Juvan's Health Law & Private Equity Report : Corporate & Health Care Lawyer & Attorney : Jayne Juvan : Benesch Friedlander Law Firm : Private Equity, Corporate Governance

• Pharmaceutical Companies Face Decreased Earnings As Generics Enter the Market.  FDA News reports that the entry of generic drugs to the market has had detrimental effects to the earnings of certain pharmaceutical companies.  Bristol-Myers Squibb, for example, lost substantial revenues when its drug Plavix, a blood thinner, faced competition from generics.  To make matters worse, the company is now under investigation by the United States Department of Justice (the "DOJ").  The DOJ is investigating whether the company's proposed settlement with Apotex, the generic maker of the drug, violated an agreement the company had with the Securities and Exchange Commission.  In the settlement, Bristol-Myers Squibb offered a reverse payment to Apotex, whereby Bristol-Myers Squibb would pay Apotex to refrain from marketing its generic version of the drug until 2011, when the patent expires.  Likewise, FDA News reports that Pfizer has also announced that it is seeking to lower operating costs and has likewise lowered revenue projections because, among other reasons, the company has faced a substantial amount of competition from generics.
• Modern Healthcare/AP Report Frightening Data Loss by Indiana Hospital.  Last week, Modern Health Care and the Associated Press reported as follows:

An Indiana-based hospital system has started notifying at least 260,000 patients of its Indiana and Illinois hospitals that a medical records contractor had lost CDs containing their Social Security numbers and other personal information.

Officials of the Sisters of St. Francis Health Services, however, say the lost CDs were recovered and that they do not believe any of the information was improperly accessed.

A letter to patients of the Mishawaka, Ind.-based St. Francis, which operates 10 hospitals in Indiana and two in Illinois, said that in July an employee of a medical billing contractor copied the data onto several CDs and placed them in a new computer bag to work on the data from home.

That employee later decided the bag was too small and exchanged it at a store, accidentally leaving the discs inside, the letter said.

Lisa Decker, a spokeswoman for St. Francis subsidiary Greater Lafayette Health Services, said the person who later bought the bag immediately returned the discs to the company and that officials were confident the data was not accessed. -- by Associated Press

This supports the concern of some in the medical profession who have asserted that the shift to e-records could jeopardize patient privacy.

• CMS Proposes Requiring Sprinkler Systems in All Long Term Care Facilities.  While current rules only require sprinkler systems in new facilities or facilities that undergo renovations, last week, CMS proposed a new rule that, if adopted, would require all facilities to be equipped with these systems.  Click here to view the Proposed Rule.  Don't like the Proposed Rule or want to suggest a change?  Submit comments to CMS for consideration no later than December 26, 2006 by 5:00 PM.
• JAMA Reports Racial Minorities Fail to Receive Similar Care.  Only about a week ago, I participated in the Cleveland Bar Association's 3Rs program that seeks to place lawyers in high school classrooms around Cleveland.  The program is simply awesome, as it attempts to demonstrate to students the value of higher education in the hope that they will continue on to college after earning their high school diploma. 

The topic of discussion for this past session was the Equal Protection Clause of the Fourteenth Amendment.  In my class, we discussed the United States Supreme Court's ruling that "separate is not equal" in Brown vs. Board of Education.  Our team of teachers asked students to ponder a society in which rights are distributed based on a variety of factors such as race or gender.  The students, many of whom were minorities, were encouraged by the current state of the law and the increased opportunities that are available to all.

Despite the progress that we've made, its almost perplexing that, all of these years after the Court's ruling in Brown, studies are showing that minorities still do not have equal access to the same high quality health care that their white counterparts have.  Christopher Lee, a Washington Post staff writer, reported last week on two studies released by the Journal of the American Medical Association that found that "[r]acial minorities are less likely to undergo major surgeries at the hospitals where those operations are done best, and black patients at Medicare HMOs fare worse than whites on several health measures regardless of plan quality."  Lee thereafter asserted that "[t]he two studies in today's issue of the Journal of the American Medical Association, plus a third showing that black women are less likely than their white counterparts to survive breast cancer, add to the voluminous evidence that the U.S. health-care system works differently for minorities than for whites despite years of efforts to erase racial disparities."

Indeed, as some may suggest, these studies may simply be reporting that which we already know.  However, it seems to me as though it is time to put together think tanks with teeth that have the ability to assess the problem, are able to come up with an action plan to address it and that must report results periodically and have them analyzed to determine effectiveness.  All of our kids deserve this!

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Here's a look back at a few stories of interest from last week:

• Researchers Say Voters View Health Care as a "Second Tier" Issue.  In recent days, news agencies have dramatically increased their coverage of the upcoming election. Thus far, the issue that probably received the most of the media's attention was the Mark Foley scandal, dubbed by many reporters as the "Foley Factor."  Discussion of health care issues has certainly not taken center stage.  This is probably due to the fact that, as reported by a few researchers, while voters view health care as an issue more important than education and the environment, it is a "second tier issue", ranking behind Iraq, the economy and gasoline prices.  Lou Dobbs is one reporter who has focused on the health care crisis, telling the story of a middle class family without health insurance who were forced to file for bankruptcy after they drowned in medical bills incurred after they obtained medical treatment for their ill son.
• More Shame Brought to the FDA as Former Head Lester Crawford Pleads Guilty to Charges.  On Tuesday, Lester Crawford, who headed the FDA for only two months in 2005, pled guilty to conflict of interest charges and charges that he failed to disclose some of his stock holdings.  Crawford will be sentenced in mid January and potentially could face jail time. 
• Generic Drugs May Enter the Market Sooner.  The Kaiser Family Foundation reported that the FDA will "accelerate reviews for the first generic versions of brand-name medications that no longer have patent or market exclusivity."  In response, Kathleen Jaeger, the head of Generic Pharmaceuticals Manufacturers Association, stated that this move by the FDA, which will bring generics to the market much more rapidly, will save consumers millions of dollars.

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• Doctors Make Little Use of E-Records Systems, Study Finds.  The Washington Post reports that a study found that only about 25% of doctors use electronic health records systems. 

Since their inception, whether doctors should in fact adopt e-records systems has been the subject of much debate.  Supporters of these systems argue that e-records will bring better care to patients because doctors will be able to have greater access to their medical records.  "[S]tandardized electronic records that can be shared among care providers would improve patient care, reduce errors, curb unnecessary tests and cut paperwork," advocates argue.  But privacy rights activists reject these arguments, citing the high risk that information gathered could be compromised or exploited. 

Indeed, the possibility of having a person's entire medical history exposed to the world as a result of a data breach or the loss of a laptop is a rather frightening proposition, and the fear of this prospect may be making some hesitant to shift.  As one commenter to the Post's article stated, "Some doctors are reluctant to adopt EHRs because if a breach occurs, such as a stolen computer, lost USB flash drive or revenge from a disgruntled employee, the act of notifying all of the patients in the practice is almost sure to bankrupt the business."

Only time will tell whether doctors will buy in to this new way of treating patients.

• Privatizing the Role of the FDA?  The FDA has most certainly come under attack in recent months.  Last week, not long after a damning report by the Institute of Medicine was released claiming that the perception of crisis has called into question the FDA's credibility and that the FDA does not consistently demonstrate transparency or accountability, The New England Journal of Medicine published an editorial endorsing the report.  Many others have likewise claimed that they are tired of waiting for the FDA to solve its problems.  But one entrepreneur has decided to take matters into his own hands. 

Meet Daniel Palestrant, founder and CEO of Sermo Inc. ("Sermo"), the entity that owns sermo.com, an Internet site that allows doctors to post information about off-label uses of drugs.  On this site, credentialed doctors not only have the right to post about the side effects of drugs, but they are actually paid $30 to $50 to post.  Other credentialed doctors are paid to rank the credibility of the observations posted.  Since its debut, postings have alleged that Pfizer's Lipitor causes nightmares and that Amylin Pharmaceuticals' and Eli Lilly's diabetes drug Byetta is linked to sudden death in 50 patients. 

Sermo claims that it launched the site in the hope to have the opportunity to work with the FDA so that dangerous drugs are taken off of the market.  The site also markets itself to Wall Street investment companies, stating that it is a forum that assists these companies to anticipate swings in the stock of drug companies.  Such investment companies may subscribe to the site for an unspecified fee. 

This new site has received criticism from both pharmaceutical companies and advocacy groups that urge the FDA to remove dangerous drugs from the market.  One of Pfizer's vice presidents, Gregg Larson, was quoted in an article from the Boston Globe as stating, "This is such a strange situation with this website. . . . It's not scientifically based.  It's not clinically based."  Advocacy groups are concerned that such sites could attempt to replace the FDA's role as the watchdog.  Dr. Sidney Wolfe, the director of one such group, was quoted in the same article as stating that "[i]t's a function too important to be left to venture capitalists and the drug industry."

The site is backed by Longworth Venture Partners of Waltham, which provided a $3 million dollar capital infusion to the company.  Sermo is currently looking for additional investors, hoping to receive an additional $8 to $10 million. 

• NPI Roundtable Transcript Is Now Available.  CMS has made the transcript for the 9/26 NPI Roundtable available on its web site.  Click here to view the transcript.

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CMS Attempts to Set Medicare Reimbursement Rates in Close Proximity to Market Rates

Beginning on November 15, power wheelchair suppliers will receive a 35% cut in Medicare reimbursement rates--a decrease so large that it almost shocks the conscience.  While the current reimbursement rate is $6,130 for standard power wheelchairs, the new rate will be a mere $3,800.  Discussing the rate cut, Ellen Griffith, spokesperson for CMS, quoted in a release from the Kaiser Family Foundation, stated, "Medicare was paying for the equipment at a much higher rate than what it was being sold on the market, and the beneficiary was paying a higher co-payment as a result."

Many suppliers are up in arms over the new cuts, alleging that their current profit margins will not allow them to sustain the decrease.  These suppliers argue that beneficiaries will ultimately pay, as they will have decreased access to the equipment.

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• Bernanke Asks Whether, Given the Impending Health Financing Crisis, We Will "Treat Future Generations Fairly."  This week, speaking before the Washington Economic Club, Ben Bernanke, the Chair of the Federal Reserve, reiterated that the baby boomers will have a major impact on the government's budget in the not too distant future.  "As the population ages," he said, "the nation will have to choose among higher taxes, less non-entitlement spending, a reduction in outlays for entitlement programs, a sharply higher budget deficit, or some combination thereof."  The increased health care spending will have an adverse effect on future generations and the "long-run productive potential of the U.S. economy." 
• Clinical Trials Today Examines Patient and Physician Motivation.  This week, Clinical Trials Today examined whether reports of the unethical recruitment of patients and manipulated findings have driven patients and physicians away from participation in clinical trials.  The study, based on over 700 patient surveys and over 7,000 physician surveys, found that patients are generally most concerned about flexible hours.  Risk level associated with procedures and the risk of side effects ranked second, the availability for public transportation to take them to the appropriate site ranked third, and the fear of receiving the placebo ranked fourth.  Generally, participants reported that they entered clinical trials in the hope of being cured of their disease and to advance science for the benefit of others.  Seventy percent of participants stated that they received excellent care, and eight-seven percent stated that they would recommend participation in a clinical trial to a family member or friend.  Physicians responded that their top concern was having access to sufficient information about the investigational drug.  The report concluded that, "despite the great deal of scrutiny being paid to clinical trials, very few physicians or volunteers seem deterred or even concerned about the potential for harmful outcomes."
• October Is Breast Cancer Awareness Month.  Last week marked the first week of breast cancer awareness month.  The focus on early detection, the investment of substantial amounts of money, and the sheer desire of so many to find a cure to this disease have all contributed to making it very treatable if detected early.  Recently diagnosed women now have many options that help them to wage successful battles against this type of cancer.  Many women are able to live normal lives after diagnosis due, at least in part, to research that has discovered successful chemotherapy and radiation combinations.  Relatively new hormone therapy treatments are now available for women with ER/PR positive breast cancer.  Also, women with Her-2 positive breast cancer have found new hope due to Genentech's Herceptin.  Juvan's Health Law Update would like to do its part in helping to spread awareness.  Here's a few facts that every woman should know (as reported by www.breastcancer.org):

• About one in seven women in the United States will have breast cancer in her lifetime
• "Most women who get breast cancer do NOT have an inherited abnormal breast cancer gene"
• Smoking increases a women's risk from being 14% to 32%
• Yearly mammograms substantially increase the likelihood that cancer will be detected in its earliest, most treatable stage

What can you do if someone you know is diagnosed with breast cancer?

• Offer to accompany her to doctor's visits
• Make a meal for her
• Hire someone to clean her house while she is undergoing treatment (this will help to save her time and ensure that she is in a sterile environment, thereby reducing the threat of infection)
• Talk with her when she so desires
• Buy her beautiful scarves and hats
• Throw a party for her as she reaches each milestone
• Let her know that there is always hope

This announcement is in recognition of all of those women who must battle this terrible disease, including, but not limited to (as lawyers always say), my mother, my dear friends Barb, Debbie, Carol, Theresa, Jeanette and Jo Ann and all of the amazing ladies at www.her2support.org.

Juvan's Health Law Update would like to extend its most sincere gratitude to all of those courageous women who have entered clinical trials.  These participants are pioneers.  They're soldiers on the front lines seeking to not only beat the disease for themselves, but to also provide hope to all of their sisters.

Juvan's Health Law Update would also like to thank Benesch Friedlander Coplan and Aronoff, LLP for lending support to people who must battle this disease and for its support of the Gathering Place, an organization that provides services to those with cancer.

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On Tuesday, the National Labor Relations Board ("NLRB") rendered three decisions that clarified the test applicable to determine whether an individual qualifies as a "supervisor" or an "employee" under the National Labor Relations Act ("NLRA").  One of the NLRB's decisions in particular has left many nurses outraged. 

Under Section 2(11) of the NLRA, the term "supervisor" includes "any individual having authority, in the interest of the employer, to hire, transfer, suspend, lay off, recall, promote, discharge, assign, reward, or discipline other employees, or responsibly to direct them, or to adjust their grievances, or effectively to recommend such action, if in connection with the foregoing the exercise of such authority is not of a merely routine or clerical nature, but requires the use of independent judgment" (emphasis added).  The distinction regarding whether an individual is a supervisor or an employee under the NLRA is a meaningful one because, while employees have the right under the NLRA to collectively bargain, supervisors do not have the same rights and protections. 

Until these three decisions were handed down, the NLRB rather narrowly construed the term "supervisor."  In a 2001 United States Supreme Court decision, NLRB v. Kentucky River Community Care, 532 U.S. 706 (2001), the Court addressed the status of similar types of employees and criticized the NLRB's interpretation of the term "independent judgment."  The NLRB has now seized upon the opportunity to clarify its interpretation of the phrase "independent judgment" and at the same time also altered its interpretation of the terms "assign" and "responsibility to direct."   

In Oakwood Healthcare, Inc., 348 NLRB No. 37 (Sept. 29, 2006), the NLRB held that charge nurses employed by an acute care hospital executed supervisory authority within the meaning of Section 2(11) of the NLRA because they assigned responsibilities to other nurses and exercised independent judgment in making such assignments.  Specifically, the charge nurses in Oakwood independently exercised their own judgment in "assigning nursing personnel to patients."  The NLRB did, however, distinguish between these nurses and rotating nurses, holding that, because the rotating nurses in this case did not exercise supervisory authority a substantial amount of the time, they were properly characterized as employees under the NLRA. 

The NLRB stated that "assign" means to designate "an employee to a place (such as a location, department or wing), appointing an individual to a time (such as a shift or overtime period), or giving significant overall duties, i.e. tasks, to an employee . . . and refers to the . . . designation of significant overall duties to an employee, not to the . . . ad hoc instruction that the employee perform a discrete task."  An individual has the "responsibility to direct" other employees if the individual "decides what job shall be undertaken next or who shall do it," as long as the individual is also "responsible" and carries out the tasks with "independent judgment."  Finally, an individual exercises "independent judgment" if the individual exercises judgment that is not controlled by another authority and if the degree of discretion arises above the "routine or clerical."

The NLRB has applied this new interpretation in two companion cases.  In Croft Metals, Inc., 348 NLRB No. 38 (Sept. 29, 2006), the NLRB held that lead persons at a manufacturing plant were not supervisors because their employer retained so much control over their decisions that the direction they gave to other employees was simply routine and clerical.  Similarly, in Golden Crest Healthcare Center, 348 NLRB No. 39 (Sept. 29, 2006), the NLRB concluded that the charge nurses at issue were not supervisors because they did not have the authority to assign tasks to other nurses, to require other nurses to stay beyond their shift or to call in off-duty nurses.  Moreover, the annual rating of these nurses based upon their ability to direct other nurses was insufficient to establish that these nurses were actually accountable for the job performance of other nurses.

Many nurses have already begun to revolt against this new interpretation.  The Sacramento Business Journal reports, for example, that over 30,000 nurses have signed pledges promising to strike if their employers attempt to exploit the decision. 

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• Uncle Sam Holds Medicare Payments.  Medicare payments took center stage last week, as a nine day hold on these payments, as mandated by Section 5203 of the Deficit Reduction Act of 2005, was in full force and effect.  Though the government claims that it gave plenty of notice about this hold, many expressed their outrage and asked whether they could likewise place a hold paying their creditors, including their employees.  Fortunately, this nine day hold has expired, and we can all return to business as usual. 
• Physicians May Receive a Pay Raise.  Though physicians were plagued by the nine day hold, the news for physicians from last week was not all bad.  The Washington Post reports that Congress will likely soon act to reverse the planned 5.1% cut to physician Medicare reimbursement rates, thereby costing the federal government approximately $13 billion dollars over the next five years.  Under a draft proposal prepared by House Energy and Commerce Committee Chair Joe Barton, a Republican from Texas, over the next three years, physicians would receive a .5% increase.  Additionally, they would also receive a .25% increase in 2008 and 2009 if they report quality data to the government.  So, you may ask, where will the government obtain the money to support this increase?  HMOs that manage Medicare benefits, of course.  As expected, the health insurance industry has already begun to launch attacks against this funding scheme. 
• Vioxx Debacle May Have Slowed Drug Approval Process.  The New York Times reports that, as a result of the Vioxx recall that occurred back in 2004, FDA reviewers are taking more precautions before approving drugs and are requesting more data than before.  Lee Simon, a former head of the FDA, has stated, "I speak to reviewers, and they all feel worried that the decisions they make may come back to haunt them."  Some say that only time will tell if the FDA's drug approval criteria has really stiffened.

Feel free to post additional stories of interest.

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Make sure to obtain your copy of the October 2006 issue of Inside Business, which offered an article about Juvan's Health Law Update (see page 20).  The latest issue also included many other interesting articles, such as an article about Jack Landskroner, an attorney who brought a class action suit on behalf of plaintiffs who were injured when they had medical procedures performed that included the use of illegally harvested tissue, bones and organs, and a write-up on Dr. Delos "Toby" Cosgrove, the CEO and President of the Cleveland Clinic.

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Welcome to our new site!  This new blog allows  for the availability of an increased number of resources and links, provides viewers with the opportunity to subscribe to feeds and has many, many more capabilities.  The team at Juvan's Health Law Update sincerely hopes that you enjoy the new layout!

The following individuals substantially contributed to the design of this new site:

• Joni M. Bowen, Senior Reporter and Editor, Juvan's Health Law Update.  Joni has a Bachelor of Arts in Journalism from Malone College and is a seasoned reporter.  She currently works at The Alliance Review.  Prior to joining The Alliance Review, she was the Editor-in-Chief of The Aviso, the Malone College newspaper.  Joni will be bringing you stories written from a reporter's perspective from time to time.
• Daniel D. Depenbrok, Graphic Designer, Juvan's Health Law Update.  Dan has a Bachelor of Fine Arts in Illustration from the Columbus College of Art and Design.  He has his own graphic design and freelance business, and he also currently designs advertisements and the web site for MGI, Inc.  Dan will periodically update the graphics, layout and design of Juvan's Health Law Update.

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