Category: Health

Apple Smartwatch Antitrust Case Survives, Showing ‘Freedom of Design’ is Not Absolute

Judge Cites ‘Associated’ Anticompetitive Conduct Claims

It’s a case that challenges the limits of the “freedom of design” usually enjoyed by companies accused of product design changes alleged to harm competition. Ordinarily, a design change is not the kind of conduct that runs afoul of the antitrust laws, but on March 21, U.S. Judge Jeffrey S. White from the Northern District of California denied Apple Inc.’s motion to dismiss an antitrust case brought against it by AliveCor Inc. The suit alleges that Apple unlawfully maintained its monopoly in the market for heart rate analysis apps by updating WatchOS, the Apple Watch operating system on which AliveCor’s heart rate analysis app runs. (AliveCor, Inc. v. Apple Inc., No. 21-cv-03958-JSW, N.D. Calif.).

Heart rate analysis apps analyze the user’s heart rate in real time using a sensor close to the user’s wrist and determine whether the user’s heart rate is normal or irregular. The app runs constantly while the device is worn and alerts the user when a situation arises requiring an ECG recording and medical analysis. AliveCor also sells an electrocardiogram-capable wrist band for the Apple Watch and related WatchOS software that analyzes reading from the band. AliveCor claims that its products—the ECG-wristband hardware and software and its heart rate analysis app—“helped change the perception of the Apple Watch from an accessory to a personal health monitoring tool.”

AliveCor calls its heart rate monitoring app “SmartRhythm.” According to AliveCor, when sales of SmartRhythm took off Apple was inspired to announce an update to WatchOS with its own heart monitoring app designed to exclude AliveCor from the U.S. market for WatchOS heart rate analysis apps.

SmartRhythm works by using data from the Apple Watch’s heart rate algorithm. According to the complaint, Apple’s update to WatchOS altered the heart rate algorithm in a way that prevents third-party developers from being able to detect heart rate fluctuations and irregularities. As a result of these changes, SmartRhythm could not provide accurate heart rate analysis, and AliveCor removed it from the market.

Consequently, Apple is a monopolist in the WatchOS heart rate analysis app market, which AliveCor claims Apple is maintaining with exclusionary design changes to WatchOS, in violation of Section 2 of the Sherman Act, California’s Unfair Competition Law, and Section 17200 of California Business and Professions Code.

The court denied Apple’s motion to dismiss AliveCor’s monopolization claim in what it characterized as the “[single brand] aftermarket for WatchOS apps.” Applying the factors enumerated by the court in Newcal Indus., Inc. v. Ikon Office Sol., 513 F.3d 1038, 1044 (9th Cir. 2008), the court found that the WatchOS app aftermarket was wholly derivative from the primary smartwatch market, the alleged restraint applied only to the aftermarket, Apple’s aftermarket power was not obtained through contract terms reached in the primary market, and that competition in the smartwatch market does not discipline anticompetitive practices in the WatchOS app aftermarket. Accordingly, the court ruled that AliveCor’s market definition met the Newcal standards for a “single product” relevant market.

Apple argued that a company that improves a product to the benefit of consumers does not violate antitrust laws “absent some associated anticompetitive conduct,” citing the leading “freedom of design” case of Allied Orthopedic Appliances Inc. v. Tyco Health Care Group LP, 592 F.3d 991, 998-99 (9th Cir. 2010). The court quoted the holding of Allied: “If a monopolist’s design change is an improvement, it is necessarily tolerated by the antitrust laws, unless the monopolist abuses or leverages its monopoly power in some other way when introducing the product.”

Apple argued that its update to WatchOS was purely a design change that benefitted users, with no associated anticompetitive conduct. It observed that AliveCor hadn’t established that consumers use Apple’s app instead of some third-party app, or that Apple rejected any third-party apps, or that no other third-party heart apps are available to Apple Watch users. But the court rejected those arguments, noting that Apple failed to provide any legal authority that would require such allegations.

Apple ignored AliveCor’s allegations that Apple abused or leveraged its monopoly power “in some other way” by changing its heart rate algorithm to make it effectively impossible for third parties to inform a user when to take an ECG. AliveCor contended that Apple’s updated heart rate algorithm, which was pushed out to all earlier Apple Watch models, did not improve user experience. Its purpose was to prevent third parties from identifying irregular heart rates and offering competing apps based on that data. “These allegations present the type of ‘associated conduct’ that makes product design changes cognizable under antitrust law. Plaintiff’s allegations plausibly establish that Apple’s conduct was anticompetitive,” Judge White held. A case management conference set for May 20.

Commentary

It is truly difficult to see how some separate, “associated” conduct by Apple other than its design change to WatchOS violates Section 2. It seems more straightforward to consider the design change itself to be a cognizable anticompetitive act. It may be time to drop the fiction maintained in Allied v. Tyco that design changes are “never” antitrust violations unless accompanied by some “other” conduct. Here, Apple has created the market itself in the form of an OS platform used by millions of consumers who depend on it to access all manner of competing complementary products. Under those circumstances, it should be uncontroversial to hold a platform operator liable under the antitrust laws for design changes that exclude competitors or foreclose participants from the market, without indulging in the fiction of “associated” conduct.

Article By Jonathan Rubin of MoginRubin

For more antitrust legal news, click here to visit the National Law Review.

© MoginRubin LLP

FDA and FTC Issue Warning Letters to CBD Companies

  • On March 28, 2022, the Food and Drug Administration (FDA) and Federal Trade Commission (FTC) jointly issued seven warning letters to companies marketing cannabidiol (CBD) products with COVID-19 related claims.
  • Specifically, the agencies warned the following companies regarding the promotion of their respective products with claims that they cure, mitigate, treat or prevent COVID-19: Cureganics, Heaven’s Organics LLC, Functional Remedies, LLC D/B/A Synchronicity Hemp Oil, Greenway Herbal Products LLC, CBD Social, UPSY LLC, and Nature’s Highway. Examples of claims include: “Our research suggest that CBD . . . can block SARS-Cov-2 infection at early and even later stages of infection. . .”, “Studies Show CBD Compounds Prevent COVID Cells From Replicating”, and “Can CBD Help with the Fight Against COVID? Some of the worst effects of COVID are caused by inflammation, and CBD is a potent anti-inflammatory.”
  • By way of background, under the Federal Food, Drug, and Cosmetic Act (FD&C Act), products intended to cure, treat, mitigate, or prevent disease are considered drugs and are subject to the requirements that apply to drugs. Therefore, the agencies classified the products as unapproved and misbranded drugs that may not be legally introduced or delivered for introduction into interstate commerce without prior approval from FDA.
  • The letters included a cease-and-desist demand from FTC, prohibiting the companies from making such COVID-19 related claims. The companies were provided with 48 hours to respond with specific steps that were taken to correct the violations.

Article By Food and Drug Law Practice Group at Keller and Heckman LLP

For more food and drug law legal news, click here to visit the National Law Review.

© 2022 Keller and Heckman LLP

EPA Will Propose to Ban Ongoing Uses of Asbestos

The U.S. Environmental Protection (EPA) announced on April 5, 2022, that it will propose to prohibit ongoing uses of chrysotile asbestos, the only known form of asbestos currently imported into the United States. EPA notes that the proposed rule will be “the first-ever risk management rule issued under the new process for evaluating and addressing the safety of existing chemicals under the Toxic Substances Control Act (TSCA) that was enacted in 2016.” EPA will propose to prohibit manufacture (including import), processing, distribution in commerce, and commercial use of chrysotile asbestos for all ongoing uses of chrysotile asbestos. EPA will also propose targeted disposal and recordkeeping requirements in line with industry standards, Occupational Safety and Health Administration (OSHA) requirements, and the Asbestos National Emission Standards for Hazardous Air Pollutants (NESHAP). EPA has posted a pre-publication version of the proposed rule. Publication of the proposed rule in the Federal Register will begin a 60-day comment period.

Background

As reported in our January 4, 2021, memorandum, EPA released on December 30, 2020, the final risk evaluation for asbestos, part 1: chrysotile asbestos (Asbestos RE Part 1). Of the six use categories evaluated (chlor-alkali diaphragms, sheet gaskets, other gaskets, oilfield brake blocks, aftermarket automotive brakes/linings, and other vehicle friction products), EPA found that there is unreasonable risk to workers, occupational non-users (ONU), consumers, and/or bystanders within each of the six chrysotile asbestos use categories. EPA found no unreasonable risk to the environment. According to the final risk evaluation, chrysotile is the prevailing form of asbestos currently mined worldwide, and “so it is assumed that a majority of commercially available products fabricated overseas that contain asbestos are made with chrysotile. Any asbestos being imported into the U.S. in articles is believed to be chrysotile.” The other five forms of asbestos are now subject to a significant new use rule (SNUR), as reported in our April 18, 2019, memorandum, “EPA Announces Final SNUR for Asbestos Will ‘Close Loophole and Protect Consumers.’”

Proposed Rule

EPA will propose a rule under TSCA Section 6(a) to prohibit manufacture (including import), processing, distribution in commerce, and commercial use of chrysotile asbestos in bulk or as part of chrysotile asbestos diaphragms used in the chlor-alkali industry and chrysotile asbestos-containing sheet gaskets used in chemical production. EPA will propose that these prohibitions take effect two years after the effective date of the final rule.

EPA will also propose pursuant to TSCA Section 6(a) to prohibit manufacture (including import), processing, distribution in commerce, and commercial use of chrysotile asbestos-containing brake blocks used in the oil industry, aftermarket automotive chrysotile asbestos-containing brakes/linings, other chrysotile asbestos-containing vehicle friction products (not including the National Aeronautics and Space Administration (NASA) Super Guppy Turbine aircraft use), and other chrysotile asbestos-containing gaskets. EPA will propose that these prohibitions take effect 180 days after the effective date of the final rule.

EPA will further propose pursuant to TSCA Section 6(a) to prohibit manufacture (including import), processing, and distribution in commerce of: aftermarket automotive chrysotile asbestos-containing brakes/linings for consumer use, and commercial use of other chrysotile asbestos-containing gaskets for consumer use. EPA will propose that these prohibitions take effect 180 days after the effective date of the final rule.

EPA will also propose disposal and recordkeeping requirements under which regulated parties would document compliance with certain proposed prohibitions. EPA states that it does not intend the proposed prohibitions on processing or distribution in commerce to prohibit any processing or distribution in commerce incidental to disposal of the chrysotile asbestos waste in accordance with the proposed requirements.

According to EPA, because a determination has been made that chrysotile asbestos presents an unreasonable risk to health within the United States or to the environment of the United States, pursuant to TSCA Section 12(a)(2), the proposed rule would apply to chrysotile asbestos even if being manufactured, processed, or distributed in commerce solely for export from the United States.

Commentary

Bergeson & Campbell, P.C. (B&C®) commends EPA on this historical achievement. Unsurprisingly, there are aspects of this precedent-setting proposed rule that invite discussion and warrant comment from affected parties. Key among these issues is a potential significant legal vulnerability in the underlying risk evaluation (i.e., Asbestos RE Part 1) for the proposed rule, an issue that may overshadow this historic achievement in a manner reminiscent of EPA’s failed ban of asbestos in 1991 (Corrosion Proof Fittings v. EPA, 947 F.2d 1201 (5th Cir., 1991)).

EPA proposed that the prohibition on specific conditions of use (e.g., chrysotile asbestos diaphragms used in the chlor-alkali industry) would take effect two years after the effective date of the final rule. EPA stated that it “believes an aggressive transition away from chrysotile asbestos will spur adoption of superior technology [e.g., membrane cells with increased concentrations of per- and polyfluoroalkyl substances (PFAS)].” The clear need to consider EPA’s intended action on asbestos in the context of its ongoing actions on PFAS is of course not lost on the Agency. EPA acknowledged that “the transition away from asbestos-containing diaphragms could result in greater usage and release of PFAS.”

B&C notes that innovative new technologies, such as alternative membrane cells, may be available in the future, but those technologies must be proven to be economically and technically viable. Once proven effective, the underlying chemical substances must be reviewed as new chemicals if so classified under TSCA. The development, review, and approval are all on indeterminate timelines, so it is speculative when novel, non-PFAS-based technologies will be commercially available and, of course, whether that time will be prior to the effective date of EPA’s proposed ban on asbestos.

EPA requested comment on specific aspects of the proposed rule that B&C encourages potentially impacted parties to consider. For example, EPA discussed its authority under TSCA Section 6(g) to grant a time-limited exemption for a specific condition of use, such as the chlor-alkali industry, where EPA finds “that compliance with the proposed requirement would significantly disrupt the national economy, national security, or critical infrastructure.”

EPA also requested comment on a primary alternative regulatory option that EPA discussed for the chlor-alkali diaphragm and sheet gasket categories that would allow a prohibition to take effect five years after the effective date of the final rule. As part of this option, EPA would include establishment of a risk-based performance standard known as an existing chemical exposure limit (ECEL). EPA developed an eight-hour time-weighted average (8-hr TWA) ECEL of 0.005 fibers/cubic centimeter (f/cc) for inhalation exposures to chrysotile asbestos as an eight-hr TWA ECEL-action level of 0.0025 f/cc, with associated requirements for initial and periodic monitoring and respirator usage/type if exceedances are found.

As part of the monitoring requirements, EPA stated that it would “require use of appropriate sampling and analytical methods to determine asbestos exposure, including: … Compliance with the Good Laboratory Practice Standards at 40 CFR Part 792,” despite the fact that EPA acknowledges that other standards, such as Industrial Hygiene Laboratory Accreditation Program (IHLAP), are more appropriate for industrial hygiene monitoring. EPA’s TSCA Section 5(e) order template states the following under Section III.D:

Compliance with TSCA GLPS, however, is not required under this New Chemical Exposure Limit Section where the analytical method is verified by a laboratory accredited by either: the American Industrial Hygiene Association (“AIHA”) Industrial Hygiene Laboratory Accreditation Program (“IHLAP”) or another comparable program approved in advance in writing by EPA.

EPA devoted one paragraph in the proposed rule to “TSCA section 26(h) considerations.” EPA stated, in part, that its unreasonable risk determination “was based on a risk evaluation, which was subject to peer review and public comment, was developed in a manner consistent with the best available science and based on the weight of the scientific evidence as required by TSCA sections 26(h) [and 26(i)] and 40 CFR 702.43 and 702.45.”

B&C notes that EPA stated in the Asbestos RE Part 1 the following:

TSCA § 26(h) and (i) require EPA, when conducting Risk Evaluations, to use scientific information, technical procedures, measures, methods, protocols, methodologies and models consistent with the best available science and base its decisions on the weight of the scientific evidence. To meet these TSCA § 26 science standards, EPA used the TSCA systematic review process described in the [2018] Application of Systematic Review in TSCA Risk Evaluations document [citation omitted] [2018 SR Document].

Prior to completing Asbestos RE Part 1, EPA requested the National Academies of Science, Engineering, and Medicine (NASEM) to review the 2018 SR Document. In February 2021, NASEM released its consensus study report on EPA’s 2018 SR Document and concluded that it did not meet the criteria of “comprehensive, workable, objective, and transparent” and that “The OPPT approach to systematic review does not adequately meet the state-of-practice.”

NASEM recommended that “With regard to hazard assessment for human and ecological receptors, OPPT should step back from the approach that it has taken and consider components of the OHAT, IRIS, and Navigation Guide methods that could be incorporated directly and specifically into hazard assessment.”

In response to the NASEM review, EPA revised its systematic review method. On December 20, 2021, EPA released the “Draft Systematic Review Protocol Supporting TSCA Risk Evaluations for Chemical Substances” (2021 Draft Protocol) for public comment. EPA acknowledged in the 2021 Draft Protocol that:

Previously [in the 2018 SR Document], EPA did not have a complete clear and documented TSCA systematic review (SR) Protocol. EPA is addressing this lack of a priori protocol by releasing [the 2021 Draft Protocol].

EPA further stated that the:

[2021 Draft Protocol] is significantly different [from the 2018 SR Document] in that it includes descrition [sic] of the Evidence Integration process…, which was not previously included in the [2018 SR Document].

B&C recognizes that the scientific methods used to inform systematic review are not static and that updates will be required as the science evolves. In this instance, however, many of the documents cited as supporting information for updating the 2021 Draft Protocol (e.g., Office of Health Assessment and Translation (OHAT), 2015) were available prior to EPA issuing the 2018 SR Document. Rather than utilizing these documents at the time, EPA developed the 2018 SR Document de novo. In other words, EPA chose to develop its own methodology in 2018 rather than incorporating and adapting existing methodologies that represented the best available science at the time.

These issues raise interesting procedural questions and issues around whether EPA demonstrated that Asbestos RE Part 1 was based on the best available science and weight of scientific evidence, as required under TSCA Sections 26(h) and 26(i) and the implementing regulation under 40 C.F.R. Part 702.

B&C encourages stakeholders to review EPA’s proposed risk management rule on chrysotile asbestos, even for entities that do not manufacture, process, distribute, or use this substance. We urge this review because of the precedential nature of EPA’s decisions. B&C also encourages interested parties to provide public comments on the proposed rule, given that risk management decisions in the proposed rule will likely serve as a basis from which EPA regulates other chemical substances EPA is evaluating under TSCA Section 6.

Article By: the Government Regulation practice at Bergeson & Campbell, P.C.

For more environmental legal news, click here to visit the National Law Review.

©2022 Bergeson & Campbell, P.C.

HIPAA Enforcement Continues Under Right of Access Initiative

On March 28, 2022, the Department of Health and Human Services (HHS) Office for Civil Rights (OCR) announced the resolution of two additional cases as part of OCR’s HIPAA Right of Access Initiative.

The Right of Access Initiative was launched by OCR in 2019 “to support individuals’ right to timely access their health records at a reasonable cost under the HIPAA Privacy Rule” as explained by OCR. In the March 28 announcement, OCR indicated its continuing commitment to enforce compliance with the HIPAA Rules, including the “foundational” Right of Access provision. With the two most recent cases, there have now been 27 investigations and settlements under the Right of Access Initiative (see full chart below).

Nearly all of the investigations in the Right of Access Initiative involve a single individual unable to obtain a copy of some or all of their protected health information from a health care provider or to do so within the timeframe required or in accordance with fees permitted by the HIPAA Privacy Rule. In some cases, additional issues found during the investigation, such as failure to have conducted a HIPAA risk assessment or lack of HIPAA policies, are part of the settlement.  In all cases, in addition to the monetary penalty, the settlement has included a Corrective Action Plan imposing various obligations, such as policy development, training, and mandatory reporting to OCR.

The Right of Access Initiative remains one of the most active areas of HIPAA enforcement. In its most recent Annual Report to Congress on HIPAA Privacy, Security, and Breach Notification Rule Compliance, OCR noted that right of access was the third most common issue of complaints resolved. Moreover, the Right of Access Initiative coordinates with the ONC 2020-2025 Federal HIT Strategic Plan and the goal of “Providing patients and caregivers with more robust health information.” It is a core tenant of the Federal HIT Strategic Plan that access to health information will “better support person-centered care and patient empowerment.”

Article By Allen R. Killworth and Zeina Abu-Hijleh of Epstein Becker & Green, P.C.

For more health law legal news, click here to visit the National Law Review.

©2022 Epstein Becker & Green, P.C. All rights reserved.

HHS OIG Signs Off on Substance Use Recovery Incentive Program

On March 2, 2022, the Department of Health and Human Services (“HHS”) Office of the Inspector General (the “OIG”) issued a new advisory opinion (“AO 22-04”) related to a program through which the Requestor would provide certain individuals access to digital contingency management (“CM”) and related tools to treat substance use disorders (“Program”).  The OIG advised that it would not impose administrative sanctions under the Anti-Kickback Statute (“AKS”) or the Beneficiary Inducements Civil Monetary Penalty Law (“CMPL”).

The Requestor, a digital health company, offers a Program that uses smartphone and smart debit card technology to implement CM for individuals with substance use disorders, addressing aspects of these disorders “in ways that conventional counseling and medications often cannot.” The Requestor makes this technology available to individuals who meet certain requirements through contracts with a variety of entities, such as health plans, addiction treatment providers, employee assistance programs, research institutions, and other treatment providers (“Customers”).

Individuals (‘Members”) are Customer- or self-referred, and are subject to a structured interview using the American Society of Addiction Medicine Continuum Triage tool before participation in the Program. The Requestor’s enrollment specialist, under the guidance of a licensed clinical supervisor, determines the type of services and frequency of recovery coaching using an evidence-based, automated algorithm. The Program technology establishes the schedule of expected target behavioral health events, objectively validates whether each expected event has occurred, and, if it has, promptly disburses the exact, protocol-specified incentive to the Member, using (where appropriate) a progressive reinforcement schedule.

The Program is not limited to treatments or federally reimbursable services; it also includes, among other features, support groups, medication reminders, and appointment attendance verification. For those that do include federally reimbursable services, the Requestor advised that such services may be furnished by a Customer. Incentives from the Program are provided to Members via a “smart debit card.” The card includes “abuse and anti-relapse protections (e.g., it cannot be used at bars, liquor stores, casinos, or certain other locations nor can it be used to convert credit to cash at ATMs or gas stations)”, and allows the Requestor to monitor use. Incentives are capped at $200/month and $599/year; individual incentives are typically relatively small, at $1-$3.

The Requestor receives fees from Customers on either a flat monthly basis, per eligible, active Member, or a pay-for-performance model, in which Requestor is paid upon a Member achieving certain agreed-upon targets for abstinence. The Requestor certified that the aggregate fees are consistent with fair market value and do not vary based on the volume or value of business generated under federal health care programs. Instead, fees are based on the service configurations being purchased and the intensity of behavioral targets that are planned for each Member, as well as whether a member is low- or high-risk, and in or out of treatment.

OIG concluded that two stream of remuneration potentially implicate the AKS and CMPL.  First, Customers pay Requestor a fee to provide services, some of which could incentivize a Member to receive a federally billable service. Second, some of the fees Customers pay to Requestor get passed on to Members as CM Incentives for achieving certain behavioral health goals, some of which may involve services that could be billable to Federal health care programs (e.g., a counseling session) by a particular provider or supplier, which could be a Customer. OIG noted its longstanding concerns relating to the offer of incentives intended to induce beneficiaries to obtain federally reimbursable items and services, as such incentives could present significant risks of fraud and abuse.

The OIG concluded that the Program presents a minimal risk of fraud and abuse and declined to impose sanctions, providing four justifications –

  1. The Requestor certified that the Program is based in research, and provided evidence that CM is a “highly effective, cost-efficient treatment for individuals with substance use disorders.” Therefore, the OIG decided that, taken together with the other safeguards present in the Arrangement, the incentives in the Requestor’s Program serve as “part of a protocol-driven, evidence-based treatment program rather than an inducement to seek, or a reward for having sought, a particular federally reimbursable treatment.”
  2. The incentives offered through the Program have a relatively low value and a cap, and largely are unrelated to any federally payable services, especially as the Requestor is not enrolled in and does not bill to federal health care programs for Program services. Therefore, the OIG determined that the risk of the incentives “encouraging overutilization of federally reimbursable services is low.”
  3. The Requestor’s Customer base is not limited to entities that have an incentive to induce receipt of federally reimbursable services. While the OIG acknowledged that there may be instances where an incentive may be given for receiving a federally billable service, the fees do not vary based on volume or value of any federally reimbursable services, and the Customers do not have control of the Program. Therefore, the OIG determined that the risk is low an entity would become a Customer to “generate business or reward referrals.”
  4. Although the incentives loaded onto a smart debit card function as cash equivalents, the OIG found the safeguards included in the Arrangement sufficient to mitigate fraud and abuse concerns. The Requestor, which does not bill federal health care programs or have an incentive to induce overutilization, determines what services an individual needs and what incentives are attached. Additionally, the smart debit card has “anti-relapse protections”, which can signal possible need for intervention. Therefore, the OIG concluded that the remuneration in the form the smart debit card is sufficiently low risk.

AO 22-04 reflects HHS’s continued aims to increase flexibility around substance use disorder treatments.  Just two weeks before, HHS announced two grant programs, totaling $25.6 million, to expand access to medication-assisted treatment for opioid use disorder and prevent the misuse of prescription drugs. In a press release, HHS Secretary Xavier Becerra is quoted as saying, “At HHS we are committed to addressing the overdose crisis, and one of the ways we’re doing this is by expanding access to medication-assisted treatment and other effective, evidenced-based prevention and intervention strategies.” HHS’ “National Tour to Strengthen Mental Health” is intended to “hear directly from Americans across the country about the challenges they’re facing, and engage with local leaders to strength the mental health and crisis care in our communities”, focused on three aspects: mental health, suicide, and substance use. Further flexibilities should be anticipated in these areas as the Tour continues.

Anyone seeking treatment options for substance misuse should call SAMHSA’s National Helpline at 800-662-HELP (4357) or visit findtreatment.gov. If you or anyone you know is struggling with thoughts of suicide, please call the National Suicide Prevention Lifeline at 800-273-TALK (8255), or text the Crisis Text Line (text HELLO to 741741).

Article By Christine M. Clements and Theresa E. Thompson of Sheppard, Mullin, Richter & Hampton LLP

For more health law legal news, click here to visit the National Law Review.

Copyright © 2022, Sheppard Mullin Richter & Hampton LLP.

Surprise! The No Surprises Act Changes Again

The No Surprises Act (Act), which became effective Jan. 1, 2022, is the latest health care law passed with the best of intent: to create consumer protection from unexpected out-of-network medical bills and to create a federal independent dispute resolution (IDR) process to resolve payment disputes between payers and out-of-network providers. Unfortunately, the Act, especially the U.S. Department of Health and Human Services’ (HHS) implementation of the IDR process, also creates a new administrative burden for health care providers. Providers and medical associations filed lawsuits in multiple jurisdictions to challenge HHS’ implementation of the IDR process and the constitutionality of the Act before it was even in effect.

On Feb. 24, 2022, the United States District Court for the Eastern District of Texas granted the Texas Medical Association’s Motion for Summary Judgement to vacate select IDR requirements. The Court found that HHS’ interim final rule’s IDR process, intended to resolve payment disputes regarding reimbursement for out-of-network emergency services and out-of-network services provided at in-network facilities, was contrary to the clear language of the Act[1] (Rule).

In general, the Act[2] requires health insurance payers (Insurers) to reimburse providers for certain out-of-network services at a statutorily calculated “out-of-network rate.”[3] Where an All-Payer Model Agreement or specified state law does not exist, to set such a rate, an Insurer must issue an initial out-of-network rate decision and pay such amount to the providers within 30 days after the out-of-network claim is submitted.[4] If the provider disagrees with the Insurer’s proposed out-of-network reimbursement rate, the provider has a 30-day window to negotiate a different payment rate with the Insurer.[5] If these negotiations fail, the parties can proceed to the IDR process.[6]

Congress adopted a baseball-style arbitration model for the Act’s IDR process. The Insurer and provider each submit a proposed out-of-network rate with limited supporting evidence. The arbitrator picks one of the offers while taking into account specified considerations, including the “qualified payment amount,” the provider’s training, experience, quality, and outcomes measurements, the provider’s market share, the patient’s acuity, the provider’s teaching status, case mix, and scope of services, and the provider’s/Insurer’s good-faith attempts to enter into a network agreement.[7] The “qualifying payment amount” (QPA), is designed to represent the median rate the Insurer would pay for the item or service if it were provided by an in-network provider.[8]

The Rule requires the IDR arbitrator to select the proposed payment amount that is closest to the QPA unless “the certified IDR entity [arbitrator] determines that credible information submitted by either party … clearly demonstrates that the [QPA] is materially different[9] from the appropriate out-of-network rate.”[10] This is a clear departure from the analysis set forth in the Act.

The Texas Medical Association challenged the Rule under the Administrative Procedures Act (APA), arguing that the Departments exceeded their authority by giving “outsized weight” to one statutory factor over the others specified by Congress, and that the Departments failed to comply with the APA’s notice and comments requirements in promulgating the Rule. In turn, the Departments argued that the plaintiffs did not have standing to bring the claims.

After dispensing with defendant’s standing arguments, the Eastern District of Texas Court ruled in favor of the plaintiff’s Motion for Summary Judgment and determined that “the Act unambiguously establishes the framework for deciding payment disputes and concludes that the Rule conflicts with the statutory text.” Under the Act, the arbitrators (or certified IDR entities) “shall consider … the qualifying payment amounts” and the provider’s level of training, experience, and quality outcomes, the market share held by the provider, the patient’s acuity, the provider’s teaching status, case mix, and scope of services, and the demonstrated good faith efforts of both parties in entering into a network agreement.”[11] The Act did not specify that any one factor should be considered the “primary” or “most important” factor. The Rule, in contrast, requires arbitrators to “select the offer closest to the [QPA]” unless “credible” information, including information supporting the “additional factors,” “clearly demonstrates that the [QPA] is materially different from the appropriate out-of-network rate.”[12] The Departments characterized the other factors as “permissible additional factors” that may be considered only when appropriate.[13] The Court found that the Department’s Rule was inconsistent with the Act and that since Congress had spoken clearly on the factors to be considered in the arbitration process, the Department’s interpretation of the Act was not appropriate and had exceeded the Department’s authority.[14]

Following the Court’s decision, the Departments issued a memorandum on Feb. 28, 2022, clarifying the Act’s requirements for providers and Insurers. The memo specifically noted that the Court’s decision would not, in their opinion, affect the patient-provider dispute resolution process.[15] The Departments also stated they would withdraw any guidance inconsistent with the Court’s Opinion, provide additional training for interested parties, and keep the IDR process portal open to resolve disputes. The Departments also will be considering further rulemaking to address the IDR process.

The No Surprises Act continues to surprise us all with more adaptations. Enforcement of this new law remains uncertain in light of the numerous legal challenges, including at least one constitutionality challenge.

[1] Requirements Related to Surprise Billing: Part II, 86 Fed. Reg. 55,980 (Oct. 7, 2021).

[2] Consolidated Appropriations Act of 2021, Pub. L. No. 116-260, div. BB, tit. I, 134 Stat. 1182, 2758-2890 (2020).

[3] 300gg-111(a)(1)(C)(iv)(II) and (b)(1)(D).

[4] 300gg-111(a)(1)(C)(iv) and (b)(1)(C).

[5] 300gg-111(c)(1)(A).

[6] 300gg-111(c)(1)(B).

[7] 300gg-111(c)(5).

[8] 300gg-111(a)(3)(E)(i)(I)-(II).

[9] “Material difference” is defined as “a substantial likelihood that a reasonable person with the training and qualifications of a certified IDR entity making a payment determination would consider the submitted information significant in determining the out-of-network rate and would view the information as showing that the [QPA] is not the appropriate out-of-network rate. 149.510(a)(2)(viii).

[10] 45 C.F.R. 149.510(c)(4)(ii).

[11] 300gg-111(c)(5)(C)(i)-(ii).

[12] 45 C.F.R. 149.510(c)(4)(ii)(A).

[13] 86 Fed. Reg. 56,080.

[14] Because the Departments had exceeded their statutory authority, no Chevron deference was owed to their regulations. Chevron U.S.A. v. Natural Resources Defense Council, Inc., 468 U.S. 837 (1984).

[15] This is a separate dispute resolution process designed to address disputes between patients and providers when bills for uninsured and self-pay patients are inconsistent with the good faith estimate provided by the health care provider.

Article By Stacey A. Borowicz and Joseph D. Wheeler of Dinsmore & Shohl LLP

For more healthcare legal news, click here to visit the National Law Review.

© 2022 Dinsmore & Shohl LLP. All rights reserved.

Congress Grants Five Month Extension for Telehealth Flexibilities

On Tuesday, March 16, 2022, President Biden signed into law H.R. 2471, the Consolidated Appropriations Act, 2022 (“2022 CAA”). This new law includes several provisions that extend the Medicare telehealth waivers and flexibilities, implemented as a result of COVID-19 to facilitate access to care, for an additional 151 days after the end of the Public Health Emergency (“PHE”). This equates to about a five-month period.

The 2022 CAA extension captures most of the core PHE telehealth flexibilities authorized as part of Medicare’s pandemic response, including the following:

  • Geographic Restrictions and Originating Sites: During the extension, Medicare beneficiaries can continue to receive telehealth services from anywhere in the country, including their home. Medicare is permitting telehealth services to be provided to patients at any site within the United States, not just qualifying zip codes or locations (e.g. physician offices/facilities).
  • Eligible Practitioners: Occupational therapists, physical therapists, speech-language pathologists, and qualified audiologists will continue to be able to furnish and receive payment for telehealth services as eligible distant site practitioners during the extension period.
  • Mental Health:  In-person requirements for certain mental health services will continue to be waived through the 151-day extension period.
  • Audio-Only Telehealth Services: Medicare will continue to provide coverage and payment for most telehealth services furnished using audio-only technology. This includes professional consultations, office visits, and office psychiatry services (identified as of July 1, 2000 by HCPCS Codes 99241-99275, 99201-99215, 90804-90809 and 90862) and any other services added to the telehealth list by the CMS Secretary for which CMS has not expressly required the use of real-time, interactive audio-visual equipment during the PHE.

Additionally, the 2022 CAA allocates $62,500,000 from the federal budget to be used for grants for telemedicine and distance learning services in rural areas. Such funds may be used to finance construction of facilities and systems providing telemedicine services and distance learning services in qualified “rural areas.”

Passage of the 2022 CAA is a substantial step in the right direction for stakeholders hoping to see permanent legislative change surrounding Medicare telehealth reimbursement.

Article By Joelle M. Wilson and Laura Little of Polsinelli PC

For more health law legal news, click here to visit the National Law Review.

© Polsinelli PC, Polsinelli LLP in California

Sugar Association Files Supplemental Petition Urging Regulatory Changes for Artificially Sweetened Foods

  • This week the Sugar Association submitted a Supplemental petition (“Supplement”) to FDA to further support the Association’s June 2020 petition Misleading Labeling Sweeteners and Request for Enforcement Action (“Petition”).  As noted in a previous post, the Association’s petition asks FDA to promulgate regulations requiring additional labeling disclosures for artificially sweetened products, which it believes are necessary to avoid consumer deception. Other than acknowledging accepting the petition for filing on Nov. 30, 2020, (see Regulations.gov), the agency has not responded.
  • The Supplement provides new data and information that the Association believes supports its original Petition, alleging that misleading labeling is “getting more prolific in the absence of FDA action.”  According to the Association, the number of new food product launches containing non-sugar sweeteners has increased by 832% since 2000, with 300% growth in just the last five years.  To further support its position, the Association references consumer research that it commissioned, suggesting that consumers think it is important to know if their foods contain sugar alternatives.
  • The Association is urging FDA to mandate significant additional disclosures on labels of artificially sweetened food products, including the following requirements to —
    • Clearly identify the presence of alternative sweeteners in the ingredient list;
    • Indicate the type and quantity of alternative sweeteners, in milligrams per serving, on the front of package of food and beverage products consumed by children;
    • Disclose the sweetener used on the front of package for products making a sugar content claim, such as “Sweetened with [name of Sweetener(s)]” beneath the claim;
    • Disclose gastrointestinal effects of various sweeteners at minimum thresholds of  effect;
    • Require that no/low/reduced sugars claims be accompanied by the disclosure “not lower in calories” unless such products have 25% fewer calories than the comparison food.

Article By The Food and Drug Law Practice Group at Keller and Heckman LLP

For more biotech, food, and drug legal news, click here to visit the National Law Review.

© 2022 Keller and Heckman LLP

Electronic Medical Record Provider Pays $930,000 in First Civil Cyber-Fraud Initiative Settlement

For the first settlement as part of the Department of Justice’s Civil Cyber-Fraud Initiative, DOJ settled a case against medical services government contractor Comprehensive Health Services, LLC (CHS) for $930,000.  This settlement resolves allegations brought forth in two qui tam lawsuits, where four whistleblowers filed suit on behalf of the government under the qui tam provision of the False Claims Act.  Three of the whistleblowers received $15,000, in addition to attorneys’ fees, and one relator received $127,050 for reporting fraud.

“This settlement serves notice to federal contractors that they will be held accountable for conduct that puts private medical records and patient safety at risk,” said the United States Attorney for the Eastern District of New York.

CHS, as part of the medical services they provided to the U.S. government, was paid to implement a secure electronic medical record (EMR) system as part of contracts with the State Department and Air Force at various U.S. consulate and military locations in Iraq and Afghanistan.  The EMR system housed personal health information and medical records for anyone who received medical treatment at the locations CHS served, including U.S. service members, diplomats, officials, and contractors.  According to the allegations, CHS did not consistently store patients’ medical records on the secure EMR system and indeed left scans on a network drive which non-clinical staff could access.

As part of several contracts to which CHS was a party, CHS was supposed to provide medical supplies, including controlled substances subject to U.S. Food and Drug Administration (FDA) or European Medicines Agency (EMA) approval.  According to the allegations, CHS “knowingly, recklessly, or with deliberate ignorance” submitted claims for payment for controlled substances that they obtained by means not sanctioned by these contracts.  Not only did CHS lack a Drug Enforcement Agency license to export controlled substances, but CHS also obtained controlled substances by having their U.S.-based subsidiary request that a South African physician prescribe controlled substances, according to the allegations.  The South African physician prescribed these controlled substances, absent FDA or EMA approval, and a shipping company from the same country imported the substances to Iraq.

Government contractors are supposed to adhere to the terms of their contracts in order to receive reimbursement from the U.S. government.  This medical services provider ignored procurement guidelines to obtain controlled substances, undermining safety controls and misrepresenting their adherence to contract terms in providing medical services to U.S. military personnel.  The DOJ’s Civil Cyber-Fraud Initiative brings the power of the False Claims Act to bear on contractors whose job is to protect sensitive information and critical systems.  Representing that data is secure when it is, in fact, not is a violation of the False Claims Act and constitutes cyber-fraud.  As the Special Agent in Charge of the U.S. Department of State OIG, Office of Investigations noted, “…this outcome will send a clear message that cutting corners on State Department contracts has significant consequences.”

Whistleblowers raised data privacy concerns to CHS, but the contractor failed to implement better cybersecurity protocols in response to their concerns.  The Department of Justice has rewarded its first whistleblowers as part of the Civil Cyber-Fraud Initiative, and they’re just getting started.

© 2022 by Tycko & Zavareei LLP
For more articles about digital health, visit the NLR Health Care Law section.