Big Pharma Takes Biotech Seriously in 2007

FierceBiotech reports that: "2007 may well go down as the year that Big Pharma went beyond merely embracing biotechnology and decided that now was the time to marry up with the new technology. With Big Pharma's accountants totting up the last big rewards from a slew of blockbusters, biotech was seen at the next big thing in therapeutics, and companies were willing to spend big to get in the act."

FierceBiotech expects the unmistakable surge in deal-making (in 2007) between Big Pharma and biotechnology (through mergers, collaborative risk-sharing, joint ventures and other co-development and co-promotion arrangements) to continue in 2008.

IRS Issues FY 2008 Exempt Organization Implementing Guidelines

FY 2008 EO Implementing Guidelines

Tennessee Court of Appeals Allows Jury Instruction on Superseding Cause

In White v. Premier Med. Group, a wrongful death action, the decedent, Wastille Jones, was admitted to Gateway Medical Center with back pain and was negligently given an overdose of narcotics by the defendant, Scott William McLain, M.D. Jones was subsequently transferred to ICU where she was intubated, but a mucous "plug" obstruted the endotracheal tube, restricting oxygen flow. Jones died the following day. The Tennessee Court of Appeals held there was sufficient evidence for a jury to find that the subsequent negligent acts and omissions of the nurses and respiratory therapists in the ICU "actively worked to bring about a result which would not have followed from Dr. McLain’s original negligence."

White v. Premier Med. Group, No. M2006-01196-COA-R3-CV (Tenn. Ct. App. Nov. 28, 2007).

Court Confirms Application of "Alter Ego" Doctrine to Pierce the Veil of a Nonprofit Parent Corporation

Michael W. Peregrine, of McDermott Will & Emery LLP, writes in Health Lawyers Weekly (December 14, 2007), "The Return of Alter Ego": "In the recent decision, Network for Good v. United Way of the Bay Area, the San Francisco Superior Court applied the hoary legal concept of alter ego to allow a small charity to “pierce the corporate veil” of a United Way affiliate and attribute millions of dollars in liability to the larger parent organization. In so doing, the court confirms application of alter ego and related “ascending liability” theories to the nonprofit sector. It also raises a significant “yellow flag” to nonprofit organizations, including health systems, in their efforts to streamline system governance and management, and achieve system-based operating efficiencies. Indeed, some control practices utilized by nonprofit systems to achieve efficiencies through subsidiary operations may unintentionally expose the parent to greater liability based upon Network for Good-type facts. As such, the decision is a useful guide for nonprofit corporate counsel."

Peregrine continues: "The particular relevance of alter ego treatment, and of the Network for Good decision, lies in efforts by nonprofit organizations and systems (e.g., health systems) to transition from the traditional (but looser) holding company governance and management model, to the (tighter) corporate enterprise model. The attributes of the latter model include greater influence and (in some cases) outright control at the “top”/parent level over system assets, governance, management, and quality. Sometimes referred to as “systemness,” this model reflects the goal of acting more like a single integrated organization rather than as a collection of independent entities under common control."

Continue reading.

Supreme Court Hears Testimony in Medical Device Suits

The United States Supreme Court has granted certiorari to hear two cases to determine whether the manufacturer of a medical device approved for sale by the Food and Drug Administration (FDA) can be sued for damages under state law if the device injures a patient. In particular, the Court will determine whether the express preemption provision of the Federal Food, Drug and Cosmetic Act (FDCA) preempts state-law claims seeking damages for injuries caused by medical devices with FDA premarket approval (PMA). The New York Times reports that the last time the Court heard a medical device case was in 1996, "when it ruled that devices approved by the FDA under a different, more expedited process were not shielded from state liability."

The first case before the Court, Riegel v. Medtronic Inc., was brought by the family of a New York man who suffered severe medical complications when a balloon catheter burst during a procedure to clear his arteries. The second case, involving claims for injuries allegedly caused by Rezulin, a now-withdrawn drug used to treat diabetes, will be heard in February.

Continuing coverage:
- Los Angeles Times (12/4)
- Minneapolis Star-Tribune (12/4)
- Minnesota Public Radio (12/4)
- Wall Street Journal (12/5)
- Financial Times (12/5)
- Law.com (12/5)
- PharmExec.com (12/12)

U.S. Court In Tennessee Holds PBM Was Not ERISA Fiduciary

[Source: Health Lawyers Weekly, December 7, 2007 - AHLA]

A pharmaceutical benefits manager (PBM) was not a fiduciary under the Employee Retirement Income Security Act of 1974 (ERISA) by virtue of the services it provided pursuant to its contract with the sponsor of an employee benefits plan, a federal trial court in Tennessee ruled November 13.

. . . .

Plaintiff alleged Caremark acted as an ERISA fiduciary in that it had sole discretion to (1) set the price the plan paid for generic prescriptions; (2) select the benchmark average wholesale price reporting source used to set the price the plan paid for brand-name prescriptions; (3) determine whether a particular prescription would be adjudicated and priced as a brand-name or generic prescription; (4) decide when to dispense a brand-name drug as a generic prescription at its mail order facilities; and (5) manage the plan’s formulary.

The U.S. District Court for the Middle District of Tennessee found these activities related to the basic administration of Caremark’s own business and that Morrell & Co. retained exclusive control over the management and administration of the plan at all times.
Thus, the court held Caremark did not exercise discretionary control over the plan and the PBM was not a fiduciary under ERISA.

Continue reading

CMS proposes linking hospital performance to Medicare reimbursements.

[Source: Health and Life Sciences Law Daily, November 27, 2007 - AHLA]

CQ Healthbeat (11/27, Carey) reports, "The Centers for Medicare and Medicaid Services (CMS) on Monday sent a series of options to Capitol Hill to change Medicare hospital payment so that it is based on the quality of care a facility delivers." Building on the existing Medicare "Value-Based Purchasing Program," which "pays hospitals more Medicare money if they report data on various performance measures designed to assess quality," a "percentage of the hospital's base operating payment for each discharge -- its 'diagnosis related group' or DRG payment -- would depend on its quality performance." Kerry Weems, CMS acting administrator, suggested that Congress could potentially implement the proposals "as a savings tool."

The Wall Street Journal (11/27, D3, Francis) described the report as offering "sweeping changes to the way" CMS "reimburses hospitals, outlining a plan that would essentially redistribute cash by reducing payments across the board and then giving providers a chance to 'earn back' money by meeting quality-of-care thresholds." However, "Some health-policy experts warn that incentive programs can backfire if structured poorly." Currently, "Medicare makes up nearly half of some hospitals' revenues, and many operate on razor-thin margins." In 2005, 50 percent of "hospitals netted less than 3.75 percent, according to a study by Cleverley and Associates."

CBO Projects Health Care Costs Could Reach 49% of GDP by 2082

In a November 2007 CBO Study, "The Long-Term Outlook for Health Care Spending," the CBO suggested that, in the absence of changes in federal law:

• Total spending on health care would rise from 16 percent of gross domestic product (GDP) in 2007 to 25 percent in 2025, 37 percent in 2050, and 49 percent in 2082.


• Federal spending on Medicare (net of beneficiaries' premiums) and Medicaid would rise from 4 percent of GDP in 2007 to 7 percent in 2025, 12 percent in 2050, and 19 percent in 2082.
  

"In 2005, the most recent year for which data are available, national spending on health care totaled nearly $1.9 trillion, or 14.9 percent of the nation’s GDP. Some 55 percent of the total was financed privately, and the rest came from public sources (see Table 1). Payments by private health insurers were the largest component of private spending, accounting for 37 percent of national health expenditures. Consumers’ out-of-pocket expenses, which include payments for deductibles and copayments for services covered by insurance as well as payments for services not covered by insurance, accounted for 13 percent of national health expenditures. Other sources of private funds, from philanthropy and on-site clinics that some employers maintain for their workers, accounted for 4 percent of the total.

Federal spending on Medicare accounted for 18 percent of national health expenditures in 2005, while federal and state spending on Medicaid accounted for 17 percent. A variety of other public programs accounted for 10 percent of national health expenditures, including ones by state and local health departments, the Department of Veterans Affairs, and the Department of Defense; workers’ compensation programs; and the State Children’s Health Insurance Program."

Read CBO Study

Tennessee Supreme Court Holds Attorney-In-Fact Could Bind Resident To Arbitration Agreement

[Source: Health Lawyers Weekly, November 16, 2007 - AHLA]

A durable power of attorney for healthcare authorizes the attorney-in-fact to enter into an arbitration agreement on behalf of a resident as part of a nursing home’s admissions process, the Tennessee Supreme Court held November 8.

Thus, the appeals court upheld the pre-dispute arbitration agreement in so far as plaintiff argued the attorney-in-fact could not bind the principal and that the agreement was otherwise unenforceable or violated public policy.

The high court did remand for further proceedings, however, on whether the arbitration agreement was an unconscionable contract of adhesion. Continue Reading

Owens v. National Health Corp., No. M2005-01272-SC-R11-CV (Tenn. Nov. 8, 2007).

[Corrected Opinion]

Shareholders sue Sanofi-Aventis after FDA rejects diet drug

[Source: Health and Life Sciences Law Daily, November 16, 2007 - AHLA]

Fortune Magazine (11/16, Simons) reports, "The world's third-largest drug company, Sanofi-Aventis is facing a shareholder lawsuit for allegedly hyping a weight-loss pill that eventually failed to pass FDA muster." The class-action lawsuit alleges "that Sanofi's statements regarding anti-obesity drug, Zumulti, 'were materially false and misleading' because they 'concealed data concerning Zumulti's propensity to cause depression.'" The lawsuit "calls into question the expectations investors have regarding any yet-to-be-approved drug. Since 2004's Vioxx (rofecoxib) withdrawal, the FDA has been under pressure to be more safety-minded." However, some legal experts "contend that cases such as the one filed against Sanofi are difficult to prove." John Coffee, professor of law at Columbia Law School, said that in cases like this one, "plaintiffs need to prove there was an intent to defraud, not just woeful misjudgment."

- - - - - - -

Jeanne Whalen, in WSJ Health Blog, discusses the FDA's concerns with Sanofi-Aventis’s diet pill: "Sanofi-Aventis’s weight-loss pill rimonabant ran into trouble with the FDA this summer over concerns about the pill’s psychiatric side effects, such as suicidal thinking. Now the drug, dissed by advisers to FDA but sold in Europe and Latin America, is getting knocked in an analysis that concludes it increases a person’s risk for depression and anxiety." Continue reading

Patient Privacy Rules under HIPAA May Come At a Cost

Kaiser Daily Health Policy Report: The medical privacy rule issued following passage of the Health Insurance Portability and Accountability Act might limit the ability of epidemiologists to conduct studies in the U.S., according to a study published on Wednesday in the Journal of the American Medical Association, the Pittsburgh Post-Gazette reports (Fahy, Pittsburgh Post-Gazette, 11/13).

The HIPAA Federal Privacy Rule, implemented in 2003, allows health care providers to share patient medical records for the purposes of treatment and other "health care operations." Providers do not have to obtain written consent before they disclose medical records but are required to inform patients of their rights and make a "good-faith effort" to obtain written acknowledgment from patients that they have received the information. Providers must obtain consent from patients before they can disclose medical records in "nonroutine" cases (Kaiser Daily Health Policy Report, 7/3).

For the study, researchers led by Roberta Ness, chair of the epidemiology department at the University of Pittsburgh Graduate School of Public Health, e-mailed surveys to more than 10,000 members of 13 epidemiology societies. Among the more than 1,500 respondents, two-thirds said that the medical privacy rule has limited their ability to conduct studies, and one in nine said that the rule prompted them to abandon a potential study, the study found (Johnson, AP/Chicago Tribune, 11/13). Only one-fourth of respondents said that the rule improved medical privacy for study participants, according to the study.

Ness said, "The privacy rule has made research more costly and time consuming" (Pittsburgh Post-Gazette, 11/13). According to the AP/Tribune, participants in the study, commissioned by the Institute of Medicine, "could have answered the survey more than once," and those "with strong feelings may have been more likely to participate, which would have skewed the results" (AP/Chicago Tribune, 11/13).

An abstract of the study is available online.

CMS Proposes E-Prescribing Standards

Healthcare Financial Management Association (HFMA): On Nov. 13, HHS Secretary Mike Leavitt announced that the department, through the Centers for Medicare and Medicaid Services (CMS), is proposing rules to adopt new standards to advance the use of electronic prescribing (e-prescribing) for formulary and benefit as well as medication history transactions used under the Medicare prescription drug benefit. The proposed standards will be published in the Nov. 16 Federal Register.

The Medicare Modernization Act of 2003 requires CMS to adopt final standards for e-prescribing. All providers and pharmacies transmitting prescriptions electronically for Medicare-covered drugs are required to comply with any CMS standards in effect. The standards cover:

• Transactions between prescribers and dispensers for new prescriptions; refill requests and responses; prescription change requests and responses; prescription cancellation, request, and response; and related messaging and administrative transactions
• Eligibility and benefits queries and responses between prescribers and Part D sponsors
• Eligibility queries between dispensers and Part D sponsors

Download the proposed standards.

The Joint Commission Annual Report Shows Further Improvement in Health Care Quality in Nation’s Hospitals

The Joint Commission, in a recent press release, shows that according to its second annual report on health care quality and patient safety in the nation's hospitals, American hospitals are making measurable strides in the quality of care provided for patients with heart attacks, heart failure, pneumonia and surgical conditions.

Among the specific findings in the 2007 report:

• Accredited hospitals continue to show measurable improvements in performance. The magnitude of improvement from 2002 to 2006 ranges from 3.6 percent to 52.2 percent. Some improvements over the five-year period of data collection - such as in providing smoking cessation advice - have been dramatic. Hospitals provided this advice to 89.4 percent of patients admitted with pneumonia in 2006 compared with only 37.2 percent of such patients in 2002. Hospitals also demonstrated 90 percent or higher compliance with 10 of 16 National Patient Safety Goal requirements that address issues such as medication safety, caregiver communication and preventing patient falls.


• Requiring hospitals to follow standardized processes for quality measurement, reporting and improvement has contributed significantly to the positive results. For measures tracked for the first time in 2005, performance was generally lower and more variable than for measures tracked since 2002. This demonstrates a clear correlation between performance measurement and quality improvement. Much of the improvement reflected in this report can be attributed to the consistent application of focused, evidence-based measures which are the foundation of the Joint Commission’s performance measurement endeavors.


• Room for improvement exists for most of the quality measures. A 90 percent compliance level was achieved for only four of 22 quality-related measures tracked during 2006. In addition, certain treatments are not being performed consistently for some measures in place since 2002. For example, two measures introduced in 2002 that relate to prescribing of ACE inhibitors at discharge for patients with heart failure or with heart attack show the most room for improvement, with hospitals offering these treatments only 64 and 56 percent of the time, respectively.


• Hospitals continue to be challenged in meeting certain patient safety requirements. Non-compliance rates for six of the 16 National Patient Safety Goal requirements range between 16 and 37 percent. While some of this performance can be explained by more searching during on-site evaluations by Joint Commission survey teams, a number of hospitals appear to be struggling with the re-design of patient care processes - such as the reconciliation of medication lists when patients move from one care site to another - that the goal requirements are seeking.


• Significant variability exists in the performance of hospitals by state, as well as between the highest- and lowest-performing hospitals. For example, on the measure of providing pneumococcal vaccination, performance ranged from 55.5 percent to 91 percent. On specific measures of surgical care, the difference between the highest state rate and the lowest state rate ranged as high as 80 percent.
  

Report: Improving America’s Hospitals: The Joint Commission’s Annual Report on Quality and Safety 2007


Theo Francis in WSJ Health Blog comments on the JC report.

New TN law sets forth parameters for reasonable non-compete covenants between health care providers and employees

Public Chapter 487
NON-COMPETE COVENANTS BEWEEN HEALTH CARE PROVIDERS AND EMPLOYEES

This new law sets forth parameters for reasonable non-compete covenants between health care providers and employees upon termination or conclusion of the employment or contractual relationship. It applies to health care providers licensed by the Board of Registration in Podiatry, Board of Chiropractic Examiners, Board of Dentistry, Board of Medical Examiners, Board of Optometry and Board of Examiners in Psychology. It does not apply to physicians who specialize in the practice of emergency medicine or radiology.

The restriction must be set forth in employment agreement or other written document signed by the health care provider and the employing or contracting entity and must be for two years or less. The maximum allowable geographic restriction is the greater of a ten mile radius from the primary practice site of the health care provider while employed or contracted or the county in which the primary practice of the health care provider while employed or contracted is located or there is no geographic restriction but the health care provider is restricted from practicing his or her profession at any facility at which the employing or contracting entity provided services while the health care provider was employed or contracted with the employing or contracting entity. Any restriction under this subsection shall not be binding on a health care provider who has been employed by, or under contract with, the employing or contracting entity for at least six years.

It also allows that an agreement entered into in conjunction with the purchase or sale of a health care provider's practice, or all or substantially all of the assets of the health care provider's practice, may restrict such health care provider's right to practice his or her profession, provided that the duration of the restriction and the allowable area of the restriction are reasonable under the circumstances. There shall be a rebuttable presumption that the duration and area of restriction agreed upon by the parties in such an agreement are reasonable.

The complete text of the Public Act, including provisions for any areas of exemption; enforcement of the Act; and action to be taken for violations of the Act, is available at here.

This law becomes effective on January 1, 2008.

. . . . . . . . . .

Note: This law effectively overrules Murfreesboro Medical Clinic, P.A. v. Udom, 166 S.W.3d 674 (Tenn. 2005)

FDA to hear arguments over proposed new "behind-the-counter" drug class.

[Source: Health and Life Sciences Law Daily, November 14, 2007 - AHLA]

HealthDay (11/14, Reinberg) reports, "Experts at the U.S. Food and Drug Administration are meeting Wednesday to hear arguments on whether or not pharmacists might someday bypass doctors and directly provide consumers with certain drugs that now require a prescription." If such a plan is adopted, "it would create a new class of drugs that could be sold by pharmacists 'behind-the-counter (BTC),'" and might include things like "birth control pills, cholesterol drugs, and migraine medicine." Pharmacists would be required to discuss purchases of these types of drugs with patients before dispensing them.

CNN (11/14, Smith) adds, "So far in the U.S., Plan B is the only prescription drug to switch to behind-the-counter status."

GAO report finds 30,000 Medicaid providers did not pay federal taxes in 2006.

[Source: Health and Life Sciences Law Daily, November 14, 2007 - AHLA]

USA Today (11/14, Wolf) reports, "More than 30,000 Medicaid providers in seven states failed to pay more than $1 billion in federal taxes last year, but the government can't trim healthcare payments in order to collect," according to a report by the Government Accountability Office (GAO). "In its fifth report to a Senate panel investigating tax cheats that do business with the government," the GAO estimates that "about five percent of Medicaid providers in the seven states cheat on their taxes -- particularly payroll taxes collected from employees." According to USA Today, "Some of the more flagrant violators had multimillion dollar homes, along with fancy cars and boats, the report says. Others were guilty of patient abuse or other healthcare violations." However, the report did not identify the doctors or providers.

The AP (11/14) adds that the GAO report examined providers in "California, Colorado, Florida, Maryland, New York, Pennsylvania and Texas." Currently, "federal law does not prevent healthcare providers who owe back taxes from enrolling in Medicaid." And, officials at the CMS "said such a requirement could make it harder for states to provide healthcare to poor people." Meanwhile, the GAO's report stated "that if the IRS had a system to levy part of the Medicaid payments, it could have collected between $70 million and $160 million last year."

Federal court upholds dismissal of "Roe v. Wade for Men" lawsuit.

[Source: Health and Life Sciences Law Daily, November 7, 2007]

The AP (11/7) reports that on Tuesday, a three-judge panel of the 6th U.S. Circuit Court of Appeals "upheld the dismissal of a lawsuit nicknamed 'Roe v. Wade for Men,'" which was filed on behalf of Matthew Dubay by the National Center for Men. Dubay "said he shouldn't have to pay child support for his ex-girlfriend's daughter," because she "knew he didn't want to have a child and assured him repeatedly she couldn't get pregnant because of a medical condition." Dubay "argued that if a pregnant woman can choose among abortion, adoption or raising a child, a man involved in an unintended pregnancy should have the choice of declining the financial responsibilities of fatherhood." However, U.S. District Judge David Lawson "disagreed, rejecting Dubay's argument that Michigan's paternity law violates the U.S. Constitution's equal protection clause because it didn't extend reproductive rights to men."

CMS Issues New Rules for Physician Fees and for Outpatient Prospective Payment System (OPPS)

[Source: Healthcare Financial Management Association (HFMA)]

CMS Issues 2008 Outpatient Prospective Payment System Final Rule

On Nov. 1, the Centers for Medicare and Medicaid Services (CMS) continued its initiative to link payment with quality in a final rule with comment period updating the hospital Outpatient Prospective Payment System (OPPS), effective for services furnished during CY08. The rule also updates the payment rates for the revised ambulatory surgical center (ASC) payment system beginning in CY08.

After taking into account the market basket update and other factors that affect the level of payments, CMS estimates hospitals will receive an overall average increase of 3.8 percent in Medicare payments for outpatient services in CY08. The CMS Office of the Actuary projects that payments (including beneficiary coinsurance) under the OPPS will increase by about 10 percent to approximately $36 billion in CY 2008 from $32.7 billion in CY 2007, due in part to increased use of hospital outpatient services.

Hospitals that are paid under the Inpatient Prospective Payment System are required to report the applicable hospital outpatient quality measures in order to receive the full OPPS market basket update in CY 2009; otherwise, their CY 2009 update will be reduced by 2.0 percentage points.

In addition, the final rule provides larger payment bundles for certain OPPS services, which is intended to provide hospitals with greater flexibility in managing their resources.

The final rule will be published in the Federal Register on Nov. 27, 2007. View the final rule. Read the CMS press release.

See AHLA's report on this issue: "Final OPPS Rule Includes Overall 3.8% Update", Health Lawyers Weekly, November 2, 2007

- - - - - - -

Medicare Final Rule Announces 2008 Physician Fees and Reforms for Accurate Payments and Quality

Under a final physician payment rule issued yesterday, the Centers for Medicare and Medicaid Services (CMS) estimates that it will pay approximately $58.9 billion to about 900,000 physicians and other healthcare professionals. The revised payments, quality incentive rates, and related policy changes, which will become effective Jan. 1, 2008, are included in the Medicare physician fee schedule final rule. The rule will be published in the Nov. 27 Federal Register.

Since July 1, 2007, under the Physician Quality Reporting Initiative (PQRI), eligible professionals who report specific measures on quality of care furnished to Medicare beneficiaries may earn incentives up to 1.5 percent of their total allowed charges, subject to a cap.

The Medicare law includes a statutory formula requiring CMS to implement a negative 10.1 percent update in payment rates for physician-related services. This formula compares the actual rate of growth in spending to a target rate, which is based on such factors as the growth in the number of Medicare fee-for-service beneficiaries and statutory or regulatory changes in benefits. According to a press release, "CMS has no choice but to implement this negative update because it is mandated by a statutory formula."

Download the final rule. Read the CMS press release.

See AHLA's report on this issue: "CMS Issues Final Physician Payment Rule With 10.1% Cut", Health Lawyers Weekly, November 2, 2007

Cost of Uncompensated Hosptial Care Reached $31.2 Billion in 2006; Underpayments Reached $29.9 Billion

The American Hosptial Association (AHA) released the results of its Annual Survey of Hospitals in October. In its Uncompensated Hospital Care Cost Fact Sheet, AHA said that the data from the Annual Survey showed that hospitals had uncompensated care costs amounting to $31.2 billion (5.7% of total expenses) in 2006. However, uncompensated care excludes other unfunded costs of care, such as underpayments from Medicare and Medicaid. In its Underpayment By Medicare and Medicaid Fact Sheet, AHA reported that underpayments to hospitals (defined as the difference between the costs incurred and the reimbursement received for delivering care to patients) reached $29.9 billion in 2006 (up from $4 billion in 2000).

Other reports and studies by the AHA can be found here.

District Court in Alabama to Determine Whether section 1395w-26(b)(3) of Medicare Act is a "Complete Preemption" Statute

[Source: Health Lawyers Weekly, November 2, 2007]

The U.S. District Court for the Southern District of Alabama granted a motion for interlocutory appeal October 15 on the question of whether whether § 1395w-26(b)(3) of the Medicare Act is a complete preemption statute. The court ruled in the instant case that at least some of plaintiffs' state law claims were completely preempted, while the same court and another district court ruled previously that similar claims were not subject to complete preemption. See Bolden v. Healthspring of Alabama, Inc., Nos. 07-413-CG-B, 07-414-CG-M (S.D. Ala. 2007); and Harris v. Pacificare Life & Health Ins. Co., No. 2:06-956-ID (M.D. Ala. 2007).

The cases involved lawsuits brought against health insurers by Medicare beneficiaries asserting they were fraudulently induced into enrolling in the insurers' Medicare Advantage (MA) plans.

Continue reading

Case: Dial v. HealthSpring of Ala., Inc., No. 2:07-0412-KD-C (S.D. Ala. Oct. 15, 2007).

New York Court Says A Physician's E-mails With Attorney on Hospital's E-mail System Not Privileged

[Source: Health Lawyer's Weekly, November 2, 2007]

A physician's communications with his attorney via his hospital-employer’s email system were not protected from discovery under the attorney-client privilege or work product doctrine in a subsequent employment dispute, a New York court ruled October 17.

According to the court, because hospital policy explicitly prohibited personal use of its email system and informed employees of potential monitoring, the physician could not claim these communications were privileged.

Court said, “A ‘no personal use’ policy combined with a policy allowing for employer monitoring and the employee’s knowledge of these two polices diminishes any expectation of confidentiality.”

Continue reading

2007 Tennessee Medical Malpractice Claims Report - Judgments Down in 2006

The Tennessee Department of Commerce & Insurance released the 2007 Medical Malpractice Claims Report, which showed a decline in medical malpractice judgments and settlements in 2006. Tennessee trial courts issued six medical malpractice judgments totaling $4,951,459 (down from $6,075,724 in 2005). Settlements in 2006 occurred for 15.24% of medical malpractice claims, totaling damage payments of $100,233,337 (down from $119,091,990 in 2005).

See report here

Medicare Part D spent $32 billion in 2006, study finds.

[Source: Health and Life Sciences Law Daily, November 2, 2007]

HealthDay (11/2, Preidt) reports, "In 2006, introduction of the U.S. Medicare Part D prescription drug benefit increased the number of seniors' prescriptions by 158 million, at a cost of $32 billion to Medicare," according to a study published in the November/December issue of the journal Health Affairs. Co-author Frank Lichtenberg, a business professor at Columbia University, and colleagues "analyzed data on 584 million prescriptions filled at the Walgreens pharmacy chain from September 2004 to December 2006." After including "the increased number of prescriptions that followed the introduction of Medicare Part D," the researchers found "that the amount paid by patients decreased only 5.6 percent, while the amount paid by private insurers increased by 22.3 percent." In addition, the data indicated that "Medicare spent about $203 for each additional prescription for the elderly, about 3.5 times as much as the average price ($57) for a prescription in 2006." The researchers concluded that "we need to think carefully about the economic implications of this program, which the federal government will ultimately have to raise taxes to pay for," particularly since Medicare Part D is expected to cost "$797 billion by 2015."

Some medical groups express support for physician disclosure bill.

[Source: Health and Life Sciences Law Daily, Oct. 24, 2007]

Congressional Quarterly (10/24, Bloedorn) reports, "Several key medical groups have announced their support for legislation (S 2029) that would require pharmaceutical companies to report any gifts given to physicians." The legislation, "sponsored by Sen. Charles E. Grassley (R-Iowa), and co-sponsored by Sen. Herb Kohl (D-Wis.)," would require "pharmaceutical companies with revenues exceeding $100 million...to file quarterly reports detailing all gifts of $25 or more given to physicians and clinicians." The American Medical Students Association, the National Physicians Alliance, and the Prescription Project said that "such gifts influence doctors to prescribe more expensive name brand medications" rather than "generic drugs." However, the Pharmaceutical Research and Manufacturers of America argues that the legislation "would create a 'reporting bureaucracy and could cause confusion and burdens for companies, physicians and patients.'"

See "Physician Payments Sunshine Act of 2007" (S. 2029) here

Interactive Online Tool Provides Side-by-Side Comparisons of Presidential Healthcare Proposals

The Kaiser Family Foundation has released an interactive online tool to compare the healthcare proposals of presidential candidates. The tool, 2008 Presidential Candidate Health Care Proposals: Side-by-Side Summary, summarizes positions in four overall categories: access to healthcare coverage, cost containment, improving the quality of care, and financing.

Nonprofit Panel Releases Principles For Good Governance

[Source: Health Lawyers Weekly, October 19, 2007]

The Panel on the Nonprofit Sector has released Principles for Good Governance and Ethical Practice: A Guide for Charities and Foundations aimed at helping organizations strengthen their effectiveness and accountability.

The Guide describes six principles that all charitable organizations must take because they are required by law as well as 27 additional principles that charities should strongly consider based on their structure and purposes.

The 33 principles are organized under four categories: Legal Compliance and Public Disclosure; Effective Governance; Strong Financial Oversight; and Responsible Fundraising.

Read the Guide.

Miller v. Tennessee Board of Nursing

Davidson County - This appeal involves a disciplinary proceeding against a registered nurse. After receiving a report that a registered nurse left her patients in a hospital’s medical/surgical unit before the end of her shift, the Tennessee Board of Nursing commenced a contested case proceeding to discipline the nurse. Following the hearing, the Board ordered the nurse to pay a $1,000 civil penalty and also immediately suspended the nurse’s license pending a psychological evaluation. The nurse sought judicial review of the Board’s decision by the Chancery Court for Davidson County, and the trial court affirmed the Board’s finding that the nurse had abandoned her patients, the assessment of the civil penalty, and the immediate suspension of the nurse’s license. The nurse appealed. We have determined that the record contains substantial and material evidence that the nurse abandoned her patients and that the Board did not act arbitrarily by requiring the nurse to pay a $1,000 civil penalty. However, we have determined that the Board acted arbitrarily when it immediately suspended the nurse’s license pending a psychological examination in the absence of any evidence or finding that the nurse was presently mentally unfit to practice nursing.

Case: Miller v. Tennessee Board of Nursing, No. M2005-02383-COA-R3-CV (Tenn. Ct. App. September 26, 2007)

CMS approves TennCare waiver

[Source: Health and Life Sciences Law Daily, October 9, 2007]

The AP (10/9) reports, "The federal government has approved a three-year TennCare waiver extension that will leave the state with about $270 million less than needed to cover growing hospital costs, state officials announced today." However, the CMS-approved agreement "is an improvement over an original proposal that would have left Tennessee with more than $385 million less than projected."

Modern Healthcare (10/9, Galloro) notes, "The new agreement sets an annual cap of $540 million, or $1.62 billion over the three years of the waiver, on payments that TennCare can make to hospitals to offset the costs of treating uninsured patients not covered by TennCare."

The Chattanooga Times Free Press (10/9, Bregel) adds, "Although the TennCare Bureau submitted its request to renew the waiver in 2006 -- a year in advance of the waiver's originally expiration date of June 30, 2007 -- negotiations fell apart when the CMS added a provision to cap the amount of money TennCare could provide to hospitals as reimbursement for uncompensated care, TennCare Bureau officials have said."

Read the press release posted on TennCare’s website.

FTC approves doctor-hospital network integration.

[Source: Health and Life Sciences Law Daily, October 8, 2007]

American Medical News (10/8, Sorrel) reports that on Sept. 17, the Federal Trade Commission (FTC) issued an advisory opinion that "has opened the door for a physician and hospital network to contract jointly with health plans under a clinical integration program." In only the second opinion (pdf) of its kind, "the Health Care Division of the FTC Bureau of Competition said Greater Rochester Independent Practice Assn.'s plan showed no signs of illegal price fixing. Instead, the bureau found that the program had the potential to provide low-cost, high-quality care to patients in the Rochester, N.Y., area." Moreover, "group negotiation appears 'reasonably necessary' to reach that goal, the FTC letter stated." AMNews adds, "Experts say the recent 30-page opinion on the Greater Rochester IPA's plan is chock-full of clues as to what the government might view as acceptable." Eric Nielsen, M.D., chief medical officer for the Greater Rochester IPA, said, "This is valuable not just to our physicians and to us, but to the country as a whole in showing that this model of clinical integration, which has been out there in the theoretical for the past 10 years, really can be implemented."

HHS awards $22.5 million in contracts to implement national electronic health record system.

[Source: Health and Life Science Law Daily, October 8, 2007]

Modern Healthcare (10/6, DerGurahian) reported that the HHS awarded nine grants totaling $22.5 million to health information exchanges "to test implementation of a nationwide health information network, officials announced." Specifically, the grants will be used to test the Nationwide Health Information Network, or NHIN, "a trial network, involving patients, providers and other healthcare stakeholders in exchanging information through the use of electronic health records. Officials stressed that the data will remain private and secure. The organizations represent both statewide and regional information exchanges."

Healthcare IT (10/5, Monegain) added, "The work is intended to move the nation toward President Bush's goal of most Americans having access to secure electronic health records by 2014." HHS Secretary Michael Leavitt said, "Trial implementations of the Nationwide Health Information Network will bring us steps closer to a health IT system that will improve quality of care, increase efficiencies in healthcare, and improve disease prevention." Computer World (10/5) also covered the story.

U.S. Supreme Court grants cert. to determine whether FDA premarket approval of medical device preempts state law

The United States Supreme Court granted certification to review Riegel v. Medtronic, 451 F3d 104 (2nd Cir. 2006), to determine whether the express preemption provision of the Medical Device Amendments to the Food, Drug, and Cosmetic Act, 21 U.S.C. §360k(a), preempts state-law claims seeking damages for injuries caused by medical devices that received premarket approval (PMA) from the Food and Drug Administration.

As Bloomberg.com reports, the federal law says preemption applies when the U.S. government imposes a "requirement,'' though it doesn't specify whether that term includes FDA approval.

Court case: 06-179, Riegel v. Medtronic, Inc.

Applicable law:

21 U.S.C. §360k
(a) General rule
Except as provided in subsection (b) of this section, no State or political subdivision of a State may establish or continue in effect with respect to a device intended for human use any requirement—
(1) which is different from, or in addition to, any requirement applicable under this chapter to the device, and
(2) which relates to the safety or effectiveness of the device or to any other matter included in a requirement applicable to the device under this chapter.

Joint Commission revises accreditation participation requirement to include physicians

The Joint Commission reports:

Physicians and medical staff members who have concerns about the safety and quality of care at their hospital may report those concerns with the understanding that retaliatory disciplinary action is prohibited, according to explicit new rules announced today by The Joint Commission. The accreditation participation requirement previously referred generally to hospital staff, although it has always been intended that physicians and medical staff be included as part of ‘Good Faith Participation’ in the accreditation policy.

The revised requirement, which will become effective January 1, 2008, means that accredited hospitals must educate staff and medical staff that any employee or any physician who has concerns about the safety or quality of care provided in the hospital may report these concerns to The Joint Commission. Hospitals also are expected to inform staff and medical staff that no disciplinary action will be taken if concerns are shared with The Joint Commission, and hospitals should demonstrate this commitment by refraining from taking action against employees or physicians who report their concerns to The Joint Commission.

“The Joint Commission policy forbids accredited organizations from taking retaliatory actions against those who report quality of care concerns because it is the obligation of everyone in an organization to make patient well-being the priority,” says William E. Jacott, M.D., special advisor for Professional Relations, The Joint Commission.

Hospital's proposal to compensate physicians for on-call ED coverage does not violate anti-kickback statute

[Source: Health Lawyers Weekly, Sept. 28, 2007]

A medical center’s proposal to compensate physicians for providing on-call coverage does not run afoul of the Anti-Kickback Statute, the Department of Health and Human Services Office of Inspector General (OIG) said in an Advisory Opinion posted September 27.

Faced with a shortage of physicians willing to provide ED on-call coverage, the medical center proposed an arrangement under which it would pay a per diem rate to physicians for each day spent on-call at the ED, except for one and one-half days that each physician must contribute free of charge to the rotation schedule monthly.

Here, OIG found the personal services safe harbor does not apply to the arrangement because the hospital’s payments to physicians are not “set in advance” as required under the safe harbor. Nevertheless, OIG concluded the arrangement “presents a low risk of fraud and abuse,” pointing to the fact that the payments are fair market value for actual services needed and provided, without regard to referrals.

OIG concluded that while the arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute, it would not impose administrative sanctions on the medical center.

Read full story

Advisory Opinion No. 07-10 (Dep’t of Health and Human Servs. Office of Inspector Gen. Aug. 28, 2007).

President Bush signs drug-safety bill into law.

[Source: Health and Lifes Sciences Daily, Sept. 28, 2007]

The AP (9/28, Bridges) reports that on Thursday, President Bush signed the Food and Drug Administration Amendments Act of 2007 (H.R. 3580 ), which grants the FDA "broad new powers to ensure the safety of prescription drugs used by millions of Americans." The new law reauthorizes, for five years, "programs to collect fees from drug and medical device manufacturers," with drug companies expected to pay "$393 million, and medical device makers $48 million, in various fees next year." FDA Commissioner Dr. Andrew von Eschenbach noted, "It really represents an important addition to the FDA's authority." The legislation grants the FDA "the power both to require drug companies to do further study on the safety of medicines, if needed, and to mandate new label warnings when problems do appear. The FDA also gains the ability to fine companies to ensure compliance with those two new authorities." Moreover, the new law "requires companies to publicly release results of all clinical trials that show how well their approved drugs performed. Not-yet-approved drugs could be subject to the requirement later." The AP notes, "The FDA was still reviewing the 156-page law and its roughly 200 specific provisions, many with timelines, before deciding how to implement them."

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FDALegislativeWatch.com reviews the new bill.

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Patent Baristas reviews the new bill.

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FDA has yet to determine how quickly it can exercise new authorities created by the FDA Amendments Act of 2007

[Source: FDALegislativeWatch.com]

The question is whether the new authorities "are self-implementing or whether they need clarification in the form of a reg or a guidance," Deputy Commissioner for Policy Randall Lutter said.

If regulations or guidance are necessary, agency use of new tools - such as the ability to order drug companies to make labeling changes, conduct post-approval clinical trials or develop risk evaluation and mitigation strategies - will be delayed as the agency goes through public comment procedures.

Complicating implementation of the statute is its size and scope. "There appears to be at least 200 specific provisions, many of which have timelines that have been identified within the bill itself," Commissioner Andrew von Eschenbach pointed out. An implementation strategy will be evolving during the coming weeks and months, he said.

Continue reading

FDA encourages drugmakers to study genetics and drug safety.

[Source: Health and Life Sciences Daily, Sept. 28, 2007]

The New York Times (9/27, C3, Pollack) reported, "Seven of the largest pharmaceutical companies have formed a group to develop genetic tests to determine which patients would be at risk from dangerous drug side effects." The FDA has "encouraged" the formation of the group, called "the International Serious Adverse Events Consortium." One of its goals is to determine if, by withholding drugs from patients who have a "genetic risk" for side effects, "it could not only protect the patients," but also "help manufacturers get their drugs approved or avoid having to remove them from the market." The group's first task will be to attempt to "find genetic predictors of two side effects -- serious liver toxicity and Stevens-Johnson syndrome, a rare but potentially fatal blistering of the skin. Both effects are associated with numerous drugs."

The AP (9/27, Johnson) quoted Dr. Janet Woodcock, deputy commissioner for operations at the FDA, as saying, "This is what personalized medicine is really about, finding out for the individual, not just the general population...what their risks are. ... 'Up until now we've been kind of helpless' in dealing with adverse effects." The AP noted, "Reports of such events are on the rise, jumping 150 percent from 1998 to 2005."

According to the Wall Street Journal (9/27, D7, Dooren), "The consortium will collect and combine already existing data on serious liver side effects, tissue samples housed in two Britain-based academic institutions, and information and DNA samples from at least one pharmaceutical firm on Stevens-Johnson Syndrome and a related skin condition known as toxic epidermal necrolysis." Then, "DNA from the individuals with side effects will be compared with DNA from 'control' subjects who didn't have drug side effects to see if there are genetic variations among the two groups." Should the consortium's first two studies prove successful, it will "move to other serious side effects like heart trouble and kidney damage that are linked to several different types of drugs as well as drugs in the same class." The group plans to share data from its studies with the public and agencies like the FDA.

And, the Chicago Tribune (9/27, Japsen) added, "Drug companies and the FDA alike have been under fire for perceived lax monitoring of prescription drugs once they reach the market." The Tribune continued, "The group hopes to reduce an estimated 150,000 deaths and annual costs of more than $100 billion to the U.S. economy from serious adverse events (SAEs) by addressing more safety issues for drugs before they reach the market." Arthur Holden, the consortium's chairman and chief executive, said, "The traditional research model only provides one piece of the puzzle in understanding the genetic variations that could lead to an increased risk of an adverse event. ... The most efficient way to study drug-induced SAEs is to create a global, publicly available 'knowledge base' that will help identify the genetic variations that may predict SAEs."

CMS Issues Final Rule On “Revisit” User Fees For Healthcare Facilities Cited For Quality Deficiencies

[Source: Health Lawyer's Weekly, Sept. 21, 2007]

The Centers for Medicare and Medicaid Services (CMS) issued this week a final rule establishing user fees for healthcare providers and suppliers cited for deficiencies with federal quality of care requirements that require a “revisit” to ensure appropriate corrective action.

The final rule is effective as of the date of its publication in the Federal Register, which was September 19 (72 Fed. Reg. 53628).

The fees would be assessed for revisits required because of deficiencies cited during initial certification, recertification, or substantiated complaint surveys, CMS said.

continue reading

View the final rule.

California case will test health-insurance rescission.

[Source: Health and Life Science Law Daily, Sept. 21, 2007]

Law.com (9/21, Hirsch) reports that next week, California's 4th District Court of Appeal will hear arguments in the "closely watched" Hailey v. California Physicians' Service (pdf), a case that "challenges Blue Shield of California's practice of rescinding coverage based on inaccuracies in an application." The case centers the issue of "willful misrepresentation" and insurers' ability to rescind an individual's coverage based on inaccurate information in an application. Law.com writes, "Plaintiff attorneys in the field contend that a showing of willful misrepresentation is required before yanking coverage; defense attorneys say the mention of willful misrepresentation does not amount to a prerequisite. ... If the 4th District requires a showing of willful misrepresentation, health insurers will likely find it harder to get cases thrown out early."

U.S. Senate approves legislation to overhaul FDA.

[Source: Health and Life Science Law Daily, Sept. 21, 2007]

The AP (9/21, Bridges) reports, "Congress sent President Bush legislation Thursday giving the Food and Drug Administration new powers to ensure the safety of prescription drugs. The Senate passed the FDA bill by voice vote Thursday, a day after the House approved it by an overwhelming margin."

The Wall Street Journal (9/21, A12, Rubenstein, et al.) notes that the bill "increases the fees that drugmakers pay the FDA to review their drugs and allots a portion of the money for the agency to monitor the safety of drugs after they go on the market. It also solidifies the agency's authority to mandate changes to drug labels, require additional safety studies and limit the distribution of medications when safety concerns arise -- powers that have existed informally but haven't always been clearly delineated." The Journal adds, "For the most part, drug companies say they welcome the changes, hoping that with more money and power, the FDA will resolve safety worries more quickly -- and with measured approaches that don't scare the public or entail calling for withdrawal of drugs from the market."

The Los Angeles Times (9/21, Alonso-Zaldivar) writes, "In addition to building a new computerized system to spot drug risks, the bill would strengthen the FDA's enforcement powers and require greater disclosure of private and public clinical research and of agency decision-making. It also would take steps to reduce FDA reliance on outside advisors with financial conflicts of interest, as well as create a new program to review drug-company advertising." However, some experts say implementing the changes may take longer than expected. Mark B. McClellan, FDA commissioner from 2002 to 2004, said, "This is a different way of doing business for FDA, and there are going to be some real challenges in implementing it effectively. ... It's going to shift the focus away from information provided by the drug manufacturers to much broader sources of information in our healthcare system."

* * * * * *

Joe Mantone stated in WSJ Health Blog: "A provision to empower FDA to yank consumer drug ads was stripped from the final version of an FDA bill, which was passed yesterday.But it wasn’t Big Pharma that carried the day on the revision; it was the Gucci-loafered lobbyists for media and advertising firms. The WSJ reports the pharmaceutical lobby had other priorities with the bill. But media and advertising groups were sweating about regulators cutting back on what has become a dependable stream of revenue. In the U.S., drug makers represented the tenth-biggest advertising category in 2006, spending $5.3 billion, or 3.5% of the total $149.6 billion U.S. ad market." Continue reading

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Reauthorized FDA User Fee Bill increases fees for drugs and devices
[Source: Health Lawyers Weekly, Sept. 21, 2007] - Full Text

The Senate passed by unanimous consent September 20 the Food and Drug Administration Amendments Act of 2007 (H.R. 3580), which reauthorizes the prescription drug user fee program through 2012. The bill passed the House September 19 on a motion to suspend the rules.

The compromise bill includes the administration's request for an increase in the total annual user fees collected to $392.8 million for fiscal year 2008, an $87.4 million increase over the current base, according to a bill summary posted on the House Energy and Commerce Committee's website.

In addition, the legislation contains an additional $225 million in user fees that will be collected over five years to be used for drug safety activities and "are intended to supplement and not supplant any other drug safety resources," according to the summary

The legislation also reauthorizes the medical device user fee program and includes enhancements to ensure sound financial footing for the device review program and to the process for pre-market review of device applications.

Under the new bill, medical device companies will pay 31% more in fees in 2008 and 8.5% more each subsequent year through 2012, the summary said. Two new types of fees are set forth in the bill--an annual establishment registration fee and an annual fee for filing periodic reports--which will generate about 50% of the total fee revenue.

. . . .

View the text of H.R. 3580 and a bill summary.

HHS unveils report on personalized healthcare.

[Source: Health and Life Sciences Daily, Sept. 20, 2007]

Modern Healthcare (9/20, DoBias) reports that the HHS "has unveiled a road map that would parlay current health initiatives, such as the use of information technology and evidence-based practices, into a workable system in which scientists and physicians could 'customize' the care they give to an individual based on that person's genetic makeup and other factors." The report, Personalized Health Care: Opportunities, Pathways, Resources (pdf), examines "the preliminary challenges that scientists face when they translate their growing knowledge of the human genome into the everyday practice of medicine."

Government Health IT (9/19, Ferris) noted that at a conference on personalized medicine, Health and Human Services Secretary Mike Leavitt said, "The potential is huge -- for protecting health, for preventing and pre-empting disease and for personalizing treatment according to each person's unique biology." According to the report, "personalized healthcare will support prevention of some illnesses and enable practitioners to avoid making some treatment errors."

U.S. House passes bill to give FDA more power

[Source: Health and Life Sciences Daily, September 20, 2007]

The CBS Evening News (9/19, lead story, 2:10, Couric) reported, "Congressional negotiators have agreed on an overhaul of the Food and Drug Administration to give it more power to protect us from potentially dangerous food and medications. The bill would give the FDA the power, for the first time ever, to demand studies on the safety of drugs even after they've been approved, and the power to demand changes in drug advertisements."

The New York Times (9/20, A18, Harris) reports that on Wednesday the U.S. House of Representatives voted 405 to 7 to pass H.R. 3580, legislation that "is expected to give federal drug regulators significantly more money and power to ensure the safety of the nation's drug supply." All signs point to a Senate passage on Thursday and President Bush is expected to sign it shortly thereafter. According to the Times, "The legislation was welcomed by both industry and consumer groups, who all found something to trumpet in the mammoth bill."

Congressional Quarterly (9/20, Armstrong) notes, "Under the compromise, drug companies would pay a new user fee totaling some $225 million over five years that would fund FDA drug-safety activities. The FDA would be able to "strictly" regulate direct-to-consumer ads. The agency "would be able to review drug ads and fine companies for false or misleading ads, but it would not be able to ban them, even temporarily." Furthermore, the agency could force drug manufacturers to conduct follow-up safety studies after a drug has been approved," and "would also have the authority to require changes to drug labeling and levy fines for non-compliance."

Bloomberg (9/20, Blum) reports, "Companies that violate FDA orders on labels and studies or certain other requirements could face maximum fines of $250,000 for a single violation and $10 million for multiple failings handled in one proceeding. The top fines are less than the House had previously approved." Bloomberg continues, "The legislation includes a compromise that would place new conflict-of-interest restrictions on participants in advisory panels used by the FDA to review drugs and devices," requiring "the FDA to decrease the number of participants with conflicts by five percent a year. The House had previously approved a limit of one conflict per committee meeting."

The AP (9/20) adds, "Stripped from the bill was a bid by Democrats to limit to three months, from the current six months, in additional patent protection blockbuster drugs can gain if their manufacturers study their use in children. The stripping of even three months of protection from generic competition could spell several hundred million dollars in lost revenue for the makers of drugs with sales that exceed $1 billion a year."

The Wall Street Journal (9/20, A6, Mathews, et al.) reports, "The final bill includes a provision backed by House Democrats that could weaken a key legal defense that pharmaceutical companies have used in plaintiff suits. The debate centered on the question of drug companies' protection against plaintiffs claiming that they were injured by medicines. The Bush administration has backed the idea that FDA-approved drug labels pre-empt state law," and many pharmaceutical companies "have used that as a shield in legal cases, arguing that they weren't required to warn consumers about a potential risk if the FDA determined that the safety issue didn't warrant inclusion in the label." However, the newly passed FDA bill "includes language that could limit that protection, by saying that drug companies have a responsibility to maintain their labels, thus leaving the manufacturers potentially liable if they fail to make changes even without the FDA's explicit approval." Gerie Voss, regulatory counsel for the American Association for Justice, "said it supported the House language because it is 'still putting the onus on the drug companies to let the public know when there is a potential drug hazard.'"

Update on Follow-on Biologics

In July, the Senate Health, Education, Labor and Pensions HELP Committee gave the thumbs up to the Biologics Price Competition and Innovative Act of 2007 (S. 1695), which lays out a pathway for approving the development of follow-on biologics.

"This Act amends section 351 of the Public Health Service Act to provide for an approval pathway for safe biosimilar and interchangeable biological products (relying in part on the previous approval of a brand product) while preserving the incentives that have fueled the development of these life-saving medicines. "

Draft legislation: Biologics Price Competition and Innovative Act of 2007 (S. 1695)

The New England Journal of Medicine published a good article by Richard Frank, Ph.D., "Regulation of Follow-on Biologics"

DrugResearcher.com ran this piece in July

House Passes Patent Reform Act of 2007 - Biotechs Express Concerns

On Friday, September 7th, the House passed HR1908 (currently before the Senate, S. 1145)

The bill focuses on minimizing patent litigation by making it harder to claim the infringement of intellectual property and taking away lawsuits' potential rewards. The bill calls for a first-to-file standard, allows post grant reviews, and has a narrower definition of willful infringement.

See Fish & Richardson's presentation overview of the Patent Reform Act of 2007 (reflects recent updates)

Patent Baristas has a nice review of the bill

Biotechnology Industry Organization (BIO) Expresses Disappointment with House Vote on Patent Reform - read press release

* * * * * *

BIO's concerns are as follows:

Inequitable Conduct Reform

S. 1145, while attempting to reform the use of the “inequitable conduct” defense, does exactly the opposite. This judicially-created doctrine allows accused infringers to assert that otherwise-valid patents should be declared unenforceable for reason of “inequitable conduct” – an alleged misrepresentation or failure to disclose information to the patent examiner years earlier. This defense is almost routinely raised in patent litigation. While it rarely succeeds, it is a major driver of the cost, length, and acrimony of patent litigation. The fear of being later accused of inequitable conduct also chills patent applicants from communicating openly and efficiently with patent examiners today, leading the U.S. Patent & Trademark Office (PTO) to call for inequitable conduct reform as a foundational element for improving patent examination quality. The National Academy of Sciences has lamented the abuse of this highly subjective doctrine and called for its elimination or reform; while the U.S. Court of Appeals for the Federal Circuit (the Federal court that hears patent appeals) has deemed inequitable conduct claims an “absolute plague.”

Rather than stemming such costly and lengthy litigation abuse, S. 1145 as reported codifies the most criticized aspects of this doctrine. Specifically, the codified materiality standard is so low that virtually any omission or misstatement could be considered material – a standard specifically rejected by the PTO in 1992 when it revised its own internal administrative rules in this area. Moreover, the legislation fails to affect true reform because it still permits unenforceability even where the misconduct did not impact the granting of the patent. Further, S. 1145 grants a new compulsory licensing remedy that would only incentivize additional attacks on patent owners.

Post- Grant Opposition

S. 1145 creates a new proceeding within the PTO in which third parties are allowed to challenge validly-issued patents administratively instead of having to challenge such patents in court. Under the bill’s provisions, patents can be subjected to serial administrative attacks by competitors, under a lower standard of evidence than would be required in court, throughout the entire patent life. Because patents are the linchpin of biotechnology R&D, the increased uncertainty over the patent’s reliability created by this process will drive investment away from biotech and to other less risky endeavors, harming our industry’s efforts to develop and produce the next generation of products designed to improve global health and the environment.

Apportionment of Damages

The language in S 1145 creates a new regime for awarding damages based upon a “patent’s specific contribution over the prior art.” This new, untested regime systematically undervalues the bulk of inventive work done in biotechnology because it (i) fixes the marketplace value of an invention at the time the invention was made – not when the patent is infringed, and (ii) attempts to set the commercial value of an invention according to its technological advance over preexisting technology, rather than, as under current law, determining a royalty based on the value obtained by the infringer by utilizing the patented invention. This fundamental shift in valuation will make infringement cheaper, and thus incentivize infringement and discourage good faith licensing of inventions. Additionally, the bill would impose arbitrary limits on when the value of the infringing product may be used as the base for calculation of royalties, which will have great impact in fields such as biotechnology where the infringing product sales is often the most appropriate or only base upon which royalties can be assessed.

We believe that patent reform, if done properly, can truly improve the system for all innovators across the spectrum of American industry. There is broad consensus on many of the reforms contained in S. 1145 that will do just that. Unfortunately, by insisting on the controversial provisions described above, the proponents of this legislation are harming efforts to achieve true patent reform. We urge you to oppose S. 1145, and to also oppose bringing the current legislation to the Senate floor before consensus is reached on these controversial issues.

TN Supreme Court holds that a child born alive has an independent cause of action for failure to obtain informed consent

In, Marissa Miller, a minor, by and through her mother, and next friend, Miranda Miller v. John Dacus, M.D. - M2006-02728-SC-R23-CQ View, the Tennessee Supreme Court held that child born alive does have an independent cause of action for injuries caused by the failure of a physician to obtain informed consent from the child’s mother during labor.

In 2003, the Plaintiff through her mother and next friend brought a medical malpractice suit in federal district court against the obstetrician for injuries sustained by the Plaintiff during her birth in 1993, alleging both medical negligence and lack of informed consent. The district court dismissed the lack of informed consent claim on summary judgment, ruling that a child born alive does not have an independent action for lack of informed consent. On appeal, the United States Court of Appeals for the Sixth Circuit certified two questions of law to this Court.

1. Whether a child born alive has an independent cause of action for injuries allegedly caused by the failure of a physician to obtain informed consent from the child’s mother during labor and delivery.
2. If the Answer to Question 1 is ‘Yes,’ whether the minority provision of Tennessee’s legal disability statute, Tenn. Code Ann. § 28-1-106, tolls the medical malpractice statute of repose, Tenn. Code Ann. § 29-26-116(a)(3), as applied to a fetus’s lack of informed consent claim.

TN SC holds that Tennessee Code Annotated section 28-1-106 tolls the three-year statute of repose for the Plaintiff’s lack of informed consent claim because the claim was commenced before December 9, 2005. See Calaway v. Schucker, 193 S.W.3d 509 (Tenn. 2005).

View case

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Note: TN's Callaway v. Schucker, 193 S.W.3d 509 (Tenn. 2005), case has held that TN's statute of repose is not tolled by child's minority. The court in Miller applied Callaway prospectively only.

NIH advisory panel says further testing needed to determine gene therapy's role in patient death.

[Source: Health and Life Sciences Law Daily, Sept. 18, 2007]

The Washington Post (918, A4, Weiss) reports that according to a National Institutes of Health panel, "tests on an Illinois woman who died mysteriously in July after getting an experimental gene treatment show no evidence that she was killed directly by the genetically altered viruses she was given" by Targeted Genetics, a Seattle biotechnology company, but "further tests will have to be done to see if the treatment somehow contributed to her death, perhaps by leaving her vulnerable to a runaway fungal infection." The FDA "has placed the experiment on hold, and the case is being watched closely by leaders of other gene-therapy experiments."

The New York Times (9/18, A22, Pollack) notes that the woman, Jolee Mohr, "died on July 24 at the University of Chicago Medical Center, three weeks after trillions of genetically engineered viruses were injected into her right knee as a test of an experimental treatment for rheumatoid arthritis. The type of virus used as a gene carrier has widely been considered safe and is being used in 35 other trials."

Insurance companies limiting coverage to drugs approved by FDA in order to control costs.

[Source: Health and Life Sciences Daily, Sept. 18, 2007]

The Wall Street Journal (9/18, A1, Anand) reports, "Doctors, particularly oncologists, rely on medicines approved for other diseases to try to save patients for whom all other treatments have failed. But as new medicines come to market at ever-higher prices, insurers are pushing back, limiting coverage of these drugs to only the disease for which they are specifically approved by the Food and Drug Administration -- or for which there is extensive evidence of efficacy in clinical trials." The Journal notes that insurers "have little leverage in negotiating the prices of many specialty drugs because they often extend lives and lack competition." And, according to many insurers, they must "limit use of the most expensive drugs to control healthcare costs, which are surging at a seven percent to eight percent annual rate and continue to outpace inflation." The insurers say it "makes sense" to require "proof that a drug works in a patient's particular disease before doling out tens or hundreds of thousands of dollars." Mohit Ghose, spokesman for America's Health Insurance Plans, an industry trade group, noted, "We're trying to bring new drugs to consumers, but trying to do it with employers getting the best value of every healthcare dollar spent in the system."

CMS report finds states differ widely in spending on healthcare.

[Source: Health and Life Science Daily, September 18, 2007]

The New York Times (9/18, A22, Pear) reports that according to a study appearing in the Web edition of the journal Health Affairs, a huge variation exists "in personal health spending among states, ranging from an average of nearly $6,700 a person in Massachusetts to less than $4,000 in Utah." The study "said that Massachusetts, Maine, New York, Alaska and Connecticut had the highest per capita spending on healthcare in 2004," while the "lowest-spending states were Utah, Arizona, Idaho, New Mexico and Nevada. Per capita spending in Utah was 59 percent of that in Massachusetts." The lead author of the report, Anne B. Martin, an economist at the CMS, "said the reasons for the differences included the age and incomes of the population, the concentration of doctors in a state, the generosity of public programs, the extent of private health-insurance coverage, and the mix of services used by state residents." The AP (9/18, Schmid) notes, "Nationally, per capita health spending increased on average 6.3 percent per year from 1998 to 2004, the report said."

Health Law Statutes and Regulations

I've recently posted a list of commonly used Health Law Statutes and Regultions here.

New CMS Stark rules expand physician recruiting exception, removes some "bright-line" rules.

[Source: Health and Life Sciences Law Daily, September 17, 2007]

American Medical News (9/24, Glendinning) reports that on August 27, the CMS "unveiled the phase III, or final, version of the prohibitions known informally as the Stark II rules." AMNews continues, "In the final rule, CMS did not make any sweeping changes to the existing prohibitions. It contains no new exceptions for physicians, hospitals and others implementing business and referral arrangements. The agency did, however, revise and clarify the regulatory language in a number of areas in the hope of making compliance less burdensome." The CMS "expanded the physician recruiting exception to make it easier for hospitals to attract physicians to rural or underserved areas." The CMS also removed "some of the 'bright-line' rules under which healthcare entities have been operating, said Gina M. Cavalier, an attorney with Reed Smith in Washington, D.C." For example, the new regulation "eliminates a safe harbor on hourly payments to physicians from the definition of fair market value." AMA Executive Vice President and CEO Michael D. Maves said that the "current self-referral laws are already too complex to be understood without legal assistance and too restrictive to be fair." He continued, "Adding more layers of confusion and regulation serves only to further confound physicians, shift more money to the attorneys that are required to interpret them, and discourage efficient, innovative, quality health care." The Stark II phase III rule "goes into effect in December, though some types of existing contracts are protected by a grandfather clause until the end of the contract term."

Genetic Technologies and the Law

Notes on genetic technologies and the law are now available here.

Notes include information relating to the following:
- Access to and disclosure of genetic information: rights, duties, and liabilities
- Legal issues in genetics research involving human subjects
- Commercialization of genetic tests and products
- Clinical applications of genetics: Genetic testing and legal liability

[More notes will be added periodically]

Tennessee Case Reviews

Covenants Not to Compete
HLD, v. 33, n. 8 (August 2005)]

Tennessee Supreme Court holds covenants not to compete in physician contracts Are unenforceable as a matter of public policy. Such agreements are permissible in two limited circumstances, which themselves include certain restrictions, as specified by state statute--namely, when the employer is a hospital or an affiliate of a hospital, and when the employer is a "faculty practice plan" associated with a medical school. Tenn. Code Ann. § 63-6-204. [Source:

[Murfreesboro Med. Clinic, P.A. v. Udom, No. M2003-00313-SC-S09-CV (Tenn. June 29, 2005). To read the case, go to http://www.tsc.state.tn.us/opinions/tsc/Sc2qtr2005.htm]

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Causation in Informed Consent Cases
[Source: HLD, v. 28, n. 4 (April 2000)]

Tennessee Supreme Court Adopts Objective Approach to Evaluating Causation in Informed Consent Cases

The Tennessee Supreme Court agreed with the majority of jurisdictions and chose to employ the objective approach in evaluating causation in informed consent cases, finding that the objective approach was consistent with the prevailing standard in negligence cases, appropriately respected a patient's right to self-determination, and provided a realistic, rather than speculative and emotional, framework for a rational resolution of the issue of causation.

Ashe v. Radiation Oncology Assocs., 9 S.W.3d 119 (Tenn. Dec. 27, 1999) (reh'g denied Jan. 7, 2000)

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Expert Testimony to Establsih Mental Distress in IIED Claims
[Source: HLD, v. 28, n. 2 (February 2000)]

Tennessee Supreme Court Holds That Expert Medical or Scientific Proof of Serious Mental Injury Is Generally Not Required to Maintain Claim for Intentional Infliction of Emotional Distress

Miller v. Willbanks,, No. E1997-00022-SC-R11-CV, 1999 WL 1146559 (Tenn. Nov. 15, 1999)

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Compliance with HCQIA
[Source: HLD, v. 31, n. 1 (January 2003)]

Tennessee Appeals Court Says Hospital That Complied With HCQIA Requirements Was Not Liable For Monetary Damages To Suspended Physician

Dr. Richard Peyton sued Johnson City Medical Center (Hospital) in state trial court, alleging that the Hospital had improperly revoked his privileges and seeking injunctive relief and monetary damages in the amount of $10 million. The trial court granted partial summary judgment in favor of the Hospital pursuant to the Health Care Quality Improvement Act (Act), 42 U.S.C. § 11101 et seq., a decision that effectively prevented Peyton from receiving monetary damages. Peyton appealed.

The Tennessee Court of Appeals affirmed. As a threshold matter, the appeals court noted the presumption under the Act is that a facility is entitled to immunity from monetary liability under § 11112(a). The appeals court agreed that Peyton had failed to rebut this presumption by failing to show by a preponderance of the evidence that the Hospital did not comply with the Act.

Peyton v. Johnson City Med. Ctr., No. E2001-02477-COA-R3-CV, 2002 WL 31421670 (Tenn. Ct. App. Oct. 29, 2002).

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Locality Rule - Medical Malpractice
[Source: HLD, v. 30, n. 4 (April 2002)]

Tennessee Appeals Court Upholds Exclusion Of Expert's Testimony Under Locality Rule In Medical Malpractice Action

The appeals court explained that, because Engle did not begin making Tenn Care reviews until almost two years after the alleged malpractice, his testimony did "not meet the language of the statute requiring knowledge at the time of the alleged malpractice." Accordingly, the appeals court affirmed the lower court's judgment.

A concurring opinion commented that "the General Assembly should revise Tenn. Code Ann. § 29-26-115 and bring it in compliance with how physicians are being trained and how health care is being administered to patients in this State."

Henry v. Obstetrics and Gynecology Consultants, P.C., No. E2001-01246-COA-R2-CV, 2002 WL 199723 (Tenn. Ct. App. Feb. 8, 2002).

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Statute of Limitations Tolled by Mental Incapacity

Tennessee High Court Finds Statute Of Limitations In Negligence Action Against Nursing Home Tolled By Deceased Resident’s Mental Incapacity

The applicable one-year statute of limitations for a negligence action filed against a Tennessee nursing home and its owners by a deceased nursing home resident’s son who was the resident’s durable power of attorney at the time the action accrued was tolled by the resident’s mental incapacity, the Tennessee Supreme Court ruled April 24.

The Tennessee high court also held the existence of a durable power of attorney did not affect the tolling of the applicable statute of limitations.

Sullivan ex rel. Wrongful Death Beneficiaries of Sullivan v. Chattanooga Med. Investors, L.P., No. M2004-02264-SC-R11-CV (Tenn. Apr. 24, 2007).

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Institutional Liability for Informed Consent
[Source: HLD, v. 28, n. 6 (June 2000)]

Tennessee Supreme Court Holds That Hospitals Do Not Owe Duty to Obtain Informed Consent of Patient Undergoing Surgery Ordered and Performed by Non-Employee Physician

In a case of first impression in Tennessee, the Tennessee Supreme Court affirmed, holding that Tennessee law generally does not require a hospital "to procure a patient's informed consent to surgical procedures ordered and performed by non-employee doctors." First, the supreme court observed that Centennial was within the purview of the Tennessee Medical Malpractice Act ("Act"), which states that

"In a malpractice action, the plaintiff shall prove by evidence as required by § 29-26-115(b) that the defendant did not supply appropriate information to the patient in obtaining his informed consent (to the procedure out of which plaintiff's claim allegedly arose) in accordance with the recognized standard of acceptable professional practice in the profession and in the specialty, if any, that the defendant practices in the community in which he practices and in similar communities."

Bryant v. HCA Health Servs., No. 96C-1013, 2000 WL 266821 (Tenn. Mar. 13, 2000)

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Hospital Liability for Agent Action

Tennessee Appeals Court Finds Hospital Cannot Be Held Liable For Actions Of Physician It “Disavowed” As Agent In Consent Form

In two separate medical malpractice cases, a hospital took sufficient steps to disavow an agency relationship between itself and the physician alleged to have committed the underlying negligent act thereby precluding plaintiffs’ apparent agency claims, a Tennessee appeals court ruled June 12.

Dewald v. HCA Health Servs. of Tennessee, No. M2006-2369 (Tenn. Ct. App. June 12, 2007).

Boren v. Weeks, No. M2007-628 (Tenn. Ct. App. June 12, 2007).

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Medical Board's Right to Request Patient Records
[Source: HLD - April 2007]

Tennessee Appeals Court Holds Physician May Not Shield Patient Records From Medical Board’s Review

Physicians in Tennessee have no reasonable expectation that they can shield their patients’ records from the regulatory oversight of the state’s medical board, a Tennessee appeals court ruled March 13.

Accordingly, a physician who refused to comply with the board’s lawful request for his patient records was properly subject to discipline, the appeals court found.

Under state law, the Board has the authority to obtain patient records through a written request from healthcare providers being investigated for potential wrong doing. See Tenn. Code Ann. § 63-1-117.

McNiel v. Cooper, No. M2005-01206-COA-R3-CV (Tenn. Ct. App. Mar. 13, 2007).