HHS Abandons Proposal to Reform Drug Manufacturer Rebate System

On Thursday, July 11, 2019, the White House administration reversed course on the Department of Health and Human Services’ (HHS) recent proposal to reform drug manufacturer rebate system. As we previously reported, HHS’s February 6, 2019 proposed rule sought to modify the Anti-Kickback Statute safe harbor protection with the aim of lowering prescription pharmaceutical product prices and out-of-pocket costs for consumers (primarily Medicare Part D and Medicaid Managed Care Plan members). With the proposed rule, HHS hoped to encourage medication manufacturers to pass discounts directly to consumers and develop a transparent framework for the prescription drug product market.

The public comment period for the proposed rule closed at midnight on April 8, 2019, with over 25,000 comments received. The pharmaceutical industry welcomed the proposed rule. Pharmaceutical Research and Manufacturers of America (PhRMA) informed HHS in April that it considers the proposed reform of the rebate system to be urgent. On the other hand, payers, pharmacy benefit manager and providers have opposed the proposal, collectively warning that the elimination of the safe harbors could lead to higher costs for patients.

According to several reports, the administration’s decision to back away from the proposed rule is based on the prospects of bipartisan legislation aimed at reducing drug costs, as well a concern that the proposed rule would have imposed increased drug costs on seniors. In a May 2019 report, the Congressional Budget Office estimated that the proposed rule would increase federal spending by about $177 billion from 2020 to 2029, with increases in Medicare Part D plan premiums.   HHS officially withdrew notice of its pending final rule on July 10, 2019.

DOJ Challenges Charitable Copay Subsidies

Medical CostsThe Department of Justice intervened in a False Claims Act lawsuit involving “so-called charitable patient assistance funds” used for prescription drug copays. The DOJ wants to make “clear that the Department will hold accountable drug companies that pay illegal kickbacks to facilitate increased drug prices.”  See a report at the Anticorruption blog here.

Healthcare Employers: Exercise Caution When Enforcing Mandatory Vaccination Policies

Healthcare employers should consider a recent trend when determining what safety requirements to impose on their employees. Recent settlements between healthcare providers and the Equal Employment Opportunity Commission show that even employers in the healthcare industry must consider accommodating their employees’ religious beliefs when enforcing mandatory vaccination policies.

On June 25, 2019, the EEOC announced that a Michigan hospital had agreed to compensate a medical transcriptionist $74,418 to settle claims arising from the hospital’s alleged failure to reasonably accommodate her sincerely held religious beliefs. The EEOC filed suit, stating that the hospital violated Title VII of the Civil Rights Act—which requires that employers reasonably accommodate employees’ sincerely held religious beliefs, unless that would cause an “undue hardship.” Specifically, the hospital rescinded a job offer to an applicant after she refused an influenza vaccine based on her religious beliefs against inoculation. The hospital’s policy allowed employees to wear masks in lieu of receiving the vaccines, but only if they had disabilities that prevented them from receiving flu vaccines. The hospital refused to extend this same accommodation to the job applicant. The fact that the hospital provided this accommodation for disabilities made it more difficult for the hospital to deny this accommodation when requested for a sincerely held religious belief. Continue Reading

Three weeks to go until Oral Arguments in Texas v. United States

There are now only three weeks before the Fifth Circuit Court of Appeals is scheduled to hear oral arguments in Texas v. United States, the latest legal front in the ongoing battle over the future of the Patient Protection and Affordable Care Act (ACA).

Texas v. United States is a lawsuit focusing on the indispensability of the individual mandate, which required most Americans to maintain “minimum essential” health insurance coverage, to the rest of the signature Obama-era healthcare law. Continue Reading

Medical Imaging Company Pays $3 Million Data Security Fine

Data ProtectionA medical imaging company is paying for its flawed data security system. In addition to its system failures, the company failed to investigate and respond properly when alerted to problems by the FBI. As a result, the Office of Civil Rights imposed a $3 million penalty and required a corrective action plan. This yet another warning to the health care industry that data security matters.

Office of Civil Rights Enforcement

The Office of Civil Rights (OCR) in the U.S. Department of Health and Human Services investigates and enforces violations of HIPAA, the Health Insurance Portability and Accountability Act. In this case, OCR investigated a medical imaging company that allowed privacy information about more than 300,000 patients to be visible on the internet.

Compounding The Failure

OCR reported that an “insecure transfer protocol (FTP) web server” permitted internet searches to access social security numbers and other patient data. Because the company had not conducted a risk assessment, it did not identify the problem. In fact, it did not even have required Business Associate Agreements in place with its vendors. Compounding all this, the company declined to “identify and respond” for more than four months after the FBI notified the company of the failure.

Prevention Is The Cure

Every company handling ePHI (electronic protected health information) must protect its patients and itself. If you have questions about protecting ePHI, please feel free to contact us.

Court Again Rules that HHS’s Medicare 340B Drug Price Cuts are Illegal, But Gives the Agency a Chance to “Unscramble the Egg”

As previously reported, last December the U.S. District Court for the District of Columbia ruled that the Department of Health and Human Services (HHS) had overstepped its bounds when it slashed the 2018 Medicare Part B outpatient reimbursement rates for covered drugs purchased under the 340B Program. AHA v. Azar, 1:18-cv-2084-RC (D.D.C. December 27, 2018). The court, however, held off on imposing a remedy until after the parties first had the opportunity to provide further input. On May 6, 2019, having received that input, the court has now ordered a remedy, which it has also applied to the HHS’s identical reimbursement rate reduction for 2019. The court sent both the 2018 and 2019 rate-setting rules back to the agency to give “it the first crack at crafting appropriate remedial measures” and directed HHS to “resolve this issue promptly.” Continue Reading

New DOJ Guidance On Credit Under False Claims Act

Department Of Justice In Washington DCThe Department of Justice just released new guidance how to obtain credit for cooperation under the False Claims Act (FCA).  The guidance stresses the importance of cooperation but mentions other actions as well.  The FCA greatly impacts the health care sector, with settlements and judgments reaching to billions of dollars.  Please see the post on the Anticorruption blog for a description of this guidance.

Recent Case Provides Important Lessons For Buyers Acquiring Unionized Businesses

When healthcare entities are seeking to expand their operations, they often will find interesting targets who have union-represented employees.  A union’s presence will create additional compliance obligations but, contrary to common misconceptions, union-related obligations are not necessarily unmanageable.
In a recent case, which arose after new owners took over a skilled nursing home facility, the National Labor Relations Board reiterated the standards that will determine whether a buyer must recognize the seller’s former labor union, retain former union-represented employees, and bargain with that union before initially determining the wages, hours, and other working conditions at the organization.  Ridgewood Health Care Center, Inc., 367 NLRB No. 110 (Apr. 2, 2019).  The Board also clarified an existing rule in a way that will reduce the potential risk for a buyer.
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Sixth Circuit Upholds Ohio Law Defunding Planned Parenthood

In a closely watched decision, this past week the U.S. Court of Appeals for the Sixth Circuit upheld an Ohio law permitting Ohio to defund Planned Parenthood clinics.  See Planned Parenthood of Greater Ohio v. Hodges, Case No. 16-4027 (Mar. 12, 2019).  An 11 to 6 majority of the full panel of the Sixth Circuit reversed a district court decision enjoining a 2016 Ohio law that barred Ohio’s health department from funding organizations that perform nontherapeutic abortions.  In challenging the law, Planned Parenthood claimed that it would lose $1.5 in annual funding as a result.   Specifically, Planned Parenthood claimed that the law violated “the First and Fourteenth Amendments by conditioning government funding on giving up their rights to provide abortions and to advocate for them.”
In reversing the decision of the district court, the panel held that this funding “condition does not violate the Constitution” because the affiliates of Planned Parenthood “do not have a due process right to perform abortions.”   Because it held that providers do not have a constitutional right to perform abortions, it did not need to reach the free speech claim.

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