Pennsylvania Pharmacists Association v. Houstoun, Civil Action No. 99-491 (E.D. Pa. 6/7/2000)
| Decision Date | 07 June 2000 |
| Docket Number | Civil Action No. 99-491. |
| Parties | PENNSYLVANIA PHARMACISTS ASSOCIATION, et al., Plaintiffs, v. FEATHER O. HOUSTOUN, Defendant. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Presently before the Court are the Plaintiffs' and Defendant's Motions for Summary Judgment. After oral argument on May 25, 2000, and consideration of all briefs filed, for the reasons discussed below, the Defendant's Motion is Granted and the Plaintiffs' Motion is Denied.
Pennsylvania Pharmacists Association ("PPA") and sixteen individual pharmacies ("Named Pharmacy Plaintiffs"), collectively, ("Plaintiffs") have brought this class action pursuant to 42 U.S.C. § 1983 and 1988 against Feather O. Houstoun, the Secretary of the Pennsylvania Department of Public Welfare ("Department"). Plaintiffs seek various forms of relief, including a declaration that the outpatient pharmacy rates implemented under a managed-care program known as HealthChoices after February 1, 1997, were implemented in violation of federal law, the HealthChoices waiver, and pharmacies' Medical Assistance provider agreements. In addition, Plaintiffs seek to enjoin the Defendant from permitting continued reimbursement of providers under the HealthChoices program using the current outpatient pharmacy rates and directing Defendant to require reimbursement under the same rates as pharmacies being reimbursed under the Medical Assistance fee-for-service program. Finally, Plaintiffs seek attorneys' fees and costs.
PPA is a Pennsylvania non-profit corporation representing over 440 independent pharmacies and over 1,000 pharmacists employed at these facilities. The Named Pharmacy Plaintiffs are independent pharmacies operating in Southeastern Pennsylvania. Plaintiffs represent a class of all pharmacies (not only the independent pharmacies that are members of PPA) participating in Pennsylvania's Medical Assistance Program and serving Medical Assistance Beneficiaries ("MABs") under Title XIX of the Social Security Act, 42 U.S.C. § 1396-1396v, in the counties of Bucks, Chester, Delaware, Montgomery, and Philadelphia (the "Five County Area").
To participate in the program, the Named Pharmacy Plaintiffs entered into standard provider agreements ("Agreements") with the Department, which cover the provision of brand-name and generic prescription drugs to eligible beneficiaries. Under the Agreements, the Department is obligated to insure that the Named Pharmacy Plaintiffs are reimbursed in accordance with state and federal law.
On December 31, 1996, the Department secured a waiver, effective February 1, 1997, from the United States Department of Health and Human Services, Health Care Financing Administration ("HCFA") to certain provisions of the Social Security Act1 in order to implement Pennsylvania's Medicaid Managed Care Program called HealthChoices.2 Pursuant to the waiver, the Department contracted with four health maintenance organizations ("HMOs")3 to administer the HealthChoices Program. These HMOs then subcontracted with pharmacy benefits managers to administer the outpatient pharmacy benefit under the respective HealthChoices Plan. The pharmacy benefits managers in turn contracted directly with participating pharmacies, including Plaintiffs, to provide outpatient pharmacy services to beneficiaries in the Five County Area. The basis of Plaintiffs' complaint is that the pharmacy benefits managers, without oversight from the Department, systematically decreased the outpatient pharmacy benefit rates to unreasonably low levels and that the Department's method of implementing the HealthChoices program to permit this result violated the waiver, the Agreements, and applicable federal law.
Specifically, Plaintiffs allege that the outpatient pharmacy rates are now set below the cost of acquisition and the cost of dispensing drugs that Named Pharmacy Plaintiffs supply to MABs enrolled in HealthChoices. They contend that this has resulted in a situation that is inconsistent with efficiency, economy, and quality of care and has decreased MABs' access to retail pharmacies under HealthChoices in violation of the Social Security Act, specifically 1902(a)(30)(A), 42 U.S.C. § 1396a(a)(30)(A) ("Section 30(A)")4. Section 30(A) provides that a state plan for medical assistance must:
provide such methods and procedures relating to the utilization of, and the payment for, care and services available under the plan . . . as may be necessary to safeguard against unnecessary utilization of such care and services and to assure that payments are consistent with efficiency, economy, and quality of care and are sufficient to enlist enough providers so that care and services are available under the plan at least to the extent that such care and services are available to the general population in the geographic area.
In addition, the regulation at 42 C.F.R. § 431.12, which was adopted pursuant to 1902(a)(4), 42 U.S.C. § 1396a(a)(4) ("Section (a)(4)"), requires a state plan to provide for a medical care advisory committee that must have the opportunity to participate in policy development and program administration. Plaintiffs assert that the Department has failed to comply with this regulation as well.
Under Federal Rule of Civil Procedure 56(c), the test is whether there is a genuine issue of material fact and, if not, whether the moving party is entitled to judgment as a matter of law. Gray v. York Newspapers, Inc., 957 F.2d 1070, 1078 (3d Cir. 1992). In evaluating a summary judgment motion, the court may examine the pleadings and other material offered by the parties to determine if there is a genuine issue of material fact to be tried. Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). When considering a motion for summary judgment, a court must view all evidence in favor of the non-moving party. See Bixler v. Central Pa. Teamsters Health and Welfare Fund, 12 F.3d 1292, 1297 (3d Cir. 1993).
A movant "bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits, if any which it believes demonstrate the absence of a genuine issue of material fact". Celotex, 477 U.S. at 323. When movants do not bear the burden of persuasion at trial, they need only point to the court "that there is an absence of evidence to support the nonmoving party's case. Id. at 325. A fact is material if it might affect the outcome of the suit under the governing substantive law. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). For the dispute over the material fact to be genuine, "the evidence must be such that a reasonable jury could return a verdict in favor of the non-moving party." Id. To successfully challenge a motion for summary judgment, the non-moving party cannot merely rely upon the allegations contained in the complaint, but must offer specific facts contradicting the movant's assertion that no genuine issue is in dispute. Kline v. First West Government Securities, 24 F.3d 480, 485 (3d Cir. 1994).
The Third Circuit has recently decided that 30(A) does not require any particular methodology for satisfying the substantive requirements of a modified state Medicaid plan. See Rite Aid v. Houstoun, 171 F.3d 842, 851 (3d Cir. 1999). However, since a state may not act in an arbitrary and capricious manner, the state must have some objective basis by which it determines Medicaid reimbursement rates. Id. It is the responsibility of this Court then, to determine whether the Department has acted in an arbitrary and capricious manner in setting its reimbursement rates in the HealthChoices Southeast geographic area.
The Court may find that an action is arbitrary and capricious if the Department relied on factors other than those intended by Congress, did not consider "an important aspect" of the issue confronting the agency, provided an explanation for its decision which "runs counter to the evidence before the agency," or is entirely implausible. See Motor Vehicle Mfrs. Ass'n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 2867 (1983).
The scope of review is narrow as the Court should uphold the Department's decision of less than ideal clarity if the Department's path may reasonably be discerned. Id. at 43, 103 S.Ct. at 2867.
The Department, in formulating payments and methods to be used in the Medicaid Program, must consider whether payments are consistent with efficiency, economy, quality of care and access to services, although it need not consider every factor to the same degree. Rite Aid, 171 F.3d at 851-853.
The Department's procedure for deciding whether MABs had sufficient access to services was not arbitrary. The Department considered information from "other states" concerning reasonable "access provisions" and established a policy requirement that each HealthChoices HMO have available at least two participating pharmacies within 30 minutes travel time in urban areas, or within 60 minutes travel time in rural areas, via public or county transportation services (the "30/60 Standard"). (Def. Br. at 8). The Department developed the 30/60 Standard after reviewing its own data and that of other states who had received HCFA approval for modifications of their Medicaid plans. Standards similar to the 30/60 Standard have been considered favorably by HCFA.5 The Department continued to consider access when the HealthChoices HMOs lowered their pharmacy reimbursement rates in 1998 and 1999. It regularly receives lists of providers and maps showing provider access from the four HMOs.
The Plaintiffs point out that the 30/60...
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