Health Care Providers, Health Plans, and Health IT Developers Sharing Patient Data Likely Impacted by New Final Rules

Certain health care providers, health information technology (IT) developers, and health plans could see the way they share patient information transformed following the release of two new final rules issued by the U.S. Department of Health and Human Services. The rules address interoperability and information blocking. Reed Smith partner Nancy Bonifant Halstead and senior associate Vicki Tankle provide an overview on key provisions of these rules in their post on our Health Industry Washington Watch blog.

COVID-19’s Potential Impact on Continuation of Business Relationships in France

As corporations continue to grapple with economic issues surrounding COVID-19, global life sciences companies must start to determine how laws in each of the jurisdictions in which they operate will impact their contractual responsibilities and opportunities for remedies in their business relationships.

Life sciences companies with operations in France must recognize that their COVID-19 response will likely need to be different than their responses to previous crises, and not only because French law has significantly changed since 2008.

Our recent client alert, “France – Coronavirus (COVID-19) and economic downturn: What impacts on the continuation of business relationships?” outlines a practical scaled approach to these issues.

EU funding call for Coronavirus projects

The Innovative Medicines Initiative (IMI) was created in 2008 as a public-private partnership between the European Union and the European Federation of Pharmaceutical Industries and Associations (EFPIA).[1] Its overall goal is to increase the competitiveness of R&D in the European pharmaceutical sector by encouraging companies to work with each other and with the public sector.

Over the past decade, IMI has expanded its activities beyond the pharmaceutical sector and it also partners with medicine regulators; health technology assessment groups; patient organizations; and other stakeholders, including associated partners such as the Wellcome Trust and the Bill and Melinda Gates Foundation. IMI-supported projects now range from remote decentralized clinical trials (Trials@Home) and multi-partner AI platforms for drug discovery (MELLODDY) to finding better biomarkers for testing nonalcoholic fatty liver disease (LITMUS).[2]

IMI currently controls around €3 billion in investments.

On March 3, IMI launched a COVID-19 funding call to develop treatments and diagnostics to better tackle the Coronavirus outbreak and to increase preparedness for potential future outbreaks.[3] IMI has already committed €45 million, though total funds are expected to be set at €90 million.

Proposals could include potential drugs that are already at a very advanced stage of development, or an existing, approved drug that could be “repurposed” to treat COVID-19. Also of interest is the development of diagnostic tests to rapidly and reliably identify people infected with the coronavirus that causes COVID-19 and for use in clinical trials of new drugs. Vaccine development is excluded from the scope of this call.

Applicant consortia can mobilize resources through the inclusion of contributing partners (for example, an EFPIA company or affiliated entity, or an IMI Associated Partner), which is expected to have a favorable effect on the application assessment. Several contributing partners have already expressed an interest in joining an applicant consortium, including AbbVie, Astellas, Bayer, E-Pharma, Enyo Pharma, IDbyDNA, Merck, Novartis, Special Product’s Line SpA and Takeda.[4]

The deadline for submitting applications is March 31, 2020.

At the same time, the European Medicine Agency (EMA) has activated its plan for managing emerging health threats.[5] The overall aim of the plan is to draw on the expertise of the European medicines network to provide fast-track scientific advice and give prompt feedback on any proposed medicine developments (which may follow, for example, from the IMI COVID-19 call).

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United States federal and state rules and regulations during public health emergencies: navigating novel coronavirus

On January 30, 2020, the World Health Organization (WHO) declared novel coronavirus (also known as “2019-nCoV” and “SARS-CoV-2”) a Public Health Emergency of International Concern, and the United States Department of Health and Human Services (HHS) named it a public health emergency (PHE). In the United States, the declaration of a PHE empowers HHS to direct funding to: (1) allow the distribution of information about the virus; (2) encourage research and development of diagnostic and treatment techniques; (3) improve efforts on screening and detection; and (4) support local and state in efforts to restrain the spread of the virus. Working in tandem with HHS, the Centers for Disease Control and Prevention (CDC) continue to watch the outbreak closely, and a diagnostic test for the virus has already been fast-tracked by the U.S. Food and Drug Administration (FDA) through its emergency authorization power. The diagnostic test is only one example of the emergency activities we expect to see undertaken as federal and state agencies rush to respond to the 2019-nCoV outbreak.

In our full client alert, you will find an overview of information on the powers that enable state and federal governments to respond to a PHE, and the rules and regulations that are set forth by state and federal agencies concerning which health care providers, suppliers, and facilities may or must comply when a federal PHE has been declared or an infectious disease outbreak occurs under state law.

Court of Justice of the European Union delivers rulings on market authorisation applications

The Court of Justice of the European Union (CJEU) upheld decisions by the European Medicines Agency in two identical rulings on January 22, 2020. In the cases of PT Therapeutics International v. EMA (C-175/18 P) and MSD Animal Health Innovation and Intervet International v EMA (C-178/18 P), the decision was upheld to grant access to documents containing information submitted as part of medicinal product marketing authorisations (MA) applications. This decision could be of concern to those in the biotech or pharmaceutical industries. Competitors may gain an advantage by having the right to access documents and critical information contained in the MA file, especially in patent litigation. Companies should consider this carefully when submitting future applications and decide whether it may benefit them to withhold some of the most confidential information contained in the MAs. For a more in-depth review, please visit reedsmith.com.

FDA announces information collection on “Endorser Status and Explicitness of Payment in Direct-to-Consumer Promotion”

On January 28, 2020, the Food and Drug Administration (FDA) announced that the Office of Prescription Drug Promotion (OPDP) will conduct two studies to examine how payment disclosure statements and the types of endorsers in drug advertisements affect consumers’ understanding of the information provided in the advertisements. Below is a summary of the studies. FDA invites comments on (1) whether studies like these are necessary for FDA to perform its duties, (2) the accuracy of the regulatory burden that FDA estimated, (3) how FDA’s information collection can be enhanced or improved, and (4) how the regulatory burden can be minimized through information technology.

The first study, involving a fictitious acne product, will recruit a total of 654 subjects (for the pretest and the main study) and will involve three different endorser types (celebrity, physician, and patient) and the presence of disclosure statements (for example, “[Endorser] has been paid to appear in this ad for Drug X”). The second study, for a fictitious endometriosis product, will involve 698 subjects (for the pretest and the main study) and will test the subjects’ reactions to endorsements by a social media network influencer and by a patient. This study would examine also how the different levels of explicitness in payment disclosure statements (for example, “paid advertisement” versus “#sp” for “sponsored”) used in the advertisements affect the subjects’ understanding of the content. FDA did not disclose the identity of the celebrity or the influencer who will be used in the trials.

Through these studies, FDA seeks to study information such as the audience’s retention of the presented risk/benefit information, recognition of the advertisement as promotion, and recognition of the endorser’s paid status, as well as behavioral intentions (for instance, asking a physician about the drug). The agency believes that these study will provide specific scientific evidence to assist in determining the agency’s policies regarding drug promotion. FDA will accept comments until March 30, 2020, and the authors would be pleased to discuss potential comments with those interested in submitting.

Health care and life sciences companies may gain clarity from proposed amendment to California Consumer Privacy Act (CCPA)

Proposed amendment AB 713, if passed, would hopefully provide clarity to businesses working with clinical research data. The amendment proposes matching CCPA de-identification standards to those set forth in the Health Insurance Portability and Accountability Act (HIPAA), in addition to equally important clarifications for life sciences companies, health care providers and medical researchers. In particular, AB 713 covers five major principles:

  1. HIPAA De-identification
  2. Privacy Disclosure
  3. Business Associates
  4. Medical Research
  5. Product and Medical Device Tracking

This proposed amendment will hopefully be a source of guidance for those seeking to comply with CCPA, and businesses in this space should watch the amendment process. For a more in-depth explanation of the above amendment, please visit our Technology Law Dispatch blog.

Please join us for an upcoming CLE Webinar, “Digital Health 101”

On Thursday, January 23, 2020 at 12:00 PM ET, Reed Smith will be hosting “Digital Health 101”, a CLE webinar covering:

  • Federal and state health care regulatory and reimbursement issues, including fraud and abuse implications and insurance coverage for digital health devices and services
  • Applicability of federal and state privacy laws, including the Health Insurance Portability and Accountability Act (HIPAA), Telephone Consumer Protection Act (TCPA), California Consumer Privacy Act (CCPA), biometric privacy laws, and Federal Trade Commission (FTC) and Office for Civil Rights (OCR) enforcement
  • U.S. Food & Drug Administration (FDA) regulation, enforcement discretion, and risk-based approach to software functions found in many of today’s mobile medical apps and other digital health technology
  • Global issues, including data, consumer protection, and the medical device regulatory framework in the European Union (EU) and other regions

Please click here to register for the webinar.

This program is presumptively approved for 1.0 general CLE credit in California, Illinois, New Jersey, Pennsylvania, Texas and West Virginia. For lawyers licensed in New York, this course is eligible for 1.0 credit under New York’s Approved Jurisdiction Policy. Please allow four weeks after the program to receive a certificate of attendance.

FDA’s Section 804 Prescription Drug Importation Program and 801(d)(1)(B) Guidance

On December 23, 2019, the U.S. Food and Drug Administration (FDA) published in the Federal Register a set of proposed rules covering the requirements and procedures for importing under Section 804 of the federal Food, Drug, and Cosmetic Act (FDCA) prescription drugs from Canada. It is these proposed rules under which prescription drugs intended for the Canadian market could be imported and distributed in the United States. Separately, FDA also published a draft guidance on December 18, 2019, explaining how manufacturers wishing to market a foreign version of a prescription drug (not limited to Canada) pursuant to Section 801(d)(1)(B) of the FDCA may obtain a new National Drug Code (NDC) for the imported drug, and how they may demonstrate to FDA that the foreign drug is the same as the version marketed in the United States. These proposals follow the two pathways contained in the HHS and FDA Safe Importation Action Plan, which was announced in July 2019 and is designed to lay the foundation for safe importation of certain drugs originally intended for foreign markets.

According to HHS Secretary Alex Azar “These are historic actions by HHS and the FDA, and they represent the bold nature of President Trump’s agenda for lowering drug costs. The President has recognized the opportunity to lower costs for American patients through safe importation, and we at HHS and FDA are delivering on that possibility through a safe, commonsense approach.”

As can be seen below, however, what may be considered “safe” and “commonsense” by FDA and HHS is definitely not simple, and may not be very practical or valuable in the long term. We have prepared a brief summary of the regulatory requirements below. FDA is currently accepting comments. Please let us know if you have any questions.

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Eleventh Circuit hears oral argument in key FCA materiality case

On Wednesday, November 20, a three-judge panel of the U.S. Court of Appeals for the Eleventh Circuit heard oral argument in the closely watched False Claims Act (FCA) case of United States ex rel. Ruckh v. Salus Rehabilitation, Inc.  The case involves questions regarding how to interpret and apply the FCA’s materiality standard set forth in the Supreme Court’s decision in Universal Health Services, Inc. v. United States ex rel. Escobar, 136 S. Ct. 1989 (2016).

Factual and procedural history of the Ruckh case

The relator in the case, Angela Ruckh, filed an FCA case in the Middle District of Florida, alleging that a nursing home operator and its affiliates had submitted false claims to Medicare by (1) upcoding, which was defined as submitting a claim with a higher level of therapy coding than that which was actually provided to patients; and (2) ramping, which referred to a practice whereby the defendants would allegedly provide more therapy to patients during government assessment periods, which resulted in increased billing and violated agency guidance that ramping was an abusive practice.  With respect to the Medicaid claims, the relator had argued that the defendants had submitted false claims to the Florida Medicaid program by not creating or maintaining comprehensive care plans for patients, which was an express condition of payment in Florida’s Medicaid regulations.  After a month-long trial, a jury found that the defendants were liable under the FCA, and the district court entered a $347 million judgment of damages and penalties.

Months later, and in response to the defendants’ motion for judgment notwithstanding the verdict, the district court set aside the entire $347 million judgment.  In making this decision, the district court held that the relator had not proven that any of the alleged false claims submitted to Medicare or Medicaid were material based on the “rigorous” and “demanding” materiality standard espoused in the Supreme Court’s Escobar decision.  The district court further explained that the relator did not present any evidence that the government had refused or threatened to refuse to pay the defendants’ claims despite the lawsuit.  In addition, the district court held that the relator had not proven that the defendants knew that any alleged false claims submitted to the government were material.  The relator appealed.

Arguments raised during oral argument

During the oral argument, the Eleventh Circuit primarily focused on whether and how the FCA’s materiality standard should be applied to both factually false and legally false claims.  Specifically, the panel distinguished between the evidence present (and not present) in the record as to materiality for the Medicare claims and the Medicaid claims.

When specifically considering the evidence presented regarding materiality for the upcoding issue, the court questioned how one could even argue that coding for therapy not provided could be anything but material to the government’s reimbursement decision.  In supporting the relator’s appeal as an amicus curiae, the Department of Justice argued that the question of materiality in these types of factually false claims should be measured based on whether the false information was “important” to the transaction in question at the time the claim was submitted.  The DOJ argued that submitting a claim with a higher level of therapy coded than that actually provided was obviously “important” to the government and thus material to the government’s payment decision.  The panel seemed more likely than not to agree with this argument, going so far as to question whether Escobar even applies to these types of factually false claims given that the Supreme Court’s discussion of materiality in the Escobar opinion came after its holding that implied false certification is a viable theory of FCA liability.  Although other circuits have applied Escobar’s stringent materiality standard to other theories of FCA liability, how the Eleventh Circuit rules on this question could create complications for FCA defendants, who often face a combination of implied certification claims, express certification claims, and factually false claims in their FCA cases.

The panel seemed more skeptical, however, as to whether it was reasonable for a jury to conclude that the alleged false claims regarding ramping or the failure to maintain comprehensive care plans were material to the government’s decision to pay.  Specifically, the court repeatedly questioned both the relator’s counsel and the DOJ as to whether there was any evidence that the Florida Medicaid agency had ever initiated any enforcement or recoupment proceedings against a nursing home operator for failing to create or maintain a comprehensive care plan.  Despite the fact that the relator’s expert had opined that the Florida Medicaid agency would automatically deny a claim for payment if it was aware that a comprehensive care plan did not exist for a Medicaid beneficiary, one member of the panel noted that he could not see how the care plans were material to the fraud itself.

Importantly, the Eleventh Circuit panel discussed and considered additional arguments that could dispose of the appeal on procedural grounds without even addressing the district court’s interpretation of Escobar’s materiality standard.

  • First, the defendants had filed a motion to dismiss the relator’s appeal, arguing that the relator did not have standing because she had assigned 4 percent of any recovery obtained from the case to a third-party litigation funder. Although the FCA allows the government to assign its interest in the case to a relator, because the FCA does not expressly allow a relator to reassign the government’s interest, the defendants argued that the relator no longer had standing to bring the action by reassigning her interest.  This argument did not gain significant traction with the Eleventh Circuit panel, and it is unlikely that the panel will dispose of the case pursuant to this procedural argument.
  • Second, the relator had argued that the district court improperly considered the defendants’ arguments challenging the jury’s finding of materiality and knowledge as to the Medicare false claims because those issues had not been properly preserved for appeal pursuant to the Federal Rules of Civil Procedure. Although the relator’s counsel presented this argument to the panel, the panel did not challenge the defendants on the issue during the oral argument.

Interestingly, the panel also questioned the parties on the damages methodology used by the relator to calculate and extrapolate damages despite the fact that the district court did not rest its ruling on any damages calculation issue and the parties had not briefed the issue.  Although it is unlikely that the court will consider this issue directly in ruling on the appeal, the question of whether statistical sampling and extrapolation are an appropriate way to measure damages in FCA cases remains an important issue for FCA defendants.

Prediction as to what the court will decide

Based on the panel’s questions during oral argument, we believe that it is unlikely that the court will resolve the case based on procedural grounds.  As to the merits, it is more likely than not that the Eleventh Circuit will find that the relator’s allegations regarding the submission of false claims for upcoding the amount of therapy actually provided are either not subject to the heightened materiality standard set forth in Escobar or that the jury reasonably found that those false claims were material.  On the other hand, the panel challenged the relator and the DOJ as to whether sufficient evidence was presented as to materiality for the Medicare ramping claims and the Medicaid claims.

Even if the Eleventh Circuit finds that the district court erred in setting aside the jury’s $347 million verdict based on only one of the three theories of falsity, it is possible that the court could remand the case back to the district court for a new trial if the Eleventh Circuit finds that the original jury’s verdict cannot be parsed on a theory-by-theory basis as it relates to falsity.

Although it is unknown when the Eleventh Circuit will issue its opinion regarding the Ruckh case, it is likely that it could be many months until we see a ruling.  We will continue to keep an eye on this case and provide an update once the court issues its opinion.

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