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Archive for the ‘Medical & Health Care’ Category

FDA’s Draft Guidance on When to Submit A 501(k) Bolsters Potential for Medical Device Manufacturers to Argue that State Tort Claims are Impliedly Preempted

Posted on: September 8th, 2016

Doctor workplace with digital tablet and stethoscope

By: Michael Bruyere and Amanda Hall

On August 8, 2016, the FDA issued draft guidance on “Deciding When to Submit a 510(k) for a Change to an Existing Device.” Current regulations provide that a manufacturer of a medical device must submit a premarket notification submission to the FDA at least 90 days before beginning to sell a device that has been changed or modified in any manner “that could significantly affect the safety or effectiveness of the device.” 21 C.F.R. § 807.81(a)(3). The draft guidance clarifies this language, providing more specific examples of when a 510(k) submission must be made.

The draft guidance, although it is not final nor binding, is significant not only because it should assist medical device manufacturers in determining when a 510(k) submission should be made. The increased clarity also bolsters the likelihood of a medical device manufacturer being able to successfully employ an implied preemption argument akin to those that have been successfully used with respect to generic drugs (see PLIVA v. Mensing, 564 U.S. 604 (2011) and Mutual Pharmaceutical Co. v. Bartlett, 133 S.Ct. 2466 (2013)) to defeat state law tort claims. In the generic drug context, a generic drug manufacturer cannot unilaterally change its label because it has the duty of sameness with respect to the brand drug. Accordingly, courts have concluded that state law claims against such manufacturers – typically alleging that the generic drug manufacturer was somehow negligent by failing to immediately provide a specific warning on its label – are impliedly preempted because the generic drug manufacturer could not immediately alter its label on its own without violating the law. As the Court said in Mensing, “[i]f the Manufacturers had independently changed their labels to satisfy their state-law duty, they would have violated federal law…Thus, it was impossible for the Manufacturers to comply with both their state-law duty to change the label and their federal law duty to keep the label the same.”

To date, attempts by medical device manufacturers to make an analogous argument, i.e. that they could not immediately change their device to make it safer (thus complying with a duty pursuant to state tort law) because such a change would require submitting a new 510(k) to the FDA and waiting 90 days (thus complying with an obligation under federal law), have been unsuccessful. By clarifying instances in which a 510(k) must be submitted, the draft guidance increases the possibility of medical device manufacturers successfully defending against state tort claims on this basis.

OCR Casts a Wider Net on HIPAA Breaches

Posted on: August 29th, 2016

HIPAA health care document in duo tone blue

By: Agne Krutules

Under the Health Insurance Portability and Accountability Act (HIPAA), covered entities and their business associates have duties under the Privacy Rule and the Security Rule to protect patient health information. The U.S. Department of Health and Human Services, Office for Civil Rights (OCR) regional offices are required to investigate all reported breaches involving the protected health information (PHI) of 500 or more individuals. With regard to smaller breaches, however, OCR has discretion whether to conduct an investigation.

From 2003 through May 31, 2016, OCR received more than 134,246 HIPAA-related complaints and investigated and resolved more than 24,241 cases. The vast majority of these investigations involved larger breaches of unsecured PHI affecting 500 or more individuals. That is typically what most people have grown to expect—more attention to large-scale breaches, with smaller breaches under 500 individuals typically not receiving as much scrutiny. However, these traditional expectations are about to change due to a recent announcement from OCR about its plans to increase efforts to investigate smaller breaches more frequently.

Through an August 18, 2016 email, OCR announced that it is launching an initiative “to more widely investigate the root causes” of HIPAA breaches affecting fewer than 500 individuals. According to the announcement, OCR’s regional offices have ramped up their efforts to identify and obtain corrective action to address “entity and systemic noncompliance” related to these smaller scale breaches. While not every HIPAA breach will be the subject of investigation due to limitations on resources, OCR says that the following factors will be considered in determining whether to pursue such investigations:

  1. The size of the breach;
  2. Theft of or improper disposal of unencrypted PHI;
  3. Breaches that involve unwanted intrusions to IT systems (for example, by hacking);
  4. The amount, nature, and sensitivity of the PHI involved; and
  5. Instances where numerous breach reports from a particular covered entity or business associate raise similar issues.

OCR’s announcement also states that “Regions may also consider the lack of breach reports affecting fewer than 500 individuals when comparing a specific covered entity or business associate to like-situated covered entities and business associates.” This is the first time OCR has ever specifically announced that it would consider the factor of underreporting when determining whether to investigate a data breach. Thus, covered entities and business associates should use this message to focus on their breach investigation techniques and breach reporting processes.

Although the investigations of the smaller scale breaches will remain discretionary, more investigations affecting less than 500 individuals are certain. Accordingly, covered entities and business associates should not become complacent when dealing with smaller or “routine” incidents, and they should take proactive steps to review their HIPAA compliance obligations and update safeguards to protect against breaches. Becoming an object of an OCR investigation can be time-consuming and expensive, even without considering the potential costs of civil monetary penalties if HIPAA non-compliance is uncovered.

From 3D Printing to 4D Printing – New Advances in Science Implicate Changes in Existing Products Liability Law

Posted on: February 25th, 2016

option 3By: Amanda K. Hall

On January 25, 2016, researchers at Harvard University and The University of Illinois Urbana-Champaign detailed their creation of “4D-Printed” structures –made by mimicking the way orchids and other plants move and twist – that could ultimately lead to advances in the way medical devices are created both in the United States and abroad. For instance, scientists are working to create 4D-printed robotic tools that move and bend in order to assist in surgeries.  3D Printing, also known as additive manufacturing, is already being used to revolutionize the healthcare industry through the creation of things such as prosthetic devices.

As technology continues to advance, the effect that this emerging technology will have on traditional theories of products liability remains unseen. For example, in the products liability realm, the persons or entities responsible for injuries or damage caused by a defective medical device are typically those who manufactured or sold the defective product.  Because of the nature of 3D printing, however, there is a challenge in determining who should be held liable.  The manufacturer of the 3D printer itself, the software designer or CAD developer who assist in developing the code that is fed into the 3D printer in order to create the product, and the doctors and hospitals who own and use the 3D printer, are all potential candidates.  Under existing law, however, there are potential pitfalls to an injured plaintiff seeking to hold any of these individuals or entities liable.  A more thorough analysis of these issues can be found in “3-D Printing of Medical Devices,” DRI Magazine, September 2015, available here.  Additionally, our lawyers are available to assist you in taking steps to minimize the potential risks and liability associated with the use of this technology.

Insurance Application Omissions Not Enough to Rescind Policy

Posted on: January 19th, 2016

option 4By: Kristian Smith

Insurers may need to pay closer attention to insurance applications. A Pennsylvania jury recently ruled that an insurer knew (or should have known) about omissions on an insurance application, preventing the insurer from rescinding the policy.

In May 2015, H. J. Heinz Co. filed suit against Starr Surplus Lines Insurance Co. for breach of contract, declaratory judgment and bad faith, arising from Heinz’s claim for coverage under a Starr product contamination policy for losses Heinz incurred when its baby cereal product was recalled for lead-contamination. Heinz made claims for $25 million involving baby cereal that Heinz sold in China. Starr denied coverage for the claim, and Heinz filed suit.

Starr responded with a counterclaim seeking rescission of the policy. Starr claimed that Heinz’s applications for the product contamination policy, submitted in May and June 2014, failed to disclose four accidental contamination losses Heinz suffered in early 2014, misstated the value of a loss for a 2008 contamination incident and failed to disclose a 2013 fine by the Chinese food safety agency. One of the 2014 incidents that Starr contends Heinz failed to disclose was a $12 million loss related to production and sale of baby cereal in China that was contaminated with high levels of nitrite. Starr claimed that if Heinz had accurately disclosed these losses and recalls in its policy application, Starr would not have issued the policy or would have issued it with substantially different terms.  In response, Heinz claimed that Starr should have done more due diligence regarding Heinz’s application. Heinz also claimed that these omissions were not “material” to constitute rescission.

In regards to Starr’s counterclaim, a jury ruled on December 16, 2015 that although Heinz made misrepresentations in its application, Starr knew about the misrepresentations and sold the policy anyway.

There was also a noteworthy discovery ruling in this case – the judge ruled that Starr must produce to Heinz information from its underwriting files for similar product contamination policies that Starr issued to other insureds, in order for Heinz to test Starr’s claim of materiality.



Drug Distributors May Find Themselves Without a Defense

Posted on: December 23rd, 2015

mediacationsBy: Michael Bruyere and Kristian Smith

Rising prescription drug abuse has put drug distributors under scrutiny in the last few years. Now, pharmaceutical companies are being sued for the economic costs associated with the epidemic, but they may not be able to rely on their insurance companies for a defense. Pending a decision by the 11th Circuit, insurers may not have to provide a defense to pharmaceutical companies in “pill mill” lawsuits.

The state of West Virginia brought suit against Anda, Inc. (which, along with its parent company Watson Pharmaceuticals Inc. is now known as Actavis Inc.) and nearly a dozen other pharmaceutical companies in June 2012, claiming these companies supplied their drugs to “pill mills” or pharmacies that did not monitor the distribution of their drugs. The suit also claims Anda and the other companies did not report “suspicious” pill orders to the authorities. West Virginia alleges that the companies’ distribution of controlled substances without effective monitoring or controls cost its hospitals, courts, jails and other facilities $430 million in 2010 and projected a cost of $695 million by 2017.

Anda had insurance coverage under Travelers Property Casualty Co. of America and St. Paul Fire & Marine Insurance Co. for various policies it had purchased from 2001-2013. Travelers and St. Paul sued Anda in 2012, seeking declaratory judgment that their policies did not require them to defend against the claims against Anda. The insurers claimed that they had no duty to defend Anda because the state of West Virginia didn’t allege damages “for” or “because of” bodily injury,” a requirement to trigger coverage under Anda’s policies.

In March, a Florida district court judge agreed with Travelers and St. Paul and granted them summary judgment, ruling that West Virginia’s suit didn’t assert claims on behalf of individuals for bodily injury they suffered but instead sought relief from the “massive costs suffered by the state due to Anda’s distribution of drugs allegedly in excess of legitimate medical need.”

Anda appealed to the 11th Circuit, arguing in its opening appellate brief that prescription drug abuse necessarily causes bodily injury and the resulting damages are not excluded from coverage just because they are brought by the state and not an individual. Travelers and St. Paul disagreed, and in their December 16th brief argued that alleging that a class of nonparties has suffered narcotics addiction to support a claim for economic loss does not convert the claim into one for “bodily injury.” In addition, the insurers argued that Anda’s insurance policies contain an exclusion for claims “arising out of” or “resulting from” products sold, handled or distributed by Anda. As stated in Travelers’ brief, “There is no plausible way for Anda to argue that narcotics addiction does not ‘arise out of’ or ‘result from’ the very same narcotics that cause the addiction. In short, Anda’s response to the ‘no bodily injury’ argument walks itself directly into the scope of the products exclusions.”

The 11th Circuit’s pending decision is complicated by two opposite federal decisions on this issue handed down in March 2014– one by the 4th Circuit and one by a federal court in Kentucky – that held insurers of other pharmaceutical companies implicated in West Virginia’s suit must defend their insureds against West Virginia’s claims, thereby broadening the scope of the insurers’ various policies.

The West Virginia trial is scheduled for October 2016.