Omnibus Spending Bill Promises Increased Funding for Ebola Response in FY 2015

The Consolidated and Further Continuing Appropriations Act, 2015, an omnibus spending bill that provides funding for many areas of federal government in the remainder of FY 2015, was passed by Congress and signed into law by President Obama on December 16, 2014. Among the allocations that the bill provides is $5.4 billion to several regulatory agencies tasked with responding to the Ebola epidemic, both within the United States and internationally. “FY 2015 Ebola Federal Funding: Congressional Increases and Program Support,” a post on Reed Smith’s Global Regulatory Enforcement Law Blog written by attorneys Lorraine Campos, Christopher Rissetto and Robert Helland, breaks down the Ebola-related funding by detailing the amount each regulatory agency will receive and specifically how the bill has designated that the money be used. The federal agencies that will be receiving funding for Ebola response in 2015 include the Centers for Disease Control and Prevention, Department of Defense, Food and Drug Administration, Department of Health and Human Services, National Institutes of Health and Department of State.

To read the full post, click here.

Proposed HELP Committee Bill Aims to Incentivize Development of Ebola Treatments and Vaccines

In light of the recent Ebola outbreak and concerns over health safety, members of the U.S. Senate’s Health, Education, Labor, and Pensions (HELP) Committee have introduced a bill that would add Ebola to the Food and Drug Administration’s (FDA) priority review voucher program, which is designed as an incentive for developers of treatments and vaccines for neglected tropical diseases. Senators Tom Harkin (D-IA), Chairman of the HELP Committee, and Lamar Alexander (R-TN), Ranking Member of the HELP Committee, both expressed hope that passing this bill would encourage developers to devote knowledge and effort towards treating and preventing Ebola.

The HELP Committee is scheduled to vote on the bill on November 19th. To read the HELP Committee’s press release discussing the bill, click here.

Innocent Co-Insureds Coverage Not Void Under Fake Doctor's Application

Reed Smith’s Policyholder Perspective blog recently posted about an October 21, 2014 ruling in the U.S. District Court in South Carolina that sounds as if it came from a Hollywood film. In Evanston Insurance Company v. Agape Senior Primary Care, et al., 2014 WL 5365679, the court held that despite a false application for professional liability insurance submitted by an applicant pretending to be a doctor, the insurance afforded to the company and other doctors and nurses identified as named insureds under the policy remained in force, and was not void ab initio as to the innocent co-insureds. To read the full alert by Reed Smith attorneys Kevin Dreher and Natalie Metropulos, click here.

New California Amendment Aims to Increase Breach Responsibility and Accountability

Reed Smith’s Global Regulatory Enforcement Law Blog features a post on a California bill recently signed into law which expands the scope of requirements for entities that own, license, and maintain personal data or information about a California resident. “Did California Just Impose a First-in-the-Nation Requirement for Breaching Companies To Offer Identity Theft Prevention and Mitigation Services?” written by Reed Smith attorneys Paul Bond, Lisa Kim, and Leslie Chen, focuses on the three sections of the California Civil Code affected by the amendment:

  1. An entity that “maintains” an individual’s data or information – such as a retailer – is required to employ appropriate anti-breach protection. Previously this was only required of companies who “owned” or “licensed” personal information;
  2. An entity identified as the source of a breach of social security numbers or driver’s license numbers must offer affected individuals appropriate anti-breach protection and mitigation services for a period of at least one year; and
  3. An entity is disallowed – except in particular circumstances – from selling, advertising, or offering for sale an individual’s social security number.

The amendments will go into effect on January 1, 2015, after which point entities that do not follow these regulations will be at risk for legal action brought by affected individuals.

To read the full post, click here.

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

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

French Class Actions: How potentially dangerous will they be?

This post was written by Daniel Kadar

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

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

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

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

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

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

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

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

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

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

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

UK Government Addresses Lack of Regulation and Legislation in Cosmetics Industry

In April 2013, an independent review of the regulation of cosmetic interventions in the UK was published, highlighting an insufficient amount of regulation in this industry by the UK government, due in part to the rapid growth of cosmetic procedures in the United Kingdom. Cases such as unauthorized (and potentially defective) materials being used in procedures has forced the UK government to acknowledge that the level of regulation of cosmetic procedures must increase. The UK government responded to this review in February 2014 by unveiling a set of actions that will be taken to address the current dearth of cosmetic regulation and legislation, and ensure that the quality of care is improved. Among these actions are the introduction of a code of conduct, an ombudsman, and accredited qualification of practitioners. Some of these actions have already been initiated.

For more information on the government’s response and proposed changes, read the full alert written by Reed Smith lawyers John Wilkinson, Nicola Maguire, and Adam Lewington, and trainee Daryl Cue.

A Comparison of the U.S. and French Sunshine Reporting Requirements

This past year both the U.S. and France enacted substantial new reporting and disclosure requirements under their respective Sunshine Acts, which were designed to increase the transparency of the financial relationships between manufacturers and health care professionals and to allow patients to make more informed decisions regarding their health treatments. The U.S. and French Sunshine Acts are not identical, however, as indicated in this alert written by Reed Smith lawyers Elizabeth Carder-Thompson and Daniel Kadar. Their side-by-side review illustrates that the scope and focus of transparency differs between the U.S. and France. This alert includes a summary chart comparing and contrasting the differences in Sunshine Act reporting requirements in a number of areas including effective dates, who must report, what information must be reported, payment thresholds and categories of payments that must be reported as well as those that can be excluded. This information is especially relevant to global manufacturers working to comply with these provisions.

A copy of the full alert and comparison chart is available here.

Something to Give Up for the New Year: Pennsylvania Hospitals May Forgo Some DOH Licensure Reviews

This post was written by Karl A. Thallner, Jr. and Zachary A. Portin

With the arrival of 2014, the Pennsylvania Department of Health (“DOH”) is now authorized to grant “deemed status” for licensure purposes to hospitals that have been accredited by national accreditation organizations, such as The Joint Commission. This past July, Governor Corbett signed Act 60 of 2013 (“Act 60”) into law, which amends the Health Care Facilities Act to require DOH to accept hospital surveys and inspections conducted by national accreditation organizations designated as acceptable to DOH in lieu of DOH’s regular licensure renewal surveys. In addition, Act 60 extends the term of licensure from two years to three years for all Pennsylvania hospitals.

Cutting red tape? Described by DOH as a “historic rewrite” of Pennsylvania hospital licensure requirements, Act 60 was championed to help eliminate the redundant nature of multiple and sometimes inconsistent licensing and accreditation surveys that Pennsylvania hospitals routinely undergo. In this regard, most Pennsylvania hospitals complete voluntary accreditation inspections conducted by national accreditation organizations, in addition to the required licensing inspections conducted by DOH. The Pennsylvania House Appropriations Committee predicted that Act 60 would eliminate approximately 55 percent of regular licensure renewal surveys that DOH conducts annually.

What is “deemed status”? “Deemed status” is a process under which a hospital may choose to be exempt from routine licensure renewal surveys conducted by DOH. Hospitals are exempted by securing accreditation from a national accreditation organization – an organization authorized by CMS to conduct hospital surveys to ensure compliance with the CMS conditions of participation.

Pursuant to Act 60, if a national accreditation organization’s final report finds a hospital to be in “substantial compliance” with the accreditation organization’s standards, DOH must accept the report as evidence that the hospital has met DOH’s licensure requirements. The hospital must furnish a copy of the report to DOH within 10 days of its receipt from the national accreditation organization, and then DOH will grant the hospital “deemed status.” If, however, a hospital receives “anything less than full accreditation” in the national accreditation organization’s final report, that hospital will be subject to a full licensure survey by DOH.

Even if a hospital is granted “deemed status,” DOH reserves the right to make unannounced visits for a number of reasons. For example, DOH may respond to complaints, follow up on concerns or events identified by the national accreditation organization, and validate that organization’s findings that the hospital is in compliance with the conditions of participation issued by CMS.

Accreditation organization standards. “Deemed” hospitals are required to comply with the standards established by the national accreditation organization that accredits the hospital. In order for an accreditation organization to be approved by DOH, DOH must determine that the accreditation organization’s standards are equal to or more stringent than DOH’s existing survey requirements, evaluate the integrity of the accreditation organization’s survey process, and require the accreditation organization to enter into a written agreement with DOH. DOH has thus far approved the following four national accreditation organizations: The Joint Commission, the AOA Healthcare Facility Accreditation Program, Det Norske Veritas and the Center for Improvement in Healthcare Quality. In practice, the national accreditation organization will be required to apply the more stringent standards during licensure surveys.

Facilities eligible for “deemed status.” In general, Act 60 provides that a “hospital” that has been licensed by DOH to operate for at least three years and has not been subject to a provisional or restricted license is permitted to request DOH to grant deemed status.

Accordingly, Act 60 applies to health care facilities licensed as a “hospital” under Pennsylvania law. DOH has clarified that general acute care hospitals, children’s hospitals, long-term acute care hospitals, rehabilitation hospitals, cancer hospitals and other specialty hospitals are eligible for “deemed status.” DOH has also opined that ambulatory surgical facilities, behavioral health hospitals, behavioral health units within hospitals, home health agencies and/or divisions, rural health clinics, and inpatient psychiatric hospitals licensed by the Department of Public Welfare are not eligible for “deemed status.”

“Deemed status” is voluntary. Pennsylvania law does not require hospitals to be accredited by a national accreditation organization. Even if a hospital has achieved such accreditation, it is not required to utilize “deemed status.” DOH has clarified that it will continue to perform regular licensure renewal surveys, as it currently does, for facilities that have not secured accreditation by a national accreditation organization or that do not choose to use “deemed status.” Hospitals that desire “deemed status” are required to notify DOH using a form posted on DOH’s website.

What aspects of licensure are not impacted by Act 60? All hospitals, including those obtaining “deemed status,” are still required to submit plans for new construction and renovation to DOH, and receive approval from DOH before providing services in the newly constructed or renovated areas. DOH will also continue to survey hospitals for compliance with occupancy requirements.

Conclusion. Act 60 enables hospitals to potentially streamline and simplify the survey process by conforming to a single set of requirements and avoiding DOH licensure renewal surveys. “Deemed status” will be particularly attractive to any Pennsylvania hospital that has already developed a productive relationship with an approved national accreditation organization and familiarity with its standards. At the same time, DOH has noted that hospitals that are concerned that the accreditation organizations’ reviews will be “more intense” may elect to forgo “deemed status.”
 

Supreme Court Decision on Reverse Payments has Significant Implications for Pharmaceutical Manufacturers

Reed Smith’s Global Regulatory Enforcement Law Blog recently featured a detailed analysis of the Supreme Court’s decision in FTC v. Actavis, where the court ruled five-to-three that reverse payments, also called pay-for-delay settlements, can violate antitrust laws and are subject to antitrust review under the rule-of-reason. As reverse payments are commonly used by branded drug manufacturers to settle patent litigation related to generic drug manufacturers’ market entry, this decision will change the approaches courts, drug company litigants, and lawmakers take to the issue of generic entry into a patented brand drug’s market. To learn more about the implications for both branded and generic drug manufacturers, particularly in their approach to resolving patent litigation, read the full alert.

Supreme Court Decides Mutual Pharmaceutical Co. v. Bartlett

As reported on Drug and Device Law Blog, in a five-to-four decision by Justice Alito, the Supreme Court has decided Mutual Pharmaceutical Co. v. Bartlett, No. 12-142, slip op. (U.S. June 24, 2013), a generic drug preemption case out of the First Circuit where that court had permitted the plaintiffs to recover on a “design defect” claim alleging that the drug should not have been sold at all, despite its FDA approval.  The Supreme Court reversed.  To read more about the decision, see Jim Beck’s analysis in his “Bartlett – A Big Win For Preemption” blog post.

Seeing the Light With the Physician Payment Sunshine Act

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On February 1, 2013, the Centers for Medicare & Medicaid Services released the long-awaited final rule implementing the physician payment transparency provisions, commonly referred to as the Physician Payment Sunshine Act, in the Obama administration's 2010 health care reform legislation. The Sunshine Act joins the list of significant federal laws addressing potential conflicts of interest in health care, including the Anti-Kickback Statute and the Stark Law. With implementation of the Sunshine Act now in sight, stakeholders face the real challenge of complying with, and practicing under the shadow of, the Sunshine Act and its complex and detailed regulations.

To read the full article "Seeing the Light With the Physician Payment Sunshine Act," please visit law.com.

New Jersey Appropriations Committee Approves Off-Label Drug Coverage Legislation

This post was written by Jennifer Pike.

On March 7, 2013, the New Jersey Assembly Appropriations Committee approved legislation related to off-label drug coverage. Assembly bill A1830 would require health benefits plans offered to individuals and small employers, the State Health Benefits Program (SHBP) and the School Employees’ Health Benefits Program (SEHBP), to provide coverage for certain off-label uses for drugs that are approved by the U.S. Food and Drug Administration. The health plans would be required to provide coverage for off-label use of a drug if the drug is recognized as being medically appropriate for the specific treatment for which is has been prescribed in one of two established reference compendia (the American Hospital Formulary Service Drug Information or the U.S. Pharmacopeia Drug Information), or if the drug is recommended by a clinical study or review article in a major peer-reviewed professional journal. According to bill sponsor Herb Conaway M.D., "the purpose of [the] bill is to extend the medical benefits that may derive from the use of off-label drugs to individuals who may not be able to access these medications. In particular those individuals who are suffering from a terminal or chronically debilitating illness, because their insurance carriers won’t cover these drugs.” The full text and status of the bill are available here.

House Approves ACA Device Tax Repeal Bill in Face of Veto Threat

This post was written by Ruth N. Holzman, Angelo Ciavarella and Debra A. McCurdy.

Yesterday the House approved by a vote of 270-146 legislation to repeal the ACA’s controversial 2.3% excise tax on the sale price of certain medical devices, which is scheduled to apply to sales after December 31, 2012. The repeal provision is included in H.R. 436, the Health Care Cost Reduction Act of 2012, which also would: repeal ACA provisions that disqualify expenses for over-the-counter medicine under certain health savings arrangements; allow employees with health flexible savings arrangements funded through salary deductions to “cash out” any remaining balance at year-end (up to $500), and treat such funds as taxable compensation; and require individuals who receive ACA health insurance exchange subsidies to which they are not entitled to repay the full amount of overpayments. The bill now moves to the Senate, where its fate is uncertain, particularly since the Administration has threatened to veto the bill. According to the Administration, the medical device industry will benefit from expanded health insurance coverage under the ACA, and a repeal would “fund tax breaks for industry by raising taxes on middle-class and low-income families.”

House Leaders Plan June Vote on ACA Medical Device Tax Repeal

This post was written by Debra A. McCurdyRuth N. Holzman, and Angelo Ciavarella

A vote on legislation to repeal the ACA’s medical device excise tax could come in June, House Majority Leader Eric Cantor announced today.  The ACA imposes a 2.3% excise tax on the sale price of medical devices sold by the manufacturer, producer, or importer of the device after December 31, 2012. Citing the negative impact of this “draconian tax” on jobs in the medical device industry, Cantor plans a vote on H.R. 436, which would repeal the medical device tax, as early as the week of June 4, 2012. The bill would then await Senate action.

Update: New Hampshire State Senate Hearing on Prohibition of Certain Physician Relationships with Medical Device Companies

This post was written by Elizabeth Carder-Thompson and Nancy E. Bonifant.

The New Hampshire State Senate held a hearing on April 19, 2012 regarding HB 1725, a new measure that would prohibit all health care practitioners from prescribing or referring any U.S. Food and Drug Administration class II or class III implantable medical device if the practitioner stands to “profit indirectly or directly from the sale of [the] medical device by any supplier in which the health care practitioner has a direct or indirect ownership interest.” The testimony from supporters and opponents at the hearing, as well as recent commentary on the bill, indicate that there is significant disagreement over the reach of the measure and in particular whether the definition of “ownership interest” will include “royalty arrangements” between practitioners and medical device manufacturers.

As currently drafted, HB 1725 incorporates the following broad definition of “ownership interest”:

Any and all ownership interest by a healthcare practitioner or such person’s spouse or child, including, but not limited to, any membership, proprietary interest, stock interest, partnership interest, co-ownership in any form, or any profit-sharing arrangement. It shall not include ownership of investment securities purchased by the practitioner on terms available to the general public and which are publicly traded.

At the hearing, supporters of the bill clearly stated that the bill’s purpose is to address growing concerns regarding physician-owned distributors (“PODs”), which can implicate state and federal anti-kickback prohibitions. Opponents, however, argued that the current definition of “ownership interest” could reach much further. On the one hand, “royalty arrangements” between practitioners and medical device manufacturers could arguably be deemed “compensation arrangements” involving the transfer of intellectual property rather than “ownership interests,” and hence fall outside of the bill’s proscriptions. At the same time, the broad definition in the proposed legislation of “any and all ownership interests” followed by a non-exclusive list of examples, and the current significant disagreement over the measure’s reach, suggest that the bill would benefit from additional drafting for clarity.

We will continue to monitor developments in this area. To view our previous post on this topic, click here.
 

New Hampshire Quietly Considers Prohibition Of Physician Relationships With Medical Device Companies

This post was written by Elizabeth Carder-Thompson and Nancy E. Bonifant.

On March 29, 2012, the New Hampshire House of Representatives recommended for passage HB 1725.  If passed, HB 1725 would prohibit all health care practitioners from prescribing or referring any U.S. Food and Drug Administration class II or class III implantable medical device if the practitioner stands to profit, directly or indirectly, from the sale of the device, or from performing any procedure involving the device.

Proponents of the bill assert that it is necessary to address growing concerns regarding physician-owned distributors (“PODs”).  As drafted, however, the bill reaches much further than PODs by incorporating the definition of "ownership interest" from Sections 125:25-a to 125:25-c of the New Hampshire Revised Statutes, which requires practitioners to disclose to patients and licensing authorities “any and all ownership interests” the practitioner has in entities that provide diagnostic and therapeutic services.  A relationship that triggers the disclosure requirements, therefore, is not limited to PODs.  As a result, HB 1725 could prohibit legitimate intellectual property relationships between practitioners and medical device companies that exist to develop and promote life-saving medical devices.  Thus, the bill could significantly affect a practitioner’s ability to continue practicing in his or her specialty in New Hampshire if that practitioner has an ownership interest in a medical device related to his or her practice.

In addition to constituting an unfair or deceptive act or practice in violation of New Hampshire law, failure to comply with the prohibition would expose practitioners to a $5,000 fine per procedure for a first offense and potential suspension or loss of professional licensure, and up to a $10,000 fine, for a second offense.

HB 1725 has been fast-tracked to the New Hampshire Senate, where it is expected to meet with approval.  A hearing has been scheduled for this Thursday, April 19.
 

Increased Scrutiny for the 510(k) Process

This post was written by Michelle Lyu Cheng.

On November 14, 2011, the Senate Health, Education, Labor and Pensions Committee held a hearing called "Medical Devices: Protecting Patients and Promoting Innovation." The hearing focused on the continued viability of a medical device clearance process that clears for market medical devices that are "substantially equivalent" devices to previously cleared devices (also known as the "510(k) process," in reference to the statutory provision governing this process). Class III medical devices not cleared through this process must undergo the more rigorous and time-consuming Premarket Approval process. Among the issues considered were whether the 510(k) process sufficiently evaluated the safety of devices when clinical data is not necessarily always considered or part of the submission; whether high-risk medical devices should always be considered for the 510(k) process; the user fees for medical device applications; strengthening post-approval monitoring requirements; and the resources and needs for the FDA and the Center of Devices and Radiological Health (CDRH) in reviewing, clearing and approving medical devices. 

Testifying witnesses before the panel were as follows: Jeffrey Shuren, Director of the CDRH of the Food and Drug Administration; Ralph Hall, Professor of Practice, University of Minnesota, Minneapolis; David R. Challoner, M.D., Vice President (emeritus) of Health Affairs, University of Florida, and Chair, IOM Committee on the Public Health Effectiveness of the FDA 510(k) Clearance Process, Gainesville, Fla.; and Gregory Curfman, M.D., Executive Editor, New England Journal of Medicine, Boston. 

The first discussion panel centered on Dr. Shuren and his work with CDRH. In late 2009, the CDRH initiated a review of the 510(k) process, among others, and in 2010, released two reports concluding that the FDA had not managed its premarket programs sufficiently, with the most dire problem being unpredictability in the 510(k) and other premarket processes. This led to other increases in costs to the industry and delays in bringing innovation to the market. The root causes were determined to be the lack of personnel resources in CDRH, as compared with the center for drugs and biologics, insufficient reviewer training, insufficient managers and frontline reviewers, rapidly growing workload caused by increased complexity of devices and number of admissions, insufficient guidance for FDA, and poorly drafted submissions by the industry. In 2011, Dr. Shuren testified that concrete steps for improving the transparency, predictability and consistency of the premarket programs were outlined and evaluated. The Committee members generally focused on the sufficiency of CDRH/FDA's resources and an increase in review times for both the 510(k) and the Premarket Approval processes. One suggestion from Sen. Harkin (D-Iowa) was that the user fees for these submissions should be increased, although later it was conceded that the optimal solution would be if the FDA was independently funded. 

The second discussion panel with Mr. Hall and Drs. Challoner and Curfman focused on the 510(k) process and the National Academies of Science, Institute of Medicine (IoM) report that heavily criticized the 510(k) process. Mr. Hall started first, outlining that the drug and medical device sectors are very different, including because medical device development is an iterative process that builds upon previously created devices, and clinical testing is not necessarily an optimal or feasible method of measuring safety and effectiveness for medical devices compared with drugs. In response to Sen. Harkin's question about 510(k) devices bearing little resemblance to each of its predicate devices that may compromise patient safety, Mr. Hall noted the FDA has resources and regulatory powers at its disposal to satisfy itself for any issues relating to safety and effectiveness. Mr. Hall also stated in response to Sen. Blumenthal's (D-Conn.) question that post-market surveillance should be improved but that currently, FDA does have controls and regulatory systems in place for monitoring. Mr. Hall also emphasized that the 510(k) process does control for safety and effectiveness.

The discussion with Dr. Challoner primarily focused on IoN's report, as he chaired the committee that drafted it. The IoN report concluded that the 510(k) process generally does not evaluate safety and effectiveness, but only evaluates whether it is substantively equivalent to prior devices previously cleared. He stated that the IoN committee concluded that overhauling the 510(k) process was an optimal scenario, but per Sen. Mikulski's (D-Md.) question, Dr. Challoner stated that he did not expect the 510(k) process be eliminated overnight. He considered the IoN report to be a conversation starter. Dr. Challoner also testified that since the 510(k) process will not be immediately overhauled, it may be necessary to evaluate and strengthen the post-market processes and improve quality control. Dr. Curfman provided testimony similar to Dr. Challoner, namely that post-market surveillance controls would be helpful in monitoring the safety and effectiveness of devices. One potential way of doing so would be to institute a uniform device identification system so that a device can be tracked over its lifetime.

Sen. Harkin, the Committee Chair, concluded that this hearing was helpful in illustrating the need to take a more intense look at the approval process and post-surveillance controls, especially for certain higher-risk devices. While Sen. Harkin conceded that user fees may not be the optimal solution to compensate for the FDA's lack of resources, he did not consider that any changes to this would be feasible in light of the current climate. Based on some of the discussion points raised during this hearing, the 510(k) process and the post-market surveillance requirements may see increased scrutiny.

A link to the videotaped hearing is here.

Tort Reform In Texas: Loser Pays Rule Signed Into Law

With a hat tip to the California Civil Justice Blog, earlier this week Texas enacted a "loser pays" system that proponents say will help rid the system of meritless cases. House Bill 274 takes effect September 1, 2011 and directs the Texas Supreme Court to enact rules providing for the early dismissal of "causes of action that have no basis in law or fact on motion and without evidence." For cases that fall within this "no basis in law or fact" category, the trial court may award the prevailing party costs and "reasonable and necessary attorney's fees . . . that the court determines are equitable and just" whenever it grants or denies a motion to dismiss, in whole or in part.

Given the rulemaking yet to occur and the discretion vested in the trial courts in whether to award fees, the exact contours of this law will take some development, and it remains to be seen whether Texas civil litigants will be ordered to pay attorneys fees rarely or with some frequency. Still, an interesting experiment in civil justice reform that will bear watching.

IRS Extends to June 10 the Deadline for Submitting Error Reports on Branded Prescription Drug Sales

This post was written by Ruth N. Holzman, Angelo Ciavarella, Joseph W. Metro and Vicky G. Gormanly.

On Friday, May 27, 2011, the Internal Revenue Service ("IRS") issued Notice 2011-46 (the "New Notice"), which extended to June 10, 2011 the deadline to submit error reports in accordance with the dispute resolution process established with respect to the preliminary fee calculation of the 2011 fee imposed on certain manufacturers and importers of branded prescription drugs.

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Tort Reform Heats Up with Hearing in the Senate Judiciary

The National Law Journal's article “Torts once again on the front burner in the House” discusses the March 24, 2011 U.S. House Judiciary subcommittee hearing on tort reform. The hearing, entitled, "Can We Sue Our Way to Prosperity?: Litigation's Effect on America's Global Competitiveness," once again opens the debate regarding the US tort system. Topics included a bill that would cap non-economic damages in cases of medical malpractice, and a hearing on the yet-to-be-introduced Lawsuit Abuse Reduction Act, a proposal to implement mandatory sanctions of attorneys who violate civil procedure's Rule 11 against filing frivolous claims.

Sunshine in Litigation Act to Senate Judiciary

In February we noted that the perennial "Sunshine in Litigation" bill had been introduced again. The Senate version in S. 623  and the House version is H.R. 592 but there is no real difference.  It now is scheduled for consideration in Senate Judiciary on May 5 at 10:00 a.m.  A link to the webcast should be available then from the relevant Senate Judiciary Committee hearing and meeting page.

"Sunshine in Litigation" Bill Introduced Again

Law360 is reporting that Rep. Jerrold Nadler (D-NY) is seeking to revive the 2009 "Sunshine in Litigation Act," a bill we covered previously.  H.R. 592 would turn around the Supreme Court's Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33 (1984), which concluded that discovery materials are not public components of a civil trial.  As a result, litigation protective orders are permissible to protect the confidential and proprietary information of parties to civil litigation, at least until information produced in discovery is filed with the court or introduced into evidence for determination of a merits issue (such as on a motion for summary judgment or at trial.  These bills are introduced regularly, even though in 1996 the Federal Judicial Center confirmed there was no basis for the primary justification articulated by proponents of such measures, reporting that its "empirical study showed that the orders did not impact public safety or health. . . . The empirical data showed no evidence that protective orders create any significant problem of concealing information about public hazards."

IRS Extends Filing Date for Reporting 2009 Sales of Branded Prescription Drugs Under the Affordable Care Act, Clarifies Information Requested From Covered Entities

This post was written by Ruth N. Holzman, Angelo Ciavarella, Joseph W. Metro and Vicky G. Gormanly.

On January 14, 2011, the Internal Revenue Service ("IRS") issued Notice 2011-9 (the "Notice"), which extended the filing date for reporting on Form 8947 a covered entity's 2009 sales of branded prescription drugs under the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the "Affordable Care Act" or the "ACA"). The filing date for Form 8947 with respect to 2009 sales of branded prescription drugs was extended from January 20, 2011 to February 11, 2011. In addition, in response to numerous comments received by the IRS, the Notice made certain changes to Notice 2010-71, 2010-50 IRB (the "Initial Notice"), primarily with respect to the information requested from covered entities. Please click here to view the full alert prepared by Reed Smith Tax and Life Sciences Health Industry attorneys.

On November 29, 2010, the IRS issued the Initial Notice, which provided guidance on the calculation of the annual fee imposed on certain manufacturers and importers of branded prescription drugs for calendar years beginning after December 31, 2010. Click here to view Reed Smith's previous alert which includes a detailed description of the Initial Notice, including the definitions of "branded prescription drugs," "covered entity," "Sales Year" and "Fee Year."

IRS Issues Guidance on Calculation of the Annual Fee Imposed on Manufacturers and Importers of Branded Prescription Drugs Under the Affordable Care Act

This post was written by Ruth Holzman, Angelo Ciavarella, Joe Metro, Jeffrey Kaylor, and Vicky Gormanly.

On November 29, 2010, the Internal Revenue Service (the “IRS”) issued Notice 2010-71, 2010-50 IRB (the “Notice”), which provides guidance on the calculation of the annual fee imposed on certain manufacturers and importers of branded prescription drugs for calendar years beginning after December 31, 2010, pursuant to the Patient Protection and Affordable Care Act of 2010, as amended by the Health Care and Education Reconciliation Act of 2010 (collectively, the Affordable Care Act or the “ACA”). Reed Smith Tax and LSHI attorneys have prepared an analysis of the guidance which provides background on the annual fee and a summary of the information contained in the Notice. While the Notice provides a solid starting point for IRS guidance, there are nevertheless areas of ambiguity that companies will need to evaluate. Please click here to view our full alert.

Upcoming Hearing on Draft Dingell/Waxman Drug Safety Legislation

On September 30, the House Energy and Commerce Committee is holding a hearing on draft drug safety legislation (per energycommerce.house.gov, witness list not yet available). The legislation, which was drafted by Reps. John Dingell, Henry Waxman, Frank Pallone, and Bart Stupak, requires parity between foreign and domestic drug facility inspections, increases the number of pre-approval drug inspections, prohibits the entry of drugs into the United States lacking documentation of safety, requires manufacturers to ensure the safety of their supply chain, and grants FDA authority to mandate recalls of unsafe drugs. For background information on the draft legislation (including the text), see energycommerce.house.gov.

UPDATE:  This hearing has been postponed, and no new date has yet been announced.

Pennsylvania Assisted Living Residences Final Regulations

This post was written by Karl A. Thallner and Amie E. Schaadt.

On July 17, 2010, the Pennsylvania Department of Public Welfare (DPW) published its final regulations for assisted living residences (ALRs) operating within the Commonwealth  40 Pa.B. 4073. The final-form regulations were drafted to fulfill the statutory requirements of Act 56, which was enacted by the Pennsylvania General Assembly on July 25, 2007 and amended the statute regulating and licensing personal care homes by creating, defining and providing for the licensing and regulation of ALRs.

DPW had published proposed ALR regulations on August 9, 2008. While much has remained the same, Act 56 and the final regulations for ALRs represent a significant change in the manner in which the Commonwealth views the continuum of care for seniors and individuals with chronic disabilities.  The final ALR regulations incorporate some significant changes from the proposed regulation and ALRs will need to comply with DPW’s new regulatory requirements.

To learn about the important differences between the proposed and final regulations, read our full alert.

Reed Smith Health Care Reform Review: The Affordable Care Act - Analysis and Implications for DMEPOS Suppliers

This post was written by 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 suppliers and manufacturers of durable medical equipment (DME), prosthetics, orthotics, and supplies (DMEPOS).

To read the full alert, click here.

Caution Lights Ahead for Pharmaceutical Settlements? Impact of Medicaid Exclusion Provisions of PPACA

This post was written by Elizabeth B. Carder-ThompsonCarol LoepereJoseph W. Metro, and Scot T. Hasselman.

We want to alert our manufacturer clients to the potential importance of a specific provision included in our analysis of the recent health care reform legislation. As we note at page 108 of our memorandum:

Medicaid Exclusion from Participation Relating to Certain Ownership, Control, and Management Affiliations (Sec. 6502)

[T]his provision requires Medicaid agencies to exclude individuals or entities from participating in Medicaid for a specified period of time if the entity or individual owns, controls, or manages an entity that: (1) has failed to repay overpayments during the period as determined by the Secretary; (2) is suspended, excluded, or terminated from participation in any Medicaid program; or (3) is affiliated with an individual or entity that has been suspended, excluded, or terminated from Medicaid participation.

In recent years, a number of pharmaceutical and device manufacturers that have been subject to investigation and enforcement activity by the Office of Inspector General, the Department of Justice, and/or state entities, have opted to have subsidiaries -- sometimes all but defunct ones -- plead guilty to a criminal kickback charge for which they are excluded from participation in Medicare and Medicaid under the mandatory exclusion provisions of 42 U.S.C. 1320a-7(a). The parent organization or another subsidiary then has continued to conduct business as usual, though typically subject to a Corporate Integrity Agreement.

The cited provision in the PPACA legislation could be interpreted to mean that, if a pharmaceutical manufacturer's subsidiary or affiliate takes a plea and is excluded, then state Medicaid programs must exclude the parent company from Medicaid participation. This in turn means that the parent's products will not be reimbursed by Medicaid programs -- in effect, that patients will not have access to that manufacturer's products. This is a draconian measure not previously contemplated as a mandatory matter. Further, such an action could be a predicate for Medicare exclusion as well. There remain some undefined terms in the legislation (for example, the period of exclusion), and it is unclear whether state Medicaid agencies might interpret the provision to allow them to adopt some type of "permissive exclusion" process, rather than having exclusions be automatic.

While at first blush this provision appears to be adverse to manufacturers in the sense that it authorizes additional sanctions, its practical implications in the context of global resolutions of dual track criminal-civil investigations are less clear. On the one hand, it could arguably provide even greater leverage to prosecutors than already exists. On the other hand, since the exclusion implications of a criminal kickback plea would likely be wholly unacceptable to a manufacturer, it could either act as a barrier to global resolutions or alternatively might force the parties to consider other sorts of pleas that are not subject to mandatory exclusion (e.g., pleas to FDA violations).

Reed Smith Issues Major Analysis of the Patient Protection and Affordable Care Act, Focusing on Health Care Provider and Medical Product Manufacturer Impact

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

On March 23, 2010, President Obama signed into law the Patient Protection and Affordable Care Act (PPACA), a sweeping measure designed to expand access to health insurance, reduce health care spending (particularly in the Medicare program); expand federal fraud and abuse authorities and transparency requirements; impose new taxes and fees on health industry sectors; and institute a variety of other health policy reforms. The President also signed a second bill into law on March 30, 2010, the Health Care and Education Reconciliation Act of 2010 (Reconciliation Act), which includes a series of “fixes” to the PPACA, including substantive changes to the PPACA’s provisions regarding Medicare prescription drug coverage, Medicare Advantage and fee-for-service payments, Stark law self-referral policy, and Medicaid matching payments, among many others. Within the thousands of pages of the new laws are numerous provisions that will have a direct and material impact on nearly every component of the health care delivery and financing systems in the United States, including health insurers, health care providers, and manufacturers of pharmaceuticals and medical devices, as well as employers, taxpayers, and patients. Moreover, the impact of some of these provisions will be felt immediately, as certain provisions are effective upon enactment, and some have January 1, 2010 effective dates. Reed Smith has prepared a major Alert concentrating on those PPACA provisions we believe are of most interest to health care providers and medical device and pharmaceutical manufacturers.

California Health Care Update: New Laws Adopted in 2009 and Effective in 2010

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.

Senate Committee Meets To Hear From Witnesses Regarding "The Medical Device Safety Act of 2009"

On Tuesday, August 4, 2009, the Senate Committee on Health, Education, Labor and Pensions met for a hearing called "Protecting Patients from Defective Medical Devices" regarding Senate Bill 540, a companion bill to the House bill, H.R. 1346, the "Medical Device Safety Act of 2009." The House Subcommittee on Health, of the Committee on Energy and Commerce also met earlier this year on this issue, with some of the same speakers. 

S. 150 and H.R. 1346 seek to overturn the Supreme Court's important ruling in Riegel v. Medtronic, Inc., 128 S.Ct. 999 (2008), which held that the PMA approval process for Class III devices imposes federal requirements that preempt state tort claims which would impose additional or different "requirements" regarding the safety and efficacy of the device, pursuant to the express preemption clause found in the Medical Devices Amendment of 1976.

Speaking in support of the bill were William Maisel, Director of the Medical Device Safety Institute, Thomas McGarity, Professor at the University of Texas School of Law, and Michael Mulvihill, a patient who was formerly implanted with a medical device. The arguments they presented echoed those of preemption opponents.

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Next Congressional Hearing About Medical Device Safety Announced

On August 4, 2009 at 2:30 p.m., it will be the Senate's HELP Committee's turn to hold a hearing entitled "Protecting Patients from Defective Medical Devices". No witness list is yet posted.

For our coverage on past hearings on this issue, click here.

California E-Discovery Act Signed into Law

This post was written by Meghan Landrum and Renee Feldman.

California's tireless Civil Justice Association of California sponsored an electronic discovery bill that was signed into law on June 29, 2009 by Governor Schwarzenegger. The Electronic Discovery Act (“the Act”) establishes procedures for litigants when obtaining discovery of electronically stored information in California. The Act amends the California Code of Civil Procedure, effective immediately, by adding provisions specifically related to electronic discovery.

Modeled after similar electronic discovery rules in the Federal Rules of Civil Procedure, the Act strives to strike a balance between making ESI available to a requesting party without over-burdening a responding party who utilizes mass quantities of ESI in its normal course of business. For more information, please read Reed Smith's full alert.

New Postings on the Reed Smith Health Industry Washington Watch Blog

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

 

Congressional Hearings On Medical Device Regulation, Litigation Protective Orders

Congress has been busy and there is no sign it intends to slow down just because it is summer.

In two weeks, the House Energy and Commerce Health Subcommittee will hold a hearing entitled, "Medical Devices: Are Current Regulations Doing Enough for Patients." The hearing will be on June 18th at 9:30 a.m. in 2322 Rayburn House Office Building and access to the webcast and witness list should be available from this page once available. Information about this subcommittee's May 12th hearing about medical device preemption is in this prior post.

Earlier this week, the House Judiciary Committee held a hearing on a bill to curtail the discretion of federal judges in issuing litigation protective orders under Federal Rule of Civil Procedure 26(c ) and limiting the use of confideniality provisions in litigation settlement agreements subject to court approval or filed with the court. Proponents of this bill, the "Sunshine in Litigation Act of 2009", H.R. 1508, suggest that it is needed to help keep defendants in civil litigation from "hiding" health and safety hazards.

As the Supreme Court recognized in Seattle Times Co. v. Rhinehart, 467 U.S. 20, 33 (1984), discovery materials are not public components of a civil trial. Until information produced in discovery is filed with the court or introduced into evidence for determination of a merits issue (such as on a motion for summary judgment or at trial), protective orders routinely protect the confidential and proprietary information of parties to civil litigation.

Testimony by the Hon. Mark R. Kravitz of the District of Connecticut, on behalf of the Conference’s Committee on Rules of Practice and Procedure and its Advisory Committee on Civil Rules, opposed the bill on the ground that it effectively amends the Federal Rules of Civil Procedure outside the rulemaking process, contrary to the Rules Enabling Act (28 U.S.C. §§ 2071-2077). He testified that the bill is not needed (emphasis added):

In 1994, the Rules Committees asked the Federal Judicial Center (FJC) to do an empirical study on whether discovery protective orders were operating to keep information about public safety or health hazards from the public. The FJC completed the study in April 1996. . . . The FJC study showed that discovery protective orders were requested in only about 6% of the approximately 220,000 civil cases filed in federal courts in that time period. Most of the requests are made by motion. Courts carefully review these motions and deny or modify them in a substantial proportion. Less than one-quarter of the requests are made by party stipulations and the courts usually accept them. In most civil cases in which discovery protective orders were entered, the empirical study showed that the orders did not impact public safety or health. . . . The empirical data showed no evidence that protective orders create any significant problem of concealing information about public hazards.
* * * *
Even when a protective order is entered, it usually does not result in the sealing of all, or even many, documents or information submitted to the court. Case law shows that courts are rightly protective of the public’s right to gain access to information and documents submitted to the courts.
* * * *
Requiring courts to review discovery information to make public health and safety determinations in every request for a protective order, no matter how irrelevant to public health or safety, will burden judges, further delay pretrial discovery and inevitably increase the cost of civil litigation in federal courts.

We've attached a copy of the Federal Judicial Center's Report.  Additional testimony on the bill is available here.

House To Hold Hearing On Patent Settlements Involving Generics And Impact On Competition

On June 3, 2009, the House Judiciary Courts and Competition Policy Subcommittee will hold a hearing, "Pay to Delay: Are Patent Settlements That Delay Generic Drug Market Entry Anticompetitive?", sure to interest all prescription drug manufacturers. No witness list is posted yet.

Significant Amendment to the Federal False Claims Act

This post was written by Scot T. Hasselman, Andrew C. Bernasconi and Nathan Fennessy.

On May 20, 2009, the President signed into law the Fraud Enforcement and Recovery Act of 2009 (“FERA”), which will implement significant changes to the federal False Claims Act (“FCA”). The amendments to the FCA will significantly expand the scope of FCA liability, provide for new investigative tools, and make it easier for qui tam relators to bring and maintain FCA suits on behalf of the government.

The House and Senate both passed the bill with overwhelming majorities before the President signed FERA into law. While the new law is primarily targeted at potential fraud involving recipients of economic stimulus funds in the financial services industry, it also includes some very significant changes to the liability provisions of the federal False Claims Act affecting members of the health care industry.  To read Reed Smith's full alert, please click here.

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House Subcommittee Holds Hearing To Overturn Riegel: H.R. 1346, the "Medical Device Safety Act of 2009"

On May 12, 2009 the Subcommittee on Health, of the Committee on Energy and Commerce, House of Representatives, held a hearing on H.R. 1346, the "Medical Device Safety Act of 2009".  If passed, it would overturn the Supreme Court decision, Riegel v. Medtronic, Inc., 128 S.Ct. 999 (2008), which held that under the express preemption clause of the Medical Devices Amendment of 1976 (MDA), the federal requirements created by the premarket approval process for Class III devices preempted state law tort claims that added or differed from the federal requirements.  This hearing comes at the heels of public and media scrutiny of this decision, including last year's House Committee on Oversight and Government Reform preemption hearing held May 14, 2008 and the Senate Judiciary Committee's preemption hearing held June 11, 2008.

Before the invited panel of witnesses spoke, numerous members of the subcommittee provided opening remarks, which reflected the division among those who argued that the Supreme Court's analysis in Riegel departed from the legislative intent of the MDA, and those who agreed that the pending legislation would prevent innovation and access to medical devices that are life-saving. Arguments against the bill also noted that moving against preemption would otherwise place safety concerns in the hands of juries across the country, instead of on the FDA's safety and efficacy evaluations. Some focus was also placed on the FDA's effectiveness in policing the manufacturers, with several congress members such as Representative John Dingell, MI and Henry Waxman, CA arguing that the FDA has not been able to identify and take action on defective products, therefore calling into question their effectiveness in ensuring safety, while other congress members such as Representatives Steve Buyer, IN and Michael Burgess, TX argued that if the FDA is underfunded and without resources, the Committee should focus on the FDA, not on tort reform.

Most of the invited witnesses were repeat appearances from last year's hearing. David Vladeck, J.D., Professor of Law, Georgetown University Law Center presented his case in support of the bill, and repeated his concerns about the Riegel court's alleged deviation from congressional intent as reflected in legislative history. He also argued that manufacturers brought the express preemption defense to fore and that it was a more recent phenomena since the mid 1990s, after the Cipollone v. Liggett Group, Inc., 505 U.S. 504, 517, 112 S.Ct. 2608, 2618 (1992) decision.

William H. Maisel, M.D., M.P.H., Director, Medical Device Safety Institute, Department of Medicine, Beth Israel Deaconess Medical Center, Boston also testified, as both a practicing cardiologist and as a consultant and advisory committee member for the FDA. He provided anecdotal background with what he represented as an example of a man who was implanted with a St. Jude pacemaker that allegedly was subjected to a recall and resulted in additional surgical procedures.  In making this example, Dr. Maisel argued that the self-interest of companies are at odds with the congressional goal of ensuring public safety. Gregory Curfman, M.D., Executive Editor, New England Journal of Medicine also echoed similar sentiments, and discounted the arguments made about innovation and safety for consumers being mutually exclusive.

Richard Cooper of the law firm Williams & Connolly LLP provided a big-picture review of what it would mean to have 50 state juries take the place of the FDA and seasoned clinicians when determining what constitutes a "defect" meriting liability. Mr. Cooper also emphasized that innovation would be hampered should preemption be denied to medical device companies, noting how many smaller companies that are focused on under-served areas of practice would be litigated out of their market share.

Bridget Robb of Pennsylvania and Michael Kinsley of Washington both presented anecdotal history with medical devices. Ms. Robb testified about her experience with a cardiac lead that she claimed unnecessarily shocked her and caused grievous subsequent emotional and physical injury, while Mr. Kinsley presented his story of how deep brain stimulation and other implanted medical devices has allowed him to lead a productive life despite a Parkinson's Disease diagnosis. Both presented different takes on the limits of how much risk a patient should face when balanced with the potential benefits offered by their medical devices.

Prior to the hearing, the Energy & Commerce Committee also published a letter asking the FDA to reexamine its decision to approve a medical device called the "collagen scaffold" that is used to reinforce and repair the meniscus, which is a natural cushion in the knee. This letter, as addressed to the FDA Principal Deputy Commissioner, seeks reexamination of the approval decision that the authors argue was made over the objection of FDA scientists.

For more information, please see the previous post "Will The May 12 Hearing On The "Medical Device Safety Act of 2009" Recognize The Costs Of Eliminating Preemption?"

Senate Finance Committee Options for Expanding Health Care Coverage (Comment Deadline May 22, 2009)

On May 11, 2009, Senate Finance Committee Chairman Max Baucus (D‐Mont.) and Ranking Member Chuck Grassley (R‐Iowa) released their policy options for expanding health care coverage, including options for designing a government-run public health insurance plan. Members are scheduled to meet to discuss these options on May 14, and public comments will be accepted on the options through May 22, 2009. An overview of the document is reprinted after the jump. This is the second of three options papers scheduled for release by the Committee, with the third options paper on financing health care reform planned for release before a May 20 meeting of Finance Committee members.

For the full post, please see our sister blog, HealthIndustryWashingtonWatch.com.

Sweeping Changes to the Federal False Claims Act are on the Horizon

This post was written by Scot T. Hasselman, Andrew C. Bernasconi, and Nathan R. Fennessy.

On April 28, both the U.S. Senate and the U.S. House of Representatives took steps that would provide sweeping changes to the federal False Claims Act ("FCA"). The bills would significantly expand the scope of FCA liability while at the same time make it easier for qui tam relators to bring and maintain FCA suits on behalf of the government.

In short, the bills are answers to a DOJ and relator’s counsel "wish list" that would eliminate 20 years of hard-fought defense jurisprudence. In addition, the House bill, for example, would eliminate the public disclosure jurisdictional bar and defense, which could allow a sworn federal agent to utilize information obtained in the course of official investigations to file FCA lawsuits as a relator, and to receive a portion of any financial recovery. The House bill would also eliminate any basic pleading standards by relators and allow relators’s attorneys to file fishing expeditions without any substantive basis of allegation. 

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

Senators Seek June 2009 Markup of Health Reform Legislation

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. 

Health Information Privacy and Incentives, Medicaid Funding, and Other Health Care Provisions in the American Recovery and Reinvestment Act

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.

HIPAA Privacy and Security Changes in the American Recovery and Reinvestment Act

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.

FDA Globalization Act Of 2009 And Preemption

As Point of Law pointed out on February 3, a move is afoot to "Revers[e] Preemption, One Bill At A Time," starting with industries regulated by the FDA.

Section 2 of the FDA Globalization Act OF 2009, H.R. 759, merits the attention of the life sciences industry. It provides:

This Act and the amendments made by this Act may not be construed as modifying or otherwise affecting any action or the liability of any person (as defined in section 201 of the Federal Food, Drug, and Cosmetic Act) under the law of any State.
 

 

UPDATE:  Drug and Device Law has posted Bert Rein On The Politics Of Preemption on this issue, and it is definitely worth a read.

The New Consumer Product Safety Improvements Act -- Implications for Pharmaceutical Manufacturers

This post was written by Stephen P. Murphy.

On Aug. 14, 2008, the President signed the Consumer Product Safety Improvements Act (the Act) into law. By an unfortunate and possibly unintended consequence of poor drafting by the Congress, all of the statutes enforced by the U.S. Consumer Products Safety Commission were brought within the coverage of the new Act. One of those statutes is the Poison Prevention Packaging Act, which requires a wide range of pharmaceuticals to be packaged in child-resistant packaging. Under the new Act, all such pharmaceuticals manufactured after Nov. 12, 2008 are now required to have general conformity certificates by which either the importer or the domestic manufacturer, on the basis of a reasonable testing program, attests that the products comply with the PPPA. These certificates are required to "accompany" each lot or batch of products manufactured. The CPSC has construed that an electronic certificate readily available to the CPSC or to the Customs and Border Patrol complies with the new Act. But the products must have on the shipping documents or the shipping package, a unique identifier and a URL to the website in order to facilitate review. The certificates are intended to be available through the chain of distribution, but not to patients. There are some exceptions to this statute. These rules become effective Feb. 19, 2009.

The CPSC has publicly stated that it does not have the resources to specifically enforce the new Act now, but will do so in the ordinary course of its regular activity. The CPSC expects to get supplemental funding for enforcement and other activities toward the middle of the second quarter of 2009. However, Customs is authorized by the Act to detain and destroy products that do not have the required general conformity certificate. Along with this new authority, the Act has increased the fines that CPSC can impose from $5,000 per violation to $1.25 million, and for a series of violations from $1.825 million to $15 million. In addition, the new Act introduces criminal penalties for knowing violations of the new Act and of the other statutes enforced by the CPSC.

Massachusetts Releases Proposed Restrictions on Drug and Device Marketing Activities, Annual Financial Disclosure Requirement

This post was written by Matthew E. Wetzel.

On Dec. 10, 2008, the Massachusetts Department of Public Health released proposed regulations that would impose aggressive restrictions on pharmaceutical and medical device manufacturers’ sales and marketing activities that exceed similar restrictions in other jurisdictions. The proposed regulations—intended to implement section 14 of the Massachusetts Act to Promote Cost Containment, Transparency and Efficiency in the Delivery of Quality Health Care—would also require companies to file annual disclosures of all fees, payments and economic benefits paid to health care professionals that total $50 or more. If the Department finalizes these regulations as proposed, Massachusetts will join the ranks of seven other jurisdictions that have issued similar requirements.

Click here to read the full Client Alert.

Health Care Reform During the Obama Presidency: The Impact on Hospitals

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."

California's New HIPAA-Like Requirements Impose New Data Privacy & Security Duties - and Create New Potential Liabilities

Data breaches can occur in any industry, but those that involve medical information create unique problems. Starting January 1, they also will carry unique penalties, at least in California. The new California laws, Senate Bill 541 (SB 541) and Assembly Bill 211 (AB 211).

Health care providers clearly need to take heed of the laws' directives that they take additional affirmative steps to prevent “unauthorized access” to patient information. But AB 211 is particularly broad in scope, covering “any person or entity" that "negligently discloses" or "knowingly or willfully obtains, discloses, or uses medical information," which mean other players in the life sciences industry probably should take note as well. A full discussion of SB 541 and AB 211, written by Janet H. Kwuon and Rachel A. Rubin, is here.
 

Ghosts Of Product Liability Legislation Past

Over at Drug and Device Law Beck and Herrmann muse on the possible impact of a win by Sen. Obama on drug and device law. This blog takes no sides on the election - and this may mean nothing for the future development of the law - but it is interesting to note that in the past, Sen. McCain has supported the criminalization of product liability in certain circumstances, as Victor Schwartz explains in this March 2006 testimony before the Senate Judiciary Committee.
 

Health Industry Washington Watch Regulatory and Legislative Developments

Regulatory and legislative developments posted on Health Industry Washington Watch include:

  • Regulatory Developments.  The Agency for Healthcare Research and Quality (AHRQ) and the HHS Office for Civil Rights have announced the availability of an interim guidance document entitled “Implementing the Patient Safety and Quality Improvement Act of 2005, Including How to Become a Patient Safety Organization.'' The Centers for Medicare & Medicaid Services (CMS) has published a notice soliciting comments on the Medicare Part D/Medicare Advantage Calendar Year (CY) 2010 Bid Pricing Tool and the CY 2010 Plan Benefit Package software and formulary submission.
  • Other CMS Developments.  CMS has released details on the scoring methodology it uses to identify those nursing homes that become candidates for the “Special Focus Facility” initiative by virtue of their more serious history of severe and persistent quality of care problems. The agency also is soliciting comments regarding an interim study of options for revising geographic location adjustments under the Medicare physician fee schedule. In addition, CMS has posted Medicare Part D prescription drug plan and Medicare Advantage health plan information for 2009 online.
  • Legislative Developments.  President Bush recently signed into law a number of health bills, including legislation to restrict internet pharmacy sales, increase funding for health centers, and expand disease research, among others.
  • Odds & Ends.  The Food and Drug Administration (FDA) has released a draft guidance document on “Potency Tests for Cellular and Gene Therapy Products.” The Government Accountability Office (GAO) has issued reports examining the FDA’s advisory committee processes and reviewing how nonprofit hospitals meet community benefit requirements. The AHRQ's Technology Assessment Program will be posting draft reports on its website, including an upcoming report on "Potential Conflict of Interest in the Production of Drug Compendia." In addition, CMS is encouraging hospitals and other health care providers to review a new publication, “Community Pan-Flu Preparedness: A Checklist of Key Legal Issues for Healthcare Providers."
  • Upcoming Events.  CMS is hosting a Special Open Door Forum for physicians on the Medicare Medical Home Demonstration project. The agency also is holding a Prescription Drug Event Symposium at CMS headquarters in Baltimore for researchers and other interested parties. In addition, CMS will host a series of national provider calls regarding issues associated with the adoption of the ICD-10 coding system.

New Postings on the Reed Smith Health Industry Washington Watch Blog

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.

Senate Hearing on DTC Advertising for Medical Devices

The United States Senate Special Committee on Aging heard testimony Sept. 17, 2008, to consider recommendations on whether increased regulation of direct-to-consumer (“DTC”) advertising is needed for restricted medical devices regulated by FDA, such as heart stents, replacement hips, and other implanted medical devices. (The Federal Trade Commission regulates advertising for non-restricted medical devices.) 

Describing its inquiry as “Marketing or Medicine: Are Direct-to Consumer Medical Device Ads Playing Doctor?” the hearing was another in the committee’s on-going, 15-month series of oversight hearings on medical device and pharmaceutical marketing practices. Committee Chairman Sen. Herb Kohl (D-Wis.) observed in his opening remarks that the pharmaceutical industry has spent “billions of dollars advertising their products directly to consumers” since the mid-1990s, while the medical device industry is “just beginning to get into the game.” (According to AdvaMed’s President and CEO, Stephen J. Ubl, pharmaceutical companies spent $2.46 billion on DTC ads in 2005 while medical device companies spent $116 million.) 

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The Medicare Improvements for Patients and Providers Act of 2008

This post was written by Debra A. McCurdyRobert J. Hill, Jacqueline B. PenrodCatherine Durkin, Jamie L. Schreiber, and Nancy A. Sheliga.

I.  Introduction

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

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

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

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Health Law Monitor

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.

Proposed Stark Law Changes in CMS's 2009 IPPS Proposed Rule

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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Operating Notes: Developments Surrounding Outpatient Surgical Facilities Continue to Unfold in 2008

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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California Assemblyman Introduces Legislation to Require Notice of Defective Foreign Products

It seems like a rare day when there is not a notice of a foreign-made defective product being recalled in the United States. In recent months, there have been more than 500 recalls of a variety of products including millions of toys coated with lead paint, thousands of illegal fireworks, contaminated meats, and tainted medicines.

The issue has become so enormous that the U.S. Government has created a website—www.recalls.gov—that provides information about recalls coordinated by a variety of agencies including the Consumer Product Safety Commission, the Food and Drug Administration, U.S. Department of Agriculture, the Environmental Protection Agency, and others.

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Medicare, Medicaid, and SCHIP Extension Act of 2007 Enacted into Law

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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