Enforcement 

Prompt Payment Discounts Not an Anti-Kickback Statute Violation

In United States of Am. et al. ex rel. Ruscher v. Omnicare, No. 15-20629, 2016 W: 6407128 (5th Cir. Oct. 28, 2016), the court of appeals affirmed summary judgment for Omnicare, the nation's largest provider of pharmacy services to long-term care facilities such as skilled nursing facilities (SNFs). Relator, who worked in Omnicare's collections department, filed a qui tam action on behalf of the United States and 22 states, alleging that Omnicare violated the False Claims Act (FCA) and state mini-FCAs by causing SNFs to make false claims for Medicare and Medicaid reimbursements that allegedly resulted in kickbacks in violation of the Anti-Kickback Statute (AKS). Relator had two primary kickback theories: 1) Omnicare did not collect Part A debt and 2) Omnicare offered prompt payment discounts (PPDs) to induce the SNFs to refer patients to Omnicare who were covered under Part D and Medicaid. The court ruled there was inadequate evidence of the first of these as opposed to non-confrontational efforts to collect verifiable debt and settle billing disputes. The court also ruled that PPDs are permissible. Relator also brought a reverse FCA claim by alleging that Omnicare violated an obligation to disclose a "reportable event" of Medicare fraud to the Office of the Inspector General for the U.S. Department of Health and Human Services (HHS) pursuant to a Corporate Integrity Agreement. The court disagreed that there was sufficient evidence that a reportable event occurred during the timeframe under review.

Qui Tam Action Alleging Fraud Dismissed for Lack of Particularity 

In Lawton ex rel. United States of Am. v. Takeda Pharm. Co., Ltd., No. 16-1382, 2016 WL 6872652 (1st Cir. Nov. 22, 2016), the court affirmed dismissal of the relator's qui tam action, alleging with insufficient particularity that pharmaceutical companies conspired in a fraudulent marketing campaign that allegedly caused third parties to submit false reimbursement claims to government entities for off-label uses of proprietary treatment for Type 2 diabetes in violation of the FCA and New York State False Claims Act. Relator was a former chemist and patent litigator at a competitor pharmaceutical company. The court observed that the evidence necessary to achieve the inference of fraud essential to satisfy Federal Rule of Civil Procedure 9(b) generally requires the relator to plead, inter alia, the "'specific medical providers who allegedly submitted false claims,' the 'rough time periods, locations, and amounts of the claims,' and 'the specific government programs to which the claims were made.'"

Public Disclosure Bar Applies When Relator Relied on Form 10-K

In United States of Am. ex rel. Silver v. Omnicare, No. 11-1326, 2016 WL 6997010 (D.N.J. Nov. 28, 2016), the court granted the defendant's motion to dismiss based on the public disclosure bar and declined to exercise supplemental jurisdiction over state mini-FCA claims. The FCA's public disclosure bar deprives courts of jurisdiction over qui tam suits when the relevant information has already entered the public domain. If X + Y = Z, where Z is fraud, the public disclosure bar applies if either Z, or both X (misrepresented facts) and Y (true facts) are publicly disclosed by way of a listed source. The relator examined U.S. Securities and Exchange Commission (SEC) Form 10-Ks available on the internet to infer that PharMerica is selling prescription drugs to nursing homes at "below cost per diems." He also made random phone calls to nursing homes that "confirmed" his suspicions that PharMerica is offering below cost per diem pricing, and he met with a consultant for nursing homes who, however, did not tell him that PharMerica was offering below cost per diem pricing. Even if the public disclosure bar would otherwise apply to a claim, it does not when the person bringing the action is an original source of the information. In this case, the court ruled that this exception does not apply.

Antitrust 

FTC's Geographic Market Definition Applicable to Hospital Merger Upheld

In Federal Trade Comm'n v. Advocate Health Care Network, 841 F. 3d 460 (7th Cir. 2016), the court of appeals reversed and remanded the district court's decision denying a motion for preliminary injunction meant to enjoin a proposed merger of hospitals on the grounds that the district court reached the wrong conclusions about the proposed geographic market. First, the district court erred in rejecting the Federal Trade Commission (FTC) expert's candidate market as too narrow due to circularity of reasoning. Pursuant to the hypothetical monopolist test, the expert proposed a candidate market, simulated a monopolization of that market, then adjusted the candidate market and re-ran the simulation. The court of appeals ruled this was not circular but properly iterative. Second, the court of appeals ruled that the district court erred in rejecting the FTC expert's proposed geographical market due to exclusion from the market of academic hospitals. Demand for academic hospitals differs from demand for general acute care centers, which draw patients from smaller geographic areas. Third, the district court erred in rejecting the FTC expert's proposed geographical market due to the expert's determination that patients generally choose nearby hospitals. Last, the district court erred in assuming that measures of patient substitution such as diversion ratios, which examine where a patient would go for care if his or her first choice was unavailable, translated into options for insurers' networks.

Syringe Supplier's Alleged False Advertising Was Not Anticompetitive 

In Retractable Tech., Inc. v. Becton Dickinson & Co., No. 14-41384, 2016 WL 7046601 (5th Cir. Dec. 2, 2016), the court of appeals ruled that a competitor's false advertising that its syringes were the "world's sharpest" and had "low waste space" was not actionable anticompetitive conduct. According to the court, "absent a demonstration that a competitor's false advertisements had the potential to eliminate, or did in fact eliminate, competition, an antitrust lawsuit will not lie." Additionally, the court ruled that patent infringement is not an injury cognizable under the Sherman Act and that the competitor did not engage in predatory or anticompetitive conduct by allegedly tainting the market for retractable syringes. Calling the tainting theory "entirely illogical as a vehicle to prove exclusionary conduct," the court asked, "If BD set out to exclude RTI from the market by tainting its own product, who would be the loser?"

Credentialing and Peer Review

Judicially Created "Crime-Fraud Exception" to Peer Review Privilege Reversed 

In Novotny v. Sacred Heart Health Servs., Nos. 27615, 27626, 27631, 2016 WL 6393782 (S.D. Oct. 26, 2016), in connection with their lawsuit against the defendants for negligence, negligent credentialing, fraud, deceit, bad faith peer review, unjust enrichment, racketeering and conspiracy, plaintiffs moved to compel production of independent-source materials directly from a peer review committee and asked the circuit court to find unconstitutional South Dakota Codified Law (SDCL) §36-4-26.1, which grants a privilege to peer review materials. The circuit court ruled that the statute is constitutional, but only if a "crime-fraud exception" exists, which it created and determined was met in this case, and ordered the defendants to produce the information sought under protective order without an "in camera" review. The court of appeals reversed and ruled that the litigants are not entitled to discover any of the materials within the peer review committee's possession but may obtain such information from independent sources. Plaintiffs invited the court of appeals to weigh the public policy of peer review confidentiality against their need for evidence and of revealing instances of bad faith peer review, but the court of appeals observed that neither the circuit court nor plaintiffs had identified a protected liberty or property interest at stake that the state deprived. For example, plaintiffs failed to show that they have no other access to information necessary for the causes of action that they are claiming, and they failed to provide authority for the proposition that their right to open courts, under S.D. Const. art. VI, §20 is violated when a litigant is denied access to the best and most relevant information to establish their claim. The court of appeals concluded, "[C]arving out an exception in this case is a task better left for the Legislature, which by statute created the peer review privilege."

Neurosurgeon Subject to Peer Review Process is a Protected Whistleblower 

In Armin v. Riverside Cmty. Hosp., No. G052125, 2016 WL 6805466 (Ca. App. Div. 3 Nov. 16, 2016), the court of appeal ruled that a neurosurgeon need not complete an internal peer review process prior to filing a hospital whistleblower retaliation claim, notwithstanding what the hospital characterized as the sheer absurdity of a doctor who is himself the object of peer review disciplinary proceedings being able to de facto retaliate against medical staff for having brought the action in the first instance. A hospital's medical staff has a statutory conditional opportunity to seek a court injunction to stop discovery propounded by the plaintiff under California Health and Safety Code §1278.5 upon a showing of interference with an ongoing peer review proceeding, but the proceeding itself is not precluded. Moreover, the court ruled that the Health Care Quality Improvement Act of 1986 (HCQIA) affords, at most, merely a presumptive and, hence, rebuttable immunity from Section 1278.5 proceedings requiring factual investigation. The court also determined that a physician may not name individual physicians involved in the peer review process who allegedly instigated the process in retaliation for the physician's whistleblowing in a Section 1278.5 complaint. Last, the court determined that, where the physician first voiced complaints of religious discrimination including anti-Semitic slurs prior to the initiation of the peer review proceedings, the complaint was not so intertwined with the peer review proceedings as to subject his discrimination claims to an anti-strategic lawsuit against public participation motion.

Regulation and Legislation

  • The Centers for Medicare & Medicaid Services (CMS) released on Dec. 12, 2016, the final 2018 Notice of Benefit and Payment Parameters outlining, inter alia, changes to the ACA risk adjustment program, stating user fees for federally facilitated exchange and state-based exchanges on the federal platform, standardized plan benefits and special enrollment periods.
  • Twenty-five HHS regulations are under reviewat the Office of Information and Regulatory Affairs (OIRA) as a precursor to publication in the Federal Register. Several additional HHS regulations were anticipated for release this year, but their fate is now uncertain. Examples of affected regulations include final 340B Drug Discount Program Mega-Guidance; Pass-Through Payments in Medicaid Managed Care Delivery Systems; Advancing Care Coordination Through Episode Payment Models; Medicare Part B Demonstration; 2018 Notice of Benefit and Payment Parameters; and Revisions to Safe Harbors Under the Anti-Kickback Statute, and Civil Monetary Penalty Rules Regarding Beneficiary Inducements and Gainsharing.
  • CMS issued a memorandum on Dec. 9, 2016, stating that it has suspended enforcement of its rule prohibiting long-term care facilities that participate in Medicare or Medicaid from entering into pre-dispute arbitration clauses as long as a court-ordered injunction remains in place entered in Am. Health Care Ass'n v. Burwell, No. 3:16-cv-00233, 2016 WL 6585295 (N.D. Miss. Nov. 7, 2016), citing 81 Fed. Reg. at 68,867 (to be codified at 42 C.F.R. §483.70(n)(1).