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Congress and FTC Deepen Inquiry into PBM Business Tactics

The current congressional inquiry into pharmacy benefit managers (PBMs) is being led by the House Committee on Oversight and Accountability, chaired by James Comer (R-KY). The inquiry is focused on the role of PBMs in rising health care costs and their impact on patient care.

Comer issued a report in 2021 outlining how pharmacy benefit managers’ (PBMs) practices increase prescription drug prices, impact patient health, hurt competition, and distort the marketplace. The report, entitled “A View from Congress: The Role of Pharmacy Benefit Managers in Pharmaceutical Markets,” details findings from a forum held by Comer examining how PBM tactics contribute to the rising cost of prescription drugs for Americans. The report emphasizes the need for greater transparency to determine the extent of the damage PBM practices are having on patients and the marketplace and calls for further congressional review of legislative solutions to provide meaningful reform.

Key views from his report include:

– – PBMs use their market leverage to increase their profits, not reduce costs for consumers. PBMs control which medications are included on a given health plan’s formulary, or the list of drugs that plan agrees to cover. Drug manufacturers agree to discounts, or pay rebates, in order to get their products placed more favorably on formularies. But the savings from the discounts and rebates do not make their way down to the consumer; they go to the PBMs’ bottom line.
– – Drug manufacturers actually raise their prices due to PBMs. As PBMs demand larger and larger rebates or discounts, manufacturers offset these reductions by raising the “list” prices for their drugs. PBMs encourage this practice because they pocket the higher rebates received from higher priced drugs.
– – PBMs own their own pharmacies, which creates conflicts of interest, hurts competition, and distorts the market. Another key function of PBMs is to establish a network of pharmacies from which plan beneficiaries can get their prescriptions filled. However, the three largest PBMs – CVS Caremark, Express Scripts, and Optum Rx – own their own pharmacies. They also control 80 percent of the market. But they are not the only ones – smaller PBMs own their own pharmacies too.
– – PBMs “steer” patients to the pharmacies they control, making it difficult for independent pharmacies to survive. PBMs also reimburse unaffiliated pharmacies at low rates and charge a number of fees to independent pharmacies. These retroactive fees can be for just participating in the network, or they can be tied to performance metrics, such as pharmacy refill rates, error rates, or audit rates, which the PBM establishes. These retroactive fees add up – sometimes it costs a pharmacy more to fill a prescription than it is reimbursed. For specialty pharmacies, they accrue fees based on irrelevant metrics.
– – Rebates are not the only way PBMs drive up costs. A list price is like the sticker price on a car: few people actually pay that amount. Higher list prices still drive-up costs, even if that’s not the actual cost patients are paying. Insurance premiums and copayments are based on list prices. PBMs engage in a number of questionable practices, one of which is “spread pricing,” in which PBMs pay a pharmacy a lower amount than they report to a health plan sponsor. The PBM pockets the difference. Sometimes they get caught – PBMs have overcharged state Medicaid programs in Ohio, Kentucky, Illinois, and Arkansas more than $415 million once spread pricing schemes were discovered.

More recently, in March 2023, Chairman Comer sent letters to senior officials at the Office of Personnel Management (OPM), Centers for Medicare and Medicaid Services (CMS), and the Defense Health Agency (DHA) requesting documents and communications related to PBMs. The letters stated that the Committee is “examining the extent to which PBMs’ tactics impact healthcare programs administered by the federal government.”

And on May 23, 2023, the Committee held a hearing on the role of PBMs in rising health care costs. The hearing featured testimony from representatives from PBMs, insurers, pharmacies, and patient advocacy groups.

The Committee is continuing its investigation into PBMs. It is unclear when the Committee will release its findings or make recommendations for reform.

In addition to the congressional inquiry, the Federal Trade Commission (FTC) is also investigating pharmacy benefit managers (PBMs). The FTC’s inquiry is focused on whether PBMs are engaging in anti-competitive practices that are driving up the cost of prescription drugs.

The FTC issued compulsory orders to six of the largest PBMs in the United States: CVS Caremark, Express Scripts, OptumRx, Humana, Prime Therapeutics, and MedImpact Healthcare Systems. The compulsory orders require these companies to provide the FTC with information and documents about their business practices, including their contracts with drug manufacturers, pharmacies, and health plans.

And last month issued two additional orders to Zinc Health Services, LLC, and Ascent Health Services, LLC. Zinc and Ascent refer to themselves as group purchasing organizations or GPOs, sometimes also called rebate aggregators, which negotiate rebates with drug manufacturers on behalf of the PBMs and hold the contracts that govern those rebates.

Zinc was founded in 2020 and operates as the GPO for CVS Caremark. Ascent was founded in 2019 and operates as a GPO for Express Scripts, Prime Therapeutics, Envolve Pharmacy Solutions, and Humana Pharmacy Solutions.

The FTC is issuing the orders under Section 6(b) of the FTC Act, which authorizes the Commission to conduct studies without a specific law enforcement purpose. The companies will have 90 days from the date they receive the order to respond.

The FTC’s inquiry is a significant development in the effort to address the high cost of prescription drugs. The FTC has the power to take enforcement action against companies that engage in anti-competitive practices. If the FTC finds that PBMs are engaging in anti-competitive practices, it could take steps to lower the cost of prescription drugs for patients and health plans.

Studies and Surveys Show VA Hospitals Outperform Private Hospitals

Maybe it is now time for private health care facilities to step up their game!

A nationwide Medicare survey released this month found that veterans rated Veterans Affairs hospitals higher than private health care facilities in all 10 categories of patient satisfaction. The VA takes care of about 9 million veterans at 1,255 facilities – the nation’s largest integrated health care system.

This most recent survey, known as HCAHPS (Hospital Consumer Assessment of Healthcare Providers and Systems), showed that the VA beat out private facilities in all the categories surveyed, such as patient satisfaction, hospital cleanliness and communication with nurses and doctors.

As a part of the survey, Medicare awards star ratings from one star to five stars, with “more stars representing better quality care.” Based on patient surveys between July 2021 and June 2022, 72% of VA hospitals received four or five stars for Overall hospital rating compared to 48% of reporting non-VA hospitals.

Additionally, VA hospitals received a higher percentage of four or five star ratings than non-VA hospitals for Communication with doctors (87% vs. 48%), Communication with nurses (59% vs. 35%), Responsiveness of hospital staff (63% vs. 34%), Communication about medicines (80% vs. 38%), Cleanliness of the hospital environment (69% vs. 52%), Quietness of the hospital environment (49% vs. 38%), Discharge information (65% vs. 55%), Care transition (76% vs. 35%), and Willingness to recommend the hospital (76% vs. 52%). The results are drawn from Medicare’s Care Compare website.

“This offers among the first opportunities to directly compare us with our private sector counterparts, and we’re really happy with the results but we won’t be content until 100% of hospitals are pinging in the right ratings,” Dr. Shereef Elnahal, VA undersecretary for health. told NPR. who reported on this new survey.

VA also surveys Veterans in order to understand and improve the Veteran experience with VA. The VA Trust Report for the second quarter of fiscal year 2023 shows that nearly 90% of Veterans who get their care from VA trust VA for their care (based on 560,000 surveys). Additionally, more than 79% of Veterans trust VA overall, reflecting a 1.9% increase from the last quarter and a 24% increase since 2016.

And, despite many widely publicized scandals, VA health care has been consistently rated as competitive with private care in dozens of peer-reviewed articles.

The Journal of General Internal Medicine and the Journal of the American College of Surgeons published articles based on a systematic review of studies about VA health care, concluding VA health care is consistently as good as – or better than – non-VA health care.

The findings come from a national review of peer-reviewed studies that evaluated VA on quality, safety, access, patient experience, and comparative cost/efficiency. Of the 26 studies that looked at non-surgical care, 15 reported VA care was better than non-VA care and seven reported equal or mixed clinical quality outcomes. Of the 13 studies that looked at quality and safety in surgical care, 11 reported VA surgical care is comparable or better than non-VA care.

This year’s systematic review included studies published between 2015 and 2021. This is the third systematic review of studies comparing VA care to non-VA care, the most recent of which was published in 2017. Each of these systematic reviews has come to the same overarching conclusion: on average, VA care is better than or comparable to non-VA care in the domains of clinical quality and safety.

June 5, 2023 – News Podcast


Rene Thomas Folse, JD, Ph.D. is the host for this edition which reports on the following news stories: AI Used to Discover New Antibiotic for Deadly Superbug. U.S. Supreme Court Deals Another Blow to Labor Unions. 9th Circuit Limits Application of LC 2810.3 Protections For Farm Workers. Trilogy of WCAB Decisions Find Valley Fever Presumptively AOE-COE. Invidior Resolves Suboxone Pricing Scheme For $102.5 Million. DHS Ends Form I-9 Requirement Flexibility on July 31, 2023. 4th Largest Drug Distributor Suspended From Controlled Substance Sales. CPT Codes Silent About Amazing Advancements in MRI Equipment.

9th Circuit Finds Co-Worker Sexist/Racist Music-Blasting Actionable

Stephanie Sharp and seven other plaintiffs in this action are former employees of apparel manufacturer S&S Activewear. Seven are women and one is a man.

Sharp alleges that S&S permitted its managers and employees to routinely play “sexually graphic, violently misogynistic” music throughout its 700,000-square-foot warehouse in Reno, Nevada. According to Sharp, the songs’ content denigrated women and used offensive terms “very offensive” lyrics that “glorifie[d] prostitution” extreme violence against women.

Blasted from commercial-strength speakers placed throughout the warehouse, the music overpowered operational background noise and was nearly impossible to escape. Sometimes employees placed the speakers on forklifts and drove around the warehouse, making it more difficult to predict – let alone evade – the music’s reach.

In turn, the music allegedly served as a catalyst for abusive conduct by male employees, who frequently pantomimed sexually graphic gestures, yelled obscenities, made sexually explicit remarks, and openly shared pornographic videos. Although the music was particularly demeaning toward women, who comprised roughly half of the warehouse’s workforce, some male employees also took offense.

Despite “almost daily” complaints, S&S management defended the music as motivational and stood by its playing for nearly two years, until litigation was filed.

Sharp eventually filed suit, alleging that the music and related conduct created a hostile work environment in violation of Title VII. The district court granted S&S’s motion to dismiss and denied leave to amend the music claim, reasoning that the music’s offensiveness to both men and women and audibility throughout the warehouse nullified any discriminatory potential. The court countenanced S&S’s argument that the fact that “both men and women were offended by the work environment” doomed Sharp’s Title VII claim.

The 9th Circuit (with presides over California and other western states) reversed in the published case Sharp et al. v. S&S Activewear, L.L.C., – No. 21-17138 (Jun. 7, 2023).

The trial court held that Sharp failed to state an actionable Title VII claim because there was no allegation “that any employee or group of employees were targeted, or that one individual or group was subjected to treatment that another group was not.” Because the music offended men and women alike, the district court reasoned, it could not be the basis of a sexual harassment claim.

However, the 9th Circuit noted that the offensive conduct must be “sufficiently severe or pervasive to alter the conditions of employment.” Christian v. Umpqua Bank, 984 F.3d 801, 809 (9th Cir. 2020). Notably, individual targeting is not required to establish a Title VII violation. See Reynaga v. Roseburg Forest Prods., 847 F.3d 678, 687 (9th Cir. 2017). “It is enough,” it has held, “if such hostile conduct pollutes the victim’s workplace, making it more difficult for her to do her job, to take pride in her work, and to desire to stay on in her position.” Steiner v. Showboat Operating Co., 25 F.3d 1459, 1463 (9th Cir. 1994).

And context matters. “Workplace conduct is to be viewed cumulatively and contextually, rather than in isolation.” This approach makes common sense in order to screen out one-off, isolated events and yet benchmark conduct in the context of a specific workplace. Objectionable conduct is not “automatically discrimination because of sex merely because the words used have sexual content or connotations.”

Applying these core principles, we conclude that the district court erred in rejecting Sharp’s hostile work environment claim as incurable and legally deficient. More than offhand foul comments, the music at S&S allegedly infused the workplace with sexually demeaning and violent language, which may support a Title VII claim even if it offended men as well as women.”

“Although we have not before addressed the specific issue of music-as-harassment, this court and our sister circuits have recognized Title VII redress for other auditory offenses in the workplace and for derogatory conduct to which all employees are exposed. The EEOC, which filed an amicus curiae brief on behalf of Sharp, endorses this position. Emphasizing this appeal’s impact on the future ‘ability of the EEOC and private parties to enforce Title VII,’ the agency agrees that ‘exposing employees to misogynistic and sexually graphic music can be discrimination because of sex, even where the employer exposes both women and men to the material and even though both women and men find the material offensive.’ ”

U.S. Opioid Settlements Now total Over $50 Billion

More than $50 billion in settlement funds is being delivered to thousands of state and local governments from companies accused of flooding their communities with opioid painkillers that have left millions addicted or dead. The settlement money comes from a number of legal battles around the nation and the world.

Christine Minhee, attorney by training and founder of OpioidSettlementTracker.com, has compiled data on the settlements tracking the amount of money allocated and where states have decided to spend it. According to her data, which is used by state governments and the Centers for Disease Control and Prevention, the total pot of funds available from the settlements has reached around $54 billion dollars, with nearly half of the money coming from a $26 billion dollar 2022 settlement with drug manufacturers and distributors, and more funds expected from ongoing legal battles.

However, her website says that “of this sum, about 75% – a whopping $39.8 billion – remains unattached to explicit requirements to publicly report opioid remediation expenditures. Thus they have created a state-by-state “Opiod Settlement Transparency Map” to help answer the question “Will opioid settlements be spent in ways that bolster the public health response to drug addiction?

The California Attorney General confirms that Opioid manufacturers Allergan and Teva have committed to move forward with settlements for up to $2.37 billion and $4.25 billion, respectively, to resolve allegations that, among other things, the companies deceptively marketed opioids by downplaying the risks of addiction and overstating their benefits.

If the settlements are approved by the court, California may receive up to approximately $375 million from the Teva settlement and up to approximately $205 million from the Allergan settlement. The settlements with the opioid manufacturers also include strong injunctive relief that prohibits opioid-related marketing by Teva while Allergan is prohibited from selling opioids for the next 10 years.

Chain pharmacies CVS and Walgreens also committed to moving forward with national settlements worth up to $5 billion and $5.7 billion, respectively, to resolve claims that the companies ignored signs of prescription abuse and failed to prevent drug diversion.

If approved by the court, California may receive up to approximately $470 million from the CVS settlement and up to $510 million from the Walgreens settlement. CVS and Walgreens have also agreed to injunctive relief that requires the pharmacies to monitor, report, and share data about suspicious activity related to opioid prescriptions. A final agreement with Walmart, worth up to $3.1 billion, is not being announced today; however, that settlement is expected to move forward in the coming weeks.

In addition to these new announcement, in March of 2022, the California Attorney General announced a $6 billion conditional settlement with Purdue Pharma and the Sackler family over their alleged deceptive and illegal marketing and sales practices, in an agreement that would also allow the family’s name to be removed from buildings, scholarships, and fellowships.

In February 2022, a bankruptcy court confirmed a plan that would allow an agreement between certain states, including California, and Mallinckrodt, the largest generic opioid manufacturer in the United States, to move forward. That settlement includes an expected $1.6 billion payment by the company to a trust that would benefit public and private opioid-related claimants.

In July 2021, the California Attorney General announced a $26 billion settlement, which was finalized in Spring 2022, with Johnson & Johnson, which manufactured and marketed opioids, and Cardinal Health, McKesson, and AmerisourceBergen, the nation’s three major pharmaceutical distributors. It was the second largest multistate agreement in U.S. history, and its terms bar Johnson & Johnson from being involved in selling or promoting opioids for a decade and require the distributors to monitor, report, and share data about suspicious activity related to opioid sales.

In February of 2021, the California Attorney General announced a $573 million settlement with one of the world’s largest consulting firms, McKinsey & Company. The settlement resolves California’s investigation into the company’s role in advising opioid companies (including OxyContin maker Purdue Pharma) in the promotion and sale of their drugs.

New Book Says EDD Failures Emblematic of Antiquated Governmental Tech

A former federal technology official enlisted by Gov. Gavin Newsom to triage California’s pandemic unemployment response, explains in her new book, how technical and political failures are costly to citizens at all levels of government.

According to a report by CalMatters, Jennifer Pahlka, founder of Code For America and former U.S. deputy chief technology officer, writes in her new book, that the turmoil at California’s Employment Development Department is a prime example of failures that have also plagued other major civic tech efforts, such as the post-Obamacare implosion of healthcare.gov or archaic IT systems at the U.S. Department of Veteran Affairs.

Pahlka founded Code for America, a San Francisco-based non-profit organization that aims to make government for all people. According to the Washington Post itis the technology world’s equivalent of the Peace Corps or Teach for America” [offering] an alternative to the old, broken path of government IT.” In her 2012 TED Talk, Pahlka noted that we will not be able to reinvent government unless we also reinvent citizenship, and asked “Are we just going to be a crowd of voices, or are we going to be a crowd of hands?

In her TED Talk she said “We had a team that worked on a project in Boston last year that took three people about two and a half months. It was a way that parents could figure out which were the right public schools for their kids. We were told afterward that if that had gone through normal channels, it would have taken at least two years and it would have cost about two million dollars. And that’s nothing. There is one project in the California court system right now that so far cost taxpayers two billion dollars, and it doesn’t work. And there are projects like this at every level of government.”

Of all the tech disasters I’ve witnessed and tried to help untangle, the one I’ve come to see as most emblematic of these forces – and the ways we consistently misunderstand them – is the story of California’s unemployment insurance in the first year of the pandemic,’ Pahlka writes in the book “Recoding America: Why Government is Failing In the Digital Age and How We Can Do Better.

Three chapters of the book chronicle Pahlka’s time co-leading a “Strike Team” deployed by Newsom in mid-2020, as long benefit delays and outlandish stories of fraud began to dominate headlines. In the months to follow, state officials would find that payments were delayed to some 5 million workers and may have been improperly denied for another 1 million, all while the state lost as much as $32 billion to fraud, according to varied state and industry estimates.

Among the problems and potential solutions detailed in the new book: Why it was easier for scammers to file successful unemployment applications than it was for some workers, how a $100 million-plus tech modernization project by state contractor Deloitte buckled during the pandemic, and why the furor about outdated online systems has more to do with flawed state and federal policy than old software.

Modernizing technology without rationalizing and simplifying the policy and process it must support seldom works,” Pahlka wrote. “Mostly, it results in much the same mess you had before, only now in the cloud.”

An EDD spokesperson declined to comment.

The new details come amid a national reckoning over pandemic unemployment failures, including millions in federal funding recently made available for new tech modernization efforts. More than 150,000 workers in the state are still facing long appeals backlogs as they fight for delayed or denied unemployment benefits.

Meanwhile, congressional factions have also dragged jobless benefits back into bitter political fights. Last week, questions about responsibility for EDD woes resurfaced during a contentious U.S. House committee hearing led by Republican lawmakers opposed to President Biden’s nomination of ex-California labor chief Julie Su to be the U.S. Labor Secretary.

What exactly derailed the EDD’s computer system – or “grab bag of somewhat connected, somewhat separate systems,” as Pahlka wrote in the new book – is far more complicated than popular notions that “EDD staff was just incompetent at technology.” Even understanding the agency’s layers of antiquated technology, which she likens to an archeological dig, doesn’t get to the heart of the issue.

Rather, Pahlka explains, the dysfunction stems from the policy environment at the EDD and the bodies that oversee it. The California Legislature, federal labor regulators and flawed oversight mechanisms have all contributed, she wrote, to ever-growing and often-incompatible regulations, plus a political system that rewards compliance over public access.

“The bureaucratic confusion,” Pahlka wrote, “ultimately lands on the people.”

Some of the problems cited by Pahlka and state watchdogs have since been addressed, at least in part. The federal Pandemic Unemployment Program that was the biggest target for fraud has since ended. The EDD also went on a tech buying spree during the pandemic for services including call center support from longtime contractor Deloitte and an online identity verification system recommended by Pahlka’s Strike Team (which, in turn, spurred different complaints about long waits for some workers). The agency is now working on another nascent tech modernization project called EDDNext.

Still, Pahlka warns, the biggest underlying issues remain harder to address.

What we need has less to do with updating rigid 1950s code than with updating rigid 1950s thinking,” Pahlka wrote. “We need a fundamentally different way of delivering on the promise of policy.”

O.C. Doctor to Serve 12½ Years for Illegal Opioid Prescribing

An Orange County physician was sentenced to 151 months in federal prison for illegally distributing opioids and other powerful narcotics by writing prescriptions for “patients” without a legitimate medical purpose.

Dr. Dzung Ahn Pham, 61, of Tustin, was sentenced by United States District Judge Josephine L. Staton, who also fined him $35,000, and ordered him immediately remanded into federal custody.

Pham pleaded guilty in October 2022 to one count of conspiracy to distribute controlled substances.

Pham owned Irvine Village Urgent Care and conspired with licensed pharmacist Jennifer Thaoyen Nguyen, 52, of Irvine, who operated the Irvine-based Bristol Pharmacy, to illegally distribute narcotics, including opioids. Pham knowingly prescribed oxycodone, hydrocodone, amphetamine salts, and other controlled substances to people while acting outside the usual course of professional practice and without a legitimate medical purpose, including to people he knew were drug addicts.

Because Pham knew that many pharmacies would not fill his prescriptions, he would direct his “patients” to Nguyen, who would fill them. Pham and Nguyen also took steps to attempt to conceal their criminal conspiracy by agreeing to have Pham write prescriptions for non-controlled substances to avoid red flags to the DEA and Nguyen’s wholesaler based on the amount of controlled substances Pham was prescribing and Nguyen was dispensing.  

In November 2017, Pham wrote prescriptions to a patient, identified in court documents as “S.C.” and whom Pham knew was a drug addict, for more than 700 pills of 30mg oxycodone. To provide more narcotics to S.C., in August 2018, Pham wrote prescriptions for 75 pills of 30mg oxycodone in the name of a person labeled in court documents as “R.C.,” who was S.C.’s wife and who had never seen Pham for any medical appointment. R.C. was unaware that Pham issued the prescription in her name for S.C.

As part of the conspiracy, Pham admitted from January 2013 to December 2018, he wrote prescriptions to 18 different “patients” for a total of approximately 53,693 pills of oxycodone, approximately 68,795 pills of hydrocodone, and approximately 29,286 pills of amphetamine salts.

According to court documents, Pham abused his trust and authority as a physician to fuel the addiction of drug users in exchange for financial gain.  Pham generated large amounts of cash from the operation of Irvine Village Urgent Care by charging between $100 and $150 per office visit, including many times collecting office visit fees in which Pham wrote prescriptions for the “patients” even though they did not even have an office visit.

“[Pham], a licensed physician trusted by society and the patients that went to him, stopped treating patients and, plain and simple, became a drug dealer,” prosecutors argued in a sentencing memorandum “He turned ‘patients’ into addicts and/or fueled the addictions of drug abusers.”

Nguyen pleaded guilty in October 2022 to one count of conspiracy to distribute controlled substances. On March 17, Judge Staton sentenced Nguyen to 33 months in federal prison and fined her $10,000.

Courts Imposing Limits and Sanctions on Lawyers Use of AI In Litigation

ChatGPT is a chatbot developed by OpenAI. It is designed to be a conversational AI, and it has been praised for its ability to generate human-quality text. Microsoft and OpenAI have a long-term partnership that began in 2019. Microsoft invested $1 billion in OpenAI and became its exclusive cloud provider. This partnership has allowed Microsoft to integrate ChatGPT into its products and services, such as its Bing search engine. Google Bard is a conversational AI chatbot developed by Google AI. These three (of many) examples are based upon what is known as Generative AI.

Generative AI is a type of artificial intelligence that can create new content, such as images, text, and music. It does this by learning from existing data and then using that knowledge to generate new outputs. Unfortunately, the technology is capable of what the industry refers to as “hallucinations.” An AI hallucination refers to the phenomenon where an artificial intelligence system generates responses that are not based on real-world data.  Researchers and developers are actively working to mitigate and minimize hallucinations in AI systems, as they can hinder the reliability and trustworthiness of the technology.

Generative AI can be used to write movie scripts, create music, or write documents.  This is not without controversy and criticism. For example, the use of AI by college students to write essays has been a controversial topic in recent years. Some people believe that AI is a valuable tool that can help students to improve their writing skills, while others believe that it is a form of academic dishonesty and plagiarism. And now the controversial use of Generative AI has worked its way into courtrooms.

Steven Schwartz, who has worked for Manhattan law firm Levidow, Levidow & Obermam for three decades, apologized repeatedly during his emotional reading of a formal statement before Senior U.S. District Judge P. Kevin Castel who is overseeing potential sanctions.

Schwartz’s court filings included fake case citations generated by ChatGPT. According to the report by Courthouse News, he apologized for getting duped by the artificial intelligence tool. “It just never occurred to me that it would be making up cases,” Schwartz testified, explaining that he was unable at the time suspend disbelief that ChatGPT could generated totally fabricated responses to his research inquiries.

“I deeply regret my actions,” Schwartz said in court. “I have suffered both professionally and personally due to the widespread publicity. I am both embarrassed and humiliated and extremely remorseful. To say that this has been a humbling experience would be an understatement.”

The lawyer’s attorneys, Ronald Minkoff and Tyler Maulsby from Frankfurt Kurnit Klein & Selz, each argued that Schwartz made a careless mistake and should have noticed the red flags along the way but shouldn’t be accused of acting in bad faith. “There has to be actual knowledge that Mr. Schwartz knew he was providing bad cases … or that ChatGPT would be providing bad cases,” Maulsby said.

U.S. District Judge Castel did not immediately rule on punishment. See Mata v. Avianca, Inc., No. 22-cv-1461 (Doc. 31) (S.D.N.Y. May 4, 2023) (issuing rule to show cause where “[a] submission filed by plaintiff’s counsel in opposition to a motion to dismiss is replete with citations to nonexistent cases.”).

In the wake of publicity about Schwartz’s case, a Texas judge issued an order banning the use of generative artificial intelligence to write court filings without additional fact-checking conducted by an actual person.

According to the order given by Judge Brantley Starr who sites on U.S. District Court for the Northern District of Texas:These platforms in their current states are prone to hallucinations and bias. On hallucinations, they make stuff up – even quotes and citations. Another issue is reliability or bias. While attorneys swear an oath to set aside their personal prejudices, biases, and beliefs to faithfully uphold the law and represent their clients, generative artificial intelligence is the product of programming devised by humans who did not have to swear such an oath. As such, these systems hold no allegiance to any client, the rule of law, or the laws and Constitution of the United States (or, as addressed above, the truth).”

The new requirement comes after a lawyer representing a man suing an airline used ChatGPT to prepare a legal brief, which was discovered to be laden with errors, including made-up court cases.

We’re at least putting lawyers on notice, who might not otherwise be on notice, that they can’t just trust those databases,” Starr told Reuters. “They’ve got to actually verify it themselves through a traditional database.”

As another example, Magistrate Judge Gabriel A. Fuentes in Illinois similarly implemented a standing order that requires parties using generative AI tools in document preparation to disclose such usage in their filings.The disclosure should include specific details about the AI tool employed and the manner in which it was utilized. The judge further stated that reliance on an AI tool may not constitute reasonable inquiry under Federal Rule of Civil Procedure 11.

WCIRB Publishes Update on COVID-19 Claims and Long COVID

The Workers’ Compensation Insurance Rating Bureau of California (WCIRB) has released an updated COVID-19 report, Medical Treatments and Costs of COVID-19 Claims and “Long COVID” in the California Workers’ Compensation System – 2023 Update.

Since March 2020, over 300,000 COVID-19 workers’ compensation claims have been filed in California.The number and average cost of COVID-19 claims declined in 2021 and 2022 compared to the early months of the pandemic, partly due to higher population immunity driven by vaccinations and prior infections.  Still, many claims continued to be filed, particularly from healthcare workers on the frontline of COVID-19 patient care and others who had to work outside the home and face higher exposure to COVID-19 infection.

In March 2022, the WCIRB published a study on the patterns of medical treatment and costs of COVID-19 claims based on claim experience mostly during the pre-vaccine period. The study showed that COVID-19 claims that involved medical treatments, particularly hospitalizations, incurred significant medical costs.

The study also provided an early assessment of the prevalence of “long COVID” (post-acute sequelae of SARS-CoV-2 infection, PASC), a constellation of persistent symptoms that can emerge or linger in various body systems long after the initial infection, in the workers’ compensation system.

The study estimated that approximately 11% of COVID-19 claims with an initial mild infection received medical treatment for long COVID symptoms over a 4-month post-acute care period. The rate of long COVID spiked to about 40% for those hospitalized for the initial infection.

Since then, additional experience of COVID-19 claims has become available, providing additional insights into the impacts of long COVID on permanent disability.

The WCIRB has updated the analysis of medical treatments and costs of COVID-19 claims in the California workers’ compensation system based on almost 10,000 insured COVID-19 claims with medical payments and a reported accident date between April 2020 and December 2021. This recent study update focuses on a comparison of claims filed in 2020 to those filed in 2021 when vaccines became more widely available to California workers.

The 2023 update analyzes the prevalence of long COVID over a 12-month post-acute care period and the characteristics of workers experiencing long COVID.

The update also estimates the long COVID prevalence of workers being treated in the California group health insurance system to validate the estimates in the workers’ compensation system and includes an additional analysis of how comorbidities affect long COVID among patients with group health insurance.

Highlights of the report include:

– – COVID-19 claims for accident years 2020 and 2021 share a similar mix of mild, hospital and death claims.
– – Over a 12-month post-acute care period, approximately 13 percent of COVID-19 claims with medical payments received treatments for long COVID symptoms in the workers’ compensation system.
– – The risks of long COVID are higher among female workers, workers over age 50 as well as those with comorbidities.
– – Claims involving treatments for long COVID symptoms are four times more likely to receive permanent disability benefits compared to other COVID-19 claims without treatments for long COVID symptoms.

The full report is available in the Research section of the WCIRB website.

5th Try for Five Guys Restaurants $1.2M Wage/Hour Settlement Approval

Five Guys Enterprises, LLC is an American fast food chain focused on hamburgers, hot dogs, and french fries. It is headquartered in Lorton, Virginia. Five Guys has over 1,600 locations in the United States, Canada, Europe, and Asia. The company is privately owned and operated by the Murrell family. The state with the most number of Five Guys locations in the US is California, with 128 restaurants, which is about 9% of all Five Guys restaurants in the US.

In December 2018, a class action lawsuit was filed by lead plaintiff Jeremy R, Lusk in the United States Federal District Court in Fresno California against Five Guys Enterprises alleging that the company violated California labor laws by denying its workers breaks and overtime pay. The lawsuit was filed on behalf of 2,206 non-exempt workers at the gourmet burger chain. Lusk worked as an hourly, non-exempt, manager-in-training at a Five Guys establishment in California from August to November 2016.

Lusk alleged that while working as an hourly, non-exempt employee, he and class members were not always permitted to take 30-minute meal breaks and 10-minute rest breaks for each 4-hour work period as it would be too busy to do so. And that he and class members were required to perform work off- the-clock as they would have to clock out but continue to perform work, such as counting out the cash register, which may take up to twenty minutes.

Lusk also alleged that he and class members were required to utilize their own personal vehicles to perform their job duties, such as travelling to and from other restaurants owned by Defendants to pick up food and supplies and Five Guys did not reimburse them for utilizing their own personal vehicles to do so.

This conduct was the basis of his claims under Labor Code §§ 203 and 226 and the Unfair Competition Law for failure to pay for all time worked, failure to provide legally compliant meal and rest breaks, failure to reimburse, and failure to provide meal and rest periods.

Plaintiff finally alleged that Defendants obtained his and class members’ employment applicants’authorization to procure background check reports through the use of a disclosure form that did not comply with the Fair Credit Reporting Act (FCRA),the California Consumer Credit Reporting Agencies Act ( CCRAA) or Investigating Consumer Reporting Agency Act (ICRAA) requirements. However verified discovery responses later established the Defendants had not actually run any background checks on any employees or applicants, including Plaintiff.

In October 2019, Five Guys and the plaintiffs agreed to a $1.2 million settlement. However, the settlement was rejected by a California federal judge on December 23, 2019, the Court without a hearing and identified several issues that needed to be addressed.

On May 18, 2020, Plaintiff filed a First Amended Motion for Preliminary Approval, which addressed the issues raised by the Court. However, on October 19, 2020, the Court again denied Plaintiff’s motion and found more issues that needed to be addressed.

On February 26, 2021, Plaintiff filed a Supplemental/Second Amended Motion for Preliminary Approval. On June 1, 2021, the Court denied Plaintiff’s motion.

On September 25, 2021,Plaintiff filed a Third Amended Motion for Preliminary Approval. On January 24, 2022, the Court denied Plaintiff’s motion.

On July 25, 2022, Plaintiff filed a Fourth Amended Motion for Preliminary Approval. On October 3, 2022, the Court approved Plaintiff’s amended motion without a hearing in its Order on Plaintiff’s Fourth Amended Motion for Preliminary Approval. The Court set the Final Approval Hearing for March 27, 2023, which was later continued to another date..

In a brief filed April 13, 2023, the Five Guys employees urged U.S. District Judge Jennifer Thurston to green light the settlement — seven months after they received preliminary approval of the deal.

This proposal is the fifth due to the judge’s questions on the four previous occasions. With the new agreement of $1.2 million, each claimant could receive up to $900, dependent on the final plaintiffs’ legal fees.

The Five Guys employment law class action is one of several recent lawsuits alleging that the company violated labor laws. In 2022, a former employee filed a lawsuit alleging that Five Guys violated the Illinois Biometric Information Privacy Act (BIPA) by requiring employees to scan their fingerprints to clock in and out of work. In addition, Five Guys has been hit with a negligence class action lawsuit alleging that the company failed to properly secure the private information of individuals who applied for employment with the company.