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Focus on Regulation

Posted on By Paul Dacam

Freedom of Information in the private sector?

The Confederation of British Industry (“CBI“) has revealed that it is developing “transparency guidelines” that will apply to private companies that provide services to the NHS (the “Guidelines“).

The CBI’s public service strategy board, which includes managers and directors from some of the UK’s most high-profile outsourcing firms, will be responsible for drawing up the Guidelines which have already been dubbed “an industry version of FOI” (Health Service Journal: May 15, 2013).

The Guidelines follow closely on the heels of the report produced by Monitor in March entitled: “A fair playing field for the benefit of NHS patients” (the “Monitor Report“), following its review of the opportunities available to potential NHS service providers.

The Monitor Report favoured increased transparency in the health sector, stating:

“[H]istorically, public providers have faced higher levels of scrutiny than other providers… This degree of scrutiny can improve accountability to patients and promote good practice.”

At present most private providers are not subject to the Freedom of Information Act (“FOIA“) but since NHS commissioners are, the current NHS standard contract sets out a number of transparency requirements with which private and charitable providers must comply.  These include, for example, a requirement that such providers should provide information to commissioners who are the subject of FOIA requests.

The Monitor Report highlighted the inconsistencies in the current approach, explaining that extending FOIA requirements to private and charitable providers did not appear to be “operating effectively as yet” and noting that, in any event, “other aspects of transparency do not apply across all types of provider.” The Report, therefore, recommended that the Government should ensure transparency is “implemented across all types of provider of NHS services on a consistent basis.”

These Guidelines appear to be aiming towards this consistency of approach, although at present it is unclear precisely what their scope and impact will be. However, with transparency now firmly on the agenda for private companies providing services to the public sector, there is clearly potential for similar guidelines to be introduced in other industries, beyond healthcare.

Posted on By Douglas Wheeler and Emily Kimball

Update: U.S. Senator Barbara Boxer tackles NEPA Reform in the Water Resources Development Act of 2013; CEQA Modernization Proposal Falls Short in California

Despite criticism from environmentalists and the Obama Administration concerning provisions that would streamline compliance with the National Environmental Policy Act (NEPA), the Senate passed the Water Resources Development Act of 2013 (WRDA), S. 601, by a decisive 83-14 vote on May 15.  The bill in its final form includes provisions that would speed up deadlines for the coordinated review process for feasibility studies requiring an Environmental Impact Statement (EIS) under NEPA for Army Corps of Engineers water development projects such as dam optimization, navigational infrastructure projects, and flood damage reduction projects. 

The new deadlines will apply to the “environmental review process,” a new term defined as “the process of preparing documents under NEPA and the completion of any environmental permit, approval, review, or study required under any Federal law.”  As explained by the Environmental and Public Works Committee report, if an agency’s reviews under all laws are not complete by the later of 180 days after the completion of the Record of Decision or 180 days after all necessary requests for approval have been made, an agency will face fines of $10,000 – $20,000 per week for failure to render a timely decision. The bill also mandates a review of categorical exclusions from EIS requirements currently in use by the Corps and requires the Secretary of the Army to propose new exclusions, where appropriate.  

These efforts to streamline the NEPA process have been met with strong opposition from environmentalists and the Administration.  In an official statement of Administration policy, the White House voiced objection to the bill because it “constrains science-based decision making, increases litigation risk, and undermines the integrity of several foundational environmental laws, including…the National Environmental Policy Act.”  Several environmental groups that are usually closely aligned with Senator Barbara Boxer, the bill’s primary sponsor, have criticized her for “working to undermine one of the bedrock environmental laws.”  Senator Boxer resisted most remedial amendments, laying claim to strong environmental credentials as justification for these modest NEPA reforms.  However, an amendment which characterizes these reforms as a pilot project, limiting their effect to ten years, was adopted prior to passage.  

The legislation next moves to the U.S. House for consideration, although House members are working on their own version of the bill.  It is also unclear whether President Obama will continue to object.  A WRDA bill has not passed Congress since 2007.    

Meanwhile, in Senator Boxer’s home state, California Senate President Pro Tempore Darrell Steinberg’s measure to update the California Environmental Quality Act (CEQA), SB 731, was reported favorably by the Senate Environmental Quality Committee on May 1, 2013.  According to Senator Steinberg’s office, the newly-enhanced bill would establish standard environmental thresholds of significance for impacts of traffic and noise at infill projects, so that projects meeting those thresholds would not be subject to further environmental review for those impacts.  SB 731 also would exclude aesthetic considerations from CEQA analysis. As amended, the bill would reduce legal challenges by raising the threshold for “new information” which might warrant further consideration under CEQA. Finally, the bill also includes provisions for speeding up the disposition of legal challenges under CEQA by allowing for electronic filing of certain procedural notices and findings, for internet-based preparation of the administrative record, and for mutual tolling of the statute of limitations to facilitate settlements. 

However, these amendments have fallen far short of industry’s expectations for significant legislative reform.  Environmentalists also view the bill with skepticism, despite some support for its mostly moderate provisions.  Ultimately, Steinberg’s attempt to find a middle ground for reform may bring incremental improvements, but is unlikely to satisfy advocates of comprehensive reform. Prospects for enactment are clouded, in part because, as reported in our previous post, Governor Jerry Brown has called for more aggressive CEQA reform, which he has referred to as “doing the Lord’s work.”  Last month the Governor acknowledged that enactment of SB 731 would not satisfy his quest for effective reform.

Posted on By Pete Dungan

Hogan Lovells Issues Client Alert on New DoD Counterfeit Parts Regulations

Hogan Lovells’ Government Contracts Practice recently issued a Client Alert on the first proposed rule issued by the Department of Defense (“DoD”) regarding the detection and avoidance of counterfeit parts in the DoD supply chain.  Authored by Partners Thomas L. McGovern III and Michael D. McGill and Associate Michael J. Scheimer, the alert analyzes each section of the proposed rule, including key definitions, cost principles, and contract clause language.  The authors write:

The proposed regulations . . . reveal that DoD does not intend to extend the reach of the rules beyond electronic parts, at least for the immediate future.  But the Proposed Rule seems to raise or avoid as many questions as it answers, falling short of the hope that it might provide clarity on the most pressing issues, including DoD’s intentions with respect to designating “trusted suppliers” and what will be expected of prime contractors in managing their respective supply chains.

You can download a copy of the client alert here.

 

Posted on By Anne Mutashi

OPDP Issues Another Enforcement Letter Aimed at Preapproval Promotion

The Food and Administration’s (FDA’s) Office of Prescription Drug Promotion (“OPDP”) issued an enforcement letter to CBA Research, Inc., on April 25, 2013 regarding improper promotion of its investigational new drug CBT-1® (tetrandrine) Capsule (“CBT-1”).  According to OPDP, the company’s website misleadingly promoted the investigational new drug as safe and effective and  overstated its efficacy.  CBA research has submitted a new drug application (“NDA”) for the use of CBT-1 as an adjunct to chemotherapy in all cancer types with multidrug resistance.  This letter is the latest in a series of enforcement actions OPDP has taken against alleged preapproval promotion – continuing a trend that has lasted for approximately 2 years.  By our count, FDA has issued 8 letters about pre-approval promotion since 2010. 

 In the CBA Research letter, FDA clarifies that the scientific exchange exception to the prohibition on pre-approval promotion does not apply to claims of safety or effectiveness for an investigational use.  OPDP cited several examples from CBT-1’s website, including:

  • “ADMINISTERED ORALLY Oral delivery of CBT-1® prior to and during the administration of chemotherapy, achieves the required therapeutic concentration necessary to reverse multidrug resistance in the clinical setting.”
  • “NO SIGNIFICANT OR LASTING TOXIC SIDE EFFECTS CBT-1® demonstrated no significant or lasting side effects in the clinical setting, and had a very favorable adverse event profile.”
  • “MULTIPLE CANCERS Eight Phase I and II clinical trials, with patients that had failed conventional chemotherapy treatments, showed efficacy of CBT-1® in multiple cancers.  Likewise, the targeted mechanism of action multidrug resistance of CBT-1® is found in the vast majority of all late stage human cancer types.” 

The website also contained a downloadable presentation about CBT-1® clinical trials, which contained claims such as:

  • “CBT-1® A Novel Multidrug Resistant Modulator for Cancer Chemotherapy”
  • “CBT-1® Safety and Efficacy Profile
    • Preclinical and Clinical research has consistently demonstrated the potential for CBT-1® to be safe and effective.
    • The drug is safe, well tolerated, lacks harmful pharmacokinetic interactions when combined with chemotherapeutic agents . . . has produced clinically objective responses in heavily pretreated and/or late cancers. 
  • “ADVANTAGES OF CBT-1®”
    • Reverses drug resistance in multiple cancer types.
    • Strong safety and tolerability profile: side effects are manageable and non-life threatening.
    • In advanced relapse cancers clinical trials demonstrate a meaningful response rate.
    • Oral administration prior to chemotherapy achieves required concentration to reverse drug resistance
    • Does not alter the pharmacokinetic profile of Doxorubicin and Paclitaxel (two MDR substrates).” 

OPDP reminded the company that as an investigational new drug, the product’s indication(s), warnings, precautions, adverse reactions, and dosage and administration have not been established and are unknown at this time.  OPDP noted that although one of the slides stated that research has consistently demonstrated the potential for CBT-1 to be safe and effective, the slide was immediately followed by conclusive language regarding safety and efficacy.  Also, while minimal disclaimers stated that an NDA has been submitted and is currently under review, such disclaimers were not sufficient to mitigate overwhelmingly misleading impressions on the website.

 

Posted on By Todd Overman

SBA Removes Award Caps from Women Owned Small Business Set Asides

On May 7, 2013, the Small Business Administration issued an interim final rule that removed limits on the dollar value of awards that may be set aside for Women Owned Small Businesses (WOSB) and Economically Disadvantaged Women Owned Small Businesses (EDWOSB). See 78 Fed. Reg. 26504 (May 7, 2013).  Previously, for a contract to be set aside under the WOSB program, the award total had to be below $6.5 million for manufacturing contracts and $4 million for non-manufacturing contracts.  Now, contracts of any dollar amount may be set aside under the WOSB program, as long as other WOSB program requirements are satisfied. Continue Reading

Posted on By Danielle Drissel and Eliza Andonova

HHS-OIG updates Special Advisory Bulletin on effect of exclusion from federal healthcare programs

On May 8, 2013, the Office of Inspector General for the U.S. Department of Health and Human Services (OIG) published an updated Special Advisory Bulletin (SAB) on the scope and effect of federal healthcare program exclusion. OIG is the agency with the authority to exclude from participation in Medicare, Medicaid, and other federal healthcare programs individuals and entities who have engaged in misconduct related to federal healthcare programs. The SAB updates and narrows guidance OIG issued 13 years ago on the practical implications of exclusion. Notably, the new guidance, in apparent conflict with current regulations, asserts that exclusion is limited to federal healthcare programs and does not prohibit excluded individuals and entities from participating in other government programs, including procurement programs. At the same time, however, the SAB details the significant effort the OIG expects of the industry to monitor arrangements and thereby avoid potential Civil Monetary Penalties (CMPs) for violating the exclusion provisions.

Additional information regarding the SAB can be found in a Hogan Lovells Health Alert.

 

Posted on By Jamie Potter

Easy win for “easyCouncil”

R (Nash) v Barnet London Borough Council [2013] EWHC 1067 (Admin)

A recent decision of the High Court has highlighted the uncertainty around when time starts to run for bringing judicial review proceedings where there may be series of decisions and an arguable “continuing breach.

In this case, the High Court has dismissed a challenge to the decision of Barnet London Borough Council (the “Council“) to move to a so-called “easyCouncil” model of procurement on the basis that the claimant’s application was out of time.

Continue Reading

Posted on By Patrick R. Rizzi

U.S. Department of Transportation Awards Slot Exemptions to Southwest Airlines

The U.S. Department of Transportation today awarded two within-perimeter slot exemptions to Southwest Airlines for nonstop service from Ronald Reagan Washington National Airport (DCA) to Houston (Hobby). DOTOrder2013-5-6.  In making the award, the Department chose Southwest’s service proposal over JetBlue’s proposal for nonstop service to Jacksonville, Florida, and US Airways’ proposal for nonstop service to Oklahoma City, Oklahoma.  Southwest has until August 5, 2013, to start the new service. 

The Department concluded that the benefits of Southwest’s service to Houston outweighed the benefits of the other carrier-city proposals.  The Department summarized:

 

[W]e have concluded that the criterion set forth in Section 41718(b)(5) – promoting service that produces maximum competitive benefits, including low fares – carries the most weight in this proceeding and that Southwest’s application best satisfies this criterion. This proceeding presents a unique opportunity to connect the close-in, downtown airport serving the nation’s capital (DCA) with a close-in, downtown airport in the nation’s fifth largest metropolitan area (HOU), and to do so with a low-fare air carrier. . . .

In comparing the merits of the applications under the Section 41718(b)(5) criterion, we find that both Southwest and JetBlue would likely offer low-fare service. Both carriers have affirmatively asserted their intention to offer low fares in their applications and have well-established records of providing competitive, low-fare service upon entering markets. In contrast, US Airways made no mention of offering low-fare service in its application, instead stating that fares would be “competitive with current OKC-Washington and OKC-Charlotte fares.”  In addition, US Airways proposes to operate the route with 99-seat E-190 aircraft. This is the smallest proposed aircraft in this proceeding and would not utilize the available capacity at DCA as efficiently as the Southwest or JetBlue proposals to use 143-seat and 150-seat aircraft respectively.  Moreover, US Airways’ application stated that the route may be operated from time to time by its regional affiliates, which would use even smaller aircraft. Given these factors, we do not believe the merits of US Airways’ application with respect to Section 41718(b)(5) reach those of either Southwest’s or JetBlue’s applications.

Having made this determination, we turned to a comparative analysis of the Southwest and JetBlue applications under Section 41718(b)(5). In comparing the applications, we examined the patterns of air service between DCA and Houston, and DCA and Jacksonville, including the average fares in each market. Our examination led us to find that Southwest’s average fare calculation methodology (removing zero-fare passengers and including an allocation for baggage fees) is logical and produces results within a reasonable margin of error. Based on these calculations, we find that travelers pay a 45% ($98 per passenger) fare premium for travel between DCA and Houston compared to other markets of similar size and distance. By contrast, the fare premium in the DCA-Jacksonville market is only 10.4% ($21 per passenger).

Further analysis revealed several instances in which Southwest’s inauguration of service at HOU has had a positive competitive effect on otherwise-monopoly service from IAH. Southwest began HOU-DEN service in 2006, prior to which the Houston to Denver market was operated on a monopoly basis by United through IAH. After Southwest’s HOU-DEN service began, fares on the IAH-DEN route dropped significantly and passenger usage increased. Similar patterns can be seen where Southwest inaugurated HOU service to Greenville/Spartanburg, SC; Philadelphia, PA; and Jacksonville, FL; as well as the New York City and San Francisco metropolitan areas. Given this history, together with Southwest’s presence at HOU, including the many connecting opportunities, we are confident that the award of these slot exemptions to Southwest will have a competitive effect in the greater Houston market. Moreover, Houston is a much larger market than Jacksonville, providing for a larger pool of potential passengers. When examining current schedules (both on a city-pair and airport-pair level) we found, consistent with the City of Houston’s claims, that, when adjusted for population size, there is less air service between DCA and Houston than between DCA and Jacksonville. HOU also offers more online connecting opportunities for passengers than does JAX.”

 

Posted on By Stuart M. Langbein, Beth Halpern and Emily Stopa

Medicare Inpatient Hospital Proposed Rule for Fiscal Year 2014 Released

The Centers for Medicare & Medicaid Services (CMS) released the Hospital Inpatient Prospective Payment System (IPPS) proposed rule for fiscal year (FY) 2014 on April 26, 2013.  The proposed rule addresses changes in payment rates for general acute care and long-term care hospitals effective October 1, 2013, as well as revisions to the Hospital Value-Based Purchasing Program, hospital quality measures programs, and CMS guidance relating to when hospital inpatient admissions are determined reasonable and necessary for payment under Medicare Part A.  The IPPS rule also includes proposals pertaining to implementation of the FY 2015 payment adjustment under the Hospital-Acquired Condition Reduction Program established by the Affordable Care Act.

CMS proposes to increase Medicare payments to acute hospitals that submit quality data under the Hospital Inpatient Quality Reporting program by 0.8 percent in FY 2014, or approximately $27 million, and to increase payments to long-term care hospitals by 1.1 percent, or approximately $62 million. 

The proposed rule will be published in the Federal Register on May 10, 2013, and CMS will accept comments on it until June 25, 2013.  The final rule will be issued by August 1, 2013.

Posted on By Patrick R. Rizzi

U.S. Department of Transportation Imposes Consent Order on Southwest Airlines

 The U.S. Department of Transportation has entered a Consent Order against Southwest Airlines for failing to provide timely dispositive written responses to written complaints involving disabled travelers under 14 CFR Part 382 and for failing to provide timely substantive responses to complaints involving scheduled service under 14 CFR Part 259.  SouthwestDOTConsentOrder    As the Department explained,

“Pursuant 14 CFR 382.155, carriers are required to provide a dispositive written response to a written complaint alleging a violation of Part 382 within 30 days of receipt of the complaint. An appropriate dispositive response must specifically discuss the complaint at issue, specifically admit or deny whether the carrier believes that a violation of Part 382 occurred under the circumstances, summarize the facts that led the carrier to its conclusion of whether or not a violation of Part 382 occurred, and advise the complainant of his or her right to refer the matter to the Department for an investigation.”

“Part 259 is a regulation requiring enhanced protections for airline passengers. Pursuant to 14 CFR 259.7(c), covered carriers must acknowledge receipt of written complaints regarding scheduled service within 30 days of receipt of the complaint. Within 60 days of the receipt of the complaint, the carrier must provide a substantive written response to the complaint.”

Southwest apparently experienced an inadvertent technical glitch whereby certain customer complaints were mis-routed during a seven-month period.  Interestingly, although the civil penalty was for $150,000, the Department gave Southwest credit for $115,000 of ticket refunds that Southwest “on its own initiative” gave to the passengers involved.   The Consent Order also imposed the Department’s typical cease-and-desist obligation on Southwest.