Election 2020 Puts Cannabis Center Stage

The cannabis industry was center stage during the November election, collecting a trove of wins making recreational marijuana legal now in 15 states and approved it for medical use virtually nationwide. The overwhelming nods in the recent election made marijuana more mainstream across the country and proved the cannabis industry has built a profound and powerful voice when it comes to messaging and revenue-building in states.

The multiple victories for cannabis on state ballots across the nation are the freshest evidence yet that American attitudes toward cannabis have been transformed. In an era of hyperpartisanship, cannabis reform is one of the few issues that is bringing Americans of different political affiliations and ideologies together. Continue Reading

CMS Publishes Stark Law Final Rules-Updated

In follow up to our post last month, on Wednesday, December 2, The Centers for Medicare and Medicaid Services (CMS) published final rules implementing many of the Stark Law changes first proposed in October 2019 (the Final Rules).

These changes have been adopted to address the shift to a value-based and coordinated healthcare environment. The Final Rules represent CMS’s recognition that the healthcare delivery and payment environment has changed from the “fee-for-service” model under which the Stark Law was developed, and that, in its current form, the Stark Law can impede the development of value-based relationships. In connection with this change, the Final Rules introduce new Stark Law exceptions and revise or re-evaluate many existing Stark Law exceptions and definitions.  You can read our summary of the changes in our latest client alert, available here.

UPDATE:  In December, the Government Accountability Office (GAO) found that the Final Rules’ January 19, 2021 effective date violated the Congressional Review Act, which requires major rules to have a 60-day delay in the effective date from the date of publication in the Federal Register.   This, together with the Biden administration’s recent Regulatory Freeze memo could be used to delay the Final Rules’ effective date.  You can read more about it here.

Supreme Court Rules that Arkansas Act 900, Affecting the Prices that PBMs Pay to Pharmacies, Is Not Preempted Under ERISA

On December 10, 2020, the Supreme Court released its decision in Rutledge v. Pharmaceutical Care Management Association. Justice Sotomayor wrote the Court’s opinion, which was joined by all Members of the Court except Justice Barrett, who did not participate. Justice Thomas filed a concurring opinion, which expressed his prior opinions that the Court’s ERISA preemption tests have strayed from the text of ERISA’s statutory language.

The question presented was whether ERISA preempts Arkansas Act 900, an Arkansas law that regulates the price at which pharmacy benefit managers (PBMs) reimburse pharmacies for the cost of drugs covered by prescription drug plans. PCMA, the Pharmaceutical Care Management Association, which represents some of the largest PBMs in the country, challenged Arkansas Act 900 by arguing that the Act is preempted by ERISA. In the recent Opinion, the Court reversed the judgment of the U.S. Court of Appeals for the Eight Circuit, ruling that Act 900 was not preempted by ERISA.

The Opinion reasoned that Arkansas Act 900’s requirements were too far away from ERISA and ERISA plans to have an “impermissible connection” with ERISA plans, even though the law has an indirect effect on what ERISA plans pay for prescription drugs. “State regulations that merely increase the costs or alter incentives for ERISA plans without forcing plans to adopt any particular scheme of substantive coverage are not preempted by ERISA,” Justice Sotomayor wrote, citing earlier Supreme Court opinions.

The Court’s Opinion is a strict preemption analysis and does not cite to, or reference, the many amicus briefs filed in the case or the political debate surrounding Arkansas Act 900, other than to reiterate the express legislative intent in enacting Arkansas Act 900. PBMs typically use a “maximum allowable cost” list to determine how much pharmacies should be reimbursed. Trade groups for rural and independent pharmacies have argued that PBM’s strategies in reimbursement rates of maximum allowable costs are unfair and can be lower than the pharmacies’ cost to purchase the drug. Conversely, other trade groups in support of PCMA, state that PBMs have expertise in ensuring efficiency and cost reduction, and that drug prices are largely established by drug manufacturers. According to America’s Health Insurance Plans, Inc. (AHIP), PBMs provide incentives to pharmacies to offer low-cost generic drugs and to be more efficient with their drug purchasing. AHIP also claims that PBMs have the expertise in pharmaceutical manufacturing and distribution systems, and that the compliance costs of managing different state regulations make work in this area prohibitively expensive.

The Court’s Opinion may lead to further state regulation of PBMs. A statement from PCMA expressed disappointment and urged states to proceed cautiously: “We are disappointed in the Court’s decision that will result in the unraveling of federal protections under . . . ERISA,” and “As states across the country consider this outcome, we would encourage they proceed with caution and avoid any regulations around prescription drug benefits that will result in higher health care cost for consumers and employers.”

EU Pharmaceutical Strategy

The European Commission President Ursula von der Leyen has put an emphasis on health policy since the beginning of her term, by promoting the development of a number of initiatives that will be published in the months and years to come.

Inevitably, the COVID-19 pandemic has generated a growing demand for better coordination across EU Member States in connection to the management of health systems and health emergency response, an area in which Member States opted to maintain full competence.

A new Pharmaceutical Strategy for Europe, published on 25 November has been one of those initiatives, which aim to establish a future-proof and crisis-resilient pharmaceutical system in the EU. In this client alert, we are looking into the strategy and the future initiatives stemming from the strategy, as well as future health policies that can be expected.

You can read more about this by downloading our client alert, available here.

Cross-Post from Law360: The Legal Implications Of Mobile Health Advancements

This is a cross post from Law360.  Please contact Sarah Rathke, Kristin Bryan or John Wyand with any questions.

In response to American health care needs during the COVID-19 pandemic, the U.S. is seeing a rapid acceleration in mobile health care, however, this new age form of health care does present some risk and legal implications.  In the recently published Law360 article, we discuss the legal implementations facing mobile health care.  Read the full article here.

CMS Releases Final Rules Implementing Stark Law Changes to Reflect Value-Based Healthcare Delivery and Payment Environment

On Friday, November 20, CMS released final rules implementing many Stark Law changes first proposed in October 2019 (the “Final Rules”). This release comes despite earlier suggestions that these Final Rules may be delayed until sometime in 2021. Developed as part of the Regulatory Sprint to Coordinated Care program, the Final Rules represent CMS’s recognition that the healthcare delivery and payment environment has changed from the “fee-for-service” model under which the Stark Law was developed, and that, in their current Form, the Stark Law’s regulations  can impede the development of beneficial value-based relationships.

In its Friday press release, CMS identified four broad policies implemented under the Final Rules:

  • Finalizing new, permanent exceptions for value-based arrangements that will permit physicians and other healthcare providers to design and enter into value-based arrangements.
  • Finalizing additional guidance on key requirements of Stark Law exceptions to make it easier for physicians and other healthcare providers to make sure they comply with the law (e.g. clarification on the definition of “fair market value”).
  • Finalizing other new exceptions to provide protection for non-abusive, beneficial arrangements between physicians and other healthcare providers (e.g. donations of cybersecurity technology).
  • Reducing administrative burdens that drive up costs by taking money previously spent on administrative compliance and redirecting it to patient care.

In CMS’s view, the Final Rules include “a comprehensive package of reforms to modernize the regulations that interpret the Stark Law while continuing to protect the Medicare program and patients from bad actors” and will “support the necessary evolution of the American healthcare delivery and payment system.” It is clear that the changes implemented by the Final Rules offer physicians and other health care providers significant new business opportunities and may also call for a reevaluation of certain existing agreements in light of the new guidance. With one exception (relating to group practice profit shares), the Final Rules’ changes are to become effective January 19, 2021.

Addressing COVID-19 Vaccine Supply Chain Challenges

At the time of this writing, two companies, Pfizer Inc. and Moderna, Inc., have announced promising early results from Phase 3 of their COVID-19 vaccine trials.  Additional promising results are hoped for from Johnson & Johnson, and AstraZeneca soon, and perhaps from others later.  This is good news.

Developing a vaccine is one thing, however.  Distributing it is another.  Indeed, managing the COVID-19 supply chain will pose tremendous logistical challenges for health care providers and at all levels of government unequalled for any other pharmaceutical product in history – and the stakes could not be higher.  A complicating factor is, undoubtedly, the turnover of presidential administrations.  And while a carefully coordinated handoff from the Trump Administration to the Biden Administration would no doubt be ideal, that may not be forthcoming.  However, this turnover also provides an opportunity to reconsider and optimize the role the federal government could play in distributing COVID-19 vaccines to the U.S. population.

Recently, we wrote an article in Law360, describing “Key Government Tools for Addressing National PPE (Personal Protective Equipment) Shortages.”  Many of the observations in this article concerning how the federal government can normalize and optimize the supply of PPE to health care providers hold true for COVID-19 vaccine distribution as well.  You can read our thoughts on this issue at our Global Supply Chain Law Blog, available here.

Brexit: Phased Approach for Northern Ireland Protocol (NIP) for the Pharmaceuticals Sector

The UK Cabinet Office released a statement last Thursday 5th November 2020 that could provide some breathing space for the UK/EU pharmaceuticals sector during the Brexit transition, by indicating that a one year implementation period would apply to application of the protocol for certain matters.

For the pharmaceuticals sector, these include batch testing, importation and rules relating to falsified medicines (FMD).

The details of the exact scope of this relaxation are not clear from the statement and more guidance is to follow. This guidance will be important in establishing how compliance can be achieved from 1/1/21 given that importation, for example, has many regulatory aspects, some of which may continue to apply under the EU acquis from 1/1/21. The guidance could also shed light on what must change at the end of 2021 when the NIP is assumed to apply in full – subject to any further agreement.

The agreement of the Specialised Committee, set up under the NIP, clearly acknowledges difficulties in applying existing rules in Northern Ireland only once the Brexit implementation period comes to an end on 31/12/20, and how current systems and checks can be split apart, in practical terms, given well established regulatory infrastructure.

ONC Delays Timeframes for Information Blocking and Changes To Health IT Certification Program

Last week, the Department of Health and Human Services (“HHS”) Office of the National Coordinator for Health Information Technology (“ONC”) announced an Interim Final Rule with Comment Period (“IFC”) delaying compliance dates and timeframes for information blocking and the health IT certification program. This delay will come as a welcome change for “Actors” (i.e., health care providers and developers of certified Health IT) struggling to implement changes amid the COVID pandemic.


ONC issued the Cures Act Final Rule (the “Final Rule”) in March 2020 to implement the 21st Century Cures Act’s information blocking provision and establish additional health information technology (“health IT”) certification requirements. A month later, in response to concerns raised regarding the COVID-19 pandemic by health IT developers, ONC delayed effective dates for three months longer than initially proposed. The IFC expands upon these revised timeframes to give providers additional flexibility to prioritize their pandemic responses. Continue Reading

Cross-Post from Law360: Key Gov’t Tools For Addressing National PPE Shortages

This is a Cross-Post from Law360.  Please contact Sarah Rathke with any questions.

The COVID-19 pandemic has revealed shortcomings in U.S. supply chains requiring immediate action to continue to provide personal protective equipment (“PPE”) during the ongoing crisis.  Here, we’ve been published in Law360, discussing federal solutions for our national PPE shortages.  Read the full article here.