerous internal control weaknesses.” Specifically, the OIG identified 151 vulnerabilities in the systems and controls intended to protect ePHI. Of these vulnerabilities, 124 were categorized as “high impact.” These vulnerabilities placed the confidentiality, integrity, and availability of ePHI at risk. The consequences of the high impact vulnerabilities is that it (1) may result in the highly costly loss of major tangible assets or resources; (2) may significantly violate, harm, or impede an organization’s mission, reputation, or interest; or (3) may result in human death or serious injury. 

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This post was written by Joseph W. Metro and  David E. Dopf .

The New Jersey Department of Human Services (“Department”) has sent letters to numerous pharmaceutical manufacturers demanding rebate payments under the Work First New Jersey General Public Assistance/Medicare Part D Wraparound Drug Rebate Program (“GA Rebate Program”). The Department is seeking to collect payments from manufacturers that have chosen not to participate in the GA Rebate Program and thus never entered into a GA Rebate Program agreement with the Department (“Rebate Agreement”). In addition, for some manufacturers that have entered into Rebate Agreements, the Department is now seeking payments for time periods prior to the effective dates of those Rebate Agreements.

The Department’s demand letters have uniformly provided the manufacturers with the option of requesting, within twenty (20) days from their receipt of the letter, either a pre-hearing conference for purposes of trying to resolve the payment dispute or a formal hearing before the New Jersey Office of Administrative Law (“OAL”). Manufacturers choosing to pursue a pre-hearing conference can still request a hearing before the OAL within twenty (20) days from the date of the pre-hearing conference if the dispute is not resolved.

We believe there are very strong arguments in support of the position that a manufacturer cannot be liable for payments under the GA Rebate Program in the absence of a Rebate Agreement covering the time period for which the payments relate. Please contact Joe Metro or David Dopf if you have any questions regarding the Department’s actions or would like assistance challenging the Department’s demand for payment.
 

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This post was written by Carol C. Loepere and Catherine A. Hurley.

In an “Alert” dated November 9, 2010, the Centers for Medicare and Medicaid Services (CMS) has published a revised implementation timeline applicable to liability insurance (including self-insurance) “responsible reporting entities” (RREs) under Section 111 of the Medicare, Medicaid and SCHIP Extension Action of 2007 (MMSEA). Specifically, the obligation to report “total payment obligation to claimant” (TPOC) amounts subject to the reporting requirement has been extended from the first calendar quarter of 2011 to the first calendar quarter of 2012. Moreover, under the revised implementation timeline, only TPOC amounts established on or after October 1, 2011 (instead of October 1, 2010) must be reported. Earlier reporting (i.e., reporting prior to the first calendar quarter of 2012), and reporting of TPOC amounts established prior to October 1, 2011 is now optional. CMS has also delayed the staggered phase-out of its interim threshold dollar amounts for TPOC amounts that liability insurance (including self-insurance) and workers’ compensation RREs must report by one year. 

Mandatory reporting of ongoing responsibility for medicals (ORM) by liability insurance (including self-insurance) RREs has not been delayed. Similarly, mandatory reporting by other types of RREs (such as group health plans, no-fault insurance, and workers’ compensation) has not been delayed. Finally, this implementation delay does not affect liability insurance (including self insurance) RREs’ status as “primary payers” under section 1862(b) of the Social Security Act.

According to CMS, this Alert will be incorporated into a forthcoming revision to CMS’s MMSEA Section 111 Medicare Secondary Payer Mandatory Reporting “User Guide” for Liability Insurance (Including Self-Insurance), No-Fault Insurance, and Workers’ Compensation. 

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Despite the many years since enactment, counseling health care clients on the broad and complex federal physician self-referral law, commonly called the Stark Law, will become increasingly difficult. Although originally enacted in 1989 to create "bright line" to demark improper physician self-referred laboratory services, and expanded in 1993 to cover a wide range of "designated health services" reimbursable under Medicare, the contours of the Stark Law continue to evolve and new uncertainties emerge.

The significant damages that can result from a Stark Law violation — most particularly the prospect under the False Claims Act for recovery of three times the Medicare reimbursement paid as a result of a prohibited referral — has caused the Stark Law to attract increasing attention from U.S. Attorneys offices and the private qui tam relator bar.

In his article "Stark Law Developments Will Challenge Health Care Attorneys," published in The Legal Intelligencer, Reed Smith Partner Karl Thallner discusses recent developments demonstrating the difficulties in counseling health care clients on the application of the Stark Law, as well as with selecting a course of action when a Stark Law violation has been discovered.

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This post was written by Daniel A. Cody, Scot T. Hasselman, Carol C. Loepere and Debra A. McCurdy.

On September 23, 2010, the Centers for Medicare & Medicaid Services (CMS) published a proposed rule that would implement provisions of the Affordable Care Act (ACA) designed to strengthen provider and supplier screening requirements under the Medicare, Medicaid, and Children’s Health Insurance Program (CHIP). According to CMS, the Proposed Rule is intended to ensure "that only legitimate providers and suppliers are enrolled in Medicare, Medicaid, and CHIP, and that only legitimate claims will be paid."

Among many other things, the Proposed Rule would: apply screening tools, including unannounced site visits, background checks, and fingerprinting, based on the level of risk associated with different provider and supplier types; impose a $500 application fee on certain providers and suppliers; authorize temporary moratoria on enrollment of certain types of new providers and suppliers; require Medicare and Medicaid payments to be suspended upon credible allegations of fraud; and update various Medicaid screening requirements. Comments on the proposed rule will be accepted until November 16, 2010.

Our full alert provides an analysis of the proposed rule.

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This post was written by Elizabeth Carder-Thompson, Joseph W. Metro, Robert J. Hill, Jennifer A. Goldstein, Kevin M. Madagan, Carol C. Loepere and Debra A. McCurdy.

In April 2010, Reed Smith provided an extensive analysis of the recently-enacted health reform legislation, H.R. 3590, the Patient Protection and Affordable Care Act (PPACA), as amended by H.R. 4872, the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act). In this analysis, we concentrate on those provisions in the new law that will affect life sciences entities: pharmaceutical, device, and biologics manufacturers. To read the full alert, click here.

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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 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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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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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 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 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 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 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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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, and Daniel A. Cody.

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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