Barclay Damon
Barclay Damon

Legal Alert

H&B obtains court ordered stay of mandatory mail order prescriptions for Medicaid recipients.

Hiscock and Barclay’s health care litigation team won another nationally-reported landmark litigation victory for medical providers and patients after filing a declaratory judgment and class action on October 5, 2012. The Stay temporarily enjoins the State’s implementation of regulations that would have diverted hundreds of millions of taxpayer dollars that fund the Medicaid pharmacy program to out-of-state mail order houses without any savings to the State.

The “hybrid” class action and declaratory judgment action, filed on behalf of the Pharmacists Society of the State of New York, five drugstores and several Medicaid patients, alleges that the New York State Department of Health “DOH” compiled a list of expensive drugs that Medicaid managed-care plans could restrict to a limited network of pharmacies that operate by mail order only through wholly-owned or contractually-affiliated mail order facilities located outside of New York.

The plaintiffs allege that the list was compiled after “secret meetings” the DOH held with insiders, including managed-care plans, pharmacy benefit managers and large mail-order pharmacies, all of whom stand to benefit if a large portion of the Medicaid prescription drug budget is diverted to their out-of-state pharmacies. The complaint alleges the ill-advised changes have already begun to endanger the health and lives of many of New York’s most vulnerable citizens and in many cases has effectively severed the longstanding professional relationships that existed between pharmacists, prescribers and their patients. The complaint provides several troubling examples of patient health being compromised due to a failure of the mail order service model.

Several representative Medicaid patients are fighting alongside their pharmacists and the Pharmacists Society to enforce existing laws that ensure a patient’s access to local pharmacies of their choice as long as the cost is the same to the Medicaid program. Medicaid is the joint federal-state program that pays for medical services for the poor and disabled. Up to 70 percent of Medicaid patients are minorities and suffer disproportionately from socioeconomic challenges such as cultural issues, literacy and language barriers, transience and limited transportation resources, all of which can make mandatory mail order a bad fit for Medicaid patients suffering from complicated medical conditions.

Federal law provides a “freedom of choice requirement” for Medicaid recipients, meaning the list of doctors or pharmacies offering services must be robust. To underscore the commitment to that standard of patient choice, New York’s legislature amended Section 3216 of the New York State Insurance Law in late 2011 to prohibit insureds from being mandated to use a mail-order pharmacy, according to the lawsuit. Known as AMMO, for anti-mandatory mail order, the amendment required that “any pharmacy,” mail order or community-based retailer, could be used by patients as long as the pharmacy offers the same pricing and terms. The AMMO bill thus leveled the pharmacy playing field by requiring health insurers to provide patients with equal access to retail Medicaid pharmacy providers as long as equivalent pricing and terms are offered.

However, this March, the Legislature, while reaffirming patient choice, amended the New York State Social Services law by creating what was intended to be a narrow exception allowing Medicaid managed-care plans to “limit” their networks of pharmacies for so-called specialty drugs based on undefined “clinical, professional or cost criteria.” Initially, pharmacists assumed the excluded drug list would include only those rare drug classes of limited distribution or those not traditionally available at the retail level. As drafts of qualifying criteria evolved toward a mail order model, however, groups such as the New York State Board of Pharmacy (the licensing body for pharmacies in New York State), the Chain Pharmacy Association and the plaintiff Pharmacists Society (the trade group for pharmacists) expressed concern that the list of eligible drugs was extremely overbroad, vague and undefined, and could be used to scuttle a patient’s statutory rights to choose where they get their prescriptions filled, thus nullifying the primary purpose of the Statute.

The final list is extremely broad, and contains many common medications that have been filled reliably by community pharmacies for decades for such widespread diseases as multiple sclerosis, rheumatoid arthritis, cancer and hepatitis C, among others. In terms of dollars it represents a dramatic incursion into the drug formularies traditionally served by retail pharmacies representing a significant portion of the $5 billion Medicaid drug program serviced by the 4,000-plus pharmacies currently in the Medicaid program. The lawsuit expresses concern about the list’s impact on patients’ health since in a mail-order scenario, patients–many of whom are high risk–are required to use designated mail-order providers in a setting in which there is no face-to-face contact with the dispensing pharmacy or its staff; no mandatory counseling is provided or required; and without the benefit of interpersonal contact that can be critical to a patient’s understanding of drug regimens, interactions, side effects and other related factors.

The claims asserting antitrust violations allege that in addition to harming patients in the short run, the excluded drug program, coupled with mandatory mail order, will drive many independent pharmacies out of business, resulting in a significant increase in the already highly concentrated market power of the mail-order pharmacies associated with Pharmacy Benefit Managers. The case raises the concern that the new marketplace for pharmacy services, denuded of many community pharmacies that have loyally served patients locally for decades, will restrict competition, patient choice and access.

The court-ordered stay of DOH’s implementation of the excluded drug list leaves patients with the statutory right to fill their prescriptions at their local pharmacy at the mail order rate pending the court’s consideration of the merits of the case. Managed-care plans have been alerted of their obligations to honor a patient’s choice to fill their prescriptions at a community pharmacy.

The plaintiffs were represented by Linda J. Clark, Partner, and associate Joseph A. Murphy of Hiscock & Barclay’s Albany office. Members of the firm’s health care group assisted including Robert Tengeler and Greg Macmillan.

Inquiries or requests for copies of the case documents can be obtained by emailing Linda Clark at lclark@hblaw.com. Linda can be reached by phone at 518-429-4241 and her contact and other information is available at www.hblaw.com.