Category: Administrative & Regulatory

340B Drug Pricing Program Notices on Group Purchasing Organizations and Medicaid Exclusion File

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Following the recent release of new Program Notices regarding the Group Purchase Organization (GPO) prohibition and Medicaid Exclusion File, 340B participating entities should review their 340B program policies and procedures to ensure compliance with new and clarified guidance regarding GPO purchasing and dispensing of 340B drugs to Medicaid patients.

On February 7, 2013, the Health Resources and Services Administration Office of Pharmacy Affairs (OPA) issued new Program Notices related to the Group Purchasing Organization (GPO) prohibition and the Medicaid Exclusion File (the Program Notice).

GPO Prohibition 

Disproportionate Share Hospitals, children’s hospitals and freestanding cancer hospitals that participate in the 340B program are prohibited from purchasing “covered outpatient drugs” through a GPO or other group purchasing arrangement.  Covered outpatient drugs include most outpatient drugs obtained by written prescription, with the exception of vaccines and certain drugs classified as devices by the U.S. Food and Drug Administration.

Prior to the release of the new Program Notice, OPA had provided little guidance regarding the scope and enforcement of the GPO prohibition.  The Program Notice appears to have resulted from OPA concern that certain hospitals may have been routinely using outpatient GPO accounts when unable to purchase drugs at 340B prices.  With the Program Notice, OPA has now formally established policies regarding the application of the GPO prohibition to drug shortages, outpatient clinics and virtual inventory/replenishment purchasing models.

With the new Program Notice, and accompanying FAQs released subsequent to the publication of the Program Notice, OPA advises that the GPO prohibition applies even when a covered outpatient drug is not available at the 340B price due to a manufacturer shortage.  In such cases, hospitals are instructed to notify OPA of the issue, but may not obtain the drug through a GPO.

The Program Notice also provides that the GPO prohibition does not extend to certain off‑site outpatient clinics.  A hospital may use a GPO to purchase covered outpatient drugs for an off-site outpatient clinic if all of the following requirements are met:

Further, OPA establishes that a hospital may not use a GPO to purchase covered outpatient drugs for dispensing to patients through a contract pharmacy.  This guidance does not prohibit a contract pharmacy that is not owned by a hospital (which is the entity that would be subject to the GPO prohibition) from accessing GPO pricing through its own account, so long as the hospital is not involved in the pharmacy-GPO arrangement and does not benefit from the pharmacy’s GPO pricing.

  • The off-site outpatient clinic is located at a different physical address than the hospital
  • The off-site outpatient clinic is not registered in the OPA 340B database as participating in the 340B program
  • Covered outpatient drugs for the off-site outpatient clinic are purchased through a separate pharmacy wholesaler account than the hospital
  • The hospital maintains records demonstrating that drugs purchased through a GPO for the off-site outpatient clinic are not utilized by or transferred to the hospital or any off-site outpatient location registered in the OPA 340B database

Hospitals, including their outpatient sites, subject to the GPO prohibition must discontinue GPO purchasing of covered outpatient drugs before the first day of their respective 340B program eligibility, although each may continue to dispense previously purchased GPO inventory.  Those hospitals that maintain pharmacy inventory through a virtual inventory/replenishment model, in which 340B drugs are purchased based on prior dispensing to 340B-eligible patients, are also prohibited from using a GPO to purchase covered outpatient drugs.  OPA has advised that hospitals utilizing a replenishment model in “mixed use” (inpatient and outpatient) pharmacies must now account for (“accumulate”) dispensed drugs for inventory replenishment as either inpatient, 340B-eligible or outpatient non-340B.  Drugs accumulated for outpatient non-340B replenishment may only be purchased through a non-340B, non-GPO account.  In addition, a hospital may not purchase drugs on a 340B account until the 340B-eligible accumulator reaches a full package size and/or minimum order quantity.  The result is that such drugs typically must be purchased at wholesale acquisition cost (WAC) or prices individually negotiated between the hospital and manufacturer.

The new Program Notice advises that hospitals subject to the GPO prohibition that are found in violation of the prohibition may be immediately removed from the 340B program and subject to repayment to manufacturers for the period of non-compliance.  However, in a separate FAQ on the OPA website, OPA advises that it will not enforce the GPO prohibition until after April 7, 2013.  Those hospitals that are unable to meet the compliance deadline are advised to either notify OPA of non-compliance and submit a corrective action plan (such submissions will be handled on a case-by-case basis) or disenroll either the entire hospital or, if applicable, non-compliant off-campus locations, from the 340B program.

Medicaid Exclusion File

Drug manufacturers are not required to provide a 340B discount and Medicaid rebate on the same drug.  In order to prevent these “duplicate discounts,” OPA maintains the Medicaid Exclusion File.  This database lists all 340B participating entities (covered entities) and indicates whether the covered entity has elected to dispense 340B drugs to Medicaid patients (carve-in) or obtain drugs for Medicaid patients at non-340B pricing (carve-out).  Covered entities that have elected to carve-in are listed in the Medicaid Exclusion File by Medicaid billing number.

State Medicaid programs are instructed to access the Medicaid Exclusion File to ensure they do not seek manufacturer rebates from those covered entities that are listed in the database.  In the Program Notice, OPA reminds states to use the Medicaid Exclusion File to prevent duplicate discounts and to report any discrepancies between provider billing practices and the information in the database to OPA.

The Program Notice advises covered entities of a change in OPA policy regarding the timing of changes to a covered entity’s decision to carve-in or carve-out.  While changes previously could be made at any time, OPA will now only permit changes on a quarterly basis.  OPA also clarifies that a covered entity may choose to carve-in or carve-out for a subset of 340B enrolled locations, but if it does so, must obtain a separate Medicaid provider number for any eligible locations that carve-in.  Covered entities are also reminded that they must ensure their information is accurately reflected in the Medicaid Exclusion File and that they may be subject to manufacturer repayment if the database reflects that the covered entity opted to carve-out, but the covered entity has been dispensing 340B drugs to Medicaid patients.

Next Steps

340B participating hospitals subject to the GPO exclusion should review their current operations and policies and procedures to evaluate compliance with the guidance released in the new Program Notice and FAQs, with particular attention to use of GPO purchasing to obtain covered outpatient drugs that are not available at 340B pricing and for replenishment inventory.  As necessary, hospitals should cease purchasing covered outpatient drugs through a GPO and begin revising purchasing procedures to ensure compliance by April 8, 2013.

Hospitals should also evaluate current policies regarding use of GPOs at off-site outpatient clinics not registered in the OPA 340B database to determine whether such locations may be eligible to purchase covered outpatient drugs through a GPO.  Previously, many such off-site outpatient clinics were restricted to only purchasing at WAC pricing due to the GPO exclusion.  The new Program Notice makes clear that, so long as purchasing is conducted through a separate pharmacy wholesaler account (not the hospital’s), hospitals subject to the GPO exclusion can use a GPO to purchase drugs for off-campus outpatient clinics that are not registered in the OPA 340B database.  Therefore, outpatient sites now have the flexibility to purchase drugs through a GPO for those clinics that are not yet eligible for 340B enrollment (e.g., they have not yet appeared on a filed Medicare cost report) and to opt-out of enrolling off-site outpatient clinic sites if certain locations would see greater benefit from GPO purchasing than from 340B participation.  Further, hospitals may wish to explore opportunities for selective enrollment of off-site outpatient locations to ensure patient access to certain drugs, such as intravenous immunoglobulin, that have historically been difficult to obtain at 340B pricing and cost-prohibitive to obtain at WAC.

All covered entities should review their information in the Medicaid Exclusion File to ensure the database reflects current Medicaid billing practices and be aware that any changes will only be effective as of the next quarter beginning January 1, April 1, July 1 or October 1.  Covered entities should also use this opportunity to review state Medicaid program requirements regarding carve-in or carve-out restrictions and billing rules related to 340B drugs.

© 2013 McDermott Will & Emery

Not so Fast at the Eden Roc

The National Law Review recently published an article, Not so Fast at the Eden Roc, written by Nelson F. Migdal with Greenberg Traurig, LLP:

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Within hours of the appeals court’s ruling [Marriott International v Eden Roc 3-26-2013.pdf], there have been announcements about the demise of the long-term hotel management agreement and the hotel owner’s inviolate right to terminate (revoke) management agreements “at-will.”  But the wiser course might be to not speak too soon, but, rather, to ponder the consequences.  Remember that Judge Schweitzer’s prior ruling on October 26, 2012 granted Marriott’s request for a preliminary injunction to prevent the hotel owner from removing the hotel operator in another of a series of “midnight raids,” where the hotel owner sweeps in and removes the hotel operator.  The hotel operator at the Eden Roc chose to stand its ground, and the injunction order maintained the status quo.  In many situations, the parties are able to resolve their dispute, either on their own or with the assistance of a mediator.  In fact, the Judge urged the parties to do just that.

The parties were not able to resolve their differences, and on March 26, 2013, a New York appeals court vacated Judge Schweitzer’s injunction.  This is not a sweeping and staggering new law. Citing the 1991 Woolley case, the order merely confirms that a principal may freely remove its agent and terminate the agency relationship “at-will” (absent the presence of a “coupled interest” as part of the contract; see the attached link to our prior piece on the Turnberry decision).  (To this extent, I disagree with the appellate court’s dicta that the agreement in question is not an agency agreement; in fact it is). The order further confirms that certain contracts that have the characteristics of a personal services contract cannot be enforced by means of an injunction.  It is also not news that if a hotel owner desires to terminate its management agreement with the hotel operator in this manner, that the hotel owner may be answerable in damages to the hotel operator.  Some blog posts within the last 24 hours make reference to the recent Fairmont Hotels & Resorts termination at the Turnberry Resort.  Very few of those blog posts complete the factual story and note that the hotel owner ultimately paid Fairmont damages reported to be roughly $19,000,000, representing the approximate present value of expected future management fees. Depending on the performance of the hotel, an Owner’s summary revocation of a hotel management agreement could be akin to selling “puts”; you get to own the stock, but do you really want to own it that cost?

So, let’s just be more judicious here.  Hotel owners and hotel operators actually do talk with each other more often than not, and do enter into legally binding agreements for management of the owner’s hotel.  I will continue to advocate for good faith negotiation over litigation, and monitor the complete story, including the fact that terminating the hotel management agreement may grant an owner its wish to regain the hotel, but that will come at a price, and then, the next step is that the hotel owner will need to replace the removed hotel operator with yet another hotel operator – which hotel owners realize can add a significant expense for the owner.

©2013 Greenberg Traurig, LLP

Supreme Court Hears Oral Argument in “Pay-for-Delay” Patent Settlement Antitrust Case

The National Law Review recently published an article, Supreme Court Hears Oral Argument in “Pay-for-Delay” Patent Settlement Antitrust Case, written by Jeffrey W. Brennan and Glenn Engelmann with McDermott Will & Emery:

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On March 25, 2013, the Supreme Court of the United States heard argument on the issue of pharmaceutical patent settlement agreements between branded and generic drug companies that contain so-called “pay-for-delay” or “reverse payment” provisions. Federal Trade Commission v. Actavis, Inc., involves the Federal Trade Commission’s (FTC’s) appeal of the U.S. Court of Appeals for the 11th Circuit’s order affirming dismissal of an FTC charge that such an agreement was an unfair method of competition in violation of Section 5 of the Federal Trade Commission Act.  Proof that an agreement between competitors is anticompetitive under Section 5 (which only the FTC may enforce) and under Section 1 of the Sherman Act (for which there is a private right of action) is essentially the same.  The Supreme Court’s ruling in FTC v. Actavis will almost certainly have major implications for the viability of FTC and private suits alleging that pay-for-delay settlements are anticompetitive, and for the level of antitrust risk facing companies that enter into such settlements.

Pay-for-delay challenges arise from settlements of patent infringement suits by branded drug patent holders against generic drug applicants under the Hatch-Waxman framework.  Two provisions must be present for the theory to apply: a restriction on generic entry until a future date (even if the entry precedes patent expiration), and payment of money or other value by the brand to the generic firm.  The payment typically is part of an ancillary agreement, such as a supply or co-promotion arrangement or IP license (coined a reverse payment because the plaintiff pays the defendant to settle).  The FTC argues that this paradigm delays competition because it likely induces the generic to settle for later entry, or would have under exclusivity provisions if it won the lawsuit.  The FTC finds the agreements presumptively unlawful and would put the burden on defendants to prove otherwise.  Defendants counter that the patent conveys a right to exclude and that these settlements promote and accelerate competition, because they enable generic entry prior to patent expiration.  Defendants assert that the burden should remain with the plaintiff to prove an anticompetitive effect.

The facts alleged in the FTC complaint squarely fit this paradigm.  The settlement occurred in 2006.  Solvay marketed branded drug Androgel.  A formulation patent claiming Androgel expires in 2020.  Generic drug firm Watson (now Actavis) had applied to the U.S. Food and Drug Administration for approval to launch a generic version of Androgel and certified that the generic product did not infringe Solvay’s patent and that the patent was invalid.  Solvay sued Watson and another firm for patent infringement, then settled.  The parties agreed that Watson would not launch its generic version of Androgel until 2015—five years prior to patent expiration—and that Watson would promote Androgel to a key customer source, urologists, and be compensated by Solvay for those services.  The agreement thus contains both components of an FTC pay-for-delay paradigm: a time-restriction on generic entry and a reverse payment.

The 11th Circuit followed its own precedent in rejecting the FTC case under the “scope-of-the-patent” test.  (The Second and Federal Circuits apply the same test.)  Under that analysis, if the patent was not obtained by fraud, and the infringement suit is not a sham (i.e., objectively baseless), then a settlement does not violate the antitrust laws if its terms do not expand the exclusionary scope of the patent, such as by prohibiting generic entry even after the patent expires.  Since the Solvay-Watson settlement provided for generic entry five years before patent expiration and did not otherwise allegedly fail the foregoing tests, the 11th Circuit affirmed dismissal of the FTC complaint.  The Supreme Court likely accepted the case because of a circuit split on this issue.  In 2012, in In re K-Dur Antitrust Litigation, in which the FTC was not a party, the Third Circuit reversed a district court and applied a legal analysis that rejects the scope-of-the-patent test and essentially adopts the FTC approach.

In the oral argument, the Justices directed a number of pointed questions and comments to each side.  As noted, the government would put the burden on defendants to show that their agreement is not anticompetitive, arguing that “agreements of this sort should be treated as presumptively unlawful, with the presumption able to be rebutted in various ways” that do not include an assessment of the patent’s validity or of the strength of the infringement claim.  Members of the Supreme Court expressed skepticism about that rule.  Justice Kennedy responded, “[t]hat’s my concern, is your test is the same for a very weak patent as a very strong patent.  That doesn’t make a lot of sense.”  Justice Scalia said that to not evaluate the strength of the patent in assessing competitive effects is to leave out “the elephant in the room.”  Justice Breyer remarked that the government proposes “a whole set of complex per se burden of proof rules that I have never seen in other antitrust cases,” adding, “I’m worried about creating some kind of administrative monster.”

Justices also had pointed comments for the companies’ counsel, particularly on whether it is appropriate to find that the patent has an absolute right to exclude even though it was being tested in court.  The companies’ counsel argued that “the patent gives the patentholder the legal right to exclude” and that unless the patent is legally unenforceable, the patentholder is “entitled to monopoly profits for the whole duration of the patent.”  Justice Sotomayor said “there is no presumption of infringement” by the generic product, “[s]o what you’re arguing is that in fact a settlement of an infringement action is now creating the presumption.”  She added, “I don’t know why we would be required to accept that there has or would be infringement by the product that has voluntarily decided not to pursue its rights.”  Justice Kagan remarked that “[i]t’s clear what’s going on here is that [the brand and generic firms are] splitting monopoly profits and the person who’s going to be injured are all the consumers out there,” and that under the companies’ proposed rule, the brand and generic firm will have the incentive “in every single case . . . to split monopoly profits in this way to the detriment of all consumers.”

The Supreme Court’s term concludes in June 2013, by which time a decision is expected.

© 2013 McDermott Will & Emery

Federal Circuit Courts Find No Causal Connection in Employee Retaliation Claims

The National Law Review recently featured an article, Federal Circuit Courts Find No Causal Connection in Employee Retaliation Claims, written by Katherine G. Cisneros of Schiff Hardin LLP:

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As employers know, retaliation cases are notoriously difficult to defend. However, two recent decisions from federal courts of appeal may help employers prevail in such cases. The Sixth and Seventh Circuit U.S. Courts of Appeals recently affirmed summary judgment in two retaliation cases, both courts holding that the employees’ claims did not establish a causal connection between the protected activity and adverse employment action.

Timing Alone Insufficient Where Multi-Year Gap Between Protected Activity and Adverse Action

In Fuhr v. Hazel Park Sch. Dist., No. 2:08-cv-11652 (6th Cir. Mar. 19, 2013), the Sixth Circuit affirmed summary judgment for Hazel Park School District, finding no causal connection between a coach’s prior lawsuit and her subsequent removal from a coaching position. Fuhr served as the high school girls’ varsity basketball head coach at Hazel Park High. In 1999, Fuhr sued the school district, alleging gender discrimination based on the school district’s failure to hire her as the high school boys’ varsity basketball head coach. At the time, the boys’ and girls’ teams played during different seasons. Fuhr ultimately prevailed and in 2004 became the boys’ basketball coach. Anticipating a federal district court order requiring the basketball seasons be played at the same time, the school district removed Fuhr as the girl’ head coach in 2006 because it would be too difficult to coach two teams in the same season.

Fuhr sued, claiming that her removal as the girls’ coach and other harassing acts were retaliation for prevailing in her previous lawsuit. Fuhr claimed her principal told her that “this is a good old boys network….They are doing this to you to get back at you for winning the lawsuit.” The Sixth Circuit determined that the principal’s statement was too ambiguous to provide direct evidence of unlawful retaliation. The court next found that Fuhr failed to demonstrate a causal connection between her prior lawsuit and removal as the girls’ coach. While a close temporal proximity between events can constitute evidence of a causal connection, here, the “multi-year gap prove[d] fatal” to establishing causality. The court also added that even if Fuhr could prove causation, the school district was able to offer legitimate, non-discriminatory reasons for any alleged harassing actions. Accordingly, the Sixth Circuit affirmed summary judgment for the school district on Fuhr’s retaliation claim based on the lack of any temporal proximity.

Employee’s Disagreement with Employer’s Investigation Does Not Prove Retaliation

In Collins v. American Red Cross, No. 08-cv-50160 (7th Cir. Mar. 8, 2013), the Seventh Circuit affirmed summary judgment in favor of the American Red Cross, finding that the employer’s investigation report, albeit possibly incorrect, is not evidence of unlawful retaliation or discrimination. Collins, an African-American woman, worked for the Red Cross. In 2006, Collins filed a racial discrimination charge with the Equal Employment Opportunity Commission (“EEOC”) based on harassment from her co-workers. Collins received a “right-to-sue” letter, but did not file a suit. In 2007, Collins’s co-workers complained that, among other acts of misconduct, Collins said that the Red Cross was out to get minorities. The human resources officer assigned to investigate found that all of these allegations against Collins were “substantiated,” and Collins was terminated.

Collins sued, claiming that her termination was in retaliation for her filing of the EEOC charge. Collins claimed that the report did not really substantiate the claim that Collins said the Red Cross is out to get minorities, and therefore, the report must have been referring to the EEOC complaint. Although the report was “sloppy, and perhaps it was also mistaken or even unfair,” Title VII only forbids discriminatory or retaliatory terminations. Nothing in the report suggested the Red Cross was concerned with Collins’s EEOC complaint. Collins only provided speculation that the report was incorrect because of the EEOC complaint, and mere speculation is not enough to overcome summary judgment. Accordingly, the Seventh Circuit affirmed summary judgment for the Red Cross on Collins’s retaliation claim because she failed to show a causal link between the filing of her EEOC complaint and her subsequent termination.

The Seventh Circuit also affirmed summary judgment on Collins’s race discrimination claim because Collins failed to prove that the Red Cross’ reason for termination was pretextual, emphasizing that “pretext means a lie.” The only piece of evidence Collins offered was that she denied all the allegations raised by her co-worker’s complaints. Denying the allegations is not enough to survive summary judgment because the “fact that a statement is inaccurate does not meant that it is a deliberate lie.” Evidence that an employer reached the wrong conclusion can suggest discrimination if the conclusion were “incredible on its face.” However, here, the court found that the report’s conclusions were not incredible, and there was nothing in the record to suggest racial animus toward Collins. While the Red Cross’s report may have been wrong, that is not enough for Collins’s claim to survive summary judgment.

Sound Employer Practices Remain Key to Successful Defenses

As is clear from the Seventh Circuit case, employer investigations remain a key component of successful defenses of claims. Employers should utilize human resources or other professionals who are trained in both conducting investigations and writing investigation reports to investigate allegations of harassment, discrimination or retaliation. Also keep in mind that, as the Sixth Circuit case suggests, if a long period of time elapses between the employee’s protected activity and the adverse action, it is likely that additional evidence of retaliatory conduct will be required in order for the employee to prevail. To defeat any such evidence, employers should be sure that the legitimate, non-discriminatory reasons for the actions taken are well-documented.

© 2013 Schiff Hardin LLP

Supreme Court Narrows ‘State Action’ Immunity From Antitrust Laws

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The U.S. Supreme Court has referred to the federal antitrust laws as “a charter of freedom [having] a generality and adaptability comparable to that found to be desirable in constitutional provisions.” The antitrust laws are generally broadly worded, and they have been subject to various interpretations and reinterpretations over the past century. Certain types of anti-competitive activity, such as horizontal price fixing, have been deemed so obviously harmful to the marketplace as to be declared per se illegal. Others are judged by the so-called “rule of reason” analysis, in which courts weigh the effect on a defined market of the alleged anti-competitive activity.

Click the View Media link to read the full article.

HIPAA Omnibus Rule Effective March 26, 2013

The National Law Review recently featured an article, HIPAA Omnibus Rule Effective March 26, 2013, written by the Health Care & Health Care Finance group with Vedder Price:

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The omnibus final rule that amends the privacy, security and enforcement rules1 promulgated under the Health Insurance Portability and Accountability Act of 1996 (the statute and rules, together, HIPAA) requires that Covered Entities revise and redistribute their notice of privacy practices (NPP). As described below, this will generally involve updating NPPs for legally required changes and redistributing the NPPs, whether by posting on an intranet site or distributing hard copies, by September 23, 2013.

The final rule became effective on March 26, 2013; however, Covered Entities have until September 23, 2013 (the compliance date), unless otherwise excepted, to bring their NPPs into compliance. Many of the changes to the NPPs are required pursuant to statutory enactments under the Health Information Technology for Economic and Clinical Health Act (HITECH Act) and the Genetic Information Nondiscrimination Act (GINA). Most new requirements are generally applicable to all Covered Entities, as defined under HIPAA, but certain requirements apply specifically to health plan Covered Entities and health care provider Covered Entities as summarized below.

New Requirements for Covered Entities’ NPPs

A Covered Entity must update its NPP to include these additional elements:

  1. A statement that certain uses and disclosures of protected health information (PHI) require an authorization from the subject individual, specifically psychotherapy notes (if recorded or maintained by the Covered Entity), PHI for marketing purposes and PHI in instances constituting the sale of PHI;
  2. A statement that uses and disclosures not addressed within the NPP require a written authorization;
  3. An acknowledgment that the individual may revoke any authorization granted for uses and disclosures requiring such authorization; and
  4. A notice of the individual’s rights following a breach of unsecured PHI, which can be sufficiently accomplished with a statement that the individual has a right to or will receive notification of a breach of his or her unsecured PHI.

Covered Entities that seek to contact individuals to raise funds for themselves must also include a notice of such intentions and of the individual’s right to opt out of such communications. However, the mechanism for opting out of fundraising communications does not need to be included in the NPP.

Specific Requirements for Health Care Providers’ NPPs

Tangential to new rights created by the final rule for individuals to restrict access to PHI, each health care provider must notify individuals of such new rights through its NPP.

  1. Notice Elements. In addition to those provisions discussed above, health care providers must include in their NPPs a statement notifying the individual of the individual’s right to restrict—and a health care provider’s affirmative obligation to agree to restrict—disclosures of PHI to the individual’s health plan where the individual has paid for the items or services out-of-pocket and in full.
  2. Distribution Methods. The final rule did not amend those provisions relating to the distribution of NPPs for health care providers; however, the preamble to the final rule did clarify the manner in which health care providers are expected to distribute NPPs by the compliance date. NPPs must be available at the delivery site, but health care providers may choose to post a summary of the policy with copies of the entire policy readily available at the patient’s request, with the exception of new patients, who must be given a complete copy and must return a good faith acknowledgment of receipt.

Specific Requirements for Health Plans’ NPPs

  1. Notice Elements. In addition to the above requirements, a health plan that uses PHI for underwriting purposes must include in its NPP a disclosure that the health plan may not use or disclose PHI that is genetic information for underwriting purposes.
  2. Distribution Methods. A health plan that currently posts its NPP on the company’s intranet site must (i) post the revised NPP (or the material changes to the NPP) on the website by September 23, 2013 and (ii) within the next annual mailing, provide the revised NPP or information about the material changes to the NPP and instructions for obtaining a copy of the revised NPP.

Alternatively, for those health plans that do not provide access to the NPP on the company’s intranet site, either (i) the revised NPP or (ii) information regarding the material change in the policy and instructions on how to obtain a copy of the revised notice must be distributed to individuals covered by the subject plan of the NPP within 60 days of such material revision. Distribution may be made via regular mail, hand delivery or, if applicable, electronic means. We anticipate many health plans will distribute a revised NPP as part of open enrollment.

Excepted Entities

The final rule exempts certain entities from specific aspects of the revised NPP provisions. Issuers of long-term care policies do not need to include notice of the restrictions on the use and disclosure of genetic information for underwriting purposes, as GINA did not apply such restrictions to these plans. As discussed above, health care providers are not required to disclose the protections afforded to individuals under GINA in NPPs, as health care providers may continue to disclose genetic information, subject to the minimum necessary requirements and in reliance upon a patient’s health plan’s exclusive obligation to comply with GINA’s restrictions on its use of and requests for such information.

Lastly, those health plans that have previously distributed NPPs in compliance with the final rule (as a result of the statutory enactment of such requirements under GINA and the HITECH Act) do not need to redistribute NPPs by the compliance date.

Action Items

Before September 23, 2013, Covered Entities should revise NPPs to be compliant with the final rule and distribute such revised NPPs in accordance with the specified distribution methods applicable to the Covered Entity. Furthermore, those health plans that have previously distributed NPPs to comply with GINA and the HITECH Act should ensure that all of the elements of the final rule, including those applicable to all Covered Entities, have been satisfied before determining that the exception granted under the final rule applies.

1 45 C.F.R. parts 160 and 164, subparts A and E, 45 C.F.R. parts 160 and 164, subparts A and C, and 45 C.F.R. parts 160, subparts C through E, respectively.

© 2013 Vedder Price

East Coast Spotlight on Design Patents: Spanx v. Yummie Tummie

The National Law Review recently featured an article, East Coast Spotlight on Design Patents: Spanx v. Yummie Tummie, written by Michael A. Cicero with Womble Carlyle Sandridge & Rice, PLLC:

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Certainly the recent design patent litigation between Apple and Samsung in the Northern District of California garnered significant media attention.  Design patents now reside in the media spotlight once again, but this time through East Coast litigants.  The president of a New York-based maker of women’s control tops that is a named owner of several design patents openly declared that she hopes her Georgia-based competitor “is ready for war because [she] will not lie down.”  The accused infringer actually started the litigation following its receipt of a cease-and-desist letter from the New York company’s legal counsel.

On March 5, 2013, Spanx, Inc. (“Spanx”) filed a declaratory judgment complaint in the Northern District of Georgia against Times Three Clothier, LLC d/b/a Yummie Tummie (“Yummie Tummie”), requesting the court to declare that three Spanx products do not infringe seven design patentsclaimed to be owned by Yummie Tummie.  The lawsuit has already generated a considerable amount of media coverage, including sources cited below and NBC’s Today Show.

The lawsuit pits two prominent entrepreneurs against one another.  Heather Thomson, the president of Yummie Tummie, is not only the sole inventor named in each of the patents-in-suit (as Heather Thomson Schindler), but was also one of the “Real Housewives of New York.”[1]  Sara Blakely, according to ABC News, “founded Spanx in 2000, introducing what Spanx calls a shaping camisole in 2005,” and is “the youngest woman on Forbes’ billionaires list.”

Referring to an interview Thomson gave to the publication WWD (Women’s Wear Daily),lifeinc.today.com reports:

Thomson told WWD that she first learned of the product this past November when she received an anonymous package containing the Spanx Total Taming Tank and a note saying it was on sale at QVC.  “I immediately recognized it as my original Yummie Tummie tank,” Thomson told WWD.  The unsigned note said Spanx was selling it at QVC.  A spokeswoman for Thomson declined to comment further.

“The Patents-in-Suit are related to one another,” states Spanx’s complaint, “in that [six of the patents] all claim priority to the [oldest] Patent.”  Excerpts from two of these patents appear in Figure 1, below, for purposes of illustration.

The complaint alleges that Yummie Tummie’s counsel sent Spanx a cease-and-desist letter on or around January 18, 2013, identifying the accused products as Spanx’s “Total Taming Tank,” the “Top This Tank Style 1847,” and the “Top This Cami Style 1846.”  (See Figure 2 below, depicting two of those products.)  Spanx responded to that letter on or around February 14, 2013, according to the complaint, “describing in detail significant differences between the Accused Products and the Patents-in-Suit and stating, among other things, that it does not believe the Accused Products infringe the Patents-in-Suit.”

Figure 1: Depictions of Fig. 1 from Yummie Tummie’s U.S. Patents Nos. D606,285S (left) and D632,052S (right)
Figure 2: Two accused Spanx products as shown in its website: Styles Nos. 1846 (left) and 1847 (right)

Counsel for each party then communicated with one another several times but, states the complaint, Yummie Tummie “continued to maintain that the Accused Products infringe the Patents-in-Suit and expressed a willingness to enforce its patents against Spanx.”  Thus, Spanx alleges, it has grounds for seeking a declaratory judgment of noninfringement of the Patents-in-Suit.  The complaint requests such declaratory relief plus “costs, expenses, and reasonable attorneys’ fees as provided by law.”

As of the time of this writing, Yummie Tummie has not yet filed a formal answer to the complaint (its allotted time for doing so under procedural rules has not yet expired).  Yummie Tummie has, though, already  issued a public statement regarding the lawsuit.  In a March 14, 2013 letter addressed directly to Blakely and published on Yummie Tummie’s website, Thomson states, among other things: “We brought this to your attention expecting you to stop.  Instead you’ve chosen to sue us, no doubt thinking that your massive company could intimidate ours.  We have successfully enforced our design patents in the past and will continue to do so.”

The case is Spanx, Inc. v. Times Three Clothier, LLC d/b/a Yummie Tummie, No. 1:13-cv-0710-WSD,filed 03/05/13 in the U.S. District Court for the Northern District of Georgia, Atlanta Division, assigned to U.S. District Judge William S. Duffey, Jr.

[1] Coincidentally, the Northern District of Georgia is also the site of a legal battle between two “Real Housewives of Atlanta,” filed just one week after the Spanx lawsuit.  See prior post.

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