HealthLawProf Blog

Editor: Katharine Van Tassel
Concordia University School of Law

Friday, July 8, 2005

Eighth Circuit Agrees: Federal Partial-Birth Abortion Act is Unconstitutional

The federal partial-birth abortion ban (Pub. L. No. 108-105), which was passed in 2003, has been held unconstitutional by three district courts (in Nebraska, San Francisco, and New York).  The Nebraska decision was affirmed today by the United States Court of Appeals for the 8th Circuit (Carhart v. Gonzales).  It agreed that Congress' failure to provide an exception to the prohibition to protect the health of the mother doomed the law in light of the Supreme Court's decision in Stenberg v. Carhart. which struck down Nebraska's partial-birth abortion ban primarily for the same failure. The Fourth Circuit similarly held against a very similar Virginia partial-birth abortion ban last month. [tm]

July 8, 2005 | Permalink | TrackBack (0)

SEC Going After Scrushy

The SEC civil suit against disgraced former CEO Scrushy had been stayed pending the jury verdict in the criminal case.  As you know, he was found not guilty on all counts just recently.  The federal court in Alabama gave the SEC an order to show cause as to why their civil suit should not be dismissed, and the SEC responded yesterday.  (The following is from the SEC response, cut and pasted from PACER.)

The Securities and Exchange Commission ("Commission" or "SEC") hereby respectfully responds to the Order of June 28, 2005, requiring the parties to show cause why this matter should not be dismissed.

The June 28 Order does not identify the issues of concern to the Court, other than noting the Scrushy acquittal. The Commission shows below that the acquittal has no collateral estoppel effect in this civil matter and that the denial of preliminary relief in 2003 does not justify dismissal on the merits. In short, there is no legal or factual basis for dismissal of the Commission's claims.Nature Of This Action

By statute, the Securities and Exchange Commission has primary responsibility for civil enforcement of the federal securities laws. Effective civil prosecution of financial fraud is essential to ensuring the integrity of America's public corporations.

The reliability of corporate records, reports, and public statements is critical to maintaining investor confidence in the capital markets. Thus, vigorous civil enforcement of the securities laws protects the American financial system.

The Commission carries out its Congressional mandate by, among other things, filing civil enforcement actions against individuals who have violated the federal securities laws. In this action against Richard M. Scrushy ("Scrushy") and HealthSouth Corporation ("HealthSouth"), the Commission alleges that from at least 1999 through mid-2002, Scrushy orchestrated a massive accounting fraud at HealthSouth and engaged in insider trading, aided and abetted HealthSouth's reporting and record-keeping violations, and circumvented HealthSouth's internal accounting systems.  The Commission alleges that Scrushy violated the anti-fraud prohibitions in Section 17(a) of the Securities Act of 1933 and Section 10(b) of the Securities Exchange Act of 1934, as well as numerous reporting, record-keeping, and internal control requirements. The Commission asks that the Court enjoin Scrushy from future securities violations, order him to disgorge his ill-gotten gains, impose civil penalties, and bar Scrushy from acting as an officer or director of any publicly-traded company.

Shortly after this action was filed in March 2003, the SEC requested that the Court freeze Scrushy's assets during the pendency of the litigation. At the asset freeze hearing, many of the witnesses (including Scrushy) asserted the Fifth Amendment privilege against self-incrimination and refused to testify. On May 7, 2003, the Court denied the SEC's petition for emergency relief, finding that the limited record failed to justify an asset freeze.  The Court also stayed this case until resolution of criminal charges against Scrushy, noting that "both the SEC and defendant Scrushy would benefit from a stay of this case until all those who pled guilty have been sentenced, so that testimony may be obtained from them . . . rather than repeated insistence . . . on their Fifth Amendment rights."

Current Status

Although Scrushy's criminal trial has gone to verdict, there has been little activity in the SEC's civil case since the stay was entered in May 2003. The only noteworthy development during this period was the entry of final judgment against HealthSouth in June 2005. Pursuant to that judgment, HealthSouth is enjoined from future securities violations and will pay $100 million in civil penalties. Final Judgment As To Defendant HealthSouth Corporation (June 22, 2005).

Before this matter was stayed, the parties conducted limited discovery directed exclusively to the asset freeze issues. There has been no discovery in this case regarding the substantive allegations of the Complaint. Indeed, Scrushy has not yet filed an Answer to the Complaint. Thus, this litigation is at a very early stage.


Neither Scrushy's acquittal nor the Court's 2003 denial of emergency relief provides a basis for dismissal of this civil action. Wherefore, the Commission requests that the Court find that there is no basis for dismissal.

I hope they get this clown - they are seeking some $785 million according to the Boston Globe.

The Atlanta Journal Constitution had an article about his ego - I mean his "philanthropy".

And there is also an article in The Birmingham News about the shareholder suit against Scrushy.  Not surprisingly, the shareholders don't think he should get to keep his bonuses!  [jt]

July 8, 2005 | Permalink | TrackBack (0)

US News Rankings ...

... for HOSPITALS has been released.  I wonder if this list causes as much angst in the hospital industry as the law school rankings do in academia. [jt]

July 8, 2005 | Permalink | TrackBack (2)

Tuesday, July 5, 2005

The NFP Hospital Debate Rages On

The tax exempt status of non-profit hospitals is under fire.  At the heart of the issue seems to be the lack of a consistent and accepted means of determining "community benefit" which generally represents the justification for this special status.  Is it fair and equitable to the for-profit systems?  Is it actually just an accounting nightmare?  In my opinion, the argument is a delightful mix of tax law, corporate law and health law, with some critical public policy issues thrown in to make it important and newsworthy. 

There have been quite a few articles recently on the subject; this article appeared in the Orlando Business Journal this week.

On a side note, I am a 3L and am planning on making this an independent study project for fall semester (working under Professor Betsy Malloy) and would welcome any advice or direction for my study.  Please feel free to email your thoughts regarding non-profit hospitals and their tax exempt status, and the meaning and definition of community benefit, to   Thanks!  [jt]

July 5, 2005 | Permalink | TrackBack (0)

States Resist Medicare Funding Provision

The New York Times reported this weekend on the developing issue of state funding for a federal project: Medicare's prescription drug plan.  Controversial in and of itself, Medicare Part D requires contributions by the states, creating potential financial issues for some states.

An excerpt from the NY Times article of July 3:

WASHINGTON, July 3 - States are openly resisting a provision of the Medicare law that requires them to pay billions of dollars a year to the federal government to help finance the cost of the new Medicare drug benefit.

Texas is leading the charge against the requirement, which states see as more onerous than the mandates imposed on them by the 2002 education law, the No Child Left Behind Act.

Gov. Rick Perry, a Republican, has vetoed a $444 million appropriation covering the Texas contribution for the next two years.

In his veto message and in a letter to other governors, Mr. Perry said he objected to the federal requirement in principle and to the way it was being interpreted by the federal Medicare agency.

"For the first time," Mr. Perry said, "state governments would be expected to directly finance federal Medicare benefits with state tax dollars. In effect, states will be billed on a monthly basis for the cost of federal services."

Bush administration officials say the federal Medicare law clearly requires states to make the payments, starting in January. One purpose of the 2003 Medicare law was to relieve states of prescription drug costs for low-income elderly people. But as states do the arithmetic, many have concluded that they will lose money because they must give back most of the savings and will incur new administrative costs.

And a link to the entire article. (free registration required)

Interestingly, the two states discussed the most in the article are the home states of the esteemed editors of this Blog, Texas and Ohio. [jt]

July 5, 2005 | Permalink | TrackBack (0)

Monday, July 4, 2005

Internal Logic, Operation of an Ethics Committee

The July 4th N.Y. Times had a good piece on the hospital ethics committee at New York's Montefiore Medical Center in the Bronx.  Although the committee's activities were described in a semi-breathless, gee-whiz style, Montefiore's approach seems mostly consistent with the five committees on which I currently serve (2 as co-chair).  Among the observations offered up by the author:

  • Montefiore's program uses the tools of mediation, common in business and divorce but relatively new to medicine. At the bedside, grown children and their parents can regress to childhood battles. Hope can overcome scientific probability. In such situations, says Nancy Neveloff Dubler, the director of bioethics at Montefiore and the founder of the program, "Getting to a common place is 95 percent cutting through conflict and 5 percent applying the rules of bioethics." The important thing, she said, is to avoid the disputes that can arise from poor communication between members of the medical team and family members, and to defuse tense situations with straight talk and empathy.
  • A living will does not cover everything.

The Montefiore style seems to exclude family decision makers at critical junctures and to be, to that extent, paternalistic, but it's hard to tell if that's an accurate impression or just the way the story was written.  [tm]

July 4, 2005 | Permalink | TrackBack (0)

Happy Independence Day

I hope everyone has a great 4th of July holiday!  Mine started as it always does, listening to the voices of NPR personalities as they read the Declaration of Independence in its entirety during Monday's broadcast of "Morning Edition."  If you missed it, you can go to the ME website and listen after the fact.  It's a stirring 9 minutes well spent.  And for a little fireworks show of your own, click here. [tm]

July 4, 2005 | Permalink | TrackBack (0)

Sunday, July 3, 2005

Frist and Stem Cells

The Washington Post's Ceci Connolly has a good piece in today's paper, in which she discusses the perception of many that Dr. Bill Frist (R. Tenn.), the Senate majority leader, is trimming his health-care sails to suit the political winds blowing him toward a run for the Presidential nomination in 2008.  Noting his strong support for federal funding for stem-cell research in July 2001, one month before the President announced his much weaker program, Connolly's article states that Frist continues to disappoint stem-cell researchers and long-time supporters of the Senator who expected more independence and leadership from their man.

Connolly says the issue may be back before the Senate in a hurry:

As Congress begins its Fourth of July recess, activists on both sides of the stem cell divide are gearing up for what appears to be a fresh fight in the Senate, perhaps as early as the week lawmakers return.

On one side are scientists and patient groups who say the cells taken from days-old embryos hold enormous potential for treating a range of illnesses because they can grow into any type of cell or tissue in the body. Opponents object to the research because the process involves destroying the embryo. . . .

In May, with 50 Republican votes, the House passed legislation [HR 810] that would permit federal research on tens of thousands of frozen embryos donated by couples at fertility clinics. Bush has threatened to veto the bill, placing additional pressure on Frist to stand by a policy that falls far short of the approach he envisioned four years ago.

This will be worth watching. [tm]

July 3, 2005 | Permalink | TrackBack (0)

Gates Foundation Grants $437 Million To Fund Innovative Health Research Projects

The William and Melinda Gates Foundation will fund 43 innovative and radical health research projects totaling $437 million.  The New York Times reports that the chosen projects were winners of a competition to find new ways to attack the greatest health challenges facing people in poor countries.  Each project will receive five year grants of up to $20 million each.  Dr. Richard Klausner, director of the Gates Foundation's global health program, says that each project is "very visionary and very, very high risk... But if any of them are successful, it will be well worth the investment."  To focus the projects direction, the Gates foundation proposed fourteen goals which include vaccines that need no refrigeration and can be given without needles, vaccines that create immunity with one dose, new ways to kill or cripple mosquitoes, more nutritious staple crops, blood tests that can be done in villages without electricity, and better animal models for human diseases.   Some of the teams will be working on the same goal and competing against each other by using different methods and taking different paths.  The article notes the example of six teams working on ways to deliver vaccines through nasal sprays, inhalers, skin patches, or drinks.  Two teams are working on creating vaccines that do not need to be kept chilled.  Currently, keeping vaccines chilled in Africa is a major obstacle to vaccinating children in rural Africa. 

Another project is headed by Dr. David Baltimore, a Nobel Prize winner and president of the California Institute of Technology.  His grant is to create stem cells that could be safely injected into a person.  The stem cells, obtaining the genetic instructions for attacking diseases, would then populate the immune system.  This process would make vaccines obsolete.  Like the other projects, this is a focused, large, and expensive gamble that normally would not receive government funding or funding of such a large amount. 

The teams are composed of researchers from universities, biotech companies, and government agencies such as Centers for Disease Control and Prevention.  As opposed to typical government grants, each project will be closely supervised and can be cut off if goals are not met.  The researchers may patent anything they invent, but they must guarantee that it will be made available to poor countries at low cost or for free.  Thanks to Lindley Bain for her help with this post.  [tm]

July 3, 2005 | Permalink | TrackBack (0)

New Direction for Drug Companies

Today's New York Times has an interesting article on how Eli Lilly plans to develop and market drugs for the future.  They appear to be relying on much of the new data we are learning from the human genome project to develop drugs targeted to an individual's genetic makeup.  The New York Times states,

Drug companies do an awful job of finding new medicines. They rely too much on billion-dollar blockbuster drugs that are both overmarketed and overprescribed. And they have been too slow to disclose side effects of popular medicines.

Typical complaints from drug industry critics, right? Well, yes. Only this time they come from executives at Eli Lilly, the sixth-largest American drug maker and the company that invented Prozac.

From this placid Midwestern city, well removed from the Boston-to-Washington corridor that is the core of the pharmaceutical industry, Lilly is ambitiously rethinking the way drugs are discovered and sold. In a speech to shareholders in April, Sidney Taurel, Lilly's chief executive, presented the company's new strategy in a pithy phrase: "the right dose of the right drug to the right patient at the right time."

In other words, Lilly sees its future not in blockbuster medicines like Prozac that are meant for tens of millions of patients, but rather in drugs that are aimed at smaller groups and can be developed more quickly and cheaply, possibly with fewer side effects.

We will have to see if this strategy works.  I thought that the new genetics might make drugs more expensive because they were so much more individualized but it looks like I could be wrong.  [bm]

July 3, 2005 | Permalink | TrackBack (0)