Category: Health Law Highlights

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Health Law Highlights

USPTO Issues Training Materials to Examiners for Searching FDA and NIH Resources

From Knobbe Martens, by Joseph Mallon, Ashley Morales:

On March 20, 2024, the USPTO issued an alert about new training materials for patent examiners, developed to enhance searches for prior art in FDA and NIH databases. The training was first presented at the Biotechnology, Chemical, and Pharmaceutical Partnership Meeting on March 19, 2024.

The materials guide patent examiners on using various FDA and NIH resources to search for drug information. These resources include FDALabel, Drugs@FDA, and DailyMed. Examiners were also given guidance on how to use Google for searching FDA.gov.

These materials were developed as part of the ongoing collaboration between the USPTO and the FDA, initiated by Executive Order 14036, which seeks to promote competition in the American economy. The goal is to balance the patent system to incentivize investments for life-saving drugs and biologics, while preventing its misuse to delay the introduction of affordable generic drugs and biosimilars.

The impact of these training materials on patent examination for brand-name drugs and biologics is yet to be seen. Further examiner training is expected under these ongoing collaboration initiatives.

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Health Law Highlights

Texas Physicians Push for More Regulation Over Med Spas

From KCENTV, by Baylee Bates:

Physicians are raising concerns over the lack of regulation and policy enforcement in the medical spa (med spa) industry, following the death of Fairfield resident Jenifer Cleveland after an IV treatment at a med spa. Dr. Patricia Aronin, affiliated with the TX400, a group of Texas physicians, has called for changes in the industry, which she describes as largely unsupervised and prone to malpractice.

Med spas, offering services ranging from IV therapy to skincare and cosmetic procedures, have grown in popularity but lack sufficient oversight. According to Dr. Aronin, many people do not realize that these services are medical treatments requiring adequate supervision and record-keeping. She asserts that the current state of affairs has been deteriorating over the past decade and has called for changes before more incidents occur.

The issue is compounded by the structure of the medical industry and Texas law, which has created opportunities for illegal practices within med spas. Dr. Aronin highlights that the Texas Medical Board requires good faith examinations and proper medical record-keeping, both of which she suspects are lacking in many med spas.

In response to Cleveland’s death, the Texas Medical Board temporarily suspended the license of Dr. Michael Patrick Gallagher, who served as the medical director at the med spa where Cleveland received her treatment. Dr. Aronin emphasizes that the role of the medical director in med spas is a critical area requiring reform, including clearer guidelines on hiring practices and the responsibilities of the position.

Dr. Aronin also calls for patients to be more proactive in advocating for their health, urging them to inquire about qualifications, practices, and equipment at med spas. She stresses the need for the public to recognize that med spa treatments are serious medical procedures, not casual beauty treatments. As of 2022, 63% of med spas were owned by non-physicians and non-surgeons, according to the American Med Spa Association.

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Health Law Highlights

Behavioral Health Industry Reshaping As a Result of AI

From The National Law Review, Jean Marie R. Pechette, Neal D. Shah, Joelle M. Wilson, Catherine Kozlowski, Matthew T. Lin:

Artificial Intelligence (AI) is significantly influencing the field of behavioral health, offering potential advancements in diagnostics, treatment, and patient outcomes. The application of AI technologies ranges from virtual mental health assistants and predictive analytics to AI-enabled chatbots for therapy and AI-integrated Electronic Health Records (EHR) for diagnosis and treatment. These technologies are expected to expand further as trust in AI systems grows.

Despite the transformative potential of AI in behavioral health, the legal and regulatory implications are uncertain. The US lacks a comprehensive federal law that regulates AI development and use. However, efforts are underway to address potential risks, including promoting transparency, ensuring fairness, and protecting privacy and security of health information.

Key legal risks associated with the use of AI in behavioral health treatment include data privacy, algorithm bias, and professional liability. Data privacy risks involve ensuring compliance with HIPAA, 42 CFR Part 2, and state privacy laws.

Providers can mitigate these risks to some extent by obtaining informed consent from patients before using AI tools, vetting third-party vendors offering AI solutions for adherence to data privacy and security rules, seeking transparency from developers and vendors about the data on which AI tools were trained, and reviewing the scope of professional liability coverage before adopting AI-enabled tools.

While AI holds significant promise for transforming behavioral health care, it’s crucial to anticipate and address the evolving regulatory frameworks and legal risks associated with AI applications. AI regulation is a moving target, and anticipating and mitigating legal risks will be key to fostering a trustworthy and secure environment for both practitioners and patients.

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Health Law Highlights

Health Care Groups Resist Cybersecurity Rules in Wake of Landmark Breach

From CyberScoop, by AJ Vicens and Elias Groll:

A devestating cyberattack on payment processor Change Healthcare has spurred discussions in Washington about urgent cybersecurity regulations for the healthcare sector. Health and Human Services (HHS) is working on developing mandatory rules, including updating the Health Insurance Portability and Accountability Act with cybersecurity requirements.

These updates are meeting resistance from the healthcare industry, which argues that hospitals should not be punished for the success of hackers. President Biden’s budget proposal includes funding for hospitals’ cybersecurity efforts and penalties for non-compliance. Despite this, the complexity of implementing such standards, especially for smaller health entities, and the current political climate suggest no significant changes will occur soon.

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Health Law Highlights

Inside the Healthcare Industry: The Growing Importance of Intellectual Property Valuations

From J.S. Held, by Magi Curtis, Noor Al-Banna, Greg Campanella:

Healthcare and life sciences companies are increasingly recognizing the importance of Intellectual Property (IP) in their strategic growth initiatives, investments, and licensing of data. A study by Ocean Tomo found that approximately 90% of the value of companies in the S&P 500 comes from intangible assets, such as brands, technology, patents, data, and software. This has led to two major trends in the healthcare industry.

Healthcare organizations are also becoming more thoughtful in managing their IP. They are using IP analysis not just for accessing capital, but also to provide a baseline for management to understand the incremental value generated by different strategic approaches. The rise of AI platform development technology in healthcare, life sciences, and medical device industries is another trend that is accelerating. However, healthcare organizations need to be cautious about regulatory issues around AI use and the data it’s trained on.

Data is a significant IP asset that healthcare organizations can leverage. Anonymized information and technical data related to processes, procedures, and methodologies can be licensed or sold to healthcare technology, life science, and medical device companies. This data can also be used to train AI platforms, adding further value. However, healthcare organizations need to be aware of the potential costs and dangers related to the use of this data.

Healthcare organizations need to recognize the value of their brands and negotiate license fees for their use in joint ventures and partnerships. This can be achieved by establishing a rate card, a price list for the use of an organization’s name for a specific type of service. The earnings from these license fees can be reinvested into the system, research, and more.

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Health Law Highlights

Healthcare Hit Hardest by Ransomware Last Year, FBI IC3 Report Shows

From Health IT Security, by Jill McKeon:

The Federal Bureau of Investigation’s 2023 Internet Crime Report reveals that the healthcare sector experienced the highest number of ransomware attacks among all critical infrastructure sectors last year.

The FBI’s Internet Crime Complaint Center (IC3) recorded an unprecedented 880,418 complaints, marking a 10% increase from the previous year and financial losses exceeding $12.5 billion, a 22% increase. Of the total complaints, 1,193 were from critical infrastructure organizations, with 249 from healthcare and 218 from critical manufacturing.

The report suggests that the high figures from the healthcare sector could be due to its readiness to report such incidents. The FBI has historically struggled to determine the actual number of ransomware victims, as many cases go unreported. The two most prevalent ransomware variants, LockBit and ALPHV/BlackCat, known for targeting healthcare, were responsible for 175 and 100 attacks respectively.

Ransomware was a significant concern across IC3’s complaint database, with over 2,800 complaints related to ransomware, an 18% increase from 2022. Financial losses from these attacks rose by 74% from $34.3 million to $59.6 million. The FBI noted emerging trends, including deploying multiple ransomware variants against the same victim and using data-destruction tactics to increase pressure on victims to negotiate.

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Health Law Highlights

Six AI Applications to Transform Your Clinical Operations

From D Magazine, by Dr. Harvey Castro:

Artificial Intelligence (AI) and Machine Learning (ML) are set to revolutionize the healthcare industry by enhancing clinical outcomes, improving access to care, and elevating the patient experience. The integration of sophisticated AI applications is expected to increase healthcare efficiency, accuracy, and personalization globally. AI can automate routine tasks, allowing human expertise to focus on direct patient care. The potential benefits include earlier disease detection, reduced error rates, optimized resource allocation, and cost-effective solutions.

Challenges exist around transparency, data access, and over-reliance on technology. However, steady progress in AI validation is laying the foundation for new standards of evidence-based medicine. The future of healthcare will likely be defined by the fusion of clinical wisdom and machine insights, paving the way for innovative solutions to improve lives.

AI has the potential to transform clinical operations in several ways:

  • Rewriting Medical Language: Large language models can tailor medical vocabulary to fit the patient’s understanding. For example, they can convert discharge instructions into a coloring book for a young patient or translate complex medical and legal language related to lawsuits.
  • Virtual Nursing Assistants: AI-powered virtual assistants can optimize nursing workflows by performing basic triage, reviewing patient records, answering common questions, and scheduling appointments. This allows healthcare professionals to focus on more complex care needs. 
  • Medical Imaging Analysis: AI has shown proficiency in analyzing complex medical images and detecting anomalies, rare diseases, and cancers. This technology can free up radiologists’ time for more challenging cases while providing faster second opinions.
  • Virtual Clinical Assistants: AI assistants can augment clinicians during patient visits by providing real-time diagnostic and treatment suggestions. They can also summarize records and prompt providers to address preventative care gaps.
  • Predictive Analytics and Outreach: Machine learning can analyze vast amounts of data to identify individuals at high risk for emergent or costly conditions early on, enabling proactive healthcare delivery. This can improve patient outcomes and reduce healthcare costs.
  • Personalized Treatment Matching: AI can leverage real-world outcomes data to recommend treatments and care pathways most likely to benefit each unique individual. This personalized approach can enhance treatment effectiveness for complex conditions.
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Health Law Highlights

5th Circ. Backs NLRB On Nurse Fired Over COVID Complaints

From Law360, by Tim Ryan:

The Fifth Circuit court upheld a 2022 National Labor Relations Board (NLRB) ruling that Texas-based Renew Home Health LLC unlawfully dismissed a nurse who raised concerns about the company’s handling of the COVID-19 pandemic.

The three-judge panel unanimously rejected Renew’s argument that Bornschlegl was a supervisor and therefore not protected under the National Labor Relations Act (NLRA).

The nurse was fired in April 2020 after she and her coworkers wrote a letter expressing concerns about shortages of personal protective equipment and inadequate hazard pay during the early stages of the pandemic.

Renew Home Health argued that the nurse was not protected under the NLRA as she was a supervisor. However, the panel disagreed, stating that the board had enough evidence to conclude that Renew fired the nurse due to her protected activity. The company had claimed that she was fired because she signed a coworker’s name to the letter without permission, but the panel found that her protected activity was a motivating factor in her termination.

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Health Law Highlights

The Knowledge Requirement in a Case Alleging False Claims Act Violations

From PharmacyToday, by David B. Brushwood, BSPharm, JD:

This matter involved a pharmacy corporation accused of violating the FCA due to falsification of prior authorization (PA) forms by a Clinical Pharmacy Manager (CPM). The CPM allegedly completed these forms with false information, leading to coverage of Medicaid patients who did not meet criteria for payment. This resulted in a substantial increase in the pharmacy’s revenue from just over $1.5 million to over $5 million in 15 months.

The pharmacy corporation moved to dismiss its case, arguing that it was unaware of the CPM’s illegal actions.

The court denied the motion, noting that the FCA holds liable any person who knowingly presents or causes to be presented a false or fraudulent claim for payment. “Knowingly” is defined as having “actual knowledge”, “deliberate ignorance”, or “reckless disregard of the truth or falsity.”

The court reasoned that the corporation was aware of the significant increase in revenue, which was discussed between the CPM and her supervisor. Furthermore, the corporation’s bonus program, which incentivized higher sales, could have potentially encouraged the increase in revenue by any means necessary.

The takeaway is that pharmacy supervisors should be vigilant about any unexpected increase in pharmacy revenues and should confirm a legitimate explanation to prevent liability for knowingly allowing fraudulent activity. Any unlawful request must be reported to a supervisor, and rules must be adhered to for the benefit of the patients.

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Health Law Highlights

The FTC Hosts Workshop on Private Equity in Health Care

From Sheppard Mullin Richter & Hampton LLP, by John Carroll, Joy Siu, Jake Walker:

On March 5, 2024, the Federal Trade Commission (FTC) hosted a workshop titled “Private Capital, Public Impact: An FTC Workshop on Private Equity in Health Care”. The event aimed to explore the effects of private equity (PE) investment on the health care system. The workshop brought together representatives from the FTC, Department of Justice (DOJ), Department of Health and Human Services (HHS), academia, and health care professionals. Concurrently, these agencies initiated a “Cross-Government Inquiry on Impact of Corporate Greed in Health Care”, issuing a Request for Information (RFI) to seek public opinions on health care deals involving PE firms.

The workshop revealed a general skepticism from the agencies towards the escalating involvement of PE in the health care industry. They expressed concerns about potential negative impacts, such as increased consolidation and poorer patient outcomes. FTC Chair Lina Khan and Assistant Attorney General of the Antitrust Division of the DOJ, Jonathan Kanter, were among those who voiced worries about the potential for profit motives to override medical judgment and the detrimental effects of PE ownership on patient care.

The workshop also highlighted that antitrust enforcement is looking to address certain practices employed by PE firms in the health care sector. These include serial acquisitions of provider practices, short-term acquisitions with high debt aimed at quick profit and resale, investments in competing companies within the same industry, and PE representation on the boards of competing companies. Testimonies from health care professionals further supported these concerns, citing instances of reduced staffing and lower quality of care following PE acquisitions.

During a discussion, FTC Commissioner Rebecca Slaughter and Rhode Island Attorney General Peter Neronha addressed how Rhode Island’s Hospital Conversions Act allowed the state to impose conditions on a private equity transaction. They advocated for similar legislation and encouraged state attorneys general to use state antitrust and consumer protection laws to combat PE consolidation in the health care system.

The workshop and RFI emphasize an increasing federal and state oversight of PE transactions, particularly in the health care sector. Several states have proposed new legislation to provide state attorneys general with more power to investigate and potentially block investments by PE firms in the health care industry. The goal of the RFI, as stated by Jonathan Kanter, is to understand the modern market realities of the health care industry and enforce the law against unlawful deals. PE firms, sellers, and portfolio companies should be aware of these potential obstacles when considering health care transactions.