News & Insights


January 27, 2020

Health Headlines – January 27, 2020

King & Spalding Client Alert: Is Your Hospital Ready for a Pandemic? – On January 21, 2020, the Centers for Disease Control and Prevention confirmed the first case of a new coronavirus, “2019-nCoV” or “Wuhan coronavirus,” in the United States.  The respiratory virus has spread to Thailand, Canada, Japan, South Korea, Taiwan, Macau, Nepal, Singapore, Vietnam, Australia, Cambodia, and the United States, sickening almost 3,000 people and causing eighty-one deaths since reported in China in December 2019.  Currently, there is no vaccine for coronaviruses.  The recent outbreak of Wuhan coronavirus emphasizes the need for hospitals to adopt policies and proper training to facilitate a more effective response during a pandemic.  Click here for a Client Alert issued by Catherine Greaves and Jennifer Siegel of the King & Spalding Healthcare team that describes challenges that hospitals may encounter if faced with a pandemic.

King & Spalding Client Alert:  HHS Issues Notice of Violation to California for its Universal Abortion Coverage Mandate - On Friday afternoon, January 24, 2020, HHS Office for Civil Rights (OCR) issued a Notice of Violation to the state of California demanding that the state stop imposing abortion coverage mandates on health plans and issuers (“the Notice”). The Notice gives California 30 days to inform OCR whether it will take corrective action or continue imposing the coverage mandates. The Notice warns that if California chooses to continue imposing the coverage mandates, OCR will forward the Notice and its evidence to the “appropriate HHS funding components” for further action. Click here for more information in a Client Alert issued by Marcia Augsburger and Yujin Chun of the King & Spalding Healthcare team.

Federal Court Partially Grants Motion to Dismiss Clearing Way for New HHS Liver Allocation Policy to Go into Effect On January 21, 2020, the U.S. District Court for the Northern District of Georgia granted in part and denied in part a motion challenging a new HHS policy for allocating livers to transplant patients in the United States.  The ruling comes just days after the court lifted an injunction that allows the new policy to go into effect.

The new policy, which was adopted in May 2019, gives priority to patients with the most urgent medical need living within a 500-mile radius of the donor hospital.  In contrast, under the old rule, patients with the greatest need and closer to donors in a geographic region received greater priority.

The complaint, filed on April 22, 2019, by several transplant patients and transplant centers (Plaintiffs), alleged three counts against HHS and the United Network for Organ Sharing including failure to comply with the Administrative Procedures Act (APA), 5 U.S.C. §§ 706(1) and 706(2) (Counts I and II) and violation of Plaintiffs’ due process rights (Count III).  In the ruling, the Court dismissed Count I by reference to the Eleventh Circuit’s reasoning in Callahan v. United States Dep’t of Health & Human Servs. through Alex Azar II, 939 F.3d 1251 (11th Cir. 2019), which is available here.  There, the Circuit Court found that HHS had “broad discretion to determine how [the Organ Procurement and Transplantation Network] should be reviewed” and the APA did not require HHS to refer the new policy to the Advisory Committee on Organ Transplantation or post it in the Federal Register before adoption. 

The Court denied the motion to dismiss Counts II and III finding that the complaint properly alleged the Secretary acted arbitrarily and capriciously by ordering a new liver allocation policy on a truncated timeline (Count II) and deprived those challenging it of due process during the new policy’s adoption (Count III).

The ruling on the Plaintiffs’ motion to dismiss comes on the heels of the court’s January 16, 2020 ruling lifting an injunction that had put the new policy on hold since May 2019.  In that ruling on the motion for a preliminary injunction, the Court found Plaintiffs were not substantially likely to succeed on the merits of their case and therefore denied the Plaintiffs’ motion.

The case is Callahan v. U.S. Dep’t of Health & Human Servs., No. 19–cv–1783–AT (N.D. Ga.).  The January 12, 2020 ruling on the motion to dismiss is available here, and the January 16, 2020 ruling on the injunction is available here.

Reporter, Nicholas J. Kump, Sacramento, +1 916 321 4817,

HHS Issues Final Rule Requiring Disclosure of Partial Refills of Prescriptions to Help Curb Opioid Abuse – On January 23, 2020, HHS issued its final rule adopting a modification of the requirements for the use of the Telecommunication Standard Implementation Guide, Version D.0, National Council for Prescription Drug Programs (NCPDP) by requiring that covered entities use the Quantity Prescribed field for retail pharmacy transactions for Schedule II drugs (Final Rule).  The Final Rule enables covered entities to distinguish whether a prescription is a “partial fill” (where less than the amount prescribed is dispensed) or a refill (where the full amount prescribed is dispensed) in HIPAA retail pharmacy transactions.

As background, the Controlled Substances Act prohibits the refilling of Schedule II drugs (those defined, in part, as having a high potential for abuse) but permits partial refills in limited circumstances where a pharmacist has less than the prescribed amount in stock, the prescription is for a patient in a long-term care facility, or a patient has a terminal illness. 

The Health Insurance Portability and Accountability Act of 1996 (HIPAA) requires HHS to adopt standards for the electronic transmission of certain healthcare administrative transactions between providers, health plans, healthcare clearinghouses, and others.  In January 2009, HHS adopted the NCPDP Telecommunication Standard Implementation Guide, Version D.0, August 2007 (Version D.0), for the following retail pharmacy transactions: (1) healthcare claims or equivalent transactions; (2) referral certification and authorization; and (3) coordination of benefits.  Version D.0 includes a data field titled “Fill Number,” and specifies that a “0” be entered for a new prescription and the number be sequentially increased by “1” for each refill.

In 2012, OIG issued a report titled “Inappropriate Medicare Part D Payments for Schedule II Drugs Billed as Refills,” that analyzed 2009 prescription drug event records for Schedule II drug refills.  OIG focused on the Fill Number field and concluded that Medicare had inappropriately paid $25 million for Schedule II drug refills and that long-term care facilities billed for 75% of such refills.  CMS, however, believed OIG’s findings were based in part on a misinterpretation of Schedule II drug partial fills dispensed to long-term care facility residents as refills.  An NCPDP work group formed at CMS’s request also found that the industry used the Fill Number field to represent the amount actually dispensed, and not necessarily the refill number.  As a result, the NCPDP work group recommended a change to Version D.0 to require the use of the “Quantity Prescribed” field, which previously was not used in claim billing transactions, to indicate the actual quantity prescribed in the transmission of the claim.  NCPDP noted this change in its November 2012 publication of Version D.0 and advised CMS that the modification would make data available to validate whether there are inappropriate fills in excess of the quantity prescribed.  However, HHS has not adopted the November 2012 publication of Version D.0, so HIPAA covered entities may not use it for HIPAA transactions. 

The Final Rule, which takes effect on September 21, 2020, modifies the requirements for the use of the Quantity Prescribed (460-ET) field, as set forth in Version D.0.  The modification requires that covered entities treat that field as required where a transmission uses Version D.0 for a Schedule II drug for the following transactions: (1) healthcare claims or equivalent encounter information; (2) referral certification and authorization; and (3) coordination of benefits.  HHS believes that this modification would enable covered entities to clearly distinguish whether a prescription is a “partial fill,” or a refill in HIPAA retail pharmacy transactions.  HHS also explained that the Final Rule supported “one of its top opioid strategic priorities calling for better data, which may ultimately help in reducing the drug supply.”

The Final Rule is available here.

Reporter, John Whittaker, Sacramento, +1 916 321 4808,

OIG Issues Advisory Opinion Permitting Drug Manufacturer to Provide Travel, Lodging, and Expenses to Patients in Limited Circumstances  – On January 15, 2020, OIG issued Advisory Opinion No. 20-02 analyzing an arrangement between a pharmaceutical manufacturer and certain drug recipients whereby the manufacturer provides certain drug recipients with financial assistance for travel, lodging and per diem expenses to stay near the site of the drug infusion for a period of approximately four weeks after the drug infusion.  OIG analyzed the arrangement under the Anti-Kickback Statute (AKS) and the Beneficiary Inducements Civil Monetary Penalties provision (CMP).  OIG concluded that even though the arrangement would implicate the CMP, the arrangement would fall within the Promotes Access to Care Exception to the Beneficiary Inducements CMP; and even though the arrangement could generate prohibited remuneration and implicate the AKS, OIG would not impose administrative sanctions.

The drug manufacturer’s proposed arrangement concerns a one-time use drug meant to treat two diseases, one affecting primarily children and young adults and one affecting primarily adults.  The drug is manufactured from a patient’s cells and carries an FDA black-box warning for potentially life-threatening side effects including a “Syndrome.”  The FDA’s prescribing protocol requires patient monitoring for signs of the Syndrome and instructs patients to remain within a certain proximity of the infusion center for four weeks.  The drug manufacturer is also required to implement a Risk Evaluation and Mitigation Strategy (REMS) that includes only using REMS-certified physicians and entering into arrangements with REMS-compliant infusion centers.  The infusion centers and physicians are not required to prescribe the drug manufacturer’s drug and any physician or center that meets the criteria may become involved in the arrangement.

Because of the severe consequences of being far away from a center, including possible death, the drug manufacturer proposed providing patients and caregiver(s) with one round-trip to the center, lodging, meals and certain out-of-pocket expenses for the period of monitoring after the infusion.  Assistance would only be given to those who have been prescribed the drug and who have a household income that does not exceed 600 percent of the Federal Poverty Level and live a certain distance away from the infusion center.  Further, the financial assistance would not be advertised to patients.

OIG found that the arrangement would implicate the AKS because the meals, lodging, and travel expenses would constitute remuneration that may induce beneficiaries to select the manufacturer’s drug and may influence patients to choose a certain center—effectively “steering” patients to a certain drug or center.  In addition, this assistance would constitute remuneration to the centers and to physicians by affording them an opportunity to earn fees relating to administration of the drug.  However, OIG also found that (1) the arrangement would help disproportionately needy or rural patients; (2) the arrangement would enable patients to meet the FDA monitoring requirements; (3) the physicians and centers who may administer the drug are limited as necessary for patient safety and compliance with FDA regulations; (4) the drug is a one-time, potentially curative treatment; (5) the arrangement would be available only to patients who live far away from the center and only if the center does not provide lodging; and (6) the Secretary does not have authority to pay for these non-medical expenses.  For these reasons, OIG determined it would not impose administrative sanctions under the AKS.

Lastly, OIG concluded that the Promotes Access to Care Exception to the Beneficiary Inducements CMP applies because the arrangement “improves a beneficiary’s ability to obtain the items and services payable by Medicare and Medicaid program” and poses a low risk of harm.

Although OIG advisory opinions are technically not recognized as precedent for any other arrangements, they can serve as a helpful tool to ascertain the boundaries of what arrangements fit within the safe harbors, and what facts and safeguards incorporated into an arrangement will result in a lower risk of causing OIG to impose administrative sanctions.

Advisory Opinion No. 20-02 is available here.

Reporter, Taylor Whitten, Sacramento, +1 916 321 4815,


King & Spalding Washington Insight Webinar Series: Congress 2020: The Year Ahead
On January 30, 2020, from 12:00 PM ET to 1:00 PM ET, King & Spalding LLP will host the first in a series of webinars designed to provide participants with knowledge about what is happening in Washington.  In Congress 2020: The Year Head, members of King & Spalding’s Government Matters and Trial and Global Disputes groups will provide an overview of what to expect in the current session of Congress, including:

  • U.S.-Mexico-Canada Agreement (USMCA)
  • Drug Pricing
  • Impeachment
  • Tax Reform
  • Big Tech and Privacy
  • 2020 Election

Join us for this interactive webinar and get early insights into what 2020 will bring from Washington.  You do not need to be a client to attend, and there is no charge.  For more information and to register, please click here.

King & Spalding 29th Annual Health Law & Policy Forum – On March 16, 2020, King & Spalding LLP will host its annual forum in Atlanta, GA, focusing on the foremost legal and political developments impacting the healthcare industry.  This year’s Keynote Speaker is George F. Will, America’s foremost political columnist.  He will speak on healthcare’s role in the 2020 political campaign.  Other Forum highlights include:

  • Leading practitioners providing policy and regulatory enforcement updates, and other industry developments;
  • Special considerations healthcare providers face in pandemics; and
  • Developments in telehealth.

Registration closes on March 2, 2020, and capacity is limited.  For more information and to register, please click here.