UR Nation End of Month Regulatory News Summary

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announcement-updated_4-1-15
George Parisotto Named CA DWC Administrative Director

As you may recall, Destie Overpeck was the Administrative Director (AD) for CA DWC. But in February of 2016 she resigned and went to work for the State Bar of California. George Parisotto was immediately named “Acting Administrative Director” by Gov. Brown. At the time, it was unclear if Mr. Parisotto wanted to be the full time AD, or whether or not Gov. Brown was interested in someone else filling the position. That issue is now settled as Gov. Brown has appointed George Parisotto to the position.

The AD position is very important at CA DWC, as the IMR reports produced by Maximus Federal Services are the adopted opinion of the AD. And the AD has broad powers to change policy and create rules for system participants. For example, the upcoming formulary drug list will be amended from time to time by the AD, with input from his medical advisory committee.

Trump Declares Opioid Epidemic a Public Emergency

President Donald declared the opioid epidemic a national emergency. In a speech delivered in the East Room of the White House, Trump told the audience “we can be the generation that ends the opioid crisis.”  In addition to suggesting a wall would help stop the flow of illegal drugs from Mexico, Trump said he directed acting Health Secretary Eric Hargan to declare a public health emergency under the Public Health Services Act. This act directs federal agencies to grant more money to combat the opioid epidemic. Trump also touted “a really big, really great ad campaign” that would convince people to avoid opioids and illegal drugs.

Some believe Trump should have used the Stafford Act, where the federal government could have been able to tap into funds from FEMA. However, many feel this is not a good fit because FEMA money is meant for natural disasters, not health emergencies. Others are critical of Trump not changing the rules (or providing waivers) that would allow Medicaid to pay for drug rehab treatment at larger institutions for mental disease (IMD). For 50 years, the law has been that people on Medicaid can’t get substance abuse treatment at IMDs with more than 16 beds. Many, including NJ Gov. Chris Christie, have advocated changing the Medicare law and have suggested to Trump and members of Congress to repeal the IMD 16-bed exclusion.

  FDA Withholds Approval of Abuse-Deterrent Opioid Rexista

Intellipharmaceuticals International, based in Toronto, Canada, has come up with an abuse-deterrent extended release oxycodone tablet called Rexista. Rexista has two abuse-deterring features. First, it has a blue dye that can presumably help law enforcement trace it back to its origins. Rexista also has a nasal irritant contained in the drug’s formulation. This nasal irritant presumably makes the drug harder to crush and snort.

However, the FDA has asked Intellipharmaceuticals to complete additional studies to further assess these two abuse-deterring features. The FDA has given them one additional year to conduct the studies, and Intellipharmaceuticals can apply for additional time if needed. In addition, the FDA does not like the name Rexista, and has asked the company to propose an alternative proprietary name for the product.  Intellipharmaceuticals has said they still believe they will obtain FDA approval, and that the request for additional studies does not affect their timeline for commercialization of the product.

UR Nation believes this may be further evidence that the FDA is tightening the noose on new opioid products coming to market.

Liberty Mutual Files Suit in Pennsylvania Against Pharmacies over Compounded Medications

As reported in the Philadelphia Inquirer, Liberty Mutual Insurance Company filed a lawsuit in Pennsylvania against 18 Philadelphia area pain management doctors who have allegedly prescribed $4.7 million in pain creams to injured workers. The lawsuit alleges that the group of 18 doctors referred workers’ compensation claimants to pharmacies in which they had a financial interest. Those pharmacies billed Liberty Mutual for vast quantities of compounded pain creams at inflated prices – up to $8,000 per tube.

Liberty Mutual also alleges that the compounded creams were manufactured in batches and not mixed specifically for individual patients, which is a violation of FDA regulations. The top prescriber alleged in the lawsuit is Dr. Rishin Patel of Allentown. He is alleged to have prescribed $506,163 worth of pain creams that were dispensed by the “700 Pharmacy” in which he is a part owner.

An interesting aspect of the case is that the lawsuit alleges that the workers’ comp system in Pennsylvania allows recovery of attorney’s fees when the insurance carrier refuses to pay for drugs. The matter is heard before a workers’ comp judge (WCJ), and the WCJ hears the evidence and renders his or her award. But the lawsuit alleges that in cases where the WCJ makes a finding in favor of the insurance carrier, the carrier is unable to seek its attorney’s fees. In addition, a favorable ruling for the insurance carrier is not given collateral estoppel effect, which means if a compound is not allowed in one case it could still be allowed in another – the issue would still be open.

Because the suit seeks unjust enrichment, the defendant doctors and compounding pharmacies will likely fight this case bitterly. In other words, the defendants will not want to “give back” the money they will claim they lawfully made as system participants in the Pennsylvania workers’ comp system.

Here’s another thought. If the Pennsylvania District Attorney’s office files a criminal action against any of the doctor defendants, one of them may turn state’s evidence and plead to a lesser crime in exchange for providing evidence against the other doctor defendants. In that instance Liberty Mutual would be in good position. But if there is no criminal action, and the evidence that surfaces in this case is not very strong, Liberty’s suit may be subject to a summary judgment motion. Remember, proving a fraud case is generally a difficult proposition. In the case of a summary judgment motion, or loss at trial, Liberty may not only be hit with a very large cost bill, but may find itself on the wrong end of a wrongful use of civil proceedings action. In Pennsylvania they call this a Dragonetti action.

If Liberty Mutual is successful, this may encourage other insurance carriers to go after compounders and doctors who allegedly prescribe pain creams in order to pump up profits. But if the suit fails there will undoubtedly be a lot of hand-wringing in the Liberty Mutual camp, and other insurance carriers will proceed accordingly.

Montana Labor Management Committee Voted to Adopt ODG Formulary

Bri Lake, a research analyst with the Employment Relations Division of the Montana Division of Workers’ Comp confirmed that the Labor Management Committee has voted to adopt the ODG drug formulary.  The division recommended ODG over two other formularies, including ACOEM and the Washington Dept. of Labor & Industries formulary.

Ms. Lake said several issues need to be worked out before Montana implements the formulary.  These include how to deal with legacy claims, prior authorization, and dispute resolution issues.  She said that she will give a presentation to the division in November or December on how other states have handled those issues.  While no specific date was mentioned for implementation, UR Nation believes that given the issues the division must work through a realistic implementation date would be the middle of 2018, or possibly Q4 of 2018.

NY Shelves Highly Touted Medical Portal

You may recall that at the end of 2016 news broke that New York’s medical portal launch had been delayed. Now the program has been shelved completely. The medical portal concept was one where system participants would use a portal to enable providers to submit RFA’s and other documents electronically. From there, insurance carriers, TPAs, and their URAs could respond to requests for treatment inside the portal. The injured worker and his or her attorney were also supposed to be able to get case updates and obtain status updates through the portal. Tim Purcell, the NY board’s project coordinator and director of eCommerce, said, “The board is very committed to the concept of a medical portal… the usability is not meeting expectations, and we want to achieve our original goals.”

Albany defense attorney Peter Walsh said that he has heard recently from several state government officials that the medical portal is “effectively dead as a practicality.” Walsh went on to say, “The problem is it’s very difficult technology-wise to get this portal up and going. It’s a very challenging concept, and they can’t meet that challenge right now. Maybe in 10 years.”

Farmingdale claimants’ attorney Robert Grey, who chairs the NY Workers’ Comp Alliance said, “During the period of time I was on the advisory council, the medical portal was a high-priority item, and there was a lot of discussion about it. I don’t think they even provided an explanation today for why it was shelved. The board got $60 million in funding to do it. I’m not sure what they have to show for that money.”

Tom Swiatek

Tom Swiatek

As Assistant Vice President of Regulatory Services, General Counsel, and Editor in Chief of UR Nation, Tom Swiatek draws on his experience as an insurance attorney on both the general liability side, as well as on workers’ compensation matters. As a California Workers’ Compensation Section Member, Tom is leading the discussion with respect to the regulatory challenges and opportunities facing the workers’ compensation system.