Editor: Ms. Pechette, would you tell us about your practice today?
Pechette: My practice at Kelley Drye & Warren LLP is focused primarily on the convergence of information technology, intellectual property and healthcare. I represent a wide range of clients, both publicly and privately held, in complex commercial transactions, including strategic alliances, software development and licensing, technology transfers and IP counseling. With respect to healthcare clients, I also counsel on privacy, security, HIPAA and other regulatory compliance matters. The healthcare industry is very heavily regulated, and Kelley Drye's Washington DC office practices in a variety of areas, including the Federal Corrupt Practices Act, the Medicare and Medicaid Patient Protection Act of 1987 - the Anti-kickback Statute - and fraud and abuse laws, privacy and security, and FDA matters. Lobbying and legislative affairs complement my practice as well.
Editor: Who are some of your clients?
Pechette: Some of my clients in the healthcare industry include GE Healthcare, and in particular its Integrated IT Solutions business that provides clinical and financial information technology solutions; a publicly held leading global medical device company that manufactures cardiology-related products; a privately held global company that manufactures and offers products and services for the blood transfusion medicine industry; and a start-up software company that offers a hosted software tool and redundant database storage services to help healthcare institutions manage their regulatory compliance and quality assurance programs.
Editor: Your healthcare law background is impressive. How did this originate?
Pechette: Following law school, in the mid-1980s, I was recruited by a small Chicago firm which was known as a pioneer in the then newly emerging area of law called computer law. As a contributing author and editor, I assisted the managing partner, the late Mark Gordon, in writing a book titled Computer Software: Contracting for Development and Distribution. For a young lawyer it was both daunting and thrilling to be charting new waters by writing what the law should be since there was not much established law at the time.
Editor: How did this early introduction to what is more commonly known today as information technology law steer you into the healthcare industry?
Pechette: As an associate, my early practice was primarily in commercial litigation. Because my first law firm had a reputation for expertise in the high-tech area, we represented a number of hospitals in their disputes concerning their healthcare information systems as well as healthcare information technology vendors in their intellectual property related disputes. Thus, my entre into the healthcare field was by way of handling information technology litigation.
I have since practiced at other firms, including Sidley Austin, where as an IP lawyer I was part of the corporate/M&A group. At that firm, I also contributed to another book titled Telemedicine and E-Health Law , co-authoring a chapter on establishing an e-health website. Most recently, I served as the general counsel for one of GE Healthcare's business units which provides digitized imaging and clinical information systems.
Editor: How did you end up at GE Healthcare?
Pechette: I was recruited by GE after serving as the IP counsel on the M&A team representing General Electric Company in their acquisition from Loral/Lockheed Martin of its picture archiving communication system (PACS) business unit. This represented GE's first major foray into the information technology market. GE Healthcare - then known as GE Medical Systems - was already a leading medical device company, and the acquisition expanded their presence in the healthcare IT space. Over the course of my six years with GE, I saw the business grow explosively from a start-up of less than $50 million to almost $2 billion. It was here that I became truly immersed in healthcare law.
Editor: I would assume that your in-house experience gave you an insider's view on some of the emerging legal and business issues faced by the healthcare industry in the 21st century. What are some of these issues?
Pechette: The concept of e-health is now playing a major role in defining healthcare. This has greatly accelerated over the past 10 years, as the paperless, digitized, portable and wireless delivery of healthcare information and services has taken hold. In 2004, President Bush called for a transformation of healthcare delivery through the adoption of interoperable EHRs - the electronic health record, an individual patient's medical record in digital format available from anywhere at any time - by 2014. The industry has evolved from the early websites dispensing medical information, to "evidence-based" medicine aided by electronic health records with e-prescribing capabilities forming the backbone for Regional Health Information Organizations (RHIOs), and ultimately a National Health Information Network (NHIN). One of the major efforts towards implementing EHRs is in the recent amendments to the safe harbor rules of the federal Anti-kickback Statute and Stark laws designed to increase the use by physicians of electronic prescribing systems by removing some of the barriers that prevented their access to such technology. However, even with these incentives, the new technology is not welcomed by all healthcare service providers and patients. Their reluctance to move from a paper-based to a paperless system is but one of the challenges that the healthcare industry faces today.
Editor: What are some of the forces driving these initiatives?
Pechette: Perhaps the single most important driving force is the need to stem the seemingly endless rising cost of healthcare. Put another way, the need to provide effective and high quality healthcare at a reduced cost without sacrificing quality or compromising patient safety is absolutely crucial in the effort to make these initiatives a reality. There is widespread acceptance that the utilization of information technology is essential to provide such care at reduced cost, in addition to simply reducing the incidence of medical error. However, the implementation of a fully functional IT infrastructure with capability to store, transmit, process, access, retrieve, and share healthcare information across a wide range of networks is going to take time - if it is a vision that can even be achieved.
Editor: This sounds pretty difficult for patients to navigate.
Pechette: For patients and for physicians. There was considerable debate even 10 years ago, when there was talk about migrating to electronic medical records. People were concerned about the legal risks inherent in EHR. If there is a reluctance on the part of some physicians to move to a paperless environment, it is based in part on the basic fact that medical data and the practice of medicine do not adhere to one monolithic standard. Similarly, healthcare IT systems and medical devices also have not been developed using the same technical standards, so interoperability remains a huge challenge. In addition, there are concerns that the concept of an integrated health information network or of portable readily accessible patient information would jeopardize patient privacy and security.
Editor: What are some of the new legal challenges raised by these trends?
Pechette: While we will benefit if we are able to achieve the widespread use of healthcare information technology, there are legitimate concerns about patient privacy and security. As we move closer to EHR as a reality it becomes less an academic exercise and more an issue to be addressed and hopefully, resolved. Technology exists today and is in development which I believe will enable us to take advantage of healthcare IT, including the use of EHR, without necessarily compromising patient privacy or security.
Encouraging physicians to adopt e-health and e-prescribing makes sense, but this area is also fraught with regulatory compliance issues that physicians, healthcare institutions, and healthcare vendors need to carefully navigate.
Editor: You also cite a growing need for parties to enter into joint development and collaboration agreements. What are the issues here?
Pechette: With the pressure to create interoperable systems, the industry participants have to play together, sometimes reluctantly, in the same sandbox by developing open systems and standards-based products. There is an increased need to share and leverage each other's intellectual property - for example, to develop bi-directional interfaces to enable data sharing. In recent years for example, we saw a lot of this activity fueled by the whole movement towards IHE compliance (Integrating the Healthcare Enterprise).
These alliances raise thorny issues around the ownership of the intellectual property that each party brings to the relationship, and the parties together develop, as well as the proper allocation of risks and responsibilities between them with respect to the project. The initial focus is on ownership of what is jointly developed, of course, but the parties have to also consider how to safely retain their original rights and any improvements and derivative works based on these rights. Since each party is almost certain to highly value its contribution to the new IP, the lawyers negotiating the arrangement need to come up with a balanced approach that reflects a realistic assessment of the value of each party's contribution.
The reflexive approach is for the parties to agree on joint ownership of IP. However, this approach while seemingly equitable may have some unintended consequences. Depending upon the type of intellectual property created, differing IP laws might apply with very different results. For example, each joint owner of a copyright has the right to grant non-exclusive licenses to the work without the other party's consent subject to sharing royalties with the other party. Similarly, each joint owner of a patent has the right to grant non-exclusive licenses to the patent but without a duty to account to the other party. So one joint developer may find to its dismay that the other party has licensed the interface to its competitor without any ability to limit that license. Another contentious issue in joint development/collaboration projects is how the fruits of the undertaking are to be jointly or separately exploited by the parties. The parties also must plan for the contingency of the collaborative effort coming to an end, with or without fault. These issues should be addressed before a final joint development and collaboration agreement is executed.
Editor: If we look five years out, are we going to be looking at the same issues? Do you think we are going to make some progress on addressing the issues presently before us?
Pechette: Obviously, none of us can predict with any precision what the issues will be five years from now. If the past is any guide, that evolution will result in settling some of the issues we face today but, at the same time, in introducing a whole new array of challenges. In such an environment it is essential for a practitioner to be nimble, creative and open to continually advancing technology and change. One way or another, it is the future.
Published March 1, 2008.
