Health Law Advisor

Thought Leaders On Laws And Regulations Affecting Health Care And Life Sciences

A “Mixed Bag” from SCOTUS – Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter

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In a unanimous decision announced May 26, the U.S. Supreme Court, in Kellogg Brown & Root Services, Inc. v. United States ex rel. Carter, 2015 BL 163948, U.S., No. 12-1497, 5/26/15, ruled that the Wartime Suspension of Limitations Act (“WSLA”) applied only to criminal charges and not underlying civil claims in times of war. Thus, the WSLA – which suspends the statute of limitations when the offense is committed against the Government – cannot be used to extend the statute of limitations in cases such as those brought under the False Claims Act (“FCA”). This ruling reversed a decision of the Fourth Circuit which had previously held that WSLA applied to both criminal and civil claims.

In the same decision, the Court offered some clarity around the FCA’s “First to File” bar. Under the statute, “[w]hen a person brings an action . . . no person other than the Government may intervene or bring a related action based on the facts underlying the pending action.” 31 U. S. C. §3730(b)(5) (emphasis added). Affirming the Fourth Circuit in interpreting the definition of the word “pending,” the Court held that it’s meaning was intended to be consistent with its general meaning – “remaining undecided” or “awaiting decision.” Thus, once a decision is reached and the case is no longer active, it is no longer “pending” within the meaning of the statute and does not operate as a bar to a subsequent suit – although the Court noted that doctrines such as claim preclusion might be available in the defense of a later filed suit, depending on the circumstances of the case.

Holding that the WSLA does not extend the statute of limitations in FCA cases is good news. However, the first to file holding will provide an opportunity for relators to bring more troublesome cases after early filers’ cases have been rejected by the government and abandoned by relators or dismissed by courts. In other words, the ruling will afford time that can allow “the cream to rise to the top.” Thus, this decision allows for complex and sophisticated lawsuits that are not recognized at first blush but which can be brought at any time when there is nothing else relevant pending.

Health Care Industry: OSHA Is Quietly Gunning for You – Is Your Workplace Ready?

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On April 2, 2015, Thomas Galassi, Director of the Directorate of Enforcement for OSHA, sent a memorandum to all Regional Directors announcing that the agency’s National Emphasis Program on Nursing and Residential Care Facilities would be extended until replaced by updated guidance or removed by the agency.  Mr. Galassi went on to state that, because the health care industry reports more work-related injuries and illnesses than any other general industry,

the Agency will continue to use both enforcement and collaborative efforts to address hazards such as musculoskeletal disorders from lifting patients or residents, exposures to tuberculosis, bloodborne pathogens, workplace violence, and slips, trips and falls. We are advising you of the Agency’s intent to soon issue updated guidance that instructs OSHA offices to allocate enforcement and other resources to additional inpatient healthcare facilities, such as nursing homes and hospitals that have occupational illness and injury rates above the industry average.

For the full blog post by our colleague Valerie Butera, please visit the OSHA Law Update blog.

House Energy and Commerce Committee Proposes, then Drops, 340B Reform Language to 21st Century Cures Legislation

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By Alan J. Arville, Constance A. Wilkinson and Selena M. Brady

The House of Representatives Energy and Commerce Committee (“the Committee”) circulated draft language to include in its 21st Century Cures legislation earlier this week to reform the 340B drug discount program (the “340B Program”). Although the draft 340B language was pulled from the legislation yesterday, the language proposed provides insight into what future legislative reform may include. The draft language, if adopted, would have a substantial impact on all 340B Program stakeholders, including, covered entities, contract pharmacies, 340B technology vendors, and drug manufacturers.

The draft language addressed the concerns of several Committee members during the Health Subcommittee hearing on March 24, 2015 (discussed here), including the lack of clarity surrounding the patient eligibility definition, the lack of transparency on how hospital-based covered entities use 340B savings to benefit underserved patients, and the Health Resources and Services Administration’s (“HRSA”) limited authority to issue regulations and enforce 340B Program requirements. In addition, the draft language would impose several new requirements on 340B contract pharmacy arrangements. The following summarizes several key provisions included in the draft language.

Patient Eligibility Definition

The proposed language defining “patient” did not significantly deviate from the existing definition set forth in HRSA’s 1996 guidance, but added a requirement that the patient have an “in-person” clinical or medical visit at the covered entity.

New Obligations for Covered Entities

The draft language proposed several new requirements of covered entities in order to participate in the 340B Program, including the following:

  • Covered entities would pay a user fee not to exceed 0.1 percent of covered outpatient drug purchases.
  • Covered entities with high volume purchases would be required to conduct an annual independent audit of the entities’ 340B Program compliance, and provide the results to the Department of Health and Human Services (“HHS”).
  • Hospital-based covered entities (except for critical access hospitals) would be subject to substantial new reporting requirements, including the submission of an annual report detailing the following: (1) patient breakdown by payor and the aggregated amount of acquisition cost and reimbursement for covered outpatient drugs by payor, (2) the use of its 340B Program revenue relating to the access and provision of health care for the uninsured, underinsured, underserved and medically vulnerable, (3) its prevention of duplicate discounts, (4) the number of covered outpatient drugs dispensed by each of its contract pharmacies, (5) the amount of uncompensated care, and (6) the name of any third parties or vendors that administer its inventory management system or contract pharmacy arrangement.

Guidance on Contract Pharmacies

The proposed language also addressed contract pharmacies and imposed some potentially onerous obligations for covered entities and contract pharmacies. The contract pharmacy language required covered entities utilizing contract pharmacies to:

  • Have a contractual agreement in place with each contract pharmacy;
  • Register the contract pharmacy agreement and the contract pharmacy’s “distance” from the covered entity with HRSA;
  • Ensure compliance of each contract pharmacy agreement with the requirements to prevent drug diversion and duplicate discounts;
  • Develop a mechanism to track the income of the patients of the covered entity and the amount such patients pay to receive covered outpatient drugs from the contract pharmacy;
  • Maintain and ensure that each contract pharmacy maintains, auditable records;
  • Develop a process and conduct review of prescribing and dispensing records to identify irregularities; and
  • Provide annual audits of the contract pharmacy to be conducted by an independent auditor.

Expanded HHS Authority

The proposed changes would have provided HHS with the authority to establish limits on what the uninsured pay for 340B drugs and allowed HHS to impose new penalties on covered entities for non-compliance with the 340B Program. Perhaps, most significantly, the proposed language would have given HHS the authority to issue regulations addressing several areas of the 340B Program including, but not limited to, covered entity eligibility, patient definition, contract pharmacy arrangements, covered entity reporting requirements, duplicate discounts, limits on amounts charged to uninsured patients, and penalties for non-compliance.

Positive Change for the Home Health Community in New Jersey

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On March 3, 2015, the New Jersey State Board of Nursing (“Board”) issued a comprehensive set of proposed amendments, repeals and new rules pertaining to Delegation and Certification; Homemaker-Home Health Aides.  The changes broaden the authority of registered professional nurses (“RNs”) and permit RNs to train, and then delegate tasks to licensed practical nurses (“LPNs”), certified home health aides (“CHHAs”) and other assistive persons (collectively “assistants”).  This certainly seems like a positive step for the Home Health industry and its patients.  Nurses will be able to serve a broader patient base by maximizing the talents of more caregivers who are, perhaps, being under-utilized in the current model.

Currently New Jersey limits those tasks which an RN can delegate.  Those restrictions were understandable.  Delegation of nursing duties is a delicate and complex process.  An RN must fully assess and understand a patient’s needs and the potential for complication before feeling secure enough to assign another responsibility for that care.  The law change seems to embrace the fact that RNs have always had this key competency, the art of assessment and delegation, but were lacking the necessary assurances that their assistants were able to accept higher levels of responsibility, or that their license would be protected if something were to go wrong. Thus, the new law tightens the screening and training processes employed by HHAs to ensure that the assistants are “equal to the task” of accepting delegation.

It would certainly seem that New Jersey has made changes to benefit the Home Health Industry’s clients.  Among those benefits:

  • Safe and efficient care is delivered with highly skilled RNs able to devote significant time and attention to those patients in need of specialized care;
  • Duplication of services is minimized;
  • More care givers are empowered and more patients treated;
  • A “team” is established to effectuate goals and problem-solve;
  • Care is administered in a more efficient and cost-effective manner.

As with any changes, however, we have to be on the lookout for unintended consequences.  There are legal and ethical consequences to delegation.  Those nurses who master the art of delegation are still responsible for the care rendered and supervision is key.  The RNs must be certain they are delegating to people who are properly trained, understanding of their role, and capable of administering safe nursing care.  The delegates must be comfortable with this increased reliance on their skills.  Any hiccup in the link between the delegator and the delegate could create patient safety issues.  Thus, if any other states are inclined to follow New Jersey’s lead, attention not only to the benefits of delegation, but also to the attendant training and supervision requirements is essential for success.

Members of House Subcommittee Express Support for the 340B Program, but Need for Clarity, Oversight and Transparency

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On March 24, 2015, the House of Representatives Energy and Commerce Health Subcommittee[1] (the “Subcommittee”) held a 340B Program hearing with testimony from the Deputy Administrator of Health Resources and Services Administration (“HRSA”), the Director of the Office of Pharmacy Affairs (“OPA”) of HRSA,[2] the Director of Health Care of the Government Accountability Office (“GAO”), and Assistant Inspector General of the Office of Evaluation and Inspection of the U.S. Department of Health and Human Services (“HHS”) Office of Inspector General (“OIG”).

The purpose of the hearing was to assess the functionality of the 340B Program, and, in particular, HRSA’s activities to address the findings in the GAO report, issued in September 2011, titled “Manufacturer Discounts in the 340B Program Offer Benefits, but Federal Oversight Needs Improvement,”[3] and OIG report, issued in February, 2014, titled “Contract Pharmacy Arrangements in the 340B Program.”[4]

The GAO issued a follow-up report on March 24, 2015, titled “Drug Discount Program, Status of GAO Recommendations to Improve 340B Pricing Program Oversight.”  The follow-up report stated that HRSA had implemented two of the GAO’s four recommendations and that HRSA plans to address the remaining two recommendations to clarify the patient definition and hospital criteria for eligibility.  The OIG also recommended that HRSA clarify patient definition, particularly in to the context of contract pharmacies.  The OIG provided examples of how eligibility determinations in the contract pharmacy setting can result in diversion based on the lack of clarity in the patient definition.  Additionally, the OIG stated that HRSA could increase 340B Program transparency by sharing 340B ceiling prices with providers and Medicaid state agencies (though the OIG acknowledged that HRSA lacked the authority to share 340B prices with Medicaid state agencies).

Throughout the hearing, several members of the Subcommittee expressed their support for the Program and acknowledged that the 340B Program is necessary for hospitals, health centers, and other Covered Entities to serve underserved populations.  At the same time, Subcommittee members expressed concerns that the 340B Program needs greater clarity, oversight by HRSA, and transparency.  Subcommittee Chairman Joseph R. Pitts’ (R.-PA) opening statement sums up the message delivered by Congress:

“This program, designed to stretch scarce federal dollars, is critically important for indigent and low-income patients who may otherwise be unable to access needed drugs or afford treatment. . . . One thing I hope we can all agree on, is that to preserve the 340B program and ensure that it is serving those who most need help, greater oversight and transparency is needed to increase the program’s accountability. Today’s hearing marks the first step in that direction.”[5]

The following are several themes that were discussed during the hearing:

  • Chairman Pitts suggested that Medicaid expansion as a result of the Affordable Care Act may lead to more hospitals meeting the disproportionate share hospital (“DSH Hospitals”) percentage, and thus, becoming Covered Entities under the 340B Program. Chairman Pitts questioned whether the DSH percentage was an appropriate proxy for determining the extent to which a hospital serves low income populations and whether a different methodology would be more appropriate.
  • A few Subcommittee members expressed concern that DSH Hospitals have no obligation to report how 340B savings are used to benefit underserved patients. One member expressed the more specific concern that there was no transparency to determine the extent to which the 340B discount is passed on to uninsured individuals.   The Subcommittee members contrasted this with HRSA grantees, such as health centers, which are required to reinvest proceeds to advance grant purposes. HRSA’s Deputy Administrator noted that such reporting and use of 340B savings by DSH hospitals is not required by the statute and, in response, a member of the Subcommittee suggested that this was an issue being discussed among the members that could potentially require a legislative fix.
  • A few Subcommittee members broached the topic whether, in light of HRSA’s limited rulemaking authority, whether HRSA’s issuance of guidance was a “long term solution” and whether HRSA needed more expansive rulemaking authority. Although HRSA’s Deputy Administrator acknowledged that enforcement of rules would strengthen HRSA’s oversight, the Deputy Administrator did not explicitly request rulemaking authority or other legislative change and stated simply that HRSA would use all the tools at its disposal to enforce 340B Program compliance.
  • Certain Subcommittee members expressed concern over the lack of clarity surrounding the patient eligibility definition; noting that compliance cannot be enforced if the definition is unclear.
  • Several Subcommittee members expressed concern and asked questions regarding the transparency of 340B ceiling prices to Covered Entities and the length of time it has taken HRSA to implement the pricing database. HRSA noted that the secure website would be operational later this year. Other Subcommittee members posed questions regarding whether the ceiling prices needed to be shared with state Medicaid agencies, even though HRSA does not have such authority.

Based on the Subcommittee’s questions and the testimony, it appears that the Subcommittee is intent on “preserving” the 340B Program, and exploring whether legislative “fixes” are needed.  The Subcommittee discussed some areas that can only be addressed through the legislative process, such a change of methodology to 340B hospitals, and transparency requirements with respect to the utilization of 340B savings.

However, there currently does not appear to be any consensus on the scope of such legislation, or even whether legislation is needed.  Ultimately, legislation will likely depend on HRSA’s ability to ensure 340B Program compliance with its current tools, including Covered Entity and manufacturer audits, limited rulemaking authority, and the issuance of guidance.

[1] The full Energy and Commerce committee has primary jurisdiction over the 340B Program in the House of Representatives.

[2] The Office of Pharmacy Affairs is tasked with Administratoring the 340B Program.

[3] http://www.gao.gov/products/GAO-11-836

[4] http://oig.hhs.gov/oei/reports/oei-05-13-00431.pdf

[5] Opening Statement of Subcommittee Chairman Joseph R. Pitts, available at http://energycommerce.house.gov/hearing/examining-340b-drug-pricing-program.

EEOC Issues Proposed Wellness Program Amendments to ADA Regulations

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My colleagues Frank C. Morris, Jr., Adam C. Solander, and August Emil Huelle co-authored a Health Care and Life Sciences Client Alert concerning the EEOC’s proposed amendments to its ADA regulations and it is a topic of interest to many of our readers.

Following is an excerpt:

On April 16, 2015, the Equal Employment Opportunity Commission (“EEOC”) released its highly anticipated proposed regulations (to be published in the Federal Register on April 20, 2015, for notice and comment) setting forth the EEOC’s interpretation of the term “voluntary” as to the disability-related inquiries and medical examination provisions of the American with Disabilities Act (“ADA”). Under the ADA, employers are generally barred from making disability-related inquiries to employees or requiring employees to undergo medical examinations. There is an exception to this prohibition, however, for disability-related inquiries and medical examinations that are “voluntary.”

Click here to read the full Health Care and Life Sciences Client Alert.

EEOC Wellness Regulations – What Do They Mean for Employer-Sponsored Programs?

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The U.S. Equal Employment Opportunity Commission issued proposed regulations addressing how the Americans with Disabilities Act (“ADA”) applies to corporate wellness programs.  Namely, the proposed rule amends the ADA regulations to provide guidance on the extent to which employers may use incentives to encourage employees to participate in wellness programs that include disability-related inquiries and/or medical examinations.  The proposed rule will be published in the Federal Register on April 20, 2015.  Comments will be due 60 days from the date of publication.  The pre-publication version of the proposed rule can be viewed here. For additional information, visit Epstein Becker Green’s website to sign up for our upcoming webinar:  EEOC Wellness Regulations – What Do They Mean for Employer-Sponsored Programs?

 

SCOTUS Update – Armstrong v. Exceptional Child Center, Inc.

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On March 31, 2015, the Supreme Court of the United States decided Armstrong v. Exceptional Child Center, Inc. The Court handed down a hodgepodge of opinions but, in the end, five Justices concurred in the judgment that the Constitution’s Supremacy Clause does not confer a private right of action, and that Medicaid providers, therefore, cannot sue for an injunction requiring compliance with the reimbursement laws.  This ruling will adversely affect at least those health care companies that have contemplated suing on the basis that the reimbursement they are getting is less than what the law entitles them to. 

 

FTC Focus on Privacy

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At the International Association of Privacy Professionals (“IAPP”) Global Privacy Summit in Washington, D.C. on March 5th and March 6th, the Federal Trade Commission (“FTC”) was clear in its message that privacy was a top priority for the agency.  The FTC had a strong presence at the conference.  Three of the five Commissioners and the Director of the Bureau of Consumer Protection (Jessica Rich) all spoke at the conference and relayed a message of the importance of consumer privacy and security.  In that regard, the FTC speakers stressed the importance of:

  • informing consumers of the collection of consumer information;
  • informing consumers how such collected information will be used; and
  • providing strong safeguards for information collected.

The FTC speakers also announced that the FTC will be beginning a new security campaign to engage businesses of all sizes in understanding the importance of securing consumer information.  The FTC speakers also emphasized the FTC’s concern and focus on the collection of health information by organizations that are not covered under HIPAA (for example organizations developing wearable devices or other consumer driven apps).  Given the tenor of the discussions, there is no question that FTC will continue to make privacy enforcement a top priority.  As a result, device manufacturers, pharmaceutical manufacturers, and mobile health developers should remember to think beyond HIPAA when they think of U.S. privacy compliance.  For a listing of prior privacy enforcement actions by the FTC see, https://www.ftc.gov/news-events/media-resources/protecting-consumer-privacy/enforcing-privacy-promises.

Higher Bar for “Good Faith Compliance” in Second Year of Exchange Operations

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The Centers for Medicare & Medicaid Services (“CMS”) expects Qualified Health Plan (“QHP”) Issuers to be more familiar with Marketplace requirements and better reflect those standards in Issuers’ written policies and procedures, officials stated at the recent 2015 QHP Certification Conference held at CMS Headquarters in Baltimore, Maryland.

Twenty-three Issuers across fifteen Federally-facilitated Marketplace (“FFM”) States were audited for compliance with Federal QHP requirements during 2014.  The audits focused largely on QHP’s policies and procedures relating to FFM operations, including oversight of first tier, downstream and related entities (“FDRs).  While CMS held to its previously announced policy to not pursue sanctions against non-compliant Issuers which made a good faith effort to comply with requirements, officials noted that audit findings showed a lack of familiarity with Federal QHP requirements.  Many QHPs’ Marketplace-related policies and procedures were either non-existent, newly created near the time of the audit or generic, not addressing Marketplace-specific requirements.  Other common findings included QHP failure to:

  • Meet notice accessibility requirements;
  • Address requirements on maintaining current and accurate provider directories;
  • Ensure compliance with agent/broker training and registration requirements; and,
  • Ensure that agent/broker compensation is equal inside and outside the Exchange.

CMS is reviewing available data to select Issuers for audit during 2015.  Audit initiation will be staggered throughout the year and may be conducted on a standard or expedited timeframe.  The process may be managed as a desk review or may be onsite, but will include review of QHP systems and documents as well as interviews and will look at QHP oversight of FDRs.  Despite CMS’s decision to extend its good faith compliance policy through 2015, it may be difficult to find a QHP to have acted in good faith where policies and procedures fail to reflect FFM requirements, such requirements remain unimplemented or QHPs fail to monitor contractor compliance with FFM rules.