Health Law Advisor

Drug manufacturer Eli Lilly has filed suit against four companies involved in making, prescribing, and/or selling compounded versions of its weight loss and diabetes drugs ZEPBOUND® and MOUNJARO®. Lilly’s drugs, injected under the skin, are the only FDA-approved medicines containing tirzepatide in the United States.

Two complaints, filed April 23 in the U.S. District Court for the Northern District of California, contend that the founders and chief executive officers of Mochi Health Corp. (“Mochi Health”) and Fella Health exerted control over multiple affiliated entities, including medical groups, in violation of California law prohibiting unlicensed individuals and corporations from practicing medicine (generally known as the “Corporate Practice of Medicine” or “CPOM” laws). The plaintiffs allege unfair competition and false advertising under state law and the Lanham Act; and assert state CPOM claims through supplemental and/or diversity jurisdiction.

This latest development on the drug compounding front comes at a time when states are keeping a sharp eye on private investment in the health care space—increasingly proposing legislation to strengthen CPOM laws and also increase oversight on corporate transactions involving health care entities. The majority of U.S. states have some form of CPOM restriction, and some, including Oregon, Texas, and Washington, are considering taking steps advocates say will strengthen theirs—with proposals, for example, to prevent private equity groups or hedge funds from interfering with health care decisions and limiting or eliminating common forms of affiliation with professional medical practices.

California’s legislature recently passed AB 3129, and it is awaiting Governor Gavin Newsom’s signature. While AB 3129 impacts several different provider types, this article focuses on its impact on Management Service Organizations (MSOs) and Physician Practice Management Companies (PPMCs) as the historically accepted structure for purposes of complying with the prohibitions on the corporate practice of medicine (CPOM). In its initial drafts, AB 3129 seemed highly focused on MSOs and the Friendly PC models for PPMs in the state.

While much of the early language regarding MSOs seems to have been shed from the bill, some ambiguity remains regarding whether, and in what contexts, sponsored MSOs will need to give pre-transaction notice to, or obtain the consent of, the California Attorney General (AG).  A later section of the bill highlights what will likely be CPOM enforcement priorities and is worth the close attention of all MSOs operating in the state.

Aesthetic services and the medical spa industry have continued to grow over the past few years as clients continue to demand the availability of such cosmetic services. In response, many providers and investors in the health care industry are seeing opportunities to open or invest in a medical spa.

Before opening or investing in a medical spa there are several key elements to be considered:

Corporate Structure

One of the first elements to consider when opening a medical spa is the corporate structure and ownership of the medical spa. Many jurisdictions have “Corporate Practice of ...

On April 13, 2021, a New York-based chiropractor, was sentenced to nine years in prison, and ordered to pay close to $20 million, for running what the federal government alleged was a large scale scheme to defraud Medicare and other third party insurers.[1]   The sentencing stems from a case originally filed under seal on August 29, 2018, in which the U.S. Attorney’s Office for the Southern District of New York alleged that two New York chiropractors – James and Jeffery Spina – improperly owned and controlled multiple medical practices and engaged in submission of fraudulent health care claims from 2011 until September 2017.

The California Court of Appeals, Second Appellate District (the "Court") in Epic Medical Management, LLC v. Paquette rendered an decision that was published earlier this year that is helpful to those who engage in provision of management services to physicians or medical groups (possibly other professionals as well) including, without limitation, hospitals, health systems or private equity backed organizations.  In this case, although not directly ruling on the legality of the arrangement, the Court states that if it had so ruled, it would have determined that a comprehensive ...