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THE FLORIDA BAR HEALTH LAW SECTION
DECEMBER 2013 HEALTH LAW MONTHLY UPDATES
The following are brief summaries prepared by section volunteers of new developments
in Florida and Federal health care law that may be of interest to members of the Health Law
Section. The summaries are presented for general information only as a courtesy to section
members and do not constitute legal advice from The Florida Bar or its Health Law Section.
LIFE SCIENCES
Generic Drug Labeling Change Proposed by FDA is Significant and Will Likely Negate
Preemption of State Failure-to-Warn Claims in Generic Drug Cases
Under current law, an individual can bring a product liability action for failure to warn against a
brand name drug company, i.e., the NDA (New Drug Application) holder, but generally not
against a generic manufacturer, the holder of an ANDA (Abbreviated New Drug Application).
Federal preemption stems from FDA regulations that do not permit the holder of an approved
ANDA to change labeling to add new safety information the generic company becomes aware of
until and unless the brand name company that holds the NDA for the reference listed drug (RLD)
modifies the labeling. This interpretation was affirmed by the U.S. Supreme Court in 2011 in
the Pliva, Inc. v. Mensing case. The Court, however, left the door open when it added “Congress
and the FDA retain the authority to change the law and regulations if they so desire.”
In November 2013, the US Food and Drug Administration (FDA) began the process to do just
that when it published a proposed rule that will require generic drug companies to update the
labeling of their drugs in light of new safety risks even though the RLD labeling for those
products has different information on warnings, precautions, contraindications, adverse reactions
and the like.
Under the proposed regulation, when the ANDA holder has “newly acquired information” that
presents “sufficient evidence of a causal association” between the unlabeled warning and the
approved generic drug, the generic manufacturer must submit a Changes Being Effected (CBE0) supplement to its ANDA and immediately change its label. Also, the ANDA holder will be
required to send the NDA holder both the labeling change and a copy of the information
supporting the change. Any changes ultimately approved by FDA would affect both the generic
label and the RLD holder’s labeling.
The FDA has noted that “if this proposed regulatory change is adopted, it may eliminate the
preemption of certain failure-to-warn claims with respect to generic drugs.”
Interested parties wishing to provide input on the proposed rule must submit comments by
January 13, 2014. The full text of the proposed rule is available at this link:
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https://www.federalregister.gov/articles/2013/11/13/2013-26799/supplemental-applicationsproposing-labeling-changes-for-approved-drugs-and-biological-products.
The Pliva v. Mensing, 131 S.Ct. 2567 (2011) decision is available at this link:
http://www.supremecourt.gov/opinions/10pdf/09-993.pdf.
Submitted by Alina Denis Jarjour
New Regulations for Compounding Pharmacies
In the wake of the 2012 meningitis outbreak which was tied to a contaminated compounded
medication, compounding pharmacies have garnered more regulatory attention nationwide.
Florida is no exception and in 2013, the Florida Department of Health promulgated new
regulations directed at just these types of pharmacies. 64B16-28.100(8), Florida Administrative
Code, proposed in January 2013 and effective September 23, 2013, creates a requirement for
compounding pharmacies to obtain a special sterile compounding permit by application to the
Florida Department of Health. The application/license fee is waived for existing pharmacies
which obtain the permit on or before March 21, 2014 (180 days after the effective date of the
Rule requiring the permit) and is $225 for new facilities. Compounding pharmacies must also
comply with the previously-existing dictates of 64B16-27.700 and 64B16-27.797, Florida
Administrative Code, which define “compounding” and create standards of practice for
compounding. Stand-alone Special Parenteral/Enteral and Special Parenteral/Enteral Extended
Scope pharmacies are exempted from this new permit requirement.
On December 20, 2013, the Department of Health noticed its proposal to open Rule 64B1627.700 (defining “compounding”) for development in light of the recently-enacted federal
Compounding Quality Act. This new law, signed by President Obama on November 27, 2013, is
directed at both large and small-volume compounding pharmacies. It clarifies existing oversight
and imposes higher standards of quality for compounders of all sizes. Furthermore, the law
creates the designation of “outsourcing facility” for larger-scale compounding pharmacies which
can allow for certain exemptions from new requirements. In addition to the foregoing, the law
creates future responsibilities for the federal Food and Drug Administration.
In addition to noticing the rule development proposal, the Department of Health has also
proposed a bill which would require certain disclosures from all non-resident pharmacies and
would allow Florida to either send or hire inspectors to out-of-state compounding pharmacy
facilities which send compounded drugs into Florida, with the pharmacy footing the bill. Florida
regulators previously had no authority to inspect these out-of-state pharmacies, even though they
send drugs into the state. In light of all the new developments in the regulation of compounding
pharmacies, it is particularly important for attorneys representing compounding pharmacies to
keep tabs on the state and federal legal and regulatory developments that are sure to arise in the
coming months and years.
Submitted by Melanie R. Leitman
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THIRD PARTY PAYOR
Westside EKG Associates v. Blue Cross and Blue Shield of Florida, Inc., Case No. 01-16184(07),
pending in the Seventeenth Judicial Circuit in and for Broward County, Florida. In an order
entered on September 26, 2013, the trial court interpreted certain provisions of the Florida
prompt pay statutes (Sections 641.3155, 627.6131, Florida Statutes). This trial court order has
not been appealed, but it is significant because there are very few cases interpreting these
statutory provisions.
The Florida prompt pay statutes govern the processing of certain clean claims submitted by
Florida providers to insurers and HMOs. If a claim is governed by the prompt pay statutes, the
applicable insurer or HMO is required to take one of three actions within a prescribed number of
days after receiving a claim submitted by a provider: (1) pay the claim, (2) notify the provider
that the claim is denied, or (3) notify the provider that the claim is contested and provide an
itemized list of additional information or documents required to process the claim. Id.
Plaintiff, a provider group, argued when an insurer or HMO paid less than the provider’s full
billed charges, the payment constituted a “contest” (the third option) and required Defendants to
provide a list of additional information or documents necessary to process the claim.
Defendants, an insurer and two HMOs, asserted that payment of less than the provider’s fullbilled claim constituted a “payment” (the first option) because it was a final adjudication of the
claim and no additional information or documentation was required to process the claim.
The Court was “persuaded by the Defendants interpretation that a payment of less than the billed
charge is still a ‘payment’ and is not a ‘contest’ of a submitted claim.” September 26, 2013
Order. Thus, Defendants were not required to provide an itemized list of additional information
or documents when paying a provider, even if the payment was less than the provider’s full
billed charges. The Court stated that “Plaintiff has remedies in the event of underpayment.
Seeking damages for alleged violations of the prompt pay statutes is not one of them.” Id.
Submitted by Kimberly J. Donovan
Qui Tam Relators: On the Outside, Looking In. United States ex rel. Myers v. Shands
Healthcare, No. 3:08-cv-00441-J-16HTS (M.D. Fla.) (filed under seal Apr. 30, 2008) By
Barbara Bolton Litten
Shands Teaching Hospital & Clinics Inc., Shands Jacksonville Medical Center Inc. and Shands
Jacksonville Healthcare Inc. (“Shands”) agreed to pay $26 million to the federal government and
the State of Florida to resolve whistleblower allegations of false claims to Medicare, Medicaid
and other federal health care programs. The relator’s complaint alleged violations of the Federal
False Claims Act, conspiracy to violate the False Claims Act, and violations of the Florida False
Claims Act. The relator in this case was not an employee – as so often is the case. Instead, the
relator was an outside healthcare consultant hired by Shands to conduct a payor audit of its
network of healthcare providers. The allegations in this case underscore the importance of
designing compliance programs that both anticipate and recognize potential whistleblowers and
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developing appropriate responses to false claims allegations. In addition, health care entities
should fully investigate outside consultants before retaining, review and/or revise the contract
with the outside consultants to address concerns identified by the outside consultant, and
maintain and establish a good working relationship with outside consultants.
The relator was Terry L. Myers, founder and President of YPRO Corporation (“YPRO”), a
nationwide health care consulting firm. According to the complaint, YPRO’s primary services
include coding audits, medical necessity audits and clinical documentation improvement audits.
Shands contracted with YPRO to perform on-site Medicare and Commercial payor review of
observation services and one-day inpatient stays at six Shands hospitals in June, 2006.
Allegedly, the audits revealed systemic serious billing, coding and compliance issues occurring
on a daily basis, which resulted in overbilling to and overpayment by Medicare, Medicaid, and
other federal health care programs.
Myers’ complaint alleges that after completion of the audits and distribution of audit reports
highlighting allegedly improper claims, YPRO offered quotes to Shands for future medical
necessity training and other needed coding and compliance education that YPRO could provide.
Shands elected to perform their own corrective action plan internally. The corrective action plan
did address “adjustments” for the overpayment identified by the 2006 YPRO audit but YPRO
never observed any action actually taken. Myers allegedly discussed the need for self-disclosure
of overpayments with Shands, but never saw any evidence of self-disclosure. Shands contracted
with YPRO for an audit in 2007 to reassess the same issues. YPRO alleged that the results of the
2007 audit were significantly worse than the 2006 audit and that overbilling and overpayments
increased and under-billing decreased. YPRO recommended continued monitoring and another
audit which Shands declined.
In its August 19, 2013 press release reporting the Shands settlement, the Department of Justice
(“DOJ”) described the False Claims Act as one of the most powerful tools available to the Health
Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, a partnership between
the DOJ and the U.S. Department of Health and Human Services focused on reducing and
preventing Medicare and Medicaid financial fraud.
Submitted by Kimberly J. Donovan
COMPLIANCE
OIG Advisory Opinion No. 13-18 – on a Proposed Arrangement between a City and a Supplier
of Emergency Ambulance Services.
The Office of Inspector General (OIG) issued an unfavorable advisory opinion regarding a
proposed arrangement between a City and a supplier of emergency ambulance services
(Requestor). Under the proposed arrangement, the City required the Requestor to provide the
following: (1) free emergency ambulance service to individuals insured by the city’s insurance,
(2) equipment, (3) free EMS training, (4) discount on emergency ambulance services for
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uninsured senior citizens, and (5) replenishment of medical supplies used by the city during
delivery of care to patients transferred by ambulance.
The OIG’s legal analysis focused on the anti-kickback statue, specifically where remuneration is
paid to induce or reward referrals of items or services. The opinion stated that the provision of
free services and equipment, which were the city’s expenses to incur, would fall into the
language of the anti-kickback statute. However, the opinion went on to say that by billing the
City directly at fair market value for services would not implicate the anti-kickback statute.
Regarding the free EMS training, the Requestor proposed an annual free EMS class that would
be open for anyone to attend. The OIG stated that “this offering of free, open, pre-existing
training would present a minimal risk under the anti-kickback statute”. Instead of providing
discounts to uninsured seniors the Requestor would continue its policy of offering charity care
based on need. The OIG found that this aspect of the proposed arrangement presented only a
minimal risk and of fraud and abuse under the anti-kickback statue. Replenishment of supplies,
to be distinguished from stocking of the city’s inventory, is regarded as part of the general
ambulance service and payment for them would be included in the Medicare payment rate for
transport. Therefore, replenishment of supplies would present only a minimal risk of fraud and
abuse under the anti-kickback statute.
The primary concern of the OIG under the proposed arrangement was the donation of equipment
to the city which was to be evaluated by a compliance officer on a case-by-case basis. The OIG
stated that “in the absence of established, objective criteria and other safeguards against potential
fraud and abuse, there is significant risk that donation of equipment by the Requestor would be
tied to the contract award”. Therefore, OIG could not conclude that this aspect of the proposed
arrangement would present a minimal risk of fraud and abuse under the anti-kickback statute.
In its opinion, OIG considered the proposed arrangement as a whole and as such could not
conclude that the proposed arrangement would present a minimal risk of fraud and abuse in
connection with the anti-kickback statute. The opinion states that the proposed arrangement
could potentially generate prohibited remuneration under the anti-kickback statute, which could
potentially lead to administrative sanctions.
The full text of OIG Advisory Opinion No.13-18 is available at:
https://oig.hhs.gov/compliance/advisory-opinions/#2013
Submitted by Judy-Ann Smith, Judy-Ann Smith Law Firm, P.A.
HIPAA
HIPAA Violation Results in $1.44 Million Jury Verdict Against Walgreens, Pharmacist
An Indiana Superior court jury awarded $1.44 million to a Walgreen’s customer based on
violations of privacy and confidentiality of health information. HIPAA does not create a private
cause of action, however, it is being used to establish a standard of care for providers. The
plaintiff in this case filed suit based on allegations that a Walgreens pharmacist accessed,
reviewed and shared customer prescription history with others and the information was then used
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to intimidate and harass the customer. The plaintiff/customer claimed that the pharmacist and
Walgreens breached their duty of confidentiality and privacy.
The plaintiff argued at trial that although HIPAA does not create a private cause of action, it does
establish a standard of care for confidentiality and privacy of patient health information.
Therefore, because the pharmacist violated HIPAA, the pharmacist also breached the standard of
care. Further, since the pharmacist was acting within the scope of her employment Walgreens
was also liable.
HIPAA is becoming an important aspect of establishing a standard of care in negligence and
professional liabilities involving improper disclosure of health information.
Source: Mondaq Business Briefing, August 16, 2013, by Cory J. Fox.
Full article is available at:
http://www.mondaq.com/unitedstates/x/258310/Professional+Negligence/HIPAA+Violation+Re
sults+in+144+Million+Jury+Verdict+Against+Walgreens+Pharmacist
Submitted by Judy-Ann Smith, Judy-Ann Smith Law Firm, P.A.
PUBLIC HEALTH
The CDC has announced publication of its December 2013—Public Health Law News at:
http://www.cdc.gov/phlp/news/current.html
Submitted by Rodney M. Johnson
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