News & Insights


November 22, 2021

Health Headlines – November 22, 2021

Federal COVID-19 Mandates and Lawsuit Roundup – Lawsuits challenging the CMS Interim Final Rule (IFR) on COVID-19 vaccine requirements for healthcare workers and Occupational Safety and Health Administration’s (OSHA) COVID-19 Emergency Temporary Standards on Health Care Employment and Vaccinations and Testing for Large Employers (ETS) continue to be filed in various jurisdictions nationwide. On November 4, 2021, CMS issued an IFR requiring staff at 21 types of healthcare facilities and service providers that participate in Medicare or Medicaid programs to be fully vaccinated against COVID-19 by January 4, 2022. More information about the IFR can be found here. The first challenge to the CMS rule was filed by ten separate states in the Eastern District of Missouri on November 10, 2021. Another complaint was filed by twelve different states in the Western District of Louisiana on November 15, 2021.  Other states have followed with individual complaints, including Texas on November 15, 2021 in the Northern District of Texas, and Florida in the Northern District of Florida on November 17, 2021.

All of the complaints make similar arguments, including:

  • The vaccine mandates exceed CMS’s statutory authority to “make and publish such rules and regulations, not inconsistent with this chapter, as may be necessary to the efficient administration of the functions with which [he] is charged under” the acts governing the Medicare and Medicaid programs, as well as the other statutory grants of authority pointed to in the CMS rule;

  • The vaccine mandate violates 42 U.S.C. §1395, which provides that nothing in the Social Security Act “shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided, or over the selection, tenure, or compensation of any officer or employee of any institution, agency, or person providing health services; or to exercise any supervision or control over the administration or operation of any such institution, agency, or person;”

  • The vaccine mandate violates the Administrative Procedure Act (APA) because the IFR was issued without notice and the opportunity to comment under 42 U.S.C. §1395hh(b)(1);

  • The vaccine mandate violates the Congressional Review Act (CRA) requiring rules to be submitted to Congress for an opportunity to pass a resolution disapproving the rule and “major rules” must receive a report from the Government Accountability Office before it becomes effective; and

  • The vaccine mandate is arbitrary and capricious under the APA.

The complaints seek injunctive and declaratory relief setting aside the IFR.

OSHA ETS and Lawsuits

On November 5, 2021, OSHA issued the ETS.  As we previously reported, the ETS requires, among other things, that private employers with 100 or more employees develop, implement, and enforce COVID-19 testing and vaccination policies. Lawsuits have been filed in all 12 regional circuits by numerous states, employers, unions, and other petitioners seeking to set aside the ETS, and on November 12, 2021 a panel of the Fifth Circuit Court of Appeals issued a 22 page opinion granting the petitioners’ request to stay the ETS pending review.

On November 12, 2021, pursuant to 29 U.S.C. § 2112(a)(3), the Judicial Panel on Multidistrict Litigation issued an order consolidating the petitions and randomly selected the Sixth Circuit Court of Appeals to handle the consolidated cases.

Many of the petitioners in the now-consolidated Sixth Circuit case moved for initial en banc review, which would bypass a panel entirely and put the case before the entire Circuit Court. The Circuit’s En Banc Coordinator has directed OSHA to file a consolidated response to those petitioners by November 30, 2021. OSHA has since announced that it will suspend all implementation activities while the litigation unfolds.

Reporter, David Tassa, Los Angeles, + 213 443 4335,

OIG Issues Favorable Advisory Opinion for Free Drug Sample Arrangement – On November 10, 2021, OIG issued Advisory Opinion No. 21-16 permitting an arrangement whereby a drug manufacturer (Requestor) provides free samples of a long-acting injectable atypical antipsychotic drug (the Drug) to certain hospitals.  Under the proposed arrangement, hospitals that do not accept and dispense Prescription Drug Marketing Act of 1987 (PDMA)-compliant samples in their facilities are permitted to request up to a maximum number of free units of the Drug to be dispensed solely to inpatients.  After careful consideration of the facts presented, OIG determined that although this arrangement implicated the federal Anti-Kickback Statute, it presented a sufficiently low risk that OIG would not impose administrative sanctions under that law.
OIG noted that the arrangement implicates the Anti-Kickback Statute because the free trial units of the Drug are remuneration provided to the hospitals, and the hospitals are referral sources for the Drug.  However, OIG considered the following factors in deciding that the arrangement presented a low risk under the Anti-Kickback Statute:

  • The risk of a participating hospital steering inpatients to the Drug is low because for the first 14 days after the initial administration of the Drug, a patient must receive concurrent treatment with daily antipsychotics.  These daily antipsychotics are not provided for free and therefore the hospital does not benefit from administering the Drug under the arrangement.  Further, the patient may switch from the Drug to a daily or oral antipsychotic medication after being discharged without facing a clinical barrier.

  • There is a low risk of overutilization because the prescribing physician is not given an incentive to prescribe the Drug to inpatients as opposed to a competing drug or daily oral alternative.

  • The arrangement is unlikely to increase costs to federal healthcare programs because the Drug is not separately billable during the inpatient stay.  Although the Drug could be billed if the beneficiary continued to receive the Drug after discharge, the long-term likelihood of positive treatment outcomes could reduce aggregate expenditures by federal programs.  There is a potential cost savings to federal healthcare programs because studies show that the Drug could reduce incidences of nonadherence and the risk of negative outcomes (e.g., hospitalizations).

  • Hospitals are obligated to only agree to give the free trial units to patients diagnosed with a specific disorder for whom a physician has determined that the Drug is clinically appropriate and increases the long-term likelihood of positive outcomes.

  • The arrangement is not advertised to the public.  Hospitals are made aware of this offer by field-based sales representatives or through Requestor-approved communications sent directly to the hospital.  Hospitals must enroll in the arrangement to receive the free trial units of the Drug and receive only a limited number of units per year and per patient.  As part of enrollment, hospitals must agree to a number of terms that OIG considered to be safeguards against abuse, such as:

    • Hospitals must agree not to sell, resell, trade or distribute for sale, or bill for the free trial units.

    • Prescribers are required to act in accordance with professional standards.

    • The participating hospital must understand that it is not under any obligation to prescribe, use, or continue using the Drug as a condition of receiving free units.

OIG did not opine on matters relating to the arrangement as it relates to outpatient settings, potential liability under PDMA, or the False Claims Act.

The full text of Advisory Opinion No. 21-16 is available here.

Reporter, Kimberly Rai, New York, +1 212 556 2198,

OIG Issues Advisory Opinion Permitting Cost-Sharing for Medicare-Reimbursable Items and Services in a Clinical Trial – On November 19, 2021, OIG issued Advisory Opinion No. 21-17 in which it responded to a request for an advisory opinion regarding a proposed subsidization of certain Medicare cost-sharing obligations in the context of a clinical trial (Proposed Arrangement) submitted by a device manufacturer (Requestor). As discussed in further detail below, OIG determined that the Proposed Arrangement could generate prohibited remuneration under the federal Anti-Kickback Statute and the beneficiary inducement provision of the civil monetary penalties law. However, OIG ultimately concluded that it would not impose administrative sanctions upon Requestor because the Proposed Arrangement presents a low risk of fraud and abuse.

Factual Background

Requestor manufactures an implantable medical device approved by the FDA for two indications: (i) use as an adjunctive therapy in reducing the frequency of seizures in patients with partial onset seizures that are refractory to antiepileptic medications; and (ii) use as an adjunctive long-term treatment of chronic or recurrent depression for patients who are experiencing a major depressive episode and have not had an adequate response to four or more adequate antidepressant treatments. Requestor is sponsoring a clinical trial designed to determine whether the device achieves superior reduction in baseline depressive symptom severity in patients with the disease (Study). CMS approved the Study for coverage under the Medicare program, meaning that Medicare will cover the cost of the implantable device as well as the implantation procedure, treatment of any complications from the implantation procedure, routine pre-operative and follow-up care, and clinician visits during the course of the Study for subjects in both the treatment and control groups.

Under the Proposed Arrangement, Requestor will pay cost-sharing obligations that Medicare beneficiaries participating in the Study would otherwise owe for Medicare-reimbursable items and services provided during the Study. Such costs will be paid directly to the person or entity to whom the subject would owe the amount. Medicare beneficiaries will not incur out-of-pocket expenses relating to their participation in the Study. Requestor proposed that the Proposed Arrangement would serve a dual function of reducing financial barriers to enrollment in the Study (i.e., allowing greater participation from a broader range of potential subjects) and preserving the blinding of subjects.

Requestor certified that neither Requestor nor its investigators nor its third-party recruitment partners would advertise the availability of cost-sharing subsidies to prospective subjects. Information about the subsidies would be included in the informed consent documents provided to each subject, which is the point at which most subjects would learn of them.

Legal Analysis

OIG determined that the Proposed Arrangement could generate prohibited remuneration under the Anti-Kickback Statute and the beneficiary inducement provision of the civil monetary penalties law. However, OIG stated that it would not impose administrative sanctions on Requestor in connection with the Proposed Arrangement because it presents a minimal risk of fraud and abuse. In coming to this conclusion, OIG relied upon the following factors:

  1. The Proposed Arrangement is part of a clinical study that has been developed in consultation with, and approved by, CMS.

  2. The Proposed Arrangement would pose a low risk of overutilization or inappropriate utilization of federal healthcare program items and services.

  3. The Proposed Arrangement is distinguishable from problematic seeding arrangements, such as those in which manufacturers initially offer subsidies to lock in future utilization of a reimbursable item or service.

As is typical, OIG stated that Advisory Opinion No. 21-17 is limited in scope to the Proposed Arrangement.  However, this opinion provides guidance as to how OIG might respond to similar requests. OIG Advisory Opinion No. 21-17 is available here.

Reporter, Michelle Huntsman, Houston, +1 713 751 3211,


CMS Estimates a Decline of Over $20 Billion in Medicare Fee-For-Service Improper Payments by Since 2014 – On November 15, 2021, CMS issued a press release wherein CMS states that “aggressive corrective actions led to an estimated $20.72 billion reduction of Medicare Fee-for-Service (FFS) improper payments over seven years.”  CMS classifies improper payments as “payments that do not meet CMS program requirements. Improper payments can be overpayments or underpayments, or payments where insufficient information was provided to determine whether a payment is proper or not.” As reported by CMS in the press release, the “2021 Medicare FFS estimated improper payment rate (claims processed July 1, 2019 to June 30, 2020) is 6.26%  ̶  an historic low.”  CMS says that it saw key success in two main areas: inpatient rehabilitation facility claims and durable medical equipment claims. A copy of the CMS press release is available here.

King & Spalding WebinarPharmaceutical and Medical Device Enforcement Developments & Trends in 2021 – On Tuesday, November 30, at 12:30 pm ET, King & Spalding will be hosting a 60-minute webinar to examine recent enforcement developments and trends relevant to pharmaceutical and medical device manufacturers in the evolving paradigm of COVID-19. More specifically, this presentation will review recent DOJ statements, settlement announcements and ongoing litigation to provide in-house counsel with perspective on the post-COVID-19 enforcement world and what to expect going forward.

The presenters include Brandt Leibe, Craig Carpenito, Ethan Davis, and Luke Fields.  To register for the event, click here.

King & Spalding Webinar:  Ransomware for Healthcare Providers: What You Need To Know Right Now – On Wednesday, December 1, at 1:00 pm ET, King & Spalding will be hosting a 60-minute webinar to discuss the ransomware threat landscape and best practices to mitigate risk associated with ransomware attacks.
Topics will include the following:

  • Shifting tactics by ransomware attackers

  • Working with law enforcement

  • Engaging with threat actor, including whether to pay ransom

  • Analyzing HIPAA, OCR guidance and state data breach laws

  • Making notifications, including how to evaluate notification deadlines

  • Coordinating with cyber insurance carrier

  • Taking proactive steps to be ready

The presenters include Rob Keenan, Phyllis Sumner, and Bethany Rupert.  To register for the event, click here.