Volume 12 | December 2020
Court Considers Constitutionality of Virtual Grand Juries

The COVID-19 pandemic has forced nearly everyone to drastically alter how they once did things, including the justice system. Many aspects of the criminal justice system are now conducted virtually, including but not limited to arraignments, bond revocation hearings, and motions hearings. 

One of the more controversial aspects of the criminal justice system to have gone virtual in some states is the grand jury. New Jersey implemented a pilot program earlier this year to hold grand juries via Zoom video conference. While many laud the efforts as a way to get the wheels of justice moving, particularly for those who remain in detention pending a trial, the concept of a virtual grand jury has been criticized by many as constitutionally unsound. 

A New Jersey Superior Court is now poised to be the first to address the constitutionality of virtual grand juries. In State of New Jersey v. Omar Vega-Larregui, the defendant has moved to dismiss the indictment against him because use of remote grand juries impedes the proper functioning of the grand jury and infringes on his constitutional rights. Mr. Vega-Larregui was arrested and charged with drug distribution and resisting arrest after an officer found cocaine in Mr. Vega-Larregui’s truck. 

Although Mr. Vega-Larregui was not in custody prior to the indictment, prosecutors proceeded with empaneling a grand jury and presenting their case against Mr. Vega-Larregui. There were technical difficulties when the prosecutor attempted to show the grand jurors an exhibit, and the jurors were only able to see head and shoulders of the arresting officer as he testified. Nonetheless, the grand jury indicted Mr. Vega-Larregui and he now contends that remote grand juries do not allow the jurors to view evidence, like documents or a witness’ body language, the way they could in person and as a result his indictment should be dismissed on constitutional grounds. 

Mr. Vega-Larregui is joined by both prosecutors and defense counsel in his opposition to virtual grand juries. The County Prosecutors Association of New Jersey has also criticized the virtual grand jury as a “constitutional mistake” because the secrecy of grand jury proceedings cannot be ensured in video conference settings, there are inevitable racial and socioeconomic inequalities, and technological difficulties call into question the efficacy of the grand jury. The Association of Criminal Defense Lawyers of New Jersey (ACDL-NJ) is also opposed to remote grand jury proceedings and is expected to file an amicus brief in support of Mr. Vega-Larregui’s motion to dismiss. 

How the Court will ultimately rule remains to be seen, but either grand juries will be allowed to continue proceeding remotely or will be suspended until the pandemic concludes. Either outcome will have serious effects on the criminal justice system. 
HHS Publishes Long-Awaited Stark Law and Anti-Kickback Statute Rules

On November 20, 2020, the Centers for Medicare & Medicaid Services (CMS) published a draft of its final rule regarding Medicare’s physician self-referral law, colloquially known as the Stark Law. On the same day, CMS also issued a press release and fact sheet regarding the Rule and how it modernizes and clarifies the Stark Law.  

Concurrently, the Office of Inspector General for the Department of Health and Human Services (OIG) published a draft of the final revisions to safe harbors under the Anti-Kickback Statute (AKS). 

Stark Law Background 

The Stark Law, originally enacted in 1989, generally prohibits physicians from making referrals for certain designated healthcare services payable by Medicare or Medicaid to entities with which the physician (or an immediate family member of the physician) has a “financial relationship,” which is defined broadly to include ownership interests and compensation arrangements. The Stark Law also prohibits the entity receiving the referral from filing claims with Medicare or Medicaid for services that result from a prohibited referral.      

Stark Law violations can be punished through an action by the DOJ or a private whistleblower under the federal False Claims Act (FCA), or through an action by the OIG under the Civil Monetary Penalties Law. The government may also pursue administrative actions against providers who violate the Stark Law, including exclusion from federal healthcare programs. The Stark Law is a strict liability statute, meaning no specific intent to violate the Stark Law is required. Although the Stark Law contains numerous exceptions (including, among others, exceptions for bona fide employment, rental agreements, and personal service arrangements), these exceptions must be followed strictly.  

The Stark Law and its exceptions are complex, ambiguous, and levy significant administrative demands. As CMS noted, “ambiguities in the Stark law have frozen many providers in place, fearful that even beneficial arrangements might violate the law, which can come with dire and costly consequences.” 

Overview of New Stark Law Rules

According to CMS, the Stark Law (before the recently-released Rule) had not evolved with the change from volume-based healthcare delivery to value-based healthcare delivery, and would “prohibit some arrangements that are designed to enhance care coordination, improve quality, and reduce waste.” On October 17, 2019, CMS issued proposed reforms to the regulations that interpret the Stark Law, which CG Attorneys wrote about. The draft final Rule includes numerous reforms to modernize the Stark Law, such as new exceptions and new definitions that must be interpreted carefully.

New Exceptions 

The Stark Law Rule contains new exceptions that apply to compensation arrangements that qualify as “value-based arrangements.” A value-based arrangement is “an arrangement for the provision of at least one value-based activity for a target patient population to which the only parties are: (1) a value-based enterprise [“VBE”] and one or more of its VBE participants; or (2) VBE participants in the same value-based enterprise.” There are at least six new definitions related to value-based exceptions. These definitions are interconnected and should be read together, according to CMS. 

  1. VBE Assumes Full Financial Risk. This exception applies to value-based arrangements where a value-based enterprise has (during the arrangement) “assumed full financial risk from a payor for patient care services for a target patient population.”
  2. Physician Assumes Meaningful Downside Financial Risk. This exception applies to a value-based arrangement where the physician “is at meaningful downside financial risk for failure to achieve the value-based purposes of the value-based enterprise” during the entire arrangement period.  The physician must be responsible to pay or forego no less than 10% of the value of the remuneration the physician receives under the value-based arrangement.
  3. Value-based Arrangement with Any Level of Risk. This exception applies to value-based arrangements undertaken by the VBE or the VBE participants, regardless of the level of risk. 

The value-based compensation exceptions also apply to indirect compensation arrangements that include a value-based arrangement if a physician or physician organization is a direct party. Nothing in the Rule requires that the value-based purpose(s) be achieved for a value-based arrangement to be protected under an applicable exception. However, the government implemented safeguards to avoid willful avoidance and gamesmanship. If the parties engage in an action (or inaction) knowing it “will not further the value-based purpose(s) of the value-based enterprise, it will cease to qualify as a value-based activity.” Members of a value-based arrangement must also monitor whether they have provided value-based activities required under their arrangement and how continuation of the value-based activities is expected to further the purposes of the value-based enterprise.  

CMS also provided new special rules on compensation arrangements. Under the new rules, for compensation arrangements that are required to be in writing, the writing requirement may be satisfied with a collection of documents (including contemporaneous documents) if such documents evidence the course of conduct of the parties. Regarding temporary noncompliance, parties may obtain required writings within 90 calendar days after the compensation agreement becomes non-compliant with an exception. The 90-day grace period for satisfying signature requirements is also contained in the Rule. 

CMS also created a new exception to protect arrangements involving donations of certain cybersecurity technology (and related services) and to protect limited remunerations to a physician. The new exception for limited remunerations to a physician protects compensation or remuneration not exceeding an aggregate of $5,000 per calendar year for the provision of certain limited services.  

According to CMS, the new Stark Law exceptions allow providers “to design and enter into value-based arrangements without fear that legitimate activities to coordinate and improve the quality of care for patients and lower costs would violate the Stark Law.” As with any exception, the provider, entity, and parties to an arrangement must satisfy the requirements of each exception strictly – and many of the new exceptions include significant requirements, new or revised definitions, and include protections against overutilization and other harms.  

New and Revised Definitions

To reduce compliance-related burdens with the Stark Law, CMS has provided clarification, defined new terms, revised the definition of terms fundamental to many aspects of the Stark Law, and provided guidance on technical compliance requirements.  

For many Stark Law exceptions, the compensation arrangement must be commercially reasonable. Before the current Rule, commercial reasonableness was addressed only in the 1998 proposed rule. The new Rule provides that “commercially reasonable means that the particular arrangement furthers a legitimate business purpose of the parties to the arrangement and is sensible, considering the characteristics of the parties, including their size, type, scope, and specialty.” An arrangement can be commercially reasonable even if it does not result in profit for one or more parties. The requirement to meet commercial reasonableness is based upon an objective standard, according to a response to comment on the proposed rule.

Many exceptions to the Stark Law require the determination of fair market value. Determining fair market value has been a significant area of debate with varying interpretations. In the new Rule, CMS revises the definition of fair market value to mean “the value in an arms-length transaction, consistent with the general market value of the subject transaction.” Regarding equipment rental, “fair market value means the value in an arms-length transaction of rental property for general commercial purposes (not taking into account its intended use), consistent with the general market value of the subject transaction.” And regarding rental of office space, “fair market value means the value in an arm’s length transaction of rental property for general commercial purposes (not taking into account its intended use), without adjustment to reflect the additional value the prospective lessee or lessor would attribute to the proximity or convenience to the lessor where the lessor is a potential source of patient referrals to the lessee, and consistent with the general market value of the subject transaction.”

The new Rule also clarifies and revises parts of the definition of “remuneration.” Although remuneration has been broadly defined, there are exceptions, and some activities are not considered remuneration. “Furnishing of items, devices, or supplies” for statutorily identified purposes is one such exception. This exception did not include furnishing surgical items, devices, or supplies. Under the new Rule, the exception no longer excludes furnishing surgical items, devices, or supplies for statutorily identified purposes. CMS also revised the meaning of “designated health service (DHS).” Under the new Rule, hospital services furnished to inpatients are not considered designated health services if the service does not increase the Medicare payment amount to the hospital under certain prospective payment systems. 
Anti-Kickback Statute Background

The Federal Anti-Kickback Statute (“AKS”) prohibits, among other things, knowingly and willfully paying or receiving, remuneration in exchange for federal healthcare program referrals. Remuneration is defined broadly and includes anything of value (e.g. cash, discounted rent, meals, or excessive compensation, etc.). The AKS is a criminal statute and violators may be subject to criminal penalties, civil monetary penalties, and administrative actions like exclusion from federal healthcare programs. Similar to Stark Law, the AKS has exceptions ordinarily called “safe harbors,” which allow for payments and business practices that would otherwise violate the AKS to not be treated as offenses under the statute.  

Overview of New AKS Rules

In its new Rule, the OIG implemented three new safe harbors for remuneration exchanged between or among participants in value-based arrangements “that fosters better coordinated and managed patient care.”  

  1. Care Coordination Arrangements. This safe harbor protects in-kind remuneration between value-based enterprise participants when the remuneration is used predominately to engage in value-based arrangements and other important factors are met.  
  2. VBE Assumes Substantial Downside Financial Risk. This safe harbor protects in-kind and monetary remuneration between a VBE and VBE participant, however, the VBE must assume substantial downside financial risk from a payer if the VBE participant assumes a meaningful share of the risk. The VBE participant must share at least 5% of the financial risk to qualify. 
  3. VBE Assumes Full Financial Risk. The safe harbor protects in-kind and monetary remuneration from a VBE to a VBE participant if the VBE assumes full financial responsibility for the costs items and services covered by a payor. 

The AKS value-based safe harbors are generally stricter than the value-based Stark Law exceptions. Pharmacy benefit managers, laboratory companies, compounding pharmacies, medical device and supply distributors/wholesalers, and pharmaceutical manufacturers, distributors, and wholesalers are excluded from the AKS value-based safe harbors. The protections associated with the value-based safe harbors vary depending on numerous factors, including the level of risk assumed, eligible entities, the remuneration protected (in-kind, monetary, etc.). Only value-based arrangements with substantial risk protect monetary remuneration (e.g. care coordination arrangements do not protect monetary remunerations).

In addition to value-based safe harbors, the OIG also finalized a new Cybersecurity Technology and Services Safe Harbor to help improve cybersecurity in healthcare. The OIG also provided new exceptions for outcome-based activities and Point-of-Sale Price Reductions that may be considered improper remunerations. 

  1. Cybersecurity Technology and Services Safe Harbor. The new cybersecurity safe harbor applies to nonmonetary donations of certain cybersecurity technology and related services that are necessary and used predominately to implement, maintain, or reestablish effective cybersecurity. The cybersecurity safe harbor contains four requirements. Donors of cybersecurity are prohibited from considering the volume or value of referral or other business generated between the parties when deciding whether to donate cybersecurity or services. Another requirement prohibits donors from conditioning donations on future referrals. Likewise, the recipients are prohibited from conditioning the receipt of technology on doing business in the future. There must a written description of the technology or services being donated and the recipient’s contribution, if applicable. Finally, the donor may not shift the cost of the donated technology or services to any federal healthcare program.   
  2. Outcome-Based Remuneration Exclusion. One of the key elements of AKS culpability is remuneration. Under the new rule, certain outcome-based activities meeting specific requirements are not considered remuneration under AKS. Some requirements include the achievement of outcome measures that are (1) selected based on clinical evidence or credible medical support, and (2) meet certain benchmarks involving patient care or cost reduction (or both). 
  3. Point-of-Sale Remuneration Exclusion. Under the new rule, a reduction in price by a manufacture, Medicare Part D plan sponsor, or Medicaid Managed Care Organization for certain prescriptions otherwise payable by a Medicare Part D plan sponsor or Medicaid Managed Care Organization will not be considered a remuneration under AKS when certain requirements are met. 


Overall, the new rules and revisions to the Stark Law and AKS provide new exceptions, safe harbors, new and revised definitions, protection for beneficial arrangements that are non-abusive, and mechanisms to reduce administrative burdens. Although the Stark Law and AKS often operate in tandem, there are significant distinctions between the two laws. Many commenters to the proposed rules sought uniformity to ease compliance burdens. However, the new rules clarify these laws are distinct enforcement tools.

These rules and revisions focus heavily on value-based care, technology, and flexibility. However, the substantive details of these rules are extensive. Considering the significance of the changes and the breadth of the material (over a thousand pages), the government may provide clarification and additional guidance as the healthcare industry works to interpret the new rules. The Stark Law and AKS rules were published on December 2, 2020.
HHS Continues Cross-Agency Collaborations with New FCA Working Group

On December 4, 2020, the U.S. Department of Health and Human Services (HHS) announced the creation of the False Claims Act Working Group (FCA Working Group). The federal False Claims Act (FCA) has remained one of the federal government’s top tools to investigate and punish alleged fraud, waste, and abuse in federal programs. In fiscal year 2019, the Department of Justice (DOJ) collected over $3 billion in settlements and judgments under the FCA. CG attorneys have written about the government’s continued use of the FCA during the COVID-19 pandemic.  

The creation of the FCA Working Group shows the government’s continued reliance on and acknowledgment of the FCA as a powerful tool and evidences its continued strategic use of cross-agency partnerships to wield that tool. One reason HHS’ Office of the General Counsel created the FCA Working Group is to strengthen the working relationship with DOJ. The FCA Working Group includes former DOJ lawyers and healthcare fraud prosecutors, a former private counsel for healthcare and life sciences, and HHS attorneys. As part of its responsibilities, the FCA Working Group will identify potential FCA violations and refer those cases to the DOJ.

The new FCA Working Group will partner with the DOJ and HHS’ Office of Inspector General (OIG) “to enhance the mission shared with DOJ and OIG of preventing fraud and abuse.” To further the shared goals of fraud and abuse prevention, detection, and prosecution, the FCA Working Group will also provide targeted training and resources concerning HHS programs vulnerable to fraud and abuse. The targeted training will help HHS attorneys better detect and refer potential FCA cases. The FCA Working Group will serve as a “focal point” within the agency for consultation regarding the legal framework of various federal funding programs. As described by HHS, the FCA Working Group is “the conduit to HHS’ over 600 subject-matter attorneys and their agency clients, who have expertise in HHS’ funding programs.” According to HHS Secretary Alex Azar, “[t]his working group strengthens our partnership with DOJ and OIG on using the False Claims Act to pursue bad actors and protect taxpayer funds. Ensuring that resources are focused on bad actors will deter would-be fraudsters and avoid burdening those working in good faith to comply with the law.”

Through cross-agency collaborations, the government has taken significant enforcement actions. In October 2020, CG attorneys wrote about a nationwide enforcement action involving 345 defendants allegedly responsible for submitting more than $6 billion in fraudulent healthcare claims. This nationwide enforcement action involved collaboration between various federal and local agencies. HHS Deputy Inspector General Gary Cantrell’s explained, “collaboration is critical in our fight against health care fraud. We will continue working with our law enforcement partners to hold accountable those who steal from federal health programs and protect the millions of beneficiaries who rely on them.” The new FCA Working Group is another example of the federal government utilizing cross-agency collaborations and resources. Businesses and individuals, particularly those in the healthcare industry, must remain vigilant in their compliance efforts and in addressing potential fraud and abuse concerns. The government’s use of the FCA, cross-agency collaborations, and enforcement actions will continue to increase. 
Purdue Pharma Pleads Guilty to Kickback Conspiracies

On November 24, 2020, Purdue Pharma LP pleaded guilty to allegations that it conspired to defraud the government and violate the anti-kickback statute. Purdue pleaded guilty to three felony charges: one count of dual-object conspiracy to defraud the United States and to violate the Food, Drug and Cosmetic Act (FDCA), and two counts of conspiracy to violate the Federal Anti-Kickback Statute. 

Purdue admitted that it marketed and sold opioid products to healthcare providers when it knew that the products were being diverted to opioid abusers, and it further admitted that it lied to the Drug Enforcement Administration (DEA) about anti-diversion programs the company had implemented. Specifically, Purdue admitted that from May 2007 to at least March 2017, Purdue impeded the lawful function of the DEA by reporting misleading prescription data to boost Purdue’s manufacturing quotas. The conspiracy also involved facilitating the dispensing of Perdue’s opioid products, such as OxyContin, without a legitimate medical purpose, which constitutes aiding and abetting violations of the FDCA. 

Purdue also admitted that it violated the Federal Anti-Kickback statute. From June 2009 to March 2017, Purdue paid doctors under the guise of a speaker program to induce those doctors to write more prescriptions for Purdue’s opioid products. Additionally, from April to December 2016, Purdue paid an electronic health records company to refer, recommend, and arrange for the ordering of Purdue opioid products. 

According to the DOJ press release, the plea agreement imposes the largest penalty ever levied against a pharmaceutical manufacturer, including a criminal fine of $3.544 billion and an additional $2 billion in criminal forfeiture. Separately, Purdue agreed to pay $2.8 billion to resolve its civil liability under the False Claims Act. Notably, the criminal release extends only to Purdue; it does not release any individuals from potential criminal liability. None of the company’s executives or employees are receiving civil releases either. The guilty plea follows the resolution of DOJ’s criminal and civil investigations that was announced in October 2020 and about which Chilivis Grubman attorneys have written previously
False Claims Act: D.C. District Court Judge Rules that Whistleblowers Alleging Fraud in the Inducement Need Not Allege Materiality

On November 6, 2020, a D.C. District Court judge ruled that a whistleblower bringing a suit under the False Claims Act (FCA) need not allege “materiality” when relying on the “fraud in the inducement” theory of falsity. 

Over the years, Congress and federal agencies have enacted a variety of efforts to boost certain contractors. Under these programs, the government sets aside certain contracts for contractors who may have a special status. For instance, under a 2006 federal statute, the Department of Veterans Affairs (VA) has the authority to set-aside certain contracts for Service-Disabled Veteran-Owned Small Businesses (SDVOSBs) and Veteran-Owned Small Business (VOSBs). It is not surprising, then, that a contractor who applies for such a status and falsely claims that he or she meets all of the requirements may face potential liability under the FCA. 

The FCA states that a person who “knowingly presents … a false or fraudulent claim for payment or approval” may be liable for treble damages and civil penalties. The FCA does not define what constitutes a “false or fraudulent claim,” so courts have stepped in and established three ways in which a claim can fit that description. In the most straightforward case, a claim is “false” if it includes “an incorrect description of goods or services provided” or a “request for reimbursement for goods or services never provided.” Under the “fraud in the inducement” theory, a claim can be false or fraudulent is if it is submitted pursuant to a contract that was procured by fraud. Most recently, the U.S. Supreme Court recognized the “implied false certification” theory of liability under which a claim is false or fraudulent if the person submitting it knowingly fails to disclose noncompliance with certain requirements and knows that such noncompliance is material to the government’s decision to pay. 

Back in August of 2014, a qui tam whistleblower filed a complaint under the False Claims Act (FCA) against several government contractors. The whistleblower alleged that the contractors effected a scheme to submit bids and obtain millions of dollars in government construction contracts by fraudulently claiming or obtaining SDVOSB and other special statuses for which they were not eligible.  The litigation is ongoing, but this year, the defendants moved to dismiss the claim on the grounds that the whistleblower failed to allege materiality as required under the “implied false certification” theory of liability. The D.C. District judge overseeing the case denied the contractor’s motion. In his ruling, the judge explained that blatantly lying about eligibility for a special status is more than mere noncompliance with a requirement (i.e. implied false certification) — it is fraud in the inducement. The judge declined to require that the whistleblower meet the materiality requirement and found that “plaintiffs suing under the fraud in the inducement theory need only allege that false statements induced the government to award the contract, not also that those false statements were material to the government’s decision to pay the party under the contract.”

For now, this ruling has limited reach with respect to other federal courts, but it should nevertheless serve as a warning that a failure by a whistleblower (or the government) to meet the “materiality standard” may not be enough to escape liability under the FCA.  

The case is captioned United States ex. rel. Scollick v. Narula, et al., No. 14-cv-1339 (D.D.C.).
Clinic Owner and Employee Posing as Doctor Sentenced to 28 Years Collectively for Conspiring to Illegally Prescribe Hundreds of Thousands of Opioid Pills

On Thursday, December 10, 2020, the Department of Justice issued a press release regarding the sentencing of a Texas clinic owner and employee to 20 years and 8 years in prison, respectively, for their roles in a pill mill scheme. 

The clinic owner, Baker Niazi, pled guilty in April 2018 to conspiracy to unlawfully distribute and dispense controlled substances. The clinic employee, Muhammad Arif, posed as the clinic’s physician and was found guilty at trial. According to the trial evidence, Niazi owned and operated Aster Medical Clinic from September 2015 through February 2016, and hired Arif, who was not licensed to practice medicine in the United States. Arif would see patients and write illegal prescriptions on a prescription pad that was pre-signed by a co-conspiring licensed physician. Aster Medical Clinic would see over 40 people on busy days and charged $250 (in cash) per visit, according to the press release. The government also notes in the press release that people posed as patients to obtain prescriptions for controlled substances to divert onto the black market. 

Based on the scheme, the government contends that Aster Medical Clinic dispensed over 200,000 dosage units of hydrocodone and over 145,000 dosage units of carisoprodol, the combination of which has no known medical benefit. The government did not indicate the number of patients illegally prescribed both medications. For his role in this scheme, Niazi was sentenced to 240 months (20 years) in prison. He was also ordered to pay a $500,000 fine and to forfeit $493,000. Arif was convicted of one count of conspiracy to unlawfully distribute and dispense controlled substances, and three counts of unlawfully distributing and dispensing controlled substances. Arif was sentenced to 96 months (8 years) in prison and ordered to forfeit $11,423.11. An unnamed co-conspirator also pled guilty for his role and is awaiting sentencing.
This case is another example of the federal government utilizing cross-agency collaborations and resources, the prevalence of which CG attorneys recently discussed. The press release also noted that the Department of Health and Human Services (HHS) Centers for Medicare & Medicaid Services (CMS) is working with the HHS’ Office of Inspector General to “increase accountability and decrease the presence of fraudulent providers.”  
Medical Device Manufacturer Settles EEOC Suit for $240,000

On November 24, 2020, the U.S. Equal Employment Opportunity Commission (EEOC) settled its lawsuit against Tegra Medical LLC (Tegra) for $240,000, according to a press release

In July 2020, the EEOC sued Tegra alleging sexual harassment in violation of Title VII of the Civil Rights Act of 1964. Title VII prohibits discrimination based on race, sex, religion, national origin, and retaliation. According to the EEOC, Zahira Othman, a former Tegra employee, was sexually harassed by her supervisor and faced retaliation when she reported the harassment.  

The EEOC alleged that Ivan Pacheco, Ms. Othman’s manufacturing supervisor, made lewd comments and inappropriately touched Ms. Othman. When Ms. Othman reported the abusive behavior, Tegra did not take appropriate action, according to the EEOC. Before Ms. Othman’s complaint, at least three other female employees made complaints against Mr. Pacheco for inappropriate behavior. Shortly after Ms. Othman complained, another female employee complained to Tegra’s human resource manager about Mr. Pacheco. Despite multiple complaints, the manager denied the existence of previous complaints, according to the EEOC.

Ms. Othman also sought leave under the Family and Medical Leave Act to care for her son shortly after complaining about Mr. Pacheco’s actions. However, Tegra denied her leave request despite receiving documentation from the doctor of Ms. Othman’s son. Because of the denial, Ms. Othman resigned from her position to care for her son. According to the EEOC, “Tegra retaliated against her by denying her request for leave to care for her son under the Family and Medical Leave Act, resulting in her constructive discharge.” 

The EEOC sought pre-litigation resolution through its conciliation process. However, pre-litigation resolution attempts failed and the EEOC sued Tegra in July 2020. The parties settled shortly after the EEOC sued. According to the consent decree resolving the case, Tegra must pay $240,000 to two women allegedly subject to harassment and retaliation. Tegra will implement an independent hotline for employee complaints and report all complaints of sexual discrimination and retaliation to the EEOC. Tegra will update its policies related to discrimination and investigating complaints of discrimination. Tegra employees will undergo EEO training and Tegra’s human resource department must undergo training (in addition to the EEO training). Finally, under the consent decree, the human resource manager must obtain a senior human resources certification to maintain her position.

“Employers who are aware of sexual harassment in the workplace have a clear duty to act swiftly act to end the harassment,” explained Jeffrey Burstein, regional attorney for the EEOC’s New York District Office. An employer’s failure to end harassment violates federal law. Employers of all types and sizes, regardless of industry, should ensure that they have legitimate and unbiased internal systems designed to identify and address discrimination or vulnerabilities for discriminatory actions to occur. Employers should also ensure they have up-to-date policies and procedures in place so that managers and employees are well-trained regarding anti-discrimination and anti-retaliation rules and regulations.  
DOJ Sues Walmart in Latest Opioid Suit

The U.S. Department of Justice (“DOJ”) filed a lawsuit on December 22, 2020 against retail giant Walmart, alleging the company played a significant role in fueling the country’s opioid epidemic. The lawsuit is the result of a years’-long investigation by the DOJ’s Prescription Interdiction & Litigation (“PIL”) Task Force.  

The DOJ alleges that Walmart violated the Controlled Substances Act (“CSA”) by knowingly filling thousands of controlled substance prescriptions that were not issued for legitimate medical purposes or not issued in the usual course of medical practice, and knowingly filling prescriptions outside the ordinary course of pharmacy practice. The DOJ also alleges that Walmart, as the operator of its distribution centers, received hundreds of thousands of suspicious orders that it failed to report as required to by the Drug Enforcement Agency (“DEA”).

Jeffrey Bossert Clark, Acting Assistant Attorney General of the Civil Division commented on the allegations, “It has been a priority of this administration to hold accountable those responsible for the prescription opioid crisis. As one of the largest pharmacy chains and wholesale drug distributors in the country, Walmart had the responsibility and the means to help prevent the diversion of prescription opioids. Instead, for years, it did the opposite — filling thousands of invalid prescriptions at its pharmacies and failing to report suspicious orders of opioids and other drugs placed by those pharmacies. This unlawful conduct contributed to the epidemic of opioid abuse throughout the United States. Today’s filing represents an important step in the effort to hold Walmart accountable for such conduct.”

Walmart faces civil penalties of up to $67,627 for each unlawful prescription filled and $15,691 for each suspicious order not reported, which total hundreds of thousands of alleged CSA violations, in addition to potential injunctive relief. Civil penalties could amount to billions of dollars if the government is successful.

The case is pending in the U.S. District Court for the District of Delaware. The government is represented by attorneys from the DOJ Civil Division’s Consumer Protection Branch and from the U.S. Attorneys’ Offices for the District of Colorado, District of Delaware, Eastern District of North Carolina, Eastern District of New York, and Middle District of Florida. In addition to the PIL Task Force’s work on the investigation, assistance was also
provided by the DEA’s Dallas Field Division and Diversion Control Operations personnel, the DEA’s Office of Chief Counsel, and the Criminal Division’s Narcotic and Dangerous Drug Section. The DOJ continues to coordinate its enforcement efforts across multiple agencies.  
Texas Piggybacks off of DOJ – Hires Private Lawyers to Sue Google

Chilivis Grubman alerted you to the DOJ’s decision to go after tech giant Google using the antitrust laws in October. Now, Texas is leading a coalition of state attorneys general that seemingly plan to piggyback on that strategy. The states are looking into Google’s dominant presence in the digital advertising market. To that end, Texas served a civil subpoena last year.

But Texas is taking a different approach. The state will use private lawyers to launch its antitrust attack on Google. The Texas Attorney General intends to hire the Lanier Law Firm, a prominent trial firm with Texas roots, as well as Keller Lenkner, a Chicago-based firm focused on complex litigation. The Lanier Law Firm, led by Mark Lanier, is known for its work in product liability cases against some of the world’s largest companies, including pharmaceutical giants, oil companies, and more, recovering billions of dollars in the process. 
The states’ focus is on Google’s ad-tech business, which enables consumers to pay for the use of software to buy and sell ads on sites across the web. According to the state attorneys general, Google owns the primary tool at every point in the ad-tech process, which means it controls the monetization of that process. Google’s would-be competitors claim that the it uses the software across its other sites, like YouTube, to gain an anticompetitive advantage.  

Google has denied any anticompetitive behavior. In fact, Google notes that it operates in highly competitive markets for online advertising, and points to the benefits that its services offer to consumers and businesses alike.

The state coalition is said to be coordinating with the DOJ, which has been gathering information regarding the Google ad process under the auspices of its ongoing litigation efforts. The use of private lawyers to act on behalf of the state is not a new concept, but it could be significant resource in the current legal battle against one of the world’s largest businesses.
Home Depot Settles 2014 Data Breach for $17.5 Million

Home Depot has agreed to settle a multistate investigation into the data breach involving the theft of millions of customers’ credit cards. In 2014, Home Depot was the target of a cyberattack where the company’s point-of-sale systems were infected with malware designed to steal customer payment card data. 

The settlement resolves 46 states’ and the District of Columbia’s investigations into the breach. The $17.5 million settlement amount will be divided among the states and used for attorneys’ fees, investigation and litigation costs, or applied to a consumer protection law enforcement fund. Of the $17.4 million amount, Texas is to receive $1.78 million, Connecticut is to receive $1.09 million, and California is to receive $1.8 million. 

In addition to the fine, Home Depot must implement a new information security system designed to protect personal information. According to a court filing, Home Depot must develop a written program that takes into account the size and complexity of Home Depot’s operations and the sensitivity of the information the company keeps. The program must be overseen by a Chief Information Security Officer with appropriate credentials, background, and expertise in information security. Home Depot must also provide security awareness training for its staff, among other requirements detailed in the filing. 
OCR Enforcement Actions Continue Under HIPAA Right of Access Initiative with Thirteenth Settlement

CG attorneys have discussed the U.S. Department of Health and Human Services’(HHS) Office of Civil Rights (OCR) focus on patient access to records in its “HIPAA Right of Access Initiative.” Under this initiative, OCR settled numerous actions involving medical practices that potentially violated the HIPAA Privacy Rule’s right of access requirements (45 C.F.R. § 164.524), including at least four such actions since November 2020. 

In November, CG attorneys alerted readers to OCR’s tenth settlement under its HIPAA Right of Access Initiative. The settlement involved a medical practice that received two complaints regarding failure to provide a patient with their requested records. Although the practice asserted that it did not have to comply with the request under the psychotherapy note exception, OCR explained that medical records that do not contain psychotherapy notes should be provided to the patient. The medical practice settled for $25,000. Six days after OCR’s tenth settlement announcement, OCR announced its eleventh settlement regarding alleged violations of HIPAA Privacy Rule’s right of access requirements. The medical practice settled for $15,000 and agreed to take corrective actions. Also, in November, OCR announced that the University of Cincinnati Medical Center, LLC agreed to take corrective actions and pay $65,000 to settle a potential violation of the HIPAA Privacy Rule’s right of access requirements. The University of Cincinnati Medical Center’s settlement was OCR’s twelfth settlement under its HIPAA Right of Access Initiative.

On December 22, 2020, OCR announced its thirteenth settlement under its initiative. According to the press release, OCR received a complaint alleging that Elite Primary Care did not respond to a patient’s request for access to his medical records. Like previous settlements, OCR provided the practice technical assistance regarding the HIPAA Privacy Rule’s right of access requirements and closed the complaint. OCR received a second complaint five months later, which alleged that Elite Primary Care had yet to provide the patient access to his medical records. OCR initiated an investigation and determined that Elite Primary Care’s failure to provide medical records may have violated HIPAA Privacy Rule’s right of access requirements, according to the press release. Elite Primary Care agreed to a two-year corrective action plan (CAP) and to pay $36,000 to settle the potential violations. Under the CAP, Elite Primary Care must develop and revise written HIPAA policies and procedures, provide training to all employees, provide a written report regarding its status of implementing the CAP, and implement record retention requirements. 

These settlements are clear indications of OCR’s continued prioritization of enforcing the HIPAA Privacy Rule’s right of access requirements. In November, Director Roger Severino commented on OCR’s HIPAA Right of Access Initiative: “We will continue to prioritize HIPAA Right of Access cases for enforcement until providers get the message.” Providers should heed OCR’s warnings and ensure proper training on and compliance with HIPAA Privacy Rule’s right of access mandate, which provides parameters for the provision of access, denial of access, and record-keeping requirements for medical record requests.


Strength shows not only in the ability to persist,
but the ability to start over.


Second Drug Manufacturer and Vendor Settles False Claims Act Allegations Related to Co-pay Coverage

In July 2020, CG attorneys discussed two settlements by Novartis Pharmaceuticals Corporation for $729 million involving allegations that Novartis paid kickbacks to doctors and patients. One settlement involved Novartis agreeing to pay $51.25 million to resolve federal False Claim Act (“FCA”) allegations that Novartis coordinated with and funneled money to charitable foundations to pay the co-pay for patients who otherwise could not afford Novartis’ drugs.  

The government’s scrutiny of charitable patient assistance programs continues. On December 17, 2020, the Department of Justice (“DOJ”) published a press release announcing that Biogen, Inc., a Massachusetts-based pharmaceutical company, agreed to pay $22 million to settle alleged FCA and federal Anti-Kickback Statute (“AKS”) violations. The alleged violations stem from subsidized co-pays through charitable patient assistance programs created by Biogen. The AKS prohibits, among other things, knowingly and willfully paying or receiving, remuneration in exchange for federal healthcare program referrals, or as related to Biogen, the purchase of company drugs. Remuneration is defined broadly and includes anything of value, like co-pay coverage.  

Biogen’s alleged scheme involved coordination with its vendor Advanced Care Scripts (“ACS”). As part of this scheme, Biogen allegedly identified specific patients in Biogen’s free drug program for ACS. ACS transferred the identified patients to Biogen’s nonprofit foundations. These foundations were used to pay the co-pay obligations of the patients to induce those patients to purchase Medicare-reimbursed Avonex and Tysabri prescriptions, according to the press release. “By treating the foundations simply as conduits to pay the co-pays of its own patients, Biogen violated the anti-kickback statute and undermined Medicare’s co-pay structure, which Congress intended as a safeguard against inflated drug prices,” explained First Assistant United States Attorney Nathaniel R. Mendell. For its involvement, ACS agreed to pay $1.4 million in a separate settlement.

The Biogen settlement resolved the lawsuit captioned United States ex rel. Nee vs. Biogen et. al., Case No. 17-CV-10192-MLW (D. Mass.), filed under the qui tam (whistleblower) provisions of the FCA. The qui tam provision allows private parties to file FCA lawsuits on behalf of the government. The government may intervene in a qui tam action, as the government did in Biogen. Also, under the qui tam provision, a whistleblower may receive anywhere between 15 and 30 percent of the government’s recovery. The whistleblower in Biogen will receive approximately $3.96 million from the settlement, according to the press release
Earlier this month, Chilivis Grubman partner Scott Grubman's article discussing a recent Anti-Kickback Statute decision from the Eleventh Circuit Court of Appeals (US v. Shah) was published by the American Bar Association's Health Law Section. The Court's decision in Shah eliminated the "one purpose rule" as it applies to the "payee" side of an AKS violation.
On December 9, Chilivis Grubman co-hosted the False Claims Act Virtual Summit, which featured speakers from across the FCA legal spectrum, including leading plaintiff and defense lawyers, as well as a representative from the DOJ. Over 100 attendees participated in the Summit, which was co-chaired by Scott Grubman.

The following week, Scott also presented at the Georgia Academy of Healthcare Attorneys (GAHA) Annual Meeting on the topic of government fraud and abuse enforcement. GAHA is affiliated with the Georgia Hospital Association.
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