State News : Texas

At the request of the U.S. Food and Drug Administration (FDA), the Department of Justice filed a
complaint in the U.S. District Court for the Northern District of Texas on January 4, 2016, alleging
that Downing Labs LLC has been engaged in manufacturing drugs that, by virtue of their labeling and/or route of administration, purport to be or are intended to be sterile, but that fail to meet the
safety protections provided under federal law.
The complaint alleges, among other things, that Downing Labs and the individual defendants violate
the Act by introducing or delivering sterile drugs that are prepared, packed, or held under insanitary
conditions whereby they may have been contaminated with filth and/or rendered injurious to health.
The complaint also alleges the drugs are adulterated because the methods used in, or the facilities
or controls used for, their preparation do not comply with current good manufacturing practices
requirements. For example, during one of the inspections conducted by the FDA of Downing Labs
and its predecessor, NuVision Pharmacy Inc., test records showed excessively high levels of
endotoxins. Endotoxins are substances found in certain bacteria that can cause a wide variety of
serious reactions in humans, including high fever and shock. These products were not distributed.
In 2014, records showed that 19 lots of supposedly sterile drugs had tested positive for the pathogens
Staphylococcus haemolyticus and Nocardia nova. These products were not distributed, but the FDA
alleges that the company failed to adequately investigate the cause of these sterility problems. The
complaint alleges that Downing Labs has a long history of manufacturing drug products under
conditions that fall short of the minimum requirements to ensure safety and quality.
The permanent injunction requires Downing Labs and the individual defendants to bring their
processes into compliance with the law. Until then, the defendants are enjoined from manufacturing,
holding, or distributing drugs manufactured at or from their McEwen Road facility (located at
4001McEwen Road, Suite 110, Dallas, Texas). In addition, the FDA has been authorized to order
Downing Labs to stop drug manufacturing should it determine that Downing Labs has violated the
terms of the decree, and may also order Downing Labs to recall drugs or to destroy drugs that are
in the process of being manufactured.

On December 28, 2015, the Division announced that the interest and discount rate as of January 2,
2016 will be 4.19 %. The rate is effective as of January 1, 2016, and will remain in effect through
March 31, 2016. The rate was previously 3.96 %.
The Division is required to compute and publish the interest and discount rate quarterly, on January
1, April 1, July 1, and October 1. Prior to January 1, 1991, the rate was fixed at 4%. As of June 17,
2001, however, the Division is required to calculate the rate based on the treasury constant maturity
rate for one-year treasury bills.

A Dallas doctor and an Arlington pharmacist are among dozens charged in a "pill mill" operation
in Texas and Louisiana that allegedly hired homeless people to pose as patients and obtain
prescriptions for pain medications.
Richard Andrews, DO (of Dallas) and pharmacist Ndufola Kigham (of Arlington) were arrested on
January 20, 2016 on federal charges of conspiracy to distribute a controlled substance. The
indictment alleges that the clinic, McAllen Medical Clinic, allegedly handed out prescriptions for
more than 150,000 oxycodone pills between January 2013 and July 2014, despite knowing "there
was no legitimate medical purpose" for them. Prosecutors involved in the case described that these
operations typically utilize drivers to pick up recruits to pose as patients. The recruits are given
money to pay for their visit to the clinic, and are paid a fee (usually around $30) for their work. The
recruits are coached on what to say to get a specific prescription. The driver takes them to the
pharmacy and pays for the prescription; the drugs are then sold on the street for a profit. If convicted
of the conspiracy charges, Dr. Andrews and Dr. Kigham face up to 20 years in federal prison and
$1 million in fines.

Effective February 1, 2016, Fentanyl Transdermal Patches, MS-Contin, Levorphanol
(Levo-Dromoran), and Morphine ER/Naltrexone (Embeda) will change status from "Y" to "N" drugs
in the ODG's Appendix A. Accordingly, beginning February 1, 2016, prescriptions for these drugs
will require preauthorization. The Division is encouraging system participants to discuss and
coordinate the ongoing course of treatment of claimants who are currently being prescribed these
drugs.

The Division announced it will host two education conferences in 2016: one in Austin and one in
Dallas. The Austin conference will be September 19 and 20 at the Crowne Plaza Austin Hotel, and
the Dallas conference will be October 24 and 25 at the Renaissance Dallas-Richardson Hotel. The
conferences will be geared to health care providers, medical office staff, employers, employee
organizations, carriers, and third party administrators, and will feature general and breakout sessions
on a variety of topics and issues in the Texas workers' compensation system. Conference registration
will be available beginning Spring 2016.

Air Evac EMS, Inc., a provider of emergency air ambulance services, has filed suit in the U.S.
District Court for the Western District of Texas seeking declaratory and injunctive relief. Air Evac
seeks a declaration that the Airline Deregulation Act (ADA) preempts Texas Labor Code Sections
401.001–401.026, and related regulations (which establish a fee schedule and fee guidelines for
reimbursement for air ambulance services to workers' compensation claimants) as applied to
federally-regulated air carriers. Air Evac also seeks to permanently enjoin the Division from
enforcing any provision of the Texas Labor Code (and accompanying reimbursement rules) that cap
the price for Air Evac's services. Alternatively, Air Evac is requesting that the Court declare Texas
Labor Code §§ 415.021, 415.0215, 413.042, and any other section, rule, or regulation that
establishes or limits the price or rate charged, inapplicable to air ambulance providers, and to
permanently enjoin the Division from enforcing these statutes and regulations against air ambulance
providers.
Air Evac claims that the ADA preempts the above provisions because "the ADA requires that it is
the free market, not administrators or courts, that sets an air carrier's prices." The complaint alleges
that the Division establishes and enforces a fee schedule and fee guidelines under state law and
regulations that limit the amount that air ambulance providers can receive for emergency
transportation of injured workers, and that this reimbursement rate is "well below Air Evac's billed
charges, and the usual and customary fare it charges for its services." Air Evac alleges that the ADA
expressly preempts any state law or regulation that purports to restrict or economically regulate the
prices or services of air carriers within the United States, citing 49 U.S.C. § 41713(b)(1).
The complaint alleges that in 2015, Air Evac provided air ambulance services to several workers'
compensation patients, and has been paid only a "small fraction" of its billed charges because of the
Texas Labor Code's reimbursement scheme.

There is talk of a push by the Division to scrutinize DD analysis letters that "exceed the intent of
Rule 127.10(a)(2)." Rule 127.10(a)(2) allows treating doctors and insurance carriers to send the
designated doctor an "analysis of the injured employee's medical condition, functional abilities, and
return-to-work opportunities." The Rule states that the analysis "may include supporting
information such as videotaped activities of the injured employee, as well as marked copies of
medical records," and the analysis "may only cover the injured employee's medical condition,
functional abilities, and return-to-work opportunities as provided in Labor Code §408.0041." (Labor
Code §408.0041 states that the treating doctor and the carrier may send the DD an "analysis of the
injured employee's medical condition, functional abilities, and return-to-work opportunities.") If
the carrier sends an analysis, a copy must be sent to the treating doctor, the claimant, and the
claimant's representative, if any. (Likewise, if a treating doctor sends an analysis, a copy must be
sent to the above parties, as well as the carrier.)
There is no indication as to what language, exactly, the Division interprets as "exceeding the intent"
of Rule 127.10(a)(2). We suspect, however, they may be looking at letters that advocate strongly
for a particular position, cite one-sided legal authority, and/or give instruction to the DD on how he
or she is supposed to opine. Word on the street is that the Division is already looking at samples of
letters it deems possible violators.More to come, surely. To that end, we recommend carriers (or vendors who send letters on their
behalf) review their DD analysis letters to ensure they are not running afoul of the intent of Rule
127.10(a)(2).

The Division announced early this month that it is maintaining the four-region split of Field Offices
(North, Coastal, South, and West) and the respective Team Leads over each (Cheryl Dean, Ken
Huchton, Carol Fougerat, and now Teresa Hartley, replacing Don Woods). In an interesting twist,
however, it was announced that the Team Leads will supervise not only the Hearing Officers in their
regions, but the BROs as well. The former BRO team leads will now be acting as "liaisons" between
the BROs and the new Team Leads.
Jennifer Hopens and Allen Craddock will serve as regional Managers over the North/West and
South/East halves of the state, respectively.

The Department of Justice charged five individuals, including two medical doctors and a
chiropractor, for their participation and profit in a scheme which provided illegal kickbacks to dozens of doctors, chiropractors, and other individuals in exchange for the referral of patients to
Pacific Hospital in Long Beach, California.
From 2005 through 2013, the DOJ estimates that insurers were billed over $580 million for spinal
surgeries performed on more than 4,400 patients who were referred to the hospital. The participating
doctors, chiropractors, and others referred patients in exchange for illegal payments which included
up to $15,000 for a lumbar fusion and $10,000 for a cervical fusion. The hospital, its owner, and its
executives made the payments using a combination of nefarious means, including making rental
payments to the referring doctors for use of their offices (the hospital never used the offices), making
$100,000 per month “option payments” to the referring doctors for the right to purchase medical
practices (a right that was never exercised), and paying the doctors to help the hospital collect on
surgical bills (the doctors did not participate in the collection efforts).
The individuals recently charged in the scheme were: James L. Canedo, former CFO of the hospital;
Philip Sobol, an orthopedic surgeon; Alan Ivar, a chiropractor; Paul Richard Ragnall, a health care
marketer; and Mitchell Cohen, an orthopedic surgeon. In April 2014, the former CEO and owner
of the hospital, Michael Drobot, pleaded guilty to participating in the scheme. Each of these
individuals is reportedly cooperating with the DOJ in its investigation.
“Operation Spinal Cap” is ongoing. Stay tuned.

The DWC is proposing a revision to DWC Form-048, to incorporate the 2014 revisions to Rule
134.11(a), which allows injured workers to request travel reimbursement to attend DD exams,
RMEs, or post-DD RMEs. The proposed revision also creates separate Spanish and English forms
and includes a section for a plain language explanation for the approval/denial of the travel
reimbursement request. The public comment period on the new form closes on December 28, 2015.

The DWC also proposes a new form to report administrative violations to the DWC. In accordance
with Rule 180.2(a), any person may submit a complaint to the DWC for alleged administrative
violations, and TEX. LAB. CODE §402.023(c), directs the DWC to develop a standardized form for
the filing of workers’ compensation complaints. The proposed Workers’ Compensation Complaints
Form is the DWC’s effort to meet these regulatory requirements. In its current draft, the proposed
form may be inadequate because it fails to provide sufficient space for the complainant to identify
his, her, or its relationship to the claim. Informal comments on the proposed complaint form are due
on or before January 4, 2016.