Medco Discloses Two New Whistleblower Suits

In May, Medco disclosed it would take a $163 million charge in connection with an expected settlement with the Justice Department concerning previous whistleblower allegations of fraud. The settlement involved allegations that, among other things, Medco inappropriately canceled or changed prescriptions, underfilled pill bottles and took longer to fill prescriptions than it claimed.
In the [8/4/06 release], the company said the settlement is still pending because "non-financial elements" hadn't been agreed upon.
Medco said in the course of negotiating the settlement, it learned of the additional whistleblower actions, one filed in the Eastern District of Pennsylvania and the other filed in the District of New Jersey. Medco said the actions were sealed, and that each action "appears to allege" billing violations.
The Pennsylvania case, Medco said, appears to allege the company billed government payors using invalid or out-of-date national drug codes. The New Jersey case appears to allege that Medco charged government payors a different rate than it reimbursed pharmacies; engaged in duplicate billing; refilled prescriptions too soon; and billed government payors for prescriptions written by unlicensed physicians and physicians with invalid Drug Enforcement Agency authorizations.
Medco said the additional whistleblower actions aren't being considered in the current settlement negotiations with the Justice Department.
Whistleblower suits are filed under the federal False Claims Act, and the filers can win up to a third of any recovery made by the government.
Medco said it didn't know the identity of the filers or any other defendants in the actions.
-By Tony Cooke, Dow Jones Newswires; 202-862-1347; tony.cooke@dowjones.com

Pasted from <http://www.easybourse.com/Website/dynamic/News.php?NewsID=37467&lang=fra&NewsRubrique=2>

The State of New York Insurance Department has recently withdrawn its circular letters that provided that "Discretionary Clauses" that are permitted under ERISA are an abusive marketing practice because they do not disclose the level of judicial review that will be employed
by a federal court for determinations of coverage by such Plans, i.e., arbitrary and capricious.

http://www.ins.state.ny.us/cl06_08.htm

http://www.ins.state.ny.us/cl06_14.htm

NYSID has indicated that they will issue proposed rules to the same effect.

First, if a practice is truly abusive, why couldn't NYSID enforce its broad statutory enforcement rights to do so. Second, if it is a disclosure issue, isn't it possible for the industry to solve this issue by including broad disclosures in the sales and benefit plan materials? Third, if the Department finds that they are unfair is this a finding that the ERISA framework for judicial review is unfair? Is there a distinction between such a position and external review statutes, which have been upheld. In essence, both regulations require ERISA plans to waive a procedural right under ERISA. I intend to draft in the near future a separate post on the ERISA preemption issue exclusively as well as a broader national survey of recent discretionary clause activity.

For a contrary review, see the link to the August 2004 edition of the National Academy for State Health Policy issue brief.

http://www.statecoverage.net/pdf/issuebrief804.pdf

The U.S. District Court for the District of Maryland has issued an opinion finding that Maryland's so-called Wal-Mart law is preempted by ERISA because, in essence, the statute attempts to define the terms of large employer health and welfare benefit plans related to health insurance. The opinion is notable in its applicability to other "play or pay" type mandated benefits legislation similar to the Massachussets comprehensive health reform statute as well as the program being introduced by the City of San Francisco recently.

http://www.mdd.uscourts.gov/Opinions152/Opinions/Walmartopinion.pdf

WSJ reports 7/31/06 regarding potential decline of public HMO stocks following disappointing earning reports last week. Nearly every HMO revised their yearly membership projectings as price competition and their desire to maintain margin makes these goals unprofitable. The real question is whether health plans are adding value to the average customer in what they are doing or have they turned into a utility type enterprise in which everyone needs one but there really is no differentiation other than price?

What the story doesn't report is that regional competitors, such as non-profits and smaller for profit plans, do not have the same margin requirements and may be in a better position to compete on price even with the lack of the so-called economies of scale. In addition, many small TPAs still are cheaper than the large plans and provide better service.

All of this ignores, of course, the fact that health plans have not really been doing much to control costs other than passing more of it on to the customer. Targeted disease and population management and wellness programs are a start but it is hard to see how they are going to get the traction required to have a major impact on a macro level.

http://online.wsj.com/article/SB115431323388421950.html?mod=hps_us_my_companies

The drug industry continues to have significant issues related to reporting of safety data in medical journals. In the latest story, the Wall Street Journal reports FDA approved drug Ketek for Sanofi Aventis with knowledge that a clinical study requested by the FDA in order to grant approval contained irregularities in data submitted by multiple physicians, some of whom had significant credentialing and/or fraud and abuse issues. The study had been cited in last month's New England Journal of Medicine.

Of note, the manufacturer's use of a product development support firm that paid for physicians to recruit study candidates may have increased the potential for program abuse even with the procedural safeguards put in place both by the manufacturer and the development firm.

http://online.wsj.com/article/SB114644463095840108.html?mod=hps_us_pageone

Also from the Wall Street Journal, United Healthcare's option grants to William McGuire, MD and several other executives continue to attract scrutiny. The United Board of Directors is scheduled to meet today to discuss executive compensation and other governance issues.

UnitedHealth's McGuire DeclinesQuestions on Stock-Option Grants
http://online.wsj.com/article/SB114649629932440504.html?mod=article-outset-box

Read the original article reporting on a number of firms that may have backdated option grants:

http://online.wsj.com/article/SB114265075068802118.html?mod=article-outset-box

We are pleased to announce the formation of the Health Care Practice Group at Webster Szanyi LLP and the launch of our blog page. The Webster Szanyi Health Law site will be developed to timely and thoughtful commentary on legal and business developments affecting the health care industry.

Webster Szanyi provides a broad range of legal services with concentrations in the litigation, environmental, health care and general business law. At Webster Szanyi, we are focused on helping our clients improve health care for their customers and consumers through innovation and strong legal representation. The Health Care Practice Group is led by Scott V. Carroll and Michael P. McClaren.

Attorney Profiles

Scott V. Carroll, Esq.

Scott Carroll is co-leader of the health care practice group of Webster Szanyi, LLP and has over ten years experience in health care law, transactions and litigation. Prior to joining Webster Szanyi, Mr. Carroll was Assistant General Counsel of HealthNow New York Inc., a non-profit health service corporation and HMO that operates in Upstate New York as BlueCross BlueShield of Western New York and BlueShield of Northeastern New York. At HealthNow, Mr. Carroll was responsible for providing and managing legal services related to health and insurance regulation, health care and corporate transactions and strategic investments. In this capacity, Mr. Carroll was principally responsible for handling all provider network, IPA, management service and group health care transactions. Mr. Carroll assisted in the formation of HealthNow's Business Development Department and coordinated HealthNow's response to federal and state regulatory examinations of the organization. Mr. Carroll also pursued and defended numerous antitrust, product liability and other complex litigation matters on behalf of HealthNow. Prior to joining HealthNow in 1997, Mr. Carroll was an associate at a Washington, D.C. managed health law firm.

Mr. Carroll received his law degree from the Catholic University of America, Columbus School of Law in 1994 where he was Executive Editor of the Journal of Contemporary Health Law and Policy. Mr. Carroll received his Bachelors of Arts in Philosophy cum laude from Catholic University in 1991. Mr. Carroll has published articles and lectured on a variety of issues of concern to managed care organizations and healthcare providers, including Medicare managed care, federal fraud and abuse regulations, provider disputes and information technology.

Michael P. McClaren

Michael McClaren, as a full time litigator and trial attorney, regularly practices in both federal and state courts, and concentrates primarily on defending claims involving health care, civil rights, municipal liability and ERISA. Mr. McClaren's variety of clients include health insurance companies, health maintenance organizations, municipalities, municipal insurance carriers, and construction contractors.

Mr. McClaren is a member of the Defense Research Institute, Association of Trial Lawyers of America, and the Tort & Insurance Law, Health Law and Litigation sections of the American Bar Association. He is also a member of the Municipal Law section of the Erie County Bar Association, and the Municipal Law, the Tort and Insurance Law, and the Health Law committees of the New York State Bar Association.

In addition to his defense work, Mr. McClaren represents individuals in pursuing claims against broker-dealers and stockbrokers for unsuitable transactions, fraud, churning and breach of fiduciary duty. Mr. McClaren is an active member of the Public Investors Arbitration Bar Association, and is recognized in the field for his aggressive pursuit of these claims.
Born in Buffalo, New York, Mr. McClaren is a graduate of St. Lawrence University and Albany Law School. As a result of his statewide practice, Mr. McClaren is admitted to practice in all courts of the State of New York, as well as the United States District Courts for the Western and Northern Districts of New York, the Western District of New York Bankruptcy Court, and the Second Circuit Court of Appeals.