Last week, the Office of Inspector General (OIG) for the Department of Health and Human Services published Advisory Opinion 15-10 (Opinion). The Opinion addressed a hospital system’s proposal to lease non-clinician employees and provide operational and management services to a related psychiatric hospital. While finding that the Proposed Arrangement could potentially generate prohibited remuneration under the Anti-Kickback Statute (AKS), the OIG stated that it would not impose administrative sanctions in connection with the arrangement because it was sufficiently low-risk.
The hospital system (System) that requested the Advisory Opinion is a non-profit system that owns multiple hospitals and other health care providers. The System and a non-profit corporation are the sole members of a non-profit psychiatric hospital (Center), which in turn is part of the System’s integrated health network. The Center is paid by Medicare under the inpatient psychiatric facility prospective payment system and the Center (and certain parts of the System) file cost reports with the Centers for Medicare & Medicaid Services (CMS). The System and Center are possible referral sources for each other.
Prior to requesting the Advisory Opinion, the System and Center were already parties to a Master Services Agreement and an Employee Lease Agreement under which the System: (1) leased non-clinician employees to the Center for an amount equal to the System’s fully loaded costs (i.e., salary, benefits and overhead expenses for those employees) plus a two percent administrative fee; and (2) provided operational and management services to the Center for a fee equal to the System’s fully loaded costs to provide those services plus a two percent administrative fee (the Existing Arrangement). Under the arrangement proposed to OIG (Proposed Arrangement), the parties would retain the Existing Arrangement except that the Center would no longer pay a two percent administrative fee for either the leased employees or the operational and management services. Continue Reading
One of the most frequently asked questions posed to healthcare lawyers is whether State X has a prohibition on the corporate practice of medicine, nursing or other profession, and if so, whether the prohibition is enforced. As demonstrated by last month’s well-publicized settlement between Aspen Dental Management, Inc. (ADMI) and the New York State Attorney General’s Office (AG), the answer to that question in New York is a resounding “yes.”
Although most states with corporate practice and fee-splitting prohibitions focus on medicine, some, like New York, have broad prohibitions that encompass virtually all of the licensed professions, including nursing, clinical social work, and dentistry. While there are professionals who may run afoul of the corporate practice prohibition because they inadvertently render services through a business corporation rather than a professional corporation, more significant risks arise when third party vendors are hired to manage a professional’s back-office matters, and the line between ownership and management becomes blurred. In the case of ADMI, the AG believed that line was crossed. Continue Reading
As we’ve previously discussed, states have begun to actively regulate the substitution of interchangeable biosimilars before any FDA-approved biosimilar has even hit the market. State biosimilar legislation passed to date has focused on the circumstances under which biosimilar substitution is permitted, notice requirements, and record retention time periods.
We have been tracking state biosimilar legislation and have prepared a chart that summarizes enacted legislation. The chart can be downloaded here and will be updated periodically as state developments warrant.
Below we summarize common requirements across the enacted state biosimilar legislation and identify five issues to watch as states continue to legislate and regulate in this area.
State Legislation Trends
As of July 1, 2015, 16 states have enacted legislation or promulgated administrative rules governing biosimilar substitution by pharmacists. Additionally, 4 states currently have pending legislation that could pass before the end of the current legislative session.
- 14 of the 16 state laws require the pharmacist to notify the prescriber of the substitution.
- In one of these states, Virginia, the statutory provision requiring prescriber notification expired on July 1, 2015.
- Similarly, an amendment to Oregon’s law will end the prescriber notification requirement on January 1, 2016.
- 10 state laws require the pharmacist to notify the patient of the biosimilar substitution.
- 3 state laws require the pharmacist to obtain the patient’s affirmative consent prior to dispensing a biosimilar as a substitute for the prescribed biological product.
- 10 state laws require that pharmacies maintain written records of biosimilar substitution for a set period of time, typically 2 years.
- 2 states require that the interchangeable biosimilar must cost less than the prescribed biological product in order for the pharmacist to dispense the biosimilar.
- 3 states require the pharmacist to substitute the biosimilar product unless certain criteria are met.
- For example, in Tennessee, the prescriber must satisfy fairly strict standards to demonstrate that the prescribed biological product is medically necessary for the particular patient in order to prevent biosimilar substitution.
5 Issues to Watch
- Biosimilar “Name”: 9 of the 16 state laws require that the pharmacist communicate the name and manufacturer of the dispensed biological product to the prescriber. These laws do not address whether the “name” is referring to the product’s brand name or non-proprietary name. We are still waiting for FDA’s policy decision on whether biosimilar non-proprietary names will be the same as or different from the reference biological product. This decision from FDA will likely have a significant impact on what is considered to be the biosimilar’s “name” for purposes of compliance with state-imposed prescriber notification rules.
- Orange Book vs. Purple Book: In defining the “interchangeability” of a biosimilar or determining permitted substitutions, 4 state laws refer to FDA’s “Orange Book” and 2 state laws refer to the “Purple Book.” References to the Orange Book may lead to unnecessary confusion down the road, because the Orange Book lists drug products approved under a New Drug Application (NDA) along with the generic drug therapeutic equivalence information. The Orange Book will not contain biosimilar information because those products are approved pursuant to a Biologics License Application (BLA). Instead, the Purple Book – FDA’s “Lists of Licensed Biological Products with Reference Product Exclusivity and Biosimilarity or Interchangeability Evaluations” – will be the relevant source for referencing approved interchangeable biosimilars. This inaccuracy in the state laws may create interpretation issues for Boards of Pharmacy and pharmacists who will have to implement regulations and comply with these new rules.
- Application to Provider-Administered Products: Most of the recent state laws impose requirements on pharmacists dispensing biosimilar products directly to patients, even though the initial round of biosimilar applications being reviewed by FDA are for biological products that are more commonly (or even solely) provider-administered. We have not seen similar patient notification requirements imposed on prescribers that might be “substituting” an interchangeable biosimilar for its reference biological product in the context of a hospital, clinic, or other health care setting.
- Medical Necessity Requirements: It will be interesting to see whether any other states take a similar approach to Tennessee’s unique requirement that the prescriber demonstrate medical necessity in order to prevent substitution of the biosimilar.
- Expiration of Notification Requirements: As noted above, the Virginia prescriber notification provision already expired on July 1st. Despite an effort to extend it by Delegate John O’Bannon, who introduced the original 2013 biosimilar substitution bill, the Virginia legislature was unable to pass an extension of the prescriber notification requirement. Oregon’s law was also amended to terminate this requirement on January 1, 2016. Stay tuned for whether this issue reemerges as interchangeable biosimilars come closer to entering the market.
We will be hosting a webinar with Bloomberg BNA titled “Will State Action on Biosimilars Thwart Anticipated Savings for Health Care Programs?” on Wednesday, August 5, 2015 at 1 pm. For more information or to register for the webinar, click here. Use the promotion code FIRMDISC25 to receive 25% off your registration fees.
Mintz Levin’s Communications Practice recently released a Communications Advisory discussing a Declaratory Ruling and Order released by the Federal Communications Commission (FCC). The ruling clarified and expanded the reach of the Telephone Consumer Protection Act (TCPA). While the ruling is broad in its subject matter, part of the ruling specifically addresses so-called “robocalls” made by health care providers.
The portions of the ruling related to health care were the result of a petition filed by the American Association of Healthcare Administrative Management (AAHAM). AAHAM’s petition primarily related to the TCPA’s consent requirements. FCC rules generally require that callers obtain the prior express consent of the called party before calls or text messages are made to wireless phones using autodialing equipment or an artificial or prerecorded voice.
In response to the petition, the FCC ruling clarifies that an individual’s act of providing their phone number to a health care provider constitutes prior express consent under the TCPA. AAHAM also asked the FCC to clarify that consent would be properly obtained if it was given by a third party on behalf of an incapacitated patient. The FCC agreed and clarified that such consent would be sufficient. Continue Reading
In yet another data breach affecting millions of individuals, UCLA Health System (“UCLA”) reported on July 17, 2015, that hackers had accessed portions of its health network that contained personal information, including names, addresses, dates of birth, social security numbers, medical record numbers, Medicare or health plan ID numbers, and some medical information (including medical conditions, medications, procedures, and test results). Affected individuals include UCLA’s patients as well as providers that sought privileges at the health system.
On July 21, 2015, UCLA became a defendant in a class action lawsuit after plaintiff Michael Allen filed the action in California federal court. The complaint alleges a number of violations related to the breach, including violation of California’s Confidential Medical Information Act.
According to its press release, UCLA determined on May 1, 2015, that the attackers had accessed UCLA’s network. Interestingly, UCLA notes that it had detected suspicious activity on its network in October of 2014, at which time it began working with the FBI to investigate the breach. At the time, UCLA did not believe that the attackers had access to the part of its network that contained personal information. However, as of May 5, 2015, UCLA concluded that the hackers may have had access to personal information as far back as September of 2014. UCLA has made identity protection and credit monitoring services available to potentially impacted individuals.
The class action claims that the breach was a direct result of UCLA’s failure to take “basic steps” to safeguard the sensitive information. One of these “basic steps”, the plaintiff argues, is the encryption of UCLA’s patient information. Continue Reading
Biosimilars continue to be a topic to watch in 2015 as the law around biosimilar products evolves. In March 2015, CMS released guidance addressing Medicare and Medicaid coverage for biosimilar drug products, shortly after the FDA’s approval of a biosimilar version of Amgen’s drug Neupogen®. Then, in April 2015, FDA released final versions of three key biosimilar guidance documents under the Biologics Price Competition and Innovation Act (BPCIA).
Most recently, as my colleague Thomas Wintner discussed in an Intellectual Property Alert (“Article”), the Federal Circuit Court of Appeals issued a key decision regarding the meaning of various provisions of the BPCIA. See Amgen Inc. v. Sandoz Inc., Fed. Cir. Case No. 2015-1499. The appeal had been fast-tracked because of the potentially imminent marketing of Sandoz’s biosimilar version of Neupogen®. Continue Reading
Mintz Levin’s Health Care Enforcement Defense Practice has published its most recent Qui Tam Update, analyzing overall trends in 36 recently unsealed health care related whistleblower cases.
In this issue, the team highlights a case that was filed back in 2006, with allegations that focus on a hospital’s failure to maintain a culture of compliance.
- United States Of America ex rel. Dan Bisk, State Of New York ex rel. Dan Bisk v. Westchester Medical Center, 1:06cv15296 (S.D.N.Y) – the defendant’s former compliance officer alleged a variety of FCA and Stark Law violations involving the New York hospital, and claimed the defendant retaliated against him; the government focused its investigation on a particular physician practice group.
The team also reviews a trio of cases against the same defendant, alleging dermatology sweetheart deals.
- United States ex rel. Ross v. Family Dermatology of Penn., P.C., No. 1:11-cv-2413 (N.D. Ga.); United States ex rel. Baucom v. Family Dermatology of Penn., P.C., No. 1:11-cv-4260 (N.D. Ga.); and United States ex rel. Milstein v. Family Dermatology, P.C., 1:13-cv-01027 (N.D. Ga.) – the relators had different levels of involvement with the defendants, but each is a physician who alleged that the multi-state dermatology practice, and its husband and wife owners, would buy dermatology practices, then enter into independent contractor agreements with the remaining physicians, and require them to refer their pathology specimens to a lab owned by the defendants, in violation of FCA, Stark Law and AKS.
Read the full Qui Tam Update for more information about these cases, and the trends we’ve observed in all of the recently unsealed cases. In our Qui Tam Update series, we monitor recently unsealed FCA cases, identify trends in health care enforcement, and discuss noteworthy cases and developments. To receive the Qui Tam Update by email, subscribe here.
In a set of rules published last week, the government finalized a July 2010 interim final rule (“IFR”) related to coverage of certain preventive services and an August 2014 IFR regarding the definition of an eligible organization and the process by which an eligible organization can provide notice of its religious objection to the coverage of contraceptive services.
The Affordable Care Act (“ACA”) requires that non-grandfathered health plans cover certain preventive services at no additional cost to its members (i.e. no deductibles, coinsurance, or co-payments). The Department of Health and Human Services (“HHS”) adopted guidelines developed by the Institute of Medicine (“IOM”) that set out required preventive services. These guidelines require coverage of all Food and Drug Administration (“FDA”)-approved contraception methods, as prescribed.
As we have been discussing, this requirement was met with protests from religious employers who believe that forcing them to offer and pay for contraceptive services violates their first amendment right to religious freedom. To address these concerns, the Department of Labor (“DOL”) and HHS promulgated regulations creating an exception to the contraceptive coverage mandate for religious employers that qualify as an “eligible organization.” These regulations, discussed on our blog in greater detail here, result in a system where health plans and third party administrators (“TPAs”) (which include pharmacy benefit managers (“PBMs”) for the purpose of this regulation), must pay for these contraceptive services and then receive reimbursement for the services more than a year later, if at all.
New York State Attorney General Eric Schneiderman recently announced that his office had reached a $2.5 million settlement in a federal False Claims Act (FCA) case with Trinity HomeCare and its related entities. The case, filed as a qui tam action in federal district court in the Eastern District of New York, alleged that Trinity’s violations of New York’s Medicaid regulations in the delivery of hemophilia drugs resulted in its submission of false claims to the New York Medicaid Program, in violation of both the federal and state FCAs.
The Trinity settlement may seem relatively insignificant, especially in comparison to other FCA cases which settled for billions, not millions, of dollars. But the Trinity case may be more representative of the future of FCA enforcement. Indeed, there are five current FCA trends evidenced by the Trinity case. Continue Reading
On June 29, 2015, the American Academy of Pediatrics (AAP) published a policy statement supporting the use of telemedicine in the practice of pediatrics as long as telemedicine technologies are used “in support of and integrated with” the patient-centered medical home (PCMH) – not in place of it.
In its first statement on telemedicine, the AAP’s Committee on Pediatric Workforce expressed concern related to the increased use of telemedicine by virtual providers who provide healthcare services to patients via smart phone, laptop or video-consultations without a previous physician-patient relationship, previous medical history, or hands-on physical examination. As noted by the committee members, such telemedicine services can undermine the basic principles of the PCMH model and thus there is a greater need for regulatory action on telemedicine from states and local governments. Continue Reading