NNCO Releases NNI Supplement to President Biden’s 2025 Budget
On December 19, 2024, the National Nanotechnology Coordination Office (NNCO) released The National Nanotechnology Initiative Supplement to the President’s 2025 Budget, which also serves as the annual report for the National Nanotechnology Initiative (NNI). According to the report, President Biden’s fiscal year (FY) 2025 budget requests over $2.2 billion for NNI, with cumulative funding totaling over $45 billion since the inception of NNI in 2001 when Congress approved increased funding for nanotechnology in FY 2021 appropriations. The funding includes over $900 million in annual investments by the National Institutes of Health alone (along with other important contributions from the U.S. Food and Drug Administration, Centers for Disease Control and Prevention, Biomedical Advanced Research and Development Authority, and basic research agencies, e.g., the U.S. National Science Foundation and U.S. Department of Energy), as nanotechnology-enabled diagnostic and therapeutic technologies for a wide variety of human health threats successfully compete for funding. The report includes examples of how NNI participating agencies are harnessing nanotechnology research and development and education programs to reduce barriers and inequities, from workforce development to economic progress in historically underserved communities. The report states that NNI participating agencies support applied research, experimental development, pre-commercialization, and standards-related efforts that build economic competitiveness, facilitating the adoption of a wide range of nanotechnologies, and helping create good-paying jobs across the country, including in both traditional and emerging industries. The report notes that the coordination provided through NNI has facilitated the proactive responsible development of new technologies, thereby streamlining their adoption.
Rethinking Alcohol Labels: The Surgeon General Calls for Change
In a recent advisory, U.S. Surgeon General Dr. Vivek Murthy underscored the connection between alcohol consumption and increased cancer risk. Citing alcohol as the third leading preventable cause of cancer in the U.S., the advisory links it to at least seven types of cancer, including breast and colorectal cancers. Despite this, according to Dr. Murthy, less than half of Americans recognize alcohol as a cancer risk factor. Dr. Murthy notes that alcohol is implicated in around 100,000 cancer cases and 20,000 cancer deaths annually, exceeding alcohol-related traffic fatalities. The advisory recommends updating the health warning label on alcohol beverages, reassessing recommended limits for alcohol consumption, strengthening public educational awareness, and promoting alcohol screenings in the clinical setting.
The health warning label on alcohol products, mandated pursuant to 27 U.S.C. 215, has remained unchanged since 1988. Although Dr. Murthy provides his recommendation to update the warning, his advisory admits that the “power to change the label statement lies with Congress.” Notably, Dr. Murthy’s advisory does not provide a sample of the language he would recommend to add to the existing health warning label on alcoholic beverages. However, his advisory points out that Ireland has a new health label going into effect in 2026 that will state that “there is a direct link between alcohol and fatal cancers”. Given the existing research showing some benefit from limited consumption of some alcohol, we expect that if Congress adopted such language, it would be challenged in the courts.
While the advisory calls for a reassessment of alcohol consumption guidelines and increased public health education, critics might question whether the recommendations adequately consider the complexity of cancer risk factors. The advisory also suggests a significant role for health care providers in informing patients about the risks, which may be challenging given the nuanced nature of individual risk factors. Dr. Murthy explains the cancer risk is also heavily determined by complex factors– biological, environmental, social, and economic factors. For example, as explained in the advisory, individuals of East Asian descent have a genetic variant that results in flushing, producing a higher biological risk for certain alcohol-related cancers. Social factors includes social norms, such as cultural norms. Asking individuals to commit to long-term quitting could be difficult due to the role alcohol plays in different social backgrounds and cultures. Additionally, the practicality of implementing widespread label changes and public awareness campaigns could face logistical and economic hurdles, potentially limiting the advisory’s effectiveness. The effectiveness could also be limited by incomplete or conflicting scientific findings, as noted above.
Alcohol is not alone in being targeted for health warnings by government actors. For instance, recently the sugar-sweetened beverage segment undertook a multi-year fight against an ordinance passed in San Francisco requiring that outdoor signs advertising sugar-sweetened beverages include a warning label, covering twenty percent of the sign, advising of the negative health impact of consuming such products. Round one of that litigation ultimately went for industry, with the Ninth Circuit ruling that the ordinance likely violated industry’s First Amendment rights. In response, San Francisco passed a new ordinance in 2020 that imposed a similar warning requirement but which reduced the size requirement to ten percent. Litigation again ensued, but this time resulted in San Francisco repealing the ordinance in 2021.
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Government Outlines Qui Tam’s Constitutionality in Detailed Brief to Eleventh Circuit
On January 6, the U.S. federal government filed a brief in U.S. ex rel. Zafirov v. Florida Medical Associates urging the U.S. Court of Appeals for the Eleventh Circuit to reverse a district judge’s ruling in a qui tam whistleblower case. In September, the U.S. District Court for the Middle District of Florida ruled that the False Claims Act’s qui tam provisions are unconstitutional, threatening to undermine the United States’ number one anti-fraud law.
The district court ruling found that the qui tam provisions were unconstitutional because they violated the Appointments Clause of Article II. The court ruled that by filing a qui tam lawsuit alleging Medicare fraud, whistleblower Clarissa Zafirov was granted “core executive power” without any “proper appointment under the Constitution.”
In its brief, the government claims that “other than the district court here, every court to have addressed the constitutionality of the False Claims Act’s qui tam provisions has upheld them.” It therefore urges the Eleventh Circuit to “join that consensus and reverse the district court’s outlier ruling.”
The government points to the Supreme Court decision in the 2000 case Vermont Agency of Natural Resources v. United States ex rel. Stevens, which held that the False Claims Act’s qui tam provisions are consistent with Article III. This decision “makes clear that relators do not exercise Executive power when they sue under the Act,” the brief states. “Rather, they are pursuing a private interest in the money they will obtain if their suit prevails. As private litigants pursuing private interests, relators are not enforcing federal law in a manner inconsistent with the Vesting and Take Care Clauses and need not be appointed in the manner required by the Appointments Clause.”
The brief further clarifies that while a relator’s qui tam suit “may also vindicate a federal interest in remedying and deterring fraud on the United States” “they are distinct from the government’s enforcement efforts even though they can supplement those efforts.”
The government additionally argues that qui tam relators are not government officers; do not exercise significant government authority due in part to the numerous statutory constraints which allow the government to “ensure that qui tam actions are consistent with its own priorities for the enforcement of federal law;” and do not occupy a continuing position since their role “is limited in time and scope, confined to a particular case, and fundamentally personal in nature.’
Further referencing Stevens and the Supreme Court’s emphasis on the long history of qui tam statutes in that decision, the government details “the prevalence of early qui tam statutes and the body of evidence that such statutes were understood to be constitutional.”
“The historical record.. suggests that all three branches of the early American government accepted qui tam statutes as an established feature of the legal system,” the brief states.
Overall, the government provides a detailed and comprehensive overview of the constitutionality of the False Claims Act’s qui tam provisions, rooted in both prior court precedent and the historical record.
Healthcare Preview for the Week of: January 13, 2025 [Podcast]
Final Week of Biden Administration
During the Biden Administration’s final week, congressional Republicans are moving full steam ahead with Senate confirmation hearings for Trump-nominated officials and with ongoing budget reconciliation discussions. Nomination hearings this week include Doug Collins for secretary of Veterans’ Affairs and Russell Vought for Office of Management and Budget (OMB) director. Hearings have yet to be scheduled for Robert F. Kennedy Jr., nominated for Health and Human Services (HHS) secretary, and other HHS agencies.
We are waiting to see if certain Biden Administration proposed rules, some of which have cleared OMB review, will be finalized this week, before President-elect Trump is inaugurated on January 20, 2025. These proposed regulations include the Marketplace Notice of Benefit and Payment Parameters, a regulation that would require coverage of over-the-counter contraception without cost-sharing or a prescription, and a rule on telemedicine prescribing of controlled substances, among others. Other proposed regulations with comment periods still open, including the 2026 Medicare Advantage policy and technical rule, could be substantially changed when Trump takes office.
Looking ahead to the new Administration, congressional Republicans are eyeing healthcare policies as potential savers for their forthcoming budget reconciliation, which is expected to target significant cuts in federal spending. At a December 2024 Republican conference meeting, $2.5 trillion in mandatory spending cuts were put on the table in exchange for a $1.5 trillion increase in the debt limit. The Congressional Budget Office (CBO) recently released options for reducing the deficit; CBO periodically releases such options, providing legislators with price tags for various policies. Healthcare options outlined by CBO include a version of Medicare site neutral payment reforms, Medicaid per capita caps, and a reduction in payment rates for 340B entities. The House Budget Committee also circulated a spending reform options document late last week detailing up to $5.7 trillion in savings. Healthcare is a primary target for savings as it makes up almost $3.5 trillion of the total figure, with $2.3 trillion coming solely from Medicaid savings.
The key House and Senate healthcare committees (Senate Finance; Senate Health, Education, Labor and Pensions; House Energy and Commerce; and House Ways and Means) are officially formed for the 119th Congress, with new members on both sides of the aisle for all four committees. The House Rules Committee is still without a chair, however, and other committees, including the House Education and Workforce Committee, are not yet formed.
Today’s Podcast
In this week’s Healthcare Preview podcast, Debbie Curtis joins Maddie News to discuss the final week of the Biden administration and the week ahead in the 119th Congress, with the Senate focused on confirmation hearings for Trump-nominated officials, and Congressional Republicans eyeing healthcare policies as potential savers for upcoming legislation.
Non-Competes: New Limits for Pennsylvania Health Care Practitioners
Pennsylvania’s new law, the Fair Contracting for Health Care Practitioners Act (the Act) went into effect on January 1, 2025. This law restricts the ability of employers and health care practitioners to enter into non-compete agreements. Governor Josh Shapiro signed the Act on July 23, 2024, aiming to ensure continuity of care between patients and their health care practitioners. The Act marks a notable change in employment practices for health care professionals in Pennsylvania, reflecting a broader movement to scrutinize restrictive covenants, especially in the health care sector. Its key goals include retaining health care talent, enhancing patient care, and promoting a competitive health care market.
The new law bans new non-compete covenants longer than a year for “Health Care Practitioners,” defined to include medical doctors, doctors of osteopathy, certified registered nurse anesthetists, certified registered nurse practitioners, and physician assistants. Certain non-competes entered into after January 1, 2025, are deemed “contrary to public policy and void and unenforceable by an employer.” However, non-compete provisions limited to one year or less are enforceable if the Health Care Practitioner terminates the employment relationship or if they are connected to the sale of a practice.
Key Provisions
Non-Compete Restrictions: Non-compete clauses that hinder Health Care Practitioners from treating or accepting patients are void and unenforceable. However, non-compete clauses lasting up to one year may still be enforced if the practitioner voluntarily resigns. These agreements become unenforceable if the employer terminates the practitioner’s employment, even if for cause.
Cost Recovery for Employers: Employers can recoup reasonable expenses, such as relocation, training, or patient acquisition costs, incurred within three years before a Health Care Practitioner voluntarily leaves.
Non-Competes in Business Sales: Non-compete agreements remain valid when tied to the sale or transfer of a business if the Health Care Practitioner is a party to the transaction.
Patient Notification: Employers must notify patients within 90 days if a practitioner with whom they have had a two-year outpatient relationship departs from the employer’s practice. The notice must explain the practitioner’s departure, how to transfer medical records, and options for continuing care with the employer or another provider.
Effective Date: Non-compete agreements executed before January 1, 2025, remain unaffected. Employers and health care practitioners should review existing agreements to prepare for the Act’s implications.
Moving Forward
Pennsylvania is among a growing number of states, including Iowa, Maryland, and Louisiana, that are restricting non-compete clauses in or health care providers’ employment agreements, joining over a dozen states have introduced similar measures. Although, the Federal Trade Commission’s proposed ban on non-compete agreements, which is currently facing legal challenges, does not apply to not-for-profit entities, such as many hospital systems. Now, Pennsylvania not-for profit health care organizations along with those in the private sector will have to consider this law when seeking to place covered Practitioners under post-employment restrictions.
FDA Finalizes Lead Restrictions in Processed Foods for Babies and Young Children
On January 6, 2025, the U.S. Food & Drug Administration (FDA, or the Agency) issued a final guidance ,“Action Levels for Lead in Processed Food Intended for Babies and Young Children: Guidance for Industry” which aims to regulate lead levels in processed foods for infants and toddlers under two years old.
As we have previously blogged, in 2021, FDA initiated its Closer to Zero policy which identified actions the Agency will take to reduce exposure to toxic elements, including lead, to as low as possible while maintaining access to nutritious foods.
As part of this initiative, FDA has also evaluated mercury, cadmium, and arsenic in foods intended for babies and young children, as well as lead in juices. Under this initiative, FDA has prioritized babies and young children as they are especially vulnerable to lead exposure, which accumulates in the body over time.
Lead is naturally present in the environment, but human activities have also released elevated levels of lead, contaminating soil, water, and air. This contamination can affect crops used in food production.
Lead exposures can lead to developmental harm to children by causing learning disabilities, behavioral difficulties, lowered IQ, and may be associated with immunological, cardiovascular, and reproductive and or/developmental effects.
To address this concern, FDA established the following action levels in the final guidance for processed foods intended for babies and young children:
10 parts per billion (ppb) for fruits, vegetables (excluding single-ingredient root vegetables), mixtures (including grain- and meat-based mixtures), yogurts, custards/puddings, and single-ingredient meats;
20 ppb for single-ingredient root vegetables; and
20 ppb for dry infant cereals.
If a processed food intended for babies and young children reaches or exceeds the aforementioned levels of lead, the product will be considered adulterated within the meaning of section 402(a)(1) of the Federal Food, Drug, and Cosmetic Act (FD&C Act).
After publishing the final action levels, the Agency will establish a timeframe for assessing industry’s progress toward meeting the action levels and resume research to determine whether the scientific data supports efforts to further adjust the action levels.
Workplace Safety Review: Navigating Change: OSHA’s 2024 Wrap-Up and a Look Ahead to 2025 [Podcast]
In the latest episode of Greenberg Traurig’s Workplace Safety Review podcast, co-hosts Adam Roseman and Joshua Bernstein provide a comprehensive wrap-up of the significant OSHA developments from 2024 and explore what’s on the horizon for 2025. They delve into the impacts of administrative changes, including the Supreme Court’s Loper Bright decision, which overturned Chevron deference, and how it may affect OSHA litigation. Their discussion highlights key regulatory updates, like the proposed heat stress and lockout/tagout standards, and examines the potential implications of the Kenrick Steel case challenging the constitutionality of the Occupational Safety and Health Review Commission. As the Trump administration prepares to take office, the hosts consider the prospective leadership and policy direction under Secretary of Labor nominee Lori Chavez-DeRemer and the next OSHA head. Workplace Safety Review is a podcast where the hosts interview influential environmental, health, and safety professionals across the country regarding timely and important topics in the environmental, health, and safety world.
How Will the Cannabis World Look When Marijuana Is Rescheduled?
A few weeks ago, someone at a holiday party asked “Whitt, why doesn’t Budding Trends take on the weighty legal issues of the day and instead resort to cheap pop culture references and puns?” I thought about responding with a quote from “Run Like an Antelope” but then it hit me: Maybe we should give some thought to a more high-minded discussion about the practical implications of marijuana rescheduling. (Editor’s note: This exchange did not actually happen.) So, I guess set the gear shift for the high gear of your soul, and let’s dive in.
It has been said that our greatest hopes and our worst fears are seldom realized. I think the recent efforts by DEA to reschedule marijuana from Schedule I to Schedule III is a good example of both. Those looking for news that marijuana is soon to be freely available nationwide will be disappointed, as, we suspect, will those who fear that rescheduling will immediately destroy the existing marijuana industry. It’s like Tom Petty reminded us, “most things I worry about, never happen anyway.”
None of This Matters if Marijuana Is Not Rescheduled, and That’s Far from a Settled Question
All of this is, of course, moot if marijuana is not rescheduled. While rescheduling is considered by many to be a fait accompli (oh yeah, Budding Trends dropping French on you) – and I agree it is more likely than not that marijuana will be rescheduled, although not in 2025 – there are a number of potential roadblocks standing in the way. We previously wrote about the process here.
But even if marijuana is not rescheduled in the near future, hopefully the discussion below will be helpful in thinking through the practical implications if marijuana is rescheduled in the future.
280E in the Rearview
It is widely assumed by many that one of the certain impacts of rescheduling is that marijuana operators would no longer be subject to the draconian tax consequences of 280E.
We previously wrote on the subject:
One of the most significant impediments to the growth of marijuana operators, and dispensaries in particular, is 26 U.S.C 280E. That one-sentence provision may be the biggest hurdle to the development of the marijuana industry in the United States. It dictates that:
“No deduction or credit shall be allowed for any amount paid or incurred during the taxable year in carrying on any trade or business if such trade or business (or the activities which comprise such trade or business) consists of trafficking in controlled substances (within the meaning of schedule I and II of the Controlled Substances Act) which is prohibited by Federal law or the law of any State in which such trade or business is conducted.”
280E has crippled the marijuana industry, often exacting an effective tax rate north of 60% for operators. “Within the meaning of schedule I and II of the Controlled Substances Act” is the ballgame. If marijuana is rescheduled to Schedule III, 280E would no longer apply and marijuana operations would be taxed as normal businesses – provided that Congress did not specially enact a marijuana tax.
Obviously, state tax laws may still penalize marijuana businesses akin to 280E, but some states proactively exempted licensed cannabis businesses from those impacts.
One question that has stuck in my mind is whether rescheduling marijuana to Schedule III would remove state-legal operators from the ambit of 280E, or would that benefit only be afforded to businesses who manufactured, distributed, and sold FDA-approved Schedule III products (i.e., not most state-licensed operators at present)?
This is a question of statutory interpretation, and I think it comes down to how the government characterizes marijuana that is not compliant with Schedule III requirements. Is non-compliant marijuana still a Schedule III substance? If so, does it somehow become Schedule I or II? If not, then it would appear that that 280E does not capture non-compliant marijuana because that provision appears to be limited on its face to Schedule I and II substances. I think the better reading is that, while non-compliant marijuana operators may face consequences as discussed immediately below, 280E will no longer include marijuana.
Another related question of great interest to marijuana operators currently sitting on huge overdue tax bills is whether rescheduling marijuana would have a retroactive effect eliminating the existing tax liabilities for marijuana operators. Generally speaking, changes to tax laws are not retroactive unless Congress expressly says so. It strikes me as very unlikely that lawmakers will be interested in allowing marijuana operators who have not paid their full tax bills for years (and in some instances publicly admitted as much) to simply walk away from those obligations.
State Medical Programs
So, if marijuana is rescheduled, what happens to existing marijuana businesses operating under the auspices of state laws? This, as well as the fate of adult-use operators discussed immediately below, may be the most consequential yet unclear aspects of rescheduling.
State-licensed marijuana operators have existed in a sort of legal limbo since their inception. How, if at all, will the rules change for state-licensed operators if marijuana is rescheduled?
The way I see it, there are three paths forward for state-licensed marijuana operators if marijuana is rescheduled:
The federal government, in a break from more than a decade of quasi-official federal policy, could actually follow the Controlled Substances Act and require marijuana operators to meet the requirements for Schedule III substances.
There is no practical change and the federal policy of non-enforcement of most marijuana operations remains in place, along with a similar posture from the states with marijuana regimes.
There is no immediate change in federal enforcement policy, but states tighten marijuana rules over time to allow for a gradual change such that access to marijuana is not immediately shut off as the federal government and marijuana operators take the steps necessary to treat marijuana like other Schedule III substances.
In a nutshell, the path chosen will answer what I believe is the most interesting and critical question in this whole discussion: Does the government intend for marijuana scheduling to be a dead letter or does the government intend to regulate marijuana as a controlled substance?
That answer will govern whether and, if so, how the federal government will regulate state-licensed cannabis operators – including potential enforcement actions.
Of the three paths above, the first strikes me as the least likely and the last strikes me as the most likely. Why? I am skeptical that the federal government would shut down existing access to marijuana (i.e., state-licensed operators) under the guise of making marijuana more available. That certainly does not comport with the statements of the political supporters of rescheduling or the spirit of rescheduling. And make no mistake, it will take years of clinical trials and FDA approval for the first marijuana medication (in a specific formulation with a specific indication) to be approved for use by patients.
I do think, however, that there will be political pressure from certain companies that do develop FDA-approved marijuana medications to curtail the state markets. Why would a company spend the substantial time and money to develop a Schedule III medication for FDA approval for a specific indication when someone can just buy marijuana to be used for any purpose from a dispensary down the street?
State Adult-Use Programs
Like state-licensed medical marijuana operators, state-licensed adult use operators have also been operating in legal purgatory, albeit with probably less legal certainty than medical operators.
To be very clear: Rescheduling marijuana under the Controlled Substances Act will do absolutely nothing to the legality of adult-use marijuana. Schedule III regulates medications prescribed by physicians and does not contemplate the recreational use of any Schedule III product.
But what does this actually mean for adult-use programs and individual operators as a practical matter? Well, as with several of the points above, we’ll see.
It is certainly possible that the federal government will continue its hands-off approach to adult-use marijuana programs. It is also possible that the federal government – and potentially some state governments – will use the ability to access federally legal marijuana by prescription to scrap existing adult-use programs. But if I was a betting man (and I am), I would bet that at least in the short term there would not be much impact, if any, to adult-use regimes.
Interstate Commerce
When it comes to transporting marijuana across state lines with Schedule III approval and appropriate federal and state licenses, interstate commerce should not be a problem.
When it comes to transporting unlicensed marijuana, theoretically it would remain illegal, and it will come down to the federal government’s appetite to enforce interstate transportation of marijuana.
Banking
Here is another instance where it depends on whether the federal government insists that marijuana products comply with the rules of Schedule III.
If the federal government insists on strict compliance with Schedule III, then any non-conforming products would likely fall within the ambit of anti-money laundering statutes. If, on the other hand, the government treats all marijuana as Schedule III, then banks may be able (albeit perhaps uninterested initially) to bank all marijuana businesses.
Private Investment
I expect there will be an immediate influx of private capital to marijuana businesses if marijuana is rescheduled. Momentum will (at least appear to) be on the side of marijuana businesses. A number of funds that have formal or informal policies governing investment in marijuana businesses will immediately investigate the opportunities. And investors will be even more motivated because it appears that 280E would no longer provide a substantial tax headwind for growth of those businesses.
This could all be thwarted if the federal government immediately makes clear that it will vigorously enforce the requirements of Schedule III, meaning that it will be extremely cash-intensive to develop profit-generating products. As noted above, I think that is unlikely, but it would certainly be an impediment to obtaining private capital.
Big Pharma/Pharmacies
The multibillion-dollar question: What role, if any, will big pharmaceutical companies and pharmacies play in the event marijuana is rescheduled?
I suspect big pharma won’t rush into the marijuana space, in part because of all the uncertainties discussed above and in part for reputational reasons. But I will be on the lookout for quiet investments by Big Pharma in companies researching and developing marijuana formulations that meet the requirements of Schedule III.
If things break a certain way, you may be able to get the best weed ever made courtesy of a brand-name pharmaceutical company. But I do believe we are years away from that happening.
Intellectual Property
This area of the law could be particularly interesting because the USPTO will have a layer of input on top of the Department of Justice and state regulators. If a product complies with Schedule III, it will have the ability to be protected by United States intellectual property laws, including trademarks and patents. If it does not comply with Schedule III, the USPTO could independently conclude that such products may not avail themselves of those protections.
Conclusions
[Deep exhale] For years, cannabis activists and legal scholars have debated the possibility and the wisdom of rescheduling marijuana. Now that we may – and I stress may – be on the horizon, it seems there are just as many questions as answers about what the implications of that change would be. So much of those implications depend on things that we do not yet know. For example, will a Trump HHS/DOJ/DEA take a different position than the Biden HHS/DOJ/DEA? Will states change their rules in response to rescheduling? And how will financial institutions and private investors react to those developments.
Trending in Telehealth: December 18, 2024 – January 6, 2025
Trending in Telehealth highlights state legislative and regulatory developments that impact the healthcare providers, telehealth and digital health companies, pharmacists, and technology companies that deliver and facilitate the delivery of virtual care.
Trending in the past weeks:
Reimbursement parity
Provider telehealth education
A CLOSER LOOK
Proposed Legislation & Rulemaking:
In Ohio, Senate Bill 95 passed both the House and Senate chambers. This bill will allow for remote pharmacy dispensing, as current state law prohibits the dispensing of a dangerous drug by a pharmacist through telehealth or virtual means.
In Oregon, the Oregon Health Authority, Health Systems Division: Medical Assistance Programs proposed rule amendments to clarify the telehealth rule definitions, including adding cross-references to established definitions in OAR 410-120-0000.
In New York, the Department of Public Health (DPH) proposed two new amendments to the Medicaid State Plan for non-institutional services:
To comply with the 2024-2025 enacted budget, DPH proposed a clarification to the March 27, 2024, notice provision regarding provider rates for early intervention services. This clarification includes a decrease to provider rates for early intervention services delivered via telehealth, with rate decreases as high as 20% in some regions.
DPH also proposed to reimburse Federally Qualified Health Centers and Rural Health Clinics a separate payment in lieu of the prospective payment system rate for non-visit services, such as eConsults and remote patient monitoring.
Finalized Legislation & Rulemaking Activity:
In Illinois, an amendment to the Illinois Public Aid Code went into effect on January 1, 2025. Passed in June of 2024, Senate Bill 3268 provides that the Department of Human Services will pay negotiated, agreed-upon administrative fees associated with implementing telehealth services for persons with intellectual and developmental disabilities receiving Community Integrated Living Arrangement residential services.
Also in Illinois, an amendment to the Illinois Physical Therapy Act went into effect January 1, 2025. Passed in August of 2024, House Bill 5087 significantly limits the ability of physical therapists to provide telehealth services to patients in the state. For more information on the effects of this bill, please read our article discussing its implications.
In Kentucky, Senate Bill 111 went into effect January 1, 2025. This bill requires health benefit plans, limited health service benefit plans, Medicaid and state health plans to provide coverage for speech therapy provided via telehealth.
Missouri’s emergency rule amendments for virtual visit coverage under the Missouri Consolidated Health Care Plan took effect as of January 1, 2025. For more information on this bill, please see our related article from last month.
In New Jersey, Assembly Bill 3853 was signed into law by the governor. The legislation extends certain pay parity regarding telemedicine and telehealth until July 1, 2026, meaning that New Jersey health plans shall reimburse telehealth and telemedicine services at the same rate as in-person services.
In New York, Assembly Bill 6799, was signed into law by the governor. The legislation establishes a drug-induced movement disorder screening education program and specifically includes services provided via telehealth.
In Vermont, House Bill 861 went into effect January 1, 2025. This bill requires health insurers to reimburse telemedicine and audio-only telephone services the same as in-person visits. However, there is an exception for value-based contracts for services delivered by audio-only telephone.
Why it matters:
States are taking action to ensure reimbursement parity for telehealth services. While there is still debate surrounding reimbursement parity for telehealth services (e., mandating reimbursement at the same rate as equivalent in-person services), several states are making strides toward ensuring equal reimbursement rates for both in-person and telehealth services. Bills requiring reimbursement parity in Illinois, Kentucky, and Vermont have taken effect in 2025. Additionally, New Jersey’s decision to extend the reimbursement parity mandate for telemedicine and telehealth services until mid-2026 illustrates the push towards reimbursing healthcare services at the same rate, regardless of the delivery medium.
States are taking measures to not only recognize telehealth, but also to educate providers on telehealth as an effective care delivery method. New York’s decision to include healthcare provider educational materials for providing telehealth services for drug-induced movement disorders underscores the growing trend and importance of educating providers on the appropriate manner for providing such treatment services.
CFPB Finalizes Rule Removing Medical Bills from Credit Reports
On January 7, 2025, the CFPB announced the finalization of a rule amending Regulation V, which implements the Fair Credit Reporting Act (FCRA), 15 U.S.C. § 1681 et seq., to prohibit the inclusion of medical bills on credit reports used by lenders and prevent lenders from using medical information in lending decisions. According to the Bureau, the final rule (previously discussed here) will remove an estimated $49 billion in medical bills from the credit reports of about 15 million Americans.
The Bureau noted that medical debts are not effective predictors of whether a borrower will repay a debt. Consumers frequently report that they receive inaccurate bills or are asked to pay bills that should have been covered by insurance. The CFPB estimates that this rule will result in the approval of approximately 22,000 additional mortgages each year and increase credit scores for those with medical debt by an average of 20 points.
This rule follows changes by three nationwide credit reporting companies and two major credit scoring companies to reduce the impact of medical debt on credit reports and scores. Specifically, the final rule will:
Prohibit lenders from considering medical information. The rule will amend Regulation V and prohibit creditors from using certain medical information and data when making lending decisions, including information about medical devices that could be used as collateral for a loan.
Ban medical bills on credit reports. The rule prohibits consumer reporting agencies from including medical debt information on credit reports and credit scores sent to lenders. The Bureau seeks to prevent debt collectors from using the credit reporting system to pressure consumers to pay medical bills, regardless of their accuracy.
The rule is effective 60 days after publication in the Federal Register.
Putting It Into Practice: The final rule is another example of the CFPB’s increased focus on regulating the credit reporting industry. (previously discussed here). However, immediately after the Bureau finalized the rule, it was hit with two separate lawsuits by trade associations challenging the rule.
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Building a Smarter Long-Term Care System in New York
New York State has a long-standing commitment to supporting its most vulnerable populations through Medicaid-funded services for older adults and those requiring long-term care. However, rising costs and an increasingly complex healthcare landscape have created challenges that demand innovative solutions. As New York seeks to align its healthcare system with evolving needs, the time has come to adopt integrated care models that promote sustainability, efficiency, and improved outcomes.
The Program of All-Inclusive Care for the Elderly (PACE) offers a clear path forward. This model has consistently demonstrated its ability to reduce healthcare costs while enhancing patient outcomes by integrating medical, social, and behavioral health services under one umbrella. PACE allows older adults to age in place by expanding access to home- and community-based services (HCBS). These services empower individuals to remain in their homes rather than institutional settings, which not only aligns with patient preferences but also reduces system-wide costs. Despite these clear benefits, New York has not approved a new PACE program since 2011, leaving this proven model underutilized in the state.
Integrated care models like PACE deliver significant advantages. By addressing social determinants of health—such as transportation, housing, and nutrition—these programs take a whole-person approach that improves both health outcomes and quality of life. At the same time, they streamline administrative processes, reducing bureaucracy for patients and providers alike. Nationally, PACE has shown remarkable success in reducing duplicative services, unnecessary hospitalizations, and other inefficiencies that drive up costs in fragmented care systems.
As the state considers reforms, it should prioritize integrated care models that promote collaboration, simplify care delivery, and align incentives across payers and providers. This could include a phased approach to transition eligible individuals from partial capitation and fee-for-service models to fully integrated plans, such as PACE or Medicare Advantage Plus (MAP). By setting clear benchmarks for integration and incentivizing innovation, the state can create a roadmap for meaningful progress.
To fully realize the potential of integrated care, New York must also address existing barriers to expanding PACE programs. Simplifying the regulatory framework and providing financial incentives for organizations willing to invest in PACE would go a long way toward increasing access, especially in underserved areas. Additionally, collaboration between managed long-term care plans and PACE could enhance the continuum of care for patients, ensuring they benefit from the strengths of both models. Nonprofit and community-based organizations, which have a history of delivering high-quality, cost-effective care, should also be given opportunities to expand their reach and impact.
Addressing misaligned incentives between Medicaid, which is state-funded, and Medicare, which is federally funded, remains a critical priority. Strengthening partnerships between state and federal entities will enable shared savings arrangements that reward innovative, high-performing care models. New York has an opportunity to lead the way in aligning these funding streams to support integrated care more effectively.
As Medicaid cost control becomes a pressing issue, piecemeal reforms that add complexity without meaningful benefits must be avoided. Instead, the state should take bold, decisive action to embrace integrated care models that deliver both financial sustainability and improved outcomes. By prioritizing proven programs like PACE, fostering collaboration among stakeholders, and removing barriers to innovation, New York can honor its commitment to aging populations and build a long-term care system that is both effective and enduring.
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Second Circuit Adopts “At Least One Purpose” Rule for False Claims Act Cases Premised on Anti-Kickback Statute Violations
On December 27, 2024, the U.S. Court of Appeals for the Second Circuit held in U.S. ex rel. Camburn v. Novartis Pharmaceuticals Corporation that a relator adequately pleads a False Claims Act (“FCA”) cause of action premised on violation of the Anti-Kickback Statute (“AKS”) by alleging, with sufficient particularity under Federal Rule of Civil Procedure 9(b) (“Rule 9(b)”), that at least one purpose (rather than the sole or primary purpose) of the alleged kickback scheme was to induce the purchase of federally reimbursable health care products or services.[1]
In doing so, the Second Circuit joins seven other Circuit Courts—the First, Third, Fourth, Fifth, Seventh, Ninth, and Tenth Circuits—in adopting the “at least one purpose” rule. This ruling lowers the bar in the Second Circuit for relators pleading AKS-based FCA claims.
Interplay Between FCA and AKS Violations
Under the AKS, “a claim that includes items or services resulting from a violation [of the AKS] … constitutes a false or fraudulent claim” under the FCA.[2]
The AKS prohibits persons from, among other things, “knowingly and willfully” soliciting or receiving “any remuneration (including any kickback, bribe, or rebate) directly or indirectly, overtly or covertly, in cash or in kind—
in return for referring an individual to a person for the furnishing or arranging for the furnishing of any item or service for which payment may be made in whole or in part under a federal health care program, or
in return for purchasing, leasing, ordering, or arranging for or recommending purchasing, leasing, or ordering any good, facility, service, or item for which payment may be made in whole or in part under a Federal health care program[.]”[3]
Alleged “Sham” Speaker Events & Excessive Compensation
In U.S. ex rel. Camburn, the relator, a former Novartis sales representative, filed a qui tam action in the U.S. District Court for the Southern District of New York alleging violations of the FCA premised on violations of the AKS. The relator alleged that Novartis operated a kickback scheme with the intent of bribing providers to prescribe Gilenya, a multiple sclerosis drug. Specifically, the relator alleged that Novartis operated a sham peer-to-peer speaker program that served as a mechanism for the company to offer remuneration to physicians in exchange for prescribing Gilenya. The relator alleged that the payments made to providers under the guise of this speaker program “caused pharmacies and physicians to submit false claims to the government and to the states for healthcare reimbursement under programs including Medicare Part D, Medicaid, and TRICARE.”[4]
U.S. District Court’s Dismissal with Prejudice
The federal government, as well as 29 states and the District of Columbia, among other parties, declined to intervene in the lawsuit. After granting the relator multiple opportunities to amend his complaint to plead factual allegations with sufficient particularity required by Rule 9(b), the district court held that the relator still failed to adequately plead the existence of a kickback scheme. Because the relator’s FCA claim was based on violations of the AKS, the district court dismissed the relator’s Third Amended Complaint with prejudice and did not address whether the relator sufficiently pled the remaining elements of his FCA claim.
Second Circuit’s Adoption of “At Least One Purpose” Rule
On appeal, the Second Circuit adopted the “at least one purpose” rule and found that, to survive dismissal, the relator “needed only to allege that at least one purpose of the remuneration was to induce prescriptions, without alleging a cause-and-effect relationship (a quid pro quo) between the payments and the physicians’ prescribing habits.”[5] Applying this standard, the Second Circuit concluded that the relator adequately pleaded an AKS violation with respect to the following three categories of allegations: (1) holding “sham” speaker events with no legitimate attendees, (2) excessively compensating physician speakers for canceled events, and (3) deliberately selecting and retaining certain speakers to induce a higher volume of prescriptions of Gilenya.
Specifically, the Second Circuit found that the relator’s “illustrative examples” of physician-speakers presenting solely to other Novartis speakers or to members of their own practice over lavish restaurant meals supported a strong inference that at least one purpose of the speaker program was to provide kickbacks to prescribers. The panel also found that the relator’s allegations that the compensation paid to physician speakers for canceled events ($20,000 to $22,500 to each speaker) over a two-year period in comparison to the dollar value of the allegedly fraudulent claims submitted to the government for reimbursement (between to $1 to $1.7 million) during that same period gave rise “to a strong inference that the payments constituted, at least in part, unlawful remuneration.”[6] Likewise, the relator’s inclusion of testimony from two Novartis sales representatives regarding the company’s alleged practice of offering speaking engagements to physicians to incentivize them to prescribe Gilenya suggested that these engagements were organized to induce providers to prescribe the drug.
The Second Circuit held that these allegations, accepted as true for purposes of the motion to dismiss, “plausibly and ‘strongly’ suggest Novartis operated its speaker program at least in part to remunerate certain physicians to prescribe Gilenya.”[7] Accordingly, the Second Circuit remanded the case to the district court to determine whether the relator sufficiently pleaded the remaining elements of his FCA claim and to weigh the adequacy of the claims under state and municipal law.
The Second Circuit affirmed, however, the district court’s conclusion that the relator “failed to link Novartis’s DVD initiative, ‘entertainment rooms,’ visual aids for billing codes, and one-on-one physician dinners with a strong inference that Novartis used these tools, at least in part, to induce higher prescription-writing,” with the caveat that another FCA claim predicated on an AKS violation may in fact survive dismissal if similar facts were pleaded with greater particularity.[8]
Practical Takeaways
This case highlights the importance of drug manufacturers and other regulated entities’ duty to implement robust and ongoing health care compliance programs in order to continuously and thoroughly evaluate enforcement and whistleblower risk relative to marketing and other business activities.
This decision’s adoption of the “at least one purpose” rule lowers the bar for relators in the Second Circuit to plead FCA violations premised on noncompliance with the AKS. Indeed, the Second Circuit rejected arguments that remuneration is unlawful under the AKS only if the “sole purpose” or “primary purpose” of the payment is to induce health care purchases. As eight circuits across the country have now held, allegations involving a single improper purpose can allow a case to survive dismissal. In these circuits, a relator merely needs to allege that at least one purpose of the remuneration was to induce the purchase of federally reimbursable health care products or services.
The heightened Rule 9(b) pleading standard fully applies in FCA cases premised on AKS violations. While the “at least one purpose” rule broadens liability, the district court and Second Circuit made clear that FCA allegations will be scrutinized to ensure they comport with the heightened Rule 9(b) pleading requirements.
Epstein Becker Green Attorney Ann W. Parks contributed to the preparation of this post.
ENDNOTES
[1] 2024 WL 5230128 (2d Cir. Dec. 27, 2024).
[2] 42 U.S.C. § 1320a-7b(g).
[3] Id. at § 1320a-7b.
[4] Camburn, 2024 WL 5230128, at *2.
[5] Id. at *4.
[6] Id. at *6.
[7] Id. at *6 (cleaned up) (quoting Hart, 96 F.4th 145, 153 (2d Cir. 2024)).
[8] Id. at *19.