Dorsey Health Law

As the world grapples with the health crisis caused by COVID-19, litigation regarding a different health crisis—the opioid epidemic—continues to progress (see our previous posts on this topic here and here). In a major development last week for the multidistrict litigation, the Sixth Circuit concluded that key bellwether cases against twelve large pharmacy chains may not include untimely dispensing allegations. The multidistrict litigation (“MDL”) includes claims by numerous plaintiffs arising out of the nation’s opioid crisis. Two of those plaintiffs—Cuyahoga County and Summit County of Ohio—brought claims against certain pharmacies that sold prescription opioids (in addition to their claims against other defendants like distributors and manufacturers). The Counties’ claims against the pharmacies are scheduled for trial in November 2020. The Counties’ claims against the pharmacies originally related to the pharmacies’ capacity as “distributors” of drugs to their own retail pharmacies. The Counties expressly declined to bring any claims against the pharmacies as “dispensers” of prescription opioids. This is an important distinction. Distributors ship pharmaceuticals wholesale; dispensers fill prescriptions. Discovery against the pharmacies proceeded with respect to their alleged role as distributors. For all parties, discovery included more than 600 depositions and the production of tens of millions of documents. However, nearly ten months after the close of discovery, the Counties reversed course and moved to amend their complaints to add dispensing allegations against the pharmacies. On November 19, 2019—i.e., almost 19 months after the court’s deadline for amendments to the Counties’ complaints—the court granted the Counties’ motion. The court did so based on perceived efficiencies, reasoning the dispensing claims were better considered by the district court now rather than later “in front of some other Court that does not have the expertise I have developed over the past two years.” The court also allowed discovery on the recently-added dispensing claims. The pharmacies were ordered to produce data on every prescription that their pharmacies had filled for any opioid medication, anywhere in the United States, for a period of 13 years—including data on prescriptions outside Ohio, which the district court intended to make available for future cases, but which would be inadmissible in the Ohio-focused case in which it was to be produced. Following the district court’s order, the pharmacies petitioned the U.S. Court of Appeals for the Sixth Circuit for a writ of mandamus. The primary issue before the Sixth Circuit on the pharmacies’ petition was the district court’s decision to allow the Counties to amend their complaints 19 months after the court’s deadline for doing so. The Sixth Circuit granted the writ in a strongly-worded order. Stating that an “MDL court may not . . . distort or disregard the rules of law applicable” to each individual case consolidated in the MDL, the Sixth Circuit concluded there was no “good cause” for the Counties’ failure to timely amend their complaints to add the dispensing allegations. In fact, the Sixth Circuit recognized that the Counties’ express decision to omit those claims earlier “arguably amounts to an outright waiver of them.” According to the Sixth Circuit, “[n]ot a circuit court in the country, so far as we can tell, would allow a district court to amend its scheduling order under these circumstances.” The Sixth Circuit’s ruling once again highlights how the unprecedented scope of the opioid litigation—with more than 2,700 cases consolidated in the MDL—deeply strains ordinary structures and procedures of litigation. In the orders at issue, the district court appeared to value efficiency and the collective interests in managing the MDL as a whole over the individual rights of the parties in the specific case at hand. Stipulating that the “district judge in this case is notably conscientious and capable, and we fully recognize the complexity of his task in managing the MDL here,” the Sixth Circuit nevertheless concluded the district court had gone too far: “Respectfully, the district court’s mistake was to think it had authority to disregard the Rules’ requirements in the Pharmacies’ cases in favor of enhancing the efficiency of the MDL as a whole.” That decision should have been based, but was not, on the record in the individual case before the court. Even in an MDL as complex as the opioid litigation, the district court’s authority to manage it is not without limit. Cases within an MDL retain their separate identities and the parties in those individual cases have rights that cannot be impinged merely to create efficiencies in the MDL generally. Particularly with respect to issues that can be dispositive, e.g., motions for summary judgment or to amend pleadings, it remains important for district courts to articulate and apply the traditional standards governing such issues. The Sixth Circuit’s decision also means that important liability questions in the opioid litigation will remain unanswered for now. Had the dispensing claims been allowed, the trial set for November 2020 may have answered whether a pharmacy could or would be held liable for filling prescriptions issued by someone else. Because those claims are no longer part of the Counties’ complaints, the full extent of potential liability large pharmacies face for the opioid epidemic is still unclear. And unlike other categories of defendants like drug manufactures and large distributors, pharmacies have largely declined to settle the claims against them. 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.

This post is an update from our earlier blog post, available here, on the bellwether federal opioids trial in the Northern District of Ohio.  Just hours prior to the start of the trial in a consolidated case involving two plaintiff counties in Ohio, all of the remaining defendants in the case, except Walgreens, reached a settlement.  In the settlement, distributors, McKesson, Cardinal Health and AmerisourceBergen (distributors of approximately 90% of all prescription medications) will pay $215M to Cuyahoga and Summit Counties in Ohio.  A manufacturer, Teva, will pay $20M in cash over three years and will donate $25M worth of Suboxone, an addiction treatment medication.  Several manufacturers who were originally named defendants in these two consolidated cases previously settled out of the cases.  Judge Polster, the federal judge who has overseen the multi-district litigation (“MDL”), announced that Walgreens would face a separate trial focusing on its role as a dispenser.  There are more than 2,000 cases filed in the MDL by states, counties, cities and tribes which Judge Polster has been overseeing for more than two years.  The remaining cases involve manufacturers, distributors and large pharmacy chains.  Lawyers involved in the cases have expressed hope that the recent settlement could encourage other cases in the MDL to settle as well, although one of the most significant hurdles has been a dispute about how any settlement money would be distributed among the plaintiffs, as well as who would control the use of the settlement funds going forward.

In the last several years, thousands of cities and counties, as well as most states, have sued various combinations of pharmaceutical manufacturers, retailers, and distributors for damages allegedly caused by the opioid epidemic.  Nearly 2,000 of those cases have been consolidated into a multi-district litigation (“MDL”) in the Northern District of Ohio. Until very recently, defendants in the MDL had not revealed how they intended to argue against the charge that they caused or contributed to the opioid crisis.  But with the first trial set to begin on October 21, 2019, the defendants recently submitted their trial briefs, which provide a sneak peek at the factual and legal arguments they intend to raise at trial.  Among other alleged causes, defendants have pointed to corrupt doctors, criminal cartels, and even local governments. For example, one drugmaker stated that it “fully recognizes the opioid crisis that exists in this country” but suggested that alternative causes such as public policy failures and illicit drug use drove the opioid crisis.  More specifically, the defendant stated: [P]ervasive diversion and abuse of oxycodone and hydrocodone pills, unscrupulous doctors and internet pharmacies operating as drug-trafficking organizations, foreign criminal cartels that flooded the country with heroin and fentanyl illegally made in clandestine labs, and state and federal governments that struggled to ensure patients had access to necessary medications while addressing long-known problems of abuse, misuse, diversion, and overdose. (Doc. No. 2633 at 8.) Another drugmaker alleged that rather than blaming defendants, the plaintiffs—i.e., two counties in Ohio—“should be examining their own actions and inaction—which directly contributed to the opioid abuse problem in the United States.”  (Doc. No. 2669 at 9.)  As an example, the defendant argued that “the Counties continue to reimburse for opioid prescriptions for chronic pain today, thereby influencing what gets prescribed and dispensed to patients—and confirming (against their very own foundational theory in this case) that opioid prescriptions may be appropriate for chronic pain.”  (Id.) Similarly, an opioid distributor believes the opioid crisis was caused by “innumerable actors not before the Court, ranging all the way from well-intentioned prescribing doctors to criminal drug dealers and heroin traffickers.”  (Doc. No. 2643 at 4-5.) Another distributor suggested that plaintiffs in the MDL overlook the “role of criminal drug cartels and other actors in the illegal opioid market.”  (Doc. No. 2659 at 4.) Finally, yet another distributor argued that alternative causes of the opioid crisis preclude recovery in the MDL.  This defendant argued that under City of Cleveland v. Ameriquest Mortg. Secs., Inc., 615 F.3d 496 (6th Cir. 2010), the presence of “independent actors between the alleged misconduct and the alleged injury” compel the conclusion that plaintiffs’ claims here are “too indirect to warrant recovery.”  Ameriquest, 615 F.3d at 506.  The defendant attempted to distance itself from defendants occupying other roles in the chain of distribution by stating that it “does not make opioids available to patients,” and instead, a “patient can obtain opioids only after a doctor makes an independent decision to write a prescription and a pharmacist makes the independent decision to fill the prescription.”  (Doc. No. 2667 at 8.) All the finger-pointing between and among plaintiffs and defendants emphasizes what has been increasingly clear as the first MDL cases approach trial; it will take a Herculean effort by the courts (and juries) to sort through the medical, social, political, and economic issues that are intertwined with the opioid crisis.  The breadth of the problem even raises the question of whether jury trials are the right tools to address social crises of this magnitude and complexity.  Indeed, some studies place the national economic burden of the opioid crisis at $78.5 billion, with over 35,000 people dying annually for drug overdoses related to opioids. U.S. District Judge Dan Polster, who presides over the MDL cases, bluntly emphasized these complex challenges in recent comments: [E]veryone shares some of the responsibility, and no one has done enough to abate it.  That includes the manufacturers, the distributors, the pharmacies, the doctors, the federal government and state government, local governments, hospitals, third-party payers and individuals.  Just about everyone we’ve got on both sides of the equation in this case. The federal court is probably the least likely branch of government to try and tackle this, but candidly, the other branches of government, federal and state, have punted.  So it’s here.

The Eliminating Kickbacks in Recovery Act of 2018 (EKRA) became law on October 24, 2018, and is codified at 18 U.S.C. § 220.  As part of the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment (SUPPORT) for Patients and Communities Act, EKRA was enacted in response to a concern that the federal Anti-Kickback Statute (AKS) was not broad enough to cover certain abusive payment arrangements related to opioid addiction treatment centers, since the AKS only applies to federal health care programs.  EKRA has considerable similarities to the AKS, but is notably distinct from the AKS in that it applies to all payors rather than just federal health care programs and has an exception for employment compensation that is much narrower than the AKS’s employment safe harbor.  Further, EKRA relates to arrangements with recovery homes, clinical treatment facilities, and laboratories (the “Subject Entities”).  With respect to laboratories, even though EKRA was enacted in response to the opioid crisis, it applies to all laboratories, not just laboratories that perform testing related to substance abuse (e.g., toxicology screening). We set forth below an overview of EKRA, exceptions to the law’s prohibitions, and recommendations to ensure compliance. Overview EKRA subjects to criminal penalties anyone who, with respect to services covered by any health care benefit program (whether federal or private), knowingly and willfully: solicits or receives any remuneration in return for referring a patient or patronage to a Subject Entity; or pays or offers any remuneration: to induce a referral of an individual to a Subject Entity; or in exchange for an individual using the services of that Subject Entity. Penalties for each occurrence of violating the law are a fine of not more than $200,000 (which is double the possible fine per violation of the AKS), imprisonment for not more than 10 years, or both. EKRA defines the Subject Entities as follows: Recovery home: “a shared living environment that is, or purports to be, free from alcohol and illicit drug use and centered on peer support and connection to services that promote sustained recovery from substance use disorders.” Clinical treatment facility: “a medical setting, other than a hospital, that provides detoxification, risk reduction, outpatient treatment and care, residential treatment, or rehabilitation for substance use, pursuant to licensure or certification under State law.” Laboratories: defined by reference to CLIA, which means that all laboratories are subject to EKRA. EKRA does not apply to conduct that is prohibited by the AKS, and EKRA does not “occupy the field” in which any state law may be more stringent related to the same subject matter. Exceptions Similar to AKS statutory exceptions and regulatory safe harbors, EKRA provides a number of exceptions to its prohibitions, including exceptions for payments made under employment arrangements, personal services and management contracts, waivers or discounts of any coinsurance or copayment, and certain other exceptions that meet specified parameters (some of which are similar to and some of which are different from the parameters under the parallel AKS exceptions/safe harbors).  EKRA also has an exception for remuneration made pursuant to certain alternative payment models, a parallel of which is not present in AKS exceptions/safe harbors. Of note, the EKRA exception for payments made by an employer is much narrower than the AKS safe harbor for employment.  Specifically, while the AKS safe harbor permits any payments to an employee as long as there is a bona fide employment relationship, the EKRA exception requires that the payment not vary based on the number of individuals referred, tests or procedures performed, or amounts billed to or received from the health care benefit program from the individuals referred.  This means that employment arrangements that would not be prohibited under the AKS, such as those with sales and marketing personnel that include commission-based compensation, appear to be prohibited under EKRA and thus need to be carefully evaluated for compliance with this new law.  (The EKRA employment exception applies to payments made by an employer both to employees and independent contractors (rather than just to employees), even though EKRA has a separate exception for personal services and management contracts.) EKRA provides that the Attorney General, in consultation with the Secretary of Health and Human Services, may promulgate regulations to clarify the exceptions described in the statute. Recommendations for Complying with EKRA The Subject Entities need to: Ensure existing and future compensation arrangements fit within EKRA exceptions, particularly for employment compensation due to the narrower parameters of the EKRA employment exception as compared to the AKS employment safe harbor, and to the extent certain of such arrangements would not otherwise be analyzed for compliance with the AKS because they do not involve payment under any federal health care program. Update policies and procedures related to financial arrangements with referral sources and related to patient copay and coinsurance waivers to address compliance with EKRA. Further, entities that are not themselves a Subject Entity but that do business with a Subject Entity should evaluate their relationships with Subject Entities to ensure that such relationships are in compliance with EKRA, since the law applies to parties on both sides of the prohibited arrangement (i.e., the law prohibits both the payment or offering of referral/inducement fees, but also the soliciting or receiving of such remuneration).  Policies and procedures of non-Subject Entities who have such business relationships should also be updated to address EKRA compliance. We will continue to closely monitor the state of EKRA for guidance, revisions to the law and enforcement. Further, it is important to also understand that several states, such as Florida, Utah and California, have passed their own state level “patient brokering” laws which prohibit similar conduct and arrangements as addressed by EKRA.  These laws can also be implicated and we are monitoring their development as well.   Summer Associate Monica Delgado provided substantial assistance researching and drafting this blog post.

Today, the Federal Government announced enforcement actions against 60 defendants in eleven federal districts, including 31 doctors, seven pharmacists, eight nurse practitioners, and seven other licensed medical professional for allegedly prescribing and distribution opioids and other dangerous narcotics and for health care fraud schemes. (DOJ Press Release, April 17, 2019). The charges involve over 350,000 controlled substances prescriptions and over 32 million pills. The unsealed indictments against the defendants can be found here. The enforcement action was led by the Appalachian Regional Prescription Opioid (ARPO) Strike Force. The ARPO Strike Force was formed in December and includes a team of federal agents and prosecutors to combat the opioid epidemic in the worst hit area of the country. The Strike Force analyzed a variety of databases to identify suspicious prescribing activity; investigators then used confidential and undercover agents to document medical professionals’ prescribing and dispensing of opioids in exchange for sex and cash. Sari Horwitz & Scott Higham, Doctors in seven states charged with prescribing pain killers for cash, sex, Wall St. J. (Apr. 17, 2019, 1:36 PM), https://www.washingtonpost.com/world/national-security/doctors-in-five-states-charged-with-prescribing-pain-killers-for-cash-sex/2019/04/17/7670d20e-607e-11e9-9ff2-abc984dc9eec_story.html?utm_term=.7ae448f3b507. In one case, a doctor allegedly prescribed combinations of opioids and benzodiazepine, sometimes in exchange for sexual favors; in total, the doctor is alleged to have prescribed approximately 500,000 hydrocodone pills, 300,000 oxycodone pills, 1,500 fentanyl patches and more than 600,000 benzodiazepine pills. In another case, a pharmacist was charged with allegedly dispensing large amounts of opioids outside the usual scope of professional practice and for no legitimate medical purpose. A dentist was also charged for alleged conduct that included writing prescriptions for opioids that had no legitimate medical purpose, removing teeth unnecessarily, scheduling unnecessary follow-up appointments and incorrect billing practices. While there has been an intense focus through litigation across the country on the role of manufacturers and distributors in the opioid crisis, recent initiatives have focused on prescribers and dispensers. Since June 2018, over 650 individuals have been excluded from participation in Medicare, Medicaid and all other Federal health care programs for conduct related to opioid diversion and abuse. For law-abiding prescribers and dispensers, it may be easy to dismiss today’s headline news as “not applicable”. However, all prescribers and dispensers should take notice of the increased number of investigations against their fellow licensees. The increased scrutiny of providers’ opioid prescribing and dispensing across the country could mean that even innocent providers are caught up in an investigation. Federal and state resources are being devoted in record numbers to investigations of prescribers and dispensers. There are regional DEA and DOJ task forces in place, dedicated funding streams for U.S. Attorneys, focused attention by state Medicaid agencies and Medicaid Fraud Control Units, and enforcement actions by state Boards of Medicine and Pharmacy. Cases against prescribers and dispensers are more likely today than in the past to include both civil and criminal penalties related to opioid prescribing and dispensing. As evidenced by today’s announcement, the government has become sophisticated in the use of data mining to identify outliers who will be the next targets of government investigations. Outliers in the number and dosages of prescriptions, the numbers of pain patients, the combinations of drugs prescribed, and failure to check and report to state prescription drug monitoring programs or report significant loss or theft to the DEA, can all trigger an investigation. In order to reduce risk of becoming the target of an investigation, prescribers and dispensers of opioids should ensure that they stay abreast of all State specific guidelines and standards of care for prescribing and dispensing opioids; review CMS guidance on opioid prescribing; review CDC Guidelines for prescribing opioids for chronic pain; and utilize their state’s prescription drug monitoring programs. Prescribers and dispensers should also focus on appropriate recordkeeping and documentation and inventory counts to reduce theft and unexplained inventory shortages. Dispensers should also ensure they know and verify the prescribers of prescriptions and document how any red flags in opioid prescriptions are resolved.   If you have any questions about these topics, please contact the authors or your regular attorney at Dorsey & Whitney.

  Last week, with bipartisan support, both the Iowa House and Senate passed, unanimously, HF 2377   (“An Act Relating to the Regulation of Certain Substances, Including the Regulation of the Practice of Pharmacy, Providing Penalties, and Including Effective Date Provisions”). The bill is expected to be signed into law by the Governor in the coming days. Like many other states throughout the country, Iowa has taken steps to increase the State’s regulation of opioid prescriptions in the wake of a national opioid epidemic. The new law will impact the operations of prescribers and pharmacies.  New requirements state that most prescribing practitioners must register with the State’s prescription drug monitoring program (PMP) and check the PMP database prior to prescribing an opioid.  The current law encourages, but does not require, practitioners to check the PMP database prior to writing a prescription for an opioid. The new law will also require pharmacies and prescribers that furnish, dispense, or supply controlled substances identified in Iowa Code 124.544(1)(g) to submit information to the PMP regarding the prescription within one business day of dispensing the controlled substance.  Current law at Iowa Admin. r. 657-37.3(3) exempts prescribers who administer or dispensed a controlled substances for purposes of outpatient care from this reporting requirement. Additionally, beginning January 1, 2020, unless an exemption applies, every prescription issued for a controlled substance must be transmitted to a pharmacy electronically. The bill also establishes continuing education requirements for licensed individuals prescribing opioids. Prescribers should be aware that, similar to legislation passed in other states, beginning February 1, 2019, the Iowa Board of Pharmacy will provide annual reports to prescribers which are aimed at showing prescribers how they compare to their peers.  Each year, prescribing practitioners will receive a summary of the prescriber’s history of prescribing controlled substances and a comparison to others in the same profession or specialty. Additionally, the Iowa Board of Pharmacy will provide specific notifications to prescribing practitioners and pharmacists regarding patients that may be doctor or pharmacy shopping or be at risk of abusing or misusing controlled substances. The bill also includes a “Good Samaritan Law” that provides immunity from prosecution under laws such as drug possession, for persons who call 911 to seek help for a drug overdose.  The immunity is not available for drug dealers or repeat offenders.  Practitioners and pharmacies should prepare now by implementing immediate changes to their policies and procedures in order to comply with the new requirements under HF 2377.  Changes would include requirements for prescribers to enroll in the PMP database, report to the PMP database within 1 business day of dispensing a controlled substance, and check the PMP database prior to writing a prescription for a controlled substance.  Software security changes may also need to be implemented by January 1, 2020 in order to accommodate the new electronic prescribing requirements for controlled substances.     

  Today, in a move that is widely supported by those in both political parties and across the country, President Trump declared the opioid epidemic a national emergency.  Doing so will allow for additional resources to be used toward fighting the opioid crisis, which could include expanding treatment facilities and supplying first responders with the anti-overdose remedy, naloxone.  The declaration of a public health emergency unrelated to a natural disaster is rare; the US Department of Health and Human Services declared one in 2016 due to the Zika virus but, prior to that, the last declaration unrelated to a natural disaster was during the 2009-10 flu season.   Drug overdose deaths continue to rise across the county, with 6 out of 10 involving an opioid.  According to the Centers for Disease Control and Prevention, 91 Americans die every day from an opioid overdose, and overdoses from prescription opioids are a driving factor in the increase in opioid overdose deaths.  Since 1999, the prescription opioids sold (and the deaths from prescription opioids) have quadrupled, with no overall change in the amount of pain American’s report.   Across the country, states have adopted a variety of strategies to combat the alarming rise in opioid drug abuse.  Additionally, as of late, a number of legislative bills have been introduced in an attempt to curb the abuse.  For example, on July 28, 2017, the “Every Prescription Conveyed Securely Act” (“Act”) was introduced in the United States House of Representatives. The Act calls for, with some exceptions, controlled substance prescriptions covered under Medicare Part D to be transmitted by a health care practitioner electronically to a pharmacy. Representative Markwayne Mullin, one of the authors of the Act, said in a press release, “[b]y requiring all doctors and pharmacists to use an online database when prescribing these highly addictive drugs, we allow e-prescriptions to control, track, and monitor these highly addictive painkillers on a new level.” The National Association of Chain Drug Stores has long been a proponent of electronic prescriptions believing that electronic prescriptions “are more efficient, improve prescription accuracy, and . . . make it easier for patients to get the medications they need, while also helping to prevent fraud and abuse.”   A full copy of the Every Prescription Conveyed Securely Act can be found by clicking here.  

The FDA has called on the drugmaker Endo Pharmaceuticals to stop selling the opioid Opana ER. The press release on June 8th reflecting this announcement marks a novel approach from the FDA, as the agency for the first time has asked a company to remove a painkiller from the market based on the public health consequences of abuse. This opioid is an extended release version of Opana, and was first approved in 2006. As the nation increasingly faced an epidemic of opioid abuse and overdoses, the manufacturer reformulated the drug in 2012, adding a coating to the medication intended to make it harder to snort or inject the medicine. The FDA found that the product met the regulatory standards for approval, but declined to approve labeling describing the medication as having abuse deterrent properties because they found that the data did not show that the reformulation could be expected to meaningfully reduce abuse. Despite the 2012 reformulation, an increasing number of people abused this opioid by crushing, dissolving, and injecting it. In March of 2017, a panel of advisers to the FDA voted 19-8, with one abstention, that the drug’s benefits no longer outweighed the risks. Data showed that while nasal abuse fell, the rate of abuse through intravenous injection increased and the drug has been associated with outbreaks of HIV and hepatitis C, as well as a blood disorder thrombotic microangiopathy. In addition, Opana was considered at the center of an HIV outbreak in Indiana in 2015. The opioid epidemic in the United States has prompted several novel approaches to reducing abuse, often at the state level. State level responses, including prescription drug monitoring programs, declarations of a state of emergency, and limiting prescription lengths for opioids, are being implemented across the country, at the same time that lawmakers debate the future of the Affordable Care Act which has aimed millions of dollars within the Medicaid program towards addiction treatment and prevention, and expanded the scope of the Mental Health Parity Act. Ohio Attorney General Mike DeWine filed a lawsuit against five opioid manufacturers on May 31, including Endo, accusing them of misleading doctors and patients about the danger of addiction and overdose. Other states and cities have filed similar lawsuits. Ninety-one Americans die every day from opioid overdose according to the CDC. The FDA has stated that if the company resists removal of this opioid from the market, the agency intends to take formal steps to remove it by withdrawing approval. Endo in a response stated that the company is reviewing the request and evaluating potential options as they “determine the appropriate path to move forward.” This FDA action is a significant step in what will likely be a lengthy journey in which federal and state regulators (and private plaintiffs) use whatever legal authorities available to combat an increasingly damaging public health crisis.