Epic Litigation Panorama Awaits Well being, Life Sci Attys In 2021
Email Jeff Overley
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Law360 (January 3, 2021, 12:02 PM EST) —
Health care and life sciences lawyers are heading into an electrifying year of litigation as the Trump administration’s 11th-hour policymaking sparks legal challenges, the coronavirus pandemic ignites fraud suits, fodder grows for kickback probes and the U.S. Supreme Court mulls momentous cases involving the False Claims Act, abortion and Obamacare.
Here, Law360 explores the most important litigation involving the health care and life sciences industries in 2021.
Cornucopia of Kickback Cases on Horizon
The country’s next 365-day trip around the sun might be a banner year for Anti-Kickback Statute investigations and litigation. The AKS punishes payments intended to reward doctors for writing prescriptions paid for by Uncle Sam, and while the law has long been wielded aggressively, there have been recent signs that enforcement is getting even more forceful.
One such sign is the maturation of the federal Open Payments program, which tracks payments to doctors from drug and device makers. It’s long been expected that the plaintiffs bar would mine the Open Payments database for indications of shady financial arrangements, and with years of data now available, that mining is likelier than ever to bear fruit.
“We now have almost seven-and-a-half years’ worth of data and millions and millions of records involving billions of dollars,” Porzio Bromberg & Newman PC principal John Patrick Oroho told Law360. “So, you can see patterns.”
The U.S. Department of Justice has also been showing strong interest in AKS enforcement: it recently inked major settlements involving kickbacks with Novartis AG, Insys Therapeutics, Purdue Pharma LP, Medtronic USA Inc. and Biogen Inc. In addition, the Office of Inspector General at the U.S. Department of Health and Human Services in November issued a “special fraud alert” pressuring drugmakers to curtail events with paid speakers whose compensation can be punished under the AKS.
The focus on payments to doctors from drug and device makers makes sense for multiple reasons. The payments can warp physician judgment, affect vast sums of Medicare spending and be targeted more easily than off-label marketing, which in recent years has received greater First Amendment protection.
“A few years ago, I was speaking at a conference in London,” Oroho recalled, “and a former DOJ official who was also speaking there said that there’s no such thing as a First Amendment defense to a bribe.”
Risks of Rushed Rulemaking
As usual when control of the White House switches parties, the incumbent administration has been scrambling to finalize numerous regulations before handing the federal government’s reins to the incoming Biden administration. Some of the most important last-minute regulations have been coming from HHS, which still has nearly three weeks to push out additional rules.
It’s likely that some of those rules will carry profound business implications and wind up in litigation. Any legal challenges would be especially likely to succeed if regulators fail to genuinely consider public feedback or otherwise short-circuit mandatory procedural steps.
“Some rules may be non-controversial,” Meena Datta, global co-leader of Sidley Austin LLP’s health practice, told Law360. “But some are non-routine. And particularly the ones that are non-routine are likely to be closely scrutinized by health care stakeholders.”
Indeed, shortly after being finalized in late November, the Trump administration’s “most-favored nation” policy — under which the U.S. would get a relatively great deal on certain prescription drugs in Medicare — attracted lawsuits in at least four federal courts.
On the flip side, the Biden administration could get hauled into court if it hastily reverses Trump administration policies, such as those affecting abortion rights, transgender discrimination in health care and sales of bare-bones insurance policies. Courts blocked a number of rapid rollbacks early in the Trump administration, and avoiding similar defeats will require patience.
“When things are rushed either on the front end or on the back end … they can be scrutinized by stakeholders and subject to challenge,” Datta noted.
Clarity Coming on CARES Act Enforcement
Early in the pandemic, Congress earmarked hundreds of billions of dollars to help employers and health care providers weather the pandemic’s financial challenges. Attorneys spent much of 2020 analyzing potential legal liability, given that the money came with lots of strings attached.
While some cases have already been brought against individuals for seemingly obvious instances of fraud, 2021 is virtually certain to shed light on what enforcement will look like in cases with gray areas.
“To the extent there’s been cases, they have been pretty much blatant cases where people [created] fictitious companies in order to gain [federal] funds, or they used those funds to purchase exotic cars,” Robert Salcido, a partner at Akin Gump Strauss Hauer & Feld LLP, told Law360. “I think what we’re going see over the next year are much more nuanced cases brought against health care facilities.”
One major question is how enforcers will interpret mandatory acknowledgements from health care providers that “full compliance with all terms and conditions is material to [HHS’] decision to disburse funds to the recipient” under the Coronavirus Aid, Relief and Economic Security, or CARES, Act.
The reference to materiality is important because False Claims Act liability depends on whether compliance failings would have materially affected government payment decisions. Lawyers in 2021 will be looking for clues that indicate whether the government literally expects “full compliance” with the intricate terms and conditions.
“It remains to be seen … whether the government’s real-life administration of the program will demonstrate that it views compliance with all terms and conditions as material to disbursing the funds,” Reed Smith LLP partner Selina Coleman told Law360.
DOJ, Plaintiffs Bar Scrutinizing Pandemic Products
Plaintiffs firms have for months been encouraging whistleblowers to report the possible misuse of pandemic relief money. But they’ve also been fishing for possible misuses that go beyond disregard for CARES Act terms and conditions.
Kohn Kohn & Colapinto LLP, for example, has a whistleblower portal that says “fraudsters will try to sell fake vaccines and treatments.” Phillips & Cohen LLP has been encouraging whistleblowers to expose companies that are “falsifying test results” in government-funded research for COVID-19 treatments or “providing substandard or defective equipment, including personal protective equipment.”
“I’ve already seen some of the qui tam plaintiffs bar websites solicit people to come forward with [their] stories,” Joseph Willey, health litigation chair at Katten Muchin Rosenman LLP, told Law360. “So I do think we’re going to see a lot of activity.”
A modest amount of enforcement activity has already occurred. The DOJ has brought charges under the Federal Food, Drug and Cosmetic Act against Chinese manufacturers accused of selling fake N95 respirators; sued the New Jersey-based Natural Solutions Foundation for allegedly marketing an unproven “nano silver” product for COVID-19 treatment; and filed a wire fraud complaint against online sellers of a bogus coronavirus vaccine.
But while some cases may involve products undoubtedly sold under false pretenses, others could involve good-faith misunderstandings about U.S. Food and Drug Administration standards.
Greg Saikin, a BakerHostetler partner, told Law360 that some companies are facing inquiries over “compliance misses” that arguably stemmed from legitimate ambiguity in FDA requirements for personal protective equipment.
“I have become aware of an increasing number of governmental investigations of various U.S. companies, where the government misconstrues these compliance misses for fraud,” Saikin said. “I think we will see a number of these types of disputes ultimately play out in court over the next couple of years.”
Shortages of PPE early in the pandemic also fueled hoarding and price-gouging, which the DOJ has tackled with a special task force and a handful of prosecutions. It’s possible that the coronavirus’ winter resurgence could once again deplete pandemic supplies, generating more price-gouging and more prosecutions.
“They’re going to look at … conduct back in time” and ensure that price-gouging “continues to be a priority going forward,” Sidley Austin’s Datta said.
Opioid Trials Await Easing of Pandemic
In the nationwide flood of opioid crisis litigation, the pandemic pushed the scheduled starts of several trials into 2021 from 2020. During the delay, some of the biggest defendants — Johnson & Johnson, AmerisourceBergen Corp., Cardinal Health Inc. and McKesson Corp. — reached tentative settlements that could keep them from going before juries.
But until deals are universally finalized, the four companies are still preparing for courtroom clashes in cases brought by local governments in multidistrict litigation and state attorneys general outside the MDL. And even if those proposed resolutions become official, there would still be many other major defendants inside and outside the MDL.
The New York attorney general, for example, has a sweeping case that also targets divisions of Endo Pharmaceuticals Inc., Teva Pharmaceutical Industries Ltd. and Allergan PLC. That case could go to trial in early 2021.
Bellwether trials in the MDL are also on the horizon later in 2021. Much of the attention in the MDL has turned to big pharmacy chains — such as CVS Health Corp., Walgreen Co., Rite Aid Corp. and Walmart Inc. — that haven’t publicly shown any interest in settling despite losing key legal disputes.
The MDL is In re: National Prescription Opiate Litigation, case number 1:17-md-02804, in the U.S. District Court for the Northern District of Ohio.
New York’s case is In re: Opioid Litigation, case number 400000/2017, in the Supreme Court of the State of New York, Suffolk County.
High Court Eyeing Major Circuit Split on FCA
The U.S. Supreme Court in 2021 will eye several cases with significance that would be hard to overstate for the health care and life sciences industries. In the False Claims Act realm, the justices are looking at two petitions from health care providers asking whether the statute requires “objective falsity.” Examples of objective falsity include billing for services that were nonexistent or tainted by kickbacks.
One of the petitions, filed in September by hospice chain Care Alternatives, has attracted support from the American Medical Association and other health care groups. But in a sign of the broad implications, it has also won backing from the U.S. Chamber of Commerce and trade group Pharmaceutical Research and Manufacturers of America.
The Chamber and PhRMA have deemed the dispute so important that it “potentially affects any entity, public or private, that receives federal funds in myriad contexts.”
Significantly, the justices in November called on whistleblowers who prevailed at the Third Circuit to respond to the petition from Care Alternatives. And in December, the justices received a separate petition presenting essentially the same question in an FCA case out of the Ninth Circuit. The petition, filed by a health care management company, echoed Care Alternatives in contending that circuit courts are badly divided on whether objective falsity is required.
“What we have now is a pronounced circuit split,” Akin Gump’s Salcido told Law360. “That will be a big issue in 2021.”
The cases are Care Alternatives v. U.S. et al. ex rel. Druding et al., case number 20-371, and RollinsNelson LTC Corp. et al. v. U.S. ex rel. Winters et al., case number 20-805, in the Supreme Court of the United States.
Intrigue Building Around High Court Action on Abortion
In one of the most closely watched abortion cases, Mississippi is seeking review of a Fifth Circuit decision that struck down the state’s ban on almost all abortions after 15 weeks of pregnancy — a gestational point roughly two to three months earlier than a fetus becomes viable.
In its decision, the Fifth Circuit found that Mississippi’s ban implicates the “central holding” of Roe v. Wade as well as another landmark Supreme Court decision on abortion, Planned Parenthood v. Casey, which said “a state may not prohibit any woman from making the ultimate decision to terminate her pregnancy before viability.”
Now that the high court has a 6-3 conservative majority, the case is looking like an early test of how aggressively the right-leaning justices might move to curtail abortion access. Mississippi is also touting its petition as a vehicle to clarify whether the Supreme Court’s mid-2020 decision in June Medical Services v. Russo eliminated a balancing test that asks whether abortion restrictions have any medical benefits to offset their burdens on abortion access.
Adding extra intrigue, the justices as of Dec. 9 had on nine occasions rescheduled consideration of Mississippi’s petition. The first rescheduling occurred only a few days after the death of Justice Ruth Bader Ginsburg, who was replaced by conservative Justice Amy Coney Barrett.
The case is Dobbs et al. v. Jackson Women’s Health Organization et al., case number 19-1392, in the Supreme Court of the United States.
Make-or-Break Decision Looms for ACA
The biggest health care case of 2021 — which implicates health insurance coverage and benefits for tens of millions of Americans — is a GOP-led effort to have the Supreme Court strike down the entire Affordable Care Act, or at least its protections for people with pre-existing conditions.
Oral arguments happened in November, and at least two conservatives — Chief Justice John Roberts and Justice Brett Kavanaugh — appeared likely to join the high court’s three liberals in preserving the Democratic Party’s top domestic achievement during former President Barack Obama’s eight-year tenure.
“There seems to be little expectation in the health policy world that the court will throw out the entire statute,” BakerHostetler senior adviser Adam Higgins told Law360.
But if the justices surprisingly nuke the ACA, chaos could ensue. And unless Democrats win a narrow U.S. Senate majority by triumphing in Jan. 5 elections for Georgia’s two Senate seats, there’s little guarantee that Congress would find a fast fix.
“Both Republicans and Democrats have signaled that if the unexpected happens, they will have to act to address the upending of parts of the health system,” Higgins said. “But if Republicans control the Senate, it’s hard to see how exactly the two parties would reconcile their vastly different views of health policy.”
The cases are California et al. v. Texas et al., case number 19-840, and Texas et al. v. California et al., case number 19-1019, in the Supreme Court of the United States.
–Editing by Philip Shea.
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