“Alexa, Reinvent the Healthcare System.” 

Amazon’s move to the health care space has the potential to revolutionize the industry.

Beginning in January, 2018, Amazon has been moving towards its latest business venture: healthcare. While a shift to health care may be unusual for Amazon, the change recognizes the fact that health care is an intricate and complex business that a disrupter like Amazon could greatly influence. Healthcare is one of the biggest industries in the U.S., but also one of the most inefficient. Approximately one third of health care spending is unnecessary and is usually wasted. A number of companies have attempted to reduce some of this waste, most notably with the partnership between Amazon, Berkshire Hathaway and JPMorgan Chase. These three businesses have a combined 1.2 million employees and the hope is their partnership will allow them to bring costs down in their own health care plans. This announcement has already had an impact on the healthcare community and drawn notice from other stakeholders in health care. 

According to the alliance, this business venture will not be aimed towards making a profit, but instead will focus on reducing the costs of the healthcare system and making the system easier to navigate. Dr. Atul Gawande, a physician and advocate for health care reform, has been chosen to lead this new venture. While details about the venture are not yet known, Dr. Gawande’s past comments have hinted that he will concentrate on three main issues: improving health benefits, boosting primary care and lowering pharmacy costs. 

The venture has also examined additional ways to lower health care costs, such as purchasing the pharmacy startup, Pillpack and investing in better software to compile medical records.Some see this as a move to make an online pharmacy platform that would allow patients to simplify obtaining prescriptions, moving the entire process to a personal, computerized system. Amazon may be able to capitalize on this new market through their existing success in online retail services. Amazon already provides medical supplies to hospital systems and they may be able to further expand within this market through sales of prescription drugs. Additionally, Amazon may also be able to integrate their Alexa home assistant technology into an integrated health program. Recent projects have used Alexa to monitor personal health, provide first aid response and report medical data. Increased utilization of Alexa-related services would allow for greater integration of Amazon products within the health care industry and may create additional ways to bring down costs. 

Amazon’s move to the health care space has the potential to revolutionize the industry, as they may create a more efficient system that other large businesses may choose to adopt. The increased uncertainty for medical practitioners will likely lead to a number of legal questions, such as issues of data privacy and monopolistic behavior. There will likely be some government regulation of these new businesses and it will be essential to keep up-to-date with legal changes to allow businesses to stay in compliance as well as participate in these new ventures.

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An Attorney’s Duty to Concussed Athletes

In November 2018, the National Hockey League (NHL) joined the National Football League (NFL) to attempt to resolve their concussion litigation. The NHL agreed to a settlement with approximately 300 former hockey players, who had unsuccessfully attempted to certify their lawsuit as a class action. NHL Players alleged negligence for how the NHL dealt with head injuries, and claimed that the league concealed the long-term risks of head injuries and concussions. In the NFL, reports have shown an increasing number of retired NFL players who have suffered concussions and developed memory and cognitive issues, including chronic traumatic encephalopathy (CTE). To date, researchers have diagnosed CTE in 110 of 111 former NFL players. At the college level, there is a growing list of legal claims against the National Collegiate Athletic Association for failing to protect athletes from the risks associated with head injuries. For sports law and health law attorneys, concussion litigation is an important issue, particularly as it relates to CTE and second-impact syndrome (SIS).   

Contact sport athletes and military veterans, populations that have a history of repetitive hits to the head have the highest risk of CTE. CTE can only be identified during a postmortem autopsy, but symptoms can be present years before death. SIS occurs when an individual receives a second head injury before recovering from the first, and often leads to permanent disability or sometimes death. Attorneys can play a large role in preventing or helping athletes decrease their risk of concussions. There are several significant federal lawsuits, including at American University, and many state lawsuits that are deciding landmark legal issues. One such case is Schmitz v. NCAA, where the Ohio Supreme Court held that the “discovery rule” allows former athletes to file suit based on traumatic brain injury symptoms that do not manifest until decades after the alleged head trauma occurred. The increase in lawsuits, even when they end in settlement, may lead more athletes to seek compensation and hopefully to minimize the risk of brain injury in sports.

Concussions will continue to be a litigated issue, both at the collegiate and the professional levels. As lawyers, what is our duty to these concussed athletes? And what is the standard of care due to athletes who suffer concussions? Most importantly, litigators need to become familiar with the symptoms of concussions, which can include physical, cognitive, and behavioral changes. Litigators also need to understand the athlete’s pre- and post-concussion cognitive abilities, along with understanding the severity and short- and long-term effects of a concussion. Pre-season neurological testing and prior medical history are probably the best tools to determine an athlete’s pre-concussion cognitive abilities. Baseline testing is useful to compare abilities, since it is not meant to be a comprehensive assessment, which can provide an objective baseline measure of the effects of a concussion. Prior medical records also reveal past concussions and anything that may affect an athlete’s abilities, including mental health. During the concussion, litigators can interview witnesses to the concussion and obtain medical records regarding the diagnosis after the concussion. Then, litigators can begin to investigate the diagnosis, and determine whether the athlete meets any of the symptoms of a concussion.

Litigating claims on behalf of concussed athletes is difficult, but the advances of medicine and awareness of symptoms may lead to changes in the law. Going forward, one of the benefits of concussion litigation is that it will likely change how contact sports are played, from youth to professional sports. Litigators who want to protect athletes, along with coaches, should begin to discuss protecting athletes at a young age, even if it removes some of the drama of athletics. Many athletes have lost their lives and lifestyles from CTE and SIS, and we can ensure better protections for budding athletes. 

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Private Equity Investment in Healthcare

“Ten years ago, only a few private equity firms had dedicated healthcare components, but today, nearly everyone does” says Dmity Podpolny of McKinsey & Company, one of the largest consulting firms in the world. Private equity and medicine are now on the rise. For years, private equity firms have invested in healthcare. However now, the rapidity is significant private equity firms increase their presence in a compartmentalized healthcare industry, grasping on alliance opportunities to obtain a better business model. PwC Health Research Institute explains that “private equity’s acquisitions and investments in the health sector have become increasingly diversified and frequent; they include such things as new entrants in technology and convenient care delivery, contract research organizations, and ophthalmology and dermatology practices”.

Last year, private equity continued to move into new medical specialties, according to a 2018 report. The report outlined three major points to consider. The third quarter of 2018 saw roughly $30.4 billion in deal volume, rising 8 percent year-over-year. Private equity will likely continue to push into the health sector, specifically in medical specialty practices. Researchers estimate that industry players have roughly one million dollars to invest in certain businesses. The urgent care realm for example, has grown by 5.8% in 2018. PwC notes that due to the high quantities of these deals involving private equity, other firms may make the decision to sell themselves to these private equity groups to better improve their business model.

Moving forward, this means several things. PwC expects this trend to accelerate even more in 2019, giving conventional healthcare companies various opportunities to sell portions of certain “noncore” assets and really focus on their core functions. Alternatively, conventional healthcare companies could partner with private equity in acquisitions, which they would otherwise be competing against or unable to accomplish without the partnership. 

For example, last month KKR & Co., a private-equity firm, entered into an agreement to purchase Envision Healthcare, an emergency department staffing company. The deal was valued at $9.9 billion, including debt. If approved by shareholders, the deal would be the largest in a string of recent health-care investments by KKR. These investments include an ambulance service, a company that helps treat children with autism, and a creator of various medical devices.

What does this mean? Private equity is accelerating change in the industry. “Private equity investment in healthcare isn’t going to single-handedly improve care quality, enhance the patient experience or reduce healthcare costs to consumers,” PwC stated. “But it likely is fueling the efforts already in place.” Private equity firms bring wealth and knowledge from other industries that can contribute to the healthcare industry’s efforts to rein in costs and achieve better outcomes.

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Expanded Anti-Kickback Protection to Care Paid by Private-Payers

As of October 24, 2018, a new regulation passed that affects the private sector of the health care industry potentially having lasting effects on clinics, laboratories and even marketing companies. Mirroring the federal Anti-Kickback Statute, the Eliminating Kickbacks in Recovery Act (“EKRA”) aims to fight the opioid epidemic. In particular, EKRA expanded the federal Anti-Kickback criminal statute by expanding it to cover payments by private insurance companies for claims submitted induced by a kickback, whereas the federal Anti-Kickback statute only covers payments made by the state or the federal government. Under EKRA, Congress applies health care fraud laws concerning improper remunerations for patient referrals to, or in exchange for an individual using the services of, a recovery home, clinical treatment facility or clinical laboratory. Absent a prescribed exception, the rule punishes any person or entity that knowingly and willingly offers, pays, solicits, or receives, directly or indirectly, anything of value to induce a referral of an individual, or in exchange for an individual using the services of a laboratory, clinical treatment facility, or recovery home.

EKRA provides several exceptions to the referral prohibition, including but not limited to:

  1. A discount or other reduction in price obtained by a provider of services or other entity under a health care benefit program if the reductions are properly disclosed and reflected in the costs claimed or charges made.
  2. Payments to employees and independent contractors that are not determined by or do not vary by . . . 
    1. The number of individuals referred to a particular recovery home, clinical treatment facility, or laboratory;
    1. The number of tests or procedures performed; or
    1. The amount billed to or received from, in part or in whole, the health care benefit program from the individuals referred to a particular recovery home, clinical treatment facility, or laboratory;

Why was EKRA implemented?

With the current opioid crisis affecting all parts of the country, EKRA was created, in part, to help curb improper patient brokering practices in all payor sectors of health care. Patient brokering occurs when a drug rehab or similar facility pays a third party to bring patients to their establishment. These unethical business practices benefit from the vulnerability of substance abusers.

What does this mean for private clinics, laboratories, treatment facilities and health care providers in general?

Because EKRA’s broad language includes a wide array of healthcare providers, many business relationships may fall under the purview of the statutory language. Examples of improper business relationships that fall within the statutory language may include serving as a medical director for a laboratory to whom a provider makes patient referrals or a business relationship with a marketing company whose job it is to steer patients to certain health care providers, such as, a clinical home or treatment center. A problem arising from EKRA is that the statute may make certain employment areas subject to criminal prosecution, such as the marketing company example provided above. However, unlike the Anti-Kickback Statute, EKRA levels the playing field by making payments made by private insurance subject to criminal prosecution.

Under EKRA, the maximum penalty per offense of illegal remunerations paid by recovery homes, clinical treatment facilities, or clinical laboratories, can result in fines of $200,000 and 20 years of imprisonment for each occurrence.

Overall, EKRA may cause companies to tread lightly in their business relationships with medical companies because now companies are subject to anti-kickback statues no matter who pays for the care (public or private insurance). However, implementation of this statute has removed the financial incentive from an all payor industry. As such, EKRA helps create a solution to one aspect of the opioid crisis by subjecting care paid by both private and public healthcare insurance to criminal prosecution for illegal remunerations.

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Cosmetic Regulation in the U.S.: Is the FDA doing enough?

The Food and Drug Administration (FDA) has had authority over cosmetics since the passing of the Food, Drug, and Cosmetic Act (FDCA) in 1938. However, this authority is based only in regulatory power, not approval power. The FDCA does not require cosmetics to acquire pre-market approval, except for cosmetics that have color additives like medical devices and drugs; instead, the FDA uses post-market regulation to bring formal or informal proceedings against a product.The FDA’s authority over the cosmetic industry, which generated approximately $84 billion in revenue in 2016, is substantially different than any other industry area the Agency regulates. 

The FDCA defines cosmetics as any product that is “intended to be rubbed, poured, sprinkled, or sprayed on, introduced into, or otherwise applied to the human body…for cleansing, beautifying, promoting attractiveness, or altering the appearance.” This includes the obvious, such as moisturizers and facial makeup, but also the nonobvious, such as deodorant and permanent hair waves.  Under this definition, the category of cosmetics encompasses things that both women and men use on a daily basis.  

So how does FDA regulate cosmetics? The FDCA prohibits the marketing of cosmetics that have been adulterated or misbranded. Adulteration address violations involving product composition whereas misbranding addresses improperly labeled or deceptively packaged products. However, the main issue with cosmetics is safety. The FDA states that “companies and individuals who manufacture or market cosmetics have a legal responsibility to ensure the safety of their products,” however “[no] FDA regulation require specific tests to demonstrate the safety of individual products or ingredients.” Companies can use “whatever testing necessary” to guarantee safety. Companies can rely upon already available test data on individual ingredients and similar product formulations or perform their own test for additional information. Even if companies conduct thorough safety testing, “the law also does not require cosmetic companies to share their safety information with FDA.” 

An optimistic approach to FDA regulation would require consumers to fully believe that cosmetic companies conduct thorough safety testing. Since a company’s reputation is on the line, testing for safety is, or should be, a company’s top priority. That is why some dermatologists believe that cosmetics are already safe and that more regulation would be unnecessary. Some also argue that stricter regulation could stifle innovation. Every year there is a new ingredient craze that rocks the cosmetic world.  With stricter regulations, these new ingredients would have to pass through extensive testing which could disincentivize innovation, lead to poorer products, and potentially increase costs. 

Since the industry self-polices, the FDA has to rely on direct reports and complaints from consumers before it can act. For example, in 2014 the FDA launched an investigation into Wen Hair Care after it received about 1,400 complaints about adverse side effects of the hair care products, like hair loss and balding. During its investigation, the FDA learned that Wen Hair Care actually received over 20,000 complaints from consumers before FDA was alerted. Under the FDCA, the FDA could only go after the Wen Hair Care if the products were determined to be adulterated or misbranded. However, if adulterations or misbranding is not the issue, then what can the FDA do? Short of seizing the products to keep them off the market, nothing. 

Current cosmetic regulation might be changing in the near future, though. There are more and more consumers that are looking for health-conscious and clean cosmetic products. Congress has also made a push toward increasing cosmetic safety. In 2017, Senators Dianne Feinstein and Susan Collins introduced a bipartisan proposal that included mandatory reporting and ingredient review of all cosmetics. Also, in 2018, Congresswoman Jan Schakowsky introduced a bill that “…calls for the full disclosure of all ingredients included in beauty and personal care products including fragrances.” While these bills are stirring around in Congress, major cosmetic brands like L’Oréal and Unilever, as well as celebrities like Kourtney Kardashian offer their support for stronger regulation.

 In 2018, Rep.Frank Pallone stated that “[w]hile all other product categories regulated by the [FDA] have been updated to keep pace with innovation and consumer expectations, the laws for cosmetics have been left untouched for nearly 80 years.” Maybe it is time for a change.  

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