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Actavis and the FTC — What it Means and Might Mean

Posted Apr 25 2013 12:00am

US-FederalTradeCommission-Seal.svg On March 25, 2013, oral arguments were given before the Supreme Court for , in what the government is calling a “pay to delay” case.  This potentially very important case could have a deep impact on the way brand-name and generic drug companies settle patent disputes– and on the cost of drugs to consumers.

A little background…

The protection of patents given to inventors originates in the Constitution in Art. I Sec. 8.  Patents are given to novel, non-obvious inventions, and a term of a patent lasts 20 years from the earliest filing date.  A patent gives the holder an exclusive right to develop, market, produce and sell their product (or not to).  The patent also allows the holder to sell or license these rights to others.

Patents and their protections existed before the Federal Trade Commission (FTC) was created and the Federal Antitrust laws were passed, and are a complete exception to the competition laws.  Antitrust seeks to prevent companies from engaging in anticompetitive conduct– those actions that lead to “fewer choices, less innovation, and higher prices.” (FTC website)

Typically the Government protects scientific patents with the justification that this maintains the incentive for companies to do the expensive research and development for new drugs and therapies.  However, Congress tried to strike a balance when it passed the Hatch-Waxman act, which encourages generic companies to challenge brand-name patents.  This was in the hope of giving generics the opportunity to enter the market earlier to manufacture and sell the “identical or acceptable bioequivalent” at a lower cost to consumers.

How this case began…

This case, , began like many other drug company challenges with the brand name drug company (Solvay Chemicals Inc.) on one side of litigation and the generic company (Actavis, Inc.) on the other.  Solvay held the patent for a topical testosterone gel drug, granted until the year 2020, which Actavis later began to develop a generic for before the patent had expired.  Solvay Chemicals notified Actavis that they were challenging their actions and were preparing to bring a patent infringement lawsuit.  Actavis responded by claiming that Solvay’s patent on this particular testosterone gel should not have been granted in the first place because it was not novel (too similar to it’s previous patent for a very similar drug).  So, the two companies began the song and dance of litigation, which continued for several years.

In 2006 the FDA granted its approval to Actavis for its generic version.  Later that year, and before a court could rule on the infringement case, the two companies met and entered into a settlement agreement.  The agreement stipulated that the companies would split the remaining patent term, allowing the generic to come to market 5 years before the brand-name patent was set to expire. In addition, Actavis agreed to assist Solvay with some marketing in exchange for annual payments between $20 and $30 million dollars.

You say “pay-to-delay,” we say “reverse-settlement”…

Now the brand name and generic companies find themselves on the same side, this time facing suit against the government.  Though this practice of “reverse settlements” has been around for a little over a decade, the FTC pursued the case to settle a circuit split over whether these payments were unlawful.  The FTC claims that this agreement is not a “bona-fide,” “good-faith” settlement as the companies argue, but rather a presumptively illegal agreement between two competitors not to compete.  The FTC alleges that if the companies had continued with the initial lawsuit and the brand-name drug patent found to be wrongfully granted, then Actavis would have had the right to begin distribution of its generic in 2006 when it received FDA approval.  The FTC calls this a “pay-to-delay” agreement and wants the Court to adopt the Third Circuit approach from , 686 F.3d 197 (2012), which held that these specific types of agreements should be reviewed with heightened scrutiny (the quick-look test).

The drug companies argue that the Eleventh Circuit is the one which got it right, and that these are simply “reverse settlement” agreements and should be validly upheld as “independent business transactions.”

Before the Supreme Court…

Before an eight member court, as Justice Alito has recused himself, the possibility of a split decision and the perpetuated circuit split remains.  The Justices primarily questioned the two sides on why either the Rule of Reason approach or the Per Se approach to addressing whether these agreements were antitrust violations were appropriate.  Though there seemed to be some agreement that these types of agreements might be anticompetitive, there was no seeming majority as to which approach the court should take in their analysis.  The Justices seemed to lean toward allowing federal district court judges the flexibility to analyze these cases on an individual basis as to the underlying intentions of the parties.

The Justices also asked many questions regarding the unintended consequences and “loop-holes” that were created by the Hatch-Waxman act.  They acknowledged that the act and its subsequent amendments were intended to encourage generic companies to challenge brand-name patents, but they also noted that there were no real requirements on the generic companies to bring these challenges and there was an incentive to bring them with no real monetary loss if they did not prevail.

The government argued that if these were merely settlements regarding the patents that the agreement should only be allowed to include a splitting of the exclusive period, and no payment.   The government added that their analysis of these payments as presumptively illegal could be rebutted by various justifications by the drug companies such as precompetitive reasons, or payment for wholly separate reasons.

The defendant drug companies argued that these are not anticompetitive agreements, and even the Rule of Reason analysis is not appropriate because the prima facie element of “anticompetitive effect” cannot be shown unless the underlying patent infringement case went all the way to judgment with the generic company prevailing.  Though the drug companies stated that there is nothing in Hatch-Waxman that encourages or requires patent litigation to go to judgment, or discouraging settlement, Congressman Waxman (sponsor of the bill) filed an Amicus brief in which he wrote that upholding these types of “reverse settlement” payments would “turn [the legislation] on its head.”

What it might mean for consumers…

If the Supreme Court decides on a rule of reasons analysis, it will be very difficult for the government to bring their antitrust case.  In these circumstances, the government must show either anticompetitive effect, or go through the often long and difficult process of defining the market and demonstrating market power.  If they decide on the “Quick Look” approach, the government does not have to go through this market definition so long as there is some basic reasonable demonstration of anticompetitive effect, and the burden would shift to the drug companies to argue some precompetitive justification.  Finally, if the court decides on per se illegality, this type of agreement would always be unlawful (though it seems unlikely the court will choose this path).

Under either the rule of reason or Quick Look approach these types of settlements will continue.  Perhaps the effect may be that generic companies will only bring Hatch-Waxman patent challenges when they believe they have a stronger case, or believe that the patent is very weak.

If the Supreme Court sides with the FTC, then perhaps Hatch-Waxman litigation will continue to judgment more often, but this could have both positive and negative effects.  If these suits go to judgment and the generic companies win, more products will enter the market at generic prices sooner a positive for the consumer.  However, if generic companies lose and brand-name companies have to continue to take on these suits (where generic companies may not risk much), and bear the costs of expensive litigation, these costs may be passed on to the consumer in the form of even higher brand name drug prices.

One interesting point of the oral arguments was when Justice Kennedy attempted to pry into the underlying premise that these monopoly protections for brand name patents help cover the very high cost of research and development.  Justice Kennedy pressed the respondant counsel four times over whether there was any evidence in the record as to the actual cost of development of drugs.  The answer was vague, and perhaps intentionally so.  There are many skeptics who criticize that there is no transparency as to the real cost of drug development, and perhaps that drug companies keep it that way so as to avoid challenge of their high cost of drugs to consumers.   For now these questions remain unanswered, and we will have to wait for the Supreme Court’s decision later this year to see if they issue a decisive opinion.

Judge with Gavel Doctors and other healthcare providers are charged with an ethical duty to maintain patient confidentiality and protect sensitive medical information from an unnecessary disclosure.

Such duty is based on an individual’s right to privacy and on the general principle that people seeking medical help should not be hindered or inhibited by fear that their medical conditions will become known to others. Such assurance is necessary in order for the doctor to provide proper treatment.

Neither AMA’s ethical guidelines nor Hippocratic oath, however, is binding by law.

So to what extent can we really trust that out private information will not be shared with the rest of the world? Under the existing law such assurance seems to be quite vague.

HIPAA, for example, prohibits healthcare providers from disclosing personal health information. Healthcare providers seem to strictly adhere to the Act (sometimes overzealously ). Similarly, New York Public Health Law § 4410 imposes a duty upon healthcare providers to maintain confidentiality of patient treatment records.

These statues, however, do not create a private cause of action, which means that if your health information was improperly disclosed to third parties you can’t go to court and sue a healthcare provider for a violation of the statute. Both statues mainly provide a standard under which doctors and hospitals should operate.

Therefore, if you are in New York and your medical information has been disclosed, your only remedy is a common-law claim of breach of fiduciary duty of confidentiality, which springs from the implied covenant of trust and confidence that is inherent in the physician patient relationship, and the breach of which is actionable as a tort.

But in an unexpected twist, which the Court Of Appeals  is scheduled to address, these common law protections could soon be effectively eviscerated.

Under the common law doctrine of respondeat superior an employer is vicariously liable for the actions of its employees, but only when they commit a negligent act within the scope of their employment and in furtherance of an employer’s business. Thus, if a hospital employee accidentally sends your medical records to your neighbor, the hospital will be liable for this act. But what would happen if a nurse looked into your medical chart, learned that you have an STD and called your girlfriend to inform her about it? In this scenario she does not act within the scope of her employment; she commits a willful wrong motivated by personal interest. Will the hospital be liable and should it?

The Appellate Division, Third Department recognized that a reliance on the traditional doctrine on respondeat superior in such a case will render protection of medical information a nullity because in most cases wrongful disclosure would be made outside of employee’s scope of employment. In Doe v. Cmty Health Plan-Kaiser Corp. (709 N.Y.S.2d 215 (3d Dep’t 2000)) the  court has explained that a corporation always acts through its agents, servants and employees and should be directly responsible if patient’s confidences are breached.

The Second Circuit recently declined to follow this one precedent in Doe v. Guthrie Clinic, LTD. and on March 25, 2013, certified the issue to the New York Court of Appeals.

If the Court of Appeals rules that the corporation should be liable, the ruling will dramatically expand the doctrine of respondeat superior. Such an expansion may very well be justified in the light of the high sensitivity of medical information, but when the law creates one exception there is always the risk of going down the slippery slope.

If the Court, on the other hand, adheres to the traditional doctrine, the protections afforded to patients’ healthcare information will continue to be limited, and if our medical information that the hospital is under the duty to protect appears on facebook the hospital may simply wash its hands of any responsibility.

Gibbons_Institute_196_7 Featuring Robert E. Rudnick and Thomas J. Bean , Directors in the Gibbons P.C. Intellectual Property Department, and Kenneth Corsello of IBM, along with industry, regulatory and academic leaders, this program will address post-grant proceedings under the American Invents Act (AIA), from both the patent owner’s and challenger’s perspectives as well as discovery and other new rules of practice before the Patent Trial and Appeal Board (PTAB).

Presented by
The Gibbons Institute of Law, Science & Technology
Seton Hall University School of Law

APRIL 23, 2013 | 5:30p.m.-7:30 p.m. | 2.0 NY/NJ CLE credit hours | CLE Financial Assistance available – click here | Cost: $30 (includes CLE credits, parking and reception)
(Free to Seton Hall Law Students & Faculty) (+ refund policy)

Location: The event will take place at Seton Hall Law School. For further information about the event, please contact Teresa Rizzo at teresa.rizzo@shu.edu .

Or Register here .

Kate Greenwood_high res 2011 Since its release last month, Sheryl Sandberg’s bestseller Lean In has attracted seemingly continuous attention and controversy.  Critics charge that the book encourages women to “lean in” to their outside-of-the-home work without fully addressing the barriers that might be impeding women’s advancement.  They express concern that too intense a focus on what individual women can do to address the persistent achievement gap between women and men will only result in women blaming themselves for structural, societal problems.  Similar concerns underlie the controversy over workplace wellness programs.  While almost no one is against “wellness,” there is concern that emphasizing what individuals should do to achieve it, potentially on pain of losing their jobs, could be ineffective and even counterproductive.

Workplace wellness programs run the gamut from providing more nutritious food in the office cafeteria, to building an on-site gym, to providing counseling and other supportive services, to positive financial incentives keyed to achieving goals such as blood pressure control or smoking cessation, to negative incentives including hiring bans, health insurance surcharges, and, ultimately, termination.  With regard to variations in the price of health insurance, Tara Ragone has explained that “[a]lthough the [Patient Protection and Affordable Care Act] prohibits issuers in the individual and small group markets from basing premium variations on health status or claims experience, Federal law permits insurers to offer premium discounts to enrollees in the small and large group markets based on participation in certain wellness programs.”  The statute provides for wellness rewards of up to 30 percent of the cost of coverage, and the Secretaries of Labor, Health and Human Services, and the Treasury have discretion to increase the rewards to up to 50 percent.

In Jessica Roberts’ latest article, Healthism and The Law of Employment Discrimination , which is available on SSRN, she explains that while “issues of income, insurance, and health” seem discrete, in fact they are “intimately intertwined.”  Wellness programs could exacerbate existing health disparities by restricting relatively unhealthy individuals’ access to wages, wellness programs, and employer-provided health insurance.  Moreover, while “using tobacco and being overweight are conduct-based statuses”and thus not fully protected under the federal statutes that outlaw trait-based employment discrimination“the underlying choices are not simple ones.”  As Roberts notes, “[t]he lack of access to healthy foods and time to work out or a longstanding addiction to tobacco may be difficult obstacles to overcome without some help.”  Roberts recommends that Congress, or the substantial number of state legislatures that have not already done so, pass legislation shielding employees from discrimination not just on the basis of their health-related traits, but also on the basis of their health-related conduct.  She recommends that such legislation permit employers “to promote the healthy lifestyle choices of their employees through rewards programs that do not relate directly to employment status or compensation.”  I recommend Roberts’ article for its helpful (and thought-provoking) overview of the intersection between employment discrimination law, insurance regulation, and workplace wellness programs and for its nuanced legislative proposal.

I also recommend Wendy Mariner’s article, The Affordable Care Act and Health Promotion: The Role of Insurance in Defining Responsibility for Health Risks and Costs , published last year in the Duquesne Law Review.  In it, Mariner argues, pithily, that “wellness program incentive systems range from minor and marginally effective, to major and possibly coercive.”  She believes that the wellness rewards that PPACA permits “are likely to be too crude to significantly improve the population’s health or save money, and they pose an unnecessary threat to the [statute’s] underlying goals[.]”  By fostering the idea that the unhealthy are at fault for their condition, such rewards may increase resistance to the “public programs to provide preventive services, safer social and built environments, research and education” for which Mariner advocates.  She calls for the elimination of PPACA’s wellness program exception to the ban on basing the price of health insurance on health status or claims experience.  With the projected cost of premiums in the new health insurance exchanges widely-reported and much decried, elimination of the wellness program exception is unlikely.  Mariner’s article nonetheless offers a valuable note of caution as 2014 approaches.

US-DeptOfJustice-Seal.svg In February 2013, a historic $26.1 million settlement was reached under the False Claims Act and Anti-Kickback Statute in a qui tam action against Florida dermatologist Steven Wasserman. U.S. ex rel. Freedman v. SuarezHoyos et al., No. 04-933 (M.D. Fla. 2012).

False Claims Act

The False Claims Act (FCA) is written to protect against physicians and hospitals presenting false claims to Medicare and Medicaid for reimbursement.  The FCA imposes civil liability for an individual or entity that “knowingly presents or causes to be presented, a false or fraudulent claim for payment or approval” to the federal government.  31 U.S.C. § 3729 .  This includes, but is not limited to, presenting claims for reimbursement of medically unnecessary services as well as reimbursement of claims for services that were never performed.  Violation of the FCA carries high civil penalties of not less than $5,500 and not more than $11,000 for each claim filed plus three times the damage sustained by the government.  § 3729(a)(1) .

Anti-Kickback Statute

Allegations

Alan Freedman, a former employee of Suarez and Tampa Pathology Laboratory (TPL), brought this qui tam action.  A qui tam action is one in which an individual brings a suit under the FCA on behalf of the government.   31 U.S.C. § 3730(b) .  Within sixty days of the filing of a qui tam action, the government has the option to intervene and conduct the action.  § 3730(b)(4)(A) .  In this case, the government intervened and proceeded with the action.  The government alleged that beginning in 1997 Steven Wasserman, a Florida dermatologist, entered into a kickback arrangement with SuarezHoyos, a pathologist and the owner of TPL.  DOJ Report Feb. 11, 2013 . According to the DOJ Report: in order to increase lab referrals Wasserman would send biopsy specimens to TPL for testing. Id.  The biopsy specimens sent to TPL were taken from Medicare beneficiaries. Id. TPL would return the specimens to Wasserman in a report that included space for Wasserman to sign his name indicating that he performed the test, even though it was TPL that performed the test. Id.  In passing this work off as his own, Wasserman was able to bill Medicare for the biopsies, receiving around $6 million in Medicare payments for services he did not perform.  Id. In addition to this, Wasserman allegedly “substantially increased the number of skin biopsies” he performed in order to increase referral business for TPL.  Lastly, Wasserman allegedly performed thousands of medically unnecessary skin surgeries in order to receive Medicare reimbursement for them.  Id.

If each of the government’s allegations is true, Wasserman’s arrangement with TPL violates both the Anti-Kickback Statute and the False Claims Act.  Wasserman was receiving a kickback in the form of Medicare reimbursements for increasing the referrals to TPL, in violation of the AKS.  In return for increasing the number of referrals to TPL, Wasserman was sent the results from TPL with space for him to sign his name indicating that he had personally performed the test. In turn he presented these results to the government and received Medicare reimbursement.  Thus, in return for referrals to TPL, Wasserman indirectly received remuneration in the form of Medicare reimbursements, made possible by the signature line on the report from TPL.  This violation is also linked to the alleged FCA violation. By presenting claims for reimbursement for the biopsies, and representing that he had performed them when he had not, Wasserman violated the FCA.  Further, by performing medically unnecessary surgeries and presenting claims for reimbursement by Medicare, Wasserman has violated the FCA.

The Settlement

However, Wasserman has not plead guilty to these charges, and this settlement is not an admission of liability to any charge.  Wasserman settled with the government for more than $26 million and has also agreed to be excluded from treating patients and being reimbursed by Medicare, Medicaid or any other federally funded healthcare program. Id. The government also settled the same allegations with TPL and SuarezHoyos for $950,000.  Robert O’Neill, the U.S. Attorney for the Middle District of Florida hailed this settlement as a “watershed achievement in [the] district’s civil health care fraud enforcement program,” and stated that “[s]chemes of this magnitude require extraordinary remedies, and [the district is] proud to have reached such an outstanding resolution for the taxpayers and their health programs.” Id.  “The settlement is the largest ever with an individual under the False Claims Act in the Middle District of Florida and one of the largest with an individual under the False Claims Act in U.S. history.” Id.

snead

O. Carter Snead, William P. and Hazel B. White Director of the Center for Ethics and Culture and Professor of Law, Notre Dame University

“Embryos are living members of the human species,” declared Professor O. Carter Snead of Notre Dame Law School during a presentation to Professor Jordan Paradise’s Law and Genetics class at Seton Hall Law School. Professor Snead, former General Counsel to The President’s Council on Bioethics under President George W. Bush, lectured and met with students  during his residence as Visiting Health Law Scholar  at Seton Hall Law School. Professor Snead presented a lecture to the Law and Genetics class that compared embryonic stem cell patenting in the United States and Europe.

In an interview with Health Reform Watch before his presentation, Professor Snead reflected on his career in bioethics, the role bioethics plays in politics, and the current need for bioethical input.

Regarding what informs his beliefs as a lawyer practicing in bioethics, Professor Snead said before serving as General Council member he “didn’t have settled opinions” and decided his opinions by “listening to debates” and following the teachings of bioethicists such as Michael Sandel, Robert George, Leon Kass, and George Annas. However, he noted that he has always had one main concern: self-governance.  As such, he disapproves of an “enclave of elite thinkers telling everybody what to do and think.”  In order to better democratize bioethical issues, Professor Snead emphasized the importance of recognizing “We all have standing to debate and discuss.  There’s no special expertise necessary to reflect on normative questions.”

In promoting the need for debate on bioethical issues, Professor Snead used physician-assisted suicide as an example to explain the shortfallings of a purely normative approach.  In setting-up a situation where physician-assisted suicide may seem reasonable to many, or “in a vacuum” as Professor Snead referred to it, moral dispute may be limited.  However, he stressed looking at the issue and its “collateral” effects including “exploitation of the poor, abuse of the disabled, and fraud and abuse.” Professor Snead contended that in order to avoid the collateral consequences, “We have to sacrifice [the] liberty of the small sliver of people who might be able to autonomously choose to end their own lives free from coercion, fraud, and abuse.” Which is to say that those most vulnerable the poor, the disabled and those most readily susceptible to fraud and abuseare not necessarily best situated to advocate for themselves. If these most vulnerable are to be properly considered, “the vacuum,” and those who construct it, must be left behind and the actualityin its broader senseconsidered.

This example led Professor Snead to advocate for responsible discussion on bioethical issues and criticism for politicians who inappropriately use the issue on their campaign platform.  ”Politicians I.D. wedge issues and try to spin the issues.  We end-up with a dishonest discussion,” stated Professor Snead.

In answering a question on what role American bioethical principles play in the global community, Professor Snead said he disfavors “exporting our bioethical approach,” noting that bioethics and moral anthropology closely coincide.  He stated, “Who you think human beings are, what are our relations to each other” is what informs a nation’s bioethical beliefs and that there is “no formulaic way.” However, Professor Snead did note, “Bioethics is an application of deeper human principles across a variety of factual and cultural contexts.”  As a law professor, he uses this philosophy and teaches “by exposing students to competing views in a neutral fashion, exploring the strengths and weaknesses of the various approaches.”

On the topic he presented to the Law and Genetics class, Professor Snead’s bioethical standpoint is that embryos are human subjects entitled to “A baseline of inalienable rights,” and further noted that, “Embryonic stem cells are not yet capable of producing therapies.”  He pointed to the potential therapeutic value of induced pluripotent stem (iPS) cells, a type of adult stem cell, and described the cells: “easier to work with, less ethically contentious, and seems to be doing the same as embryos.”  Addressing concerns of other nations conducting research with embryonic stem cells, Professor Snead stated: “The best researchers are in the US.  I’m not worried about falling behind in any area of scientific inquiry.”

Hitech Privacy This program will examine the most current issues, enforcement trends, and regulations relevant to healthcare data privacy experts who counsel hospitals, providers, and other healthcare facilities.

In collaboration with the Bergen County Prosecutor’s Office; 6 NJ/NY CLE credits. Click here for more information or to register.

Helen Oscislawski is the founder of Oscislawski, LLC in Princeton.  She provides legal guidance on HIPAA, HITECH, state privacy laws, electronic health information exchanges and health information technology to HIEs, RHIOs and ACOs, and counsels other healthcare clients in various matters.

Ms. Oscislawski was appointed by Governor Jon Corzine in 2008 to the New Jersey Health Information Technology Commission (NJHITC) and was reappointed to the NJHITC by Governor Chris Christie in 2010 where she also served as Chair of the Privacy and Security Committee for NJHIT Coordinator. She is the primary author of Update to Privacy and Security Compliance Manual, which was developed for the New Jersey Hospital Association and, most recently, she has developed and authored several editions of the HIPAA-HITECH Helpbook, a manual that combines tools and sample forms that address HITECH changes, state law and other considerations and Meaningful Use and Health Information Exchanges.

Before founding Oscislawski, LLC, Ms. Oscislawski was a healthcare attorney at Fox Rothchild in Princeton, New Jersey, where she counseled healthcare clients on a wide range of legal matters. She received her BA from Rutgers University, Douglass College and her JD from Rutgers School of Law.

Professor Frank Pasquale is the Schering-Plough Professor in Health Care Regulation and Enforcement at Seton Hall Law School. Professor Pasquale has taught information and health law at Seton Hall since 2004.  He has published over 20 scholarly articles. His research agenda focuses on challenges posed to information law by rapidly changing technology, particularly in the health care, internet, and finance industries.

Professor Pasquale is an Affiliate Fellow of Yale Law School’s Information Society Project.  He has been named to the Advisory Board of the Electronic Privacy Information Center. He has served on the executive board of the Health Law Section of the American Association of Law Schools (AALS), and has served as chair of the AALS Section on Privacy and Defamation.

Professor Pasquale received his BA from Harvard University (summa cum laude), his M.Phil. from Oxford University, and his JD from Yale Law School.

Jaime S. Pego is a Director in the Short Hills, New Jersey, office of KPMG LLP’s Healthcare Advisory Services Practice and serves as the firm’s National HIPAA Privacy Director. She has substantial experience in healthcare regulatory compliance and healthcare-related advisory services.

Ms. Pego works with a variety of healthcare clients to assist with identifying and preventing compliance risks and complying with federal and state regulations. Her work for KPMG includes serving as lead director for OCR HIPAA audits, as well as acting as Privacy Lead for the KPMG HIPAA national service line assisting covered entities and business associates with HIPAA compliance. She has conducted internal investigations concerning a variety of topics, including fraud and abuse, HIPAA violations, as well as other legal and regulatory matters, and researched and developed compliance policies for institutions in the areas of gifting under the Anti-Kickback Statute and Stark Law, the DRA, HIPAA, EMTALA and others. She participates in the KMPG National HIPAA working group to develop tools and methodologies for client needs, and conducts and manages ICD-10 Impact Assessment at a variety of healthcare organizations to help identify gaps in ICD-10 readiness. She has also served as the firm’s lead manager for health care reform legislative analysis and research.

Prior to coming to KPMG, Ms. Pego was a Local Compliance Officer at a teaching hospital and outpatient center for one of New Jersey’s largest health care systems and has worked with some of the country’s leading health systems. She received her BA from American University and her JD from Seton Hall University School of Law, with a Concentration in Health Law, and is Certified in Healthcare Compliance (CHC) by the Health Care Compliance Association (HCCA).

Joy Pritts joined the Office of the National Coordinator for Health Information Technology (ONC), Department of Health & Human Services in February 2010 as its first Chief Privacy Officer. Ms. Pritts provides critical advice to the Secretary and the National Coordinator in developing and implementing ONC’s privacy and security programs under HITECH. She works closely with the Office for Civil Rights and other operating divisions of HHS, as well as with other government agencies to help ensure a coordinated approach to key privacy and security issues.

Prior to joining ONC, Ms. Pritts held a joint appointment as a Senior Scholar with the O’Neill Institute for National and Global Health Law and as a Research Associate Professor with the Health Policy Institute, Georgetown University. She has an extensive background in confidentiality laws including the HIPAA Privacy Rule, federal alcohol and substance abuse treatment confidentiality laws, the Common Rule governing federally funded research, and state health information privacy laws.

Ms. Pritts received her BA from Oberlin College and her JD from Case Western Reserve University.

Anna Spencer is a partner in Sidley Austin’s Washington, D.C. office whose practice focuses on health care. Ms. Spencer primarily works on matters involving the privacy and security of health information and she is the firm’s global coordinator for health information privacy. She regularly counsels a broad range of clients on healthcare information privacy and security issues. This includes assisting clients with respect to HIPAA and HITECH and has significant experience in investigating and responding to data breaches and information security incidents. She has represented clients in connection with data breach reporting obligations under the HITECH regulations for breaches of protected health information and defended health care providers in investigations initiated by the Office of Civil Rights, Department of Health and Human Services.

On behalf of covered entities and entities that qualify as HIPAA business associates, Ms. Spencer has developed multiple HIPAA privacy and security compliance and training programs. She has negotiated hundreds of Business Associate Agreements on behalf of various clients.

Ms. Spencer has spoken on privacy/security matters on behalf of numerous groups such as BNA and the American Conference Institute. She has authored a variety of articles on privacy/security issues, Medicare coverage, and fraud and abuse. She is currently authoring a book for BNA on health information privacy.  Ms. Spencer received her BA from Sewanee and her JD from Vanderbilt University School of Law.

Mark Swearingen coordinates the HIPAA practice and provides counsel on health information privacy and security matters such as breach response and notification and the creation, use, disclosure, retention and destruction of medical records and other health information at the Indianapolis law firm, Hall, Render, Killian, Heath & Lyman, P.C. His counsel to clients also includes a variety of health care topics related to regulatory compliance, physician and clinical services contracting, risk management and Independent Review Organization services. He has provided such services to a broad spectrum of health system, hospital, physician practice, diagnostic imaging center, ambulatory surgical center and long-term care facility clients.

Mr. Swearingen has spoken and written nationally and regionally on numerous topics, including antitrust, electronic medical records and health information privacy and confidentiality. He is an adjunct professor of a course in Law and Medicine at the Indiana University School of Informatics at IUPUI.

Mr. Swearingen received his BA from Indiana University and his JD from Seton Hall Law School.

Seton Hall Professor and Health Care Regulation Expert Frank Pasquale to Present Draft White Paper Outlining Options and then Moderate a Discussion on its Pros and Cons with Fellow Academics

pasquale_frank_lg11 Washington, D.C. – Seton Hall University School of Law hosted an academic roundtable discussion on how our current healthcare law will respond to the new technology environment – in particular, maintaining privacy for consumers as the health industry expands adoption of cloud computing, on Friday, March 22, 2013. Seton Hall Professor Frank Pasquale moderated the event, “The Future of HIPAA and The Cloud,” and also released a white paper he coauthored with Tara Adams Ragone on the challenges that cloud computing technologies pose to the Health Insurance Portability and Accountability Act (HIPAA).

As the recent HIPAA Omnibus Rule showed, regulation must both reflect and shape technological advances. As stakeholders face new challenges and opportunities, the roundtable asked: What is the future of HIPAA in the cloud? How will patient data be used? What is the role for third party vendors? And who should be held responsible for security breaches in the cloud?

White paper abstract:

This white paper examines how cloud computing generates new privacy challenges for both healthcare providers and patients, and how American health privacy laws may be interpreted or amended to address these challenges. Given the current implementation of Meaningful Use rules for health information technology and the Omnibus HIPAA Rule in health care generally, the stage is now set for a distinctive law of “health information” to emerge. HIPAA has come of age of late, with more aggressive enforcement efforts targeting wayward healthcare entities. Nevertheless, more needs to be done to assure that health privacy and all the values it is meant to protect are actually vindicated in an era of ever faster and more pervasive data transfer and analysis.

After describing how cloud computing is now used in healthcare, this white paper examines nascent and emerging cloud applications. Current regulation addresses many of these scenarios, but also leaves some important decision points ahead. Business associate agreements between cloud service providers and covered entities will need to address new risks. To meaningfully consent to new uses of protected health information, patients will need access to more sophisticated and granular methods of monitoring data collection, analysis, and use. Policymakers should be concerned not only about medical records, but also about medical reputations used to deny opportunities. In order to implement these and other recommendations, more funding for technical assistance for health privacy regulators is essential.

Andrew Koppelman 2

Professor Andrew Koppelman

Q. (Tim Jost) Your book explains, for the general reader, what was at stake in the health care fight and what the Supreme Court did.  Why should the general reader care?  All this is old news.

A. (Andy Koppleman) If you’re sitting on a hill, and a large boulder rolls past you, it’s a good idea to look uphill to see if any more boulders are coming.  The history matters because it shows that there are real dangers.

Last spring, the Supreme Court came within one vote of taking health insurance away from more than 30 million people.  Chief Justice John Roberts declined to join the four judges who wanted to do that, but he embraced all their principles.  Those principles are nasty.  All five judges think that universal health care would be unconstitutional.  All are suspicious of a law that asks the healthy and rich to support medical care for the sick and poor.  All of them are still on the Supreme Court.  They continue to exercise political power over the rest of us.  Americans need to understand what happened.

Q.  So what do you tell us that we don’t already know from the news stories?

A.  My book explains why Obama decided to include the unpopular provision requiring everyone to have insurance.  I also show that the Republicans, who originally proposed that idea, turned against it just because they wanted to deny Obama a victory.  Most importantly, I show where they got the idea that the mandate was somehow a violation of an important liberty.

Q.  Why did the constitutional case take the form it did?

A.  The Republicans’ objection to the Act was a combination of politics and substance.  Some of them honestly thought it was bad policy.  But you can’t challenge a law in court because you don’t like the policy.  You need to make a constitutional objection.  The constitutional objection was invented, in sketchy form, just as the bill neared passage and almost instantly became Republican Party orthodoxy.  It relied on an extreme libertarian philosophy, which holds that, if you get sick and can’t pay for it, that’s your tough luck.  The challengers’ arguments would have struck down the Act even if the alternative was a huge population of uninsured.  The dark heart of the case against the ACA is the notion that the law’s trivial burden on individuals was an outrageous invasion of liberty, even when the alternative was a regime in which millions were needlessly denied decent medical care.

Q.  What about the legal arguments?

A.  These are less complex than many people think.  Insurance is part of commerce among the several states.  Congress can regulate it.  Therefore, Congress can prohibit health insurers from discriminating on the basis of preexisting conditions.  Under the Necessary and Proper Clause, it gets to decide what means it may employ to make that regulation effective.  I explain how the challengers tried, and failed, to get around this simple argument.

Q.  Much of your book deals with the history of these constitutional provisions that formed the basis for the ACA litigation.  Why should we care about this history?

There are two reasons.  One is that, in interpreting any law, it is helpful to know the reasons why the law was passed.  The second is that the framers of the Constitution were very bright people, and their insights are useful in addressing today’s problems.

The Constitution was adopted specifically in order to give Congress power adequate to address the nation’s problems.  That is its fundamental and overriding purpose.  The health care issue is one that the states had tried and failed to address: only Massachusetts did it, and its circumstances were very unusual.  A situation in which neither the states nor the federal government could solve the country’s problems was what we had under the Articles of Confederation.  It is precisely what the Constitution was intended to prevent.

Q.  What are the boulders that you suggest may still be coming down the hill?

A.  The real moral force behind the challenge to the ACA wasn’t any technical legal argument.  It was most clearly stated at the oral argument, by Justice Antonin Scalia.  The counsel for the United States argued that the state legitimately could compel Americans to purchase health insurance, because the country is obligated to pay for the uninsured when they get sick.  Scalia responded:  “Well, don’t obligate yourself to that.”

Q.  Does Justice Scalia really think that there’s no obligation to care for sick people?  Why was he saying this?

A.  The answer has to do with the structure of constitutional law.  If you want to trash the ACA –- and Scalia did –- you have to assert constitutional limits that would exist even if there were no other way to deliver medical care to everyone.

This is why so many people (including, in the end, a near-majority of the Court) who were not Tough Luck Libertarians at all, who would find that philosophy repellent, nonetheless found themselves saying Tough Luck Libertarian things, and making claims based on a Tough Luck Constitution –- a constitution in which there is no realistic path to universal health care.  That Constitution won’t be attractive unless Tough Luck Libertarianism is right that it is acceptable to deny people the medical care they need.  The challengers to the ACA talked a lot about slippery slopes – at the bottom of this one was a law requiring you to buy broccoli – but there’s a slope in the other direction as well.  Once you decide that it’s acceptable to hold your nose and make this kind of argument, it will be easier next time.

Q.  The NFIB case which the Supreme Court decided was only one of dozens of cases that have been brought challenging the Affordable Care Act.  One of those cases brought by Liberty University challenged that provision of the ACA requiring large employers to offer health insurance to their employees or pay a tax penalty.  Liberty University lost that case in the Fourth Circuit Court of Appeals, but the Supreme Court remanded it for reconsideration.  Is there any possibility the courts will find that Congress lacks the power to require large employers to offer health insurance?  Would Tough Luck Libertarianism go this far?

A. It’s hard to see how.  The employer mandate is described as a tax in the statute.  The individual mandate isn’t, but the Court upheld it as a tax.  Chief Justice Roberts also objected to the mandate because you don’t have to do anything to be subject to it.  To be subject to the employer mandate, you have to decide to employ people.  Congress has had the power to regulate economic transactions for nearly a century.  Even the Roberts Court isn’t going to change that.

Q.  Several states are refusing to implement the insurance market reforms imposed by the ACA and one state is considering legislation that would prohibit the licensure of an insurance plan that would participate in an ACA exchange.  Does the Supreme Court’s decision give any hope to states that are still refusing to assist in implementing the ACA?

A. If states won’t participate in the health exchanges, then the Federal government can and will do it for them.  That has already been happening.  It has been well settled for years that state laws designed to disrupt the operation of a federal law are unconstitutional.

The one part of the Court’s decision that empowers the states to stay out of the federal scheme is Chief Justice Roberts’s decision that states could refuse to provide Medicaid to their poorest citizens.  The Court ruled that the states could turn down the Medicaid expansion while continuing to participate in the old Medicaid program.  One might have expected that no state would turn down such a good deal: the federal government will pick up 100% of the costs until 2016, with its contribution gradually declining to 90% in 2020 and thereafter.  And there is added pressure to take the money, because previous forms of federal aid were cut off.  Hospital associations agreed to accept cuts to their reimbursement rates, expecting that this would be more than made up by money from patients newly insured through Medicaid.  States refusing the money would not only be hurting their own working poor.  They’d be rejecting a huge infusion of cash into their economies, creating many, many jobs –- good jobs, for doctors and well-paid medical technicians.  That money has a powerful multiplier effect, creating jobs outside the health sector as well.

Many Republican governors have now turned down the money, but that number is shrinking.  Gov. Rick Scott of Florida, for instance, recently changed his mind.  The big question mark is Texas.  One in four Texans is uninsured.  The ACA would insure almost two million of them.  The expansion would give Texas an additional $52.5 billion from 2014-2019, which is more than half of the state’s annual budget.  Gov. Rick Perry has insisted that he won’t take the money.  If you are a hospital executive in Texas, you probably have a fiduciary duty to do all you can to defeat Rick Perry.  Meanwhile, the Court has succeeded in hurting millions of people.  Four days before Perry announced his decision, the federal Agency for Healthcare Research and Quality ranked Texas as having the worst health care in the nation.  This is the Court’s notion of “liberty.”

Timothy S. Jost holds the Robert L. Willett Family Professorship of Law at the Washington and Lee University School of Law. He is a co-author of the casebook, Health Law, used widely throughout the United States in teaching health law, and of a treatise and hornbook by the same name. His other publications are simply to numerous to list.

Andrew Koppelman is John Paul Stevens Professor of Law, Northwestern University.  He has written extensively about the legal debate surrounding the Affordable Care Act for Salon . His latest book, The Tough Luck Constitution and the Assault on Healthcare Reform , will be published by Oxford University Press on March 22, 2013 and available online and through bookstores everywhere.

“Andrew Koppelman has magnificently captured the current legal, political and policy-related lay of the land in Washington. His insightful analysis here should be mandatory reading for anyone concerned about the future of health care in America.”

Tom Daschle, former Senate Majority Leader

 

 

 

jacobi_john Professor John Jacobi appeared in a feature Op-ed in The Record, describing the veto of New Jersey’s health insurance exchange bill as “a lost opportunity.” Professor Jacobi writes:

MANY STATES are gearing up their health insurance exchanges to accept new enrollees in October. Others, including New Jersey, have refused to do so, leaving the management of these important new institutions to the federal Department of Health and Human Services.

Although he announced in budget address last month that New Jersey would expand its Medicaid program, Governor Christie left unchanged his veto of the state’s exchange law. When he vetoed the Legislature’s bill that would have created a New Jersey exchange, Christie decided to leave the task to the federal government, citing the possible costs the state would incur running the exchange.

The governor was correct that there would have been costs, notwithstanding the offer of extensive federal funding. And the rejoinder of some opponents of the governor’s position that the costs could be covered by assessments on insurers is too easy an answer. Insurance assessments, after all, raise the cost of coverage for individuals and businesses.

But the burden of the assessments was worth the cost, and, as I describe below, the risk of pushing the task off to the federal government puts the most vulnerable of New Jersey’s residents at risk.

Read The Record’s featured Op-ed, “ Health reform: a lost opportunity.

 

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Expect to keep hearing more talk about health care cost cutting, despite charts like this . It’s an idee fixe of the Wall Street/Washington corridor, and will only be implemented more vigorously over time.  So perhaps we should take stock of a few cost cutting initiatives. Medicare Part D, it seems, is coming way under its projected budget.  But maybe that’s because of  ”a sharp fall in the number of breakthrough drugs,” a sign that innovation in pharma is stalling.  Cost cutting triumph, or logical outgrowth of a system that fails to reward actual contributions to health ?

There’s also been a lot of pressure on skilled nursing facilities to hold the line on costs.  What are we getting in return? Here’s a summary from OIG :

Skilled nursing facilities (SNF) are required to develop a care plan for each beneficiary and provide services in accordance with the care plan, as well as to plan for each beneficiary’s discharge. . . For 37 percent of stays, SNFs did not develop care plans that met requirements or did not provide services in accordance with care plans. For 31 percent of stays, SNFs did not meet discharge planning requirements. . . . [R]eviewers found examples of poor quality care related to wound care, medication management, and therapy. These findings raise concerns about what Medicare is paying for. They also demonstrate that SNF oversight needs to be strengthened to ensure that SNFs perform appropriate care planning and discharge planning.

I’m sure the health care cost cutters will use this evidence to demand the SNFs be paid even less–rather than, say, investing real funding in proper training and pay in this vital service sector.  At some point, though, costs get cut so much that Medicaid will become little more than a meaningless plastic card, and “SNF” will stand for “Scarce Nursing Forever.”

This post first appeared on HealthLawProf Blog .

Paper Warns Against ‘Nonexistent Safety Data’ and Charts a Course for FDA Oversight

Seton Hall Law Professor Jordan Paradise has released her newest paper, “No Sisyphean Task: How the FDA can Regulate Electronic Cigarettes,” scheduled to be published this Spring in Volume 13 of the Yale Journal of Health Policy, Law, and Ethics.

A report issued in February 2013 by the Centers for Disease Control and Prevention (CDC) estimates that as of 2011 “about one in five U.S. adult cigarette smokers have tried an electronic cigarette,” nearly twice as many as in 2010. CDC’s director, Tom Frieden, MD, MPH, remarked that “E-cigarette use is growing rapidly” but also noted that “there is still a lot we don’t know about these products….”

In “No Sisyphean Task: How the FDA can Regulate Electronic Cigarettes,” Professor Paradise investigates the rise of the e-cigarette phenomenon in the wake of the recently enacted Family Smoking Prevention and Tobacco Control Act of 2009 (TCA), the tumultuous history of attempts at tobacco regulation through Congress, the FDA and the courts and suggests a feasible approach to strengthening regulation of e-cigarettes under the existing statutory framework. These measures would facilitate oversight and the compilation of a safety profile for e-cigarettes; such a profile is conspicuously absent at present.

In the paper, Professor Paradise explains that because e-cigarettes contain nicotine, and are “derived from tobacco,” they have been found to fall under the designation of “tobacco products” under the TCA. Any product designated a Tobacco Product may not be considered a drug or medical device for FDA oversight purposes. Although e-cigarettes have been found to be a tobacco product, they are neither “cigarettes” nor “smokeless tobacco” under the statutory definitions.  This leaves their regulation unclear as neither drug-devices absent blatant health claims (which would subject them to rigorous preapproval clinical trials) nor cigarettes (subjecting them to flavor additive bans, advertising restrictions, and graphic warnings).  These perceived statutory gaps have thus far allowed the manufacturers, marketers and distributors of e-cigarettes  to sell their product to the public, largely unregulated and unsupervised.

Professor Paradise notes, “E-cigarettes are one of those products for which the technology has seemingly outpaced the law.  In fact, most of the core provisions of the TCA aimed at restricting youth access to smoking apply only to cigarettes and smokeless tobacco.  But there is sufficient foundation under the TCA for oversight of e-cigarettes, and that oversight can be used to inform consumers of the potential risks to health as well as any benefits.” She continued, “Although there seems to be a great many people who have benefitted from e-cigarettes to quit or drastically reduce their smoking, there is currently a dearth scientific testing, comparative data, manufacturing and quality controls, limits on nicotine levels, product standards, or labeling requirements.  This results in vials of the addictive drug nicotine being distributed for public consumption unchecked.  We don’t necessarily know what’s in e-cigarettes, we don’t know how much, nor do we know what e-cigarettes will ultimately do, health wise, to those who use them or those who are exposed to them second hand.”

As an example of potential for oversight of e-cigarettes under the existing statutory framework, Professor Paradise points out that the statute provides for heightened requirements for what are known as “modified risk tobacco products,” defined as “any tobacco product that is sold or distributed for use to reduce the harm or the risk of tobacco-related disease associated with commercially marketed tobacco products.”  The FDA has clarified the definition to say that what constitutes a “modified risk tobacco product” may be found through a product’s label, and it’s advertisingeither explicit or implicit and through any type of media.  Products which meet this definition are subject to satisfying the scientific data and comparative study requirements set out by the FDA.

In addition, Professor Paradise notes that “products which make ‘therapeutic claims,’ such as signaling that a product is intended for use as an aid in smoking cessation, reduction, or as a healthy alternative to smoking, will trigger the drug or medical device provisions under the Food Drug and Cosmetics Act as a threshold matterbringing with it, again, the need for scientific data and comparative studies. The intent in ‘Intended use’ may be determined through explicit claims or ‘expressions’ by the original manufacturer or subsequent marketer or affiliates, or, according to the FDA, ‘be shown by the circumstances surrounding the distribution of the article.’”

A good look at the advertising for e-cigarettes and the circumstances surrounding their distribution is compelling, she said.”

Recommendations:

  • Scrutinize claims and representations of e-cigarette manufacturers and distributors and identify those that trigger drug-medical device requirements.  These representations can be found on the labeling, packaging, advertising, and all printed promotional materials; television, internet, radio, and other communications; and statements in public documents, including patents and SEC filings.
  • Examine the actual consumer use of e-cigarette products to support enforcement based on drug-device requirements because of the widespread intended use of the products for smoking cessation or reduction.
  • Utilize the “new tobacco product” and “modified risk tobacco product” provisions contained in the TCA to implement heightened requirements for e-cigarettes.
  • Provide clarity on the application of universal tobacco product requirements contained within the TCA and FDA regulations regarding manufacturer registration, disclosure to FDA of ingredients, and manufacturing practice requirements.
  • Promulgate e-cigarette regulations and issue guidance documents for standardization, reporting, and labeling, including:

o   Product standards

o   Good manufacturing practices and quality control mechanisms

o   Uniform labeling and listing of ingredients on the label

o   Prominent and uniform display of nicotine levels

  • Congressional amendment of the TCA to include e-cigarettes in the flavor additive ban, advertising and marketing restrictions, and other provisions to protect adolescents and youth.
  • Proactive assessment by states and localities of the scope of laws covering access to tobacco products and public smoking bans.  Many are drafted in a manner that does not encompass e-cigarettes and “vaping”; states and localities should determine whether they should amend them to include e-cigarettes.

The paper, “No Sisyphean Task: How the FDA can Regulate Electronic Cigarettes,” may be found here on SSRN: http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2118802;

Contact info may be found here .

 

The Seton Hall Law Center for Health & Pharmaceutical Law & Policy advances scholarship and recommendations for policy on the varied and complex issues that emerge within pharmaceutical and health law. Additionally, the Center is a leader in providing compliance training on the wide-ranging state, national and international mandates that apply to the safety, promotion and sale of drugs and devices. Seton Hall University School of Law, New Jersey’s only private law school and a leading law school in the New York metropolitan area, is dedicated to preparing students for the practice of law through excellence in scholarship and teaching with a strong focus on experiential learning. Founded in 1951, Seton Hall Law School is located in Newark and offers both day and evening degree programs. For more information visit law.shu.edu .

 

tara-ragone Research Fellow & Lecturer in Law Tara Ragone appeared in Modern Healthcare on the potential impact of a recent U.S. Supreme Court decision which found a hospital not exempt from antitrust scrutiny, despite its claim to be protected from such through “state action immunity doctrine,” which, according to Modern Healthcare, “gives states wide latitude to regulate competition.”

The Court’s decision was unanimous, citing the fact that although the hospital system in question, Phoebe Putney Health System, “operates public hospitals under a $1-a-year lease from the Albany-Dougherty Hospital Authority,” it did not dispute that its latest hospital acquisition would give it “control of 86% of  a six county market after the sale.” The Court, according to Modern Healthcare, ruled that Phoebe Putney’s financial relationship with the state was not sufficient to render its state action immunity defense tenable, and that “states must expressly grant antitrust immunity to local entities.”

The Modern Healthcare article notes, however, that the decision may also have impact on Medicaid ACOs under the ACA.

Modern Healthcare writes:

And it also could affect Medicaid ACOs. “The state action doctrine has been expanded, expanded, expanded to essentially immunize them,” [Matthew] Cantor said. “The Supreme Court is going to look a bit wary about stark anti-competitive behavior.”

But Tara Adams Ragone, a research fellow and lecturer at Seton Hall University School of Law who has written about how to structure Medicaid ACOs to avoid antitrust scrutiny, noted that the laws in New Jersey, New York, Oregon and Washington do state that they intend to authorize anti-competitive behavior.

“It doesn’t change things from my analysis,” she said about the Phoebe Putney decision. Yet she added that states may have to review statutes that don’t contain that explicit language.

The Phoebe Putney decision also doesn’t address the second prong of the state action doctrine, which requires states to actively oversee the anti-competitive behavior. “That’s where there’s a lot of work to be done,” she said.

Ragone and Cantor pointed out that it’s still unclear whether the FTC and U.S. Justice Department even intend to challenge ACOs as anti-competitive. A classic antitrust case involves entities colluding to fix pricesbut the whole goal of an ACO is to reduce costs.

Read the full Modern Healthcare article, “ Phoebe Putney dealt legal blow by Supreme Court .”

jacobi_john Professor John Jacobi published a feature Op-ed in The Record, New Jersey’s most awarded newspaper, on the impact Governor Chris Christie’s decision to expand Medicaid under the ACA will have.

Professor Jacobi writes:

GOVERNOR CHRISTIE’S decision to expand Medicaid coverage to more residents will improve the health of many low-income New Jerseyans, and save the lives of some. In addition, the expansion dovetails with other reform efforts in the state, furthering implementation of innovative programs for the poor and vulnerable.

The governor’s announcement is great news for low-income individuals. The Rutgers Center for State Health Policy estimates that the expansion will lead to an enrollment increase of about 234,000 in NJ FamilyCare, which combines New Jersey’s Medicaid and Children’s Health Insurance Program.

The expansion addresses gaps in the current Medicaid system, under which many poor people were ineligible even if they had absolutely no income or assets.

The expansion will plug those gaps, allowing people to enroll so long as they are lawful residents with an income of no more than about $15,414 per year, which is about the gross income of a full-time minimum wage worker.

Health insurance coverage is important to personal health, and it is simply not true that all Americans have meaningful access to health care. As the Institute of Medicine of the National Academy of Sciences has found, people who have health insurance including Medicaid have better access to a regular source of health care. Those with no coverage, in contrast, are more likely to do without medically necessary care, particularly for chronic conditions, and to not fill prescriptions due to cost.

As a consequence, the uninsured are more likely to be in “fair” or “poor” health and to die before their time. Medicaid expansion will keep people healthy and even save lives.

 

Read the full feature, “ How Medicaid expansion will help New Jerseyans

 

Fda This past September, the Food and Drug Administration (FDA) issued a Warning Letter against L’Oreal, the world’s largest cosmetics company.  The FDA cited claims gathered online from a subsidiary of L’Oreal, Lancôme, about its expensive Genifique, Absolue, and Renergie anti-aging creams and serums. Claims such as “[U]nique R.A.R.E. oligopeptide helps to re-bundle collagenand “[B]oosts the activity of genes and stimulates the production of youth proteins” were deemed “intended to affect the structure or any function of the body,” thus rendering the claims to be drug-like under section 201(g)(1)(c) of the FDCA. Lancôme could either submit their cosmetics to the rigorous New Drug Approval process, in which safety and efficacy would be tested, or discontinue making such claims.  Lancôme chose the latter.

Although the FDA possesses the authority to regulate cosmetics companies, traditionally the agency has not enforced provisions of the FDCA against big name cosmetics corporations.  However, Lancôme has not been the only major cosmetics company to recently receive a Warning Letter for making drug-like claims. In October of 2012, the FDA sent a Warning Letter to Avon citing claims from their Anew product line.  The drug-like claims included, “The at-home answer to wrinkle filling injections.  Start rebuilding collagen in just 48 hours;” “[W]rinkles are a result of micro-injuries to the skin, so AVON studied how skin heals… ANEW’s Activinol Technology helps reactivate skin’s repair process to recreate fresh skin & help dramatically reverse visible wrinkles;” and, “In just 3 days, see tighter, firmer, more lifted skin.” As with Lancôme’s products, the FDA concluded that these products “are not generally recognized among qualified experts as safe and effective for the above referenced uses.”

The  ultimate impact of an FDA Warning Letter in terms of litigation remains unclear, but the legal industry has taken notice.  Attorneys at Venable LLP point out in their analysis of the FDA’s Warning Letter to Lancôme, “[F]ederal action has been shown to encourage consumer class action lawsuits.” Attorneys at Shook Hardy & Bacon LLP note, “Plaintiffs will allege that consumers were defrauded into purchasing the product because of illegal marketing claims and trumpet those same FDA warning letters as proof that the marketing claims were deceptive under state consumer fraud statutes.”

Those predictions turned out to be true.  Both Avon and L’Oreal and subsidiary Lancôme have been named defendants in multiple proposed class action suits for defrauding consumers. For cases naming L’Oreal and Lancôme as defendants, see Nino v. L’Oreal USA Inc., Case No. 1:12-cv-12362 (S.D. Fl.), Schwartz v. L’Oreal USA, Inc., Case No. 2:12-cv-5557 (N.D. Cal.), and Kallen v. L’Oreal USA, Inc., Case No. 12-9479 (C.D. Cal.).  For cases naming Avon as defendants, see Trujillo v. Avon Products, Inc., Case No. 12-9084, (C.D. Cal), Quinta v. Avon Products Inc., Case No. CV12-09629 (C.D. Cal.).

Attorneys at Morelli Ratner PC, who took part in filing Nino v. L’Oreal USA, Inc., write on their website: “The complaint alleges that the Defendants have advertised their “anti-aging” creams as having been scientifically tested, making claims and promising results to consumers that the Defendants know to be unfounded. Earlier this month, the Food and Drug Administration sent Lancôme a formal warning letter about the misleading advertising. The complaint alleges that L’Oreal has made millions of dollars by knowlingly  [sic] and willfully misleading consumers.” The complaint addresses that the lawsuit seeks restitution and disgorgement of profits, along with “benefits and other compensation obtained by Defendants from their wrongful conduct.”

All of the complaints for the proposed class actions cite to the Warning Letters issued against the companies.  The class actions against L’Oreal and Lancôme are to be centralized in the New Jersey District Court in the Newark Office with presiding Judge William J. Martini. In re L’Oreal Wrinkle Cream Mktg. & Sales Practices Litig., 2012 U.S. Dist. LEXIS 177694 (J.P.M.L. Dec. 12, 2012). With the potential rise in Warning Letters used in consumer fraud litigation against cosmetics companies, cosmetic companies, as Shook Hardy & Bacon LLP write, can no longer afford “to take a sit-back-and-wait approach.” It would seem that big name cosmetic companies have been put on notice: complying with FDA cosmetics regulations is now necessary for those who wish to maintain good public standing and to avoid costly litigation.

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