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Medtronic Petitions Supreme Court Concerning Preemption and Adverse Event Reports

May 20, 2013 by Leave a Comment

Medtronic, Inc., has petitioned the U.S. Supreme Court to review a decision from the Ninth Circuit Court of Appeals concerning whether the Medical Device Amendments (MDA) to the Food, Drug and Cosmetic Act (FDCA) preempt a state-law claim alleging that Medtronic violated a duty under federal law to report adverse-event information.

Background

In 2000, Richard Stengel had a SynchroMed EL Pump and Catheter, manufactured by Medtronic, surgically implanted into his abdomen to deliver pain relief medication directly into his spine. In 2005, after a hospitalization, he was diagnosed with ascending paralysis of his lower body, caused by the catheter, and a neurosurgeon removed the catheter. Stengel remained paralyzed after the surgery. In 2006, the FDA inspected a Medtronic facility and discovered that Medtronic was aware of the risks associated with the pump and catheter, and had known about them prior to Stengel’s paralysis. The FDA issued a warning letter to Medtronic, stating that Medtronic had misbranded the device by concealing known risks. Medtronic recalled the device in the spring of 2008, three years after Stengel’s paralysis.

The Stengels claimed that Medtronic was negligent under Arizona law because it allegedly failed to provide the FDA with information about adverse events involving the pump and catheter. The Ninth Circuit held that the state-law claim was not impliedly or expressly preempted by the MDA. Further, the court held that the general duty of care under Arizona common law incorporated a requirement to furnish adverse-event information to the FDA. (Stengel v Medtronic Incorporated, 704 F.3d 1224, January 10, 2013).

Petition for Certiorari

The Medtronic petition to the Supreme Court notes that courts of appeal have been divided regarding the applicability of both implied and express preemption under the MDA to state-law claims based on alleged violations of duties imposed by federal law. Regarding whether the MDA impliedly preempts state-law claims, the Ninth Circuit in this case and the Fifth Circuit in Hughes v Boston Scientific Corp., 632 F.3d 762 (2011) have said “no”; while the Sixth and Eighth Circuits have said “yes.” (See In re Medtronic, Inc., Sprint Fidelis Leads Prods. Liab. Litig (623 F.3d 1200, 1205-06 (8th Cir 2010); and Cupek v Medtronic, 405 F.3d 421, 423-24 (6th Cir. 2005)).

The circuit courts are also split on whether the MDA expressly preempts state-law claims alleging a violation of a generalized, rather than a device-specific, federal requirement. In Riegel v Medtronic, Inc. (552 U.S. 312 (2008)), the U.S. Supreme Court held that 21 U.S.C. sec. 360k expressly preempts state common-law claims regarding medical devices that have received premarket approval, unless those claims are based on state-law duties that are parallel to—and thus do not impose requirements different from, or in addition to—federal requirements. In the wake of Riegel, two circuits have held that this parallel duty exception is not applicable where a state-law duty is alleged to be parallel to a generalized federal duty that applies to all medical devices; four circuits have held the contrary position.

The petition further notes that the Ninth Circuit’s decision “would effectively eviscerate” the U.S. Supreme Court’s earlier decisions in Riegel and Buckman Co. v Plaintiffs’ Legal Comm. (531 U.S. 341 (2001)). “A claim concerning a device that has received pre-market approval can avoid preemption only if it is based on a state-law duty that is both (1) independent of (Buckman), and (2) parallel to (Riegel), a duty imposed by federal law,” according to the petition.

The petition concluded that this case is an “ideal vehicle for addressing a recurring question of exceptional importance to device manufacturers and the public health.”

Filed Under: Cases, Devices, Food & Drug Administration, HHS, News, SCOTUS

Physician Attempts New Strategy in Stopping Affordable Care Act

May 13, 2013 by Leave a Comment

A suburban Houston-based physician and prominent Republican fundraiser filed suit May 7 in a federal district court in Texas to stop the enforcement of the Patient Protection and Affordable Care Act (PPACA) (P.L. 111-148) (Hotze v Sebelius, No. 4:13-cv-01318, (S.D. Tex.)). Dr. Steven Hotze, who specializes in various types of alternative medicine, is also president of Braidwood Management, Inc., and employs over 70 people. In his complaint, Hotze said that PPACA violates both the origination clause and the Fifth Amendment of the U.S. Constitution.

Complaint

Hotze, who is also founder and president of Conservative Republicans of Texas, states that the law forces him and other Texans “to pay enormous penalties to the federal government, or else purchase health insurance that is far more expensive and less useful than existing employer-based coverage.” Hotze employs 73 people through Braidwood Management, and offers his employees a voluntary “high-deductible” health coverage plan which directly covers them for medical expenses greater than about $4,000 per year. Employees then have the option of paying into a health savings account from which they can withdraw to pay for their deductible and minor health care expenses.

The complaint notes that this sort of health plan does not meet the “minimum essential” health coverage requirements of PPACA. It also notes that Braidwood employees would not be eligible for Medicare or other public programs of minimum essential coverage, such as Medicaid. Hotze states that as of January 1, 2014, he would either have to pay a $2,000 per employee penalty, or “shared responsibility payment,” for not providing minimum essential coverage, or drop his existing health plan and switch to one that he claims would be more expensive and less desirable.

Basis of Complaint

Citing NFIB v Sebelius, No. 11-393 (U.S.), the case that upheld the health reform law, Hotze notes that U.S. Supreme Court states that the shared responsibility payment “shall be assessed and collected in the same manner’ as tax penalties,” and constitutes a tax. Hotze further states that since the Origination Clause of the U.S. Constitution (Art. I, Sec. 7, Cl. 1.) requires all revenue raising bills to originate in the House of Representatives, PPACA is unconstitutional because the text of the law originated in the Senate.

Hotze also claims that the health reform law constitutes a “taking” within the meaning of the Takings Clause of the Fifth Amendment because it compels individuals and companies to pay money to other private entities, government-approved health insurance companies, without public use and just compensation. Hotze is seeking an order prohibiting HHS and the Treasury Department from enforcing the law.

Filed Under: Cases, Individual Mandate, News, Patient Protection & Affordable Care Act

Breaking News: South Carolina Hospital Found Guilty of Submitting More Than $39 Million in False Medicare Claims

May 9, 2013 by Leave a Comment

Breaking-News-2.jpg

On the evening of May 8, 2013, a federal jury found Tuomey Healthcare System guilty of collecting millions of dollars in false Medicare claims.

It is a violation of the Stark Law if a hospital contracts with outside physicians to provide surgery exclusively in its facilities and pays them a bonus for productivity. Tuomey Healthcare System (Tuomey) in Sumter, South Carolina recently went to trial over this issue. After a four-week do-over trial, a jury concluded on the afternoon of May 8, 2013 that Tuomey violated the False Claims Act by submitting tens of thousands of illegal bills to Medicare worth $39 million. The jury found that Tuomey improperly compensated 19 specialty doctors whom hospital executives allegedly feared would divert lucrative patients to other hospitals or doctors’ offices. Jurors found that Tuomey submitted a total of 21,730 Medicare claims that were tainted by illegal compensation arrangements. The hospital’s ultimate financial penalty is not yet decided. Federal law requires repayment of all of the money paid under illegal Medicare claims, and the False Claims Act allows the government to try to reclaim up to triple the amount of total damages, plus as much as $11,000 per claim. The Court will now hear arguments and each side will submit motions interpreting what it thinks are the proper amount of damages. The Court will then rule on those motions and announce a specific penalty sometime in the future.

This was actually the second trial on the charges. In 2010, a jury that considered largely the same evidence found that the hospital violated the Stark law, but not the False Claims Act. The trial judge imposed a $45 million penalty on the hospital, but disputes over how the judge interpreted the split finding in the initial trial led the 4th Circuit Court of Appeals to invalidate the ruling and order the retrial that concluded May 8, 2013.

The Stark Law (42 U.S.C. sec. 1395nn), passed in 1989, governs physician self-referral for Medicare and Medicaid patients. The False Claims Act (31 U.S.C. secs. 3729 et seq.) is a federal law that enables whistleblowers to file legal actions against federal contractors who they claim defrauded the government. The Tuomey case began in 2005 with a lawsuit alleging hospital misconduct brought by orthopedic surgeon Michael K. Drakeford, MD, after unsuccessful contract negotiations with the health system.

In 2003, when physicians at a gastroenterology firm told Tuomey they wanted to perform outpatient surgical procedures in their own offices rather than at the hospital, Tuomey offered them a deal. The 301-bed system persuaded them and 18 other specialist physicians to sign a 10-year contract to do surgeries only at its hospital facilities. In return, Tuomey agreed to pay an annual base salary for each physician as well as “productivity equal to 80 percent of the net collections . . . Moreover, each physician was eligible for an incentive bonus that could total up to 7 percent of the productivity bonus.” Physicians were barred from competing with Tuomey for 2 years after the contract expired.

Richard P. Kusserow was the Department of Health and Human Services Inspector General for over eleven years. He is the author of nine books related to compliance. He is the founder and CEO of Strategic Management, a firm that has been providing specialized compliance advisory services since 1992 to 2,000 clients. Richard now contributes content to Wolters Kluwer health law blog to assist the industry in their understanding of compliance from the perspective of a former Inspector General. For more posts by Richards, please see Kusserow’s Corner.

Copyright © 2013 Strategic Management Services, LLC.  Published with permission.

Filed Under: Cases, Contributor's Corner, Fraud & Abuse, News, Wolters Kluwer Law & Business
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