Category: Health

Buying, Selling, and Investing in Telehealth Companies: Navigating Structural and Compliance Issues

A multi-part series highlighting the unique health regulatory aspects of Telemedicine mergers and acquisitions, and financing transactions

Investors in the telehealth space and buyers and sellers of telehealth companies need to account for a set of health regulatory considerations that are unique to deals in this sector. As all parties to potential telehealth transactions analyze their long term role in the telehealth marketplace, two of the central issues to any transaction are compliance and structure – both in terms of structuring the telehealth transaction itself and due diligence issues that arise related to a target’s structure.

The COVID-19 pandemic, combined with strained health care staffing and provider availability, have accelerated the growth of the telehealth, and start-ups and traditional health systems alike are competing for access to patient populations in the telehealth space. However, as we adjust to life with COVID-19 as the norm, the expiration of the federal Public Health Emergency (PHE) looms, and the national economy contracts, we expect that the remainder of 2022 and into 2023 will see consolidation as the telehealth market begins to saturate and the long-term viability of certain platforms are tested. Telehealth companies, health systems, pharma companies and investors are all in potential positions to take advantage of this consolidation in a ripening M&A sector (while startups in the telehealth space continue to seek venture and institutional capital).

This is the first post in a series highlighting the unique health regulatory aspects of telehealth transactions. Future installments of this series are expected to cover licensure and regulatory approvals, compliance / clinical delivery models, and future market developments.

Telehealth Transaction Structure Considerations

The structure of any given telehealth transaction will largely depend on the business of the telehealth organization at play, but also will depend on the acquirer / investor. Regardless of whether a party is buying, selling or investing in a telehealth company, structuring the transaction appropriately will be important for all parties involved. While a standard stock purchase, asset purchase or merger may make sense for many of these transactions, we have also seen a proliferation of, affiliation arrangements, joint ventures (JV), alliances and partnerships.  These varieties of affiliation transactions can be a good choice for health systems that are not necessarily looking to manage or develop an existing platform, but instead are looking to leverage their patient populations and resources to partner with an existing technology platform. An affiliation or JV is more popular for telehealth companies operating purely as a technology platform (with no core business involving clinical services being provided). For parties in the traditional healthcare provider sector that provide clinical services, an affiliation or JV, which is easier to unwind or terminate than a traditional M&A transaction, can allow the parties to “test the waters” in a new, combined business venture. The affiliation or JV can take a variety of forms, including technology licensing agreements; the creation of a new entity to house the telehealth mission, which then has contractual arrangements with the both the JV parties; and exclusivity arrangements relating to use of the technology and access to patient populations.

While an affiliation or JV offers flexibility, can minimize the need for a large upfront investment, and can be an attractive alternative to a more permanent purchase or sale, there can be increased regulatory risk. Entrepreneurs, investors, and providers considering any such arrangement should bear in mind that in the wake of the COVID-19 pandemic and proliferation of telehealth, the Office of Inspector General of the Department of Health and Human Services (HHS-OIG) has expressed a heightened interest in investigating so called “telefraud” and recently issued a special fraud alert regarding suspect arrangements, discussed in this prior post. Further, the OIG’s guidance on contractual joint ventures that would run afoul of the federal Anti-Kickback Statute (AKS) should be front of mind and parties should strive to structure any affiliation or JV in a manner that meets or approximates an AKS safe harbor.

Target Telehealth Company Structure Compliance

Where telehealth companies are providing clinical services, and are not purely technology platforms, structuring and transaction diligence should focus on whether the target is operating in compliance with corporate practice of medicine (CPOM) laws. The CPOM doctrine is intended to maintain the independence of physician decision-making and reduce a “profits over people” mentality, and prevent physician employment by a lay-owned corporation unless an exception applies. Most states that have adopted CPOM impose similar restrictions on other types of clinical professionals, such as nurses, physical therapists, social workers, and psychologists. Telehealth companies often attempt to utilize a so-called “friendly PC” structure to comply with CPOM, whereby an investor-owned management services organization (“MSO”) affiliates with a physician-owned professional corporation (or other type of professional entity) (a “PC”) through a series of contractual agreements that foster a close working relationship between the MSO, PC, and PC owner and whereby the MSO provides management services, and sometimes start-up financing. The overall arrangement is intended to allow the MSO to handle the management side of the PC’s operations without impeding the professional judgment of the PC or the medical practice of its physicians and the PC owner.

CPOM Compliance Considerations and Diligence for Telehealth Companies

A sophisticated buyer will want to confirm that the target’s friendly PC structure is not only formally established, but is also operationalized properly and in a manner that minimizes fraud and abuse risk. If CPOM compliance gaps are identified in diligence this may, at worst, tank the deal and, at best, cause unexpected delays in the transaction timeline, as restructuring may be required or advisable. The buyer may also request additional deal concessions, such as a purchase price reduction and special indemnification coverage (with potentially a higher liability limit and an escrow as security). Accordingly, a telehealth company anticipating a sale or fund raise would be well served to engage in a self-audit to identify any CPOM compliance issues and undertake necessary corrective actions prior to the commencement of a transaction process.

Below are nine key questions with respect to CPOM compliance and related fraud and abuse issues that a buyer/investor in a telehealth transaction should examine carefully (and that the target should be prepared to answer):

  1. Does target have a PC that is properly incorporated or foreign qualified in all states where clinical services are provided (based on the location of the patient)?
  2. Does the PC owner (and any directors and officers of the PC, to the extent different from the PC owner) have a medical license in all states where the PC conducts business (to the extent in-state licensure is required)? To the extent the PC has multiple physician owners and directors/officers, are all such individuals licensed as required under applicable state law?
  3. Does the PC(s) have its own federal employer identification number, bank account (including double lockbox arrangement if enrolled in federal healthcare programs), and Medicare/Medicaid enrollments?
  4. Does the PC owner exercise meaningful oversight and control over the governance and clinical activities of the PC? Does the PC owner have background and expertise relevant to the business (e.g., a cardiologist would not have appropriate experience to be the PC owner of a PC that provides telemental health services)?
  5. Are the physicians and other professionals providing clinical services for the business employed or contracted through a PC (rather than the MSO)? Employment or independent contractor agreements should be reviewed, as well as W-2s, and payroll accounts.
  6. Is the PC properly contracted with customers (to the extent services are provided on a B2B basis) and payors?
  7. Do the contractual agreements between the MSO and PC respect the independent clinical judgment of the PC owner and PC physicians and otherwise comply with state CPOM laws.
  8. Do the financial arrangements between the MSO, PC, and PC owner comply with AKS, the federal Stark Law, and corollary state laws and fee-splitting prohibitions, to the extent applicable?
  9. Is the PC owner or any other physician performing clinical services for the PC an equity holder in the MSO? If so, are these equity interests tied to volume/value of referrals to the PC or MSO (i.e., if the MSO provides ancillary services such as lab or prescription drugs) or could equity interests be construed as an improper incentive to generate healthcare business (e.g., warrants that can only be exercised upon attainment of certain volume)?

Telehealth companies considering a sale or financing transaction, and potential buyers and investors, would be well served to spend time on the front end of a potential transaction assessing the above issues to determine potential risk areas that could impact deal terms or necessitate any friendly PC structuring.

Article By Hannah E. Zaitlin, Mitchell D. Lindstrom, David S. Sanders, and Natasha Allen of Foley & Lardner LLP

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

© 2022 Foley & Lardner LLP

Feds Announce More Aggressive Enforcement of Poor Performing Nursing Homes

In February of 2022, during his State of the Union Address, President Biden announced an action plan to improve the safety and quality of care in the nation’s nursing homes.[i] On October 21, 2022, Centers for Medicare and Medicaid Services (CMS) announced new requirements to help with oversight of facilities selected to the Special Focus Facilities (SFF) Program.[ii]

The SFF Program was created to help and oversee the poorest performing nursing homes in the country and improve nursing homes that have a history of noncompliance.  The goal is to improve safety and quality of care. The facilities selected for the SFF Program must be inspected no less than once every six months and if severe enforcement is needed, it is at the discretion of the state surveyors. The main objective for the SFF Program is for facilities to show exponential improvement, graduate from the program, and then maintain compliance and better quality of care and safety.

The new CMS requirements, outlined below, are aimed at facilities that continuously fail to improve and remain in the SFF Program for a prolonged period of time. Health and Human Services Secretary Xavier Becerra stated, “Let us be clear: we are cracking down on enforcement of our nation’s poorest-performing nursing homes. As President Biden directed, we are increasing scrutiny and taking aggressive action to ensure everyone living in nursing homes gets the high-quality care they deserve. We are demanding better because our seniors deserve better.”

CMS announced the following revisions to the SFF Program:

  • Effective immediately, CMS will use escalating penalties for violations for deficiencies cited at the same level in subsequent surveys. This can include possible discretionary termination from Medicare and/or Medicaid funding for facilities that are cited with immediate jeopardy deficiencies on any two surveys while participating the in the SFF Program.
  • CMS will consider facilities’ efforts to improve when considering discretionary termination from Medicare and/or Medicaid programs.
  • CMS will impose more severe escalating enforcement remedies for SFF Program facilities for noncompliance and no effort to improve performance.
  • Increased requirements that nursing homes in the SFF Program must meet to graduate from the SFF Program.
  • For three years after graduation from the SFF Program, CMS will ensure nursing homes consistently maintain compliance with safety requirements by continuing to closely monitor these facilities.
  • CMS is offering more support resources to facilities selected for the SFF Program.

Additionally, the Biden administration released a fact sheet with the steps they are taking to in improve the quality of nursing homes. [iii] Some of the steps mentioned include more resources to support union jobs in nursing home care, establishing minimum staffing requirements, incentivizing quality performance through Medicare and Medicaid funding, and enhanced efforts to prevent fraud and abuse.

  1. https://www.whitehouse.gov/briefing-room/statements-releases/2022/02/28/…
  2. https://www.cms.gov/files/document/qso-23-01-nh.pdf
  3. https://www.whitehouse.gov/briefing-room/statements-releases/2022/10/21/…

Article By Thomas W. Hess, Kelly A. Leahy, Sydney N. Pahren, and Bryan L. Cockroft of Dinsmore & Shohl LLP

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

© 2022 Dinsmore & Shohl LLP. All rights reserved.

Fair Market Value Defensibility Analysis: Why is It Different from a Fair Market Value Opinion?

Fair market value is a pinnacle issue for compliance under the Stark Law and Anti-Kickback Statute. Compensation arrangements that are required to be representative of fair market value under Stark/AKS include employment, independent contractor, medical directorships, exclusive service arrangements, call coverage, quality reviews, medical staff officer stipends, etc.

Many consulting firms provide fair market value opinions relying extensively on the application of benchmark data. Based upon CMS’s statements in the Stark Law Final Rules, although application of benchmark data is a resource that can be utilized, fair market value can and should include the application of market/service area issues (i.e., deficiency of specialty) or physician-specific issues (i.e., expertise, productivity).

Commercial reasonableness is a separate concept from fair market value under Stark/AKS. Commercial reasonableness also entails whether the application of benchmark/market factors are defensible.

When analyzing the defensibility of compensation arrangements, it is important to view fair market value and commercial reasonableness as if advocating the facts and circumstances of the proposed compensation arrangement before a governmental entity (i.e., CMS, OIG, DOJ). When an attorney is rendering a fair market value defensibility analysis, not only will the analysis be protected under the attorney-client privilege, but the analysis will also include references and attachments to all of the applicable documentation and relevant information in case the compensation arrangement is ever required to be defended.

Article By Bob Wade of Nelson Mullins

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

Copyright ©2022 Nelson Mullins Riley & Scarborough LLP

FDA Updates Regulatory Definition of “Healthy” for the First Time Since 1994

The U.S. Food and Drug Administration (FDA) has issued a proposed rule (“Proposed Rule”)[1] that updates the definition of the “healthy” nutrient content claim under 21 C.F.R. § 101.65(d) for the first time since its issuance in 1994. The Proposed Rule, published on September 29, 2022, notes that “nutrition science has evolved since the 1990s” and that the proposed changes are intended to make the regulation “consistent with current nutrition science and Federal dietary guidance.”[2]

FDA is accepting comments until December 28, 2022.  Stakeholders should note that the proposed amendments may require companies to remove “healthy” claims from current labels and may make new products eligible to bear “healthy” claims. The comment period affords impacted companies the opportunity to provide FDA with input that could modify the current Proposed Rule. K&L Gates’ FDA team can assist clients with submitting comments and with assessing the impact of the Proposed Rule.

Highlights of the Proposed Rule

The changes in the Proposed Rule align with the FDA’s 2016 changes to the nutrition labeling regulation at 21 C.F.R. § 101.9,[3] primarily by refocusing the attention from limiting fat to limiting sugar intake.  The proposal also addresses several areas to make the regulation more consistent with current nutrition guidelines; for example, the Proposed Regulation would permit water, avocados, nuts, and seeds to bear the “healthy” claim, whereas products such as highly sweetened cereals would not be eligible for the claim.[4] 

Under the existing regulation,[5] a “healthy” food must meet certain criteria, including limits on total fat, saturated fat, cholesterol, and sodium, and minimum amounts (at least 10 percent of the Daily Value) of favorable nutrients (e.g., vitamin A, vitamin C, calcium, iron, protein, and dietary fiber).[6] In contrast, while continuing to place limits on the presence of certain nutrients (e.g., added sugar, sodium, saturated fat), the Proposed Rule’s updated “healthy” criteria take a very different approach to promoting the consumption of certain foods, consistent with the 2020-2025 Dietary Guidelines for Americans, through the new concept of “food group equivalents.” Specifically, to meet the proposed “healthy” claim criteria, a food would need to contain minimum amounts of one or more of the following food groups or subgroups: fruit, vegetables, grains, dairy, and protein foods. FDA’s proposed table of “food group equivalents” is reproduced below:

FDA Proposed Rule – Food Group Equivalents

Food Group Food Group Equivalent

 Examples
Vegetable 1/2 cup equivalent vegetable 1/2 cup cooked green beans; 1 cup raw spinach
Fruit 1/2 cup equivalent fruit 1/2 cup strawberries; 1/2 cup 100% orange juice; 1/4 cup raisins
Grains No less than 3/4 oz. equivalent whole grain 1 slide of bread; 1/2 cup cooked brown rice
Dairy 3/4 cup equivalent dairy 6 oz. fat free yogurt; 1 1/8 oz. nonfat cheese
Protein foods 1 1/2 equivalent game meat, 1 oz. equivalent seafood, 1 oz. equivalent egg, 1 oz. equivalent beans, peas, or soy products, or 1 oz. equivalent nuts and seeds 1 1/2 oz. venison; 1 oz. tuna; 1 large egg; 1/4 cup black beans; 1/2 oz. walnuts

In a change from the current “healthy” regulation, the Proposed Rule distinguishes between undesirable fat (i.e., saturated fat) and desirable fats (i.e., monounsaturated and polyunsaturated fats) in the diet. In this regard, the Proposed Rule reflects the impact of the 2015 citizen petition submitted by KIND LLC (Docket No. FDA-2015-P-4564[7]), a manufacturer of sweetened nut snack bars, which requested that FDA accommodate “healthy” claims for products containing monounsaturated and polyunsaturated fats but that are not “low fat” as defined under 21 C.F.R. § 101.62(b)(2).  KIND filed its petition after receiving a warning letter from FDA in 2015, requesting that they remove the “healthy” claim from products due to disqualifying levels of fat from nut ingredients (e.g., almonds, peanuts).  In a press release issued with submission of its petition, KIND highlighted that the current “healthy” regulation permits products like fat-free chocolate pudding, sweetened cereals, and toaster pastries to qualify as “healthy,” whereas foods like almonds, avocados, and salmon were ineligible due to their fat content.[8] In response to KIND’s petition, FDA had been exercising enforcement discretion since September 2016 for certain products not low in fat but that contain predominantly mono and polyunsaturated fats.[9]

Under the Proposed Rule, FDA has eliminated total fat and cholesterol from consideration for “healthy” claims.  Also, while a food product must adhere to limits for added sugars, saturated fat, and sodium, limits on unfavorable nutrients are no longer keyed to compliance with other nutrient content claim regulations (e.g., meeting the definition of “low saturated fat” under 21 C.F.R. § 101.62(c)(2)). The Proposed Rule expresses disqualifying levels for unfavorable nutrients as percentages of daily values under 21 C.F.R. § 101.9.

FDA summarizes the criteria for “healthy” claims by product type below.  Unlike the current regulation, the Proposed Rule would specifically allow all raw whole fruits and vegetables to qualify for the “healthy” claim because of their positive contribution to an overall healthy diet, as well as to allow water to bear the “healthy” claim:

FDA Proposed Rule – Eligible Products for “Healthy” Nutrient Content Claim

Product Criteria for bearing “healthy” claim
Raw, whole fruits and vegetables No additional criteria; all raw, whole fruits and vegetables may bear the claim.
Individual food products At least 1 food group equivalent per RACC from 1 food group, and Nutrients to limit.
Mixed products At least 1/2 food group equivalent each from at least 2 different food groups, and Nutrients to limit.
Main dish as defined at 21 CFR 101.13(m) At least 1 food group equivalent each from at least 2 different food groups, and Nutrients to limit.
Meal as defined at 21 CFR 101.13(l) At least 1 food group equivalent each from at least 3 different food groups, and Nutrients to limit.
Water Plain water and plain, carbonated water may bear the claim.

This proposed rule is likely the first of many that will bring FDA’s nutrient content claim regulations in line with its 2016 revisions to the nutrition labeling regulation.  The comment period for the Proposed Rule closes on December 28, 2022; comments can be submitted at https://www.federalregister.gov/documents/2022/09/29/2022-20975/food-labeling-nutrient-content-claims-definition-of-term-healthy#open-comment.

For more Food and Drug Legal News, click here to visit the National Law Review.

Copyright 2022 K & L Gates.

FOOTNOTES

[1] 87 Fed. Reg. 59168 (Sept. 29, 2022), https://www.federalregister.gov/d/2022-20975.

[2] Id. at 59174.

[3] For more information, see FDA, Changes to the Nutrition Facts Label, https://www.fda.gov/food/food-labeling-nutrition/changes-nutrition-facts-label.

[4] Id.

[5] 21 C.F.R. 101.65(d).

[6] 87 FR 59168, at pg. 59172, https://www.federalregister.gov/d/2022-20975/p-57.

[7] The petition is available at https://s3.amazonaws.com/kind-docs/citizen-petition.pdf.

[8] See KIND, Seven Years After KIND’s Citizen Petition, FDA Proposes New Definition of “Healthy,“ Press Release,  https://www.kindsnacks.com/media-center/press-releases/KIND+Citizen+Petition+FDA+proposes+new+definition+of+healthy.html

[9] FDA, Guidance for Industry: Use of the Term “Healthy” in the Labeling of Human Food Products, https://www.fda.gov/regulatory-information/search-fda-guidance-documents/guidance-industry-use-term-healthy-labeling-human-food-products

Five New Employment Laws that Every California Employer Should Know

A new year brings new employment laws for California employers.  California employers will want to begin revising employee policies and handbooks now, so that they are prepared to comply with these new laws when the majority of them go into effect on January 1, 2023.  Here are five new employment laws that every California employer should know:

AB 1041 (Expanded Definition of “Family Member” for Medical and Sick Leave)

Through AB 1041, the California legislature amended Government Code section 12945.2 and Labor Code section 245.5 to expand the definition of “designated person” for purposes of employee medical leave.  Section 12945.2 provides qualifying employees with up to 12 workweeks in any 12-month period for unpaid family care and medical leave.  Section 245.5 relates to California paid sick leave.  Both sections permit an employee to take protected leave to care for a “family member,” which is currently defined as a child, parent, grandparent, grandchild, sibling, spouse, or domestic partner.  With the passage of AB 1041, the Legislature added a “designated person” to this list of “family members” for whom an employee may take protected leave.  A “designated person” is defined as “any individual related by blood or whose association with the employee is the equivalent of a family relationship.”  In light of this broad definition, employers should be prepared to provide employees with leave to care for a wider range of persons.  An employee may identify his or her designated person at the time of requesting protected leave.  However, an employer may limit an employee to one designated person per 12-month period.

AB 1949 (Bereavement Leave)

AB 1949 adds section 12945.7 to the Government Code, in order to provide employees with protected leave for bereavement.  Under this new law, eligible employees may request up to five days of bereavement leave upon the death of a qualifying family member.  Family member is defined as a spouse, child, parent, sibling, grandparent, grandchild, domestic partner, or parent in law.  Although the employee must complete bereavement leave within three months of the family member’s death, the employer may not require that the five days be used consecutively.  Statutory bereavement leave is unpaid, but the employer must allow the employee to use any accrued and unused paid vacation, personal leave, sick leave, or other paid time off for this purpose.  Section 12945.7 prohibits discrimination, interference or retaliation against an employee for taking bereavement leave; also, the employer must maintain confidentiality when an employee takes bereavement leave. Finally, section 12945.7 does not apply to certain union employees, with an existing agreement regarding bereavement leave.

SB 1162 (Posting Pay Ranges and EEO Reporting Requirements)

SB 1162 modifies Government Code section 12999 and Labor Code section 432.3 to require employers to provide candidates with salary ranges on job postings, report employee compensation and demographic information to the California Civil Rights Department (formerly the DFEH) on an annual basis, and retain relevant records.  For job postings (including those posted by third parties), employers with 15 or more employees will be required to include a pay range, which is defined as the salary or hourly wage range that the employer reasonably expects to pay for the position.  In addition to the current requirement that, upon request, the employer must provide a candidate a pay range, the employer must now also provide existing employees with a pay range, when requested.  Failure to comply with the pay range disclosure or record retention requirements can result in penalties of up to $10,000 per violation.

The new reporting requirement concerns annual employer pay data reports.  Employers must now report the median and mean hourly rate by each combination of race, ethnicity, and sex, within each job category, with the first report due on May 10, 2023, based on 2022 pay data.  Employers with 100 or more employees hired through labor contractors must now produce data on pay, hours worked, race/ethnicity, and gender information in a separate report.  Employers who fail to timely file these required reports face civil penalties of up to $200 per employee.

Finally, employers must retain records of job titles and wage rate histories for each employee for the duration of the employee’s employment and three years after termination.  Failure to comply with these retention requirements can result in penalties of up to $10,000 per violation.

AB 2188 (Off the Job Cannabis Use Protection)

Effective January 1, 2024, AB 2188 adds section 12954 to the Government Code, which prohibits employers from discriminating against a person because of cannabis use while off the job, with some exceptions.  Employers may take action against a person who fails a pre-employment drug test, or other employer-required drug test, that does “not screen for non-psychoactive cannabis metabolites.”  This is because, according to the California Legislature, cannabis “matabolites do not indicate impairment, only that the individual has consumed cannabis in the last few weeks.”  The employer may administer a performance-based impairment test, and terminate any employee who is found to be impaired in the workplace.  This new law does not apply to employees in the building or construction industry, or in positions requiring a federal background investigation or clearance, and does not preempt state or federal laws that require employees to be tested for controlled substances.

AB 152 (COVID-19 Supplemental Paid Sick Leave Extension)

AB 152 modified Labor Code section 248.6 and 248.7 in order to extend COVID-19 Supplemental Paid Sick Leave (SPSL), previously blogged about here, which was expected to expire on September 30, 2022.  This new modification allows California employees to use any remaining SPSL through December 31, 2022.  It does not provide employees with new or additional SPSL.  In a departure from the original version of the law, when an employer requires an employee to take a COVID-19 test five days or later after a positive test result, the employer is now permitted to require the employee to submit to a second diagnostic test within no less than 24 hours.  If the employee refuses, the employer may decline to provide additional SPSL.  The employer obligation to cover the cost of any employee COVID-19 tests remains in effect.

Article By Kate Gold and Wesley C. Shelton of Proskauer Rose LLP

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

© 2022 Proskauer Rose LLP.

FDA Launches Study on the Role of Seafood Consumption in Child Development

  • On October 11, the FDA announced the launch of an independent study, “The Role of Seafood in Child Growth and Development,” by the National Academies of Science, Engineering, and Medicine (NASEM) on the state of scientific evidence in nutrition and toxicology associations between seafood consumption and child growth and development. The purpose of the study is to obtain the most up-to-date understanding of the science on fish consumption in a whole diet context, which will support the goals of the FDA’s Closer to Zero Action Plan for reducing the exposure of babies and young children to mercury, arsenic, lead, and cadmium from foods.

  • As part of the study, an ad hoc committee of the NASEM will:

    • Evaluate dietary intake and seafood composition data provided by the sponsors (i.e., Department of Commerce, HHS, EPA, and USDA’s Agricultural Research Service);

    • Conduct systematic reviews of the scientific literature covering the areas of seafood nutrition and toxicology associated with seafood consumption and child growth and development;

    • Review existing sources of evidence on maternal and child seafood consumption and child growth and development; and

    • Develop an approach to synthesize the scientific evidence, and utilize that strategy to develop its findings and conclusions (quantitative and/or qualitative) about associations between seafood consumption and child growth and development.

  • FDA intends for the study to help inform whether any updates are needed for the current Advice about Eating Fish for children and those who might become or are pregnant or breastfeeding, and also hopes to gain a better understanding of the science on mercury exposure from food.

  • The FDA is partnering with the National Oceanic and Atmospheric Administration, U.S. Department of Agriculture, and U.S. Environmental Protection Agency on the study, and NASEM will publish the committee’s report after the study is complete in approximately 18 months. The FDA intends to use the study findings to advance policies and programs that support healthy child growth and development.

For more Food and Drug Law News, click here to visit the National Law Review

© 2022 Keller and Heckman LLP

California PFAS Legislation Will Dramatically Impact Businesses

We previously reported on three significant pieces of California PFAS legislation that were before California’s Governor Newsom for ratification. Two of the bills were passed, which means that several categories of products will have applicable PFAS bans. The third bill was not signed by the Governor, which would have required companies to report certain data to the state for goods  sold in or otherwise brought into California that contain PFAS.

With increasing attention being given to PFAS in consumer goods in the media, scientific community, and in state legislatures, the California PFAS bills underscore the importance of companies anywhere in the manufacturing or supply chain for consumer goods to immediately assess the impact of the proposed PFAS legislation on corporate practices, and make decisions regarding continued use of PFAS in products, as opposed to substituting for other substances.  At the same time, companies impacted by the PFAS legislation must be aware that the new laws pose risks to the companies involvement in PFAS litigation in both the short and long term.

California PFAS Bills

One of our prior reports was on the first significant PFAS bill that Governor Newsom was expected to sign into law – AB 2771 – and which was indeed passed into law. The bill prohibits the manufacture, sale, delivery, hold, or offer for sale any cosmetics product that contains any intentionally added PFAS. The law would go into effect on January 1, 2025. The bill defines a cosmetics products as “an article for retail sale or professional use intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body for cleansing, beautifying, promoting attractiveness, or altering the appearance.”

The second bill signed into law by the Governor is AB 1817, which bans the use of PFAS in textiles manufactured and sold in California. More specifically, the bill prohibits, beginning January 1, 2025, any person from “manufacturing, distributing, selling, or offering for sale in the state any new, not previously owned, textile articles that contain regulated PFAS” and requires a manufacturer to use the least toxic alternative when removing PFAS in textile articles to comply with these provisions. The bill requires a manufacturer of a textile article to provide persons that offer the product for sale or distribution in the state with a certificate of compliance stating that the textile article is in compliance with these provisions and does not contain any regulated PFAS. The bill specifically regulates three categories of textiles:

(1) “Textile articles” means textile goods of a type customarily and ordinarily used in households and businesses, and include, but are not limited to, apparel, accessories, handbags, backpacks, draperies, shower curtains, furnishings, upholstery, beddings, towels, napkins, and tablecloths;

(2) “Outdoor apparel” means clothing items intended primarily for outdoor activities, including, but not limited to, hiking, camping, skiing, climbing, bicycling, and fishing; and

(3) “Apparel”, defined as “clothing items intended for regular wear or formal occasions, including, but not limited to, undergarments, shirts, pants, skirts, dresses, overalls, bodysuits, costumes, vests, dancewear, suits, saris, scarves, tops, leggings, school uniforms, leisurewear, athletic wear, sports uniforms, everyday swimwear, formal wear, onesies, bibs, diapers, footwear, and everyday uniforms for workwear…outdoor apparel and outdoor apparel for severe wet conditions.

The bill that California’s Governor vetoed was AB 2247, which would have established reporting requirements for companies that utilize products or substances that contain PFAS and which are used in California in the stream of commerce. “The bill would [have] require[d], on or before July 1, 2026, and annually thereafter, a manufacturer, as defined, of PFAS or a product or a product component containing intentionally added PFAS that, during the prior calendar year, is sold, offered for sale, distributed, or offered for promotional purposes in, or imported into, the state to register the PFAS or the product or product component containing intentionally added PFAS, and specified other information, on the publicly accessible data collection interface.”

Impact of California PFAS Legislation On Businesses

California PFAS legislation places some of the most significant and widely used consumer products in the crosshairs with respect to PFAS. While other states have banned or otherwise regulated PFAS in certain specific consumer goods, California’s bills are noteworthy given the economic impact that it will have, considering that California is the fifth largest economy in the world.

It is of the utmost importance for businesses along the whole cosmetics supply chain to evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate these compounds. One major point of contention among members of various industries is whether to regulate PFAS as a class or as individual compounds.  While each PFAS compound has a unique chemical makeup and impacts the environment and the human body in different ways, some groups argue PFAS should be regulated together as a class because they interact with each other in the body, thereby resulting in a collective impact. Other groups argue that the individual compounds are too diverse and that regulating them as a class would be over restrictive for some chemicals and not restrictive enough for others.

Companies should remain informed so they do not get caught off guard. States are increasingly passing PFAS product bills that differ in scope. For any manufacturers, especially those who sell goods interstate, it is important to understand how those various standards will impact them, whether PFAS is regulated as individual compounds or as a class. Conducting regular self-audits for possible exposure to PFAS risk and potential regulatory violations can result in long term savings for companies and should be commonplace in their own risk assessment.

Article By John Gardella of CMBG3 Law

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

©2022 CMBG3 Law, LLC. All rights reserved.

California Law Prohibits Cooperation with Out-of-State Entities Regarding Lawful Abortion

In response to Dobbs v. Jackson Women’s Health Organization, California Governor Gavin Newsom recently signed AB 1242 into law, which “prohibits law enforcement and California corporations from cooperating with out-of-state entities regarding a lawful abortion in California.”

In particular, AB 1242 prohibits California companies that provide electronic communication services from complying with out-of-state requests from law enforcement regarding an investigation into, or enforcement of, laws restricting abortion.

Sponsored by California Assembly member Rebecca Bauer-Kahan and California Attorney General Rob Bonta, AB 1242:

takes an innovative legal approach to protect user data. The bill prohibits California law enforcement agencies from assisting or cooperating with the investigation or enforcement of a violation related to abortion that is lawful in California. This law thereby blocks out-of-state law enforcement officers from executing search warrants on California corporations in furtherance of enforcing or investigating an anti-abortion crime. For example, if another state wants to track the movement of a woman traveling to California seeking reproductive health care, the state would be blocked from accessing cell phone site tower location data of the woman by serving a warrant to the tech company in California. In addition, if another state wants Google search history from a particular IP address, it could not serve an out-of-state search warrant at Google headquarters in CA without an attestation that the evidence is not related to investigation into abortion services. Although the first state to enact such a law, as California often is when it comes to privacy rights, we anticipate that other states will follow suit and that these laws will be hotly contested in litigation.

Article By Linn F. Freedman of Robinson & Cole LLP

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Copyright © 2022 Robinson & Cole LLP. All rights reserved.

Ongoing Foodborne Illness Outbreaks Increasing

  • On September 14, 2022, Food and Drug Administration (FDA) officials reported a new outbreak of infections from Listeria monocytogenes. FDA has not yet identified a particular product linked to the pathogenic bacterial outbreak but has initiated traceback procedures. To date, FDA has confirmed 6 patients from this week’s Listeria outbreak, and the numbers appear to keep rising. It is still unclear what age group or geographic location has been afflicted by the outbreak.
  • FDA is currently actively investigating ten foodborne illness outbreaks with increasing patient numbers every week. The Center for Disease Control (CDC) continues to actively investigate a sizable E. coli outbreak suspected to have been caused by romaine lettuce served at Wendy’s restaurants in Indiana, Michigan, Ohio, and Pennsylvania starting in early September 2022. To date, 43 individuals have been hospitalized due to E. coli poisoning, and 13 new patients have been accounted for this week alone. Other current FDA investigations include a Salmonella Typhimurium outbreak that now affects 30 individuals, a Cyclospora outbreak whose patient count is now 81, and a Salmonella Mississippi outbreak that now afflicts 103 patients nationwide.
  • Notably, in March 2022, FDA opened a similar investigation into a Listeria outbreak caused by ice cream products originating from Big Olaf Creamery in Sarasota, Florida. This investigation is still ongoing, but has resulted in 24 patient hospitalizations, 1 death, and 1 miscarriage across 11 states. Keller and Heckman will continue to monitor these outbreaks as they impact the food industry.

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© 2022 Keller and Heckman LLP

OCR Announces $300,000 Settlement Related to Improper Disposal of Physical PHI

On August 23, 2022, the U.S. Department of Health & Human Services, Office for Civil Rights (“HHS”) announced that it had settled a case involving the disposal of physical protected health information (“PHI”).

OCR alleged that, on March 31, 2021, a specimen containing PHI was found by a third-party security guard in the parking lot of the New England Dermatology and Laser Center (“NEDLC”). The PHI included patient name, patient date of birth, date of sample collection, and the name of the provider who took the specimen, in violation of the Health Insurance Portability and Accountability Act of 1996 (“HIPAA”).

As part of the settlement, NEDLC agreed to pay HHS $300,640. According to NEDLC’s Resolution Agreement and the Corrective Action Plan, there were two potential violations by NEDLC. First, NEDLC allegedly failed to maintain appropriate safeguards to protect the privacy of PHI,” as required by 45 C.F.R. § 164.530(c). Second, NEDLC allegedly permitted the impermissible disclosure of PHI, in violation of Rule 45 C.F.R. § 164.502(a). The Corrective Action Plan requires NEDLC to develop, maintain and appropriately revise written policies and procedures in accordance with HIPAA.

Several highlights of the settlement include:

  1. Changes to Policies and Procedures. NEDLC must develop, maintain and revise, as necessary, its written HIPAA policies and procedures, and provide such policies and procedures to HHS for review and approval. NEDLC also must assess, update and revise, as necessary, such policies and procedures at least annually, or as needed, and seek HHS’s approval of the revised policies and procedures.
  2. Designation of Privacy Official. NEDLC must designate a privacy official who is responsible for the development and implementation of NEDLC’s HIPAA policies and procedures, and a contact person or office who is responsible for receiving relevant complaints.
  3. Training Requirements. NEDLC must provide HHS with training materials for its workforce members and seek HHS’s approval of such training materials. NEDLC must also distribute the HIPAA policies and procedures to its workforce members and relevant business associates, and obtain a written compliance certification from all such individuals. NEDLC must provide HIPAA training for new workforce members, and all workforce members at least every 12 months. Each workforce member must certify, in electronic or written form, that they received training. NEDLC must review the training at least annually, and update the training where appropriate. NEDLC must promptly investigate, review, report to HHS, and sanction any workforce member that does not comply with its HIPAA policies and procedures.
  4. Implementation Report and Annual Report.  NEDLC is required to submit to HHS a written report summarizing the status of its implementation of the requirements provided set forth in the settlement, and annual compliance reports.

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Copyright © 2022, Hunton Andrews Kurth LLP. All Rights Reserved.