CEQ Reverses First Set of Trump-Era NEPA Regulatory Reforms

On April 20, 2022, the White House Council on Environmental Quality (CEQ) published a final rule rolling back minor regulatory changes to the National Environmental Policy Act (NEPA) review process that it had promulgated in 2020. The new rule reverts to the language of CEQ’s original 1978 NEPA regulations but otherwise does not substantially alter the regulatory landscape. This is the first of an anticipated two-step process as identified in CEQ’s October proposed rule. The next regulatory proposal is expected to “more broadly revisit” the 2020 regulations and propose further changes to promote environmental justice, climate change, and other Biden administration “objectives.”

The Phase 1 final rule attracted significant public comment and media coverage, but in practice, it should not meaningfully affect NEPA reviews. The regulatory changes themselves are very confined. The final rule features three main components:

Purpose & Need/Alternatives

NEPA reviews of proposed federal agency actions begin by defining a statement of purpose and need and identifying a reasonable range of alternatives. In doing so, agencies routinely give substantial weight to the project proponent’s objectives, rather than reinventing what is proposed. The 2020 rule had codified that longstanding policy by adding language expressly directing federal agencies to consider their statutory authority and the goals of the project proponent when formulating statements of purpose and need and identifying a reasonable range of alternatives that could meet the purpose and need. The new final rule deletes reference to the applicant’s goals to avoid perceived “bias” and restore “flexibility.” Yet, the final rule does not prohibit agencies from considering the applicant’s goals, and instead recognizes they remain “important.” The final rule also retains the fundamental NEPA concept that a “reasonable” alternative must “meet the purpose and need for the proposed action.”

Individual Agency NEPA Regulations

While CEQ’s regulations apply across the federal government, individual federal departments and agencies also have their own rules and procedures for implementing NEPA specific to the particular types of actions they typically undertake. CEQ oversees these agency efforts. To promote consistency in agency NEPA reviews, including those involving multiple agencies, the 2020 rule sought to restrict agencies from adopting requirements stricter than CEQ’s rules. The new Phase I rule removes this ceiling. To be clear, this change does not allow agency-specific NEPA rules and procedures to conflict with CEQ’s regulations, but it does increase the potential for inconsistencies in the application of NEPA procedures across federal agencies. That said, many federal agencies developed their own NEPA regulations and procedures years ago, did not amend those regulations and procedures in response to the 2020 rule, and are not expected to substantially alter their procedures at least while CEQ is still developing its future Phase 2 rule.

Effects

The 2020 rule simplified the regulatory definition of “effects” or “impacts” of the proposed action and alternatives to eliminate separate terms for “direct,” “indirect,” and “cumulative” effects, and to clarify which effects are “reasonably foreseeable.” It specifically provided that a “but for” causal relationship is insufficient to attribute an effect to a proposed project, while excluding potential effects from analysis “if they are remote in time, geographically remote, or the product of a lengthy causal chain” or if they are beyond the agency’s control. But the 2020 rule did not preclude consideration of cumulative impacts or climate change and allowed for their incorporation as part of the baseline for the “no action” alternative. The new Phase 1 rule simply reverses those minor changes including restoring the separate “effects” definitions. This reversion may foster more expansive indirect and cumulative impacts analysis in NEPA documents akin to the analyses developed before the 2020 rule. However, particularly because the 2020 rule did not overrule case law overwhelmingly requiring consideration of cumulative impacts and climate change, the practical implication of these changes should be minimal.

© 2022 Beveridge & Diamond PC
For more regulatory updates, visit the NLR Administrative & Regulatory section.

EPA Will Hold Webinar in May 2022 on Reducing Vertebrate Animal Testing

The U.S. Environmental Protection Agency (EPA) announced on April 18, 2022, that it will hold a webinar on May 11, 2022, entitled “Data-Driven Solutions to Reducing Animal Use in Ecotoxicity.” Speakers will include:

  • Carlie LaLone, Ph.D., EPA Office of Research and Development (ORD), on “The Sequence Alignment to Predict Across Species Susceptibility (SeqAPASS) Tool: Extrapolating Knowledge Computationally.” EPA states that regulatory decision-making for chemical safety relies upon toxicity data generated from laboratory test species for the protection of wildlife in the environment. Typically, ecological risk assessments integrate safety factors to account for interspecies variability. According to EPA, the SeqAPASS tool is a more informed way to extrapolate knowledge from model species to other species that does not require the use of animals in toxicity testing and instead uses existing protein sequence knowledge. LaLone will describe EPA’s SeqAPASS tool and its applications for cross-species extrapolation relative to understanding conservation of biology and predicting chemical susceptibility.
  • Michael Lowit, Ph.D., EPA Office of Pesticide Programs (OPP), on “Exploring Potential Reductions in Fish Testing in a Regulatory Context.” According to EPA, as part of its commitment to reducing animal testing, OPP is conducting retrospective analyses of existing data to evaluate critically which EPA guideline studies form the basis of regulatory decisions. EPA states that the results from these analyses can inform if reductions can be made to the number of animals used without reducing the quality of ecological risk assessments. EPA is currently conducting a retrospective analysis for fish acute toxicity tests, which are used by OPP to assess potential risk to fish species from pesticides. For each pesticide, EPA typically requires in vivo testing of three different fish species. Lowit will focus on the relative sensitivity among species subjected to in vivo fish acute toxicity studies. The results of this analysis will inform whether there is a basis for reducing the number of species while providing sufficient information to support pesticide registration decisions.

The webinar is co-organized by the People for the Ethical Treatment of Animals (PETA) Science Consortium International, EPA, and the Physicians Committee for Responsible Medicine (PCRM). EPA notes that it does not necessarily endorse the views of the speakers. Registration is now open.

©2022 Bergeson & Campbell, P.C.
For more updates on the EPA, visit the NLR Environmental & Energy section.

Wisconsin Judge Rules that the WDNR Lacks Authority to Regulate PFAS

On April 12, 2022, a Wisconsin judge ruled in the case of Wisconsin Manufacturers & Commerce, Inc. and Leather Rich, Inc. v. WDNR, (Waukesha County Case 2021CV000342) that the WDNR lacks the authority to regulate PFAS chemicals because the Wisconsin Legislature has not established regulatory standards for them. According to the lawsuit, Leather Rich, Inc. entered into a voluntary WDNR environmental cleanup program in 2019, and the following year WDNR indicated that the businesses enrolled in the program were required to test for emerging contaminants, including PFAS. The plaintiffs in the case argued that because the WDNR had created a list of emerging contaminants without any legislative oversight or opportunity for public comment, and had not adopted regulatory standards through administrative rulemaking, the WDNR lacked the authority to require such testing. The judge’s ruling would require the WDNR to wait until legislators have established standards for PFAS through adoption of regulatory limits in state law or through administrative rules. It is estimated that the adoption of standards for PFAS could require 1-2 years. An attorney for the WDNR indicated that the WDNR plans to appeal the decision and file a motion to place the judge’s order on hold.

The WDNR has historically taken the position that the agency has authority under Wisconsin’s “Hazardous Substance Spill Act” (“Spill Act” – Wis. Stats. 292.11) to regulate PFAS even in the absence of established standards, as the Spill Act gives the WDNR broad authority to require testing and remediation of such chemicals. In late February, the WDNR’s Natural Resources Board (NRB)—the entity that sets policy for the WDNR—took steps toward the adoption of statewide standards for two of the most common PFAS compounds, which included an approval to adopt a drinking water standard of 70 parts per trillion (ppt) for two of the most common PFAS compounds; perfluorooctanoic acid (PFOA) and polyfluorooctane sulfonate (PFOS).

PFAS is an acronym for per- and polyfluorolalkyl substances, which are chemicals that were widely used from the 1960s to the early 2000s in the manufacture of a variety of consumer products, such as stain resistant carpets, non-stick cookware (e.g., Teflon), firefighting foam, food packaging (e.g., microwave popcorn bags/pizza boxes), water resistant clothing (e.g., pre-2000 GoreTex), water resistant repellent (e.g., Scotchgard) and dental floss. While the use of PFAS compounds has largely been phased out in the U.S., these compounds are still used in the manufacturing of many products worldwide. These substances, known as “forever chemicals,” have received considerable attention by federal and state environmental regulatory agencies because of their resistance to chemical breakdown due to the chemical bond between carbon and fluorine atoms in the PFAS compounds, which is one of the strongest in nature. Because of this, humans can still be exposed to PFAS long after the chemicals were released into the environment.

The WDNR has identified approximately 90 sites throughout Wisconsin with PFAS contamination, including municipalities such as Madison, Marinette, Peshtigo and Wausau with PFAS-contaminated groundwater.

©2022 von Briesen & Roper, s.c
For more articles about state lawsuits, visit the NLR Litigation section.

SEC Issues Three Whistleblower Awards Totaling Over $1 Million

On April 18, the U.S. Securities and Exchange Commission (SEC) issued three separate whistleblower awards totaling over $1 million. Each of the awarded whistleblowers voluntarily provided the SEC with original information that contributed to the success of an enforcement action.

Through the SEC Whistleblower Program, qualified whistleblowers are entitled to awards of 10-30% of the funds collected by the SEC in the relevant enforcement action. The SEC has awarded over $1.2 billion to over 250 individual whistleblowers since issuing its first award in 2012.

One of the awards issued by the SEC on April 18 was a $700,000 award granted to joint whistleblowers. The whistleblowers provided the SEC with original information and the SEC subsequently passed this information along to another agency. The whistleblowers’ information led to the successful enforcement of actions by both the SEC and the other agency. Under the Dodd-Frank Act’s related action provisions, the whistleblowers were entitled to awards based on the sanctions collected in both actions.

According to the award order, in determining the exact percentage to award the whistleblowers, the SEC considered the following: “(i) Claimants’ information prompted Commission staff to begin an examination that led to the Covered Action, (ii) Claimants’ assistance helped focus the examination; (iii) some of the charges in the Commission’s Order were based, in part, on the information submitted by Claimants; and (iv) there was substantial law enforcement interest in the information provided, as it related to an ongoing fraud involving the misappropriation of investor funds.”

The second award from April 18 was for $450,000. The whistleblower in this case first reported the misconduct internally before providing information to the SEC. According to the award order, the whistleblower’s information “significantly contributed to an existing investigation” and “helped streamline the staff’s investigation and saved the staff time and resources.” The whistleblower also provided the SEC with additional assistance including identifying witnesses and specific events of interest.

The final award, a $45,000 award based on sanctions collected to date, was issued to a whistleblower whose information prompted the SEC to open an investigation. According to the award order, the whistleblower “participated in a voluntary interview with Commission staff” and “suffered hardships as a result of the underlying misconduct.”

On April 18, the SEC also issued a whistleblower award denial. The denial covers award claims submitted by two individuals for the same enforcement action which stemmed from an investigation based on a self-report by a company. The SEC found that the individuals did not contribute to the success of the enforcement action.

According to the denial, “[t]he staff responsible for the Covered Action credibly declared, under penalty of perjury, that it neither received nor used any of the information provided by either Claimant during the Investigation or in the Covered Action, nor did it have any communications with the Claimants. Moreover, the information the Claimants provided did not relate to the matters considered in the Investigation.”

Individuals considering blowing the whistle to the SEC should first consult an experienced SEC whistleblower attorney in order to ensure they are fully protected and qualify for the largest possible award.

Geoff Schweller also contributed to this article.

Copyright Kohn, Kohn & Colapinto, LLP 2022. All Rights Reserved.
For more articles about whistleblower awards, visit the NLR Financial, Securities & Banking section.

L’Oreal PFAS Lawsuit Again Shows ESG Risks of Marketing

In less than six months, L’Oreal has now found itself to be the target of PFAS lawsuits related to its mascara products. The latest L’Oreal PFAS lawsuit was filed in the New Jersey federal court on April 8, 2022. Cosmetics and PFAS is a topic that saw increased scrutiny from the scientific community, legislature, and the media in 2021. As we predicted in early 2021, the increased attention on the industry presented significant risks to the cosmetics industry, and our prediction was that the developments made the cosmetics industry the number two target for future PFAS lawsuits. In less than three months, four industry giants – Shiseido, CoverGirl, L’Oreal and Burt’s Bees – were hit with lawsuits related to their cosmetics and PFAS content in some of the companies’ products.  The industry, insurers, and investment companies interested in the consumer goods vertical with niche interest in cosmetics companies must pay careful attention to the cosmetics lawsuits and the increasing trend of lawsuits targeting the industry.

PFAS and Cosmetics: the 2021 Foundation

On June 15, 2021, a scientific study in the Journal of Environmental Science and Technology Letters published conclusions regarding testing of a variety of cosmetics products from the United States and Canada for PFAS content, and found PFAS present in over half of the products. On the same day that the study was published, the No PFAS In Cosmetics Act 2021 was introduced in the Senate by U.S. Senators Susan Collins (R-ME), Richard Blumenthal (D-CT), Dianne Feinstein (D-CA), Maggie Hassan (D-NH), Jeanne Shaheen (D-NH), Kirsten Gillibrand (D-NY), and Angus King (I-ME). The bill sought to ban PFAS in cosmetics.

These two developments led us to conclude “with these developments, our prediction that cosmetics is the number two target for PFAS litigation issues behind water rings true.”

Why PFAS In Cosmetics Is A Concern

PFAS content in cosmetics raises concerns for human health in scientific communities due to the fact that PFAS are capable of entering the bloodstream in ways other than direct oral ingestion, and one of these ways includes dermal absorption. Concerns have also been raised regarding absorption of PFAS into the bloodstream by way of tear ducts. The absorption issue is one that is being studied fairly extensively through various pending scientific studies. At the end of 2021, the federal Agency for Toxic Substances and Disease Registry (ATSDR) went so far as to recommend that citizens in Southern New Hampshire reduce their risk of further PFAS exposure by avoiding the use of certain consumer goods, including cosmetics.

L’Oreal PFAS Lawsuit

On April 8, 2022, plaintiff Rebecca Vega filed a lawsuit in the New Jersey federal court seeking a proposed class action lawsuit against LOreal. The L’Oreal PFAS lawsuit alleges that the company does not disclose to consumers that its mascara and other products contain PFAS. Instead, the lawsuit states, the products were fraudulently and misleadingly marketed as safe for consumers and environmentally friendly, in violation of federal and state consumer laws. The Complaint details several examples of L’Oreal marketing indicating the safe nature of the products.

The plaintiff seeks certification of the class action lawsuit, injunctive relief, damages, fees, costs and a jury trial. The proposed class is any consumer in the United States, or in the subclass of New Jersey, who purchased the relevant L’Oreal products.

Just the Beginning For Cosmetics Industry

With studies underway, legislation pending that targets cosmetics, and increasing media reporting on cosmetics concerns to human health, the cosmetics industry has a target on its back with respect to PFAS that will have impacts on the industry’s involvement in litigation. Twelve months ago, we made this prediction: “Personal injury / products liability cases, false advertising, and failure to disclose theories of liability are some of the more prominent allegations that cosmetics companies are likely to face. Further, the cosmetics industry is concerned about federal and state level regulatory enforcement action for environmental pollution remediation costs stemming from placing PFAS waste into the environment as a by-product of the manufacturing process.”

The first part of our prediction is becoming reality, as four significant cosmetics industry players now find themselves embroiled in litigation focused on false advertising, consumer protection violations, and deceptive statements made in marketing and ESG reports. The lawsuits may well serve as a test case for plaintiffs’ bar to determine whether similar lawsuits will be successful in any (or all) of the fifty states in this country. Each cosmetics company faces the stark possibility of needing to defend lawsuits involving plaintiffs in all fifty states for products that contain PFAS.

It should be noted that these lawsuits would only touch on the marketing, advertising, ESG reporting, and consumer protection type of issues. Separate products lawsuits could follow that take direct aim at obtaining damages for personal injury for plaintiffs from cosmetics products. In addition, environmental pollution lawsuits could seek damage for diminution of property value, cleanup costs, and PFAS filtration systems if drinking water cleanup is required.

Conclusion

It is of the utmost importance that businesses along the whole supply chain in the cosmetics industry evaluate their PFAS risk. Public health and environmental groups urge legislators to regulate PFAS at an ever-increasing pace. Similarly, state level EPA enforcement action is increasing at a several-fold rate every year. Now, the first wave of lawsuits take direct aim at the cosmetics industry. Companies that did not manufacture PFAS, but merely utilized PFAS in their manufacturing processes, are therefore becoming targets of costly enforcement actions at rates that continue to multiply year over year. Lawsuits are also filed monthly by citizens or municipalities against companies that are increasingly not PFAS chemical manufacturers.

©2022 CMBG3 Law, LLC. All rights reserved.
Article By John Gardella with CMBG3 Law.
For more articles on ESG lawsuits, visit the NLR Environmental, Energy & Resources section.

H-1B Cap Registrations Selected for FY 2023

On April 18, 2022, USCIS announced that it had received 483,927 registrations for the FY 2023 H-1B Cap. This is the largest number ever received – almost 200,000 more than the total count of 308,613 for FY 2022.

Out of the 487,927 registration applications, USCIS selected 127,600 to fill the 85,000 available spots. Employers whose H-1B Cap Registrations have been selected have a 90-day window to file the H-1B Cap Petitions with USCIS.

USCIS calculates the number of cases it will select based on historical data regarding the number of petitions that have been filed post-selection and the number of denials forecast. Last year, COVID-19 was a big unknown and USCIS had to conduct three selections totaling 131,970 to reach the goal of filling 85,000 H-1B Cap slots. In the first selection round last year, USCIS selected only 87,000 registrations.

Now, with better historical data, the agency has selected more registrations this year, which means it may not conduct any additional selections later this year.

Jackson Lewis P.C. © 2022

Article By Otieno B. Ombok of Jackson Lewis P.C.

For more articles on immigration, check out the NLR Immigration section.

The Misapplication & Legal Deficiencies of the TRIPS Agreement for COVID-19 Patents

Guest Commentary

Last year, the Biden Administration announced its support for a waiver of intellectual property rights to help fight the COVID-19 pandemic. Recently, the European Union, India, South Africa, and the United States have reached a tentative compromise on a proposed TRIPS waiver of intellectual property (IP) rights, meaning we are quickly approaching a collective refrain enforcing intellectual property rights related to fighting COVID by these countries within their borders. Ultimately, it is the opinion of Wen Xie, Partner at Global IP Counselors, that any attempt to waive IP will be ineffective in its application. COVID patents will probably still be enforced in the US nonetheless, and the TRIPs Waiver only destabilizes the innovative ecosystem by rendering intellectual property rights unpredictable on a global scale. The NLR asks Xie to go into more depth about the various legal questions raised by the prospective waiver.

1. NLR: Can you explain the TRIPS agreement considering the COVID pandemic? How will a non-uniform enforcement of the waiver affect companies and what should they know about it?

XIE: Right now we are working off of a leaked WTO ‘solution’ for waiving COVID patents1; nothing has been formalized or voted on at this stage. The document basically says that Member countries have the option to make, use, sell or import COVID-19 vaccines without the authorization of the patent holder, which is saying that the vaccine makers can’t (cannot) raise a big fuss and take anyone to court on the grounds that their patents are being infringed. One of the most important things to note is that there is a great degree of optionality to this proposal – the proposal repeatedly states that Member countries “may” do any of the actions that are permitted if this proposal ends up being adopted.

This means that the implementation of this TRIPS waiver will look different from country to country depending on how much they want to do in terms of waiving patent rights within their national jurisdictions. Countries that fervently advocated for this measure (namely India and South Africa2) will probably go to the whole extent of what they are allowed to do. They might even build manufacturing facilities for mRNA vaccines that are right now protected by the Pfizer and Moderna patents.  I don’t the US or Europe will go this far, if at all.  The US might choose to not waive COVID-19 vaccine patents in the US at all because the laws governing the conferring of patent rights is under Title 35 of the United States Code and has nothing to do with TRIPS or any other international agreement.  Any kind of implementation of this waiver brokered under the President’s Treaty Powers will ultimately need legislative sanction.  It’s highly doubtful the Administration will end up pushing for something like that.

What seems to be really happening with this so-called “waiver” is a multi-lateral agreement that some developing nations are going to not enforce COVID vaccine patents within their borders and the WTO is not going to retaliate.  It’s sort of like the US and Europe are saying to the countries that pushed for this, “Go ahead, you’re off the hook.” But since the tentative agreement allows Member countries the option to implement the provisions, the US will probably not choose to adopt it within its borders.

2. Given the global economic and human toll of the COVID pandemic, why is maintaining intellectual property rights for COVID-19 treatments important?

In the field of biomedical sciences, the period of exclusivity granted by patents is critical for recouping costs used for reinvestment into the next round of research and development. The major pharma companies spend as much as 25% of their revenue on R&D. Here’s a breakdown of some of the major companies in terms of their R&D spending in 2020:

  • Johnson & Johnson (14.8% of revenue)3
  • Roche (24.1% of revenue)4
  • Novartis (18.5% of revenue)5
  • Merck (28.3% of revenue)6
  • Pfizer (22.4% of revenue)7
  • AstraZeneca (22% of revenue)8
  • Eli Lilly (24.7% of revenue).9

Compare that to Apple which spent 5.99% of its revenue on R&D in 2021, and Microsoft which spent 12.32%.10

The vaccine makers are for-profit companies whether we like it or not. Pfizer, Moderna, and J&J each received governmental funding through Operation Warp Speed to incentivize them to develop the COVID vaccines in the time span that it occurred. We must examine how much suppressing IP and thereby suppressing the investment incentive to continue ongoing innovation will end up costing us as a society.

3.  What are the legal deficiencies of the TRIPS agreement?

One of the truly bizarre aspects of the TRIPS “waiver” is that there is no such thing as a “TRIPS patent.”  All patents have national jurisdictions.  US patents are issued by the United States Patent and Trademark Office under Title 35.  The same goes for the process of filing for patents at all the other national patent offices – TRIPS plays no role in the whole process.  In terms of legal deficiencies, we should be rigorously examining what kind of jurisdiction the TRIPS Agreement will have to render patents unenforceable or useless.

When it comes to patent rights, the TRIPS Agreement obligates its signatories to comply with the Paris Convention which is a treaty that was signed in 1883.  The Paris Convention was one of the first attempts to harmonize the patent system worldwide.  The reason for doing this was to create a system for claiming priority and to harmonize the standards of patentability across nations so that applications can claim priority and get the benefit of an earlier priority date of a related application that was filed in a different country.  Priority dates are used to determine the scope of the prior art that can be used against the application when examining for novelty and obviousness, which is why these dates are important.

For example, the US and Japan are both signatories to the Paris Convention treaty.  An applicant filing at the USPTO can claim priority to an earlier-filed Japanese patent application that was filed at the Japan Patent Office under the Paris Convention.  And the same can occur in reverse.

What authority does the TRIPS Agreement have in terms of patents?  I think TRIPS can possibly do away with the system of priority claiming under the Paris Convention and subject patents to reexamination as they lose their priority dates.  But neither the TRIPS Agreement nor the Paris Convention should have anything to do with domestic patent applications that are filed directly with the national patent offices.  And more likely than not, the COVID vaccine patents were filed directly at domestic patent offices around the world, which should be completely beyond the jurisdiction of the TRIPS Agreement or any other international agreement on patent rights.  The priority system is mostly utilized by companies who are constrained by their IP budget and does not yet have the budget to file in several patent offices internationally at once, so they stagger these filings over time and claim priority to the original patent application.  I doubt that this is what Pfizer, Moderna, and J&J did with the COVID vaccine patents.

4. What are the practical deficiencies of the TRIPS agreement related to COVID?

The TRIPS waiver probably won’t help the developing nations that much in terms of getting access to cheaper COVID vaccines.  Practically speaking, developing nations could have always ignored Pfizer and Moderna’s patents for their vaccines without the need for a worldwide agreement to render patents useless.  Again, patents have national jurisdiction.  So, India can just ignore Pfizer’s Indian patent, for example.  A lot of countries have fallen short of a robust assertion of patent rights in their domestic courts as agreed under the international treaties without facing WTO sanctions or penalties (see China).11 So these countries could have unilaterally treated patents however they wanted, which is already what has been happening for a long time. It is very unclear why such a drastic, coordinated course is necessary and why the US needs to be complicit in destabilizing the innovative landscape for IP stakeholders.

Another issue is that say a developing nation decides to build manufacturing facilities to produce mRNA vaccines.  Waiving patent rights does not provide them with access to manufacturing processes, test data, medical formulas, cell lines, and other critical data that they will need.  So waiving IP rights still does effectively very little in terms of improving developing nations’ access to vaccines, nor will it enhance their ability to make or produce these vaccines on their own.

5. What are the potential long-term impacts of the TRIPS agreement related to COVID, and how should companies prepare?

Both the TRIPS Agreement and the Paris Convention have provisions obligating its signatories to recognize the domestic patent rights of foreign entities and to receive the same treatment as if the patents were owned by nationals.  I think this is what it really comes down to – the TRIPS waiver is meant to give free rein to some countries who do not want to recognize the patent rights of foreign companies over products that they want more of. If this proposal is adopted, the WTO will be a collection of nations agreeing to no longer recognize that foreign entities enjoy the same property rights as nationals, which is a dangerous precedent.

In the US, we’ve never had to make a law to say foreigners can enjoy the same property rights as nationals – that was just a given under the Equal Protection Clause which entitles both citizens and aliens to the equal protection of the laws of the State in which they reside. You need sanctions in the US to seize a Russian oligarch’s yacht.

Intellectual property may not physical or tangible, but it is a right.  Patentees sought out this right in reliance on the government’s promise that it would be protected in return for a full, enabling disclosure of their inventions. There were so many alternatives that could provide developing nations with greater access to vaccines, such as purchasing the vaccines directly for them.  But instead, the government has effectively reneged on a promise, and the end result is that developing nations in need of vaccines will still face the same hardships and barriers as they did before.

The opinions expressed herein are those exclusively of Wen Xie and any commentary should be directed to the interviewee at E‐mail: wxie@giplaw.com.

Copyright (C) GLOBAL IP Counselors, LLP

Article By Wen Xie of Global IP Counselors

For more articles on IP law, visit the NLR Intellectual Property section.

Look at Me, Not Through Me: Supreme Court Limits Federal Jurisdiction for Post-arbitration Award Petitions

On 31 March 2022, the United States Supreme Court in Badgerow v. Walters limited federal subject matter jurisdiction over post-arbitration award petitions under the Federal Arbitration Act (FAA) §§ 9 and 10. After years of widening disagreement between circuit courts regarding when a federal court may exercise jurisdiction to confirm or vacate an award, the Supreme Court weighed in and held that federal courts may only exercise jurisdiction to confirm or vacate an award if the face of the application supports diversity or federal-question jurisdiction. One of the implications of this ruling is that many more post-arbitration proceedings to confirm or vacate an arbitration award may be channeled into state courts.

BACKDROP: FAA SECTIONS AT ISSUE

Section 4 states that a party seeking to compel arbitration can file suit in any court that, “save for” the arbitration agreement, would have federal jurisdiction over the underlying dispute.1

Section 9 provides that parties may apply to confirm an arbitration award in the United States court “in and for the district” where the award was made.2

Section 10 provides that parties may apply to vacate an arbitration award in the United States court “in and for the district” where the award was made.3

PRELUDE: VADEN

In its 2009 decision in Vaden v. Discover Bank, the Supreme Court found that federal-question jurisdiction could exist under a “look-through” approach in a § 4 petition to compel arbitration.4 In that case, two questions were presented: (1) whether a district court, when asked to compel arbitration, should “look through” the petition and compel arbitration if the court originally would have had federal jurisdiction; and (2) if so, may the court exercise jurisdiction over the § 4 petition when the original complaint rests on state law but the counterclaim rests on federal law?

The Supreme Court answered the first question affirmatively. In doing so, it emphasized that a “federal court may ‘look through’ a § 4 petition to determine whether it is predicated on an action that ‘arises under’ federal law; in keeping with the well-pleaded complaint rule.”5 However, the Court found that the district court could not exercise jurisdiction over the petition presented in that case, because the complaint was “entirely state-based” and “federal-court jurisdiction cannot be invoked on the basis of a defense or counterclaim.”6

Since Vaden, circuit courts have been divided over whether the “look-through” approach also applies to applications to confirm or vacate awards under FAA §§ 9 and 10. For example, the Fifth Circuit acknowledged the circuit split in Quezada v. Bechtel OG & C Constr. Servs., Inc., noting that the Third and Seventh Circuits decline to apply the look-through approach for confirmation, vacatur, or modification of arbitration awards, but the First, Second, and Fourth Circuits permit the look-through approach.7

Ultimately, a divided Fifth-Circuit panel in Quezada agreed with the majority and held that the Vaden look-through approach applies to applications to confirm or vacate arbitration awards.

OPENING ACTS: BADGEROW V. WALTERS IN THE LOWER COURTS

Badgerow v. Walters followed, implicating the Supreme Court’s Vaden decision and the Fifth Circuit’s Quezada decision on the issue of whether a federal court has subject-matter jurisdiction to review an application to confirm or vacate an arbitration award when the underlying dispute presents a federal question.

The plaintiff in Badgerow initiated arbitration against her former employer’s principals, alleging violation of federal employment law. The arbitration panel dismissed all of her claims, so she filed an action in state court to vacate the arbitration award. The defendants removed the action to the United States District Court for the Eastern District of Louisiana and filed a motion to confirm the award. Plaintiff moved for remand to state court, arguing that the district court did not have jurisdiction over the award; however, the district court denied remand and granted defendant’s motion to confirm the award.8

On appeal, the Fifth Circuit held that it was bound by its precedent in Quezada and applied the look-through approach.9 The Fifth Circuit thus affirmed the district court’s decision to exercise jurisdiction over the dispute.

Plaintiff filed a petition for writ of certiorari, which the Supreme Court granted on 17 May 2021.10

FEATURE: THE SUPREME COURT’S DECISION

In an 8-1 decision,11 the Supreme Court reversed and remanded the case, holding that FAA §§ 9 and 10 lack § 4’s “distinctive language directing a look-through” approach. Thus, without statutory language directing otherwise, “a court may look only to the application actually submitted to it in assessing its jurisdiction.”12 Noting that Congress could have replicated § 4’s look-through language in §§ 9 and 10 but chose not to, the Court held that a federal court only has jurisdiction over an application to confirm or vacate an arbitration award when the face of the application demonstrates diversity or federal-question jurisdiction.

Applying the new rule to the facts of plaintiff’s appeal, the Court explained that the parties were not contesting the federal employment dispute at this stage; rather, the parties were contesting enforcement of the arbitration award. Therefore, the Court held that federal jurisdiction was not appropriate because enforcement of the award, which was “no more than a contractual resolution of the parties’ dispute,” did not amount to federal-question jurisdiction and the parties were not diverse.

SOUVENIR: THE KEY TAKEAWAYS

Following the Supreme Court’s decision in Badgerow limiting federal subject matter jurisdiction over arbitration awards, counsel and parties seeking to confirm or vacate arbitration awards must analyze whether their application, on its face, supports an independent basis for federal subject-matter jurisdiction if they wish to bring their application in federal court. Without the “look-through” approach for §§ 9 and 10 petitions, and in particular where the parties to arbitration provisions are citizens of the same state (and thus lack diversity jurisdiction), state courts will more likely be the primary venue for post-award petitions.

FOOTNOTES

1 9 U.S.C. § 4.

2 9 U.S.C. § 9.

3 9 U.S.C. § 10.

4 Vaden v. Discover Bank, 129 S. Ct. 1262, 1268 (2009) (“A federal court may ‘look through’ a § 4 petition and order arbitration if,” notwithstanding the arbitration agreement, “the court would have jurisdiction over ‘the [substantive] controversy between the parties.’” (citations omitted)).

5 Id. at 1273.

6 Id. at 1269.

7 Quezada v. Bechtel OG & C Constr. Servs., Inc., 946 F.3d 837, 841 (5th Cir. 2020) (“After Vaden, a circuit split developed regarding whether the same look-through approach also applies to applications to confirm an arbitration award under section 9, to vacate under section 10, or to modify under section 11.”).

8 Badgerow v. Walters, — S. Ct. —-, 2022 WL 959675, at *3 (2022).

9 Badgerow v. Walters, 975 F.3d 469, 472–74 (5th Cir. 2020).

10 Badgerow v. Walters, 141 S. Ct. 2620 (2021).

11 Justice Breyer in dissent wrote that although the Court’s decision “may be consistent with the statute’s text,” practical application would create curious consequences, artificial distinctions, and results that are “overly complex and impractical.” Badgerow, 2022 WL 959675, at *10 (Breyer, J., dissenting).

12 Badgerow, 2022 WL 959675, at *3.

Copyright 2022 K & L Gates
For more articles about Supreme Court cases, visit the NLR Litigation section.

10 Law Firm Newsletter Ideas to Attract Clients

How to Start and Grow a Newsletter for a Law Firm

Email marketing often gets a bad rap. After all, we all know the annoyance of getting spam and promotional emails. Much of this content just ends up deep in our inbox. The same can happen to newsletters… especially boring ones.

Don’t let your law firm email newsletter fall to this fate. In this guide, I’ll talk about how to start a successful newsletter and use it to attract clients.

Plus, you’ll get 10 content ideas for creating an engaging newsletter.

Why start a newsletter?

A study conducted by Law Technology Today found that 86% of law firms fail to collect an email address when they acquire a new lead. Starting an email newsletter is one way to prioritize growing your email list and taking down information to nurture users into potential clients.

With this in mind, an email newsletter is about more than just sending a generic email every month; instead, it can be an effective tool for drumming up new business for your law firm. It also gives you a medium through which you can share firm news, build trust with your subscribers, and establish your law firm’s brand.

Benefits of starting a law firm newsletter

Email newsletter marketing offers many benefits to your law firm. Beyond simply sending updates to your email list, an email newsletter can bring the following perks:

  • Connection – A law firm newsletter builds connection with your new and potential clients by telling them more about your firm and offering a way for subscribers to respond directly to your email.
  • Traffic – An effective newsletter can work to drive more users to your website and social media pages.
  • Sales – Newsletters offer a convenient way for subscribers to reach out to your firm, increasing the likelihood that they will turn into new clients.
  • Community – Sending a consistent newsletter can help drive users to your social media accounts, therefore growing your community and visibility on social.
  • Reputation Management – Email provides an avenue for you to build rapport with your audience, get ahead of bad PR, and ultimately build trust in your firm.

How to write a law firm email newsletter

Before you sit down and start typing away at your newsletter, you’ll want to understand the fundamentals of what it takes to write and market a great newsletter. Here’s how to get started.

Define your target audience

Generalism is the killer of many marketing campaigns. If you don’t define your target audience – that is, the interests and persona of the people you are trying to reach – you risk offering the wrong type of content to the wrong audience. And disjointed messaging won’t bring the client-generating results that you want.

Instead, you’ll want to brainstorm a few factors to ensure you are writing for your ideal audience. These factors include:

  • What types of legal services your audience is interested in
  • What legal issues they are struggling with most
  • What questions they’re likely to have about the legal process
  • What their goals are when it comes to hiring a lawyer
  • What interests they have in understanding law, the legal system, etc.

If you’ve been in your field for a while, you’ll likely have an idea of how to answer these questions. If you’re more green, you can always ask your network, social media followers, and existing clients some of these questions to better understand their interests.

Grow your email list

Of course, before you can see results from an email newsletter you’ll need an audience to send it to! Now, building an email list organically takes time, but it’s worth it to build a list of subscribers who are actually interested in your content.

Never buy email subscribers, as these will likely be dead accounts or otherwise users who will never work with you. Instead, invest in blogging and website marketing in order to grow your community organically.

Here are some tips for growing your law firm email list:

  1. Embed a signup form on your website in order to capture users’ contact information (at the very least, their email address and name)
  2. Publish helpful blog content to drive organic search engine traffic and traffic from social media
  3. Offer downloadable content – like PDFs, infographics, guides, etc. – behind a sign-up wall to encourage users to subscribe
  4. Use email marketing software like Mailchimp to add email list signup forms to various pages or articles on your website
  5. Offer value with impactful content. If you’re able to demonstrate that you are an authority in your industry, people will be excited to subscribe for future updates

Plan your content

With your target audience in mind, you can begin to plan your newsletter content. I highly recommend choosing a “theme” and then building out a newsletter based on that theme.

For example, one month you may decide to talk about common mistakes people make in hiring a lawyer. So, you write four newsletters over the course of the month – each one addressing a different ‘mistake’ people make and how to avoid it.

You can use a notebook, Google Doc, or spreadsheet to plan your content and keep organized. Try to plan at least a month in advance so you are prepared with content ideas ahead of time. You can even write your content and schedule the delivery weeks or months out.

Write your newsletter

Whether you consider yourself a good writer or not, drafting a great email newsletter is relatively simple. There are just a few tips to keep in mind to help you produce engaging content every time:

  • Write an eye-catching subject line. Rather than simply say “newsletter”, you can include the actual subject of your email (e.g. ‘Don’t make this mistake…) to entice subscribers to click
  • Make it “scannable”. Instead of typing a long wall of text, break your email content into shorter paragraphs, sentences, or bulleted lists. This makes it easier for readers to ‘scan’ your content and find the content they are interested in.
  • ‘Close the loop’. This is a concept I got from an email copywriter. Open your email with a ‘hook’ – could be a tip, a question, or an intro to a story – and then resolve the hook at the end of your email. For example, you could open with “Many clients make a huge mistake in hiring a lawyer…” and then at the end of the email you say “Don’t want to make that mistake? Here’s how to avoid it…”. This keeps readers interested from start to finish.
  • Add a link. Include links to related blog posts, social media posts, videos, etc. to drive traffic to your other channels.
  • Include a call to action. Either encourage readers to respond to a question (e.g. “What do you think about…?”), contact you directly (e.g. “Respond now to schedule a consultation”), or visit your other platforms (e.g. “Visit our website to learn more about…”).

Use an email platform

Email marketing software like Mailchimp and ConvertKit makes it easy to write, format, schedule, and deliver your newsletter content. There’s no need to create a long CC chain to your subscribers and send your email manually. These tools allow you to send your newsletter to an entire list, schedule the delivery date, add media, and more.

Preview and test your newsletter

It’s always a good idea to preview your newsletter to check if you made any mistakes. Further, send yourself a test email to make sure there are no delivery issues. You can then also see how your newsletter looks on different devices and decide if you need to change up your content.

Send it out

Once your email template is complete, give it a final once-over for any selling issues or mistakes. When you’ve double-checked your content, you’re ready to send it to your email list.

Track results

Most email marketing tools will also provide analytics regarding your email open rate, subscriber growth, or unsubscribe rate. These metrics will help you determine the success of your newsletter and make adjustments over time. For example, if you see that your open rate is low, that may mean you need more engaging subject lines. Or, if there have been a lot of unsubscribes, this may mean users aren’t enjoying your content.

Try these creative law firm newsletter ideas

Now, the funnest part of publishing an email newsletter is the amount of creativity there is in thinking up content ideas. I strongly encourage you to be adventurous with your newsletter and not be afraid of veering from the same old script.

Here are some creative law firm newsletter ideas for you to consider:

1. Topic series

Produce a series of newsletters that cover a primary topic. For example, you can commit the month of November to talk about “DUI FYIs”, in which you reveal helpful tips in addressing a DUI over a series of emails. This approach gets subscribers looking forward to your upcoming emails and makes it easier for you to plan your content.

2. Q&A

The legal process can be super confusing for clients and the general public. With this idea, you can address a single question and answer via email over the course of the campaign. Again, this can encourage users to look forward to your upcoming Q&A sessions.

3. Interviews

Know an industry expert who has a perspective to share? Highlight this individual and provide value to your audience by including an interview in your newsletter. You can do this several times in your email marketing strategy. And, it can get subscribers to ask questions to your email campaign, which is great for deliverability and engagement.

4. Email course

Some topics warrant a deeper explanation. For subscribers wanting to learn more about the legal process or a particular topic, you can offer a multi-step email course. They will have to open each email to get new nuggets of information and to complete the course.

5. Videos

It’s no secret that today’s users love video content. Including videos in your emails is a good way to improve open rates and direct users to your video (typically, your YouTube channel or website). Be sure to include “Video:” in your email subject line to encourage subscribers to one your email.

6. Templates

Many email marketing platforms offer professional-looking email templates you can use so you don’t have to design your newsletter from scratch. A great-looking email could encourage users to engage with your content. Typically, these templates include social media icons as well, which can direct more traffic to these platforms. You can update colors, fonts, logos, images, and more.

7. ‘Get to know me’

When new subscribers join your newsletter, they may not know much about you. A “Get to know me” email can help introduce them to you, your interests, and your approach to law. Keep it fun by sharing interesting facts about yourself, likes and dislikes, hobbies, or whatever you think will be exciting to your audience.

8. Meet the team

Similarly, you can run a “Meet the team” series to introduce your entire staff to your list. This is a great way to build trust and provide that added human connection. If you have a large staff, consider breaking this out into several emails for even more content.

9. Storytime

Email subscribers love a good story. Now, while you don’t want to share any confidential information about your cases, you could share lessons learned from the industry, funny office stories, or a personal life story. You can even slowly tell the story over a course of emails to keep readers interested.

10. In the news

We’ve all come across hot news stories where celebrities land themselves in legal trouble or a large company is going under. Turn trending topics into legal lessons, offer your own unique spin, and make the legal process more relatable to your readers. We are all talking about these pop culture stories anyway, might as well use it for great email content!

Email newsletters build connection with your audience

An email newsletter is one of the best ways to build trust and connection with potential and existing clients. Remember, subscribers care less about “marketing content” and more about the value your firm can provide, the stories you tell, and how you can help them navigate their legal woes.

So, keep things fun and interesting with creative email content. Try different media, switch up topics, and, above all, stay consistent so you nurture a strong, engaged audience.

Copyright 2022 © Hennessey Digital

Article By Jason Hennessey with Hennessey Digital.

For more articles about law firm management, please visit the NLR Business of Law section.

COVID-19 Healthcare Enforcement Actions to Increase in 2022 and Beyond

“The Department remains committed to using every available federal tool—including criminal, civil, and administrative actions—to combat and prevent COVID-19 related fraud. We will continue to hold accountable those who seek to exploit the pandemic for personal gain, to protect vulnerable populations, and to safeguard the integrity of taxpayer-funded programs”

US Attorney General Merrick Garland – March 10, 2022, Remarks

The Biden Administration, US Department of Justice (DOJ), US Department of Health and Human Services Office of Inspector General (HHS-OIG), and other federal agencies have prioritized prosecuting COVID-19-related fraud since the pandemic began. Although the United States appears to be finally emerging from the pandemic, the government’s pandemic-related enforcement actions are here to stay for the foreseeable future. DOJ has made clear that the government’s COVID-19 enforcement efforts will accelerate, with a more significant focus on complex healthcare fraud cases and civil actions under the False Claims Act (FCA). As the federal government continues to devote additional resources towards its pandemic-related enforcement efforts, healthcare companies, hospital systems and providers should prepare for increased scrutiny.

Additional Resources Devoted to COVID-19 Fraud Enforcement Efforts

DOJ and other federal agencies have already devoted an unprecedented amount of resources to investigating and prosecuting pandemic-related fraud cases. These extensive efforts have led to immediate results. To date, DOJ has brought pandemic-related criminal charges against more than 1,000 individuals with the total alleged fraud losses exceeding $1 billion, and has seized more than $1.2 billion in fraudulently obtained relief funds.

DOJ’s pandemic-enforcement efforts show no sign of slowing down anytime soon. Less than a year after US Attorney General (AG) Merrick Garland established the COVID-19 Fraud Enforcement Task Force, the Biden administration announced that DOJ would appoint a chief prosecutor to expand on the Task Force’s “already robust efforts,” to focus on “most egregious forms of pandemic fraud” and to target particularly complex fraud schemes.

On March 10, 2022, DOJ announced that Kevin Chambers has been appointed as DOJ’s director for COVID-19 fraud enforcement. During his introductory remarks, Chambers said that DOJ would be “redoubling [its] efforts to identify pandemic fraud, to charge and prosecute those individuals responsible for it and whenever possible, to recover funds stolen from the American people.” He also indicated that DOJ would use “new tools” it has developed since the start of the pandemic to investigate such fraud.

In a March 2, 2022, speech before the American Bar Association’s Annual National Institute on White Collar Crime, AG Garland also announced that the Biden Administration will seek an additional $36.5 million in the 2022 budget for DOJ to “bolster efforts to combat pandemic-related fraud.” As evidence of this point, DOJ plans to hire 120 new prosecutors and 900 new Federal Bureau of Investigation agents who will focus on white-collar crime.

DOJ and HHS-OIG to Increasingly Focus on FCA Cases

For the past two years, officials from DOJ and HHS-OIG have identified civil and criminal healthcare fraud relating to COVID-19 as a high priority. As the effects of the pandemic subside, COVID-19-related civil enforcement actions targeting healthcare providers and healthcare companies seem set to increase.

During remarks at the Federal Bar Association’s annual Qui Tam Conference in February 2022, Gregory Demske, chief counsel to the inspector general for HHS-OIG, emphasized that COVID-19 remains a key enforcement priority. Demske indicated that HHS-OIG is focused on the use of COVID-19 to bill for medically unnecessary services, and fraud in connection with HHS’s Provider Relief Fund (PRF) and Uninsured Relief Fund. Demske also confirmed that HHS-OIG remains intensely focused on fraud in connection with telehealth services, the use of which increased exponentially during the pandemic. And, in March 2022, AG Garland reiterated that DOJ will use “every available federal tool—including criminal, civil, and administrative actions—to combat and prevent COVID-19 related fraud.”

The majority of pandemic-related healthcare enforcement actions to date have been criminal prosecutions involving truly blatant instances of fraud and abuse. Going forward, civil and administrative actions likely will be used to pursue cases that turn on lower mens rea requirements or involve more complex regulatory issues. These civil actions will include qui tam actions filed by whistleblowers, as well as FCA cases initiated directly by the DOJ.

In 2021, DOJ recovered more than $5 billion in connection with FCA cases involving the healthcare industry. Given the unprecedented amount of government funds expended to combat the COVID-19 pandemic, DOJ and HHS-OIG will undoubtedly rely on the FCA to maximize the government’s financial recovery. DOJ has already reached FCA settlements in several Paycheck Protection Program cases. It is only a matter of time before we see similar FCA investigations, complaints and settlements focused on relief funding to healthcare providers.

Pandemic-Related Healthcare Priorities

HHS’s PRF

The PRF was created as part of the Coronavirus Aid, Relief and Economic Security (CARES) Act to provide direct payments to “eligible health care providers for health care-related expenses [and] lost revenues that are attributable to coronavirus.” More than $140 billion has been disbursed to hospitals and healthcare providers under the PRF, which is administered by the Health Resources & Services Administration (HRSA).

Payments under the PRF are subject to specific terms and conditions. To retain PRF disbursements, providers must attest to “ongoing compliance” with these requirements and acknowledge that their “full compliance with all Terms and Conditions is material to the Secretary’s decision to disburse funds.” Notwithstanding ongoing concerns and confusion regarding the PRF program requirements, any noncompliance with the terms and conditions could result in criminal, civil and administrative enforcement actions. As recently as March 3, 2022, AG Garland identified fraud in connection with the PRF as a key DOJ enforcement priority.

To date, the Healthcare Fraud Unit of DOJ’s Criminal Division has already brought criminal charges against nine individuals for fraud relating to the PRF. These criminal cases, however, have almost exclusively focused on egregious allegations of fraud and abuses, such as misappropriating PRF disbursements and using the money for personal expenses. For example, in September 2021, DOJ charged five individuals with using PRF payments to gamble at Las Vegas casinos and purchase luxury cars.

DOJ, however, has long indicated that the FCA will also play a “significant role” in DOJ’s PRF enforcement efforts. It is now just a matter of time before such civil investigations and settlements emerge.

HRSA’s stated oversight plan includes post-payment analysis and review to determine whether HHS distributed PRF payments to eligible providers in the correct amounts; audits to assess whether recipients used the funds in accordance with laws, guidance, and terms and conditions; and the recovery of overpayments and unused or improperly used payments. Among other things, HRSA and HHS-OIG likely will evaluate ownership changes, double counting reimbursed expenses and losses, and compliance with the balanced billing requirements.

PRF oversight and enforcement actions have been delayed partly because of program complexities and extended reporting timelines. For example, the first report from PRF recipients on use of funds was not due until the end of 2021. Depending on the date funds were received, PRF recipients may have no reporting obligations through 2023. Entities that expended more than $750,000 in federal awards, including PRF payments, also must obtain an independent audit examining their financial statements; internal controls; and compliance with applicable statutes, regulations and program requirements. These independent audits of PRF payments must be submitted to the Federal Audit Clearinghouse, for nonprofit organizations, or the HRSA Division of Financial Integrity, for for-profit “commercial” organizations. Recipients also may be subject to separate audits by HHS, HHS-OIG or the Pandemic Response Accountability Committee to review copies of records and cost documentation and to ensure compliance with the applicable terms and conditions.

Finally, DOJ and HHS-OIG have increasingly relied on sophisticated data analytics to drive their healthcare enforcement efforts generally. Now that the first round of reports containing specific PRF data certifications are available to HRSA and HHS-OIG, we expect to see the use of such analytics, in conjunction with all the other available information, in connection with PRF enforcement.

Telehealth

Telehealth use expanded exponentially during the pandemic. A March 2022 HHS-OIG report showed that during the first year of the pandemic, more than 28 million Medicare beneficiaries (approximately 43% of all Medicare beneficiaries) used telehealth services—a “dramatic increase from the prior year” in which only 341,000 beneficiaries used telehealth. This increase was largely the result of HHS temporarily waiving statutory and regulatory requirements related to telehealth to allow Medicare beneficiaries to obtain expanded telehealth services.

Telehealth has been at the forefront of DOJ’s healthcare enforcement efforts for years now. For example, DOJ’s 2021 nationwide healthcare enforcement action included criminal charges against dozens of individuals for telehealth fraud schemes involving more than $1.1 billion in alleged loses. The majority of these telehealth enforcement actions to date have involved the use of telehealth to engage in traditional fraud healthcare schemes, such as illegal kickbacks and billing for medically unnecessary services and equipment.

DOJ, however, has increasingly pursued criminal enforcement actions directly related to the telehealth waivers HHS issued in response to the pandemic. For example, in November 2021, a defendant was sentenced to 82 months in prison for participating in a $73 million telehealth fraud scheme. The defendant owned laboratories that provided genetic testing and had paid his coconspirators to arrange for telehealth providers to order medically unnecessary genetic tests. The telehealth providers were not actually treating the beneficiaries, did not use the test results and often never even conducted the telemedicine consultation. Although this was primarily a traditional Anti-Kickback Statute/medical necessity case, DOJ also charged the defendant with using the COVID-19-related telehealth waivers to submit more than $1 million in false claims for sham telemedicine visits.

Similar criminal prosecutions and civil actions relating to the expanded telehealth waivers and sham telehealth encounters can be expected in the future. DOJ and HHS-OIG will likely focus on telehealth visits that resulted in claims for services and equipment with particularly high reimbursement rates, such as genetic testing and durable medical equipment. DOJ and HHS-OIG likely will use data analytics to focus on instances in which telehealth services were billed by providers with whom the beneficiary did not previously have a relationship.

Improper Billing Schemes

DOJ has also pursued criminal cases involving traditional healthcare fraud schemes that sought to take advantage of the COVID-19 pandemic. For example, in May 2021, DOJ announced criminal charges against numerous individuals who were improperly bundling COVID-19 tests with other more expensive laboratory tests, such as genetic testing, allergy testing and respiratory pathogen panel testing. DOJ has likewise pursued criminal cases in which defendants improperly used COVID-19 “emergency override” billing codes to circumvent preauthorization requirements and bill Medicare for expensive medications and treatments. Any improper billing schemes that relate to the pandemic will continue to be a focus of criminal and civil enforcement efforts going forward.

Key Takeaways and Recommendations

DOJ, HHS-OIG and other federal agencies remain focused on pursuing healthcare fraud relating to the COVID-19 pandemic. The best way for hospitals, health systems and other healthcare companies and providers to prepare for this increased enforcement activity and scrutiny is to ensure that they have a robust compliance program in place.

There is no one-size-fits-all approach to compliance, but companies can take several proactive and practical steps to minimize their enforcement risk:

  • Monitor federal and state regulatory and statutory changes. The rules, regulations and guidance relating to the COVID-19 pandemic, including for the PRF and expanded telehealth waivers, have repeatedly changed over the past two years and continue to evolve. Monitoring such changes will not only help prevent enforcement actions, but a company’s reasonable and good faith efforts to interpret and follow such rules and regulations can be a powerful defense should an investigation arise, as discussed in connection with the Allergan case, above. Further to that point, where regulatory requirements and associated guidance is ambiguous, a good documentary record of the basis for your entity’s interpretation of the rules is critical.
  • Incorporate data analytics into your compliance program. DOJ and HHS-OIG continue to rely heavily on sophisticated data analytics, including artificial intelligence, to identify and prosecute fraud. In March 2022, AG Garland emphasized DOJ’s use of “big data” to identify payment anomalies that are indicative of fraud. Healthcare companies already have access to vast amounts of data that they can and should use to proactively identify errors, monitor risk areas and address any potential misconduct.
  • Adapt your compliance program and internal controls, as appropriate, to support PRF compliance, reports and audits. Recipients should continue to practice good compliance hygiene and maintain contemporaneous records regarding the receipt and spending of federal funds. Doing so may involve implementing additional systems to track spending, recovery and relief to avoid overlapping use of funds among relief programs, or consulting with grant accounting and compliance advisors to augment existing infrastructure. Recipients also should periodically review policies, procedures and controls, particularly following major updates to program requirements and interpretations.
  • Ensure the accuracy of required PRF reports, certifications and submissions. Particularly in light of ongoing political pressure, HRSA and HHS-OIG likely will conduct extensive oversight of the PRF to identify potential errors, overpayments and improper use of funds. Recipients should carefully review guidance and instructions to avoid inadvertent errors and misstatements on all submissions. Recipients may consider revisiting prior submissions underlying significant disbursements to identify interpretative issues or compliance concerns that warrant additional supporting documentation or disclosure.
  • Carefully consider the implications before entering into arrangements with other parties. The biggest risk to healthcare companies often comes from those with whom they do business. Compliance programs should focus heavily on reducing the risk of entanglement with bad actors.
  • Be diligent in the design and oversight of marketing strategies. Healthcare companies and providers should regularly review their marketing strategies to ensure total transparency and compliance (both historic and prospective) with applicable state and federal anti-kickback statutes. Companies should confirm that patients are reached through appropriate channels. Although issues relating to COVID-19 may be the impetus for a government investigation, violations of the Anti-Kickback Statute frequently result in larger recoveries for the government.
  • Proactively examine coding and billing practices. Providers should immediately review and revisit their coding and billing practices to determine if their practices involved bundling COVID-19 testing with other claims, the use emergency override billing codes or billing for other COVID-19 related services with high reimbursement rates. There is a strong likelihood that the DOJ will review the claims data for any providers with statistically significant use of these billing and coding practices, particularly when the providers are located in geographical areas where the DOJ’s Healthcare Fraud Strike Force and HHS-OIG’s Medicare Fraud Strike Force operate.

Article By Julian L. André, Benton Curtis, and Dawn R. Helak of McDermott Will & Emery

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

© 2022 McDermott Will & Emery

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