Health Care

Over the last two years, much of the healthcare world has been watching the government’s prosecution of Insys Therapeutics for its sales and marketing practices related to its Subsys spray.  Subsys is powerful and highly addictive fentanyl spray (administered under the tongue) that was approved by the FDA in 2012 for the treatment of persistent breakthrough pain in adult cancer patients who were already receiving, and tolerant to, regular opioid therapy.  On June 5, 2019, DOJ announced a global resolution with Insys, including criminal pleas, a Deferred Prosecution Agreement (DPA), a civil settlement agreement, and a Corporate Integrity Agreement (CIA).  Then, on June 10, 2019, Insys filed for bankruptcy protection, which triggered DOJ and HHS’s ability to upend these agreements and impose powerful criminal, civil, and exclusion remedies against Insys. While much of the coverage of this case over the last few years has focused on the high-profile prosecution and conviction of company executives (including Insys’s founder) and other employees who were accused of paying kickbacks to prescribers in exchange for increased prescriptions and increased doses of Subsys, the resolution of this case on the corporate side has proven to be equally fascinating. 

On June 6, 2019, the U.S. Department of Health and Human Services’ Office of Inspector General (OIG) issued a report that found among a sample U.S. hospitals that obtained non-patient-specific (NPS) compounded drugs from outside compounders, 89% of hospitals obtained them only from compounders that were registered with the U.S. Food and Drug Administration (FDA) as outsourcing facilities. The OIG study was conducted to provide the FDA with insights to improve its oversight of compounders and enhance patient safety. According to the study, “factors associated with quality, including registration with FDA as an outsourcing facility, are among the most important factors considered when hospitals decide where to obtain their non-patient-specific compounded drugs.” Although use of compounded drugs is widespread in hospitals, the OIG also found that it is rare for hospitals to consider registering their own pharmacies as outsourcing facilities.

In the latest development in the Department of Justice (DOJ) Antitrust Division’s ongoing investigation into the generic pharmaceutical industry, Heritage Pharmaceuticals, Inc. has entered into a deferred prosecution agreement (DPA) with DOJ. The terms of the DPA require Heritage to pay a $225,000 criminal penalty and provide full cooperation with the ongoing investigation. The one-count felony charge, filed in the Eastern District of Pennsylvania on May 30, alleges that Heritage violated Section 1 of the Sherman Act by conspiring with multiple unnamed parties to divide up the domestic market and fix prices for glyburide, a diabetes medication, from April 2014 through December 2015. According to DOJ, the DPA provides that the United States will not prosecute Heritage for three years.

The HHS Office for Civil Rights (OCR) released a new guidance document regarding which HIPAA violations business associates (BAs) can and cannot be held directly liable for.  In the guidance, OCR states that BAs can be held directly liable for a list of 10 violations but notes that certain other violations, like the reasonable cost requirement for a patient’s access to their PHI, cannot be enforced directly by OCR against a BA.  The covered entity (CE) is still on the hook for violations of this type, however, so CEs should carefully review their BAAs to ensure that it covers requirements that don’t directly apply to BAs but are still enforceable against CEs.  Large data breaches also continue to dominate the press.

Earlier this week the OIG took the somewhat unusual step of issuing a fraud alert directed to Medicare beneficiaries (rather than to Medicare providers) regarding “fraud schemes” that involve genetic testing. According to the OIG, beneficiaries are being offered genetic tests in order to obtain their Medicare information, which is then used to commit identity theft or to submit fraudulent claims to Medicare. Beneficiaries are being targeted through telemarketing calls, booths at public events, health fairs, and door-to-door visits.

Medical Informatics Engineering, Inc. (Medical Informatics) and its wholly-owned subsidiary, NoMoreClipboard, LLC, an electronic medical record and software services provider is now liable for a combined total of $1 million to both the federal and state governments after hackers accessed approximately 3.5 million patients’ health records in 2015. The breach, reported to OCR on July 23, 2015, occurred through a compromised user ID and password. Compromised patient information included social security numbers, names, email addresses, health insurance policy information, addresses, dates of birth, and clinical information.

As most folks with any interest in the burgeoning cannabidiol (CBD) industry likely know, on May 31, 2019, the Food and Drug Administration held a public hearing “to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling, and sale of products containing cannabis or cannabis-derived compounds.” Stakeholders who attended the hearing presented many diverse viewpoints and the FDA panelists – who were in listening mode – received extensive information from across that spectrum of perspective.

In the ongoing public dialogue about prescription drug affordability, Maryland seems poised to lead the way for states considering a new way to rein in drug spending: drug affordability boards.

On May 14, FDA announced that it issued five Warning Letters to companies that manufacture and market homeopathic drugs for human use. The letters all cite cGMP deficiencies relating to inspectional observations and conclude that the products are misbranded prescription drugs under the Federal Food, Drug, and Cosmetic Act because “in light of their toxicity or other potentiality for harmful effect, or the method of their use, or the collateral measures necessary to their use, they are not safe for use except under the supervision of a practitioner licensed by law to administer such drugs” and they are not labeled for prescription use only.

In 2019 so far, FDA has issued Warning Letters to eleven separate homeopathic drug manufacturers, including the five letters referenced above. All of the Warning Letters, except one, cite observations from inspections and focus on cGMP and quality violations at the manufacturing facilities, including contamination and varying amounts of active ingredients, that could lead to consumer harm.

This week, the House Energy & Commerce Committee is voting on seven more drug pricing bills. The Senate is going to be unveiling its cost-containment package in the coming weeks (if not days) and should include most, if not all, of the House-passed drug pricing bills. This action will set the stage for the summer work period, which is expected to focus heavily on drug pricing and other cost-containment measures, such as surprise medical bills. At CMS, the agency published a final rule last week that touched on several noteworthy drug pricing issues. We cover this and more in this week's preview, which you can find by clicking here. 

On May 10, 2019, the Food and Drug Administration issued highly anticipated final guidance that gives drug-makers more clarity on how to demonstrate that a proposed biosimilar product meets the statutory interchangeability standard under the Public Health Service Act (PHS Act or the Act). According to the Act, an interchangeable biosimilar may be substituted for the original biological product without the involvement of a prescriber, similar to the way generic drugs are routinely substituted for brand name drugs at the pharmacy level. The Final Guidance, entitled “Considerations in Demonstrating Interchangeability with a Reference Product,” is shorter than the draft version released over two years ago, in response to industry feedback, but generally tracks the original policy positions proposed in the draft, with a few notable exceptions summarized below.

The adoption of connected medical devices and the Internet of Medical Things (IoMT) has both enhanced the quality of patient care and increased the vulnerability of health care organizations. Sophisticated cyberattacks on hospitals and health systems threaten patient safety and impose substantial financial costs.

Last week, Mintz and ML Strategies welcomed stakeholders and thought leaders from across the pharmacy and pharmaceutical industry to the Boston Office for the 4th Annual Pharmacy & Pharmaceutical Industry Summit.

The U.S. Department of Justice (DOJ) issued policy guidance on May 6, 2019, about providing credit in False Claims Act (FCA) settlements to corporations for “disclosure, cooperation, and remediation." DOJ has never previously issued guidance regarding credit in FCA matters. This guidance, coupled with the passage of the Tax Cuts and Jobs Act in 2017 (which requires DOJ to specify the amount of “restitution” or “remediation” at the time of settlement), provides meaningful specificity as to what conduct constitutes disclosure, cooperation, and remediation, as well as data for evaluating whether credit is actually reflected in negotiated FCA settlements. This policy guidance is contained in the Justice Manual, Section 4-4.112.

As part of our ongoing discussion of the Polukoff False Claims Act (FCA) qui tam case (involving allegations that certain heart procedures performed by a cardiologist, and billed for by two hospital defendants, were not medically necessary), we reported in February that some defendants filed a petition for a writ of certiorari with the United States Supreme Court. 

Yesterday, May 8, 2019, the Centers for Medicaid & Medicaid Services (“CMS”) released its final rule requiring drug manufacturers to disclose a drug’s wholesale acquisition cost (“WAC”) in direct-to-consumer television advertisements. The rule, which will become final 60 days after the official publication of the rule (which will be tomorrow, May 10, 2019) was proposal last fall. CMS is largely adopting the rule as published last fall with minor technical changes for clarification