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Mississippi Restraining Order by zjp17122

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									        IN THE CHANCERY COURT OF THE FIRST JUDICIAL DISTRICT
                    OF HINDS COUNTY, MISSISSIPPI


MISSISSIPPI INDEPENDENT PHARMACIES
ASSOCIATION, INC; MISSISSIPPI PHARMACISTS
ASSOCIATION; NATIONAL
COMMUINITY PHARMACISTS ASSOCIATION;
JOHN EDWIN WHITE, D/B/A SERVICE REXALL
DRUGS; PROFESSIONALDRUGS, INC.; D/B/A
DIKET’S PROFESIONAL DRUGS; SULLIVAN’S
DISCOUNT DRUGS, INC. D/B/A HOWELL AND
HEGGIE DRUG COMPANY; LISTINE MOSBY;
ANNIE L. SCOTT; TORNEITA HARDIN, SHERIKEE
GRIM; NATIONAL ASSOCIATION OF CHAIN DRUG
STORES; WALGREEN CO.; AND FRED’S STORES
OF TENNESSEE, INC.                                                         PLAINTIFFS

V.                                                 CIVIL ACTION NO. G-2008-704 S/2

DIVISION OF MEDICAID, OFFICE OF THE
GOVERNOR, STATE OF MISSISSIPPI; and
DR. ROBERT L. ROPBINSON, IN HIS OFFICIAL
CAPACITY AS EXECUTIVE DIRECTOR OF THE
DIVISION OF MEDICAID, OFFICE OF THE
GOVERNOR                                                                    DEFENDANTS


                          OPINION OF THE COURT

     BEFORE THIS COURT is Plaintiffs’ Complaint for Declaratory Judgment and

Injunctive Relief seeking to prevent Defendants from implementing an administrative

policy amendment setting reimbursement rates for pharmacists. Plaintiffs further filed

a Joint Motion for Temporary Restraining Order to prevent implementation of the

administrative policy amendment. After careful consideration of Plaintiffs’ Complaint

and Motion for Temporary Restraining Order, this court determined that regardless of

case style, this case is, in fact, an appeal of the final rule adopted by the Division of

Medicaid regarding pharmacy reimbursement in Section 41.04 of the Medicaid
Provider Policy Manual. Therefore, this Court concluded that this matter is an appeal of

an administrative agency’s final decision and is governed by the appropriate appellate

standard of review. Further, this Court determined the review of this agency decision “is

limited to the record and the agency’s findings.” Boyles v. Mississippi State Oil & Gas

Bd., 794 So 2d 149, 153 (Miss. 2001). Having made such decision, and currently having

the entire record of the proceedings below including the “official rule-making record,”

this Court has determined that no oral argument is necessary. Therefore, this Court shall

render its Opinion in this matter after careful consideration of the agency’s findings and

the record below.

                               Facts

On January7, 2008, Mississippi pharmacists learned that the Division of Medicaid was

considering the adoption of a new State Maximum Allowable Cost (“State MAC”)

program for generic drugs covered by Medicaid. On March 5, 2008 the Division of

Medicaid (“DOM”) filed a “Notice of Proposed Rule Adoption” with the Mississippi

Secretary of State. In the Notice, DOM stated that it was filing, as a final rule, an

“administrative policy amendment” to establish a State MAC program for certain multi-

source (generic) drugs covered through the Mississippi Medicaid program. The proposed

implementation date of the rule was scheduled to be April 1, 2008.             Following

publication of the March 5 Notice, Plaintiffs filed with DOM a number of objections to

the rule. In response to these objections, DOM filed an amended proposed rule on April

1, 2008. At the request of Plaintiffs, and in accordance with the requirements of

Mississippi Administrative Procedure law, DOM conducted an oral proceeding on April

28, 2008. During such oral proceeding, each Plaintiff was limited to a five minute
presentation to express their concerns and objections.       On April 30, 2008, DOM

completed its review of all comments and the comment period for the rule ended. On

May 1, 2008 DOM published the final pharmacy reimbursement rule.

                 Standard of Review and Scope of Review

 The standard and scope of judicial review of an administrative decision is limited. See

Loftin v. George County Bd. Of Educ., 183 So. 2d 621, 622 (Miss.1996). In particular,

appeals to the chancery court of decisions regarding agency rules are limited to the

consideration of whether the agency’s decision was (1) unsupported by substantial

evidence, (2) arbitrary or capricious, (3) beyond the power of the administrative agency

to make, or (4) a violation of some statutory or constitutional right of the complaining

party. Boyles v. Mississippi State Oil & Gas Bd., 794f So.2d 149, 152 (Miss. 2001);

Bd. Of Law Enforcement Officers Stds. and Training v. Butler, 672 So. 2d 1196, 1199

(Miss. 1996).

  It is a sound principal of Mississippi law that decisions of administrative agencies are

to be given great deference. See Melody Manor Convalescent Center v. Mississippi State

Dept. of Health, 546 So. 2d 972, 974 ( stating that agency determinations of enforcement

of its regulations are entitled to “great deference” by reviewing court in Mississippi and

burden of proof on appeal rests with party challenging action of agency). This highly

deferential standard of review is by no means “a rubber stamp” as it requires that the

decision must not be arbitrary and capricious, must be supported by substantional

evidence, and must be within the statutory authority of the agency. Mississippi State

Board of Nursing v. Wilson, 624 So. 2d 485, 489 (Miss. 1993).
                                  Discussion

 This Court has the duty to determine whether the decision of DOM to adopt an

amended rule regarding pharmacy reimbursement in Section 41.04 of the Medicaid

Provider Policy Manual is reversible under the deferential standards stated above. After

careful and thorough consideration of the administrative record, this Court finds that it is

reversible.

  Section 43-13-117 of the Mississippi Code Annotated sets forth the method and rate of

reimbursement to pharmacies for generic drugs, providing in pertinent part:

                 (b) Payment by the division for covered multisource
                 drugs shall be limited to the lower of the upper limits
                  established by Centers for Medicare and Medicaid
                  Services (CMS) plus a dispensing fee, or the estimated
                  acquisition cost (EAC) as determined by the division,
                  plus a dispensing fee, or the providers’ usual and
                  customary charges to the general public.

This section further contains a provision specifically stated that no changes in payments

and rates of reimbursement by DOM shall be implemented without specific statutory

authorization from the Legislature, unless required by federal law or regulation:

                   Notwithstanding any provision of this article, except
                   as authorized in the following paragraph and in
                   Section 43-13-139, neither (a) the limitations on
                   quantity or frequency of use of or the fees or
                   charges for any of the care or services available
                   to recipients under this section, nor (b) the
                   payments or rates of reimbursement to providers
                   rendering care or services authorized under this
                   section to recipients, may be increased, decreased
                   or otherwise changed from the levels in effect on
                   July 1, 1999, unless they are authorized by an
                   amendment to this section by the Legislature.
                   However, the restriction in this paragraph shall
                   not prevent the division from changing the
                   payments or rates of reimbursement to providers
                   without an amendment to this section whenever
                  those changes are required by federal law or
                  regulation, or whenever those changes are
                  necessary to correct administrative errors or
                  omissions in calculating those payments or
                  rates of reimbursement.


Clearly, the Mississippi Legislature has set forth specific payments and rates of

reimbursement for drugs and has outlined specific guidelines under which those

payments and rates of reimbursements may be changed.

   According to the Notice of Proposed Rule Adoption filed by DOM, the original

proposed rule amendment “established a state maximum allowable cost (State MAC)

program for certain multi-source drugs covered through the Mississippi Medicaid

program.” Specifically, the original proposed rule amendment provided, in pertinent

part:

                 Reimbursement methodology for generic drugs is:
                 The lesser of:
                 - The provider’s usual and customary charge; or
                 - The Federal Upper Limit (FUL), if applicable, and
                     a dispensing fee of $5.50; or
                 - Mississippi estimated acquisition cost (MEAC) defined
                     as the Average Wholesale Price (AWP) less 25% AND
                     a dispensing fee of $5.50; or
                  - State Maximum Allowable Cost (SMAC)
                      reimbursement and a dispensing fee of $5.50.
                   Less the applicable co-payment of $3.00.

This proposed rule amendment clearly provided a fourth methodology for rates of

payment for generic drugs under the Medicaid program. Under a plain reading of Miss.

Code Ann. §43-13-117, this added fourth methodology is outside the statutory authority

of DOM. The legislative mandate clearly provides three methods for determining rates of

payment and further prohibits changes in those methods without a statutory amendment.
Therefore, this Court would find that the original proposed rule amendment is outside the

scope of the agency’s authority.

  When the original proposed rule amendment was challenged as an action outside the

statutory authority of the agency, DOM revised its proposed rule amendment as follows:

                    Multiple Source Generic Drugs – in reimbursing
                    for multi-source generic drugs Medicaid shall pay:
                    1. The lesser of:
                        - The provider’s usual and customary charge; or
                        - The Federal Upper Limit (FUL), if applicable, plus
                           a dispensing fee of $5>50; or
                        - The EAC for multiple source drugs which is
                           defined as the lesser of:
                              - AWP minus 25% plus a dispensing fee of $5.50 or
                              - SMAC rate plus a dispensing fee of $5.50.
                     2. Less the applicable co-payment.

According to the Notice of Proposed Rule Adoption, this rule “established a state

maximum allowable cost (State MAC) program for certain multi-source drugs covered

through the MS Medicaid program as a cost containment measure….” It is clear from a

plain reading of the proposed rule amendments that in its second attempt DOM made not

substantive change to the original proposed rule amendment. Instead, DOM merely

included the fourth rate of payment methodology under the EAC definition. As stated

above, the fourth rate of payment methodology is clearly outside the statutory authority

of DOM. Therefore, DOM attempts to create statutory authority by merely realigning its

bullet points. Regardless of these attempts, DOM clearly states that this rule “establishes

a state maximum allowable cost (State MAC) program for certain multi-source drugs….”

Clearly, this second proposed rule amendment is, in truth and in effect, indistinguishable

from the original proposed rule amendment and is likewise outside the statutory authority

of DOM.
  This Court is aware that DOM is authorized by the Medicaid statutes to define the

EAC. However, the EAC has previously been defined by DOM as “the Division’s best

estimate of the actual purchase price generally and currently paid by providers for a

drug….” The proposed rule amendment purports to provide an alternative definition for

EAS as the SMAC rate. However, the new SMAC rate is not a true definition of EAC

and instead is a “cost containment measure” to be implemented by DOM seeking to

reduce annual expenditures for certain drugs by $7.8 million in state funds. Clearly,

when faced with opposition to the original proposed rule amendment, DOM attempted to

use a legislative loophole to create a rule that is otherwise outside the scope of its

authority. It is obvious that this attempt is still a violation of the statutory mandates of

§43-13-117 that prohibits changes in rates of payment without a legislative amendment.

   This Court has carefully reviewed the agency’s findings and the record below and has

found no evidence that the unauthorized change of rate of payment was “required by

federal law or regulation, or …necessary to correct administrative errors or omissions in

calculating those payments or rates of reimbursement.” Therefore, this Court can find no

exclusion to the requirement that a legislative amendment be passed to change the

generic drug rate of payment to include the State MAC.

                            Conclusion

   Therefore, in accordance with case law and statutory law, this Court finds that the

proposed rule amendment of DOM is of the rare type that does qualify as a rule to be

vacated or set aside. Therefore, this Court reverses the final rule of the Division of

Medicaid. Counsel for Plaintiffs shall prepare a Final Judgment in accordance with this
Order to be presented to the Court for approval within five (5) days of the entry of this

Order.

       SO ORDERED, ADJUDGED, AND DECREED THIS the 24th day of June,

2008




                                                     signed

                                  CHANCELLOR WILLIAM HALE SINGLETARY

								
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