Articles Posted in Health Law

For health care providers concerned about the effect the Covenant Medical Center v. State Farm ruling would have on their right to receive insurance payments for undisputed services, the University of Michigan Regents v. Victor P. Valentino, J.D. decision is a victory. The Michigan Supreme Court upheld the right of no-fault insurers to directly pay medical providers, reversing the earlier Michigan Court of Appeals decision.

The Court of Appeals ruling had awarded Victor P. Valentino, a personal-injury attorney, a portion of more than $98,000 from his client’s no-fault auto insurance settlement that was designated for medical treatment. The client, Larry Reed, later filed for bankruptcy and was subsequently unable to pay the University of Michigan’s University Hospital’s health care bills.

Reed had agreed upon a 1/3 contingency fee “of the net recovery…received through suit, settlement, or in any other manner” in Valentino’s retainer agreement. Therefore, when Reed’s insurance company began sending two-party checks listing both the hospital and Reed as payees, Valentino would take his portion of the check. Only after the hospital filed a five-count complaint alleging conversion, tortious interference with a contract, claim and delivery, declaratory relief, and injunctive relief, did Valentino forward the remainder of the insurance proceeds to the University Hospital in order to cover Reed’s medical bills.

California has joined a number of other states, including Vermont and Washington, in requiring pharmacy benefit managers (PBMs) to register with a state department. Assembly Bill 315 (AB 315), Pharmacy Benefit Management was signed by California Governor Jerry Brown on September 29, 2018 and became effective January 1, 2019. The bill includes several new requirements detailed below. A complete list of legislation affecting PBMs across the country can be found here.

Pharmacy benefit managers ostensibly exist as middlemen seeking to reduce prescription drug prices and to negotiate contracts on behalf of their clients. PBMs are now responsible, among other things, for administering the various pharmacy benefits for health plans, conducting drug utilization reviews, and negotiating rebates and reimbursement amounts. Although professionals in PBM positions, as the California Assembly analysis writes (available as PDF download here), “have one of the most prominent roles in determining coverage and payment for drug products, despite never taking physical possession of the drug”, they have largely “escaped scrutiny of regulation and licensure.” With the large purchasing power they wield, their arguably conflicting interests, and the increasingly aggressive stance of PBMs when dealing with those they interact with, it is important that the business dealings of PBMs are transparent and that the managers are held accountable.

This new bill now requires PBMs to register with the California Department of Managed Health Care (DMHC) and to “exercise good faith and fair dealing” by requiring PBMs to provide quarterly disclosures to the purchasers of their services, including revealing both direct and indirect conflicts of interest. Additional disclosures containing certain information can be requested by the purchaser at any time. These disclosures can include information such as rates negotiated with pharmacies, drug acquisition cost, and rebates received from pharmaceutical manufacturers.

In response to the current opioid crisis sweeping across the country, Congress passed the Substance Use-Disorder Prevention that Promotes Opioid Recovery and Treatment for Patients and Communities Act (commonly referred to as the SUPPORT Act). President Trump signed the Act on October 24, 2018, which will take full effect on January 1, 2022.

The Act included over 120 provisions. One of these provisions, Section 6111 (“Fighting the Opioid Epidemic with Sunshine”), expands the reporting obligations that are required as part of the Physician Payments Sunshine Act. The Sunshine Act, which the Center for Medicare and Medicaid Services (CMS) refers to as the Open Payments Program, was passed in 2010 as part of the Patient Protection and Affordable Care Act. This made it mandatory for pharmaceutical and medical device manufacturers to disclose to CMS any payments or other transfers of value, such as consulting fees or research grants, made to physicians or teaching hospitals. This payment information is then made publicly available in a searchable online database.

The SUPPORT Act extends the Sunshine Act to now include additional health professional affiliates – physician assistants, nurse practitioners, clinical nurse specialists, certified nurse-midwives, and certified registered nurse anesthetists. In addition, CMS is now authorized to post National Provider Identifier numbers (NPIs) on the public database, something that was previously barred by the Sunshine Act.