Healthcare Law Update: October 2019

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Regulation

FDA Guidance on Patient Engagement in Medical Device Development

Shannon B. Hartsfield

In recent years, the healthcare industry has been turning greater attention to the need to engage or involve patients in developing new technologies and systems to improve healthcare delivery. These patient engagement initiatives are sometimes referred to as patient "activation," shared decision-making or, in the words of the Institute for Healthcare Improvement, "actions that people take for their health and to benefit from care."

The U.S. Food and Drug Administration (FDA) first began including patient perspectives in its FDA Advisory Committee meetings in 1991. Subsequently, the FDA, along with the Clinical Trials Transformation Initiative, established the Patient Engagement Collaborative. The collaborative, facilitated by the 21st Century Cures Act and the Food and Drug Administration Reauthorization Act, is modeled on the European Medicines Agency Patients' and Consumers Working Party. The collaborative provides "an ongoing forum to discuss how to achieve more meaningful patient engagement in medical product development and other regulatory discussions." The FDA launched the Patient Engagement Advisory Committee (PEAC) in 2017. In 2018, the FDA established a pilot program called the Patient and Caregiver Connection to enable the FDA to obtain input from patients and patient organizations when evaluating medical device submissions.

The FDA's patient engagement efforts are continuing. In September 2019, the FDA announced the issuance of draft, nonbinding recommendations entitled "Patient Engagement in the Design and Conduct of Medical Device Clinical Investigations." The draft guidance is a result of the first PEAC meeting. Dr. Norman "Ned" Sharpless, Acting Commissioner of Food and Drugs for FDA, issued a statement indicating that the FDA is "committed to keeping patients, their families and caregivers at the center of our work and to deepening their involvement in how we review medical device applications." He noted that, "[t]ypically, medical device developers work with health care providers, clinical researchers and the FDA to design and test medical devices to understand how the product will benefit patients, but the process often does not incorporate direct input from patients." The FDA recognizes, however, that it can be a challenge to get patients to participate in clinical trials.

The draft guidance defines "patient engagement" as "intentional, meaningful interactions with patients that provide opportunities for mutual learning, and effective collaborations." Dr. Sharpless observed that, "[w]hen we work with patients early-on, we can advance the development and evaluation of innovative medical devices." The draft guidance includes FDA's recommendations for how manufacturers might "engage patients in multiple aspects of medical device clinical investigation design." The draft guidance, which does not establish legally enforceable responsibilities, is meant to accomplish a number of objectives, including:

  • helping clinical investigation sponsors understand how they can use patient engagement to obtain relevant information to improve the design and conduct of medical device clinical investigations
  • demonstrating the benefits of engaging patients early in the process of developing a medical device
  • showing which patient engagement activities will generally not be considered to be "research" subject to institutional review board (IRB) requirements
  • addressing common questions about collecting and providing patient engagement information to the FDA

The FDA has solicited comments on the draft guidance. Those comments are due on Nov. 25, 2019 and instructions for submitting them were published at 84 Federal Register 50047 on Sept. 24, 2019.

False Advertising

Competitive Harms Necessary for Lanham Act Standing

Nathan A. Adams IV

In ThemoLife Int'l LLC v. Am. Fitness Wholesalers LLC, No. CV-18-04189, 2019 WL 3840988 (D. Ariz. Aug. 15, 2019), the court granted the defendant's motion to dismiss the plaintiff's Lanham Act claims for lack of standing. The plaintiff alleged that the defendant is unfairly competing in the dietary supplement market through false advertising of products labeled as dietary supplements that contain ingredients the FDA labels as "drugs." The plaintiff alleged that 142 products advertised on the defendant's website contain such ingredients without any disclosure of the nature of the ingredients as "drugs." The court dismissed the complaint because the plaintiff competes higher up the supply chain than the defendant by marketing to production companies who use its patented ingredients and technology to manufacture dietary supplements. The defendant sells and advertises dietary supplements manufactured by third parties.

To establish Article III injury in a false advertising suit, the plaintiff must show that consumers who bought the defendant's product under a mistaken belief fostered by the defendant would have otherwise bought the plaintiff's product. A commercial or competitive injury is usually presumed under the Lanham Act when the defendant and plaintiffs are direct competitors. When companies are not direct competitors, competitive injuries may be shown when companies are involved in the same market if that involvement puts them within the "zone of interest" of the Lanham Act. The plaintiff's failure to allege competitive injuries such as how its sales or reputation were adversely affected also undermined its Lanham Act claims.

Privacy

No Attorney-Client Privilege for Hospital Lawyer's Communications with ER Doctor

Charles A. Weiss

Communications between a lawyer and a client, in confidence, for the purpose of obtaining or providing legal advice are ordinarily protected by attorney-client privilege. In the case of corporate or organizational clients such as hospitals, the issue of "who is the client" can be complicated. Different kinds of legal relationships exist between a hospital and its medical staff, including regular full-time employment of physicians by the hospital, an independent contractor relationship, the classic voluntary medical staff model and employment of the physicians by a group that itself contracts with the hospital to provide medical staff.

In Hermanson v. Multi-Care Health System, Inc., 448 P.3d 153 (Wash. App. 2019), a patient treated in the emergency department of Tacoma General Hospital for injuries sustained in a car crash sued the hospital for disclosing to the police the results of his blood-alcohol test. His claim was based on a breach of confidentiality, not a claim that his actual medical care was deficient. The treating physician was an employee of a regional nonprofit entity (called the Trauma Trust), organized by several hospitals to improve and coordinate trauma care in the Tacoma, Washington area. Although neither the physician nor Trauma Trust were named as defendants in the lawsuit, they retained the same attorney who was defending the hospital.

At issue was whether the hospital's lawyer could interview the physician in private to collect facts pertinent to the hospital's defense and whether attorney-client privilege would protect their conversations. The plaintiff objected, asserting that such conversations would breach the physician's duty of confidentiality to him as well as a Washington rule that prohibits attorneys from speaking with a plaintiff/patient's treating physician without consent by the patient.

The hospital responded that this case fell within an exception to the no-contact rule invoked by the plaintiff. Specifically, that rule did not apply when the treating physician was also an employee of the defendant hospital. In that circumstance, because the treating physician was also an employee of the lawyer's client, the no-contact rule gave way to a different rule governing representation by lawyers of corporate or organizational clients that recognizes that such clients can act only through humans (who are typically their employees).

The Washington court rejected the hospital's argument based on the fact that the physician was not an employee of the defendant hospital. It recognized that some courts have ruled that non-employee agents of a corporate or organization client with responsibilities that make them functionally indistinguishable from employees will be treated as employees for purposes of the attorney-client privilege, but declined to follow those cases in favor of a narrow approach under which the fact that the physician was not an employee of the hospital was dispositive against the application of privilege.

The nuances and application of the attorney-client privilege vary from state to state, but this case illustrates one potentially unexpected result when members of the medical staff are not employees of the hospital: communications between the hospital's attorneys and members of the medical staff may not be privileged, even when, as here, their purpose is to defend the hospital.

Enforcement

Dismissal of AKS and Stark Claims against HCA Affirmed

Nathan A. Adams IV

In Bingham v. HCA, Inc., No. 16-17059, 2019 WL 3451045 (11th Cir. July 31, 2019), the court of appeals affirmed the district court's grant of summary judgment in favor of the defendant on relator's qui tam action under the False Claims Act for violation of the Anti-Kickback Statute (AKS) and Stark Statute. HCA hired Tegra Independence Medical Surgical, L.C. to develop a medical office building in Independence, Missouri. As part of the development project, Tegra leased out space in the building to physicians. The relator alleged that HCA paid Tegra $4 million in improper subsidies through an initial lease and an arrangement involving parking facilities at the building, which Tegra passed on to physician tenants through payments under cash flow participation agreements, low initial lease rates, restricted use waivers and free office improvements. In exchange, the relator alleged HCA received $260 million in Medicare and Medicaid payments from patients referred to HCA's hospital by the physician tenants. The relator alleged that HCA was involved in a similar arrangement with a developer and physicians in Aventura, Florida.

The district court concluded that the supposed "low-end" rents were within the range of market rates for new construction. About the alleged free improvements, the court determined that the relator failed to tie them to specific physician tenants who were or could be referral sources or present evidence that the use waivers were anything other than a standard exercise of discretion under the relevant leases or that HCA was required to ask for something in exchange for the use waivers. Therefore, the court of appeals affirmed summary judgment on the plaintiff's AKS claim.

Likewise, the court of appeals agreed that there is no genuine factual dispute over whether a prohibited indirect compensation arrangement under the Stark Law exists inasmuch as HCA showed that there was no correlation between the size of physician tenants' space leases and their referrals to HCA. The court of appeals also affirmed the district court's decision to dismiss the relator's second amended complaint because the relator impermissibly used information learned through discovery to supplement allegations, and without this additional information the complaint would not have met the heightened pleading standard of Federal Rule of Civil Procedure 9(b).

Criminal Conviction Under AKS Affirmed for Patient Referral Payments

Nathan A. Adams IV

In United States v. Crane, No. 17-20776, 2019 WL 3072148 (5th Cir. July 12, 2019), the court of appeals affirmed the defendant's conviction for conspiring to violate the AKS. The defendant worked as a patient recruiter, van driver and psychiatric technician for Devotions Care Solutions, a partial hospitalization program providing intensive outpatient treatment for patients suffering an "acute exacerbation" of a chronic mental illness. In an interview with the Federal Bureau of Investigation (FBI), the defendant admitted that he was paid for patient referrals and that he knew the payments were wrong but he needed the money. The defendant argued that the evidence at trial was insufficient to support his conviction, but the court disagreed. The government corroborated his testimony with independent evidence such as a coworkers' testimony and the marketer's list identifying the patients that each recruiter brought in.

Medicare

FFY 2014 Merged Hospital Policy Subject to APA Review

Nathan A. Adams IV

In Yale New Haven Hosp. v. Azar, No. 3:18-cv-1230, 2019 WL 3387041 (D. Conn. July 25, 2019), the court ruled that it has jurisdiction to decide whether the secretary of the U.S. Department of Health and Human Service's promulgation of the Federal Fiscal Year (FFY) 2014 Merged Hospital Policy outside of the requirements of notice and comment of the Medicare Act and Administrative Procedure Act (APA) was unlawful, but lacked jurisdiction over the balance of the plaintiff's claims due to the preclusion statute contained in the Patient Protection and Affordable Care Act (ACA), codified at Section 1395ww(r)(3) of Title 42 of the United States Code.

The plaintiff merged with another hospital effective Sept. 12, 2012. As a result of the transaction, the plaintiff assumed the other hospital's Medicare provider agreement and its Centers for Medicare & Medicaid Services (CMS) certification number was subsumed under that of the plaintiff's. Under the policy, CMS excluded the inpatient days from the acquired hospital when calculating the plaintiff's FFY 2014 Uncompensated Care (UC) Disproportionate Share Hospital (DSH) payment. As a result, the plaintiff sued for violation of the APA and Medicare Act and on the grounds the payment was unsupported by substantial evidence in the record and ultra vires and for a writ of mandamus, under the All Writs Act, and in violation of the Constitution.

The court determined that the plaintiff failed to state a constitutional claim and that the court could not review the data that underlies the secretary's estimate because it would eviscerate the bar on judicial review, as would mandamus or another writ. In contrast, the challenge to the promulgation of the policy itself was not to the secretary's estimate of the plaintiff's DSH payment, any underlying data or the secretary's choice of such data; instead, it is a challenge to the procedure by which the secretary established the policy. Congress cast a wide net in precluding judicial review of any estimate of UC DSH payments, but "was equally clear in requiring that the Secretary adhere to notice-and-comment rulemaking in promulgating regulations."

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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