Washington state courts publish public health emergency bench book

A number of jurisdictions have published bench guides for dealing with public health emergencies. The most recent of which I am aware comes from the courts in the state of Washington. Their Public Health Emergency Bench Book (HTML) (PDF) is a tidy little guide that provides a good checklist for any other court system considering what procedures are available during a public health emergency, as well as the practical considerations involved in providing justice when court personnel are missing or when sanitary conditions cannot be assured. Other bench books have been produced for the Indiana courts (updated July 2006) and Kentucky courts. Other jurisdictions have also prepared materials on courthouse preparedness (Google search).

NY Times article on the pervasive -- and perverse -- presence of IRBs on campus

Today's article is more about nonmedical research that is subject to IRB review and occasional veto, but it is interesting as a cultural marker that shows the spreading influence of the medical model of consent (and the growing pushback thereto).

Second Champaign hospital loses its exempt status

Health Business Policy has a news flash that the Champaign County (IL) "Board of Review reports that the Illinois Department of Revenue (“DOR”) has revoked the property tax exemption of a second hospital in Champaign-Urbana, the Carle Foundation Hospital in Champaign, Illinois, agreeing with the original recommendation filed by the Board of Review to the Illinois DOR in the spring of 2005." There's nothing on the DOR web site about the alleged affirmance.

The Board of Review's letter brief argued that the hospital was guilty of inurement by providing a practice platform for the for-profit physician group that operated it. Granted, this is the position of a single taxing authority (and maybe the state as well), but if that analysis is adopted widely, a lot of multi-specialty physician groups (at least the ones that aren't organized as nonprofits) with an affiliated health or hospital group are going to want to take a close look at whether they are organized and operated for a charitable purpose. Every entity's facts will be a little different, and exempt status is a "facts and circumstances" determination, but counsel for any such organization will want to pay close attention to the County's analysis of the inurement issue, as well as the other facts relied on in their brief.

Everything you always wanted to know about nanotechnology but were afraid to ask

Health lawyer Alan Goldberg alerted me to these nanotech-related publications from EPA:

• EPA's Science Policy Council's Feb. 15 white paper (pdf);
• EPA fact sheet
• EPA's nanotech web page

If you're coming to the nanotech party a little late, a good place to start would be the federal government's National Nanotechnology Initiative:

The National Nanotechnology Initiative (NNI) is a federal R&D program established to coordinate the multiagency efforts in nanoscale science, engineering, and technology.

The goals of the NNI are to:

• Maintain a world-class research and development program aimed at realizing the full potential of nanotechnology;
• Facilitate transfer of new technologies into products for economic growth, jobs, and other public benefit;
• Develop educational resources, a skilled workforce, and the supporting infrastructure and tools to advance nanotechnology; and,
• Support responsible development of nanotechnology

Twenty-five federal agencies participate in the Initiative, 13 of which have an R&D budget for nanotechnology. Other Federal organizations contribute with studies,
applications of the results from those agencies performing R&D, and other collaborations. (See NNI Participants and NNI Structure and Strategies)

Lethal injection: what does the physicians' non-role portend?

Sunday's NY Times Magazine had an article by Elizabeth Weil on the boomlet of public and official opinion that is starting to cohere against the administration of the death penalty, in states that still have it, by lethal injection. Two articles in the past year by Atul Gawande (one in the New England Journal of Medicine and one in Nature) focus specifically on the role of physicians in such killings and are particularly worth reading.

AHLA's Health Lawyers Weekly (Feb. 9)

From the 9 February issue of AHLA's Health Lawyers Weekly:

Top Stories

• President Bush Issues FY 2008 Budget, Calls For Substantial Medicare, Medicaid Reductions
  President Bush issued his fiscal year (FY) 2008 budget proposal this week, calling for roughly $101 billion in savings from Medicare and Medicaid over five years. Full Story
• CMS Reports More Medicare Part D Beneficiaries Using Generic Drugs
  New data indicates that many Americans are saving money by switching to generic drugs, according to the Centers for Medicare and Medicaid Services (CMS). Full Story

Articles & Analyses

• Michigan Legislature Passes Provisional Nurse Licensure Statute, by Gregory W. Moore, Hall Render, Killian Heath and Lyman

Current Topics

• Arbitration/Mediation
  Ohio Appeals Court Upholds Nursing Home Arbitration Agreement Finding Procedural But Not Substantive Unconscionability
• Business Transactions
  Seventh Circuit Holds Management Company Breached Lease Agreement When Intermediary Care Facility Lost State CON
• ERISA
  U.S. Court In Michigan Finds Plan Member Has Standing To Sue Under ERISA Even Without Proof Of Personal Injury
• Food and Drug Law
  Drug Safety Legislation Introduced In Senate
• Fraud and Abuse
  1. Update
  2. U.S. Court In Arkansas Dismisses FCA Qui Tam Action Against Hospital And Rehabilitation Services Provider On Finding Of Insufficient Evidence
• Health Policy
  Major Employers, Union Team Up To Improve Healthcare System
• Healthcare Access
  Workers' Decision To Participate In Employer-Sponsored Health Insurance Plans Affected By Affordability Of Premiums, Study Finds
• HIPAA
  U.S. Court In Connecticut Says HIPAA Does Not Bar Ex Parte Interviews With Employees At Group Home Where Plaintiff Was Allegedly Neglected
• Hospitals and Health Systems
  1. Texas Appeals Court Finds Hospital District Waived Its Immunity By Filing Counterclaim To Physicians' Retaliatory Discharge Claims
  2. Lawmakers Question CMS About Specialty Hospital Following Patient Death In Texas
• Insurance
  U.S. Court In Texas Dismisses Hospital's Claims Against Plan Administrator After Plan Refused To Pay Because Of Pre-Existing Condition Exclusion
• Medicaid
  Study Finds Six States Have Reported Enrollment Drop Since Implementing New Medicaid Documentation Requirements
• Medicare
  1. OIG Presents Baseline Data On Medicare Part B Services For Nursing Home Residents
  2. U.S. Court In Tennessee Rejects MSP Action By Individual Claiming Standing As Qui Tam Relator
• News in Brief
  Low Health Literacy May Lead To Unsafe Care, Joint Commission Says
• Physicians
  Ninth Circuit Allows Physician To Proceed With Retaliatory Termination, Unfair Competition Claims Against IPA
• Quality of Care
  1. Most Patients Do Not Comparison Shop For Healthcare Services, Study Finds
  2. Public Reporting Efforts Help Improve Quality Of Care But Implementation Obstacles Remain, Report Says
• Tax
  IRS Issues Governance Guidelines For Charitable Organizations

(c) 2007, reprinted with permission of AHLA

Texas' HPV vaccination mandate: upon further reflection . . . .

The Saturday Times printed some interesting reactions to that paper's editorial support for the executive order by Texas Gov. Rick ("The Haircut") Perry that requires girls to receive HPV vaccinations before they would be allowed to enter sixth grade:

• Although you note the “opt out” approach taken by Gov. Rick Perry of Texas in which vaccination is required but parents can seek an exemption for reasons of conscience or religious beliefs, recommending the vaccine rather than requiring it could prove to be just as effective without violating the parents’ right to decide affirmatively — at least until the long-term effects are known. Amanda Styron
• Schools may rightfully require that children undergo immunizations that will protect schoolwide populations from acquiring communicable diseases, but cervical cancer does not fall into this category. However benevolent the intent, this is not a matter for Big Brother. Alan Katz
• In Texas, underscreening in African-American and Hispanic women probably accounts for their disproportionately high rates of cervical cancer. These adult women need access and coverage for screening. Unfortunately, there is no lobby for the Pap smear. Deborah Kamali, M.D.
• Compulsory vaccination has a legitimate place in our health care system. But why should the government restrict its vaccinations to the victims? Why not include the carriers? Sue Abercrombie
• Texas will pay hundreds of dollars per girl for the vaccination. Why not spend the money on health care, education about teenagers’ bodies and rights, enriching music, dance, art and science programs that engage, increase confidence and provide an alternative to sexual activity? What kind of people supply schoolgirls to a pharmaceutical company, allowing it to earn millions a year on such mandates? Elizabeth Beiter

Hospice - rethought and revised

There's a nice article in today's NY Times about hospice care and the ways in which it's being reimagined and revised to encourage its use by more patients and at an earlier stage in their illness. The key change is the option of continuing curative treatments while enrolled in hospice, which (i) makes hospice available to those who aren't ready to give up such treatments and (ii) reduces the incentive for such patients to opt for expensive hospital care -- often in the ICU -- at the end of life.

Health Care for the 21st Century: a call to action

Does anyone know what John Kitzhaber's been up to since he stopped being governor of Oregon? The Archimedes Movement. Check it out.

AHLA's Health Lawyers Weekly (12 Jan 07)

From the January 12 issue of Health Lawyers Weekly (reprinted with AHLA's permission):

Top Stories

• House Passes Bill Requiring Medicare Prescription Drug Price Negotiation; Bush Threatens Veto
  President George W. Bush has threatened to veto a bipartisan bill that would require the Secretary of the Department of Health and Human Services (DHHS) to negotiate for lower prescription drug prices on behalf of Medicare. The House passed the bill January 12 by a vote of 255 to 170. Full Story
• House Clears Stem Cell Bill
  As expected, the House passed January 11 a bill aimed at expanding research opportunities on embryonic stem cells. The measure cleared the House by a 253-174 margin, short of the two-thirds majority needed to override a presedential veto. Full Story

Articles & Analyses

• Department Of Justice Revises Policies On Waiver Of The Attorney-Client Privilege In Corporate Fraud InvestigationsBy Joseph Burby, Jennifer Odom, and Kenneth Schwartz, Powell Goldstein LLP

. . . and many news items of note.

GAO reports from November

Last week the Government Accountability Office listed its November 2006 health-related reports:

• End-Stage Renal Disease: Bundling Medicare's Payment for drugs with Payment for All ESRD Services Would Promote Efficiency and Clinical Flexibility. GAO-07-77, November 13, 2006 (35 pages). http://www.gao.gov/docdblite/details.php?rptno=GAO-07-77
• End-Stage Renal Disease: Medicare Payments for All ESRD Services,Including Injectable Drugs, Should Be Bundled. GAO-07-266T,December 6, 2006 (5 pages). http://www.gao.gov/docdblite/details.php?rptno=GAO-07-266T
• Long-Term Care Insurance: Federal Program Has a Unique Profit Structure and Faced a Significant Marketing Challenge.GAO-07-202, December 29, 2006 (29 pages). http://www.gao.gov/docdblite/details.php?rptno=GAO-07-202
• New Drug Development: Science, Business, Regulatory, and Intellectual Property Issues Cited as Hampering Drug Development Efforts. GAO-07-49, November 17, 2006 (47
  pages). http://www.gao.gov/docdblite/details.php?rptno=GAO-07-49
• Prescription Drugs: Improvements Needed in FDA's Oversight of Direct-to-Consumer Advertising. GAO-07-54, November 16, 2006 (47 pages). http://www.gao.gov/docdblite/details.php?rptno=GAO-07-54

Health Affairs' 25 most-read articles of 2006

Here's an offer that's too good to pass up:

Health Affairs’ 25 Most-Read Articles From 2006

To celebrate the start of Health Affairs’ 25th anniversary year, we list here the 25 most frequently viewed articles published in 2006. In 2006, Health Affairs’’ Web readership grew to 12 million pageviews.

The paper on nurse staffing in hospitals by Jack Needleman and colleagues took the top spot for a paper published in 2006 with 37,547 pageviews. Two papers from 2005 earned the “most-read overall” ranking: “Can Electronic Medical Record Systems Transform Health Care?” by Richard Hillestad and colleagues from Health Affairs’ September/October 2005 issue attracted 40,263 pageviews in 2006, and the medical bankruptcy Web Exclusive by David Himmelstein and colleagues from February 2005 continued its high readership, adding 39,262 pageviews in 2006 to its over 70,000 pageviews from 2005, thus surpassing 100,000 readings of the paper.

25 Most-Read Health Affairs Papers Published in 2006: http://www.healthaffairs.org/Top25_2006_MostRead.php
25 Most-Read Health Affairs Papers Overall Online in 2006: http://www.healthaffairs.org/Top25_2006_MostRead_Overall.php

We are sending this notice to subscribers so you may see which papers your cohorts viewed most often at www.healthaffairs.org. As a subscriber you have online access to these papers and to all journal content. To celebrate our 25th anniversary, we are opening access to the 25 papers from 2006 through January 19, 2007, so you may share these with colleagues, students and others who may not currently have access.

(emphasis added)

AHLA's Health Lawyers News (5 January 2007)

From the January 5 issue of Health Lawyers Weekly (reprinted with AHLA's permission):

Top Stories

• Medicaid Commission Issues Final Report On Medicaid Reform
  The Medicaid Commission said "fundamental reform" is needed to shore up the long term sustainability of the federal-state Medicaid program in a final report issued December 29 that details its recommendations for achieving that end. Full Story
• OIG Finds Only Three Of Ten State False Claims Acts Submitted For Review Comply With DRA Requirements
  The Department of Health and Human Services Office of Inspector General (OIG) has determined that only three of ten state False Claims Acts (FCAs) that it recently reviewed comply with all the requirements set forth in the Deficit Reduction Act of 2005 (DRA) to be eligible for the financial incentive bonus, according to information posted on OIG's website December 29. Full Story

Articles & Analyses

• Congress Approves Medicare, Medicaid Changes, by Karen S. Sealander and Eric Zimmerman, McDermott Will & Emery LLP
• CMS Issues Long-Awaited DRA Compliance Guidance And Teleconference, by Elizabeth Callahan-Morris, Hall, Render, Killian, Heath & Lyman, PLLC

. . . and many news items of note.

Another angle on middlemen

As noted here before (and before), middlemen have the potential to increase the efficiency of the health care system, but they can also be a drag on the system. Paul Krugman last week* noted that the privatization of Medicare, including (but not limited to) the use of pharmacy benefits managers in the Part D pharmaceutical benefit, has not worked out so well. As an example, he notes that the managed-care portion of Medicare, now called Medicare Advantage, costs on average 11% more than traditional Medicare. So much for privatization, at whose alter this administration worships: It is an empty faith that drains dollars from public programs without increasing the welfare of their intended beneficiaries.

* Krugman's column is here, which is a TimesSelect address that requires a paid subscription. There's a good summary over at Mark Thoma's blog.

HIPAA privacy rule: Is it time for (re)reform?

Kaiser's Health Policy Daily has a nice summary of a Wall Street Journal article (link good for 7 days) on HIPAA's privacy loopholes that appeared the day after Christmas:

"[I]ncreasingly complex confidentiality issues" in federal medical privacy rules "are affecting patients and their insurance coverage," the Wall Street Journal reports. According to the Journal, complaints of privacy violations "have been piling up." Between April 2003 and Nov. 30, 2006, HHS received 23,896 complaints related to medical-privacy rules. An HHS spokesperson said 75% of those complaints have been closed because no violations were found or informal guidance was provided to involved parties. Since HIPAA was enacted in 2003, HHS has not taken enforcement actions against any entity for violating the privacy rule. The Journal profiled attorney Patricia Galvin, who was denied disability benefits after her health insurer, UnumProvident, accessed notes from psychotherapy sessions at Stanford Hospital & Clinics. According to the Journal, UnumProvident said the notes indicated that Galvin was not "too injured to work" after she was involved in a car accident and applied for long-term disability leave. UnumProvident had asked Galvin to sign a broad release to access her basic medical records, which included some of the psychotherapist's notes about Galvin that Stanford had scanned into its computer records system. Galvin has filed a lawsuit against Stanford and UnumProvident for violating medical privacy laws, among other issues, under the federal Health Insurance Portability and Accountability Act. HIPAA includes added protection for mental health records, but Stanford in court papers said that "psychotherapy notes that are kept together with the patient's other medical records are not defined as 'psychotherapy' notes under HIPAA." Peter Swire, a law professor at Ohio State University who helped write the regulations, said, "We're three years into the enforcement of the rule, and they haven't brought their first enforcement initiative." He added, "It sends the signal that the health system can ignore this issue" (Francis, Wall Street Journal, 12/26/06).

Krugman touts single-payer system

This is definitely a dog-bites-man story, but it's a new year, so I suppose it's appropriate that Paul Krugman should start 2007 with a theme that was one of his favorites in 2006 [link; it's a TimesSelect item, so unfortunately it's available only for subscribers):

The U.S. health care system is a scandal and a disgrace. But maybe, just maybe, 2007 will be the year we start the move toward universal coverage.

In 2005, almost 47 million Americans — including more than 8 million children — were uninsured, and many more had inadequate insurance.

Apologists for our system try to minimize the significance of these numbers. Many of the uninsured, asserted the 2004 Economic Report of the President, “remain uninsured as a matter of choice.”

And then you wake up. A scathing article in yesterday’s Los Angeles Times described how insurers refuse to cover anyone with even the slightest hint of a pre-existing condition. People have been denied insurance for reasons that range from childhood asthma to a “past bout of jock itch.”

Some say that we can’t afford universal health care, even though every year lack of insurance plunges millions of Americans into severe financial distress and sends thousands to an early grave. But every other advanced country somehow manages to provide all its citizens with essential care. The only reason universal coverage seems hard to achieve here is the spectacular inefficiency of the U.S. health care system. . . .

The truth is that we can afford to cover the uninsured. What we can’t afford is to keep going without a universal health care system.

If it were up to me, we’d have a Medicare-like system for everyone, paid for by a dedicated tax that for most people would be less than they or their employers currently pay in insurance premiums. This would, at a stroke, cover the uninsured, greatly reduce administrative costs and make it much easier to work on preventive care.

Such a system would leave people with the right to choose their own doctors, and with other choices as well: Medicare currently lets people apply their benefits to H.M.O.’s run by private insurance companies, and there’s no reason why similar options shouldn’t be available in a system of Medicare for all. But everyone would be in the system, one way or another. . . .

But now is the time to warn against plans that try to cover the uninsured without taking on the fundamental sources of our health system’s inefficiency. What’s wrong with both the Massachusetts plan and Senator Wyden’s plan is that they don’t operate like Medicare; instead, they funnel the money through private insurance companies.

Everyone knows why: would-be reformers are trying to avoid too strong a backlash from the insurance industry and other players who profit from our current system’s irrationality. But look at what happened to Bill Clinton. He rejected a single-payer approach, even though he understood its merits, in favor of a complex plan that was supposed to co-opt private insurance companies by giving them a largely gratuitous role. And the reward for this “pragmatism” was that insurance companies went all-out against his plan anyway, with the notorious “Harry and Louise” ads that, yes, mocked the plan’s complexity.

Now we have another chance for fundamental health care reform. Let’s not blow that chance with a pre-emptive surrender to the special interests.

The L.A. Times story to which Krugman refers is a corker. It's also a good reminder that HIPAA's pre-existing condition reforms did not apply to individual policies, a particularly cruel fate for the millions of Americans for whom group policies are unavailable, either because their employer doesn't offer health benefits or because they are self-employed.

Single-payer system for the US: you heard it here last

Today's New York Times has an article on the virtually unimpeachable argument in favor of a single-payer health-care financing system for the United States. All the arguments are there (except for one, which may be implicit in the others: we could provide universal coverage and still save a bundle). The article also recognizes that the great stumbling block isn't economics or logic: it's political. The American public simply doesn't believe the arguments and certainly doesn't trust the government to get it right. And although we already have a single-payer system for the elderly and disabled (Medicare), the military and their dependents (VA and CHAMPUS), and the most indigent of the indigent (Medicaid), which includes a substantial percentage of the children in this country, we still don't trust the government to get it right. If the author of this article is correct ("What is the most pressing problem facing the economy? A good case can be made for the developing health care crisis. Soaring costs, growing ranks of uninsured and a steady erosion of corporate health benefits add up to a giant drag on the nation’s future prosperity."), this ought to be domestic policy issue #1 between now and the 2008 elections. But I'm not taking any bets.

CBO and tax-exempt hospitals

This month the Congressional Budget Office issued two reports on the tax-exempt hospital industry. Both are worth reading, as much for what they say about the mind-set on Capital Hill these days as for what they tell us about tax-exempt hospitals.

1. Nonprofit Hospitals and the Provision of Community Benefits. How much tax benefit do nonprofit hospitals receive as a result of their exemption from federal, state, and local taxation? Answer (as of 2002): $12.6 billion, about half of which comes from the federal income-tax exemption. And what is the value of the community benefits provided by the tax-exempts? Therein lies a tale, because it all depends on how you define (and measure) community benefits. This report breaks out "uncompensated care" (also a thorny definitional problem), the unreimbursed cost of providing Medicaid-covered services, and such generally unprofitable specialized services as burn intensive care, emergency room care, high-level trauma care, and labor and delivery services. This reports limits itself to five states, including one (Texas) with a very explicit community-benefits requirement for nonprofit hospitals. The tax-exempt hospitals' performance in these three areas of service are also compared to their for-profit and government-owned counterparts. How do they compare?

• When regression techniques were used to adjust for the hospitals’ size and location and for the characteristics of the local populations, nonprofit hospitals were estimated to have an average uncompensated care share that was 0.6 percentage points higher than that for otherwise similar for-profit hospitals. That estimated difference corresponds to nonprofit hospitals in the five selected states providing between $100 million and $700 million more in uncompensated care than would have been provided if they had been for-profits.
• When regression techniques were used to control for hospital characteristics, nonprofit hospitals were found to have adjusted Medicaid shares that were 1.3 percentage points lower than those of otherwise similar for-profit hospitals.
• CBO found that nonprofit hospitals were more likely than for-profit hospitals to provide each of the four specialized services examined. After adjustment for hospital characteristics, nonprofit hospitals were found to be significantly more likely than for-profit hospitals to provide two of the four specialized patient services (emergency room care and labor and delivery services).

2. Nonprofit Hospitals and Tax Arbitrage. This one's a little more technical. It deals with the ability of tax-exempt hospitals to borrow at below-market rates by issuing tax-exempt bonds and then deploy the borrowed funds for higher-yielding investments. So-called "arbitrage bonds," however, are not exempt from federal taxes, which removed the main incentive to engage in such practices. That said, there are plenty of other opportunities for nonprofit hospitals to engage in a sort of tax arbitrage, and this report analyzes some of them. One occurs when a tax-exempt entity decides to invest some of its accumulated surplus and gifts in high-yield taxable securities and to finance structures and equipment with low-cost exempt bonds. In economic terms, it's the same as if bond proceeds were being invested in securities, and there's a "replacement proceeds rule" (26 CFR § 1.148-1(c)) that attempts to identify such events and subject them to taxation. But for a variety of reasons the rule is difficult to apply and undoubtedly misses a lot of such tax-arbitrage activity. The CBO report considers the possibility of broadening the definition of tax arbitrage, which they conclude would probably result in increased tax revenues for the federal government, at least in the short run. But over time, it seems likely hospitals would adjust to the new (increased) cost of capital by reducing their level of arbitrage bond issues, resulting in a decrease in tax savings for the federal government, even under the broader definition. A second likely effect would be

two different costs of capital for nonprofit hospitals. Nonprofits with larger portfolios of investment assets would be more likely to be subject to the rule and thus effectively face higher interest costs associated with financing using taxable debt. Hospitals with smaller amounts of such assets would be more likely to continue to receive the benefit of tax-exempt financing. Both would still face lower costs of capital than for-profit hospitals. But the different borrowing costs of the two groups of nonprofit hospitals could engender inefficiencies by creating a new differential in capital costs.

Drug wholesaler settles with New York

New York's AG, Eliot Spitzer, announced on Thursday that his office had reached a settlement with prescription drug behemoth Cardinal Health, Inc., in connection with that drug wholesaler's purchasing practices. Here are some of the salient features of the announcement:

Cardinal -- based in Dublin, Ohio and ranked 19th on the Fortune 500 list of America's largest corporations -- is one of the three primary distributors of prescription drugs in the nation.

In today's settlement, Cardinal has agreed to adopt a set of Wholesaler Safe Product Practices that establish a new standard for the safe trading of pharmaceuticals and point the way forward for an industry that is vital to the health of Americans.

The investigation, which began in 2005 and is continuing with regard to other wholesalers, concerns trading practices in the secondary market for prescription pharmaceuticals. That is the market in which wholesalers trade drugs among themselves, after the drugs are sold by the manufacturer but before they are purchased by a pharmacy, hospital, or other end user. The wholesalers who sell drugs to other wholesalers are called alternate
source vendors.

Secondary market trading is not illegal on its face, but can create opportunities for the introduction of unreliable drugs, including counterfeits, into the marketplace. In recent years, there has been an increase in the number of cases of counterfeit drugs in the American supply chain.
Secondary market trading also can create an opportunity for companies to divert drugs from their intended distribution channels. Diversion into the secondary market, often to take improper advantage of manufacturer discounts, can begin a series of trades from wholesaler to wholesaler that makes it difficult to trace the origin of a drug and impossible to ascertain its authenticity.

The investigation determined that Cardinal purchased drugs from certain alternate source vendors, despite risks associated with buying from those vendors, to take advantage of higher available profit margins. Cardinal also sold pharmaceuticals to certain customers even in the face of evidence that those customers may have been illegally diverting the drugs outside their intended channels of distribution.

Under the terms of today's settlement, Cardinal will adopt an innovative set of Wholesaler Safe Product Practices, and has agreed that it will not sell pharmaceuticals to another wholesaler unless that wholesaler also adopts that same set of practices. The Wholesaler Safe Product Practices are designed to ensure that a drug may not pass through the hands of more than two wholesalers after the manufacturer sells it and before it is bought by a pharmacy or other end user.In addition to adopting the Wholesaler Safe Product Practices, Cardinal has agreed that in the regular course of its business it will:

• Buy pharmaceuticals directly from manufacturers and not on the secondary market from alternate source vendors;
• Sell pharmaceuticals only to wholesalers who have certified their compliance with the Wholesaler Safe Product Practices, and have agreed to allow audits of those certifications;
• Adopt "know your customer" provisions and monitor for customer diversion; and
• Hire an external auditor to conduct periodic reviews of its compliance with the settlement.

Thanks to Eric Turkewitz, who "represented a counterfeit drug victim, Tim Fagan, for whom pending legislation in the House and Senate is named," for the heads up. The House and Senate bills are the Counterfeit Drug Enforcement Act of 2005, [H.R.2345.IH], [S.1978.IS].

Middlemen redux

Following up on my earlier post about the role of middlemen in health care, yesterday's WSJ had a nice front-page article (link good for 7 days) on middlemen. After extolling the usual list of the virtues of a middleman --

A lot of the money that goes to health-care middlemen is well spent. It allows employers to combine their purchasing power for leverage with hospitals and drug makers. It harvests data to uncover which new procedures are valuable and which aren't. Middlemen offer health-care expertise to employers who don't have it and don't want to hire it.

-- the author then nails the downside:

But a lot of the money goes more toward fattening middlemen's bottom lines than toward improving the quality or efficiency of American health care. "At the end of the day, the only reasonable conclusion is that we waste a huge amount of money on the most nuttily cumbersome administrative system in the world," says Henry Aaron, a Brookings Institution economist.

Amen.