Long Term Care Pharmacy Alliance v. Ferguson

• Decision Date: 01 April 2003
• Docket Number: No. 03-10577JLT.,03-10577JLT.
• Citation: 260 F.Supp.2d 282
• Parties: LONG TERM CARE PHARMACY ALLIANCE, Plaintiff, v. Christine C. FERGUSON, Acting Director, Commonwealth of Massachusetts Division of Health Care Finance and Policy, Defendant.
• Court: U.S. District Court — District of Massachusetts

Page 282

260 F.Supp.2d 282

LONG TERM CARE PHARMACY ALLIANCE, Plaintiff, v. Christine C. FERGUSON, Acting Director, Commonwealth of Massachusetts Division of Health Care Finance and Policy, Defendant.

No. 03-10577JLT.

United States District Court, D. Massachusetts.

April 1, 2003.

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David Farber, John Rosans, Patton Boggs LLP, Washington DC, for Long Term Care Pharmacy Alliance, Plaintiff.

Mark E. Robinson, Daniel S. Savrin, Melissa Georgia Liazos, Bingham McCutchen LLP, Boston, MA, for Pharmacy Alliance, Plaintiff.

William W. Porter, Stephanie S. Lovell, Romeo G. Camba, Attorney General's Office, Boston, MA, for Christine C. Ferguson, Acting Director of Commonwealth of Massachusetts Division Of Health Care Finance And Policy, Defendant.

FINDINGS OF FACT AND CONCLSIONS OF LAW ON PLAINTIFF'S MOTION FOR TEMPORARY RSTRAINING ORDER AND PRLIMINARY INJUNCTION

TAURO, District Judge.

Plaintiff Long Term Care Pharmacy Alliance ("LTCPA") has filed a motion for temporary restraining order and preliminary injunction seeking to enjoin defendant Christine C. Ferguson from enforcing her Emergency Rule, scheduled to go into effect April 1, 2003, to the extent that it would reduce the reimbursement rate as it applies to long-term care pharmacies providing pharmacy services to nursing facility residents who participate in the MassHealth (the "April 1 Rate"). For the reasons set forth herein, Plaintiffs Motion is granted, and Defendant is enjoined from implementing the April 1 Rate for any Medicaid prescription dispensed to a MassHealth nursing facility resident until such time as Defendant complies with federal Medicaid statutory requirements.

FINDINGS OF FACT

The Massachusetts Medicaid Program and Defendant Ferguson.

1. This action involves the Commonwealth of Massachusetts's obligation to reimburse long-term care pharmacies providing prescription drugs to beneficiaries of Massachusetts's Medicaid program (also known as "Mass-Health"). Medicaid is a cooperative federal-state program through which the federal government provides financial assistance to participating states that choose to reimburse certain costs of medical treatment for needy individuals. Title XIX of the Social Security Act, 42 U.S.C. §§ 1396 et seq. (the "Medicaid Act"). Participation in the Medicaid program is voluntary. However, if a state elects to participate, it must comply with the requirements of Title XIX and the implementing regulations promulgated by the Secretary of Health and Human Services (the "Secretary"). See 42 C.F.R. §§ 430.1 et seq. and 447.302. Massachusetts has elected to participate in the program. See Mass. Gen. Laws ch. 118E, § 11.

2. The Medicaid Act requires states to pay for certain services, and it gives them the option to provide additional services, all of which can be subject to in excess of 50 percent reimbursement by the Federal Government. Each state may determine through statute or rulemaking what it will pay for services provided to Medicaid recipients, so long as the payments are consistent with federal law. Payments are made directly by the state to providers furnishing the services to Medicaid beneficiaries—in this case, eligible long-term care pharmacies. DHCFP sets the rates at which the Commonwealth pays long-term pharmacy providers for services to Medicaid patients. The Commonwealth of Massachusetts, through its Division of Medical Assistance ("DMA"), operates its own Medicaid program and pays for prescription drugs under its State Plan pursuant to the rates set by DHCFP. Mass. Medicaid State Plan § 3.1, Supp. 1 to Attachment 3.1-A. In turn, the Commonwealth is reimbursed by the Federal Government 50 cents for each dollar it expends on the program.

3. As a part of its obligations under the federal Medicaid program, and to be eligible for federal funding, Massachusetts (and every other state) must submit to the Center for Medicare and Medicaid Services ("CMS"), an agency of the United States Department of Health and Human Services ("HHS"), a state plan which complies with the federal law. See 42 U.S.C. § 1396; see also § 1396a(a). The Secretary of HHS has approved Massachusetts's plan and reimburses Massachusetts for 50 percent of the state's payments to providers, including LTCPA members.

Plaintiff Long Term Care Pharmacy Alliance

4. Plaintiff Long Term Care Pharmacy Alliance represents the four major national long-term care pharmacies— Kindred Pharmacy Services, Omnicare, NeighborCare, and PharMerica. Plaintiffs Memorandum in Support of Motion for Temporary Restraining Order at 5. Plaintiffs members operate "long-term care" pharmacies dedicated to providing services to residents of nursing facilities. Unlike retail pharmacies, Plaintiffs members operate "closed pharmacies," meaning they are not open to the public, and do not provide retail services. The vast majority of prescriptions that LTCPA member pharmacies provide are to nursing facilities and their residents. Dulac Decl. ¶ 15.

5. Nursing facility residents are typically among the nation's most frail and elderly, and typically require seven or more medications. To accommodate these medication needs, long-term care pharmacies have developed a highly sophisticated delivery and distribution system to avoid medication errors. Dulac Decl.¶ 5. These systems include specialized unit dose packaging (such as a so-called "bingo card" that lets the nurse punch out each pill on a card bar-coded for each patient), drug regimen reviews to avoid inappropriate drug interactions, and 24/7 deliveries (to allow medication and IV treatments in the nursing home, rather than moving the resident to a hospital). See Dulac Decl. ¶ 5. Nursing facility residents are unable to go to a retail pharmacy to obtain their prescription drugs but must have them delivered by a long term care pharmacy.

6. In addition to these unique packaging services, LTCPA members also provide a wide array of consulting pharmacist services for the unique elderly patient population that they serve, including drug regimen reviews, drug interaction analyses, and patient chart screenings. See Dulac Decl. ¶ 6. Plaintiffs members also provide "24/7" delivery, so that residents do not have to be transported to hospitals when, for example, they need an IV. Dulac Decl. ¶ 5. These critical services are intended to provide the very frail and elderly residents commonly found in nursing home settings with appropriate medical care without inappropriate drug interaction, incorrect or duplicative prescriptions, or inappropriate medications.

The April 1 Emergency Rate.

7. On March 17, 2003, Defendant Ferguson and the Massachusetts Office of Health and Human Services ("MHHS"), Division of Health Care Finance and Policy ("DHCFP"), issued a notice on the DHCFP website announcing a reduction in the reimbursement rates for prescription medications dispensed under the Massachusetts Medicaid program.

8. The emergency rule, amending 114.3 Code Mass. Regs. § 31.00, attached to the Verified Complaint, Exhibits 2 and 3, is scheduled to go into effect April 1, 2003, and will reduce reimbursements to Medicaid pharmacies by, among other things, reducing the Estimated Acquisition Cost ("EAC") from the Wholesaler's Acquisition Cost ("WAC") plus 6% to WAC plus 5%. Id. No public notice or opportunity for comment or hearing was given to providers or beneficiaries, including Plaintiff here. Dulac Decl. ¶ 8.

9. Only six months ago, on September 5 and 6, 2002, DHCFP held extensive public hearings to determine what payment levels would adequately ensure pharmacy participation in the Massachusetts Medicaid program to maintain sufficient access for MassHealth members. Based on proper notice and comment rulemaking, including testimony at the hearings and its review of relevant data, DHCFP established in October 2002 a rate at WAC plus 6%, reducing the previous rate of WAC plus 10%. Verified Complaint, Exhibit 1.

10. The March 2003 notice contemplates a hearing on the Emergency Rule on May 7, 2003, some six weeks after the Emergency Rule is scheduled to go into effect. Verified Complaint, Exhibit 2. The notice states: "[I]t is estimated that aggregate Medicaid expenditures will decrease by approximately $26 million annually as a result of the Emergency Rule. Id. Defendant admitted at the hearing that the sole motivation for the Emergency Rule was to expedite the decrease in reimbursement rates in order to address the Commonwealth's fiscal crisis.

11. In its rate-making last October, DHCFP specifically found the WAC plus 6% rate was necessary "to ensure sufficient access to pharmacy services for MassHealth members." See Verified Complaint, Exhibit 1 at 1, 14. Since that time, DHCFP has neither procured nor provided any comments, testimony, data, or findings of any kind to support a further reduction in this reimbursement rate or ensure sufficient continued access to pharmacy services for MassHealth members.

12. By its emergency rule, however, DHCFP seeks to change the rate, without any additional record evidence, public comment, or hearing testimony. Verified Complaint, Exhibit 2.

CONCLUSIONS OF LAW

13. The Pharmacy Reimbursement Change constitutes an unlawful reduction in the rate at which long-term care pharmacies are reimbursed for providing nursing facility services in the form of prescription drugs to Massachusetts's Medicaid beneficiaries. More specifically, the Emergency Rule violates the following federal laws:

42 U.S.C. § 1396a(13)(A), which grants Plaintiff specific rights to participate in and comment upon proposed rates. Defendant Ferguson denied Plaintiff any right or participation in the rate-making process, in violation of federal law;

42 U.S.C. § 1396a(30)(A), which requires Massachusetts to make specific findings that its rates will allow beneficiaries equal access to Medicaid benefits, including the pharmaceutical services at issue here. The Emergency Rule...