Am. Soc. of Consultant Pharmacists v. Garner

• Decision Date: 08 August 2001
• Docket Number: No. 00 C 7821.,00 C 7821.
• Citation: 180 F.Supp.2d 953
• Court: U.S. District Court — Northern District of Illinois
• Parties: AMERICAN SOCIETY OF CONSULTANT PHARMACISTS, et al., Plaintiffs,<SMALL><SUP>*</SUP></SMALL> v. Jackie GARNER, her official capacity as Director of the Illinois Department of Public Aid, Defendant.<SMALL><SUP>1</SUP></SMALL>

180 F.Supp.2d 953

AMERICAN SOCIETY OF CONSULTANT PHARMACISTS, et al., Plaintiffs,^* v. Jackie GARNER, her official capacity as Director of the Illinois Department of Public Aid, Defendant.¹

No. 00 C 7821.

United States District Court, N.D. Illinois, Eastern Division.

August 8, 2001.

COPYRIGHT MATERIAL OMITTED

Howard M. Hoffman, Nicholas James Lynn, Neville Maherji Bilimoria, Jason T. Lundy, Duane Morris, LLC, Chicago, IL, for Plaintiffs.

Karen Elaine Konieczny, John E. Huston, James C. O'Connell, Martin W. McManaman, Illinois Attorney General's Office, Chicago, IL, for Defendants.

AMENDED MEMORANDUM OPINION AND ORDER²

SCHENKIER, United States Magistrate Judge.

On December 15, 2000, Illinois changed the formulas it uses to pay providers of prescription drug services to Medicaid recipients. This rate change, implemented pursuant to an emergency rule, is currently in effect. Anticipating this change, on December 13, 2000, the plaintiffs, the American Society of Consultant Pharmacists and 20 pharmacies, filed this lawsuit against the Illinois Department of Public Aid ("IDPA") and its Director, in her official capacity. In earlier decisions in this case, the plaintiffs' requests for a temporary restraining order were denied.³ In addition, in a Memorandum Opinion and Order dated February 27, 2001, this Court dismissed plaintiffs' two supplemental state law claims against all defendants, and their Medicaid Act claim against the IDPA. See ASCP v. Patla, 138 F.Supp.2d 1062 (N.D.Ill.2001).

What remains in the case, therefore, is plaintiffs' claim against the Director of IDPA in her official capacity, pursuant to 42 U.S.C. § 1983, that the IDPA's new reimbursement formulas violate the Federal Medicaid Act, 42 U.S.C. § 1396a(a)(30)(A). The plaintiffs have moved for a preliminary injunction on this claim (doc. # 24-1), requesting that the Court enjoin the application of the new reimbursement formulas pending a trial on the merits. The parties have agreed to submit the matter for decision on the papers, without the need for in-court testimony. After careful review of the parties' submissions and the oral argument heard on March 26, 2001, the Court finds that the law of this Circuit, as articulated in Methodist Hospitals, Inc. v. Sullivan, 91 F.3d 1026 (7th Cir.1996), requires the Court to deny the plaintiffs' motion for a preliminary injunction.

The Court sets forth below the findings of fact and conclusions of law that constitute the basis for the denial of plaintiffs' motion for a preliminary injunction. To the extent that any finding of fact constitutes a conclusion of law, the Court hereby adopts it as such, and to the extent that any conclusion of law constitutes in whole or in part a finding of fact, the Court adopts it as such. See Miller v. Fenton, 474 U.S. 104, 113-14, 106 S.Ct. 445, 88 L.Ed.2d 405 (1985).

I.

For purposes of this preliminary injunction motion, the defendant has stipulated to the allegations in the amended complaint, the exhibits thereto, and the supplements filed by the plaintiffs (see 01/03/01 Tr. 13-14, 18). The defendant has elected not to provide any evidentiary submissions. As a result, the following findings are drawn from the Court's analysis of plaintiffs' submissions.

A. The Parties.

1. The plaintiff American Society of Consultant Pharmacists ("ASCP") is a national trade association, which is comprised of a group of pharmacies that provide Medicaid services in Illinois. The other named plaintiffs (collectively, "the Medicaid Pharmacies") all are members of the ASCP (Am.Compl.¶¶ 1-21). The Medicaid Pharmacies in Illinois employ approximately 1533 employees, including over 663 hundred professionals, including 178 pharmacists and 465 pharmacy technicians (Am.Compl.¶ 79). The plaintiffs include the following individual pharmacies:

a. Enloe Drugs; Enloe Drugs d/b/a Enloe PCI Prescription Center; Enloe Drugs, Inc. d/b/a Omnicare of the Quad Cities; Nihan & Martin, Inc. d/b/a Nihan & Martin Pharmacy; JHC Acquisition, Inc. d/b/a Jacobs Healthcare Systems; Weber Medical Systems, Inc. d/b/a Omnicare Infusion Services; Dixon Pharmacy, Inc. d/b/a Dixon Pharmacy; Dixon Pharmacy, Inc. d/b/a Dixon Main Street Pharmacy; Niv Acquisition Corp. d/b/a Denman Pharmacy; Home Pharmacy Services, Inc. d/b/a Omnicare of Southern Illinois; Home Pharmacy Services; Interlock Pharmacy System, Inc. d/b/a Inerlock Pharmacy Services; Care Pharmaceutical Services, Inc. (these 15 pharmacies are collectively referred to as "Omnicare");

b. Pharmerica Drug Systems, Inc.;

c. SunScript/HRA LLC of Burr Ridge, Illinois; and

d. Neighborcare Pharmacy Services, Inc. d/b/a Neighborcare Elgin; Neighborcare Pharmacy Services, Inc. d/b/a Neighborcare Hickory Hills; Neighborcare Pharmacy Services, Inc. d/b/a Neighborcare Monticello (these three pharmacies are collectively referred to as "Neighborcare").

2. Medicaid pays for pharmaceuticals and related services for approximately 60-65 percent of residents living in Illinois nursing homes, assisted living facilities, and community integrated living arrangements ("CILAs"). Since there are approximately 100,000 residents in Illinois living in those facilities, there are approximately 60,000 to 65,000 of those residents whose care is paid for by Medicaid. The plaintiff pharmacies provide all pharmacy services for approximately 83 percent of these residents, or approximately 50,000-54,000 individuals (Am. Compl. ¶ 20; Pharmacy A Aff. ¶ 19). The record does not disclose what pharmacies service the remaining 17 percent of this Medicaid population, where those pharmacies are located, or what geographic areas they serve.

3. While the plaintiffs in this case have adopted for themselves the label "Medicaid Pharmacies," that is something of a misnomer, because at least some percentage of their businesses also serve private pay individuals. The amount varies from plaintiff to plaintiff. See, e.g., Pharmacy A Aff. ¶ 25 (35 percent of Pharmacy A's business serves non-Medicaid recipients); Pharmacy B's Aff. ¶ 7 (37 percent of Pharmacy B's patients are non-Medicaid recipients); Pharmacy C's Aff. ¶ 6 (15 percent of Pharmacy C's patients are Medicaid recipients). As for Pharmacy D and the non-party specialty pharmacies who serve this Medicaid population, we do not know the breakdown of their business between Medicaid and non-Medicaid recipients.

4. "There is a difference in the population mix served by [plaintiffs] and the traditional retail pharmacies" (Supp. Pharmacy A Aff. ¶ 6c). The traditional retail pharmacies serve a much lower percentage of Medicaid recipients vis-a-vis its total customer base than do the plaintiffs (Id.). Moreover, traditional retail pharmacies serve non-institutionalized Medicaid recipients who require a far lower level of pharmacy services than the institutionalized recipients served by plaintiffs (Id. ¶ 6d). Thus, the cost of services provided by traditional retail pharmacies is much lower than the cost of the services provided by the plaintiffs (Id. ¶ 6e).

5. The defendant is the Director of the Illinois Department of Public Aid ("IDPA"), who is sued in her official capacity only (Am.Compl.¶ 22). The IDPA administers the Illinois Medical Assistance Program (the "Medicaid Program") and contracts with pharmacies, including the Medicaid Pharmacies, to provide prescription and non-prescription drugs and related products and services to medical assistance beneficiaries (hereafter, "Medicaid recipients") (Am.Comp.¶ 23).

6. The Medicaid recipients who live in nursing homes, assisted living facilities and CILAs are not parties to this action. However, to the extent that the IDPA's new reimbursement formula may affect their access to the services rendered, these Medicaid recipients have a stake in the outcome of this litigation (Am. Compl. at 2).

B. The Medicaid Program.

7. The State of Illinois provides medical assistance to Medicaid recipients enrolled in the Medicaid Program pursuant to the provisions of Title XIX of the Social Security Act, 42 U.S.C. § 1396-1396v (the "Medicaid Act") (Am.Compl.¶ 30). The Medicaid Program is a cooperative state and federal program whereby the federal government provides funds to the states to assist the poor, elderly, and disabled to receive medical care, prescription and non-prescription drugs, and related services (Id., ¶ 28). States may elect to opt in or out of the Medicaid Program. States that opt into the program must submit a State Plan ("Medicaid State Plan") to the United States Department of Health and Human Services ("DHHS") for approval, describing the policies and methods used to set reimbursement rates for each type of service included in the program. The provision of drugs, pharmaceuticals, and related services are one such type of service. A state must also submit for approval to the DHHS any proposed amendments. Both the Medicaid State Plan and any amendments must meet federal requirements. 42 U.S.C. §§ 1396a(a) and (b); 42 C.F.R. § 430.10, 430.12 (Id., ¶ 29).

8. The IDPA is the designated state Medicaid agency and, as such, it is responsible for administering, adopting, implementing, and amending the Illinois Medicaid State Plan in accordance with the requirements of the Medicaid Act (Am.Compl.¶ 31). Illinois has opted to cover prescription and non-prescription drugs and related services in its Medicaid State Plan (Id., ¶ 35).

9. Medicaid prescription drug reimbursement to pharmacies like the Medicaid Pharmacies is a function of two components: a formula to cover the cost of the prescription drug product and a dispensing fee (Am.Compl., ¶ 36). The drug product component cost is the cost of the drug as determined by a Medicaid formula which estimates the acquisition cost (Am. Compl.¶ 38). For some providers, such as Omnicare, the dispensing fee takes into account the costs associated with filling the prescription such as unit dose packaging, pharmacists' review, delivery, pharmacy overhead, and other...