Tap Pharmac. Prod. v. State Bd. of Pharmacy

• Decision Date: 20 November 2007
• Docket Number: No. SC 88318.,SC 88318.
• Citation: 238 S.W.3d 140
• Parties: TAP PHARMACEUTICAL PRODUCTS INC., d/b/a Pharmacy Solutions, Respondent, v. STATE BOARD OF PHARMACY, Appellant.
• Court: Missouri Supreme Court

238 S.W.3d 140

TAP PHARMACEUTICAL PRODUCTS INC., d/b/a Pharmacy Solutions, Respondent, v. STATE BOARD OF PHARMACY, Appellant.

No. SC 88318.

Supreme Court of Missouri, En Banc.

November 20, 2007.

Jeremiah W. (Jay) Nixon, Atty. Gen., James R. Layton, State Solicitor, Stacy E. Yeung, Asst. Atty. Gen., William Vanderpool, Asst. Atty. Gen., Jefferson City, MO, for Appellant.

Morgan R. Hirst, Jones Day, Chicago, Ill., Duane E. Schreimann, Michael J. Schmid, Jefferson City, MO, for Respondent.

WILLIAM RAY PRICE, JR., Judge.

I. Introduction

TAP Pharmaceutical Products Inc., d/b/a Pharmacy Solutions, seeks review of a Board of Pharmacy decision placing TAP's pharmacy permit on probation for three years. The Board's action, however, is barred by a settlement agreement that TAP entered into with the State of Missouri. Pursuant to Rule 84.14, the trial court judgment is vacated and the Board's order is reversed.

II. Facts

In September 2001, TAP agreed to plead guilty to the offense of conspiracy to violate the Prescription Drug Marketing Act, 21 U.S.C. sections 331(t) and 333(b). Specifically, TAP provided free samples of the drug Lupron to physicians with the expectation that those samples would be prescribed to patients and then illegally billed to the Medicaid program. The United States District Court for the District of Massachusetts accepted TAP's guilty plea on December 6, 2001.

TAP and the State of Missouri entered into a Settlement Agreement and Release ("Agreement") on December 3, 2001. Under the terms of the Agreement, TAP paid the state $1,827,331.90. In exchange, the state agreed to release TAP from specified claims arising from the conduct underlying the guilty plea. TAP executed a similar agreement with all other states and the federal government.

Thereafter, the attorney for the Missouri Board of Pharmacy ("Board") filed a felony conviction complaint with the Board pursuant to section 338.065,¹ which allows for discipline of a pharmacy permit if:

[A] licensee . . . has entered a plea of guilty . . . in a felony prosecution pursuant to . . . the laws of the United States of America for any offense reasonably related to the qualifications, functions or duties of a licensee . . . or any felony offense, an essential element of which is fraud, dishonesty or an act of violence, or for any offense involving moral turpitude. . . .

The Board sought to impose discipline against TAP's pharmacy permit based on the 2001 guilty plea.² The Board held a disciplinary hearing, issued its findings, and ordered TAP's pharmacy permit placed on probation for three years. TAP filed a petition for review in the circuit court, which reversed the Board's decision and remanded the case to the Board.

III. Standard of Review

In an appeal following judicial review of an agency's administrative action, this Court reviews the decision of the agency, not the circuit court. Mo. Coalition for the Environment v. Herrmann., 142 S.W.3d 700, 701 (Mo. banc 2004). Pursuant to section 536.140.2, this Court reviews to determine "whether the agency's findings are supported by competent and substantial evidence on the record as a whole; whether the decision is arbitrary, capricious, unreasonable or involves an abuse of discretion; or whether the decision is unauthorized by law." Community Bancshares, Inc. v. Secretary of State, 43 S.W.3d 821, 823 (Mo. banc 2001).

IV. Arguments

TAP challenges the Board's determination on two fronts. First, it argues that the Board's actions did not comport with due process because TAP received an insufficient hearing and the Board was not a fair and impartial tribunal. Second, TAP points to three provisions in the Agreement that it argues bar the Board from instituting the action in question. Those provisions provide:

TERMS AND CONDITIONS

• Paragraph 2: "In consideration of this Agreement and payment set forth herein and subject to the exceptions from release set forth in Paragraph 3 below, the state of Missouri on behalf of itself, its officers, agents, agencies and departments shall release and forever discharge TAP, its predecessors, subsidiaries, joint venture owners, and their corporate parents and affiliates, successors and assigns, and their current and former directors, officers, and employees from any civil or administrative claims for damages or penalties that the state of Missouri has or may have relating to the Covered Conduct as defined in Preamble Paragraph F. The payment of the Settlement Amount fully discharges TAP from any obligation to pay Medicaid-related restitution, damages, and/or any fine or penalty to the State for the Covered Conduct." (emphasis added)

• Paragraph 4: "In consideration of the obligations of TAP set forth in this Agreement, conditioned upon TAP's payment in full of the Settlement Amount and except as reserved in paragraph 3 above, the state of Missouri agrees to release and refrain from instituting, directing or maintaining any administrative claim or any action seeking exclusions from the state of Missouri's Medicaid program against TAP, its predecessors, subsidiaries, joint venture owners, their corporate parents and affiliates, successors and assigns, for the Covered Conduct or for TAP's conviction in the Criminal Action. Nothing in this Agreement precludes the state of Missouri from taking action against TAP in the event that TAP is excluded by the federal government, or for conduct and practices other than the Covered Conduct or the conviction in the Criminal Action. The Medicaid Fraud Control Unit for the state of Missouri further agrees to refrain from recommending, causing or attempting to cause any administrative action or sanction, including debarment, by any other government agency of the state of Missouri for the Covered Conduct or for the conviction in the Criminal Action. TAP acknowledges that the state of Missouri does not have the authority to release TAP from any claims or actions which may be asserted by private payors or insurers, including those that are paid on a capitated basis for providing health care to the States' Medicaid programs." (emphasis added) • Paragraph 5: "This Agreement is expressly conditioned upon resolution of the Criminal Action. In consideration of the Criminal Action, the state of Missouri agrees that it shall not investigate, prosecute, or refer for prosecution or investigation to any agency, TAP, its predecessors, subsidiaries, joint venture owners, and their corporate parents and affiliates, successors and assigns for the Covered Conduct." (emphasis added)

The Board notes that these provisions are modified by Paragraph 3, which states in pertinent part that:

• Missouri specifically does not herein release TAP from . . . any and all of the following . . . (f) except as explicitly stated in this Agreement, any administrative liability, including mandatory exclusion from Federal health care programs.

Because this dispute can be resolved based on Paragraphs 2 and 4 of the Agreement, TAP's other arguments are not addressed.

V. Analysis

A.

Missouri courts treat a settlement agreement as a contract between the parties. Andes v. Albano, 853 S.W.2d 936, 941 (Mo. banc 1993). As a result, normal canons of contract construction apply. Chief among those canons is that the court first looks to the plain language of the agreement. Id. If that language clearly addresses the matter at issue, the inquiry ends. However, if the language is not clear, the court turns to other tools of construction in an attempt to determine the intent of the parties. Id. When making that determination, courts will consider language in the context of the entire contract, as well as "the relationship of the parties, the subject matter of the contract . . . the practical construction the parties themselves have placed on the contract by their acts and deeds, and other external circumstances that cast light on the intent of the parties." Royal Banks of Missouri v. Fridkin, 819 S.W.2d 359, 362 (Mo. banc 1991).

B.

The Agreement does not contain the words "discipline," "license," "pharmacy permit" or the like regarding the proposed probation of TAP's pharmacy permit. This dispute probably would not have arisen had it done so. However, the language of Paragraphs 2 and 4, and the Agreement as a whole, is sufficiently clear to resolve this matter in TAP's favor.

C.

The key language of Paragraph 2 of the Agreement provides that "the state of Missouri . . . shall release and forever discharge TAP . . . from any civil or administrative claims for damages or penalties." (emphasis added). Numerous Missouri cases have used the phrase "penalty" to describe licensure discipline imposed by the Board and other administrative bodies. See Tadrus v. Missouri Bd. of Pharmacy, 849 S.W.2d 222, 228 (Mo. App.1993) (suspension of pharmacy license is "penalty" left largely to the discretion of the Board); Dunning v. Bd. of Pharmacy, 630 S.W.2d 155, 157 (Mo.App.1982) (Board moderated Administrative Hearing Commission's recommended "penalty" of revocation of pharmacy license); Orion Security, Inc. v. Bd. of Police Comm'rs of Kansas City, 90 S.W.3d 157, 163, 167 (Mo. App.2002) (frequently referring to licensure suspension or revocation as a "penalty").

The state notes that this Court has held that licensure discipline is remedial rather than penal in nature. Younge v. State Board of Registration for the Healing Arts, 451 S.W.2d 346, 349 (Mo.1969), cert. denied, 397 U.S. 922, 90 S.Ct. 910, 25...