Health Care Lawyer Blog

A nursing home’s lawsuit against a long-term care pharmacy provider for failure to provide prescriptions as promised was dismissed by the Michigan Court of Appeals on the grounds that plaintiff’s claims against defendant were grounded in tort law, and not contract law. In Woodward Nursing Home, Inc. v. Medical Arts, Inc., (unpublished opinion issued June 25, 2009), Plaintiff entered into a written contract with Defendant whereby Defendant agreed to provide prescription medications and supplies for Plaintiff’s nursing home residents. Plaintiff alleged that it sent Defendant a prescription order on August 11, 2004, but that Defendant failed to process or deliver the prescription for more than twelve days and then lied about their reasons for nonperformance.

Plaintiff then filed suit in Wayne County Circuit Court, claiming that Defendant’s delay in filling the prescriptions caused it to lose a valuable Medicaid program certification. As a result, Plaintiff was forced to cease operating as a nursing home, was charged with regulatory sanctions, and had its provider agreement with the Michigan Medicaid program terminated.

Plaintiff’s original complaint against Defendant alleged breach of contract, negligence, malpractice and fraud. After Defendant’s Motion for Summary Disposition was denied, Defendants appealed the case to the Michigan Court of Appeals, which held that Plaintiff’s contract claim warranted dismissal because Plaintiff had failed to provide copies of the pertinent contracts pursuant to MCR 2.113(F). The COA further held that Plaintiff should have filed a notice of intent and affidavit of merit with respect to its medical malpractice claims.

Continue reading "Nursing Home's Claim Against Pharmacy for Non-Performance Dismissed; Michigan COA Holds Damages Stemmed From Tort, Not Breach of Contract" »

Posted by Mercedes L. Varasteh | Permalink | Email This Post

Posted In: Court Procedures , Medicaid , Michigan Court Decisions

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Eliminating the Stark law’s rural provider exception for hospitals, increasing penalties for false statements on provider/supplier enrollment applications, and mandatory reporting requirements for overpayments are just a few of the proposed ways to reform the nation’s health care, according to draft legislation released Friday. A U.S. House of Representative “tri-committee” (comprised of Ways and Means, Energy and Commerce, and Education and Labor) released an 850 page “discussion draft” outlining suggested reforms for the health care system. Given President Obama’s (somewhat) urgent message to Congress on the importance of health care reform, expect to see many such proposed bills circulating in the near future.

Some of the highlights are as follows:

Stark or “Physician Self-Referral” law changes
The draft legislation eliminates the rural provider exception for hospitals and the “whole hospital” exception under the Stark laws. Physician-owned hospitals with provider agreements in effect as of January 1, 2009, would be grandfathered under the proposed legislation, although any increases in physician ownership percentages would be prohibited and hospitals would be greatly restricted in their ability to add operating or procedure rooms/beds. Grandfathered hospitals would also be subject to significant reporting and disclosure requirements, including a requirement to disclose to patients in writing if the hospital does not have 24/7 on-premises physician coverage.

Enhanced Penalties
In an effort to combat fraud and abuse, enhanced monetary penalties and administrative sanctions are created for false statements on provider/supplier enrollment applications, false statements in claims data, and delaying inspector general investigations in connection with all federal health care programs, including managed care organizations, Medicare Advantage Plans, prescription drug plan sponsors, etc. These enhanced monetary penalties/sanctions are in addition to other civil liability, such as suits under federal or state False Claims Acts.

Comparative Effectiveness Research
Under this provision, the Secretary of Health and Human Services would establish a Center for Comparative Effectiveness Research (the “Center”) within the Agency for Healthcare Research and Quality. The Center would be responsible for conducting, supporting and synthesizing research (including research conducted under the Medicare Prescription Drug, Improvement and Modernization Act of 2003) with respect to the outcomes, effectiveness, and appropriateness of health care services in order to determine how health care can be managed in the most effective matter. Such “comparative effectiveness research” has been met with strong opposition from physicians, who say that such bureaucratic mandates will impinge upon their autonomy and medical judgment.

Continue reading "Health Care Reform Draft Legislation Issued By House Committees" »

Posted by Mercedes L. Varasteh | Permalink | Email This Post

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Today the U.S. Marshals responded to a directive from the Food and Drug Administration (FDA) ordering the seizure of drugs from Caraco Pharmaceutical Laboratories, Ltd.'s facilities in Detroit, Farmington Hills and Wixom. Caraco Labs, which apparently manufacturers over 60 varieties of generic pharmaceuticals, is alleged to have failed to comply with the FDA's mandatory current Good Manufacturing Practice (cGMP) regulations, which ensure drug quality. The specific violations named involve manufacturing defects, including oversized tablets and possible formulation error. The U.S. Marshals also seized ingredients held at the same facility.

Caraco Labs previously issued major drug recalls in January 2009 in an attempt to recapture the defective medications. An FDA inspection completed in May of 2009 uncovered continuing cGMP standard violations. The drastic action taken during today's seizure will hopefully lead to major changes at Caraco's facilities.

The FDA's cGMP standards are designed to ensure that drugs are manufactured, handled, and repackaged correctly, and include strict requirements to ensure that unsafe pharmaceuticals are not introduced into commerce. The standards require drugmakers to obtain and use raw materials of appropriate quality, maintain reliable testing labs, eliminate cross-contamination with beta-lactam drugs, etc.

Posted by Mercedes L. Varasteh | Permalink | Email This Post

Posted In: News Items

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The United States House of Representatives is contemplating legislation which would tax drugmakers to the tune of nearly $37 billion in order to help pay for the nation's health care overhaul. Currently, drugmakers are permitted to deduct their direct-to-consumer advertising costs for prescription drugs. The proposal is only one of many revenue-raising measures that are being discussed as a way to fund a plan being drafted by House Democrats which would include $600 billion in tax increases and $400 billion in cuts to Medicare and Medicaid.

Drugmaker advertising has come under fire in recent months, and House Ways and Means Committee Chairman Charles Rangel has stated that it's improper for taxpayers to subsidize pharmacuetical ads because such ads actually encourage consumers to request drugs that they might not actually need. However, the proposed change has sparked outrage from drugmakers and ad groups, who claim that such measures violate First Amendment freedom of speech and unfairly target one industry.

While tax increases are seldom (if ever) met with universal approval, the fact remains that cuts and revenue-raising will have to take place at some level given the current budget deficit. Furthermore, taxpayers may be more amenable to plans that would tax drugmakers as opposed to taxing employer-provided health insurance, another idea which has been tossed around in Congress recently.

Posted by Mercedes L. Varasteh | Permalink | Email This Post

Posted In: Health Care Reform , News Items

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A bill which would ban smoking in almost all Michigan workplaces was recently approved by the House of Representatives and will now move to the Senate for consideration. House Bill 4733, which would prohibit smoking in all public establishments with the exception of cigar bars and the gaming floors of casinos (including Native American casinos), is similar to the smoke-free workplace laws already passed in 37 states and the District of Columbia. A previous bill introduced last year, HB 4163, was approved by the House and Senate but failed to receive enough votes to be passed to Michigan Governor Jennifer Granholm for signing.

Supporters of the Bill, such as the Michigan Campaign for Smokefree Air, urge that such anti-smoking restrictions are necessary to protect the health of Michigan workers and consumers. However, HB 4733 has been met with opposition from restaurant and bar owners who claim such a bill would strip them of their autonomy as business owners. (Perhaps due to these sentiments, the current Bill includes an anti-provision which prohibits business owners from taking adverse action against employees who exercise their rights under the Bill.)

While restaurant and bar owners may claims that their "business autonomy" is restricted by bills such as HB 4733, it is important to note that such business have never been granted free reign over their operations. For example, there are restrictions imposed on restaurants/bars with respect to whom alcohol can be served and when. Such businesses must pay their employees at least minimum wage (with some exceptions, such as waitstaff) and obey health and sanitation regulations with respect to how food is stored and prepared. Few would argue that such laws and regulations are necessary to protect the safety and well-being of employees and consumers.

Continue reading "Michigan "Smoke-Free Workplace" Bill Passes House, Moves to Senate" »

Posted by Mercedes L. Varasteh | Permalink | Email This Post

Posted In: Health Care Industry Issues , Michigan Legislature , News Items

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The Food and Drug Administration ("FDA") has recently taken steps to ensure that both patients and healthcare professionals are properly forewarned of potential dangerous side effects of pharmaceuticals and medical devices. Specifically, through a set of proposed guidelines targeted at medical device and drug manufacturers, the FDA is cautioning drug companies to make sure that their "big picture" advertising methods are not misleading.

Titled "Presenting Risk Information in Prescription Drug and Medical Device Promotion", the draft guidance describes how the FDA evaluates prescription drug and DME promotional materials to determine if they adequately address risk information. The draft guidance was issued in reponse to industry concerns over how to avoid FDA warning letters and other enforcement actions triggered by misleading advertising.

Often, as addressed in the draft guidance, simply stating negative side effects is not enough to avoid FDA scrutiny if the remaining content of the ad overwhelms any warning info. For instance, one example of "true but misleading" marketing cited is a TV ad for a cholestorol-lowering drug. Although the ad contains a factually accurate audio risk statement describing the drug's side effects and contraindications, this audio statement is juxtaposed with images of the patient smiling and happy, while upbeat music blares in the background. Therefore, the risk information may not be adequately communicated to consumers or healthcare professionals.

The guidance is not yet final, and interested parties may submit comments on the draft guidance to the FDA up until August 27, 2009. Although not specially cited by the FDA in the draft guidance, one ostensible reason for drug/DME industry's compliance concerns is the Supreme Court's recent decision in Wyeth v. Levine.

Continue reading "FDA issues new guidelines to Pharma, DME providers" »

Posted by Mercedes L. Varasteh | Permalink | Email This Post

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The Health Care Lawyer Blog has returned after an extended furlough. FHWN partner and blog founder David L. Haron took a sabbatical from blogging about health care law, to teaching it by serving as an adjunct law professor at Cooley Law School. The class culminated in a unique "final exam" where students were required to draft term papers addressing the current health care crisis, and analyze methods in which to improve the quality and availability of health care. Proposed solutions included implementing "wellness" programs to target smoking cessation and obesity; increasing transparency for drug manufacturers, and consolidating multiple government payors into one system.

In light of the new presidential administration's proclaimed committment to revamping the health care system, these topics and others will undoubtedly be addressed in greater detail in future posts. Most importantly, however, this blog's authors look forward to continuing to provide updates and commentary on new health care-related legislation and case law.

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I am back from a pleasant hiatus. My children, both living out of town, blessed us with two new grandchildren this summer--a grand-daughter and a grandson--and the last few months have been occupied with enjoyable travel.

The U. S. District Court for the Middle District of Georgia was more active than I was, however, when it recently held that a physician who unsuccessfully sued the hospital where he worked, and some other physicians on staff, must pay the defendants' attorneys fees and costs because he had signed an "Applicant's Consent and Release" when he was applying for medical staff privileges at the defendant hospital. The amount to be paid is yet to be determined but could be substantial because there were 3 defendants seeking fees, including two physicians and their group professional corporation.

In the case of Adeduntan v. Hospital Auth. of Clark City, No.3:04-CV-065 (CDL)(M.D. Ga. July 31, 2008), arising out of the medical peer review of plaintiff's performance during an emergency abdominal aortic aneuryism procedure, the Court found that "...[Dr. Adeduntan] was required to execute the form in order to apply for mediacal staff appointment and privileges at Athens Regional and that [his] signature appears on multiple copies."

The language of the document provided:

"If...I [Dr. Azeez Adeduntan] institute legal action against the Hospital [Athens Regional] and/or its Medical Staff members and do not prevail, I agree to reimburse the Hospital and any Medical Staff members named in the action for any and all costs incurred in defending the legal action, including reasonable attorneys fees."

Recognizing that credentialing litigation is on the rise because of numerous decisions allowing such disputes to move into the courts, and most American courts cannot impose attorney fee obligations on losing litigants, in the absence of a contractual requirement, I would expect that most staff privilege applications would be promptly amended to include such language.

Depending on the applicant's specialty, and state law, the language may or may not be negotiable. A good healthcare attorney, however, is essential to review the application, research the issue and attempt to obtain any modifications. As always, even the most innocuously appearing document--a simple "application" may contain time-bombs that lay dormant for many years.

Posted by David L. Haron | Permalink | Email This Post | Comments (0)

Posted In: Court Procedures , Employment Items , Health Care Industry Issues , Health Law Litigation , News Items

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As I reported earlier, the Michigan Medicaid False Claims Act was amended effective January 1, 2006 through the efforts of Attorney General Mike Cox and Representative David Law (R., Commerce). I worked actively for passage of the amendment and testified before the Michigan House of Representative Judiciary committee, then chaired by Rep. Law..

The State of Michigan can recoup extra funds from combined state/federal recoveries because of the provisions of the federal Deficit Reduction Act of 2005 ('DRA"). To explain, shortly after the the Michigan Medicaid False Claims Act amendment passed the Michigan Legislature and Governor Granholm signed the Act, the U.S. Congress passed the DRA providing for a 10% incentive to States which enacted a "compliant" Qui Tam statute addressing Medicaid fraud. Specifically, the Medicaid program is a joint federal/state program. Thus, in Michigan, the federal government pays about 56% and the state 44% of the costs of the Medicaid program and fraud recoveries are divided on the same percentage.

If the state has a "compliant" Qui Tam statute, the state receives an extra 10% of the recovery--that is, 54% in Michigan--of the recovery--instead of 44%--a significant amount of money since most recoveries are in the tens of millions of dollars or more!!

However, on December 21, 2006, the U.S, Department of Health and Human Services/Office of Inspector General ("HHS/OIG") advised the state, by letter, that its Medicaid False Claims Act was NOT "DRA compliant" (that is, a mirror image of the federal False Claims Act).

In order to comply, all that was needed was a simple bill adding civil monetary penalties of at least $5000 for each violation and making one other technical amendment. Since the revisions would not have had any negative fiscal impact on the state and would have had a potentially tremendous positive impact in the event of any recovery, one would have expected Representative Law to quickly introduce a clarification/modification bill and obtain quick passage--after all, the State would most certainly not turn down the opportunity to reverse the flow of funds from Michigan to Washington??

Unfortunately, in 2006 and 2007, petty partisan bickering was rampant in the Michigan Legislature--we were paralyzed by the absurd budget fight and leadership was non-existent.

Rep. Law, finally, on September 17, 2007, introduced a one-page bill. The date of introduction is significant. In addition to being a Saturday, the day of the Notre Dame-UM football game (a game, I suspect, Rep. Law, a Notre Dame grad, was attending), it was three days before Ray Sayeh, then a WXYZ-TV investigative reporter, had scheduled (at my request) an interview with the representative to discuss the failure to take action on the revisions.

Unfortunately, again because of partisanship and Democratic control of the House of Representatives, the bill went nowhere while the Attorney General continued to obtain recoveries from fraud-feasors and the unclaimed 10% incentive was lost to Washington.

Finally, on February 19, 2008, Representative Marc Courveau (D., Northville) introduced HB 5757. The amended FCA, as presented in HB 5757, would allow the Michigan FCA to become DRA compliant. Once again, the small changes made by HB 5757, as required by the federal HHS/OIG., would cost the state nothing in administrative or other costs and would bring millions of dollars in the future back from Washington.

HB 5757 quickly passed the House with NO opposition and was sent to the Senate.

Tragically, because of continued political maneuvering, the Bill sits in the Judiciary Committee.

It seems that Rep. Courveau was elected at the expense of a Republican and the leadership of the Judiciary Committee and Senate Majority Leader, Mike Bishop will not allow this largely unopposed, fiscally responsible bill, to be brought up at the committee or floor level because it would give "points" to Rep. Courveau!!!!

The State of Michigan is in a deep recession/depression, unemployment sits at 8.5%, the highest in the nation, GM is in deep trouble, the City of Detroit is selling assets and landmarks--such at the Detroit-Windsor tunnel--and the Legislature cannot pass a one-page bill that will bring money to the state and its Medicaid recipients.

This Bill is under the radar, unfortunately--Ray (now Rez) Sayeh has joined CNN International and is posted in Pakistan, columnists such as Brian Dickerson and others have been unresponsive despite my entreaties, my solicitations to the Legislature and the use of my contacts have been unavailing.

I am frustrated. Medicaid fraud is rampant, the Attorney General is acting diligently in pursuing the cheaters, and we have been filing qui tam cases under the new Act, but even if all of these activities are successful--and they will be--the State will not receive the full benefit of its recoveries!!!

I will not stop my efforts, but it will take action by my readers to move this along. Sen. Mike Bishop may be contacted by email and his office phone number is( 517) 373-2417

The other Senators on the Judiciary Committee may be emailed at:

senwkuipers@senate.michigan.gov Sen. Kuipers - Chair

senacropsey@senate.michigan.gov Sen. Cropsey

senasanborn@senate.michigan.gov Sen. Sanborn

senbpatterson@senate.michigan.gov Sen. Patterson

sengwhitmer@senate.michigan.gov Sen. Whitmer - minority vice-chair

senhclarke@senate.michigan.gov Sen. Clarke

senmprusi@senate.michigan.gov Sen. Prusi

Posted by David L. Haron | Permalink | Email This Post | Comments (1)

Posted In: Health Care Industry Issues , Health Care Reform , Health Law Litigation , Medicaid , Michigan Legislature , News Items , Qui Tam

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