Health Care

Many life sciences stakeholders are familiar with “traditional” designation programs operated by the Food and Drug Administration (FDA) in exercising its medical product authorities, such as the orphan drug designation and breakthrough therapy/breakthrough device designation programs. These designation programs follow a typical paradigm – (1) a product developer demonstrates to FDA that its candidate meets certain qualifying criteria; (2) FDA grants the relevant designation to the product candidate in question; and (3) the product developer then benefits from an increased frequency of interactions with the agency during continued development of the product and/or a valuable advantage that’s secured upon the product’s future marketing authorization (e.g., orphan exclusivity or a priority review voucher). 

The Department of Justice (DOJ) recently filed a complaint against Erlanger Health System (Erlanger), a county-owned public health system, and two of its Tennessee hospitals alleging that the health system systemically violated the Stark Law from 2014-2021 and “knowingly” submitted claims for hospital procedures in violation of the False Claims Act. The lawsuit was initially brought as a qui tam (whistleblower) lawsuit filed by a former Chief Compliance Officer and a former Chief Financial Officer of Erlanger. While fair market value compensation is a key criterion for most Stark Law exceptions, this lawsuit is one of the few enforcement actions initiated by the DOJ focused on fair market value compensation paid to employed physicians. This blog post covers three key takeaways from the DOJ’s allegations against Erlanger.

On June 28, 2024, the Food and Drug Administration (FDA) released draft guidance for industry, titled Diversity Action Plans to Improve Enrollment of Participants from Underrepresented Populations in Clinical Studies (the Draft Guidance), for public review and comment. The Draft Guidance was issued pursuant to a directive from Congress in the Food and Drug Omnibus Reform Act (FDORA), signed into law in December 2022, which required FDA to issue or update guidance on diversity action plans that sponsors submit for certain clinical studies of investigational drugs and medical devices. The Draft Guidance also serves to update guidance that FDA previously issued on the topic in April 2022.

Read about President Biden’s recent withdrawal from the 2024 presidential election and his endorsement of Vice President Kamala Harris as the Democratic nominee, including her stance on technology, climate change, health care, and tax policy.

On July 8, 2024, the Office of Inspector General (OIG) updated its General Questions on Fraud and Abuse Authorities (FAQs) related to the Anti-Kickback Statute (AKS) and the Beneficiary Inducement Prohibition of Civil Monetary Penalties Law (CMPL) with clarifications regarding waiving patients’ cost-sharing amounts pursuant to health care providers’ financial assistance policies. The new FAQs (FAQs #13-16) reiterate the OIG’s longstanding position that hospitals and other health care providers may provide financial assistance to Medicare and Medicaid beneficiaries on the basis of financial need. Of note, the OIG also provides some guidance on the distinction between marketing and advertising to patients as opposed to making patients aware about the availability of financial assistance, and this guidance may be useful in a variety of contexts beyond cost-sharing waivers. 

Read about updates to the Medicare Drug Price Negotiation Program being considered by CMS, including changes to the 2027 negotiation process, plus industry response to draft guidance and drug makers’ softened perspective on the IRA’s impact.

Read about criticism of the Biden administration’s proposal exploring the use of “march-in rights” granted under the Bayh-Doyle Act (the Act) to seize pharmaceutical patents if the administration believes that a pharmaceutical product is not available to the public at a reasonable price.

Read about litigation developments involving the Medicare Drug Price Negotiation Program, including decisions from the Third Circuit affirming the constitutionality of the program, and new cases in the pipeline.

Read about independent state boards — called Prescription Drug Affordability Boards (PDABs) — implemented by a number of states to address high drug prices in their health care systems and manufacturers’ concerns about the use of these boards.

In ‘Third Edition: Q2 2024’ of the Mintz IRA Update, we cover updates to the Medicare Drug Price Negotiation Program being considered by CMS, developments in litigation challenging the program, the consequences and costs of redesigning the Part D program, opposition to the use of march-in rights to lower drug prices, and the growing use of state prescription drug affordability boards.

Read about the 2025 redesign of the Medicare Part D program pursuant to the Inflation Reduction Act of 2022 and how those changes impact Medicare Part D plan sponsors, beneficiaries, and manufacturers.

On July 9, 2024, the Federal Trade Commission (FTC) Office of Policy Planning released an Interim Staff Report titled Pharmacy Benefit Managers: The Powerful Middlemen Inflating Drug Costs and Squeezing Main Street Pharmacies. The Interim Staff Report reflects the FTC’s work since it began its 6(b) study of PBMs in June 2022.  Mintz’s Health and Antitrust teams actively monitor federal and state regulatory and legislative developments in the PBM space, including those from the FTC. In this Special Edition of the PBM Policy and Legislative Update, the Mintz Health team partnered with our Antitrust colleagues to analyze the Interim Staff Report including Commissioner Melissa Holyoak’s dissenting statement.  We also highlight upcoming Congressional testimony by CEOs of the three largest PBMs, as well as media reports of a forthcoming FTC action related to PBM insulin rebate practices.

In the Proposed Medicare Advantage and Part D Rules for 2025, the Centers for Medicare & Medicaid Services (CMS) proposed significant changes to how Medicare Advantage organizations (MAOs) are allowed to contract with and compensate entities that provide agent/broker and enrollment services.  The proposed rules were heavily disfavored by entities that provide such services, but were not widely commented on by MAOs or Part D sponsors (PDP Sponsors), which are the entities to which the rules actually apply.

Now that the final rule on laboratory developed tests (LDTs) has been available for over a month and the stages of the enforcement discretion phaseout process and the Food and Drug Administration’s (FDA’s) newly proposed policies for continuing limited enforcement discretion for certain types of LDTs have been thoroughly described and dissected (including by us in our previous post), it’s high time to dig into FDA’s perspectives on the comments it received on the proposed rule. 

The Supreme Court now has the opportunity to define “willfulness” under the federal criminal Anti-Kickback Statute (AKS). In a declined qui tam case filed against McKesson Corporation, a pharmaceutical wholesaler, the relator, Adam Hart, a former McKesson employee, filed a petition for certiorari seeking Supreme Court review of a Second Circuit decision that upheld the dismissal of relator’s complaint asserting claims under the civil False Claims Act (FCA) premised on alleged violations of the AKS. U.S. ex rel. Hart v. McKesson Corp., 96 F.4th 145 (2d Cir. 2024). A violation of the AKS requires as the scienter element that the defendant "knowingly and willfully" offered or paid remuneration to induce the recipient of the renumeration to purchase goods or items for which payment may be made under a federal health care program. 42 U.S.C. § 1320a-7b(b)(2). The Second Circuit held that a defendant does not act “willfully” within the meaning of the AKS unless that defendant “act[s] knowing that his conduct is unlawful.” United States ex rel. Hart, 96 F.4th at 154.

The indictment, arrest, and arraignment of Ruthia He, the founder, CEO, and clinical president of Done Global (Done), and David Brody, clinical president of Done and the sole shareholder of Done Health, P.C. (PC) in connection with their alleged criminal conspiracy to distribute controlled substances, commit health care fraud, and obstruct justice may bring heightened scrutiny to behavioral health telemedicine companies and other virtual health platforms. The seven-count indictment represents the Department of Justice’s (DOJ’s) first criminal drug distribution prosecutions related to telemedicine prescribing. The prosecution of the defendants is proceeding in federal court in the Northern District of California and several additional Done personnel including an executive, physician, and nurse practitioners are similarly being prosecuted.

As the first state law to regulate the results of Artificial Intelligence System (AI System) use, Colorado’s SB24-205, “Concerning Consumer Protections in Interactions with Artificial Intelligence Systems” (the Act), has generated plenty of cross-industry interest, for good reason. In some ways similar to the risk-based approach taken by the European Union (EU) in the EU AI Act, the Act aims to regulate developers and deployers of AI Systems, which are defined by the Act as “any machine-based system that, for any explicit or implicit objective, infers from the inputs the system receives how to generate outputs, including content, decisions, predictions, or recommendations, that can influence physical or virtual environments.”

A recent court split about whether awards granted through arbitration under the No Surprises Act (NSA) are enforceable through litigation has created uncertainty around an already complicated process.  A Texas judge recently held that the NSA does not grant parties a right to bring suit to enforce arbitration awards, while last year a New Jersey court granted enforcement of a similar award.  The resulting split raises questions about the enforceability and utility of the NSA and its Independent Dispute Resolution (IDR) process. 

True to their word in several recent public statements, the Chief and Deputy Chief of the Medicaid Fraud Division have brought several recent criminal cases against dentists for fraudulent billing and unlicensed practice of dentistry.