Labs In Court

A roundup of recent cases and enforcement actions involving the diagnostics industry

SCOTUS Agrees to Step in and Resolve Obamacare Constitutionality

 Case: Before COVID-19, the health care issue that kept millions of Americans up at night was the future of the Affordable Care Act, aka Obamacare. Having survived two constitutional challenges, the ACA is now again on trial for its life in Texas federal court. Predictably, the pace has been snail-like with the case ping-ponging between the district and appeals courts leaving patients and the insurance markets to twist in the wind. The good news is that there’s light at the end of the tunnel. The US Supreme Court has agreed to intervene and hear the case on an expedited basis, rather than wait for a final ruling from the lower courts.

 Significance: While no definitive schedule has been announced, experts expected the Court to hear the case sometime in the Fall of 2020, maybe even before the election. A decision would have likely come down in the spring or early summer of 2021. The problem is that those predictions didn’t account for the COVID-19 situation. Still, if and when the Court does rule, Chief Justice Roberts, who twice sided with the justices upholding the law, is likely to play a pivotal role. Some legal scholars suggest that he wouldn’t have taken the case if he thought the votes were there to have it declared unconstitutional. But even if that’s true, there’s always the chance that the Chief Justice might have miscalculated, especially if President Trump appoints what would be his third justice before the ruling comes down. The other wildcard: The Court will strike down the now legally questionable mandate requiring taxpayers to get health insurance and leave the rest of the law standing.

Taking Job at Genetic Lab Doesn’t Violate Oncologist’s Non-Compete with Health Data Firm

 Case: Three years after becoming Senior Medical Director of Research Oncology for healthcare technology and data services company Flatiron Health, an accomplished oncologist accepted the position of Vice President of Clinical Solutions at Tempus Labs. Flatiron cried foul and sued the oncologist for violating his non-compete banning him from working for a rival company for one year after leaving the firm. But the New York federal court disagreed and tossed the claim. Although both firms provide curated data services, Tempus’ principal business is its clinical lab, something Flatiron doesn’t have. And because the oncologist would be working for the lab and not the data operations, the position wasn’t competitive.

Significance: Courts are loath to enforce non-compete covenants, particularly in the medical field where public policy dictates that doctors and other skilled practitioners be allowed to ply their trade for the public good. Another decisive factor in this case was that the oncologist returned all Flatiron documents and devices, deleted the Flatiron email account from his phone and removed himself from company Slack groups. And the data that could potentially benefit Tempus was beyond his ken as an oncologist and way too complicated for anybody to memorize [Flatiron Health v. Carson, 2020 U.S. Dist. LEXIS 9782].

NantHealth Settles Fraud Suit with Shareholders for $16.5 Million

 Case: NantHealth has agreed to pay $16.5 million to shareholders to settle a lawsuit accusing the company and its executives of making misstatements to artificially inflate company stock ahead of a 2016 IPO. When the truth came to light, NantHealth share prices crashed by nearly 24% in just a few hours. NantHealth hasn’t admitted liability but decided that settlement made more sense than risking a trial.

Significance: Shareholders claim that NantHealth founder Patrick Soon-Shiong made statements suggesting that a $10 million philanthropic donation to the University of Utah required the University to pay the firm $10 million for genetic research services. Based on this, the company was able to puff the number of test orders it reported to investors by 50% before the IPO. Company officials also overstated the success of its GPS Cancer product, the shareholders contend.


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