At the end of December, the Second Circuit joined several other circuit courts in holding that a plaintiff adequately pleads an Anti-Kickback Statute (“AKS”) violation when she states with the requisite particularity that at least one purpose of the alleged scheme was to induce fraudulent conduct, the “at-least-one-purpose” rule.

In United States ex rel. Camburn v. Novartis Pharmaceuticals Corp., Relator Steven Camburn alleged that Novartis violated the AKS, and the False Claims Act (“FCA”), in marketing its drug Gilenya, which is prescribed for multiple sclerosis (“MS”).  Since approving Gilenya in 2010, the FDA has imposed a first-dose observation requirement for new patients, who must be monitored by a doctor while attached to an electrocardiogram machine for six hours.

Continue Reading Second Circuit Adopts At-Least-One-Purpose Rule For Anti-Kickback Statute Violations

The SDNY U.S. Attorney’s Office has targeted several labs and their principals for False Claims Act violations arising out of reimbursements for COVID-19 testing services.  In a complaint filed on June 13, the government sued LabQ Clinical Diagnostics, Dart Medical Laboratory, Community Mobile Testing, and their CEO, Moshe Landau.

In response to the COVID pandemic, Congress mandated that private health insurers cover COVID-19 testing and required government health care programs to also cover such testing.  For uninsured persons, Congress appropriated funds for a federal program to reimburse health care providers furnishing COVID-19 testing to uninsured persons (the “Uninsured Program”), administered by an agency within the Department of Health and Human Services.  Before seeking reimbursement, however, COVID-19 testing providers were required to confirm that the patients were uninsured and no one else would pay for the testing. 

Continue Reading SDNY Sues Labs For Fraudulent COVID-19 Testing Under False Claims Act

Recently, in United States ex rel. Hart v. McKesson Corp., the Second Circuit clarified the standard for acting “willfully” under the federal anti-kickback statute (AKS).

False Claims Act relator Adam Hart alleged that the defendant violated the AKS by providing business management tools to its customers, without charge, to induce those customers to purchase drugs from them.  The tools helped providers to maximize profits and mitigate the risk that reimbursement rates would fall below the cost of the drugs to them.  One tool, the Margin Analyzer, compared profit margins for drugs considered to be interchangeable, and the second, the Regimen Profiler, provided margin information for an entire course of treatment as opposed to specific drugs.  The unlawful kickback, according to relator, was that the defendant did not offer these tools on a stand-alone basis, but only offered them to providers who agreed to use the defendant as their primary wholesaler of branded and generic drugs.  The defendant allegedly provided the tools as a kickback to induce drug sales. 

The Second Circuit first addressed the proper understanding of “willfulness” under the AKS.  The Court held that, in order to violate the federal AKS, a defendant must act knowing that the conduct is in some way unlawful but does not have to know specifically that the conduct violates the AKS.  The Court stated that this interpretation accords with the general goal of criminal law to punish only those who act with a “vicious will.”  Notably, in 2010, Congress amended the AKS to provide that a violation does not require actual knowledge of the AKS or a specific intent to violate the AKS.  Also, particularly with respect to the analysis of applications of AKS safe harbors to conduct, this interpretation also avoids unfairly sweeping innocent conduct under the reach of the criminal statute.

Continue Reading Second Circuit Defines “Willfulness” Standard Under Anti-Kickback Statute

On January 9, 2024, the federal Centers for Medicare and Medicaid Services (CMS) finally approved New York State’s 1115 waiver amendment to establish the New York Health Equity Reform (NYHER) Program. That application, which is the successor to the state’s Delivery System Reform Incentive Payment (DSRIP) Program that expired in March 2020, was first described in a concept paper issued by the Department of Health (DOH) in August 2021, and was filed with CMS in September 2022. The approved waiver amendment, which expires on March 31, 2027, includes most of the features included in the original application, but not all.

The overall goals of NYHER include:

  • Health-Related Social Needs: Investments in health-related social needs (HRSN) via greater integration between primary care providers and community-based organizations, with a goal of improved quality and outcomes.
  • Health Equity: Improving quality and outcomes of enrollees in geographic areas that have a longstanding history of health disparities and disengagement from the health system, including through an incentive program for safety net providers with exceptional exposure to enrollees with historically worse health outcomes and HRSN challenges.
  • Integrated Care: Focus on integrated primary care, behavioral health, and HRSN with a goal to improve population health and health equity outcomes for high-risk enrollees, including kids/youth, pregnant and postpartum individuals, the chronically homeless, and individuals with substance use disorder (SUD).
  • Workforce: Workforce investments with a goal of equitable and sustainable access to care in Medicaid.
  • Regional Approaches: Developing regionally focused approaches, including new value-based purchasing (VBP) programs, with a goal of statewide accountability for improving health, outcomes, and equity.

These goals are embodied in four new initiatives: (1) HRSN, (2) a Health Equity Regional Organization (HERO), (3) Medicaid Hospital Global Budget Initiative, and (4) Strengthen the Workforce. Each will be examined in turn.

Continue Reading CMS Approves a New 1115 Waiver Amendment:  The New York Health Equity Reform (NYHER) Program

As we head into a new calendar year, in the healthcare space it is worth reflecting on the events of the last few years, as a means of predicting what is likely to come.  Last year, the focus in healthcare policy was very much on what will come after COVID; this year, we finally have the opportunity to review what that is.  And we can confidently say that 2024 is likely to see a continuation of many of the trends in healthcare policy that we saw in 2023.

Continue Reading Healthcare Policy in 2024: What’s Next?

The Supreme Court will hear argument next week in two consolidated cases that will decide what standard applies when a doctor asserts a good faith defense to a criminal prosecution for unlawful drug distribution.  The argument on Tuesday, March 1, will address the convictions of two doctors accused of running “pill mills” and seeking to profit in the midst of the national opioid crisis.  According to the Government, “the petitioners simply cloaked themselves in medical garb while acting as drug dealers, lining their own pockets by dispensing addictive, dangerous, and lethal drugs, aware all the while that their profit-seeking came at the expense of their patients’ health.”

Yiulu Ruan was convicted in the Southern District of Alabama of conspiring to unlawfully distribute controlled substances, unlawfully distributing controlled substances, and other offenses, and was sentenced to twenty one years and two months imprisonment.  His conviction was affirmed by the Eleventh Circuit.  Shakeel Kahn was convicted in the District of Wyoming of conspiring to dispense and distribute controlled substances resulting in death, unlawfully dispensing controlled substances, and other offenses, and was sentenced to twenty five years imprisonment.  His conviction was affirmed by the Tenth Circuit. Continue Reading Supreme Court To Hear Argument Addressing Doctors’ Good Faith Defense To Pill Mill Prosecutions

On March 31, 2021, Governor Andrew Cuomo signed the Marihuana Regulation & Taxation Act (MRTA) legalizing adult-use cannabis in New York State. In doing so, New York became the 15th state in the United States to legalize cannabis use.

As  a result of the enactment of the MRTA, New York established the Office of Cannabis Management (OCM). The OCM will regulate and control the cultivation, processing, manufacture, distribution, transportation, and sale of cannabis in New York. This includes medical cannabis, adult-use or “retail” cannabis and cannabinoid hemp.

Below we’ve gathered key facts about New York State’s adult-use and medical cannabis programs. These facts, and more information on the cannabis program in New York, can be found at the websites listed at the end of this post. Continue Reading CANNABIS IN NEW YORK STATE: JUST THE FACTS

SDNY Judge Jed Rakoff rejected Northwell Health’s bid for insurance coverage for its increased costs and business losses related to the COVID-19 pandemic in a recent decision.  As the COVID-19 pandemic unfolded, Northwell was inundated with new patients, had increased cleaning costs, and stopped offering outpatient care services and elective procedures.  In the ruling, Judge Rakoff held that Northwell was not entitled to coverage under two all-risks commercial property insurance policies.

The federal government declared a COVID-19 emergency on March 13, 2020, and New York State issued orders suspending or severely curtailing operations of certain businesses.   In its complaint, Northwell alleged that, while caring for over 100,000 COVID-19 patients, it incurred significant new costs, was forced to cease elective surgeries and close physicians’ practices, and saw fewer hospital admissions and visits.  Northwell alleged that the respiratory droplets carrying the coronavirus were “physical objects, carrying a physical substance, that attach to [and] cause harm to property.”  Examining several different policy provisions, the Court held that Northwell had failed to establish an entitlement to coverage. Continue Reading Northwell Loses Bid For COVID-19 Insurance Coverage

By legislation enacted last month, on June 9, 2021, amending the New York Finance Law, Mental Hygiene Law and Executive Law, New York State established an opioid settlement fund (“OSF”).  Finance Law §99-nn(1).  The purpose of the OSF and the OSF advisory board created by the statute is to ensure that all opioid settlement monies are dedicated to the prevention and treatment of substance use disorders, and the recovery of substance use victims.  OSF will include money paid to NYS as the result of (i) the settlement or other resolution of litigation against manufacturers, distributors, dispensers or promoters of opioids on claims arising from the manufacture, distribution, dispensing or promotion of opioids and (ii) any judgment, decree or other resolution of claims against those and “related” entities “arising out of activities alleged to have contributed to increases in opioid addiction.”  Finance Law, §99-nn(4).  OSF monies will include the proceeds of these claims, whether the claims were filed or unfiled, actual or potential, legal or equitable.  Id. 

The NYS Comptroller and NYS Commissioner of Taxation will be joint custodians of the OSF.  OSF monies are required to be segregated and not commingled with any other funds held by the Comptroller.  Finance Law §99-nn(2).  OSF expenditures “shall be used to supplement and not to supplant or replace” any other federal or NYS funds which would other otherwise be used for substance use prevention, treatment, recovery and harm reduction services. Finance Law §99-nn(3).  The law specifies that general operating funds or baseline funding for substance use prevention, treatment and recovery will not be reduced due to amounts expended from OSF.  Id.  All amounts received by the OSF will remain there “unless and until directed by statute or appropriation.”  Finance Law, §99-nn(4).  Funding must be disbursed to provide adequate geographic distribution across NYS.  In addition to programs administered by the Office of Addiction Services and Supports (OASAS), OSF dollars may be used for programs of NYS agencies other than OASAS which oversee programs and services that are considered eligible OSF expenditures.  §99-nn(5).  Local governments and school districts may apply for OSF funding to the appropriate NYS agency. Mental Hygiene Law, §25.18(b). Continue Reading New York Establishes an Opioid Settlement Fund

In continuing efforts to address problems exposed by the COVID-19 pandemic, on June 18, 2021, the Governor signed legislation (S.1168-A/A.108-B) into law to address an urgent public policy priority related to clinical staffing in hospitals licensed pursuant to Article 28 of the New York State Public Health Law.  This legislation requires the establishment of clinical staffing committees to create plans to more effectively distribute staff throughout general hospitals.  The staffing committees must consist of at least fifty percent (50%) of registered nurses, licensed practical nurses, and ancillary staff providing direct patient care, and up to fifty percent (50%) of hospital administrators, including, but not limited to, the chief financial officer, the chief nursing officer, and patient care unit directors or managers or their designees.  The staffing committees shall create staffing plans with guidelines as to how many patients are assigned to each nurse, as well as how each unit is staffed with ancillary staff, based on patient needs and ratios, matrices or grids, which shall be used as the primary component of the general hospital staffing budget, provided that such staffing plans meet or exceed the terms of existing collective bargaining agreements.

The staffing committees are charged with the development of the staffing plans, and hospitals shall then adopt and submit the plans to the New York State Department of Health (“DOH”) by July 1, 2022.  The staffing plans must be reviewed internally semiannually, updated annually by July 1, and implemented thereafter by January 1 of the following year.  In addition, the staffing plans must be posted in publicly conspicuous areas in each patient unit of hospitals, and on the DOH hospital profile website.  The staffing committees are also charged with review, assessment and response to complaints regarding potential violations, staffing variations or other concerns. Continue Reading New York State Approves Establishment of Clinical Staffing Committees in General Hospitals