Managed Pharmacy Care, Corp. v. Sebelius
| Decision Date | 13 December 2012 |
| Docket Number | 12–55335,12–55535,12–55315,12–55550,12–55331,12–55103,12–55334,12–55554.,Nos. 12–55067,12–55068,12–55332,s. 12–55067 |
| Citation | 705 F.3d 934 |
| Parties | MANAGED PHARMACY CARE, a California corporation; Independent Living Center of Southern California, Inc., a California corporation; California Foundation for Independent Living Centers, a California corporation; Gerald Shapiro, Pharm D, DBA Upton Pharmacy and Gift Shoppe; Sharon Steen, DBA Central Pharmacy; Tran Pharmacy, Inc., a California corporation, DBA Tran Pharmacy; Odette Leonelli, DBA Kovacs–Frey Pharmacy; Market Pharmacy, Inc., DBA Market Pharmacy; Mark Beckwith, Plaintiffs–Appellees, v. Kathleen SEBELIUS, Secretary of the United States Department of Health and Human Services, Defendant, and Toby Douglas, Director of the Department of Health Care Services of the State of California, Defendant–Appellant. California Hospital Association, Plaintiff–Appellee, v. Toby Douglas, Director of the Department of Health Care Services of the State of California, Defendant–Appellant, and Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendant. California Medical Transportation Association, Inc., a California corporation; GMD Transportation, Inc., a California corporation; Lonny Slocum, an individual, Plaintiffs–Appellees, v. Toby Douglas, Director of the Department of Health Care Services of the State of California, Defendant–Appellant, and Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendant. California Medical Association; California Dental Association; California Pharmacists Association; National Association of Chain Drug Stores; California Association of Medical Product Suppliers; AIDS Healthcare Foundation; American Medical Response West; Jennifer Arnold, Plaintiffs–Appellees, v. Toby Douglas, Director of the Department of Health Care Services of the State of California, Defendant–Appellant, and Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendant. California Hospital Association, Plaintiff–Appellee, v. Toby Douglas, Director of the Department of Health Care Services of the State of California, Defendant, and Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendant–Appellant. Managed Pharmacy Care, a California corporation; Independent Living Center of Southern California, Inc., a California corporation; California Foundation for Independent Living Centers, a California corporation; Gerald Shapiro, Pharm D, DBA Upton Pharmacy and Gift Shoppe; Sharon Steen, DBA Central Pharmacy; Tran Pharmacy, Inc., a California corporation, DBA Tran Pharmacy; Odette Leonelli, DBA Kovacs–Frey Pharmacy; Market Pharmacy, Inc., DBA Market Pharmacy; Mark Beckwith, Plaintiffs–Appellees, v. Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendant–Appellant, and Toby Douglas, Director of the Department of Health Care Services of the State of California, Defendant. California Medical Transportation Association, Inc., a California corporation; GMD Transportation, Inc., a California corporation; Lonny Slocum, an individual, Plaintiffs–Appellees, v. Toby Douglas, Director of the Department of Health Care Services of the State of California, Defendant, and Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendant–Appellant. California Medical Association; California Dental Association; California Pharmacists Association; National Association of Chain Drug Stores; California Association of Medical Product Suppliers; AIDS Healthcare Foundation; American Medical Response West; Jennifer Arnold, Plaintiffs–Appellees, v. Toby Douglas, Director of the Department of Health Care Services of the State of California, Defendant, and Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendant–Appellant. California Hospital Association; G.G., an individual; I.F., an individual; R.E., an individual; A.W., an individual; A.G., an individual, Plaintiffs–Appellants, v. Toby Douglas, Director of the Department of Health Care Services of the State of California; Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendants–Appellees. California Medical Association; California Dental Association; California Pharmacists Association; National Association Of Chain Drug Stores; California Association of Medical Product Suppliers; AIDS Healthcare Foundation; American Medical Response West; Jennifer Arnold, Plaintiffs–Appellants, v. Toby Douglas, Director of the Department of Health Care Services of the State of California; Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendants–Appellees. California Medical Transportation Association, Inc., a California corporation; Lonny Slocum, an individual; GMD Transportation, Inc., a California corporation, Plaintiffs–Appellants, v. Toby Douglas, Director of the Department of Health Care Services of the State of California; Kathleen Sebelius, Secretary of the United States Department of Health and Human Services, Defendants–Appellees. |
| Court | U.S. Court of Appeals — Ninth Circuit |
OPINION TEXT STARTS HERE
Lindsey Powell, United States Attorneys' Office, Washington, D.C., for Kathleen Sebelius.
Kamala D. Harris, California Attorney General, Julie Weng–Gutierrez, Senior Assistant Attorney General, Karin S. Schwartz (argued), Susan M. Carson, and Jennifer M. Kim, Supervising Deputy Attorneys General, Gregory D. Brown, Joshua N. Sondheimer, and Jonathan E. Rich, Deputy Attorneys General, San Francisco, CA, for Toby Douglas.
Lynn S. Carman, Medicaid Defense Fund, San Anselmo, CA; Lloyd A. Bookman and Jordan B. Keville, Hooper, Lundy & Bookman, P.C.; Stanley L. Friedman, Law Offices of Stanley L. Friedman, Los Angeles, CA; Craig J. Cannizzo, Hooper, Lundy & Bookman, P.C., San Francisco, CA; for Plaintiffs–Appellees–Cross–Appellants.
Jessica Lynn Ellsworth, Hogan Lovells U.S. LLP, Washington, D.C., for amicus curiae.
Appeal from the United States District Court for the Central District of California, Christina A. Snyder, District Judge, Presiding. D.C. Nos. 2:11–cv–09211–CAS–MAN, 2:11–cv–09078–CAS–MAN, 2:11–cv–09830–CAS–MAN, 2:11–cv–09688–CAS–MAN.
Before: STEPHEN S. TROTT, ANDREW J. KLEINFELD, and M. MARGARET McKEOWN, Circuit Judges.
In the four cases giving rise to these eleven consolidated appeals, Kathleen Sebelius, Secretary of the Department of Health and Human Services (“HHS”), and Toby Douglas, Director of the California Department of Health Care Services (“DHCS”), appeal the district court's grant of preliminary injunctions in favor of various providers and beneficiaries of Medi–Cal, California's Medicaid program (“Plaintiffs”). The injunctions prohibit the Director and DHCS from implementing reimbursement rate reductions authorized by the California legislature and approved by the Secretary. The injunctions also stay the Secretary's approval. Plaintiffs cross-appeal the court's modification of its orders to allow the rate reductions as to Medi–Cal services provided before the injunctions took effect.
Plaintiffs assert claims against the Secretary under the Administrative Procedures Act (“APA”) and against the Director under the Supremacy Clause of the United States Constitution, claiming that the reimbursement rate reductions do not comply with 42 U.S.C. § 1396a(a)(30)(A) (hereafter “§ 30(A)”). In support of their claims, Plaintiffs rely primarily on our decision in Orthopaedic Hospital v. Belshe, 103 F.3d 1491 (9th Cir.1997). In Orthopaedic Hospital, the federal government was not a party. As such, we did not address whether deference was owed to the Secretary's interpretation of the statute. Instead, we interpreted § 30(A) as requiring a state seeking to reduce Medicaid reimbursement rates first to consider the costs of providing medical services subject to the rate reductions. DHCS did not consider such studies in all of the Medicaid services subject to the rate reductions. The Secretary points out that Congress expressly delegated to her the authority and responsibility to approve state Medicaid plans. She argues that her approval of the rate reductions, including her view that § 30(A) does not necessarily require cost studies (or any other particular methodology), is entitled to deference, overrides Orthopaedic Hospital, and complies with the APA.
In addition to joining the Secretary's arguments, the Director contends that Plaintiffs cannot maintain a direct cause of action under the Supremacy Clause for violation of § 30(A). Although we have previously discussed this issue in a case where the Secretary had not acted, Independent Living Center of Southern California v. Shewry, 543 F.3d 1050 (9th Cir.2008), we have not considered it in a situation where, as here, the Secretary has already exercised her discretion to approve the rate reductions as consistent with federal law.
The district court held that Plaintiffs in all four cases were likely to succeed on the merits of their APA and Supremacy Clause claims, and that the Plaintiffs in one case were likely to succeed on their claim under the Takings Clause of the United States Constitution. The court also concluded that Plaintiffs would suffer irreparable harm absent the injunctions and that the injunctions favored the public interest. We have jurisdiction under 28 U.S.C. § 1292(a)(1), and we conclude that the district court misapplied the applicable legal rules and thus did not appropriately exercise its discretion.
We hold that (1) Orthopaedic Hospital does not control the outcome in these cases because it did not consider the key issue here—the Secretary's interpretation of § 30(A), (2) the Secretary's approval of California's requested reimbursement rates—including her permissible view that prior to reducing rates...
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