Justia Corporate Compliance Opinion Summaries
Articles Posted in Health Law
INSULET CORP. v. EOFLOW, CO. LTD.
Insulet Corp. and EOFlow are medical device manufacturers that produce insulin pump patches. Insulet began developing its OmniPod product in the early 2000s, and EOFlow started developing its EOPatch product after its founding in 2011. Around the same time, four former Insulet employees joined EOFlow. In 2023, reports surfaced that Medtronic had started a process to acquire EOFlow. Soon after, Insulet sued EOFlow for violations of the Defend Trade Secrets Act (DTSA), seeking a temporary restraining order and a preliminary injunction to enjoin all technical communications between EOFlow and Medtronic in view of its trade secrets claims.The U.S. District Court for the District of Massachusetts temporarily restrained EOFlow from disclosing products or manufacturing technical information related to the EOPatch or OmniPod products. The court then granted Insulet’s request for a preliminary injunction, finding strong evidence that Insulet is likely to succeed on the merits of its trade secrets claim, strong evidence of misappropriation, and that irreparable harm to Insulet crystallized when EOFlow announced an intended acquisition by Medtronic. The injunction enjoined EOFlow from manufacturing, marketing, or selling any product that was designed, developed, or manufactured, in whole or in part, using or relying on alleged trade secrets of Insulet.The United States Court of Appeals for the Federal Circuit reversed the district court’s order. The court found that the district court had failed to address the statute of limitations, lacked a tailored analysis as to what specific information actually constituted a trade secret, and found it hard to tell what subset of that information was likely to have been misappropriated by EOFlow. The court also found that the district court had failed to meaningfully engage with the public interest prong. The court concluded that Insulet had not shown a likelihood of success on the merits and other factors for a preliminary injunction. The case was remanded for further proceedings consistent with the opinion. View "INSULET CORP. v. EOFLOW, CO. LTD. " on Justia Law
United States v. Bolos
The case involves Dr. Peter Bolos, who was convicted of mail fraud, conspiracy to commit healthcare fraud, and felony misbranding as part of a complex scheme. Bolos purchased an interest in Florida-based pharmacy Synergy Pharmacy Services in 2013 and became the managing partner. Synergy signed an agreement with HealthRight, a telemarketing firm, to generate business. HealthRight used social media advertisements and large phone banks to generate potential clients for Synergy. The information collected from potential clients was forwarded to a licensed doctor in the patient’s home state for review. Most of these decisions were made without the doctor ever seeing or speaking to the patient. The doctors then sent the prescriptions to Synergy for filling.The District Court for the Eastern District of Tennessee convicted Bolos on all counts after a four-week trial. Bolos appealed, arguing that his actions were not unlawful and that he was being unfairly held criminally culpable for contractual violations and others’ misconduct.The United States Court of Appeals for the Sixth Circuit disagreed with Bolos and affirmed the lower court's decision. The court found that Bolos and Synergy leadership knew of the deficiencies in their business practices and either actively facilitated and furthered them or turned a blind eye, all in an effort to induce Pharmacy Benefit Managers (PBMs) to pay Synergy. The court also held that the federal healthcare-fraud statute requires the government to prove that Bolos knowingly devised a scheme or artifice to defraud a health care benefit program in connection with the delivery of or payment for health care benefits, items, or services. The court found ample evidence in the record to support the jury’s finding that Bolos conspired to create a scheme with the intent to defraud the PBMs of their money. View "United States v. Bolos" on Justia Law
Lebanon County Employees’ Retirement Fund v. Collis
A case involving Lebanon County Employees' Retirement Fund and Teamsters Local 443 Health Services & Insurance Plan, as plaintiffs-appellants, and Steven H. Collis, Richard W. Gochnauer, Lon R. Greenberg, Jane E. Henney, M.D., Kathleen W. Hyle, Michael J. Long, Henry W. McGee, Ornella Barra, D. Mark Durcan, and Chris Zimmerman, as defendants-appellees, was heard by the Supreme Court of the State of Delaware. The plaintiffs, shareholders in AmerisourceBergen Corporation, brought a derivative complaint against the directors and officers of the Corporation alleging that they failed to adopt, implement, or oversee reasonable policies and practices to prevent the unlawful distribution of opioids. The plaintiffs claimed that this led to AmerisourceBergen incurring liability exceeding $6 billion in a 2021 global settlement related to the Company's role in the opioid epidemic. The Court of Chancery of the State of Delaware initially dismissed the complaint, basing its decision on a separate federal court finding that AmerisourceBergen had complied with its anti-diversion obligations under the Controlled Substances Act. However, the Supreme Court of the State of Delaware reversed the Court of Chancery's dismissal of the complaint, ruling that the lower court had erred in considering the federal court's findings as it changed the date at which demand futility should be considered and violated the principles of judicial notice. The case was remanded for further proceedings. View "Lebanon County Employees' Retirement Fund v. Collis" on Justia Law
Norfolk County Retirement System v. Community Health Systems, Inc.
Community, the nation’s largest for-profit hospital system, obtained about 30 percent of its revenue from Medicare reimbursement. Instead of using one of the systems commonly in use for determining whether Medicare patients need in-patient care, Community used its own system, Blue Book, which directed doctors to provide inpatient services for many conditions that other hospitals would treat as outpatient cases. Community paid higher bonuses to doctors who admitted more inpatients and fired doctors who did not meet quotas. Community’s internal audits found that its hospitals were improperly classifying many patients; its Medicare consultant told management that the Blue Book put the company at risk of a fraud suit. Community attempted a hostile takeover of a competitor, Tenet. Tenet publicly disclosed to the SEC, expert analyses and other information suggesting that Community’s profits depended largely on Medicare fraud. Community issued press releases, denying Tenet’s allegations, but ultimately corroborated many of Tenet’s claims. Community’s shareholders sued Community and its CFO and CEO, alleging that the disclosure caused a decline in stock prices. The district court rejected the claim. The Sixth Circuit reversed. The Tenet complaint at least plausibly presents an exception to the general rule that a disclosure in the form of a complaint would be regarded, by the market, as comprising mere allegations rather than truth. The plaintiffs plausibly alleged that the value of Community’s shares fell because of revelations about practices that Community had previously concealed. View "Norfolk County Retirement System v. Community Health Systems, Inc." on Justia Law
Autocam Corp. v. Sebelius
Kennedy family members own a controlling interest in corporate entities that comprise Autocam. John Kennedy is Autocam’s CEO. The companies are for-profit manufacturers in the automotive and medical industries and have 661 employees in the U.S. The Kennedys are practicing Roman Catholics and profess to “believe that they are called to live out the teachings of Christ in their daily activity and witness to the truth of the Gospel,” which includes their business dealings. Regulations under the Patient Protection and Affordable Care Act of 2010 (ACA), 124 Stat. 119, require that Autocam’s health care plan cover, without cost-sharing, all FDA-approved contraceptive methods, sterilization, and patient education and counseling for enrolled female employees. Autocam and the Kennedys claim that compliance with the mandate will force them to violate their religious beliefs, in violation of the Religious Freedom Restoration Act, 42 U.S.C. 2000bb. The district court denied their motion for a preliminary injunction. The Sixth Circuit affirmed for lack of standing. Recognition of rights for corporations under the Free Speech Clause 20 years after RFRA’s enactment does not require the conclusion that Autocam is a “person” that can exercise religion for purposes of RFRA. View "Autocam Corp. v. Sebelius" on Justia Law
Doe v. Guthrie Clinic, Ltd.
Plaintiff appealed the district court's dismissal of his complaint against the Guthrie Defendants. Plaintiff's principal issue on appeal required the court to consider whether the unauthorized disclosure of confidential medical information by a medical corporation's employee gives a plaintiff a right of action for breach of fiduciary duty under New York law that runs directly against the corporation, even when the corporation's employee acted outside the scope of her employment and is not plaintiff's treating physician. Plaintiff's appeal presented a question that has not been resolved by the New York Court of Appeals. Accordingly, the court deferred decision and certified the question to the New York Court of Appeals. The court disposed of plaintiff's remaining claims on appeal in a separate summary order filed simultaneously with this opinion. View "Doe v. Guthrie Clinic, Ltd." on Justia Law
Burwell v. Hobby Lobby Stores, Inc.
Department of Health and Human Services (HHS) regulations implementing the 2010 Patient Protection and Affordable Care Act (ACA) require that employers’ group health plans furnish preventive care and screenings for women without cost sharing requirements, 42 U.S.C. 300gg–13(a)(4). Nonexempt employers must provide coverage for 20 FDA-approved contraceptive methods, including four that may have the effect of preventing a fertilized egg from developing. Religious employers, such as churches, are exempt from the contraceptive mandate. HHS has effectively exempted religious nonprofit organizations; an insurer must exclude contraceptive coverage from such an employer’s plan and provide participants with separate payments for contraceptive services. Closely held for-profit corporations sought an injunction under the 1993 Religious Freedom Restoration Act (RFRA), which prohibits the government from substantially burdening a person’s exercise of religion even by a rule of general applicability unless it demonstrates that imposing the burden is the least restrictive means of furthering a compelling governmental interest, 42 U.S.C. 2000bb–1(a), (b). As amended by the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), RFRA covers “any exercise of religion, whether or not compelled by, or central to, a system of religious belief.” The Third Circuit held that a for-profit corporation could not “engage in religious exercise” under RFRA and that the mandate imposed no requirements on corporate owners in their personal capacity. The Tenth Circuit held that the businesses are “persons” under RFRA; that the contraceptive mandate substantially burdened their religious exercise; and that HHS had not demonstrated that the mandate was the “least restrictive means” of furthering a compelling governmental interest.The Supreme Court ruled in favor of the businesses, holding that RFRA applies to regulations that govern the activities of closely held for-profit corporations. The Court declined to “leave merchants with a difficult choice” of giving up the right to seek judicial protection of their religious liberty or forgoing the benefits of operating as corporations. Nothing in RFRA suggests intent to depart from the Dictionary Act definition of “person,” which includes corporations, 1 U.S.C.1; no definition of “person” includes natural persons and nonprofit corporations, but excludes for-profit corporations. “Any suggestion that for-profit corporations are incapable of exercising religion because their purpose is simply to make money flies in the face of modern corporate law.” The Court rejected arguments based on the difficulty of ascertaining the “beliefs” of large, publicly traded corporations and that the mandate itself requires only insurance coverage. If the plaintiff companies refuse to provide contraceptive coverage, they face severe economic consequences; the government failed to show that the contraceptive mandate is the least restrictive means of furthering a compelling interest in guaranteeing cost-free access to the four challenged contraceptive methods. The government could assume the cost of providing the four contraceptives or could extend the accommodation already established for religious nonprofit organizations. The Court noted that its decision concerns only the contraceptive mandate, not all insurance-coverage mandates, e.g., for vaccinations or blood transfusions.
View "Burwell v. Hobby Lobby Stores, Inc." on Justia Law
Burwell v. Hobby Lobby Stores, Inc.
Department of Health and Human Services (HHS) regulations implementing the 2010 Patient Protection and Affordable Care Act (ACA) require that employers’ group health plans furnish preventive care and screenings for women without cost sharing requirements, 42 U.S.C. 300gg–13(a)(4). Nonexempt employers must provide coverage for 20 FDA-approved contraceptive methods, including four that may have the effect of preventing a fertilized egg from developing. Religious employers, such as churches, are exempt from the contraceptive mandate. HHS has effectively exempted religious nonprofit organizations; an insurer must exclude contraceptive coverage from such an employer’s plan and provide participants with separate payments for contraceptive services. Closely held for-profit corporations sought an injunction under the 1993 Religious Freedom Restoration Act (RFRA), which prohibits the government from substantially burdening a person’s exercise of religion even by a rule of general applicability unless it demonstrates that imposing the burden is the least restrictive means of furthering a compelling governmental interest, 42 U.S.C. 2000bb–1(a), (b). As amended by the Religious Land Use and Institutionalized Persons Act of 2000 (RLUIPA), RFRA covers “any exercise of religion, whether or not compelled by, or central to, a system of religious belief.” The Third Circuit held that a for-profit corporation could not “engage in religious exercise” under RFRA and that the mandate imposed no requirements on corporate owners in their personal capacity. The Tenth Circuit held that the businesses are “persons” under RFRA; that the contraceptive mandate substantially burdened their religious exercise; and that HHS had not demonstrated that the mandate was the “least restrictive means” of furthering a compelling governmental interest.The Supreme Court ruled in favor of the businesses, holding that RFRA applies to regulations that govern the activities of closely held for-profit corporations. The Court declined to “leave merchants with a difficult choice” of giving up the right to seek judicial protection of their religious liberty or forgoing the benefits of operating as corporations. Nothing in RFRA suggests intent to depart from the Dictionary Act definition of “person,” which includes corporations, 1 U.S.C.1; no definition of “person” includes natural persons and nonprofit corporations, but excludes for-profit corporations. “Any suggestion that for-profit corporations are incapable of exercising religion because their purpose is simply to make money flies in the face of modern corporate law.” The Court rejected arguments based on the difficulty of ascertaining the “beliefs” of large, publicly traded corporations and that the mandate itself requires only insurance coverage. If the plaintiff companies refuse to provide contraceptive coverage, they face severe economic consequences; the government failed to show that the contraceptive mandate is the least restrictive means of furthering a compelling interest in guaranteeing cost-free access to the four challenged contraceptive methods. The government could assume the cost of providing the four contraceptives or could extend the accommodation already established for religious nonprofit organizations. The Court noted that its decision concerns only the contraceptive mandate, not all insurance-coverage mandates, e.g., for vaccinations or blood transfusions.
View "Burwell v. Hobby Lobby Stores, Inc." on Justia Law
Friedman v. Sebelius
Appellants were executives at the Purdue Frederick Company when it misbranded the painkiller OxyContin a schedule II controlled substance. The Company was convicted of fraudulent misbranding, and the executives were convicted under the "responsible corporate officer" doctrine of the misdemeanor of misbranding a drug. Based upon their convictions, the Secretary of Health and Human Services later excluded the individuals from participation in federal health care programs for twelve years under 42 U.S.C. 1320a-7(b). Appellants sought review, arguing that the statute did not authorize their exclusion and the Secretary's decision was unsupported by substantial evidence and was arbitrary and capricious. The district court granted summary judgment for the Secretary. The D.C. Circuit Court of Appeals reversed, holding (1) the statute authorized the Secretary's exclusion of Appellants, but (2) the Secretary's decision was arbitrary and capricious for want of a reasoned explanation for the length of the exclusions.
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PharmAthene, Inc. v. SIGA Technologies, Inc.
This action arose out of a dispute between two companies involved in the development of pharmaceuticals. Plaintiff was a biodefense company engaged in the development and commercialization of medical countermeasures against biological and chemical weapons and defendant was also a biodefense company that concentrated on the discovery and development of oral antiviral and antibacterial drugs to treat, prevent, and complement vaccines for high-threat biowarfare agents. The court rejected plaintiff's claim that defendant breached a binding license agreement, but found that defendant did breach its obligations to negotiate in good faith and that defendant was liable to plaintiff under the doctrine of promissory estoppel. The court rejected defendant's claim that plaintiff breached its obligation to negotiate in good faith. The court denied plaintiff's claims for specific performance of a license agreement with the terms set forth in the time sheet or, alternatively, for a lump sum award of its expectation damages. The court concluded, however, that plaintiff was entitled to share in any profits relied on from the sale of the drug in question, after an adjustment for the upfront payments it likely would have had to make had the parties negotiated in good faith a license agreement in accordance with the terms of the term sheet. In addition, plaintiff was entitled to recover from defendant a portion of the attorneys' fees and expenses plaintiff incurred in pursuing the action. View "PharmAthene, Inc. v. SIGA Technologies, Inc." on Justia Law