Health Care Lawyer Blog

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 " »

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.

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.

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 " »

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 " »

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.