On June 17, 2024, the Department of Health and Human Services Office of Inspector General (OIG) issued an advisory opinion, approving a plan to provide assistance with travel, lodging, meals, and other associated expenses for qualifying patients receiving a gene therapy product.

OIG determined that it would exercise its enforcement discretion by declining to impose administrative sanctions on gene therapy product manufacturer under the Federal Anti-kickback Statute (AKS), despite finding that the arrangement would generate prohibited remuneration if the requisite intent were present. Additionally, OIG found that the arrangement satisfies the “Promote Access to Care” Exception to the Beneficiary Inducements Civil Monetary Penalties law.

Continue Reading OIG Approves Travel and Lodging Assistance for Patients Receiving Gene Therapy

As Reed Smith has previously covered, an issue before the Supreme Court that could be decided this week could bring a seismic shift in the balance of power between agencies and courts, upend regulatory certainty, and open new opportunities for regulated industries, including health care. 

The Supreme Court’s pending decision in a pair of cases governing Commerce Department regulations warrants attention because it may bring new uncertainty to the operating environment, and could change how all regulated industries interact with agencies, lawmakers and courts, as outlined below:

  1. Currently, Chevron deference, a core principle of administrative law for forty years, has told courts that where a statute is ambiguous, the court should defer to the agency on any reasonable reading of that statute, even if the court disagrees with the reading.  
  1. The Supreme Court will soon issue an opinion in two cases—Relentless v. Dep’t of Commerce, and Loper Bright Enters. v. Raimondo—in which the petitioners have asked the Court to overrule Chevron deference. 
  1. The Supreme Court seems to be seriously considering whether to overturn or modify Chevron deference, although there were vigorous questions about the effects of doing so during oral arguments.   A decision is expected in the coming weeks.
  1. If judges, not agencies, will have the final say in what ambiguous statutes mean, that will carry potential implications and opportunities for health care and other highly-regulated industries, which include:

Potential Implications

  • May chill agencies from more expansive coverage and other interpretations.
  • May lead to challenges of longstanding agency decision-making upon which the industry may be relying (e.g., FDA approvals).
  • May allow state regulations to fill the gaps, which would create more of a patchwork approach for purposes of compliance across states.
  • Will favor the use of clear and specific statutory language, to the extent achievable through the efforts of Congress and collaboration across parties.

Potential Opportunities

  • More opportunities to challenge rules and regulations from agencies that burden regulated industries.
  • More benefit from working with lawmakers on clear and specific language in legislative drafting.
  • More opportunities to support for approaches that benefit regulated industries, whether by submitting comments to proposed rules or through amicus briefs in litigation, which help persuade a court in any post-Chevron landscape. 

We are closely watching this and after the Supreme Court’s decision, plan to offer a webinar on the implications for the healthcare industry.

Hospitals and large healthcare organizations have increasingly become prime targets for cybercriminals. In response, the Department of Health and Human Services (HHS) has established a new initiative within the National Institutes of Health (NIH) aimed at enhancing cybersecurity measures for hospitals.

This initiative, called “Universal Patching and Remediation for Autonomous Defense” (UPGRADE), was launched on May 20. UPGRADE’s mission is to develop a tailored and scalable suite of software tools that will enable hospital IT teams to effectively combat ransomware attacks and reduce the time needed to patch vulnerable healthcare products from months to just days or weeks.

Continue Reading HHS Pledges $50 million to Empower Hospitals in the Battle Against Cyberattacks

Colorado recently passed a law creating consumer protections for interactions with artificial intelligence systems. The law specifically identifies high-risk systems, including in those that impact health care. The law requires risk mitigation, documentation and robust governance.

Monique N. Bhargava has written an in-depth article on the law and what it means for AI regulation in the U.S. As AI systems pervade more of society, their regulation will continue to be an issue that states and eventually the federal government will have to tackle.

Reed Smith will continue to follow developments in the regulation of AI, if you have any questions about this Colorado law or other efforts to regulate AI systems, please reach out to Monique or to the lawyers of Reed Smith.

On May 14, 2024, FDA hosted a webinar to provide an overview of its final rule “Medical Devices; Laboratory Developed Tests” as well as FDA’s phaseout of its general enforcement discretion approach to laboratory developed tests (LDTs).   

The October 2023 proposed rule sought to phase out enforcement discretion for LDTs more broadly. However, FDA seems to have considered some of the concerns commenters raised about access to LDTs and the cost of compliance. The final rule retains varying degrees of enforcement discretion for specific types of LDTs.

Continue Reading FDA LDT Rule Begins Enforcement Discretion Phaseout, But Some Discretion Remains

The Centers for Medicare & Medicaid Services (CMS) has finally published the minimum staffing rule for Long Term Care facilities in the Federal Register, which starts the clock for compliance with some provisions of the rule.

But what does the rule actually do? And what do facilities have to do in order to come into compliance? We wrote a client alert that details most of the more difficult portions of the rule and some advice on how to comply with it. Included is a chart that provides guidance on the exemptions and waivers that are available.

Reed Smith will continue to track developments with regard to the regulation of long term care facilities. If you have any questions about compliance with this rule or about regulation of long term care facilities, please reach out to the authors or the health care lawyers at Reed Smith.

On April 8, 2024, the Department of Health and Human Services Office of Inspector General (OIG) issued Advisory Opinion No. 24-02, involving independent charity patient assistance programs (PAPs) associated with 12 specific diseases (the Disease Funds) operated by the Requestor. Each Disease Fund has a single donor–a pharmaceutical manufacturer that manufactures or markets a drug to treat the disease state associated with the fund.

Although the arrangement generates remuneration prohibited under the federal Anti-Kickback Statute (AKS) if the requisite intent were present, the OIG determined it would not impose sanctions on the Requestor. In exercising its enforcement discretion, the OIG acknowledged the public policy benefits of independent charity PAPs while highlighting the importance of a charity’s independence from pharmaceutical manufacturer influence. Additionally, the arrangement does not implicate the federal Beneficiary Inducements Civil Monetary Penalties (CMP) law.

The OIG set an effective period for the opinion that expires January 1, 2027 due to upcoming reductions in Medicare Part D cost sharing associated with the Inflation Reduction Act. The reduction in beneficiary out-of-pocket expenses could ease demand for PAP subsidies and alter the OIG’s assessment of the benefits and risks of the arrangement.

Continue Reading OIG Exercises Discretion in Independent Charity Patient Assistance Program

Elliott is a law clerk at the firm and his work is supervised by licensed attorneys. His admission to the New York bar is pending.

During a hearing before the Oversight Committee of the U.S. House of Representatives on April 11, Dr. Robert Califf, the commissioner of the U.S. Food and Drug Administration (FDA), requested congressional action to create a new pathway to regulate hemp-derived Cannabidiol (CBD) products, which the agency does not consider safe enough to be sold lawfully as a dietary supplement.

In a January 2023 statement by the prior Commissioner, Janet Woodcock the FDA declined to develop rules to allow CBD to be sold in dietary supplements or food, citing its belief that CBD does not fall under a particular regulatory scheme currently available to the agency.

Continue Reading The FDA’s Continued Search for a Legal Pathway for CBD Products

In a final rule published on April 26, the U.S. Department of Health and Human Services (“HHS”) amends the HIPAA Privacy Rule to bolster protections for individuals’ reproductive health information. This final rule comes almost exactly a year after HHS published its draft rule on the subject.

The rule is part of the Biden administration’s effort to address the Supreme Court’s 2022 decision in Dobbs v. Jackson Women’s Health Organization. Dobbs’ reversal of Roe v. Wade resulted in a patchwork of state laws governing abortion, some of which require or permit health care providers to release personal information about reproductive health care to state authorities for patients who sought an abortion.

The rule is scheduled to take effect on June 25, 2024 and most provisions will be enforceable as of December 23, 2024. Below, we summarize in more detail some of the notable changes to the HIPAA Privacy Rule. 

Continue Reading HHS Modifies HIPAA Privacy Rule to Shield Reproductive Health Information from Third Party Access

Making good on its promises to enhance oversight of Medicare Advantage (MA) and Medicare Part D plans, the Centers for Medicare and Medicaid Services (CMS) has submitted for public inspection its Contract Year 2025 Final Rule. The final rule, published in the Federal Register on April 23 and taking effect on June 3, 2024, codifies existing MA and Part D sub-regulatory guidance, adds a number of new policies for Contract Year 2025 and implements provisions of the Bipartisan Budget Act of 2018 (BBA) and the Consolidated Appropriations Act, 2023 (CAA 2023).

The rule contains many substantive changes to current MA and Part D requirements. The most impactful sections of the rule include: (1) changes to the Part D formulary, including substitutions of biosimilar biological products; (2) modification of agent and broker compensation requirements for MA plans; (3) codification of consent requirements within the MA regulations for the sharing of personal beneficiary data between third party marketing organizations (TPMOs); (4) standardization of the MA Risk Adjustment Data Validation Appeals Process; (5) changes to the Part D medication therapy management program eligibility criteria; (6) changes to contracting standards and limitations on dual-eligible special needs plans; and (7) changes to the network adequacy standards within MA to add a new facility-specialty type called “Outpatient Behavioral Health”.

Also notable is what CMS does not address in the rule – CMS declined to establish what qualifies as an identification of an overpayment that needs to be returned to avoid False Claims Act violations. That potential standard has been in the works since the Contract Year 2023 rule, but stakeholders have to keep waiting as CMS notes that it may be the subject of a future rulemaking.

Continue Reading Are you listening, Medicare Advantage and Medicare Part D Plans? It’s CMS (Again)

Last week, on April 18, several federal agencies jointly launched a “one-stop shop” to facilitate reporting of allegedly anticompetitive behavior in the health care sector. While there has always been a complaint portal for the antitrust agencies, the Federal Trade Commission (FTC), the U.S. Department of Health and Human Services (HHS), and the Antitrust Division of the U.S. Department of Justice (DOJ) established the site, HealthyCompetition.gov, to allow the public to submit complaints about potentially unfair and anticompetitive health care practices.

There is no timeframe within which reports may be submitted, as the agencies look to solicit assistance from the public in their oversight of potential antitrust violations. There is also no limitation on who can submit such reports—employees, customers, vendors, competitors, etc.

Reports will undergo a preliminary review by staff at the FTC and DOJ. Complaints that raise sufficient concern under the antitrust laws will be selected for further investigation, which may lead to formal investigation or enforcement activity by one or more of the agencies.

The portal is intended to be used only for the submission of complaints about health care competition, and not complaints about other health care issues such as failure to pay claims or cover health care services, increases in individual insurers’ rates, billing disputes, general unhappiness with the health care system, or other non-health care competition issues.

The new portal is the latest salvo in the agencies’ intensifying scrutiny of consolidation in the health care industry as part of the Biden Administration’s focus on lowering health care costs across the board, and comes on the heels of the online workshop hosted by the agencies just last month to discuss the impact of private equity ownership in the health care sector.

We covered the details of that forum, during which the agencies denounced the purported “financialization” of health care markets, in a previous blog post and client alert. In conjunction with the workshop, the agencies also issued a request for information (RFI) seeking public comment on transactions in the health care sector involving private equity firms or similar entities. Responses to the RFI are due by May 6, 2024.

Reed Smith will continue to follow developments in FTC, HHS, and DOJ’s ongoing efforts to regulate competition in the health care sector. If you have any questions about this portal or about competition enforcement in health care or would like to submit a response to the RFI, please reach out to the authors of this post.

On March 9, 2024, in response to the cyberattack on UnitedHealth Group’s subsidiary, Change Healthcare/Optum, in late February 2024, the Centers for Medicare & Medicaid Services (“CMS”) made available Change Healthcare/Optum Payment Disruption (“CHOPD”) accelerated payments to Medicare Part A providers and advance payments to Medicare Part B suppliers experiencing claims disruptions as a result of the cyberattack.

CMS, through the Medicare Administrative Contractors (“MACs”), may grant CHOPD accelerated and advance payments in amounts representative of up to thirty days’ worth of Part A or Part B claims to eligible Medicare providers and suppliers, which is calculated by taking the total claims paid to the provider/supplier between August 1, 2023 through October 31, 2023 and dividing that number by three.

In this post, we will detail eligibility requirements and terms of the payments. We note that these are not loans or grants. They are advanced and accelerated payments and CMS will immediately begin to recoup the payments. For more details, CMS has issued a Fact Sheet and Frequently Asked Questions.

Continue Reading CMS Offers Change Healthcare/Optum Payment Disruption Payments to Medicare Providers and Suppliers

The United States Food and Drug Administration (FDA) has proposed a rule on “Drug Products or Categories of Drug Products that Present Demonstrable Difficulties for Compounding Under sections 503A or 503B of the Federal Food, Drug, and Cosmetic Act”. We have put together this alert to summarize the provisions of the rule and what you need about how, if finalized, the rule could impact the drug industry.

With the rule, the FDA seeks to establish criteria for the list of drug products or categories of drug products that present demonstrable difficulties for compounding under certain sections of the federal Food, Drug, and Cosmetic Act. Additionally, the Agency is proposing to identify the first three categories of drug products on both DDC Lists. Drug products or categories of drug products that appear on the DDC Lists cannot qualify for certain statutory exemptions and therefore may not be compounded under either section 503A or section 503B, respectively.

Reed Smith will continue to follow developments on this and other issues facing compounding pharmacies and FDA regulation. If you have any questions, please reach out to the authors or to the health care lawyers at Reed Smith.

The U.S. Supreme Court heard arguments yesterday in the two consolidated cases challenging the U.S. Food and Drug Administration (FDA) approval of mifepristone. Throughout the questioning, the Justices focused on both the standing of the plaintiffs to bring the cases and on the suitability of the remedy sought.

The Court is expected to rule on the case in late June or early July. Although the Court has a 6-3 majority of justices appointed by Republican presidents, the questioning by the justices and the areas that they focused on seemed to indicate that any judicially-imposed limitations on both the FDA’s approval of the drug and the FDA’s current restrictions on the dispensing of mifepristone may be narrow.

At different times during the argument, both liberal and conservative Justices mixed together in the thrust of their questions in a way that could result in this case being a close decision with many different opinions or even resulting in a majority decision that would allow continued dispensation of the drug due to standing considerations.

Continue Reading SCOTUS Arguments on Mifepristone Cases Focus on Standing and Remedy

In the two years since the Dobbs v. Jackson Women’s Health decision from the Supreme Court, state legislatures and courts have attempted to define the new post-Roe landscape in health care. That effort includes actions by states to enact health data privacy laws or to amend existing privacy laws to protect consumer health data that may not be covered by the Health Insurance Portability and Accountability Act of 1996 and its implementing regulations.

These new and revised laws, with various effective dates, present novel considerations and compliance challenges for businesses that collect, use, and disclose consumer health data. We put together this alert to walk through some of those considerations including what types of information and businesses are covered by the laws. Additionally, Reed Smith’s San Francisco office will be hosting a comprehensive hybrid-CLE event on April 10 on recent legislation from Washington state and California as well as what to expect going forward with regard to health data privacy.

Reed Smith will continue to follow developments in health care privacy laws. If you have any questions, please reach out to the authors or to the health care lawyers at Reed Smith.

Not a question that we thought we would be asking more than a year after the large omnibus package was signed into law by President Biden. But here we are, with a federal judge in Texas ruling on Feb. 27 that the House’s passage of the Consolidated Appropriations Act, 2023 (P.L. 117-328) (CAA, 2023) violated the “quorum clause” of Article I, Section 5 of the U.S. Constitution.

The court’s ruling puts in jeopardy a number of substantive health policy provisions if it is allowed to stand. Many of the provisions of the act that could be overturned were designed to sunset at the end of 2024 and some have since been reauthorized. But some, like the FDA’s new cosmetic regulatory regime that was included in the Modernization of Cosmetics Regulation Act of 2022 (MoCRA) are more permanent and are now under threat.

The court’s decision limited its impact to only one aspect of the law and enjoined that provision only as applied to public employees in Texas, but the court’s analysis of the way that the law was passed calls into question the entire appropriations act. The Department of Justice (DOJ) has 60 days from the court’s decision to appeal to the U.S. Court of Appeals for the Fifth Circuit. The agency has filed a notice of compliance with the court indicating that neither the DOJ or Equal Employment Opportunity Commission will enforce the law against the state or its agencies.

Continue Reading Was the Consolidated Appropriations Act, 2023 Legitimately Passed by the House?

The Federal Trade Commission (FTC), the Department of Justice’s Antitrust Division, and the U.S. Department of Health and Human Services jointly announced a cross-government inquiry into the impact of private equity investment and other forms of “corporate greed” in the health care sector. As part of the announcement of this effort, the agencies produced a public workshop, hosted by the FTC and entitled, “Private Capital, Public Impact: An FTC Workshop on Private Equity in Health Care.” Before the workshop, the agencies issued a request for information (RFI) seeking public comment on transactions in the health care sector involving private equity firms and other private corporate entities. Responses to the RFI are due by May 6, 2024.

Members of our Antitrust & Competition Team and the Life Sciences Health Industry Group have come together to provide an alert that will give you all that you need to know about this new effort by the enforcement agencies. Reed Smith will continue to follow developments on this inquiry. If you have any questions, please do not hesitate to reach out to any of the authors of the alert.

The Department of Justice (DOJ) reported that its False Claims Act (FCA) recoveries for civil cases raked in approximately $2.7 billion for fiscal year 2023, representing a $450 million jump from 2022 recoveries.  Of the $2.7 billion recovered by the DOJ for 2023, approximately $1.8 billion (67%) came from the health care sector.

The real headline, however, may be the record-setting number of new FCA cases initiated in 2023 ­–– 500 initiated by the government and 712 initiated by private relators, for a total 1,212 new cases, over 250 more than the next-highest year (2022). Previous trends aside, this signals busy times ahead for the FCA.

Continue Reading DOJ Announces $2.7 Billion in FCA Recoveries and Enforcement Priorities

The Department of Health and Human Services (HHS), Department of Labor, and Department of the Treasury (collectively, “the departments”) recently confirmed that they will hold firm to the March 14, 2024 extended deadlines for initiating both new and previously initiated batched disputes or single disputes involving air ambulance services in the No Surprises Act Independent Dispute Resolution (IDR) portal.

The extension came about when the departments reopened the portal for all dispute types on December 15, 2023 following four months where the departments suspended new initiations of disputes because of court rulings vacating the departments rules and guidance in part. New single and bundled disputes were reopened on October 6, 2023. However, because the departments had more work to do to conform guidance to the court rulings on both batched and air ambulance claims, they left those suspended until December.

The deadline applies to any party submitting a batched or single air ambulance dispute for whom the IDR initiation deadline fell on any date between August 3, 2023 and December 14, 2023. However, the departments clarified that, as of March 14, 2024, initiating parties who submitted a batched dispute before August 3, 2023, and received notification from a certified IDR entity that the dispute was improperly batched will have the standard 4-business-day period to resubmit, instead of the existing 10 business day time period that was previously mentioned in a guidance document.

IDR Process has seen multiple litigation stops

The No Surprises IDR portal went live in February 28, 2022 only five days after a federal court in Texas invalidated portions of the interim final rule that established the IDR process. That court decision, a subject of an earlier blog post, vacated provisions of the rule that centered around the presumption in favor of IDR using a statutorily defined amount known in the original rule as the qualifying payment amount (“QPA”).

In July 2022 a different court decision vacated a section of the rule governing the use of the QPA that directly applied to air ambulance disputes. The departments responded by instructing certified IDR entities not to apply the vacated standard in any dispute related to air ambulance services.

The departments then issued a new final rule in August 2022 that sought to rectify the problems with the QPA provisions. Six months later, in February 2023, the same federal district court that vacated the rule in the first instance again vacated provisions of the rule. (We blogged about that decision too). The departments halted all IDR efforts for determinations issued on or after Feb. 3, 2023. However, it allowed the IDR entities to process any disputes for items or services furnished before October 25, 2022 since those were not impacted by the new court order.

By March 17, 2023, the departments had completed what they believed to be all of the necessary updates to the IDR portal and process guidance documents to bring them into compliance with the court rules. As a result, they instructed IDR entities to once again begin processing all determinations for disputes on or after October 25, 2022.

But, in August 2023, the same federal district court again vacated provisions of the rule and the guidance documents in two opinions issued three weeks apart. The first, issued on August 3, 2023 vacated the batching provisions of the rule and the $350 per party administrative fee guidance. The second ruling, issued August 25, 2023, vacated provisions relating to how to calculate the QPA.

The departments allowed single and bundled disputes submitted on or before August 3, 2023 to continue to be process, but suspended all batched dispute submissions. By October 2023, the departments had reopened the portal for new single and bundled dispute submissions but kept batched and single air ambulance disputes suspended as they worked to align their guidance to the court’s directives.

By December 2023, the departments finally reopened the portal for batched and air ambulance submissions. However, given the significant backlog of batched and air ambulance disputes that parties were unable to submit during the litigation stops, the departments granted a extension for the submission deadlines to March 14, 2024.

Reed Smith will continue to follow developments on the No Surprises Act and the IDR process. If you have any questions. Don’t hesitate to reach out to the health care lawyers at Reed Smith.

The Substance Abuse and Mental Health Services Administration (SAMHSA) has issued a final rule governing the use of medications for the treatment of opioid use disorder (OUD). In the rule, the first major update in 20 years, the agency made permanent some of the telehealth flexibilities that were put into place to respond to the COVID-19 pandemic and made a number of other changes similarly aimed at improving patient access to and reducing stigma of OUD treatment.

Additionally, with this rule, SAMHSA updated accreditation and certification requirements for opioid treatment programs (OTPs) as required by the Consolidated Appropriations Act, 2023 (CAA). The rule, which was printed in the Federal Register on February 2, 2024, takes effect April 2, 2024, and has a compliance date of October 2, 2024.

Continue Reading SAMHSA Finalizes Major Update to Rules Governing Opioid Treatment Program Requirements