Life Sciences Legal Update

Office of Pharmacy Affairs Publishes Final Notice Allowing Covered Entities to Use Multiple Contract Pharmacies

Joseph W. Metro — Tue, 09 Mar 2010 12:27:49 -0500

This post was written by Elizabeth O’Brien and Joseph W. Metro.

On March 5, 2010, the Office of Pharmacy Affairs published a Final Notice allowing covered entities to use multiple contract pharmacies in order to supplement “in-house” pharmacy services or to increase patient access to 340B drugs. This Final Notice replaces “Notice Regarding Section 602 of the Veterans Health Care Act of 1992; Contract Pharmacy Services (61 Fed. Reg. 43,549) and all other previous 340B Program guidance regarding non-network contract pharmacy services.

Under the Public Health Service Act’s Section 340B drug pricing program, manufacturers who sell covered outpatient drugs to specific federal grantees, federally-qualified health center look-alikes and qualified disproportionate share hospitals (“covered entities”) must agree to charge less than the statutorily-prescribed maximum price for those drugs, which results in significant savings on drugs for the covered entities. Previously, the Health Resources and Services Administration ("HRSA") Office of Pharmacy Affairs had specified procedures under which discounts could be made available to covered entities engaging a single contract pharmacy, and had conducted an Alternative Methods Demonstration Project program in which HRSA approved a limited number of covered entities using multiple contract pharmacies.

Effective April 5, 2010, the Final Notice permits all covered entities to use multiple contract pharmacies. The guidelines in the Final Notice give covered entities and contract pharmacies a great deal of freedom in structuring their contract pharmacy services agreements, so long as they implement and maintain mechanisms to ensure compliance with 340B Program rules, especially against diversion of drugs. To learn more about the Final Notice, including compliance guidelines, potential alternatives to the single location/single pharmacy model and suggested contract provisions, read the full alert.

House Energy & Commerce Drug Safety Hearing Set for March 10

Lisa Baird — Mon, 08 Mar 2010 10:41:37 -0500

As reported by our sister site, Health Industry Washington Watch, on Wednesday the House Energy and Commerce Health Subcommittee will hold a hearing entitled, "Drug Safety: An Update from the FDA." At the hearing, the FDA will detail its current challenges and successes in the area of drug safety. Joshua M. Sharfstein, M.D., FDA Principal Deputy Commissioner, is slated to testify.

CMS Clarifies Telemarketing Rules for DME Suppliers

Debra A. McCurdy — Wed, 17 Feb 2010 15:25:38 -0500

This post was written by Elizabeth B. Carder-Thompson and Debra A. McCurdy.

The Centers for Medicare & Medicaid Services (CMS) has issued new "Telemarketing FAQs" to supplement the Office of Inspector General's (OIG) recent revisions to its Special Fraud Alert on Telemarketing by Durable Medical Equipment Suppliers. As you may recall, in January 2010, the OIG amended the Special Fraud Alert to add a warning about suppliers contacting a beneficiary before the supplier receives written beneficiary consent, as it may violate the statutory provision that prohibits Durable Medical Equipment (DME) suppliers from making unsolicited telephone calls to Medicare beneficiaries regarding the furnishing of a Medicare-covered item. Specifically, the OIG stated that it "has also been made aware of instances when DME suppliers, notwithstanding the clear statutory prohibition, contact Medicare beneficiaries by telephone based solely on treating physicians’ preliminary written or verbal orders prescribing DME for the beneficiaries." According to the OIG, the "physician’s preliminary written or verbal order is not a substitute for the requisite written consent of a Medicare beneficiary."

In response to this new language, Reed Smith contacted the OIG to discuss the adverse impact this policy would have on timely beneficiary access to medically necessary equipment ordered by a physician, since some suppliers call a beneficiary to arrange for equipment deliveries upon receiving an initial physician verbal order. The OIG has just sent us a copy of new CMS Telemarketing FAQs that seek to clarify certain aspects of the revised Special Fraud Alert. Notably, CMS clarifies that there are circumstances in which a supplier may contact a beneficiary based on receipt of a physicians' order if the physician contacts the supplier with the beneficiary's knowledge:

Question 3: Is a supplier contacting the beneficiary based on the receipt of a physician order considered an “unsolicited” contact?

Answer 3: If a physician contacts a supplier on behalf of a beneficiary with the beneficiary’s knowledge, and then a supplier contacts the beneficiary to confirm or gather information needed to provide that particular covered item (including delivery and billing information), then that contact would not be considered “unsolicited.” Please note that the beneficiary need only be aware that a supplier will be contacting him/her regarding the prescribed covered item, recognizing that the appropriate supplier may not have been identified at the time of consultation.

On the other hand, if the beneficiary is not aware that the physician would be contacting the supplier on the beneficiary's behalf, the contact may be prohibited.

Question 4: What if a supplier contacts the beneficiary based solely on the physician order (and therefore the contact is without the beneficiary’s knowledge that the physician would be contacting a supplier on the beneficiary’s behalf)?

Answer 4: Then that contact would be considered “unsolicited” and, depending on the facts and circumstances of the particular case, may be prohibited.

New Regulations Expand Mental Health Parity Requirements for Group Health Plans

Lisa Baird — Thu, 04 Feb 2010 09:28:21 -0500

This post was written by Rachel Cutler Shim, John D. Martini, Dennis R. Bonessa, William H. Nichols and Laurie S. DuChateau.

On January 29, 2010, the U.S. Departments of Labor, Health and Human Services and the Treasury jointly issued interim final regulations implementing the Paul Wellstone and Pete Domenici Mental Health Parity and Addiction Equity Act of 2008 ("MHPAEA"). The MHPAEA, as implemented by the interim final regulations, greatly expands the parity standards of its predecessor, the Mental Health Parity Act of 1996 ("MHPA 1996").

The MHPAEA, as implemented by the interim final regulations, expands on the requirements of the MHPA 1996 and introduces new rules that prohibit group health plans from creating disparities between medical/surgical benefits and mental health benefits, as well as substance-use disorder benefits. To learn more about how MHPAEA impacts group health plans, read our full alert.

For more information, please contact one of the authors: Rachel Cutler Shim, John D. Martini, Dennis R. Bonessa, William H. Nichols and Laurie S. DuChateau.

Notes on the National Summit on Health Care Fraud

Lisa Baird — Mon, 01 Feb 2010 13:44:40 -0500

This post was written by Elizabeth Carder-Thompson.

Last week, in my capacity as president of the American Health Lawyers Association, I attended the first National Summit on Health Care Fraud, a joint undertaking by the U.S. Department of Health and Human Services and the U.S. Department of Justice. The conference brought together private sector leaders, law enforcement personnel, and health care experts as part of the Obama Administration’s coordinated effort to fight health care fraud. This was the first national gathering on health care fraud between law enforcement and the private and public sectors.

I. Presentations and Trends

Leading the morning session, HHS Secretary Kathleen Sebelius vowed to “prevent, catch, and discourage fraudsters,” stating “Criminals – your days are numbered.” She promised an aggressive new fraud prevention focus, including enhanced Medicare Strike Force activities in a number of US cities, and continued coordinated, multi-agency initiatives under HEAT – the Health Care Fraud Prevention and Enforcement Action Team Secretary Sebelius also stated that, next week, the President’s budget likely will request an additional $1.7 billion in funding for fraud prevention and detection.

Attorney General Eric Holder disclosed that, in 2009, DOJ charged over 800 individuals in health care fraud cases, and obtained 580 convictions so far. DOJ also recovered billions of dollars in False Claims Act (qui tam) recoveries. He also promised that future fraud-busting efforts will include actively engaging the private sector (including Medicare beneficiaries recruited to serve on “Senior Medicare Patrols”), the insurance industry, and health care providers.

A panel comprised of representatives from CMS, FBI, OIG, DOJ, and others who have worked on what they call “the viral fraud cases in the Miami-Dade area” (i.e., spreading like a virus) told stories about the highly-aggressive and coordinated tactics and techniques they now employ. An Assistant United States Attorney who serves as the South Florida Health Fraud Coordinator, Luis Perez, said the days of prolonged subpoena productions, accountant analyses, extended research into cases, and deference to white collar defendants, are over: “We arrest everyone,” he said. His team of government agents and prosecutors seeks to bring the highest possible provable charges as offenses are committed, and then bring in additional evidence during the sentencing phase in order to seek upward adjustments under the Sentencing Guidelines to obtain maximum prison times.

The CEO of the Tufts Health Plan in Boston, James Roosevelt, highlighted anti-fraud tactics increasingly employed by private payers. For example, Tufts has hired Nick Messuri – formerly head of the Massachusetts Attorney General’s Medicaid Fraud Control Unit and a well-known, tough prosecutor in the state – as head of its antifraud group, which includes nine other attorneys. Tufts and other payers conduct their own clinical and other investigations relating to medical necessity, upcoding, miscoding, overutilization, outliers, illegal referrals, and more. Tufts currently has 128 open investigations, some of which are being conducted in cooperation with governmental entities to which it has made reports.

II. Investigative and Enforcement Predictions

During the afternoon, attendees were divided into discussion groups to consider such issues as effective law enforcement tactics, the role of states in fraud prevention, effective use of data, and more. A report on the break out-sessions will be published in the future, but some of the common themes I observed – and the future actions I predict – are as follows:

1) There will be heightened cooperation and more aggressive, coordinated enforcement in the public and private sectors to combat fraud, abuse, and waste. The main focus used to be Medicare fraud – now it is health care fraud across-the-board.

2) Increasingly, efforts will be directed at fraud and abuse prevention, and pre-payment scrutiny, rather than just focusing on “pay-and-chase” enforcement. CMS and private payers will be seeking to justify deviating from “prompt pay” requirements in the name of fraud and abuse prevention. A number of speakers commented that investment in health care fraud provides a multiple return – for DOJ, it was a $4 return for every dollar; for Tufts, a $7 return for every dollar; and for OIG, an $8 return for every dollar.

3) There will be increased attention paid to data coordination. Currently, Medicare, Medicaid, and private payers collect and maintain data in different ways, making utilization and other “pattern” comparisons difficult. This is going to change.

4) Governmental entities are directing their resources in a more data-driven and targeted way in order to identify fraudulent patterns. For example, they know that “fraudsters” who used to operate in Miami-Dade are moving up Route 95 into South Carolina and other states. Data shows that those who defrauded fee-for-service programs for a specific item or service, e.g., orthotics and diabetes supplies, are now moving to defraud Medicare Advantage plans. Providers sanctioned and excluded in one state are moving to another. Some of these schemes have worked in the past – but they will not in the future.

5) There will be greatly increased efforts to engage the general public – Medicare beneficiaries, their families, and others – in whistleblowing.

III. What Does All of This Mean for the Future?

None of us committed to health care in America would countenance or want less than full punishment for “real” health care fraud. Unquestionably, many of the cases cited at the Summit fall in this category – billing for services not rendered, beneficiaries selling their Medicare numbers, false certifications by physicians for items of durable medical equipment, dental clinics pulling children’s teeth unnecessarily to obtain Medicaid payment, clinics billing for outmoded infusion therapy for HIV/AIDS patients, and more. I applaud aggressive and coordinated investigation and enforcement efforts to rid our system of these practices and their perpetrators, and the fraud-fighters in the government clearly are a very smart, very dedicated group

I worry, however, that the zeal for health care fraud enforcement will inappropriately ensnare committed, compassionate health care providers, suppliers, and manufacturers. In our practice, we are increasingly seeing qui tam relators – whistleblowers – with dollar signs in their eyes, bringing questionable and even frivolous actions against their employers or former employers. We are seeing overburdened prosecutors taking years to make qui tam intervention decisions – while the relators continue to work and gather “data” at their employers’ places of business, to “support” their cases.

I worry about Medicare contractors, eager to keep their contracts, trying a little too hard to prove to CMS that they are fraud-conscious. I have several supplier clients on 100% pre-pay Medicare review facing significant potential disallowances because a contractor decided for the first time to implement a technical Medicare manual provision about recording a specific date of service – when there is no question from the medical record that medically necessary, physician ordered, and readily documented services were in fact provided.

I worry about constitutional due process. One private insurance company representative at the Summit suggested that the government send announcements to all private payors when any qui tam cases are unsealed, so that the insurance companies can place “edits” on claims filed by the defendants, or at least pre-payment reviews – well before the case has been decided. I worry that the “arrest them all” enforcement mentality will harm the reputations and future livelihood of individuals not yet tried, who are later exonerated.

There are no easy answers. At a minimum, though, in this rapidly-evolving investigative and enforcement environment, health care providers, suppliers, and manufacturers need to concentrate more than ever before on compliance. Moreover, their compliance efforts need to be real and not token ones, including comprehensive training, and internal auditing and monitoring with real consequences for employees and representatives falling short. The stakes are very high, and the so-called “radar screen” that companies used to joke about “flying under” now reaches all the way to the ground.

Reed Smith will continue to monitor developments with respect to health care fraud as the health care reform debate continues. In the interim, please contact Elizabeth Carder-Thompson in our Washington office if you have questions regarding this topic.

FCC Proposes Tougher Rules on Telemarketing

Lisa Baird — Fri, 29 Jan 2010 09:46:06 -0500

This post was written by Robert H. Jackson.

The Federal Communications Commission (“FCC”) has proposed changes to its Telephone Consumer Protection Act (“TCPA”) rules that would conform to the Federal Trade Commission’s Telemarketing Sales Rule (“TSR”). The primary change in the regulations would affect the sending of prerecorded messages (a/k/a “robocalls”) by barring them even to existing customers without first obtaining prior written consent. At first blush, this seems routine, but because of differences in the FCC’s and FTC’s statutory jurisdiction, there are complicated implementation issues that could trap unsuspecting companies. Other key issues for the health care industry is whether the FCC should create an exemption for prerecorded messages that are subject to Health Insurance Portability and Accountability Act (“HIPAA”) and, if so, how such exemption should be implemented. For more information about these changes, please read our client alert written by Robert Jackson.

Drugs for the Masses: Taking a Closer Look at China's Healthcare Reform and Its Impact on Pharmaceutical Manufacturers

Lisa Baird — Wed, 13 Jan 2010 09:11:45 -0500

As noted in our September 2009 post discussing China’s new National Essential Drug System (NEDS), China continues to make progress in its healthcare reform efforts. However, new national drug lists and price caps designed to provide low-cost drugs to the masses, have at the same time raised questions about the program’s economic impact on local and multinational pharmaceutical manufacturers.

To learn more about how China’s healthcare reform package and how it may affect your company, we invite you to read Reed Smith Life Sciences Partner Gordon Schatz and ZS Associates Inc. consultant Patrick Nowlin’s “Drugs for the Masses,” recently published by China Business Review.

CPSC Continues Stay of Enforcement of Third-Party Testing Laboratory and Certification Requirements for Some Products

Lisa Baird — Thu, 31 Dec 2009 14:50:57 -0500

This post was written by Steven P. Murphy.

Responding to efforts by a number of industry groups, on December 28, 2009, the U.S. Consumer Product Safety Commission ("CPSC") posted a Federal Register notice announcing its continuation of the stay of enforcement of the third-party laboratory testing and certification required under section 14 of the Consumer Product Safety Improvement Act of 2008 ("CPSIA"). The stay was continued until February 10, 2011. The continued stay involves a discrete group of products, including children's toys and child care products with banned phthalates, toys subject to ASTM's F-963 standards, baby walkers, electrically operated toys, youth all-terrain vehicles, carpets and rugs, vinyl plastic film, and children's sleepwear. Most importantly, the stay was continued for the third-party testing and certificate of the lead content limit that applies to all children's products.

For most products subject to CPSIA jurisdiction, however, the current stay will expire February 10, 2010. For domestic manufacturing and importers of non-children's products, there is no obligation to obtain third-party laboratory certifications; only general conformity certificates ("GCCs") declaring compliance with the pertinent CPSC statute, regulation, bar, limit or rule are required. For a detailed list of effected products, see www.cpsc.gov/cpscpub/prerel/prhtml10/10083.html.

For pharmaceutical clients, it is important to note that the stay of requirements for GCC for products subject to regulations under the Poison Prevention Packaging Act ("PPPA") will end February 10, 2010. This applies to products manufactured after February 10, 2010, and not to products in inventory. For consumer goods clients, the CPSC affirmed that no GCCs are required for products subject to the labeling requirements of the Federal Hazardous Substances Act. All clients should note that even though the stay of third-party testing laboratory and certification requirements for the identified products has been continued, all of the underlying bars and limits of the CPSIA remain in effect.

The CPSC also announced an interim enforcement policy allowing component testing. As a result, domestic manufacturers and importers having CPSIA section 14 certification obligations will now have the option of obtaining test reports from approved third-party testing laboratories showing that, for example, each paint on a product complies with the 90ppm lead paint limit on each accessible component part meets the 300ppm lead limit, or obtaining test reports from their discrete paint or component supplier declaring the required compliance.

California Health Care Update: New Laws Adopted in 2009 and Effective in 2010

Daniel A. Cody — Thu, 17 Dec 2009 15:40:26 -0500

This post was written by Daniel A. Cody, Paul W. Pitts and Alison B. Riddell.

Although California legislators devoted a significant amount of time and resources to addressing the state’s budget shortfall and the economic recession, the 2009 legislature debated and passed a surprising number of bills related to health care, many of which will become effective January 1, 2010. New laws impacting California health care providers include:

Amendments to the 2008 law requiring certain health care providers to disclose unlawful and unauthorized uses or disclosure of medical information
Laws requiring the Department of Public Health [www.cdph.ca.gov] to more timely process and approve applications for new or modified hospital outpatient services
Provisions impacting the delivery of radiologic and diagnostic imaging services, such as permitting physician assistants to provide fluoroscopy services under the supervision of a physician
Amendments to California’s False Claim Act that expand the types of claims subject to the law, extend the state’s prosecutorial authority, and increase the penalties for violating the statute
Laws stating that long-term care providers will be subject to new ownership disclosure requirements
Passing Assembly Bill 215, which makes California one of the first states to recognize and incorporate the controversial Five-Star Quality Rating for nursing facilities as created by the Centers for Medicare & Medicaid Services

For the full summary of major legislation impacting California physicians, hospitals, nursing facilities, and other licensed health care facilities, read our client alert.

FDA Announces New Chief Counsel

Areta L. Kupchyk — Wed, 16 Dec 2009 14:02:26 -0500

Ralph Tyler has been appointed the new FDA General Counsel. The announcement was made today by FDA Commissioner, Dr. Margaret A. Hamburg. Mr. Tyler will join the Office of the Chief Counsel in Rockville, MD on January 19, 2010. Stepping down will be Acting Chief Counsel Michael Landa, who will return to the Center for Food Safety and Nutrition (CFSAN) as Deputy Director for Regulatory Affairs.

Mr. Tyler is currently the Insurance Commissioner of the State of Maryland. Previously he served as Chief Legal Counsel to Maryland Governor Martin O’Malley. Prior to that, Mr. Tyler served as the Deputy Attorney General, the Chief of Litigation, and Assistant Attorney General in the Maryland Attorney General’s office between 1982 and 1996. Mr. Tyler also spent several years as a partner at Hogan & Hartson, LLP. He holds a B.A. from the University of Illinois, a J.D. from Case Western Reserve University, and a LL.M. from Harvard University.

Pennsylvania Issues Licensing Regulations for Home Care Agencies and Registries

Karl A. Thallner — Wed, 16 Dec 2009 12:01:44 -0500

This post was authored by Karl A. Thallner, Jr., Amie E. Schaadt and Jacqueline B. Penrod.

On December 12, 2009, the Pennsylvania Department of Health published final regulations governing home care agencies and registries operating in the Commonwealth. The regulations, which became effective on December 12, 2009, require home care agencies and registries to obtain a license to operate. They also address the qualifications and competence of home care workers. Read our full alert to learn more about Pennsylvania's new licensing and consumer protection regulations as well as the new requirements for hiring home care personnel.

FTC (Revised) Endorsement Guides Go Into Effect

Brad Rostolsky — Wed, 02 Dec 2009 19:01:13 -0500

As noted by our colleagues at Legal Bytes, on December 1, 2009, the revised "Guides Concerning the Use of Endorsements and Testimonials in Advertising" released by the Federal Trade Commission ("FTC") came into effect. Washington, D.C. partner John P. Feldman, an authority in advertising regulations and compliance, recently outlined some considerations every advertiser should take into account in his memo, "FTC Endorsement Guides (Revised) - Some Thoughts As They Become Effective." To read John's full analysis, click here.

Legal Bytes has been following new developments regarding the FTC's Guidelines since November 2008. In case you missed any earlier updates, you can refer back to them here: FTC Testimonial and Endorsement Guides Stimulate Industry Comment (March 2009); a presentation given at the University of Limerick on the subject entitled "Trust Me, I'm a Satisfied Customer: Testimonials & Endorsements in the United States," which you can download (If You Didn't Make It to Ireland ...); Ghostwriters: Medical Research or Paid Endorsers (and are they mutually exclusive?) and Rights of Publicity - Wake Up and Smell the Coffee! (both in August 2009); and FTC Releases Updated Endorsement & Testimonial Guidelines and Reed Smith Analysis of the New FTC Endorsement and Testimonial Guidelines (both in October 2009).

FDA's Emerging Internet Policy: Themes and Recommendations From Public Hearing on Promotion of FDA-Regulated Medical Products Using the Internet and Social Media Tools

Areta L. Kupchyk — Wed, 25 Nov 2009 14:19:04 -0500

This post was written by Areta Kupchyk, Kevin Madagan, and Paul Sheives.

Following a decade-long hiatus, the Food and Drug Administration (“FDA”) appears ready to finally address industry Internet communications. FDA’s Center for Drug Evaluation and Research (“CDER”) in collaboration with other divisions within FDA, held a two-day hearing on November 12^th and 13^th to help the Agency determine how the statutory provisions, regulations, and policies governing advertising and promotional labeling should be applied to product-related information on the Internet and emerging technologies.

Much has changed since 1996, the last time FDA held a public hearing on this topic. The Internet is now widely used as a medium for companies to disseminate information about their products, and the Internet's ability to facilitate communication and collaboration has substantially evolved over the last few years primarily as a result of a second (Web 2.0) and now third (Web 3.0) generation of Internet development and website design. The inherent flexibility and intelligence of Web 2.0 and 3.0 is great for society, but also fraught with risk for an FDA-regulated industry that must carefully control its interactions with consumers and health care practitioners. Indeed, the industry has largely avoided using Web 2.0 out of fear that any social media use may result in FDA enforcement action.

Given the above, it is not surprising that FDA’s hearing was a welcome relief to many. Even though the hearing technically was only an information gathering exercise for FDA, it was an important opportunity for industry leaders and stakeholders to contribute to FDA’s emerging Internet policy. This Client Alert provides a brief summary of the major themes and recommendations from the presenters at the hearing.

In addition, please see a related commentary on the blog Adlaw by Request (“FDA Seeks To Understand Social Media”). Adlaw by Request is a blog designed to provide regular news on advertising law developments in the United States and elsewhere, with practical commentary and analysis from Reed Smith’s Advertising, Technology and Media (ATM) practice.

FDA Discusses Social Media Advertising Regulation for the Life Sciences Industry

Lisa Baird — Tue, 17 Nov 2009 12:23:27 -0500

This post was written by Dana Blanton.

On November 12 and 13, 2009, the FDA hosted public hearings to vet the potential need for regulation of prescription pharmaceutical and medical device marketing on social media outlets such as YouTube, Wikipedia, Facebook, and Twitter. The FDA specifically sought input on these five questions: (1) For what online communications are manufacturers, packers or distributors accountable? (2) How can manufacturers, packers, or distributors fulfill regulatory requirements in their Internet and social media promotion, particularly when using tools that are associated with space limitations and tools that allow for real-time communications? (3) What parameters should apply to the posting of corrective information on Web sites controlled by third parties? (4) When is the use of links appropriate? and (5) Questions specific to Internet adverse event reporting.

The hearings attracted both internet and ethical drug and device industry giants, as well as nonprofit organizations seeking to gain a better understanding of what will certainly be a new frontier for advertising these regulated products. The FDA's existing regulations for print and television advertising are widely considered unsuitable for social media outlets, some of which allow for no more than 140 characters per post--far too few to include FDA-mandated safety information--and most of which allow for uncensored layperson commentary sometimes indistinguishable from manufacturer content. As a result, pharma and medical device representatives reported, drug and device companies have been reluctant to venture into the social media advertising field. Meanwhile, media and marketing firms offered pre-packaged advertising solutions and industry critics suggested that the FDA and pharmaceutical and device companies should bear the burden of correcting misinformation on third party websites and blogs. The FDA will consider the commentary and determine whether guidelines should be promulgated.

Information on the hearing, including background, further information regarding the five issues presented, a link to transcripts of the FDA's 1996 hearing on internet advertising and other information may be found in the Federal Register Notice for the hearing and transcripts of the November 12 and 13, 2009 hearings will be available by approximately December 13, 2009.

Health Care Facilities Targeted in Wage and Hour Lawsuits

Lisa Baird — Sat, 14 Nov 2009 20:34:16 -0500

Across the country, plaintiffs’ attorneys are targeting health care facilities over their alleged failure to comply with meal break rules. These suits claim that employers have automatically deducted 30 to 60 minutes of time for employees’ meal periods, even if employees never took the breaks. Because employees can recover for violations that took place as many as three years before suit is filed, damages in these cases can be substantial.

For more information, including steps you can take to minimize exposure to these types of lawsuits, please see Reed Smith’s Employment Watch Blog.

Health Reform Update: Focus On Prescription Drug Price Regulation

Joseph W. Metro — Thu, 12 Nov 2009 10:44:59 -0500

While Congress continues to debate the “big picture” issues of broad-scale health care reform, pending bills in both the House of Representatives and Senate contain proposals to amend federal prescription drug price regulation programs such as the Medicaid rebate statute, the Public Health Service Act’s Section 340B program, and Medicare Part D.

For an overview of current proposals in this area and highlights of important issues for prescription drug manufacturers, distributors and dispensers, read the full alert, which also includes a chart comparing the drug pricing provisions in the key current bills.

Ten Data Security Questions Faced by Every Company

Lisa Baird — Thu, 05 Nov 2009 14:16:29 -0500

Privacy and data security are hot topics for everyone doing business in today's rapidly developing climate, and no less for those in life science and health-related industries. With new federal statutes, new regulations from HHS and FTC, and new state laws covering private health information, now is a good time for businesses to take stock of the applicable laws and take steps to ensure that their use, transfer, and storage of private data are secure and compliant. In this article, Reed Smith's Paul Bond gives his "Ten Data Security Questions Faced by Every Company," a one-stop survey of how every business should approach these issues.

Another Postponement of FTC's Red Flags Rule

Brad Rostolsky — Mon, 02 Nov 2009 09:00:46 -0500

On October 30, 2009 the Federal Trade Commission (FTC) issued a News Release announcing that it is granting industries under the FTC's jurisdiction an additional 7 months (i.e., until June 1, 2010) to develop and implement their identity theft prevention programs as required under the FTC's Identify Theft Red Flags Rule. According to the FTC News Release, this additional extension has been provided at the request of members of Congress. In making this announcement, the FTC attempts to refocus the attention of creditors and financial institutions to the FTC's dedicated Red Flags Rule website, which contains various compliance guidance documents designed to assist affected industries with the development of Identity Theft Protection Programs.

Also on October 30, 2009, the U.S. District Court for the District of Columbia ruled that the FTC may not apply the Red Flags Rule to attorneys. The FTC's New Release acknowledges this ruling, and further cautions that the FTC's additional postponement of Red Flags Rule enforcement remains distinct from whatever timeline may be associated with the aforementioned court proceeding and any possible appeals.

The announcement of the additional extension is available at www.ftc.gov, and our prior posts on the Red Flags Rule are available here.

HHS Rule Implements HITECH Act Changes to HIPAA Enforcement

Brad Rostolsky — Fri, 30 Oct 2009 16:24:48 -0500

On Friday, October 30, 2009, the U.S. Department of Health and Human Services ("HHS") published an interim final rule and request for comments that implements certain HIPAA enforcement changes made pursuant to the HITECH Act. Consistent with the provisions of the HITECH Act, the new rule amends the HIPAA enforcement regulations applicable to violations of each of HIPAA's Administrative Simplification Rules (i.e., Privacy Rule, Security Rule, Transactions and Code Sets Rules, Standard Unique Identifier for Employers (EIN Rule), and the Standard Unique identifier for Health Care Providers (NPI Rule)) by instituting the below categories of violations and tiered penalty scheme to HIPAA violations that occur on or after February 18, 2009.

Unknown violations (i.e., if a person did not know and by exercising reasonable due diligence would not have known that a violation occurred): The penalty shall be at least $100 for each violation not to exceed $25,000 for all such identical violations during a calendar year, but may be no more than $50,000 for each violation not to exceed $1.5 million for all such violations of an identical requirement or prohibition during a calendar year.
Violations due to reasonable cause and not to willful neglect: The penalty shall be at least $1,000 for each violation not to exceed $100,000 for all such identical violations during a calendar year, but may be no more than $50,000 for each violation not to exceed $1.5 million for all such violations of an identical requirement or prohibition during a calendar year.
Violations due to willful neglect (and the violations have been corrected): The penalty shall be at least $10,000 for each violation not to exceed $250,000 for all such identical violations during a calendar year, but may be no more than $50,000 for each violation not to exceed $1.5 million for all such violations of an identical requirement or prohibition during a calendar year.
Violations due to willful neglect (and the violations have not been corrected): The penalty shall be at least $50,000 for each violation not to exceed $1.5 million for all such violations of an identical requirement or prohibition during a calendar year.

Furthermore, the interim final rule generally amends a covered entity's ability to employ an affirmative defense against an action seeking civil monetary penalties if (i) the covered entity did not have knowledge or constructive knowledge of the violation, and (ii) the violation was not due to reasonable cause and not willful neglect. HHS is also given the authority to waive a civil monetary penalty for violations due to reasonable cause and not willful neglect if the covered entity corrects the violation within 30 days of having knowledge that the violation occurred.

Comments on this interim final rule will be considered if received by December 29, 2009.

Sebelius Issues Section 1135 Waiver

Lisa Baird — Thu, 29 Oct 2009 15:39:23 -0500

This post was written by Kevin Madagan and Paul Sheives.

On October 24, 2009, President Obama signed a proclamation declaring the 2009 H1N1 influenza pandemic a National Emergency to facilitate the nations ability to respond to the H1N1 pandemic by enabling – if warranted – the waiver of certain statutory federal requirements for medical treatment facilities.

This proclamation provided Kathleen Sebelius, the Secretary of the U.S. Department of Health & Human Services, the ability under section 1135 of the Social Security Act [42 U.S.C. § 1320b–5] to waive certain legal requirements that could otherwise limit the ability of the nation’s healthcare system to respond to the surge of patients with the 2009 H1N1 influenza virus.

Secretary Sebelius recently issued a Section 1135 waiver that becomes effective at 5:00 p.m. today but is retroactive to October 23, 2009.

Accordingly, healthcare facilities may now petition the Department for 1135 waivers to ensure that sufficient healthcare items and services are available to meet the needs of Medicare, Medicaid, and CHIP beneficiaries. Listed below are a few examples of when 1135 waivers may be necessary:

Hospitals request to set up an alternative screening location for patients away from the hospital’s main campus (requiring waiver of sanctions for certain directions, relocations or transfers under EMTALA).
Hospitals request to facilitate transfer of patients from ERs and inpatient wards between hospitals (requiring waiver of sanctions under EMTALA regulations).
Critical Access Hospitals requesting waiver of 42 C.F.R. § 485.620, which requires a 25-bed limit and average patient stays less than 96 hours.
Skilled Nursing Facilities requesting a waiver of 42 C.F.R. § 483.5, which requires CMS approval prior to increasing the number of the facility’s certified beds.