Author: WorkCompAcademy

In reaction to health hazards associated with compounded drugs, the California Pharmacy Board has been in the process of rulemaking to more closely regulate compounded drugs that are dispensed in California. The latest proposed regulations are now subject to a public regulation hearing: on November 4, 2014 at 10:30 a.m. at the Department of Consumer Affairs Headquarter Building Two located at 1747 N. Market Blvd., Room 186 in Sacramento, The 45-Day comment period: runs from September 5, 2014 to October 20, 2014.

Existing state and federal law specifically attempts to limit compounding to limited quantities for an identified patient with unique needs. This limit supposedly differentiates a manufacturer who is subject to FDA scrutiny, from a compounding pharmacist who is only scrutinized by individual states. The proposed regulations make changes to existing law on the topics of a definition of a “limited quantity” and how the distribution chain can occur from the compounding pharmacist to a dispensing physician who supposedly has a “limited quantity” of compounded medication on hand that escapes the definition of an FDA regulated “manufactured product.”

Unfortunately, the proposed regulations do not seem to consider the abuse that occurs in the California workers’ compensation arena when a seemingly endless supply of compounded pharmaceuticals are supplied in bulk to a dispensing physician, and then mechanically prescribed and dispensed to injured workers at inflated prices, all of which is claimed to be within the limits of existing federal and state law. What we see seems more like manufacturing than compounding for an identified patient. For this reason, NOW is a good time for the workers’ compensation community to alert the Pharmacy Board about the unique situation that now occurs quite often in our claims. Perhaps with our guidance, the current version of its regulations could be yet amended again to address the concerns that we see in claims about compounded pharmaceuticals. For those so inclined to make any comments to the Board of Pharmacy on its proposed compounded pharmaceutical regulations, they may read the materials on this page..

Under the current federal regulatory system, drug manufacturers are regulated by the Food and Drug Administration (FDA). Prior to the enactment of the Drug Quality and Security Act, compounding pharmacies were regulated by their respective states of residence. Compounding pharmacies also make drugs, but they are limited to producing small amounts in response to a specific patient’s prescription, or to create a small supply for an identifiable patient population to ensure continuity of treatment. The state-by-state approach to regulating compounding organizations yields inconsistent standards and varying levels of enforcement on an industry that ships dangerous drugs across state lines.

Included as part of the federal Drug Quality and Security Act (HR 3204) that became law on November 27, 2013, are provisions that establish provisions for federal regulation and oversight of large scale drug compounding by “outsourcing facilities.” The federal law sets forth voluntary requirements for licensure and enforcement of these entities. However, California’s law is more restrictive than the federal law in several areas. California will continue to require any pharmacy that is compounding sterile products for California residents or practitioners to possess licensure with the board and comply with California requirements as sterile compounding pharmacies.

SB 294 commencing July 1, 2014, expands the provisions of the California Pharmacy Law to prohibit a pharmacy from compounding or dispensing, and a nonresident pharmacy from compounding for shipment into this state, sterile drug products for injection, administration into the eye, or inhalation, unless the pharmacy has obtained a sterile compounding pharmacy license from the board. SB 294 also specifies requirements for the board for the issuance or renewal of a license, and requirements for the pharmacy as a licensee. SB 294 requires the board to adopt regulations to implement these provisions, and, on and after July 1, 2014, to review formal revisions to specified national standards relating to the compounding of sterile preparations to determine whether amendments to those regulations are necessary, as specified.

Additionally, there are compounding professional standards that are used across the nation known as the United States Pharmacopeia and The National Formulary (USP-NF). USP-NF is a book of public pharmacopeial standards. It contains standards for (chemical and biological drug substances, dosage forms, and compounded preparations), excipients, medical devices, and dietary supplements. USP-NF is a combination of two compendia, the United States Pharmacopeia (USP) and the National Formulary (NF). Monographs for drug substances, dosage forms, and compounded preparations are featured in the USP. Monographs for dietary supplements and ingredients appear in a separate section of the USP. Excipient monographs are in the NF. The U.S. Federal Food, Drug, and Cosmetics Act designates the USP-NF as official compendia for drugs marketed in the United States. A drug product in the U.S. market must conform to the standards in USP-NF to avoid possible charges of adulteration and misbranding.

At the October 2013 Board Meeting, the board moved to initial notice of proposed changes in the California’s compounding regulations (located in 16 California Code of Regulations Sections 1735 et seq. and 1751 et seq). This regulatory process has continued to develop the present version of proposed new regulations. .

Donald K. Sams and Associates, Inc.,, an independent adjusting company headquartered in Granite Bay, California, announced they have been acquired by York Risk Services Group. York is a premier national provider of a full range of claims administration, managed care, and risk management and specialized loss adjusting services. The terms of the transaction, which was effective September 2, 2014, were not disclosed.

Sams and Associates provides a wide array of claims adjusting services in 12 western states and private investigative services in California. Don Sams, founder of Sams and Associates, will assume the role of President of the York Field Services Division. He will continue to be based in the Granite Bay office.

“We are pleased to be joining York Risk Services Group,” said Don Sams, “Both companies share a commitment to delivering high-quality claims management to and building long-term relationships with our clients. Becoming a part of York allows us to expand the services and expertise we offer our current clients and at the same time help build a premier, nationwide field services company. As we grow, that company will also provide our employees opportunities to advance,” Sams added.

“Combining the expertise and geographic footprint of Sams and Associates and York’s established Field Services teams strengthens our property and casualty service offerings to all our clients, and we are looking forward to expanding this key service area under Don’s leadership,” notes Rick Taketa, President and CEO of York. “In addition, this acquisition also helps York continue to build the bench strength of our Specialized Loss Adjusting team of General Adjusters. Don will work with Danny Miller, EVP YRSG and President of our SLA team on the strategic initiatives and growth of this important offering.”

Donald K. Sams and Associates, Inc. was founded January 1st, 1990 in Emeryville, CA by Don Sams. Sams and Associates has grown to become one of the leading independent adjusting firms in the western United States. Sams and Associates provides commercial and residential claim adjusting, TPA, contract claim department and special investigation unit services to their clients.

York Risk Services Group Inc. is a premier provider of risk management, claims handling, specialized loss adjusting, managed care, pool administration, loss control and other insurance services nationwide. ;York provides risk management and managed care solutions to a variety of strategic partners, including insurance carriers, self insureds, brokers, wholesalers, MGAs, programs, risk pools and public entities and delivers customized claims solutions for all lines of business, including property, liability, products liability, ocean and inland marine, environmental, transportation and logistics, construction and workers’ compensation. Based in Parsippany, New Jersey, York and has more than 4,000 employees in 85 offices throughout the United States.

Human articular cartilage defects can be treated with nasal septum cells. Researchers at the University and the University Hospital of Basel report that cells taken from the nasal septum are able to adapt to the environment of the knee joint and can thus repair articular cartilage defects. The nasal cartilage cells’ ability to self-renew and adapt to the joint environment is associated with the expression of so-called HOX genes. The scientific journal Science Translational Medicine has published the research results together with the report of the first treated patients.

Cartilage lesions in joints often appear in older people as a result of degenerative processes. However, they also regularly affect younger people after injuries and accidents. Such defects are difficult to repair and often require complicated surgery and long rehabilitation times. A new treatment option has now been presented by a research team lead by Prof. Ivan Martin, professor for tissue engineering, and Prof. Marcel Jakob, Head of Traumatology, from the Department of Biomedicine at the University and the University Hospital of Basel: Nasal cartilage cells can replace cartilage cells in joints.

Cartilage cells from the nasal septum (nasal chondrocytes) have a distinct capacity to generate a new cartilage tissue after their expansion in culture. In an ongoing clinical study, the researchers have so far taken small biopsies (6 millimeters in diameter) from the nasal septum from seven out of 25 patients below the age of 55 years and then isolated the cartilage cells. They cultured and multiplied the cells and then applied them to a scaffold in order to engineer a cartilage graft the size of 30 x 40 millimeters. A few weeks later they removed the damaged cartilage tissue of the patients’ knees and replaced it with the engineered and tailored tissue from the nose. In a previous clinical study conducted in cooperation with plastic surgeons and using the same method, the researchers from Basel recently already successfully reconstructed nasal wings affected by tumors.

“The findings from the basic research and the preclinical studies on the properties of nasal cartilage cells and the resulting engineered transplants have opened up the possibility to investigate an innovative clinical treatment of cartilage damage”, says Prof. Ivan Martin about the results. It has already previously been shown that the human nasal cells’ capacity to grow and form new cartilage is conserved with age. Meaning, that also older people could benefit from this new method, as well as patients with large cartilage defects. While the primary target of the ongoing clinical study at the University Hospital of Basel is to confirm the safety and feasibility of cartilage grafts engineered from nasal cells when transplanted into joint, the clinical effectiveness assessed until now is highly promising.

In 2013, the health care industry experienced more data breaches than it ever had before, accounting for 44% of all breaches, according to the Identity Theft Resource Center. It was the first time that the medical industry surpassed all others, and stood in stark contrast to the financial services industry, which represented just 3.7% of the total.

Identity theft is so pervasive in health care that, according to a 2013 ID Experts data security survey of 91 healthcare organizations, 90% of respondents had experienced a data breach in the previous two years and 38% had had more than five incidents. The leading causes of a breach are typical for any business: a lost or stolen computing device, an employee error, a third-party snafu. There’s also “Robin Hood fraud,” in which someone knowingly gives a friend or family member information to fraudulently receive health care. But one cause has grown in importance: Criminal attacks have doubled in the last four years, according to the survey. (A good example: the theft of 4.5 million records this month at hospital operator Community Health Services.)

Rick Kam, president and cofounder of ID Experts, a company that helps health organizations prevent and respond to breaches, says his team has been tracking crime rings that have been prosecuted in the last year for medical fraud. “Essentially, criminals have come to understand that using your medical credentials – your name, Social Security Number and health insurance numbers – to order goods and services that are never delivered and to bill organizations like Medicare and Medicaid, those activities are more profitable than drugs, prostitution, and other crimes they may pursue.” For this reason, medical identities are 20 to 50 times more valuable to criminals than financial identities. What could exacerbate the problem is the digitization of health information found in electronic records, mobile devices, and health exchanges.

Estimates of annual United States medical fraud range from $80 billion to $230 billion. Health care organizations who suffer breaches are subject to costs that average to $2 million over two years, according to estimates. This is why the health care industry and related players are starting come together to tackle prevention. It is a formidable task: With so many potential avenues for information to be lost, so many different institutions from which to steal data, and so many ways of perpetrating fraud at other organizations – not to mention the lack of a central database for reporting such fraud – the industry is a long way from being as impenetrable as the financial services industry.

Steven Toporoff, an attorney in the division of privacy and identity protection at the Federal Trade Commission, says that people who suspect financial fraud can get free copies of credit reports and can put on a fraud alert under federal law or a credit freeze in most states to halt fraudulent activity. “There are ways to block erroneous items from their credit report,” he says. “There are also remedies if you have a bank account and monies were withdrawn. There are protections for credit cards. In the financial world, we’ve been dealing with these problems for years. Unfortunately, in the medical world, it has not caught up yet.”

This year, a few dozen businesses (including health care providers such as hospitals, integrated care payer-providers such as Kaiser Permanente, insurers, credit companies, and digital security companies) formed the Medical Identity Fraud Alliance. The industry group is focusing on three key tasks: develop best practices to prevent medical identity theft and fraud for providers, payers, information management companies, and regulators; educate consumers, providers, and third-party vendors; and influence relevant legislation and regulations.The group aims “to take an enterprise-wide approach,” says Ann Patterson, MIFA’s senior vice president and program director. A company can’t just relegate the task of theft prevention to one executive or department like the chief information officer, fraud investigator, or HIPAA privacy office, she says. “It’s everybody together, down to someone in the mail room.”

Larry Ponemon, chairman and founder of the Ponemon Institute, a cyber security research firm, says health care companies aren’t prioritizing information security enough. For instance, he says, if you call and report a lost health insurance card, most companies will reissue you a card with the same number, whereas a credit card company would issue you a card with a new one. “The insurance industry could do a better job to make sure the credential is state of the art, that it isn’t just a piece of plastic but has information about you or could even in fact be a biometric or even a retina or facial scan,” Ponemon says. He adds that health companies could also adopt the behavioral analysis used by financial companies to determine whether charges or activities fall into an unusual pattern. The health care industry could take one more page from the financial services identity theft prevention playbook: adopt the U.S. Federal Trade Commission’s Red Flags Rule, which requires businesses and organizations to develop and implement procedures to detect suspicious activities or patterns of behavior that suggest identity theft. Some measures are as simple as asking for photo identification.

State Fund hired F.D. De Leon and Associates, Inc. to collect past due debts on behalf of State Fund. The Master Service Agreement (MSA) required F.D. De Leon and Associates, Inc. to deposit payments that it collected into a trust account, and, once a payment “cleared the banking system,” to remit the payment to State Fund on the first week of the following month. The MSA required each remittance to include a statement identifying the policy account upon which payment had been collected, the commission due to F.D. De Leon and Associates, Inc. (calculated pursuant to a prescribed commission fee schedule) and the “amount due to State Fund.”

In July 2010, it was brought to the attention of State Fund’s program manager of credit and collections, Elizabeth Redican, that a former State Fund policyholder by the name of RDF Production Builders had delivered a $275,000 check “to DeLeon [sic]” in October 2007 as payment for outstanding premiums owed to State Fund. Redican then “made repeated attempts over an extended period of time to contact DeLeon [sic] for an explanation.” She “never received any explanation concerning this check from DeLeon. After Redican discovered there was no record of RDF’s payment being received by State Fund, she initiated an internal audit. Redican “determined that many former State Fund policyholders had sent money to DeLeon [sic] for past due premium[s] and that DeLeon [sic] had failed to remit the money collected to State Fund.” Redican claimed that “DeLeon [sic] received at least 34 additional checks from former State Fund policyholders where no money was ever remitted to State Fund.”

State Fund filed a civil complaint in August 2010 against F.D. De Leon and Associates, Inc., alleging causes of action for breach of written contract and fraud by affirmative misrepresentation and concealment of fact. State Fund’s complaint also named Francisco D. De Leon, individually, as an alleged “officer” of F.D. De Leon and Associates, Inc., in both causes of action. As to Francisco D. De Leon, individually, the complaint does not allege any specific misstatement of fact out of his mouth, or concealment of fact by him personally; the complaint broadly alleged “all defendants” defrauded State Fund. The complaint alleged “alter ego theory” as to Francisco D. De Leon.

In January 2013, State Fund filed a motion for summary judgment but did not identify toward which of the three named defendants, i.e., F.D. De Leon and Associates, Inc., FDDA Incorporated, and Francisco D. De Leon, the motion was actually directed. State Fund’s arguments were somewhat vague in referring only to “DeLeon.” State Fund’s separate statement includes facts continued the agency’s vague use of “De Leon” without differentiating among the named corporate defendants and Francisco D. De Leon the individual. No defendant filed opposition to State Fund’s motion, but Francisco De Leon, in his capacity as an individual defendant, filed objections to certain evidence presented in State Fund’s motion. Despite these deficiencies, the trial court granted the motion in the sum of $1.5 million against all defendants. Francisco D. De Leon, in his capacity as an individual defendant appealed, and the Court of Appeal reversed as to him in the unpublished case of State Compensation Ins. Fund v. De Leon.

State Fund’s evidence did not show who, specifically, made any representation or did any act constituting fraud against State Fund. State Fund’s evidence failed to show that Francisco D. De Leon, individually and personally, collected payments, or that he personally was responsible for the non-remittances or that he personally submitted reports which fraudulently understated the amount of payments recovered on behalf of State Fund.