For more information on possible theories of liability under the Federal False Claims Act with respect to the healthcare industry, see the following two-part article by Marc Raspani, et al. in Health Lawyers News:
- "Modern False Claims Act Liability: Cradle to Grave Liability? - Part I," December 2006
- "Modern False Claims Act Liability: Cradle to Grave Liability? - Part II," January 2007
[Excerpt]
[U]nbeknownst to many practitioners, providers, and healthcare corporations, the potential theories of liability under the FCA have expanded well beyond what one typically would expect from phrases such as “false or fraudulent claim.” The Supreme Court has construed broadly what constitutes a claim under the Act, noting that “[t]his remedial statute reaches beyond ‘claims’ which might be legally enforced, to all fraudulent attempts to cause the Government to pay out sums of money.” United States v. Neifert-White Co., 390 U.S. 228, 233 (1968). Accordingly, the Supreme Court has found that the FCA was “intended to reach all types of fraud, without qualification, that might result in financial loss to the Government.” Id. at 232; see also Cook County, Ill. v. United States ex rel. Chandler, 538 U.S. 119, 124 (2003). As a result, theories of liability have arisen that encompass every aspect of performance under a government-funded program.
Monday, July 16, 2007
Clinical Trial Procedures
Two great articles on Clinical Trial Procedures can be found here:
- "Life Sciences 101: Exploring Clinical Trials - Part I: Initiation of a Human Study," Health Lawyers News, Volume 11, No. 2, February 2007
- "Life Sciences 101: Exploring Clinical Trials - Part II: Performing a Human Study," Health Lawyers News, Volume 11, No. 6, June 2007
- "Life Sciences 101: Exploring Clinical Trials - Part I: Initiation of a Human Study," Health Lawyers News, Volume 11, No. 2, February 2007
- "Life Sciences 101: Exploring Clinical Trials - Part II: Performing a Human Study," Health Lawyers News, Volume 11, No. 6, June 2007
Enforcement in Healthcare
[Excerpts from Charlene L. McGinty et al.'s article, "Physicians Beware" - The Government Cometh: Vendor Relationships Under Fire," Health Lawyers News, Volume 11, No. 6, June 2007]
Enforcement in the healthcare industry continues unabated. In fiscal year 2006, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (DHHS) reported recoveries of nearly $38.2 billion, exclusions of 3,425 individuals and entities for fraud and abuse, and institution of 272 civil actions and 472 criminal actions against individuals and entities.1 The OIG is not the only player in this arena. With the passage of the Deficit Reduction Act of 2005, the states and their enforcement agencies will become more prominent players in enforcement initiatives, particularly in the Medicaid arena. In his State Medicaid Fraud Control Units (MFCUs) Annual Report for Fiscal Years 2004 and 2005 (MFCU Report), Inspector General Daniel Levinson reported: recoveries of $572 million in FY 2004 and $709 million in FY 2005; 1,160 convictions in FY 2004 and 1,123 convictions in FY 2005; and referrals of 1,267 providers to the OIG for exclusion.2 Not to be left out, the Federal Bureau of Investigation (FBI) also weighed in with its annual report that stated for the 12-month period ending September 30, 2006 the FBI investigated 2,423 cases of healthcare fraud that ended in 588 indictments and 534 convictions.3
. . . .
A number of federal and state laws and regulations can or will have an impact on physicians and their relationships with pharmaceutical manufacturers and/or vendors. For example, some of the federal laws that may be implicated in an arrangement include the Federal Anti-Kickback Statute5 (AKS), the Federal Food, Drug and Cosmetic Act6 (FDCA), the Prescription Drug Marketing Act7 (PDMA), and the Federal False Claims Act8 (False Claims Act).
The AKS prohibits the knowing and willful solicitation, offer, or receipt of any remuneration in return for (i) the referral of an individual to a person for the furnishing (or arranging for the furnishing) of an item or service which may be paid, either in whole or part, under a federal healthcare program or (ii) the purchasing, leasing, ordering, or arranging for the purchasing, leasing, ordering of any item or service which may be paid, either in whole or in part, under a federal healthcare program. 9 A violation of the AKS may in turn give rise to False Claims Act liability for the parties. Physicians and vendors should carefully review their arrangements and relationships to determine if the AKS is implicated.10
The FDCA and/or the PDMA regulate how drugs and pharmaceuticals are packaged, transported, labeled, and promoted, and how drug samples are handled. For example, the PDMA provides that “[n]o person may sell, purchase, or trade or offer to sell, purchase, or trade any drug sample.”11 The FDCA contains guidance regarding drug marketing and labeling provisions as well as outlines the regulatory powers and authority of the Food and Drug Administration (FDA). Therefore, any marketing initiatives and activities, unless carefully constructed to meet applicable regulatory requirements, could lead to liability for the parties to the arrangement, including the manufacturers as well as physicians.
. . . .
Generally, off-label use and improper marketing activities occur where a manufacturer’s sales force or consultants, including physicians, with either the tacit or implicit approval of the manufacturer, promote or market the use of a drug for uses that have not been approved by the FDA. Under FDA regulations, “no implied claims or suggestions of drug use may be made if there is inadequate evidence of safety or a lack of substantial evidence of effectiveness.”19 The FDA continues to be vigilant regarding enforcing the requirements of content and format of prescription drug labeling and marketing.
. . . .
End Notes:
1 U.S. Dept. of Health and Human Services, Office of Inspector General, Semiannual
Report, April 1, 2006-Sept. 30, 2006, available at oig.hhs.gov.
2 U.S. Dept. of Health and Human Services, Office of Inspector General, State Medicaid Fraud Control Units Annual Report, Fiscal Years 2004 and 2005, 2006, available at oig.hhs.gov (MFCU Report).
3 Federal Bureau of Investigation, Financial Crimes Report to the Public (Mar. 7, 2007),
available at www.fbi.gov/publications/financial/fcs_report2006/financial_crime_2006.htm.
. . . .
5 42 U.S.C. § 1320a-7b(b).
6 21 U.S.C. §§ 301 et seq.
7 21 U.S.C. §§ 353 et seq.
8 31 U.S.C. §§ 3729 et seq.
9 42 U.S.C. § 1320a-7b(b).
10 Depending on the facts and circumstances of the arrangement the Federal Physician
Self-Referral Law (Stark II), 42 U.S.C. § 1395nn, also may be implicated. However, with respect to Stark II, the government stated in the Preamble comments that pharmaceutical manufacturers are not generally subject to this law because they do not furnish “designated health services.” See 66 Fed. Reg. 855, 920 (Jan. 4, 2001). This reasoning may also hold true with respect to medical device manufacturers.
11 21 U.S.C. § 353(c).
. . . .
19 21 C.F.R. § 201.56(c).
[Additional enforcement actions against physicians can be found on the OIG's website:
oig.hhs.gov/fraud/enforcementactions.html]
Full Article
Enforcement in the healthcare industry continues unabated. In fiscal year 2006, the Office of Inspector General (OIG) of the U.S. Department of Health and Human Services (DHHS) reported recoveries of nearly $38.2 billion, exclusions of 3,425 individuals and entities for fraud and abuse, and institution of 272 civil actions and 472 criminal actions against individuals and entities.1 The OIG is not the only player in this arena. With the passage of the Deficit Reduction Act of 2005, the states and their enforcement agencies will become more prominent players in enforcement initiatives, particularly in the Medicaid arena. In his State Medicaid Fraud Control Units (MFCUs) Annual Report for Fiscal Years 2004 and 2005 (MFCU Report), Inspector General Daniel Levinson reported: recoveries of $572 million in FY 2004 and $709 million in FY 2005; 1,160 convictions in FY 2004 and 1,123 convictions in FY 2005; and referrals of 1,267 providers to the OIG for exclusion.2 Not to be left out, the Federal Bureau of Investigation (FBI) also weighed in with its annual report that stated for the 12-month period ending September 30, 2006 the FBI investigated 2,423 cases of healthcare fraud that ended in 588 indictments and 534 convictions.3
. . . .
A number of federal and state laws and regulations can or will have an impact on physicians and their relationships with pharmaceutical manufacturers and/or vendors. For example, some of the federal laws that may be implicated in an arrangement include the Federal Anti-Kickback Statute5 (AKS), the Federal Food, Drug and Cosmetic Act6 (FDCA), the Prescription Drug Marketing Act7 (PDMA), and the Federal False Claims Act8 (False Claims Act).
The AKS prohibits the knowing and willful solicitation, offer, or receipt of any remuneration in return for (i) the referral of an individual to a person for the furnishing (or arranging for the furnishing) of an item or service which may be paid, either in whole or part, under a federal healthcare program or (ii) the purchasing, leasing, ordering, or arranging for the purchasing, leasing, ordering of any item or service which may be paid, either in whole or in part, under a federal healthcare program. 9 A violation of the AKS may in turn give rise to False Claims Act liability for the parties. Physicians and vendors should carefully review their arrangements and relationships to determine if the AKS is implicated.10
The FDCA and/or the PDMA regulate how drugs and pharmaceuticals are packaged, transported, labeled, and promoted, and how drug samples are handled. For example, the PDMA provides that “[n]o person may sell, purchase, or trade or offer to sell, purchase, or trade any drug sample.”11 The FDCA contains guidance regarding drug marketing and labeling provisions as well as outlines the regulatory powers and authority of the Food and Drug Administration (FDA). Therefore, any marketing initiatives and activities, unless carefully constructed to meet applicable regulatory requirements, could lead to liability for the parties to the arrangement, including the manufacturers as well as physicians.
. . . .
Generally, off-label use and improper marketing activities occur where a manufacturer’s sales force or consultants, including physicians, with either the tacit or implicit approval of the manufacturer, promote or market the use of a drug for uses that have not been approved by the FDA. Under FDA regulations, “no implied claims or suggestions of drug use may be made if there is inadequate evidence of safety or a lack of substantial evidence of effectiveness.”19 The FDA continues to be vigilant regarding enforcing the requirements of content and format of prescription drug labeling and marketing.
. . . .
End Notes:
1 U.S. Dept. of Health and Human Services, Office of Inspector General, Semiannual
Report, April 1, 2006-Sept. 30, 2006, available at oig.hhs.gov.
2 U.S. Dept. of Health and Human Services, Office of Inspector General, State Medicaid Fraud Control Units Annual Report, Fiscal Years 2004 and 2005, 2006, available at oig.hhs.gov (MFCU Report).
3 Federal Bureau of Investigation, Financial Crimes Report to the Public (Mar. 7, 2007),
available at www.fbi.gov/publications/financial/fcs_report2006/financial_crime_2006.htm.
. . . .
5 42 U.S.C. § 1320a-7b(b).
6 21 U.S.C. §§ 301 et seq.
7 21 U.S.C. §§ 353 et seq.
8 31 U.S.C. §§ 3729 et seq.
9 42 U.S.C. § 1320a-7b(b).
10 Depending on the facts and circumstances of the arrangement the Federal Physician
Self-Referral Law (Stark II), 42 U.S.C. § 1395nn, also may be implicated. However, with respect to Stark II, the government stated in the Preamble comments that pharmaceutical manufacturers are not generally subject to this law because they do not furnish “designated health services.” See 66 Fed. Reg. 855, 920 (Jan. 4, 2001). This reasoning may also hold true with respect to medical device manufacturers.
11 21 U.S.C. § 353(c).
. . . .
19 21 C.F.R. § 201.56(c).
[Additional enforcement actions against physicians can be found on the OIG's website:
oig.hhs.gov/fraud/enforcementactions.html]
Full Article
Sixth Circuit Strikes Down Michigan Abortion Law
A three-judge panel of the Sixth Circuit found June 4 a Michigan law that regulated abortion methods was unconstitutional because it presented an “undue burden” on a women’s right to terminate her pregnancy.
The ruling comes after the U.S. Supreme Court in April upheld the federal Partial Birth Abortion Act of 2003, which criminalizes a particular type of abortion known as an “intact dilation and extraction,” or alternatively “D&X.” Gonzales v. Carhart, 127 S. Ct. 1610 (2007).
The Sixth Circuit here said its holding squared with the Court’s Gonzales ruling because the Michigan law was written to encompass other commonly used abortion procedures, such as “dilation and evacuation,” or D&E, which the Court consistently has held may not be prohibited.
Full article
The ruling comes after the U.S. Supreme Court in April upheld the federal Partial Birth Abortion Act of 2003, which criminalizes a particular type of abortion known as an “intact dilation and extraction,” or alternatively “D&X.” Gonzales v. Carhart, 127 S. Ct. 1610 (2007).
The Sixth Circuit here said its holding squared with the Court’s Gonzales ruling because the Michigan law was written to encompass other commonly used abortion procedures, such as “dilation and evacuation,” or D&E, which the Court consistently has held may not be prohibited.
Full article
Sixth Circuit Upholds Medicare Fraud Convictions, But Remands For Evidentiary Hearing On Documents Withheld By Government
The Sixth Circuit upheld June 11 the convictions of two individuals on Medicare fraud charges. At the same time, the appeals court vacated the district court's denial of defendants' motion for a new trial. The appeals court remanded for a hearing on evidence defendants said could be favorable to them but to which they were denied access by the government.
Defendants Richard B. White and Michael A. Suhadolnik were indicted on charges of conspiracy, defrauding Medicare, and money laundering. The case arose from an alleged scheme to defraud Medicare by violating the “related party” rules.
White owned and operated a number of health-related businesses. White also owned a financial management and consulting company that prepared cost reports for many of these businesses but failed to identify third-party and management service providers as “related parties” in accordance with Medicare requirements.
Full article
U.S. Court In Tennessee Refuses To Dismiss Nurses’ Claims Alleging Hospitals Conspired To Depress Wages
A federal trial court in Tennessee refused to dismiss an action brought against two healthcare corporations alleging they conspired to artificially depress nurses’ wages at their hospitals in the Memphis area.
Plaintiffs Suzanne Clark and Conise Dillard sued Baptist Memorial Healthcare Corporation and Methodist Healthcare (defendants) alleging they violated the Sherman Act § 1 by conspiring to keep nurses’ wages artificially low and by exchanging compensation information.
Plaintiffs contended that the alleged conspiracy has forced RNs to work harder for longer hours, affecting the availability of healthcare personnel and reducing patient quality of care.
Defendants moved to dismiss, arguing plaintiffs failed to allege a plausible product market and failed to plead facts sufficient to provide them with fair notice of the grounds on which relief should be granted.
The U.S. District Court for the Western District of Tennessee denied the motion.
Full article
Plaintiffs Suzanne Clark and Conise Dillard sued Baptist Memorial Healthcare Corporation and Methodist Healthcare (defendants) alleging they violated the Sherman Act § 1 by conspiring to keep nurses’ wages artificially low and by exchanging compensation information.
Plaintiffs contended that the alleged conspiracy has forced RNs to work harder for longer hours, affecting the availability of healthcare personnel and reducing patient quality of care.
Defendants moved to dismiss, arguing plaintiffs failed to allege a plausible product market and failed to plead facts sufficient to provide them with fair notice of the grounds on which relief should be granted.
The U.S. District Court for the Western District of Tennessee denied the motion.
Full article
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.
The Tennessee Court of Appeals therefore reversed, in both cases, a trial court’s ruling denying the hospital’s motion for summary judgment on the apparent agency issue.
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).
Full article
The Tennessee Court of Appeals therefore reversed, in both cases, a trial court’s ruling denying the hospital’s motion for summary judgment on the apparent agency issue.
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).
Full article
Congress May Allow Biotech Generics
The San Francisco Chronicle (7/15, E1, Tansey) reported that "[b]ig pharmaceutical companies with popular brand-name drugs have long faced competition from cheaper generic versions of those medicines. Soon, biotechnology companies -- until now exempt from generic competition -- could have the same headache. Congress is close to creating a way to approve discount copies of biotech drugs, a momentous move that would shake the biotechnology business to its roots. The off-price drugs could steal customers and drain revenue from established biotech companies, creating a much more challenging environment." Biotech drugs are the fastest-growing segment of the pharmaceutical market. "Biotech companies have been shielded from generic competition so far because the Food and Drug Administration has no procedure to approve copies of biotech medicines. These drugs, unlike simple pills such as aspirin, are often complex biological molecules produced by living cells rather than synthesized from chemicals. Ensuring that a knockoff has the same physical properties as the original biological drug can be a significant technical challenge." The debate now focuses on a Senate bill, The Biologics Price Competition and Innovation Act of 2007, "a bipartisan compromise crafted by Democrats Edward Kennedy of Massachusetts and Hillary Clinton of New York and Republicans Orrin Hatch of Utah and Michael Enzi of Wyoming. The bill has drawn praise and objections from both sides."
Dispute is over safety, length of patent protection. The San Diego Union-Tribune (7/13, Somers) noted that a major issue under debate is the length of time between when a biotech company introduces a drug and when a generic copy may be made available. "The industry says it needs 14 years of exclusivity to recoup its investment." Meanwhile, consumer groups "want five years of exclusivity. 'Each year of exclusivity will cost billions of dollars for the consumers, unions, employers and government agencies,'" one critic argued.
(Source: Health Law Daily, July 16, 2007)
Dispute is over safety, length of patent protection. The San Diego Union-Tribune (7/13, Somers) noted that a major issue under debate is the length of time between when a biotech company introduces a drug and when a generic copy may be made available. "The industry says it needs 14 years of exclusivity to recoup its investment." Meanwhile, consumer groups "want five years of exclusivity. 'Each year of exclusivity will cost billions of dollars for the consumers, unions, employers and government agencies,'" one critic argued.
(Source: Health Law Daily, July 16, 2007)
U.S. News & World Report Ranks Top Hospitals for 2007
WebMD (7/14, Hitti) reported, "Johns Hopkins Hospital in Baltimore is the nation's top hospital, according to U.S. News & World Report's 2007 list of America's best hospitals." WebMD noted, "The magazine considered 5,462 U.S. hospitals for their annual list of top hospitals. Only 18 hospitals made the list." Number two on the list was the Mayo Clinic in Rochester, Minnesota, with the UCLA Medical Center in Los Angeles coming in third. U.S. News & World Report's rankings "are based on factors including hospital quality in 16 medical specialties." More than 850,000 physicians were surveyed, "asking them to rank the top five hospitals in their specialty for difficult cases, regardless of location or expense." Rankings are also based "on hospital death rates in Medicare patients with certain conditions, the number of patients and nurses, hospital credentials, and the availability of advanced medical technology." However, the rankings do not include "military or veterans hospitals because the magazine couldn't get government data needed to rank those hospitals."
New CMS Guidelines On Informed Consent
The Centers for Medicare and Medicaid Services (CMS) issued new interpretive guidelines on informed consent on April 17, 2007. (Ref: S&C-07-17). Any hospital that accepts Medicare or Medicaid patients have to follow these guidelines for all patients. The regulations are published in the Federal Register and then CMS issues interpretative guidance to surveyors to explain the standard and how to survey it.
These new informed consent interpretive guidelines are available from the CMS website.
Full article
These new informed consent interpretive guidelines are available from the CMS website.
Full article
U.S. House Approves FDA Amendments Legislation
The Los Angeles Times (7/12, Alonso-Zaldivar) reports that on a vote of 403-16, the House on Wednesday "approved a sweeping overhaul of the nation's drug-safety system, as Congress moved swiftly to send President Bush a bill that significantly improves patient protections." The House vote "followed Senate passage in May of similar legislation to strengthen the Food and Drug Administration's ability to detect risky side effects of medicines already on the market." The newly approved safety legislation "is part of a larger measure reauthorizing the collection of industry user fees that fund more than half the FDA's budget for reviewing new drugs."
The AP (7/12, Bridges) adds, "The House version would require the FDA to review the safety of certain drugs annually for the first three years following approval and then again during the seventh year. It also would require drug ads to include a toll-free number and Web address for consumers to report side effects and would permit only a single outside expert with a potential conflict of interest to be cleared to serve on any agency advisory panel."
The Wall Street Journal (7/12, A2, Mathews) reports that the FDA "would have the clear ability to order follow-up studies, restrict distribution, and enforce changes to the medications' labels." And while neither the Senate nor the House bill grants the FDA "the power to force a moratorium on direct-to-consumer advertising, a tough restriction that was discussed earlier," the agency "would be able to levy fines for false and misleading promotions." Both versions "would also force drug companies to make public information from many clinical trials." However, the Journal continues, "a key divide between the Senate and House bills" is that "the Senate will include language that creates a pathway for the FDA to approve copycat versions of biotech drugs, and the House bill doesn't address the issue." The question now "is whether House leaders, including Energy and Commerce Committee Chairman John Dingell, a Michigan Democrat, will be willing to accept the move." Yesterday, the Journal notes, "Mr. Dingell signaled that he will oppose inclusion of the copycat biotech-drug language in a final bill."
(Source: Health Law Daily, July 12, 2007)
The AP (7/12, Bridges) adds, "The House version would require the FDA to review the safety of certain drugs annually for the first three years following approval and then again during the seventh year. It also would require drug ads to include a toll-free number and Web address for consumers to report side effects and would permit only a single outside expert with a potential conflict of interest to be cleared to serve on any agency advisory panel."
The Wall Street Journal (7/12, A2, Mathews) reports that the FDA "would have the clear ability to order follow-up studies, restrict distribution, and enforce changes to the medications' labels." And while neither the Senate nor the House bill grants the FDA "the power to force a moratorium on direct-to-consumer advertising, a tough restriction that was discussed earlier," the agency "would be able to levy fines for false and misleading promotions." Both versions "would also force drug companies to make public information from many clinical trials." However, the Journal continues, "a key divide between the Senate and House bills" is that "the Senate will include language that creates a pathway for the FDA to approve copycat versions of biotech drugs, and the House bill doesn't address the issue." The question now "is whether House leaders, including Energy and Commerce Committee Chairman John Dingell, a Michigan Democrat, will be willing to accept the move." Yesterday, the Journal notes, "Mr. Dingell signaled that he will oppose inclusion of the copycat biotech-drug language in a final bill."
(Source: Health Law Daily, July 12, 2007)
Study suggests electronic health records don't improve care for walk-in visits
HealthDay (7/11, Gardner) reports, "Electronic health records make little difference in the quality of medical care, at least when it comes to walk-in doctor visits," according to study findings published in the July 9 issue of Archives of Internal Medicine. "To see if electronic health records, as they are used now, had an effect on quality," researchers lead by Dr. Jeffrey Linder "reviewed ambulatory care visits to non-federally funded, community, office-based physician practices throughout the United States. Then the researchers cross-referenced these visits with 17 ambulatory quality indicators." Overall, they found that "there was no difference in performance between ambulatory visits with and without use of electronic health records." But, "visits to medical practices using electronic health records performed slightly better on two indicators: avoiding tranquilizers for patients with depression and avoiding routine urinalysis during general medical examinations." Electronic health records "have been proposed as a solution to improving health quality in the United States, where an estimated 100,000 deaths from medical errors occur each year. President George Bush has called for electronic health records for most Americans and the U.S. Department of Health and Human Services has a 10-year plan to computerize healthcare." The Wall Street Journal (7/10, Francis) Health Blog also reported on the story.
False Claims Act (FCA) and the Healthcare Industry
Last year alone the federal government recovered more than $3.1 billion in settlements and judgments under the federal False Claims Act (FCA). 72% of these recoveries occurred in the healthcare industry. And as part of the 2005 Deficit Reduction Act, Congress has provided substantial financial incentives to states to promulgate their own false claims acts.
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