Medical Device Daily Washington Editor

Along with data standards, privacy considerations have been one of several logs lying in the road to the electronic medical record, and a recent report by the Office of Inspector General at the Department of Health and Human Services takes the Centers for Medicare & Medicaid Services to task for not more vigorously enforcing privacy laws.

The report's cover letter, addressed to acting CMS administrator Kerry Weems, states that the latter agency "had taken limited actions to ensure that covered entities adequately implement" the security rules found in the Health Insurance Portability and Accountability Act of 1996. The letter states that CMS was authorized "to do so by federal regulations as of February 16, 2006, but that despite the authorization, CMS "had not conducted any HIPAA security rule compliance reviews of covered entities."

The cover letter states that CMS has "an effective process for receiving, categorizing, tracking and resolving complaints," but asserts that the agency "needs to become more proactive in overseeing and enforcing implementation of the HIPAA security rule." According to the cover letter's author, Daniel Levinson, the Inspector General, CMS "believes that its complaint-driven enforcement process has furthered the goal of voluntary compliance," but the agency nonetheless "agreed ... that compliance reviews are a useful enforcement tool as part of a more comprehensive enforcement strategy."

The full report also notes that CMS "had not established any policies or procedures for conducting compliance reviews at covered entities." In a letter dated June 30, Weems writes that his agency has "received and processed more than 300 security complaints" from institutions of varying size and geographic location, and that the affected institutions "have made appropriate and expedient efforts to comply." Weems also states that the Office for Civil Rights, in conjunction with the Office of General Counsel, have both adopted this complaint-based, voluntary compliance approach for complaint allegations that implicate both the privacy and security rule." Weems also indicated that at the time of the OIG audit, "CMS was already developing a statement of work to secure professional services to conduct compliance reviews."

Weems added that "OIG's singular focus on compliance reviews neglects the value that other methods," which include outreach and education, "have demonstrated in improving compliance."

Lawsuits seen as drag on investment

Is the legal environment in the U.S. an impediment to investment? An Oct. 29 statement from the Department of Commerce makes that case, at least in terms of foreign direct investment (FDI) in U.S. business.

According to the Oct. 29 statement, the U.S. economy "benefited from $238 billion in FDI in 2007," which employed more than five million Americans. On the other hand, the full Commerce Department report states, "frivolous and junk lawsuits cost our economy about $240 billion a year." The report also cites a number of studies that collectively make the case that that the U.S. "is increasingly seen from abroad as a nation where lawsuits are too commonplace."

The report states that tort costs have risen from 0.62% of gross domestic product in 1950 to 1.87% today, which is pegged at "triple that of France and the United Kingdom, and at least double that of Germany, Japan and Switzerland." The U.S. legal system is seen abroad as a highly developed system, but fear of litigation "is among the top issues listed by senior executives who manage internationally owned U.S. businesses."

The problem of perception tends to run to well-known but atypical outcomes. The report states that while the $2.9 million awarded in connection with the hot coffee lawsuit against a McDonald's restaurant was reduced to $640,000, "the awareness that unreasonable and extreme verdicts are possible has had a negative impact on businesses."

The report also says that class-action lawsuits and forum shopping are also major considerations. While progress has been made on some fronts, including passage of the Class Action Fairness Act of 2005, the report notes that state tort reform must be nudged along and judges should be encouraged to "prevent the power of justice from being used by private parties as a form of extortion" via frivolous lawsuits. This, the paper says, is "their role in our constitutional system."

Commerce Secretary Carlos Gutierrez said in the statement, "in the wake of economic challenges, it is important that America remains open and does not retreat into economic isolationism," adding that the report "highlights the important role our legal system plays in attracting capital to the United States and underscores the important work we must do to eliminate unnecessary hurdles to increased investment."

U.S., Denmark sign patent agreement

Intellectual property considerations continue to occupy a high place in national capitals, and the U.S. and Denmark recently signed on for a pilot project dubbed the Patent Prosecution Highway in an effort to help rationalize patent prosecution between nations.

According to the Nov. 3 statement at the web site for the U.S. Patent and Trademark Office, PTO and the Danish Patent and Trademark Office (DKPTO) inked the agreement in an effort to "leverage fast-track patent examination procedures already available in both offices to allow applicants to obtain corresponding patents faster and more efficiently." The national patent offices are also hopeful that the agreement will also cut down on duplicative work and thereby "reduce examination workload and improve patent quality."

Jon Dudas, director of PTO, said in the statement that the patent prosecution highway program is "an integral part of our work-sharing efforts to combat the growing global backlog of applications." His counterpart in Denmark, DKPTO director general Jesper Kongstad, described the pilot program as "a valuable improvement of the patent system for both U.S. and Danish applicants," adding that "rapid examination and high patent quality are crucial for today's businesses," making essential that national governments "continue to look for efficient solutions like the PPH pilot that improve the framework for [intellectual property rights] protection."

The pilot, which comes on the heels of an agreement between the patent office for South Korea (Medical Device Daily, Oct. 27, 2008) for patent document searches, is in force for a year, although either party can withdraw early and both parties can agree to extend the program.