Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 1 of 32 Page ID #:1

Yvette D. Roland (SBN 120311)

Audra L. Thompson (SBN 218479)

2 DUANE MORRIS LLP

633 West Fifth Street, Suite 4600

Los Angeles, CA 90071

Telephone: 213.689.7400

Facsimile: 213.689.7401

E-Mail:

droland c. duanemorris.com

E-Mail: at om son c. uanemonis.com

Frederick R. Ball (pro hac vice to be filed) Nicholas J. Lynn (pro hac vice to be filed) Richard P. Darke ,(pro hac vice to be filed) Christopher Petelle (pro hac vice to be filed) Duane Monis LLP 190 S. Lasalle Street, Suite 3700 9 Chicago, IL 60603 Telephone: 312.499-6700 10 Facsimile: 312.499-1945

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11 Attorneys for Plaintiffs

12
IN THE UNITED STATES DISTRICT COURT

13

CHA~ v ~;l.O * ·. \.~t\~il FOR THE CENTRAL DISTRICT OF CALIFORNIA ·.

:; NATlONAL ASSOCIATION OF

0

9 '?

DRUG STORES, and the NATIONAL

16 COMMUNITY PHARMACISTS' ASSOCIATION,

COMPLAINT FOR,,JNJUNCTIVE AND DECLARATORY RELIEF

17

Plaintiffs,

18

v.

19

ARNOLD SCHWARZENEGGER, not

20 individually, but solely in his official

ca2acity as Governor of the State of

21 California, DAVID MAXWELL-JOLLY,

not individually, but solely in her official

22 capacity as Secretary of tlie California

Department of Health Care Services, and

23 THE CALIFORNIA DEPARTMENT OF

HEALTHCARE SERVICES,

24

Defendants.

25

26

27

The National Association of Chain Drug Stores ("NACDS") and the National

28 Community Pharmacists Association ("NCPA") complain against Arnold

DMADMIN\1600896. I

COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 2 of 32 Page ID #:2

1 Schwarzenegger, not individually, but solely in his capacity as Governor of the State

2 of California, David Maxwell-Jolly, not individually, but solely in his capacity as the 3 Secretary, California Department of Health Care Services, and the California

4 Department of Health Care Services (the "Department") for injunctive and declaratory 5 relief.

6

This Complaint seeks to enjoin the Defendants from reducing by, on average,

7 slightly more than four percent (4%) Medicaid reimbursement based on Average

8 Wholesale Price ("AWP") for drug products paid to pharmacies for dispensing

9 prescription drugs reimbursed by the State of California's Medicaid program. The

10 Court should grant injunctive relief because: (a) Section 1902(a)(30)(A) of the Social

11 Security Act ("Section 30(A)") preempts these reimbursement cuts because the

12 Depmiment failed to properly consider and abide by the "quality of care" and "access"

13 provisions of Section 30(A); (b) the Depmiment violated federal and state law by

14 failing to obtain approval from the United States Department of Health and Human

15 Services' Centers for Medicare & Medicaid Services ("CMS") before implementing

16 the cuts to reimbursement; (c) the Depmiment violated state law by failing to consult

17 with stakeholders and other interested parties regarding the reimbursement cuts; (d) 18 the Depmiment violated federal law by making reimbursement payments to

19 pharmacies that are lower than the Department's own best estimates of pharmacies'

20 actual acquisition costs; and (e) the reimbursement cuts will reduce the quality of care

21 delivered to Medicaid beneficiaries in California and as such violates state law.

22 Finally, in the past year, this comi enjoined similar cuts in reimbursement for the same 23 reasons. For these reasons, which are more thoroughly set forth below, the

24 Pharmacies are entitled to a declaratory judgment that the reimbursement cut violates 25 federal and state law, and injunctive relief.

26

27

28
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2
COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

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1

JURISDICTION AND VENUE

2

1. Jurisdiction is proper in this Court pursuant to 28 U.S.C. § 1331. In

3 addition, this Court has supplemental jul'isdiction over the state law claims pursuant to

4 28 U.S.C. § 1367.

5

2. Venue is appropriate in this jurisdiction pursuant to 28 U.S.C. § 1391

6 because the persons sued in their official capacity all maintain offices within this

7 District and the State entities are headqua1iered within, and a substantial part of the

8 events giving rise to these claims occurred in, this District.

9

PARTIES

10

3. NACDS is a national association whose members include 20 pharmacy

11 chains in California with over 2,700 individual pharmacies within the State.

12 NACDS' s mission includes ensuring its members are adequately reimbursed by

13 federal and state healthcare programs and ensuring patient access to pharmaceutical

14 care. Members ofNACDS participate in California's Medicaid program.

15

4. NCPA is a national association whose members include independent

16 community pharmacies and pharmacists including independent community

17 pharmacists in the state of California. The nation's independent conimunity

18 pharmacists are small business owners and multifaceted healthcare providers who

19 represent a vital part of the United States' healthcare delivery system. NCPA's

20 members are committed to high quality patient care and services and to restoring,

21 maintaining, and promoting the health and well-being of the general public, including

22 Medicaid patients. NCPA represents the professional and proprietary interests of

23 independent community pharmacists, and promotes and defends those interests,

24 including those interests pe1iaining to federal and state healthcare programs.

25 Members of NCPA participate in California's Medicaid program.

26

5. Arnold Schwarzenegger is named solely in his official capacity as

27 Governor of the State of California. As Governor, Mr. Schwarzenegger has executive

28 responsibility for the Department, the single state agency responsible for
3
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Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 4 of 32 Page ID #:4

1 administering the Medicaid Program in California. See California Welfare and

2 Institutions Code, §§10722, 10740, 14100.0, 10725, 14105, and 14124.5; see also

3 ce1iification of California Attmney General, Attached to Califmnia State Plan as

4 Attachl'nent 1.1-A. Relevant sections to the.California State Plan are attached as

5 Group Exhibit A.

6

6. David Maxwell-Jolly is sued solely in his capacity as Secretary of the

7 Depmiment. The Department is charged with administering the Medicaid program in

8 California.

9

7. The Depmiment is sued in its capacity as the State of California

10 department charged with administering the Medicaid program in California and

11 implementing the September 26, 2009 reimbursement cut.

12

Laws governing California's Medicaid Program, "Medi-Cal."

13

8. Medicaid is a joint federal and state program created under Title XIX of

14 the Social Security Act to provide health care to indigent and otherwise disadvantaged

15 Americans. Federal and state government agencies share responsibility for funding

16 the Medicaid program. Each state administers its respective Medicaid program in

17 accordance with federal and state law, as well as a State-authored Medicaid State plan,

18 which the state submits to CMS, and CMS reviews and approves.

19

9. The California Medicaid State Plan ("State Plan") is the Depmiment's

20 comprehensive written statement that describes the nature and scope of the State

21 Medicaid program and gives assurances that DSHS will administer the State Plan in

22 conformity with the specific requirements of the Social Security Act. CMS must

23 approve all amendments to a State Plan before a state may implement "material

24 changes," including those made to "reflect ... comi decisions." 42 C.P.R. §

25 430.12(c)(1 )(i) and (ii).

26

10. The Depmiment is required to administer the Medi-Cal program in

27 accordance with Federal Law, as well as in accordance with the California State Plan,

28 applicable State law, and Medi-Cal regulations. 22 C.C.R. § 50004(b) (2009).
4
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1

11. Pursuant to the State Plan, California agreed to administer the state

2 Medicaid program "in accordance with the provisions of this State plan, the

3 requirements of titles XI and XIX of the Act, and all applicable Federal regulations

4 and other issuances of the Department." See California State Plan, page 1.

5

12. In order to comply with federal law, a state Medicaid program must

6 comply with the "quality of care" clause of Section 30(A) which provides in pertinent

7 part:

8

(a) A state plan for medical assistance must ... provide such methods and

9 procedures relating to the utilization of, and payment for, care and services available

10 under the plan ... as may be necessary ... to assure that payments are consistent with

11 efficiency, economy, and quality of care ... .

12

42 U.S.C. § 1396a(a)(30)(A).

13

13. A state Medicaid program must also comply with the "access" clause of

14 Section 30(A) which provides in pertinent pmi:

15

(a) A state plan for medical assistance must ... provide such methods and

16 procedures relating to the utilization of, and payment for, care and services available

17 under the plan ... as may be necessary ... to assure that payments ... are sufficient

18 to enlist enough providers so that care and services are available under the plan at

19 least to the extent that such care and services are available to the general population in

20 the geographic area.

21

Id.

22

14. For that reason, federal regulations require the Department to offer

23 payments to providers "sufficient to enlist enough providers so that services under the

24 plan are available to recipients at least to the extent that those services are available to

25 the general population." 42 C.P.R. § 4407.204.

26

15. The State Plan, as approved by CMS, affirms that "[the Depmiment's]

27 payments are sufficient to enlist enough providers so that services under the plan are

28
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1 available to recipients at least to the extent those services are available to the general

2 population." See California State Plan, 4.19(i).

3

16. Therefore, to demonstrate that reimbursement complies with federal

4 statutes, federal regulations, and the State Plan, and that its reimbursement is not

5 arbitrary and capricious, a State must show that it has evaluated, prior to

6 implementation of new rates and methodologies, that the reimbursement provided

7 complies with the "quality of care" and "access" provisions of Section 30(A), and will

8 ensure enough providers are enlisted so that services under the plan are available to

9 recipients at least to the extent that they are available to the general public.

10

The Method Used To Calculate California's Medicaid Reimbursement.

11.

17. Retail pharmacies that take part in the Medicaid program dispense

12 prescription drugs and provide related services to patients who are covered by

13 Medicaid. In return, those retail pharmacies apply for, and receive, reimbursement

14 payments from the Depmiment.

15

18. Reimbursement paid to Medicaid-enrolled pharmacies for drug products

16 and services contains two components: (1) a reasonable dispensing fee meant to

17 compensate a pharmacy for the dispensing costs that it incurs and the associated

18 services that it provides, and (2) reimbursement for the drug product itself.

19

19. With regard to the first component of reimbursement, California does not

20 provide a reasonable dispensing fee that compensates pharmacies for the dispensing

21 costs that they incur and the related services that they provide.

22

20. With regard to the second component of reimbursement, the California

23 State Plan provides that California reimburses pharmacies for single source drugs and

24 ce1iain multiple source drugs at a rate of the A WP published by First Databank, minus

25 a discount of 17%. See Cal Wel & Inst Code§ 14105.45; Exhibit A, Califmnia State

26 Plan, Supplement 2 to Attachment 4.19-b, page 1.

27

28
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1

21. California has not made assurances to CMS that the reimbursement that

2 went into effect on September 26, 2009 represents its best estimate of acquisition cost

3 ("EAC") as required by federal law.. 42 C.F.R. §447.518.

4

22. California also has not certified to the federal government in its State

5 Plan that the reduced reimbursement as of the September 26, 2009 is "designed to

6 enlist participation of a sufficient number of providers in the program so that eligible

7 persons can receive the medical care and services included in the plan at least to the

8 extent these are available to the general population." See California State Plan,

9 Attachment 4.19-B, p.l.

10

The AWP Reductions

11

23. First DataBank, Inc., a clearinghouse of data pertaining to the

12 pharmaceutical industry, publishes lists of prescription drugs and the AWP for each

13 prescription drug. The Department uses First DataBank AWP data in calculating its

14 EAC.

15

24. On March 17, 2009, First DataBank entered into a class action settlement

16 agreement ("First DataBank: Settlement") in which it agreed to reduce the mark-up to

17 the wholesale average cost ("WAC") from 1.25 to 1.20 when setting AWPs for 1,442

18 NDCs. In addition, First DataBank announced it would voluntarily cut the WAC

19 mark-up to 1.20 when setting AWPs for thousands ofNDCs where the mark-up

20 exceeded 1.20. In effect, First DataBank agreed to reduce its listed AWP for viliually

21 all NDCs by, on average, 4%. These reductions of AWPs occurred on September 26,

22 2009.

23

25. The practical effect of First DataBank's reduction of the mark-up to

24 WAC when setting AWPs is that the reimbursement for drug products tied to AWP

25 that the Depmiment pays has been reduced by slightly more than 4%.

26

26. As a result of the AWP reductions, reimbursement payments will be at

27 viliually the same levels as reimbursement payments that this Comi enjoined

28 approximately six months ago, due to violations of the same laws discussed herein.
7
COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF
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1

The Department's Failure To Comply With Federal And State Laws

2

27. There is nothing in the administrative record that suggests that the State

3 considered or otherwise took into account either the "quality of care" or the "access"

4 provisions of Section 30(A) prior to this reduction of reimbursement payments.

5

28. Indeed, the plaintiffs have not found any evidence that the State took any

6 steps to determine how the reimbursement reduction would affect compliance with the

7 "quality of care" or "access" provisions of Section 30(A).

8

29. In addition, there is no indication that the State has received approval

9 from CMS for a State Plan amendment that would allow either for this reduction in

10 actual reimbursement to pharmacies, or in the commensurate reduction in care quality 11 or access.

12

30. The State has not obtained CMS approval prior to reducing Pharmacies'

13 AWP-based reimbursement by 4%, in violation of federal law. 42 C.F.R. § 430.12(c)

14

31. There is no evidence that the State provided public notice and the

15 opportunity for public comment prior to the 4% reduction in AWP-based

16 reimbursement, as it is required to do by 42 C.F.R. § 447.205.

17

32. There is no evidence that the new, reduced reimbursement payments

18 were "designed to enlist participation" of sufficient providers of Medicaid, as the State

19 warranted in the state plan.

20

33. The State has not made, and cannot make, the required analysis, findings

21 or assurances to CMS that the new reduced reimbursement payments properly reflects

22 the EAC for prescription drugs in the State of Washington.

23

34. The California Medicaid State Plan requires the Depmiment to set

24 payment pursuant to a very specific methodology:

25

The methodology utilized by the State Agency in establishing payment rates

26 will be as follows:

27

(a) The development of an evidentiary base or rate study resulting in the

28 determination of a proposed rate.
8
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1

(b) To the extent required by State or Federal law or regulations, the

2 presentation of the proposed rate at public hearing to gather public input to the rate

3 determination process.

4

(c) The determination of a payment rate based on an evidentiary base,

5 including petiinent input from the public.

6

(d) The establishment of the payment rate through the State Agency's adoption

7 of regulations specifying such rate in the[...] Schedule ofMaximum Allowances for

8 EPSDT health assessment, or through any other means authorized by State law.

9

See Califmnia State Plan, Attachment 4.19-B, p. 1. There is no evidence the

10 State has complied with these requirements.

11

Harm To Pharmacies And Their Patients

12

35. Unless enjoined, the effect of the reimbursement reduction will be

13 catastrophic for Medicaid beneficiaries across Washington, as well as health service

14 providers like the Pharmacies. The 4% AWP cut will result in the reimbursement for

15 many drugs at a level below the Pharmacies' break even cost.

16

36. The Pharmacies will be forced to take drastic steps if the reimbursement

17 cut goes into effect, including ceasing to fill Medicaid prescriptions and dropping their

18 enrollment in the Medicaid program.

19

37. Medicaid patients such as those served by members ofNACDS and

20 NCPA may lose access to lifesaving drugs.

21

38. In short, there is real and immediate risk of harm to both the pharmacies

22 and to Medicaid beneficiaries due to the September 26, 2009 reimbursement cut.

23

COUNT I FOR AN INJUNCTION HALTING THE REil\1BURSEMENT

24

CUT

25

39. The Plaintiffs incorporate Paragraphs 1 - 38 as if set forth fully here.

26

40. This Comi has already recognized that a 10% and 5% reduction in

27 reimbursement rates would both impose irreparable harm upon Medicaid beneficiaries

28 and upon providers such as Pharmacies. See Independent Living Ctr. OfSouthern
9
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Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 10 of 32 Page ID #:10

1 Ca., Inc. v. Shewry, No. CV08-3315 CAS (MANx) (Aug. 18, 2008) and Managed

2 Pharmacy Care v. Jolly, 603 F. Supp. 2d 1230 (C.D.C. 2009). This Court enjoined

3 the Depmiment from implementing both a 10% and 5% reduction in Medicaid

4 reimbursement rates on the grounds that the Depmiment had failed to adequately

5 consider the effect such a reduction would have on Medicaid beneficiaries and the

6 availability of Medicaid services through the maintenance of a robust provider

7 network. Id.

8

41. Pursuant to Section 30(A), the Depmiment had a duty to consider

9 efficiency, economy, quality, and access when establishing reimbursement. It is the

10 state's obligation to develop methods and procedures for assuring that it complies

11 with Section 30(A). Here, the Depmiment acted in violation of the Supremacy Clause

12 of the United States Constitution because it has failed to consider or give sufficient

13 weight to the impact of the reimbursement cut on quality of care or access to care for

14 Medicaid beneficiaries required by Section 30(A), including the relationship of

15 reimbursement payments to provider costs. Additionally, there is no evidence that

16 the Depmiment has complied with the requirements of Section 30(A) prior to its

17 implementation ofthe September 26, 2009 reimbursement cut. Finally, it is evident

18 that the reimbursement cut will directly result in a failure of the State to comply with

19 the requirements of Section 30(A) because reimbursement will not be sufficient to

20 assure "quality of care" and access.

21

42. Moreover, there is no evidence that the State has complied with the

22 requirements of federal law, state regulations, or the State Plan to obtain approval of a

23 State Plan amendment prior to this material change in the State's operation of the

24 Medicaid program. 42 C.P.R.§ 430.12(c).

25

43. There is also no evidence that the Depmiment gave adequate public

26 notice or obtained public comment, as it is required to do pursuant to 42 C.F.R. §

27 447.205.

28
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1

44. It is also clear that the Department has not taken adequate steps to set

2 payment rates at such a level as to ensure that sufficient providers remain in the

3 program so that services under the plan are available to recipients at least to the extent

4 that those services are available to the general population." 42 C.F.R. § 4407.204; See

5 California State Plan, 4.19(i).

6

45. There is absolutely no evidence that the State made any finding or

7 determination that the four percent (4%) reduction in rates represents the EAC of

8 providers, which is the amount they are obligated to pay providers under Federal law.

9 42 C.F.R. § 447.518.

10

46. In short, the Department acted arbitrarily and capriciously, unlawfully

11 and in violation of the Supremacy Clause of the United States Constitution when it

12 reduced reimbursement payments to pharmacies. Based on the foregoing, Plaintiffs

13 are likely to succeed on the merits.

14

47. Irreparable harm will occur if the reimbursement cut goes into effect

15 because pharmacies, including members of the Plaintiff associations, will be forced to

16 reduce levels of service, deny prescriptions to new Medicaid beneficiaries, shut down,

17 reduce service hours, and/or refuse to take any Medicaid beneficiaries. Plaintiffs have

18 no administrative remedy, nor any plain, speedy, or adequate remedy except by this

19 complaint for injunctive relief.

20

48. The balance of harms favors entering the injunction because the physical

21 and emotional harm suffered by Medicaid beneficiaries deprived of needed access to

22 quality pharmaceutical products if the cut goes into place, as well as the inevitable

23 loss of employment if the pharmacies are forced to close or lay off workers, outweighs

24 monetary loss to the State. Moreover, the State is receiving additional federal

25 funding, the express purpose of which is to avoid this type of cut.

26

49. It is in the public interest that the court grant the injunction because it is

27 always in the public interest that State governments comply with federal and state law.

28
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1 Moreover, it is in the public interest to assure that Plaintiffs' members can continue to

2 serve Medicaid beneficiaries.

3

WHEREFORE, Plaintiffs respectfully request that this Court enter an injunction

4 enjoining the September 26, 2009 reimbursement cut.

5

COUNT II FOR DECLARATORY JUDGMENT THAT THE

6 DEPARTMENT HAS VIOLATED 42 C.F.R. § 447.205

7

50. The Plaintiffs incorporate Paragraphs 1 - 49 as if set fmih fully here.

8

51. An actual controversy exists between the pmiies concerning whether the

9 September 26, 2009 reimbursement cut violates 42 C.F.R. § 447.205.

10

52. 42 C.F.R. § 447.205 requires the Depmiment to provide public notice of

11 any significant proposed change in its methods and standards for setting

12 reimbursement for services and provide an opportunity for public comment.

13

53. The Depmiment did not provide public notice of the September 26, 2009

14 reduction in reimbursement as required by 42 C.F.R. § 447.205.

15

WHEREFORE, Plaintiffs respectfully request that this Comi enter an order

16 declaring that the September 26, 2009 reimbursement cut is invalid.

17

COUNT III FOR DECLARATORY JUDGMENT THAT THE

18 DEPARTMENT HAS VIOLATED 42 C.F.R. § 447.204

19

54. Plaintiffs incorporate Paragraphs 1- 53 as if set fmih fully here.

20

55. An actual controversy exists between the parties concerning whether the.

21 September 26, 2009 reimbursement cut violates 42 C.F.R. § 447.204.

22

56. 42 C.F.R. § 447.204, and the California State Plan, require the

23 Depmiment to set payment at such a level as to ensure that sufficient providers remain

24 in the program so that services under the plan are available to recipients at least to the

25 extent that those services are available to the general population." 42 C.F.R. §

26 447.204; See California State Plan, 4.19(i).

27

57. The proposed reduction in reimbursement will reduce the number of

28 providers in the Medi-Cal program so as to make Medicaid services less available to
12
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1 Medicaid beneficiaries than they are to the general population, in contravention of

2 Federal Regulations. 42 C.F.R. § 447.204.

3

WHEREFORE, Plaintiffs respectfully request that this Comt enter an order

4 declaring that the September 26, 2009 reimbursement cut is invalid.

5

COUNT IV FOR DECLARATORY JUDGMENT THAT THE

6 DEPARTMENT HAS VIOLATED 42 C.F.R. § 447.518.

7

58. Plaintiffs incorporate Paragraphs 1 -57 as if set forth fully here.

8

59. An actual controversy exists between the pmties concetning whether the

9 September 26,2009 reimbursement cut violates 42 C.F.R. § 447.518.

10

60. 42. C.F.R. § 447.518 requires the Depmtment to make assurances to CMS

11 that its proposed payment methodology for prescription drugs reflect the EAC for the

12 drugs. 42 C.F.R. § 447.518. These assurances are based on findings made by the

13 State regarding the EAC for prescription drugs. The State is required to retain and

14 make available to CMS "data, mathematical or statistical computations, comparisons

15 and other pe1tinent records to suppmt its findings and assurances." 42 C.F.R. § 16 447.518.

17

61. There is absolutely no evidence that the State made any finding or

18 determination that the four percent (4%) reduction in reimbursement represents the

19 EAC of providers, which is the am·ount they are obligated to pay providers under

20 Federal law. 42 C.F.R. § 447.518. Nor is there any evidence the Depmtment has

21 made the required assurances to CMS.

22

WHEREFORE, Plaintiffs respectfully request that this Comt enter an order

23 declaring that the September 26, 2009 reimbursement cut is invalid.

24

25

26

27

28
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1

COUNT V FOR DECLARATORY JUDGMENT THAT THE

2

DEPARTMENT HAS VIOLATED 22 C.C.R. § 50004(B) (2009).

3

62. Plaintiffs incorporate Paragraphs 1 - 61 as if set fmih fully here.

4

63. An actual controversy exists between the pmiies concerning whether the

5 September 26, 2009 reimbursement cut violates 22 C.C.R. § 5000

6

64. California Regulations require the Department to administer the Medi-

7 Cal program in accordance with Federal Law, as well as in accordance with the

8 California State Plan, applicable State law, and Medi-Cal regulations. 22 C.C.R. §

9 50004(b) (2009).

10

65. 42 C.P.R. § 447.204, and the California State Plan, require the

11 Depmiment to set reimbursement at such a level as to ensure that sufficient providers

12 remain in the program so that services under the plan are available to recipients at

13 least to the extent that those services are available to the general population." 42

14 C.P.R.§ 447.204; See California State Plan, 4.19(i).

15

66. 42 C.P.R. § 447.205 requires the Depmiment to provide public notice of

16 any significant proposed change in its methods and standards for setting

17 reimbursement for services and provide an oppmiunity for public comment.

18

67. The State previously established, through the methodology set out in the

19 California State Plan, that the current reimbursement payment is the proper one, and

20 ce1iified that fact to CMS in the State Plan. California State Plan Attachment 4.19-B

21 requires the Department to follow a specific methodology in adopting new

22 reimbursement, and the Depmiment has not followed that methodology here.

23

68. By failing to comply with 42 C.P.R.§ 447.204, 42 C.P.R.§ 447.205, and

24 California State Plan, 4.19(i), the Department has failed to comply with 22 C.C.R. §

25 50004(b) (2009), which requires it to administer Medi-Cal in compliance with Federal

26 regulations and the California State Plan.

27

WHEREFORE, Plaintiffs respectfully request that this Comi enter an order

28 declaring that the September 26, 2009 reimbursement cut is invalid.
14
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1

COUNT VI FOR DECLARATORY JUDGMENT THAT THE

2

SEPTEMBER 26, 2009 RATE CUT VIOLATES FEDERAL AND STATE

3

LAW

4

69. Plaintiffs incorporate Paragraphs 1 - 68 as if fully set fmih here.

5

70. An actual controversy exists between the pmiies concerning whether the

6 reimbursement cut resulting from the First Databank Settlement violates federal and

7 state law.

8

71. For the reasons set fmih above, the reimbursement cut violates both

9 federal and state law as being preempted by Section 30(A) of the Social Security Act,

10 contrary to Federal Regulations, contrary to state regulations, and contrary to the

11 Medicaid State Plan.

12

WHEREFORE, Pharmacies respectfully request that this Comi enter a

13 judgment declaring the reimbursement cut unlawful and enter an injunction preventing

14 the Department from implementing the unlawful reimbursement cut.

15

16 Dated: September 29, 2009
17 18 19
20
21
22

NE MORRIS LLP
By:- .) ) vette D. Ro an
Audra L. Thompson Attorn~ys for Plaintiffs NATIONAL ASSOCIATION OF CHAIN DRUG STORES, and the NATIONAL COMMUNITY PHARMACISTS' ASSOCIATION Forge Insurance Company

23

24

25
26

27

28
DII1ADMIN\1600896.1

15
COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 16 of 32 Page ID #:16
EXHIBIT A

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 17 of 32 Page ID #:17

Revision: HCFA-PM-91.- 4
AUGUST 19 91 .

(BPD)

OMB No, 0938Page l

S'l'ATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT MEDICAL ASSISTANCE ?ROGRAM
state/Territory: ________C_AL_I_F_O_R_N_I_A_______________________________________

Citation
42 CFR
430.10

As a condition for receipt of Federal funds under title XIX of the social Security Act, the
Department of Health Services (Single State Agency)
submits the following State plan for the medical assistance program, and hereby agrees to administer the program in accordance with the provisions of this state plan, the requirements of titles XI and XIX of the Act, and all applicable Federal regulations and other official issuances of the Department.

TN-No. -:-<JZ-----=-

supersedes

Approval Date

TN No. __._·--'~--~

Effective Date JAN OJ 'ml ·
HCFA ID: 7982E

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 18 of 32 Page ID #:18

2
Revisicn: · Em-AT-80-38 {BPP) May 22, 1980
State California

Citation 42 CFR 431.10 AT-79-29

1.1 Designation and Authority
(a) 'l'ne Department of
Health Services
Is the single State agency designated
to a:ininister or supervise the administraticn of the Medicai.d program under title XIX of the Social Security Act.· (All references in this plan to "the Medicaid agency"
mean the agency J'laJ1'ed in this
paragraph.)
ATrACHMENr 1.1-A is a oertificaticn signed by the State Attorney General identifying the single State agency
ana citing the legal authority under which it administers or supervises
administraticn of the program.

S'llu-lpe+.:..r_s_ede--,-s--
'IN .~ .. ---~

Jl.f:proval Date_ _ _ __

Effective Date_ _ __

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 19 of 32 Page ID #:19

65

Revisicn: !O'A-AT-80-38 (BPI?}
May 22, 1980
State California

Citaticn
42 ern. 447.201
42 CFR 447.204
A1'-78-90

4.19(i}

The Medicaid agency's payment.s are sufficient to enlist enough providers so that services under the plan are available to recipients at least to the
extent that those services are available to
the general J.?q:Ulaticn.

'IN#
Supe-"--rsede____,,-----s- 'INJ!._,t_ _ __

Approva1.--Date._ _ _ __

Effective Date_ _ __

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 20 of 32 Page ID #:20

STATE PLAN UNDER TITLE XIX OF TEE SOCIAL SECURITY ACT Attachment 1. 1-A !>1EDICAL f\.SSISTANCE PROGRAM
State of 'California
ATTORNEY GENERAL'S CERTIFICATION
I certify that:
the Department of Health services, State ·of California is the single State agency responsible
for:
[KJ administering the pian
The legal authority=under which the agency administers the plan on a Statewide basis is \'lelfare and Institutions- Code Sections -10722, 10740, and 14100. 1, (regulatory authority:
10725; 14105 and 14124.5) (statuto~y citations)
supervising the adminsttation of the pla~ by local political subdivisions.
The legal authority under which the agency supervises the administration of the plan on a Statewide basis is contained in
(statutory citation)
The agency's legal authority to make rules and regulation that are binoing on the'political subdivision administering the plan is
(statutory citation)

DATE

&~v~~

~ S..L ~i- -A--hm h e,G{ bSlM 0\ oJ2.._

T1tle

·

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 21 of 32 Page ID #:21
Attachment 4.19-B Page 1
STATE PLAN UNDER TITLE XIX OF SOCIAL SECURITY ACT STATE California
The policy of the State Agency is that reimbursement for each of the other types of care or service listed in Section 1905(a) of the Act that are included in the program under the plan will be at the lesser of usual charges or the limits specified in the California Code of Regulations (CCR), Title 22, Division 3, Chapter 3, Article 7 (commencing with Section 51501) and CCR, Titre 17, Chapter 4, Subchapter '13, Sections 6800-6874, for EPSDT health assessment services, or as specified by any other means authorized by state law.
The methodology utilized by the State Agency in establishing payment rates will be as follows:
(a) The development of an evidentiary base or rate study resulting in the
determination of a proposed rate.
(b) To the extent required by State or Federal law or regulations, the presentation of the proposed rate at public hearing to gather public input to the rate determination process.·
(c) The determination of a payment rate based on an evidentiary base, including pertinent input from the public.
(d) The establishment of the payment rate through the State Agency's adoption of regulations specifying such rate in the CCR, Title 22, Division .3, Chapter 3, Article? (commencing with Section 51501), and CCR, Title 17, Chapter4, Subchapter 13, commencing with Section 6868, Schedule of Maximum Allowances for EPSDT health assessment, or through any other means authorized by State law.

TN No 03-023 Supersedes TN# 92-01

Approval Date DEC 3 0 20tm!ffective Date OCT ~ 1 2003 ~----

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 22 of 32 Page ID #:22
Supplement 2 to ATTACHMENT 4.19-B
Page 1
STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS
PAYMENT METHODOLOGY FOR PRESCRIPTION DRUGS The policy of the State Agency is that reimbursement for Pharmaceutical Services and Prescribed Drugs, as one category of health care or service from among those listed in Section 1905(a) of the Social Security Act that are included in the program under the plan, will be at the provider pharmacy's current charges to the general public, up to the State Agency's limits. The price providers charge to the program shall not exceed that charged to the general public. The pharmacist, to the extent permitted by law, shall dispense the lowest cost, therapeutically equivalent drug product that the pharmacy has in stock, whir.h meets the medical needs of the beneficiary.
The methodology utilized by the State Agency, in compliance with 42 C.F.R. §§ 447.331 and 447.332, in establishing payment rates for Pharmaceutical Services (pharmacy dispensing fees) and Prescribed Drugs (dispensed drug products) to implement the policy is as follows:
A. The method used to establish maximum drug product payments is that payment~ for drugs dispensed by pharmacists shall consist of the state's Estimated Acquisition Cost (EAC) of the dn:lg product dispensed plus a dispensing fee that is added to the drug product payment (see paragraph B below). The EAC is the lowest of the Average Wholesale Price (AWP) minus '17 percent, the Maximum Allowable Ingredient Cost (MAIC); the federal upper limit of reimbursement for listed multiple source drugs (called "Federal Upper Limit," or FUL), or the charges to the general public.

TN No.. 05-01.Z.._
Supersedes TN No. 04-010

J•" 20Qfl l A Gj
Approval Date ,; ' ' ''"'

0 Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 23 of 32 Page ID #:23

Supplement 2 to ATIACHMENT 4.19-B Page 2
STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California
METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS

B. The professional fee for dispensing is seven dollars and 25 cents ($7.25) per dispensed prescription. The professional fee for legend drugs dispensed to a beneficiary residing in a skilled nursing facility or intermediate care facility is eight dollars ($8.00) per dispensed prescription. For the purposes of this paragraph B, "skilled nursing facility" and "intermediate care facility" mean as defined in Division 5 (commencing with Section 70001) of Title 22 of the California Code of Regulations.

C. For purposes of this Supplement 2, the followrng definitions apply: o "Average wholesale price" means the price for a drug product listed in the department's primary price reference source.
" "Direct price" means the price for a drug product purchased by a pharmacy directly from a drug manufacturer listed in the department's primary reference source.
o "Federal upper limit" means the maximum per unit reimbursement when established by the Centers for Medicare and Medicaid Services and published by the department in Medi-Cal pharmacy pro.vider bulletins and manuals.
o "Generically equivalent drugs" means drug products with the same active chemical ingredients of the same strength, quantity, and dosage

TN No. 05-027 Supersedes TN No. 04-010

,JUN 0 6 Approval Date

2008 Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 24 of 32 Page ID #:24
Supplement 2 to ATTACHMENT 4.19-B Page 3 STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS
form, and of the same generic drug name, as determined qy the United States Adopted Names (USAN) and ElCCepted by the federal Food and Drug Administration (FDA), as those drug products having the same chemical ingredients.
• "Legend drug" means any drug whose labeling states "Caution: Federal law prohibits dispensing without prescription," "Rx only," or words of similar import.
• "Maximum Allowable Ingredient Cost" (NIAIC) means the maximum amount the department will reimburse Medi-Cal pharmacy providers for generically equivalent drugs.
" "Innovator multiple source drug," "noninnovator multiple source drug," and "single source drug" have the same meaning as those terms are defined in Section 1396r-8(1<)(7) of Title 42 of the United States Code, the National Rebate Agreement, and other Federal instructions.
o "Nonlegend drug" means any drug whose labeling does not contain one or more of the statements required to be a "legend drug".
.., "Wholesale Selling Price" (WSP) means the weighte~ (by unit
volume) mean price, including discounts and rebates, paid by a
pharmacy to a whOlesale drug distributor.

TN No. 05-027 Supersedes TN No. 04-010

·_~~_n_B_2_006 Af:>proval Date_''

Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 25 of 32 Page ID #:25

Supplement2 to ATIACHMENT 4.19-B Page4 STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE; Cal!fomla
METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS
D. For purposes of paragraph A, the department shall establish a list of MAICs for generically equivalent drugs, which shall be published in Medi-Cal pharmacy provider bulletins and manuals. The department will
update the list of MA.. ICs and establish additional MAICs in accordance
with the following:
• The department will base the MAIC on the mean of the wholesale selling prices of drugs generically equivalent to the particular innovator drug that are available in California from wholesale drug distributors selected by the department.
.. The department will update MAICs at least every three months and notify Medi-Cal providers at least 30 days prior to the effective date of aMAIC.
E. The federal upper limits of reimbursement, FUL, are initiated by CMS and provided to the State Agency for ir:nplementation in the $tate Medicaid Manual of Instructions. Periodic revisions to Addendum A of Section 6305.3 of the Manual, which is the list of multiple source drugs and the FUL prices, are implemented by the State Agency following notice by CMS of new FUL prices. New FUL prices are implemented within the timeframe required by the CMS notice and as required by applicable California statutes and regulations.
F. Overrides to both the state and federal price ceilings are available only through a state prior approval mechanism. Prior approval is limited to

TN No. 05-027 Supersedes TN No. 04-010

JUN 0 6 2006

Approval Date

Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 26 of 32 Page ID #:26
Supplement 2 to AHACHMENT 4.19·B Page 5 STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS
. those cases where the medical necessity of a specific manufa,cturer's ·
brand of a drug, priced above the ceiling, is adequately demonstrated to a state consultant. The documentation of the approval is linked to the claims payment system assuring correct reimbursement for the brand dispensed. The same system is used for approval and payment for drugs not on the state Medicaid Drug Formulary, known as the Medi-Cal List of Contract Drugs.
G. The Medi-Cal List of Contract Drugs (List), a preferred drug list, is established pursuant to Section 1927 of the Social Security Act with prior authorization required for drugs not included on the List Prior authorization will be provided with a 24-hou! turn-around from receipt of request and a 72-hour supply of drugs In emergency situations. Prior authorization is applied to certain drug classes, particular drugs, or medically accepted indications for use and doses. The state will appoint a Pharmaceutical and Therapeutic Committee or utilize the drug utilization review committee in accordance with Federal law.
H. The Medicaid program restricts coverage of certain covered outpatient drugs through the operation of a prior authorization program. The prior authorization process provides for a turn-around response by telephone, fax, or other telecommunications device within twenty-four hours of receipt of a prior authorization request. In emergency situations, providers may dispense at least a 72-hour supply of medications in accordance with the provisions of SeCtion 1927(d)(5) of the Social Security Act.

TN No. 05-027 Supersedes TN No. 04-010

Approval Date JUN 0 6 2006 Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 27 of 32 Page ID #:27

Supplement 2 to ATTACHMENT 4.19-B
Page6
STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California
Mr.::THODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS

I.

The State Agency believes reimbursement to long-term pharrn~cy

providers to be consistent and reasonable with costs reimbursed to other

providers. The State Agency maintains an advisory committee known as

the Medi-Cal Contract Drug Advisory Committee in accordance with

Federal law.

DRUG REBATE PROGRAM
The State Agency is in compliance with Section 1927 of the Social Security Act. Tr1e
State Agency reimburses providers of drugs of manufacturers participating in the drug rebate program and is in compliance with reporting requirements for utilization and restrictions to coverage. Pharmaceutical manufacturers can audit utilization data to the extent allowed under the Health Insurance Portability and Accountability Act (HIPAA) in order to ensure that the Department is protecting information in accordance with HIPAA. The unit rebate amount is confidential and is not disclosed to anyone not entitled to the information for purposes of rebate contracting, invoicing and verification.

SUPPLEMENTAL REBATE PROGRAM

The State Agency negotiates supplemental rebates in addition to tlie federal rebates provided for in Title XIX. Rebate agreements between the state and a pharmaceutical manufacturer are separately identified from the federal rebates.

Supplemental rebates received by the State Agency in excess of those required under the national drug rebate agreement are shared with the Federal government on the same percentage basis as applied under the national rebate agreement. CMS has

TN No. 05-027 Supersedes TN No. 04-010

0 6 2006 Approval DatJUN

Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 28 of 32 Page ID #:28
Supplement 2 to ATIACHMENT 4.19-B Page 7 STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS.
authorized the State of California to enter into the Medi-Cal Supplemental Drug Rebate Average Manufacturer Price (AMP) Agreement. This supplemental drug rebate agreement was submitted to CMS on December 30, 2005 and has been authorized by CMS. CMS has authorized the State of California to enter into the Medi-Cal Net Cost Supplemental Drug Rebate Agreement. This supplemental drug rebate agreement was submitted to CMS on December 30, 2005 and has been authorized by CMS. All drugs covered by the program, notwithstanding a prior authorization agreement, will comply with the provisions of the national drug rebate agreement.

TN No. 05-027
Supersedes TN No. 04-010

JUN 0 6 2006 . Approval Date _ _ _ _ Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 29 of 32 Page ID #:29
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA
NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUDGE FOR DISCOVERY
This case has been assigned to District Judge Valerie Baker Fairbank and the assigned discovery Magistrate Judge is Frederick F. Mumm. The case number on all documents filed with the Court should read as follows:
CV09- 7097 VBF (FFMx)
Pursuant to General Order 05-07 of the United States District Court for the Central District of Califomia, the Magistrate Judge has been designated to hear discovery related motions.
All discovery related motions should be noticed on the calendar of the Magistrate Judge

NOTICE TO COUNSEL

A copy of this notice must be served with the summons and complaint on all defendants (if a removal action is filed, a copy of this notice must be served on all plaintiffs).

Subsequent documents must be filed at the following location:

[X] Western Division
312 N. Spring St., Rm. G-8 Los Angeles, CA 90012

U Southern Division
411 West Fourth St., Rm. 1-053
Santa Ana, CA 92701-4516

L] Eastern Division
3470 Twelfth St., Rm. 134
Riverside, CA 92501

Failure to file at the proper location will result in your documents being returned to you.

CV-18 (03/06)

NOTICE OF ASSIGNMENT TO UNITED STATES MAGISTRATE JUDGE FOR DISCOVERY

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 30 of 32 Page ID #:30

Yvette D.Roland (SBN 120311) Audra L. Thompson (SBN 218479) DUANE MORRIS LLP 633 West Fifth Street, Suite 4600 Los Angeles, CA 90071 Telephone: 213.689.7400; Facsimile: 213.689.7401
~_J
AttQJiieys for Plaintiffs

UNITED STATES DISTRICT COURT

.- ~·

CENTRAL DISTRICT OF CALIFORNIA

) j

NA~ ONAL ASSOCIATION OF CHAIN DRUG

CASE NUMBER

S£fj:1RES, and the NATIONAL COMMUNITY

P~ACISTS' ASSOCIATION,

PLAINTIFF(S) 1
v.

ARNOLD SCHWARZENEGGER, not individually,

but solely in his official capacity as Governor of the

State of California, DAVID MAXWELL-JOLLY, not

individually, but solely in her official capacity as

Secretary ofthe California Depmiment of Health Care Services, and THE CALIFORNIA DEPARTMENT OF

SUMMONS

HEALTHCARE SERVICES,

DEFENDANT(S).

TO:DEFENDANT(S): ARNOLD SCHWARZENEGGER, not individually, but solely in his official capacity as Governor of the State of California, DAVID MAXWELL-JOLLY, not individually, but solely in her official capacity as Secretary of the California Department of Health Care Services, and THE CALIFORNIA DEPARTMENT OF HEALTHCARE SERVICES,

A lawsuit has been filed against you.

Within 20 days after service of this summons on you (not counting the day you received it), you
must serve on the plaintiff an answer to the attached [;g) complaint D _ _ amended complaint D counterclaim D cross-claim or a motion under Rule 12 of the Federal Rules of Civil Procedure. The answer
or motion must be served on the plaintiffs attorney, Yvette D. Roland, Duane Morris LLP, whose address is 633 West Fifth Street, Suite 4600, Los Angeles, California 90071. If you fail to do so, judgment by default will be entered against you for the relief demanded in the complaint. You also must file your answer or motion with the COUli.
Clerk, U.S. District Comi

Dated:

3 0 SEP 2009
------------------------

By: ~~.:. b~')

Deputy Clerk

()

(Seal ofthe Court)

[Use 60 days ifthe defendant is the United States or a United States agency, or is an officer or employee ofthe United States. Allowed
60 days by Rule 12(a)(3)}.

CV-0 IA (12/07)

SUMMONS

American LegaiNet, Inc. www.USCourtForms.com

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 31 of 32 Page ID #:31

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA
CIVIL COVER SHEET

I (a) PLAINTIFFS (Check box if you are representing yourself 0 )
National Association of Chain Drug Stores, and the National Community Pharmacists' Association

DEFENDANTS
Arnold Schwarzenegger, not individually, but solely in his official capacity as Governor ofthe State of California, David Maxwell-Jolly, not individually, but solely in her official capacity as Secretary of the California Depmiment of Health care Services, and The California Depmiment ofHealthcare Services

(b) Attorneys (Finn Name, Address and Telephone Number. If you are representing yourself, provide same.)
Yvette D. Roland (SBN 120311); Audra Thompson (SBN 218479) Duane Monis LLP 633 West Fifth Street, Suite 4600 Los Angeles, CA 90071 Telephone: 213.689.7400

Attorneys (If Known)

II. BASIS OF JURISDICTION (Place an X in one box only.)

III. CITIZENSHIP OF PRINCIPAL PARTIES- For Diversity Cases Only (Place an X in one box for plaintiff and one for defendant.)

0 I U.S. Government Plaintiff

0 3 Federal Question (U.S.
Government Not a Party

Citizen of This State

PTF DEF

PTF DEF

0 I 0 I Incorporated or Principal Place 04 04

of Business in this State

0 2 U.S. Government Defendant 0 4 Diversity (Indicate Citizenship Citizen of Another State of Parties in Item III)

0 2 0 2 Incorporated and Principal Place 0 5 0 5 of Business in Another State

Citizen or Subject of a Foreign Country 0 3 0 3 Foreign Nation

IV. ORIGIN (Place nn X in one box only.)

0 I Original 0 2 Removed from 0 3 Remanded from 0 4 Reinstated or 0 5 Transferred from another district (specify): 0

Proceeding

State Court

Appellate Court

Reopened

0 V. REQUESTED IN COMPLAINT: JURY DEMAND: 0 Yes No (Check 'Yes' only if demanded in complaint.)

CLASS ACTION under F.R.C.P. 23: 0 Yes 0 No

0 MONEY DEMANDED IN COMPLAINT:$

6 Multi- 0 District Litigation

7 Appeal to District Judge from Magistrate Judge

VI. CAUSE OF ACTION (Cite the U. S. Civil Statute under which you are filing and write a brief statement of cause. Do not cite jurisdictional statutes unless diversity.)
Complaint for Injunctive and Declaratory Relief pursuant to 28 USC §1331
VII. NATURE OF SUIT (Place an X in one box only.)

OTHER STATUTE.S

CONTRACT

0 400 State Reapportionment 0 11 o' Insur~Jce

0 410 Antitrust

0 120 Marine

o· Jl 0 Airpl~ne

.

0 710 Fair L~bor Standard;

0 510 Motions to Vacate

Act

0 430 Banks and Banking 0 130 Miller Act

0 315 Airplane Product 0 370 Other Fraud

Sentence Habeas 0 720 Labor/Mgmt.

0 450 Commerce/ICC Rates/etc.

0 140 Negotiable Instrument

Liability

0 371 Truth in Lending

Corpus

O ISO Recovery of

0 320 Assault, Libel & 0 380 Other Personal 0 530 General

Relations 0 730 Labor/Mgmt.

0 460 Deportation 0 470 Racketeer Influenced

Overpayment & Enforcement of

Slander

Propetiy Damage 0 535 Death Penalty

0 330 Fed. Employers' 0 385 Property Damage 0 540 Mandamus/

Reporting & Disclosure Act

and Corrupt

Judgment

Liability

Product Liability

Other

0 740 Railway Labor Act

Organizations

0 151 Medicare Act

0 340 Marine

BANKRUPTCY 0 550 Civil Rights

0 790 Other Labor

0 480 Consumer Credit 0 490 Cable/Sat TV

0 152 Recovery of Defaulted 0 345 Marine Product 0 22 Appeal 28 USC 0 555 Prison Condition

Litigation

Student Loan (Excl.

Liability

I58

.. FORFBI'fURE/ .... 0 791 Empl. Ret. Inc.

0 810 Selective Service

Veterans)

0 350 Motor Vehicle 0 423 Withdrawal 28 . PENALTY ·

Security Act

0 850 Securities/Commodities/ 0

Exchange

0 875 Customer Challenge 12

USC 3410

0

~890 Other Statutory Actions 0

153 Recovery of Overpayment of Veteran's Benefits
160 Stockholders' Suits
190 Other Contract

0 355 Motor Vehicle

USC !57

Product Liability

CIVIl. RIGHTS .

0 360 Other Personal 0 441 Voting .

Injury

0 442 Employment

0 362 Personal Jnjury- 0 443 Housing/Acco-

0 610 Agriculture 0 620 Other Food &
Drug
O 625 Drug Related
Seizure of

PROPERTY RIGHTS 0 820 Copyrights 0 830 Patent
0 840 Trademark ... SOCIAL SECURITY

0 891 Agricultural Act

0 195 Contract Product

Med Malpractice

mmodations

Property 21 USC 0 61 HIA(i 395ft) .

0 0 892 Economic Stabilization Act

Liability 196 Franchise . ...

0

O 893 Environmental Matters

REAL PROPERTY · 0

tJ 0 894 Energy Allocation Act

210Land Condemnation

0 895 Freedom oflnfo. Act 0 220 Foreclosure

0 900 Appeal of Fee Determi- 0 230 Rent Lease & Ejectment

nation Under Equal 0 240 Torts to Land

0

365 Personal lnjmy- 0444 Welfare Product Liability 0 445 American with

368 Asbestos Personal

Disabilities-

Injury Product Liability IMMIGRATION
- .. 462 Natur.aliz.atton

Employment 0 446 American with
DisabilitiesOther

881 0 630 Liquor Laws 0 640 R.R.& Truck 0 650 Airline Regs 0 660 Occupational
Safety /Health
0 690 Other

0 862 Black Lung (923) 0 863 DIWC/DIWW
405(g)) 0 864 SSID Title XVI 0 865 RSI (405(g))
FEDER)\LTAX SUITS:. '
0 870Taxes (U.S.Plaintiff.

0

Access to Justice

0

950 Constitutionality of State 0

245 Tort Product Liability 290 All Other Real Property 0

463 HAap?peliacsatCiOo~npus-

0 440 Other Civil Rights

Statutes

Alien Detamee

0 465 Other Immigration

or Defendant)
0 871 IRS-Third Party 26
usc 7609

Actions

FOR OFFICE USE ONLY: Case Number:

AFTER COMPLETING THE FRONT SIDE OF FORM CV-71, COMPLETE THE INFORMATION REQUESTED BELOW.

cv-71 (05/08)

CIVIL COVER SHEET

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Page I of2

Case 2:09-cv-07097-CAS-MAN Document 1 Filed 09/30/09 Page 32 of 32 Page ID #:32

UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA
CIVIL COVER SHEET

0 VIII(a). IDENTICAL CASES: Has this action been previously filed in this court and dismissed, remanded or closed? [8J No Yes
If yes, list case number(s):
0 VIII(b). RELATED CASES: Have any cases been previously filed in this court that are.related to the present case? [8J No Yes
If yes, Jist case number(s):

Civil cases are deemed related if a previously filed case and the present case:

(Check all boxes that apply)
:::::::s

0 A. Arise from the same or closely related transactions, happenings, or events; or 0 B. Call for determination of the same or substantially related or similar questions of law and fact; or 0 C. For other reasons would entail substantial duplication oflabor if heard by different judges; or 0 D. Involve the same patent, trademark or copyright, and one of the factors identified above in a, b or c also is present.

IX.\VENUE: (When completing the following information, use an additional sheet if necessary.)

(a) tilt the County in this District; Califon1ia County outside of this District; State if other than California; or Foreign Country, in which EACH named plaintiff resides.
[8J Jsj1eck here if the government, its agencies or employees is a named plaintiff. If this box is checked, go to item (b).

Coub{y in this District:*

California County outside of this District; State, if other than California; or Foreign Country

Los)\ngeles

(b) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH named defendant resides.
[8J Check here if the government its agencies or employees is a named defendant If this box is checked, go to item (c)

County in this District:*

California County outside of this District; State, if other than California; or Foreign Country

Los Angeles

(c) List the County in this District; California County outside of this District; State if other than California; or Foreign Country, in which EACH claim arose.
Note· In hnd condemll''ttion cases, usc the location of the tract of land involved

County in this District:*

California County outside of this District; State, if other than California; or Foreign Country

\,D-S·~~

*Los Angeles, Orange, San Bernardino, Riverside, Ventura, Santa Barbara, or San Luis Obispo Counties

Note: In land condemnation cases, use the location oft

d involved

X. SIGNATURE OF ATTORNEY (OR PRO PER):

Notice to Counsel/Parties: The CV-71 (JS-44) Civil Cover Sheet and the information contained herein neither replace nor supplement the filing and service of pleadings or other papers as required by Jaw. This fonn, approved by the Judicial Conference of the United States in September 1974, is required pursuant to Local Rule 3 -I is not filed but is used by the Clerk of the Court for the purpose of statistics, venue and initiating the civil docket sheet. (For more detailed instructions, see separate instructions sheet.)
Key to Statistical codes relating to Social Security Cases:
Nature of Suit Code Abbreviation Substantive Statement of Cause of Action

861
862 863 863 864 865 CV-71 (05/08)

l-IlA
BL DIWC DIWW SS!D RSI

All claims for health insurance benefits (Medicare) under Title 18, Part A, of the Social Security Act, as amended. Also, include claims by hospitals, skilled nursing facilities, etc., for certification as providers of services under the program. (42 U.S.C. 1935FF(b))

All claims for "Black Lung" benefits under Title 4, Part B, of the Federal Coal Mine Health and Safety Act of 1969. (30 U.S. C. 923)

All claims filed by insured workers for disability insurance benefits under Title 2 of the Social Security Act, as amended; plus all claims filed for child's insurance benefits based on disability. (42 U.S.C. 405(g))

All claims filed for widows or widowers insurance benefits based on disability under Title 2 of the Social Security Act, as amended. (42 U.S.C. 405(g))

All claims for supplemental security income payments based upon disability filed under Title 16 of the Social Security Act, as amended.

All claims for retirement (old age) and survivors benefits under Title 2 of the Social Security Act, as amended. (42
u.s.c. (g))

CIVIL COVER SHEET

Page 2 of2
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DUANE M RRI LLP

633 West Fifth Street, Suite 4600

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Telephone: 213.689.7400

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Frederick R. Ball (pro hac vice to be filed) Nicholas J. Lynn y;~o hac vice to be file~ Richard P. Darke ro hac vice to be file ) Christo~1er Petelle (pro hac vice to be filed) Duane orris LLP 190 S. Lasalle Street, Suite 3700
Chica*o, IL 60603 Telep one: 312.499-6700 FacsImile: 312.499-1945

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11 Attorneys for Plaintiffs

12
IN THE UNITED STATES DISTRICT COURT
13
FOR THE CENTRAL DISTRICT OF CALIFORNIA
14

15 NATIONAL ASSOCIATION OF CHAIN DRUG STORES, and the NATIONAL
16 COMMUNITY PHARMACISTS ASSOCIATION,
17
Plaintiffs,
18
v.
19
ARNOLD SCHWARZENEGGER, not 20 individually, but solely in his official
capacity as Governor of the State of 21 California, KIM BELSHE, not individually,
but solely in her official capacity as 22 Secretary of ~he California Health and
Human SerVIces Agency, DAVID 23 MAXWELL-JOLLY, not individually, but
solely in his official capacity as Director of 24 the California Department of Health Care
Services, and THE CALIFORNIA 25 DEPARTMENT OF HEALTH CARE
SERVICES, 26
Defendants.
27

Case No.: CV09-7097 VBF (FFMx) 'F/RsT Arvt£f\J[)~O {o\-./lpl ~ 1 ,--J\ FOR INJUNCTl vE AND DECLARATORY RELIEli'

28

DM111906343.1

AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 2 of 28 Page ID #:48

1

The National Association of Chain Drug Stores ("NACDS") and the National

2 Community Pharmacists Association ("NCPA") complain against Arnold

3 Schwarzenegger, not individually, but solely in his official capacity as Governor of

4 the State of California, Kim Belshe, not individually, but solely in her official

5 capacity as Secretary of the California Health and Human Services Agency, David

6 Maxwell-Jolly, not individually, but solely in his official capacity as Director of the

7 California Department of Health Care Services, and The California Department of

8 Health Care Services (the "Department") for injunctive and declaratory relief.

9

This Complaint seeks to enjoin the Defendants from reducing by, on average,

10 slightly more than four percent (4%) Medicaid reimbursement based on Average

11 Wholesale Price ("AWP") for drug products paid to pharmacies for dispensing

12 prescription drugs reimbursed by the State of California's Medicaid program. The

13 Court should grant injunctive relief because: (a) Section 1902(a)(30)(A) of the Social

14 Security Act ("Section 30(A)") preempts these reimbursement cuts because the

15 Depmiment failed to properly consider and abide by the "quality of care" and "access"

16 provisions of Section 30(A); (b) the Department violated federal and state law by

17 failing to obtain approval from the United States Depmiment of Health and Human

18 Services' Centers for Medicare & Medicaid Services ("CMS") before implementing

19 the cuts to reimbursement; (c) the Department violated state law by failing to consult

20 with stakeholders and other interested pmiies regarding the reimbursement cuts; (d)

21 the Department violated federal law by making reimbursement payments to

22 pharmacies that are lower than the Depmiment's own best estimates of pharmacies'

23 actual acquisition costs; and (e) the reimbursement cuts will reduce the quality of care

24 delivered to Medicaid beneficiaties in California and as such violates state law.

25 Finally, in the past year, this court enjoined similar cuts in reimbursement for the same

26 reasons. For these reasons, which are more thoroughly set f01ih below, the

27 Pharmacies are entitled to a declaratory judgment that the reimbursement cut violates

28 federal and state law, and injunctive relief.
2
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELlEF DMl11906343,1

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 3 of 28 Page ID #:49

1

JURISDICTION AND VENUE

2

1. Jurisdiction is proper in this COUli pursuant to 28 U.S.C. § 1331. In

3 addition, this Comi has supplemental jurisdiction over the state law claims pursuant to

4 28 U.S.C. § 1367.

5

2. Venue is appropriate in this jurisdiction pursuant to 28 U.S.C. § 1391

6 because the persons sued in their official capacity all maintain offices within this

7 District and the State entities are headqualiered within, and a substantial part of the

8 events giving rise to these claims occurred in, this District.

9

PARTIES

10

3. NACDS is a national association whose members include 20 pharmacy

11 chains in California with over 2,700 individual pharmacies within the State.

12 NACDS' s mission includes ensuring its members are adequately reimbursed by

13 federal and state healthcare programs and ensuring patient access to pharmaceutical

14 care. Members ofNACDS participate in California's Medicaidprogram.

15

4. NCPA is a national association whose members include independent

16 community pharmacies and pharmacists including independent community

17 pharmacists in the state of California. The nation's independent community

18 pharmacists are small business owners and multifaceted healthcare providers who

19 represent a vital part of the United States' healthcare delivery system. NCPA's

20 members are committed to high quality patient care and services and to restoring,

21 maintaining, and promoting the health and well-being of the general public, including

22 Medicaid patients. NCPA represents the professional and proprietary interests of

23 independent community pharmacists, and promotes and defends those interests,

24 including those interests pertaining to federal and state healthcare programs.

25 Members of NCPA participate in California's Medicaid program.

26

5. Arnold Schwarzenegger is named solely in his official capacity as

27 GovelTIOr of the State of California. As Governor, Mr. Schwarzenegger has executive

28 responsibility for the Department, the single state agency responsible for
3
AMENDED COlv!PLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF DMII1906343,1

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 4 of 28 Page ID #:50

1 administering the Medicaid Program in CalifOlnia. See California Welfare and

2 Institutions Code, §§10722, 10740, 14100.0, 10725, 14105, and 14124.5; see also

3 certification of California Attorney General, Attached to California State Plan as

4 Attachment 1. I-A. Relevant sections to the California State Plan are attached as

5 Group Exhibit A.

6

6. Kim Belshe is sued solely in her capacity as Secretary of the California

7 Health and Human Services Agency. The California Health and Human Services

8 Agency is charged with administering the Medicaid program in California.

9

7. David Maxwell-Jolly is sued solely in his official capacity as Director of

10 the Department. The state department within the California Health and Human

11 Services Agency charged with administering the Medicaid program in California.

12

8. The Department is sued in its capacity as the State of California

13 department charged with administering the Medicaid program in California and

14 implementing the September 26, 2009 reimbursement cut.

15

Laws governing California's Medicaid Program, "Medi-Cal."

16

9. Medicaid is a joint federal and state program created under Title XIX of

17 the Social Security Act to provide health care to indigent and otherwise disadvantaged

18 Americans. Federal and state government agencies share responsibility for funding

19 the Medicaid program. Each state administers its respective Medicaid program in

20 accordance with federal and state law, as well as a State-authored Medicaid State plan,

21 which the state submits to CMS, and CMS reviews and approves.

22

10. The California Medicaid State Plan ("State Plan") is the Department's

23 comprehensive written statement that describes the nature and scope of the State

24 Medicaid program and gives assurances that DSHS will administer the State Plan in

25 conformity with the specific requirements of the Social Security Act. CMS must

26 approve all amendments to a State Plan before a state may implement "material

27 changes," including those made to "reflect ... court decisions." 42 C.F.R. §

28 430. 12(c)(1)(i) and (ii).
4
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF DM1\1906343.1

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 5 of 28 Page ID #:51

1

11. The Department is required to administer the Medi-Cal program in

2 accordance with Federal Law, as well as in accordance with the California State Plan,

3 applicable State law, and Medi-Cal regulations. 22 C.C.R. § 50004(b) (2009).

4

12. Pursuant to the State Plan, California agreed to administer the state

5 Medicaid program "in accordance with the provisions of this State plan, the

6 requirements of titles XI and XIX of the Act, and all applicable Federal regulations

7 and other issuances of the Depaliment." See California State Plan, page l.

8

13. In order to comply with federal law, a state Medicaid program must

9 comply with the "quality of care" clause of Section 30(A) which provides in pertinent

10 part:

11

(a) A state plan for medical assistance must ... provide such methods and

12 procedures relating to the utilization of, and payment for, care and services available

13 under the plan ... as may be necessary ... to assure that payments are consistent with

14 efficiency, economy, and quality of care ... .

15

42 U.S.C. § 1396a(a)(30)(A).

16

14. A state Medicaid program must also comply with the "access" clause of

17 Section 30(A) which provides in pertinent part:

18

(a) A state plan for medical assistance must ... provide such methods and

19 procedures relating to the utilization of, and payment for, care and services available

20 under the plan ... as may be necessary ... to assure that payments ... are sufficient

21 to enlist enough providers so that care and services are available under the plan at

22 least to the extent that such care and services are available to the general population in

23 the geographic area.

24

Id.

25

15. For that reason, federal regulations require the Depaliment to offer

26 payments to providers "sufficient to enlist enough providers so that services under the

27 plan are available to recipients at least to the extent that those services are available to

28 the general population." 42 C.F.R. § 4407.204.
5
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF
DM!I!906343.!

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 6 of 28 Page ID #:52

1

16. The State Plan, as approved by CMS, affirms that "[the Department's]

2 payments are sufficient to enlist enough providers so that services under the plan are

3 available to recipients at least to the extent those services are available to the general

4 population." See California State Plan, 4.19(i).

5

17. Therefore, to demonstrate that reimbursement complies with federal

6 statutes, federal regulations, and the State Plan, and that its reimbursement is not

7 arbitrary and capricious, a State must show that it has evaluated, prior to

8 implementation of new rates and methodologies, that the reimbursement provided

9 complies with the "quality of care" and "access" provisions of Section 30(A), and will

10 ensure enough providers are enlisted so that services under the plan are available to

11 recipients at least to the extent that they are available to the general public.

12

The Method Used To Calculate California's Medicaid Reimbursement.

. 13

18. Retail pharmacies that take part in the Medicaid program dispense

14 prescription drugs and provide related services to patients who are covered by

15 Medicaid. In return, those retail pharmacies apply for, and receive, reimbursement

16 payments from the Department.

17

19. Reimbursement paid to Medicaid-em'oIled pharmacies for drug products

18 and services contains two components: (1) a reasonable dispensing fee meant to

19 compensate a pharmacy for the dispensing costs that it incurs and the associated

20 services that it provides, and (2) reimbursement for the drug product itself.

21

20. With regard to the first component of reimbursement, California does not

22 provide a reasonable dispensing fee that compensates pharmacies for the dispensing

23 costs that they incur and the related services that they provide.

24

21. With regard to the second component of reimbursement, the California

25 State Plan provides that California reimburses pharmacies for single source drugs and

26 celiain multiple source drugs at a rate of the AWP published by First Databank, minus

27 a discount of 17%. See Cal WeI & Inst Code § 14105.45; Exhibit A, California State

28 Plan, Supplement 2 to Attachment 4.19-b, page 1.
6
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF
DMI\1906343.1

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 7 of 28 Page ID #:53

22. California has not made assurances to CMS that the reimbursement that

2 went into effect on September 26, 2009 represents its best estimate of acquisition cost

3 ("EAC") as required by federal law. 42 C.F.R. §447.333.

4

23. California also has not certified to the federal government in its State

5 Plan that the reduced reimbursement as of the September 26,2009 is "designed to

6 enlist participation of a sufficient number of providers in the program so that eligible

7 persons can receive the medical care and services included in the plan at least to the

8 extent these are available to the general population." See California State Plan,

9 Attachment 4.19-B, p.1.

10

The AWP Reductions

11

24. First DataBank, Inc., a clearinghouse of data pertaining to the

12 pharmaceutical industry, publishes lists of prescription drugs and the AWP for each

13 prescription drug. The Department uses First DataBank AWP data in calculating its

14 EAC.

15

25. On March 17, 2009, First DataBank entered into a class action settlement

16 agreement ("First DataBank Settlement") in which it agreed to reduce the mark-up to

17 the wholesale average cost ("WAC") from 1.25 to 1.20 when setting AWPs for 1,442

18 NDCs. In addition, First DataBank announced it would voluntarily cut the WAC

19 mark-up to 1.20 when setting AWPs for thousands ofNDCs where the mark-up

20 exceeded 1.20. In effect, First DataBank agreed to reduce its listed AWP for virtually

21 all NDCs by, on average, 4%. These reductions of AWPs occurred on September 26,

22 2009.

23

26. The practical effect of First DataBank's reduction of the mark-up to

24 WAC when setting AWPs is that the reimbursement for drug products tied to AWP

25 that the Department pays has been reduced by slightly more than 4%.

26

27. As a result of the AWP reductions, reimbursement payments will be at

27 viliually the same levels as reimbursement payments that this COUli enjoined

28 approximately six months ago, due to violations of the same laws discussed herein.
7
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELlEF DM]\]906343.]

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 8 of 28 Page ID #:54

1

The Department's Failure To Comply With Federal And State Laws

2

28. There is nothing in the administrative record that suggests that the State

3 considered or otherwise took into account either the "quality of care" or the "access"

4 provisions of Section 30(A) prior to this reduction of reimbursement payments.

5

29. Indeed, the plaintiffs have not found any evidence that the State took any

6 steps to determine how the reimbursement reduction would affect compliance with the

7 "quality of care" or "access" provisions of Section 30(A).

8

30. In addition, there is no indication that the State has received approval

9 from CMS for a State Plan amendment that would allow either for this reduction in

10 actual reimbursement to pharmacies, or in the commensurate reduction in care quality

11 or access.

12

31. The State has not obtained CMS approval prior to reducing Pharmacies'

13 AWP-based reimbursement by 4%, in violation of federal law. 42 C.P.R. § 430.12(c)

14

32. There is no evidence that the State provided public notice and the

15 opportunity for public comment prior to the 4% reduction in AWP-based

16 reimbursement, as it is required to do by 42 C.P.R. § 447.205.

17

33. There is no evidence that the new, reduced reimbursement payments

18 were "designed to enlist participation" of sufficient providers of Medicaid, as the State

19 warranted in the state plan.

20

34. The State has not made, and caml0t make, the required analysis, findings

21 or assurances to CMS that the new reduced reimbursement payments properly reflects

22 the EAC for prescription drugs in the State of Washington.

23

35. The California Medicaid State Plan requires the Department to set

24 payment pursuant to a very specific methodology:

25

The methodology utilized by the State Agency in establishing payment rates

26 will be as follows:

27

(a) The development of an evidentiary base or rate study resulting in the

28 determination of a proposed rate.
8

DMl11906343.1

AMENDED COMPLAfNT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 9 of 28 Page ID #:55

1

(b) To the extent required by State or Federal law or regulations, the

2 presentation of the proposed rate at public hearing to gather public input to the rate

3 determination process.

4

(c) The determination of a payment rate based on an evidentiary base,

5 including peliinent input from the public.

6

(d) The establishment of the payment rate through the State Agency's adoption

7 of regulations specifying such rate in the [...] Schedule of Maximum Allowances for

8 EPSDT health assessment, or through any other means authorized by State law.

9

See California State Plan, Attachment 4.19-B, p. 1. There is no evidence the

10 State has complied with these requirements.

11

Harm To Pharmacies And Their Patients

12

36. Unless enjoined, the effect of the reimbursement reduction will be

l3 catastrophic for Medicaid beneficiaries across Washington, as well as health service

14 providers like the Pharmacies. The 4% AWP cut will result in the reimbursement for

15 many drugs at a level below the Pharmacies' break even cost.

16

37. The Pharmacies will be forced to take drastic steps if the reimbursement

17 cut goes into effect, including ceasing to fill Medicaid prescriptions and dropping their 18 enrollment in the Medicaid program.

19

38. l\l1edicaid patients such as those served by members ofNACDS and

20 NCPA may lose access to lifesaving drugs.

21

39. In short, there is real and immediate risk of harm to both the pharmacies

22 and to Medicaid beneficiaries due to the September 26, 2009 reimbursement cut.

23

COUNT I FOR AN INJUNCTION HALTING THE REIMBURSEMENT

24

CUT

25

40. The Plaintiffs incorporate Paragraphs 1 - 38 as if set forth fully here.

26

4l. This COUli has already recognized that a 10% and 5% reduction in

27 reimbursement rates would both impose irreparable harm upon IvIedicaid beneficiaries

28 and upon p. roviders such as Pharmacies. S9ee Independent Living Ctr. OfSouthern

DMJ\1906343.1

AMENDED COMPLAINT !'OR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 10 of 28 Page ID #:56

1 Ca., Inc. v. Shewry, No. CV08-3315 CAS (MANx) (Aug. 18, 2008) and Managed

2 Pharmacy Care v. Jolly, 603 F. Supp. 2d 1230 (C.D.C. 2009). This Court enjoined

3 the Depmiment from implementing both a 100/0 and 5% reduction in Medicaid

4 reimburs'ement rates on the grounds that the Depmiment had failed to adequately

5 consider the effect such a reduction would have on Medicaid beneficiaries and the

6 availability of Medicaid services through the maintenance of a robust provider

7 network. Id.

8

42. Pursuant to Section 30(A), the Depmiment had a duty to consider

9 efficiency, economy, quality, and access when establishing reimbursement. It is the

10 state's obligation to develop methods and procedures for assuring that it complies

11 with Section 30(A). Here, the Department acted in violation of the Supremacy Clause

12 of the United States Constitution because it has failed to consider or give sufficient

13 weight to the impact of the reimbursement cut on quality of care or access to care for

14 Medicaid beneficiaries required by Section 30(A), including the relationship of

15 reimbursement payments to provider costs. Additionally, there is no evidence that

16 the Department has complied with the requirements of Section 30(A) prior to its

17 implementation of the September 26, 2009 reimbursement cut. Finally, it is evident

18 that the reimbursement cut will directly result in a failure of the State to comply with

19 the requirements of Section 30(A) because reimbursement will not be sufficient to

20 assure "quality of care" and access.

21

43. Moreover, there is no evidence that the State has complied with the

22 requirements of federal law, state regulations, or the State Plan to obtain approval of a

23 State Plan amendment prior to this material change in the State's operation of the

24 Medicaid program. 42 C.P.R. § 430.12(c).

25

44. There is also no evidence that the Department gave adequate public

26 notice or obtained public comment, as it is required to do pursuant to 42 C.P.R. §

27 447.205.

28
DM111906343.1

10
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 11 of 28 Page ID #:57

1

45. It is also clear that the Department has not taken adequate steps to set

2 payment rates at such a level as to ensure that sufficient providers remain in the

3 program so that services under the plan are available to recipients at least to the extent

4 that those services are available to the general population." 42 C.F.R. § 4407.204; See

5 California State Plan, 4.19(i).

6

46. There is absolutely no evidence that the State made any finding or

7 determination that the four percent (4%) reduction in rates represents the EAC of

8 providers, which is the amount they are obligated to pay providers under Federal law.

9 42 C.F.R. § 447.333.

10

47. In short, the Department acted arbitrarily and capriciously, unlawfully

11 and in violation of the Supremacy Clause of the United States Constitution when it

12 reduced reimbursement payments to pharmacies. Based on the foregoing, Plaintiffs

13 are likely to succeed on the merits.

14

48. Irreparable harm will occur if the reimbursement cut goes into effect

15 because pharmacies, including members of the Plaintiff associations, will be forced to

16 reduce levels of service, deny prescriptions to new Medicaid beneficiaries, shut down,

17 reduce service hours, andlor refuse to take any Medicaid beneficiaries. Plaintiffs have

18 no administrative remedy, nor any plain, speedy, or adequate remedy except by this

19 complaint for injunctive relief.

20

49. The balance of harms favors entering the injunction because the physical

21 and emotional harm suffered by Medicaid beneficiaries deprived of needed access to

22 quality pharmaceutical products if the cut goes into place, as well as the inevitable

23 loss of employment if the pharmacies are forced to close or lay otT workers, outweighs

24 monetary loss to the State. Moreover, the State is receiving additional federal

25 funding, the express purpose of which is to avoid this type of cut.

26

50. It is in the public interest that the court grant the injunction because it is

27 always in the public interest that State governments comply with federal and state law.

28
OM111906343.1

11
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 12 of 28 Page ID #:58

1 Moreover, it is in the public interest to assure that Plaintiffs' members can continue to

2 serve Medicaid beneficiaries.

3

WHEREFORE, Plaintiffs respectfully request that this Comi enter an injunction

4 enjoining the September 26, 2009 reimbursement cut.

5

COUNT II FOR DECLARATORY JUDGMENT THAT THE

6 DEPARTMENT HAS VIOLATED 42 C.F.R. § 447.205

7

51. The Plaintiffs incorporate Paragraphs 1 - 49 as if set forth fully here.

8

52. An actual controversy exists between the parties concerning whether the

9 September 26, 2009 reimbursement cut violates 42 C.F.R. § 447.205.

10

53. 42 C.F.R. § 447.205 requires the Depmiment to provide public notice of

11 any significant proposed change in its methods and standards for setting

12 reimbursement for services and provide an opportunity for public comment.

13

54. The Department did not provide public notice of the September 26,2009

14 reduction in reimbursement as required by 42 C.F.R. § 447.205.

15

WHEREFORE, Plaintiffs respectfully request that this Court enter an order

16 declaring that the September 26, 2009 reini.bursement cut is invalid.

17

COUNT III FOR DECLARATORY JUDGMENT THAT THE

18 DEPARTMENT HAS VIOLATED 42 C.F.R. § 447.204

19

55. Plaintiffs incorporate Paragraphs 1 - 53 as if set f01ih fully here.

20

56. An actual controversy exists between the parties concerning whether the

21 September 26,2009 reimbursement cut violates 42 C.F.R. § 447.204.

22

57. 42 C.F.R. § 447.204, and the California State Plan, require the

23 Department to set payment at such a level as to ensure that sufficient providers remain

24 in the program so that services under the plan are available'to recipients at least to the

25 extent that those services are available to the general population." 42 C.F.R. §

26 447.204; See California State Plan, 4.19(i).

27

58. The proposed reduction in reimbursement will reduce the number of

28 providers in the Medi-Cal program so as to make Medicaid services less available to
12
AMENDED COMPLAINT FOR lNJUNCTIVE AND DECLARATORY RELIEF DMI\1906343.1

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 13 of 28 Page ID #:59

1 Medicaid beneficiaries than they are to the general population, in contravention of 2 .Federal Regulations. 42 C.F.R. § 447.204.

3

WHEREFORE, Plaintiffs respectfully request that this Comi enter an order

4 declaring that the September 26, 2009 reimbursement cut is invalid.

5

COUNT IV FOR DECLARATORY JUDGMENT THAT THE

6 DEPARTMENT HAS VIOLATED 42 C.F.R. § 447.333.

7

59. Plaintiffs incorporate Paragraphs 1 - 57 as if set fOlih fully here.

8

60. An actual controversy exists between the pmiies concerning whether the

9 September 26,2009 reimbursement cut violates 42 C.F.R. § 447.333.

10

61. 42 C.F.R. § 447.333 requires the Depmiment to make assurances to CMS

11 that its proposed payment methodology for prescription drugs reflect the EAC for the

12 drugs. 42 C.F.R. § 447.333. These assurances are based on findings made by the

13 State regarding the EAC for prescription drugs. The State is required to retain and

14 make available to CMS "data, mathematical or statistical computations, comparisons

15 and other pertinent records to support its findings and assurances." 42 C.F.R. §

16 447.333.

17

62. There is absolutely no evidence that the State made any finding or

18 determination that the four percent (4%) reduction in reimbursement represents the

19 EAC of providers, which is the amount they are obligated to pay providers under

20 Federal law. 42 C.F.R. § 447.333. Nor is there any evidence the Depmiment has

21 made the required assurances to CMS.

22

WHEREFORE, Plaintiffs respectfully request that this Comi enter an order

23 declaring that the September 26, 2009 reimbursement cut is invalid.

24

25

26

27

28
DMJIJ906343.J

13
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 14 of 28 Page ID #:60

1

COUNT V FOR DECLARATORY JUDGMENT THAT THE

2

DEPARTMENT HAS VIOLATED 22 C.C.R. § 50004(B) (2009).

3

63. Plaintiffs incorporate Paragraphs 1 - 61 as if set forth fully here.

4

64. An actual controversy exists between the parties concerning whether the

5 September 26, 2009 reimbursement cut violates 22 C.C.R. § 5000

6

65. California Regulations require the Department to administer the Medi-

7 Cal program in accordance with Federal Law, as well as in accordance with the

8 California State Plan, applicable State law, and Medi-Cal regulations. 22 C.C.R. §

9 50004(b) (2009).

10

66. 42 C.F.R. § 447.204, and the California State Plan, require the

11 Depmiment to set reimbursement at such a level as to ensure that sufficient providers

12 remain in the program so that services under the plan are available t~ recipients at

13 least to the extent that those services are available to the general population." 42

14 C.F.R. § 447.204; See California State Plan, 4.19(i).

15

67. 42 C.F.R. § 447.205 requires the Department t6 provide public notice of

16 any significant proposed change in its methods and standards for setting

17 reimbursement for services and provide an opportunity for public comment.

18

68. The State previously established, through the methodology set out in the

19 California State Plan, that the current reimbursement payment is the proper one, and

20 certified that fact to CMS in the State Plan. California State Plan Attachment 4.19-B

21 requires the Department to follow a specific methodology in adopting new

22 reimbursement, and the Depmiment has not followed that methodology here.

23

69. By failing to comply with 42 C.F.R. § 447.204, 42 C.F.R. § 447.205, and

24 California State Plan, 4.19(i), the Depmiment has failed to comply with 22 C.C.R. §

25 50004(b) (2009), which requires it to administer Medi-Cal in compliance with Federal

26 regulations and the California State Plan.

27

WI-IEREFORE, Plaintiffs respectfully request that this Court enter an order

28 declaring that the September 26, 2009 reimbursement cut is invalid.
14
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF DMJ\J906343.J

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 15 of 28 Page ID #:61

1

COUNT VI FOR DECLARATORY JUDGMENT THAT THE

2

SEPTEIVIBER 26,2009 RATE CUT VIOLATES FEDERAL AND STATE

3

LAW

4

70. Plaintiffs incorporate Paragraphs 1 - 68 as if fully set forth here.

5

71. An actual controversy exists between the pmiies concelning whether the

6 reimbursement cut resulting from the First Databank Settlement violates federal and

7 state law.

8

72. For the reasons set forth above, the reimbursement cut violates both

9 federal and state law as being preempted by Section 30(A) of the Social Security Act,

10 contrary to Federal Regulations, contrary to state regulations, and contrary to the

11 Medicaid State Plan.

12

WHEREFORE, Pharmacies respectfully request that this Court enter a

13 judgment declaring the reimbursement cut unlawful and enter an injunction preventing

14 the Depatiment from implementing the unlawful reimbursement cut.

15

16 Dated: October 2, 2009
17 18 19
20 21 22

DUANE MORRIS LLP
By: Yvette . 0 an Audra . Thompson Attorn s for Plaintiffs NATIONAL ASSOCIATION OF CHAIN DRUG STORES, and the NATIONAL COMMUNITY PHARMACISTS ASSOCIATION

23

24

25

26

27

28
DMl11906343.1

15
AMENDED COMPLAINT FOR INJUNCTIVE AND DECLARATORY RELIEF

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 16 of 28 Page ID #:62
EXHIBIT A

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 17 of 28 Page ID #:63

Revision: HCFA-PH-9L- 4
AUGUST 1991

(BPD)

OMB No. 093B-
Page 1

STATE PUU~ UNDER TITLE XIX OF THE SOCIAL SECURITY ACT MEDICAL ASSISTANCE PROGRAM
State/Territory: ________C_A_L_IF_O_R_N_I_A______~___________________________~____

- Citation
42 eFR
430.10

As a condition for receipt of Federal funds under title XIX of the Social Security Act, the
Department of Health Services (Single state Agency)
submits the following State plan for the medical assistance program, and hereby agrees to admJ.nister the program in accordance with the provisions of this state plan, the requirements of tItles XI arid XIX of the Act, and all applicable Federal regula-tiona and other official issuances of the Department.

Supersedes -~---Xpproval Date .. tiQ!.l~J~2~~
TN No. ~~_J

Effective Date ~AN Ol,~
HCFA ID: 7982E

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 18 of 28 Page ID #:64

2
Revision: . BCFA-AT-80-38{BPP) May 22, 1980
State California

SEX:.TICN 1

Citation 42 CPR 431.10
A'I'-79~29

1.1 j)2signaticn and AutlXJrity (a) 'I'iIe Department of

Health Services Is the sir.qle State agency designated to a:lID.nister or supervise the
oomlnistraticn of the Medicaid program under title XIX of the Social Security Act. (All references in
this plan to "the Medicaid agency'; mean the agency named in this paragraph. )

~ l.l-A is a certification
signed by the State Attorney General identifying the single State agency
ana ci ti \1g the legal author i ty under which it administers or supervises
administraticn of the program.

'.IN _ .=..i_~ _ Supersedes 'IN .J..._ _ _~

Approval Date_ _ _ __

- - - Effective D-9.te

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 19 of 28 Page ID #:65

65
Revisic:n: lD'A-AT-SQ-38 (BJ?P) May 22, 1980 '
S~te_____c_a_l_if_'o_r_n_i_a__________________________________

Citaticn
42 CFR 447,201 42 ern 447.204
AT---78-90

4.19 (i)

The Hedicaid agency's payments are sufficient to enlist enough providers so that services under the plan are available to recipients at least to the
extent that trose services are available to the general population.

'IN .':..*_--=-__
SWup!..e.._ rsed_es__

Apptollal,...L1ate,_ _ _ _ __

Effective Date,_ _ __

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 20 of 28 Page ID #:66

STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT
Attachment 1. 1-A ~1EDICAL ASSISTANCE PROGRAM
state of 'Cali fornia
ATTORNEY GENERAL'S CERTIFICATION
1 certify that:
the Department of Health Services, State 'of California is the single State agency responsible for:
[]J aaministering the pian
The legal authority:under which the agency administers the plan on a Statewide basis is Nelfa!:'e and Insti tutions - Code Sections -, 0722, 10740, and 14100.1, (regulatory authori ty: 10725; 14'105 and 14124.5)
(statuto~y citations) supervising the adminstration of the pla~ by local political subdivisions.
The leg2.1 authori ty under which the ",geney supervises the administration of the plan on a Statewide basis is contained in -
---------(statutory citation)
The agency's legal authority to make rules and regulation that are binning on the'political subdivision a2ministering the plan is
(statutory citation)

DATE

-rI,b~nat~ure1 0~'-'<-,

~ S 'L ~O-.,vj- -Atr01 h E'A4 c;%\ S!J\ o.-Q"

Title

'

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 21 of 28 Page ID #:67
Attachment 4.19-8 Page 1
STATE PLAN UNDER TITLE XIX OF SOCIAL SECURITY ACT STATE CaliforniC!
The policy of the State Agency is that reimbursement for each of the other types of care or service listed in Section 1905(a) of the Act that are included in the program under the plan will be at the lesser of usual charges or the limits specified in the California Code of Regulations (CCR), Title 22, Division 3, Chapter 3, Article 7 (commencing with Section 51501) and CCR, Title "ll, Chapter 4, Subchapter 13, Sections 6800-6874, for EPSDT health assessment services, or as specified by any other means authorized by state law.
The methodology utilized by the State Agency in establishing payment rates will be as follows:
(a) The development of an evidentialY base or rate study resulting in the determination of a proposed rate.
(b) To the extent required by State or Federal law or regulations, the presentation of the proposed rate at public hearing to gather public input to the rate determination process.·
(c) The determination of a payment rate based on an evidentiary base, including pertinent input from the public.
(d) The establishment of the payment rate through the State Agency's adoption of regulations specifying such rate in the eeR, Title 22, Division 3, Chapter 3, Article? (commencing with Section 51501), and eCR, Title
17, Chapter 4, Subchapter 13, commencing with Section 6868, Schedule of Maximum Allowances for EPSDT health assessment, or through any other means authorized by State law.

TN No 03-023 Supersedes TN # 92-01

Approval Date DEC 3 0 20~ffective Date OCT ~ 1 2003

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 22 of 28 Page ID #:68
Supplement 2 to ATTACHMENT 4.19·B
Page 1
STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS
PAYMENT METHODOLOGY FOR PRESCRIPTION DRUGS The policy of the State Agency is that reimbursement for Pharmaceutical Services and Prescribed Drugs, as one category of health care or service from among those listed in Section 1905(a) of the Social Security Act that are included in the program under the plan, will be at the provider pharmacy's current charges to the general public, up to the State Agency's limits. The price providers charge to the program shall not exceed that charged to the general public. The pharmacist, to the extent permitted by !aw, shall dispense the lowest cost, therapeutically equivalent drug product that the pharmacy has in stock, whir.h meets the medical needs of the beneficiary.
The methodology utilized by the State Agency, in compliance with 42 C.F.R §§ 447.331 and 447.332, in establishing payment rates for Pharmaceutical Services (pharmacy dispensing fees) and Prescribed Drugs (dispensed drug products) to implement the policy is as follows:
A. The method used to establish maximum Qrug product payments is that payments for drugs dispensed by pharmacists shall consist of the state's Estimated Acquisition Cost (EAC) of the drug product dispensed plus a dispensing fee that is added to the drug product payment (see paragraph B below). The EAC is the lowest of the Average Wholesale Price (AWP) minus H percent, the Maximum Allowable Ingredient Cost (MAle); the federal upper limit of reimbursement for listed multiple source drugs (called "Federal Upper Limit," or FUL), or the charges to the general public.

T{\! No.· 05-027
Supersedes
TN No. 04-010

J' 6 200S Approval Date ""I!' "f1, ~

Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 23 of 28 Page ID #:69
Supplement 2 to ATIACHMENT 4.19·6 Page 2 STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES ·PRESCRIBED DRUGS

B. The professional fee for dispensing is seven dollars and 25 cents ($7.25) per dispensed prescription. The professional fee for legend drugs dispensed to a beneficiary residing in a skilled nUrsing facility or intermediate care facility is eight dollars ($8.00) per dispensed prescription. For the purposes of this paragraph 8, "skilled nursing facility" and "intermediate care facility" mean as defined in DiVIsion 5 (commencing with Section 70001) of Title 22 of the California Code of Regulations.

C. For purposes of this Supplement 2, the follOWIng definitions apply: I> "Average wholesale price" means the price for a drug product listed in the department's primary price reference source.
<!> "Direct price" means the price for a drug product purchased by a pharmacy directly from a drug manufacturer listed in the department's primary reference source.
4> "Federal upper limit" means the maximum per unit reimbursement when established by the Centers for Medicare and Medicaid Services and published by the department in Medi-Cal pharmacy provider bulletins and manuals.
'" "Generically equivalent drugs" means drug products with the same active chemical ingredients of the same strength, quantity, and dosage

TN No. 05-027
Supersedes TN No. 04-010

Approval Date JIJN 0 S 2008 Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 24 of 28 Page ID #:70
Supplemeilt 2. to ATTACHMENT 4.19-B Page 3 STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California
METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS
form, and of the same generic drug name, as determined qy the United States Adopted Names (USAN) and qccepted by the federal Food and Drug Administration (FDA), as those drug products having the same chemical ingredients.
'" "Legend drug" means any drug whose labeling states "Caution: Federal law prohibits dispensing without prescription," "Rx only," or words of similar import.
<I) "Maximum Allowable Ingredient Cost" (MAIC) means the maximum amount the department will reimburse Medi-Cal pharmacy providers for generically equivalent drugs.
D "Innovator multiple source drug," "noninnovator multiple source
as drug," and "single source drug" have the same meaning those
terms are defined in Section 1396r-8(k)(7) of Title 42 of the United States Code, the National Rebate Agreement, and other Federal instructions.
~ "Nonlegend drug" means any drug whose labeling does not contain one or more of the statements required to be a "legend drug".
11) "Wholesale Selling Price" (WSP) means the weighted (by unit volume) mean price, including discounts and rebates, paid by a pharmacy to a whOlesale drug distributor.

TN No. 05-027
Supersedes TN No. 04-010

o 2006 G " '\\
Approval Date c

Effective Date: October 1, 2005

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 25 of 28 Page ID #:71
Supplement 2 to ATTACHMENT 4.19-8 Page 4 STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE; California METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS
D. For purposes of paragraph A, the department shall establish a fist of MAICs for generically equivalent drugs, which shall be published in Medi-Cal pharmacy provider bulletins and manuals. The department will update the list of MAICs and establish additional MAICs in accordance
'.
with the following:
It The department will base the MAIC on the mean of the wholesale selling prices of drugs generically equivalent to the particular innovator drug that are available in California from wholesale drug distributors selected by the department.
o The department will update MAICs at least every three months and notify Medi-Ca\ providers at least 30 days prior to the effective date of aMAIC.
E. The federal upper limits of reimbursement, FUL, are initiated by CMS and provided to the State Agency for ir:nplementation in the State Medicaid Manual of Instructions. Periodic revisions to Addendum A of Section 6305.3 of the Manual, which is the list of multiple source drugs and the FUL prices, are implemented by the State Agency following notice by CMS of new FUL prices. New FUL prices are implemented within the timeframe required by the CMS notice and as required by applicable California statutes and regulations.
F. Overrides to both the state and federal price ceilings are available only through a state prior approval mechanism. Prior approval is limited to

TN i'lo. 05-027 Supersedes TN i'lo. 04-010

JUN 0 6 2006

Approval Date

Effective Date: October 'I, 2005

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 26 of 28 Page ID #:72
Supplement 2 to ATTACHMENT 4.19-B Page 5 STATE PLAN UNDER TITl.E XIX OF THE SOCIAL SECURITY ACT STATE: California METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES ·PRESCRIBED DRUGS
. those cases where the medical necessity of a specific manufa,cturer's
brand of a drug, priced above the ceiling, is adequately demonstrated to a state consultant. The documentation of the approval is linked to the claims payment system assuring correct reimbursement for the brand dispensed. The same system is used for approval and payment for drugs not on the state Medicaid Drug Formulary, known as the Medi-Cal List of Contract Drugs.
G. The Medi-Cal List of Contract Drugs (List), a preferred drug list, is established pursuant to Section 1927 of the Social Security Act with prior authorization required for drugs not included on the List. Prior authorization will be provided with a 24-houi" turn-around from receipt of request and a 72-l1our supply of drugs in emergency situations. Prior authorization is applied to certain drug classes, particular drugs, or medically accepted indications for use and doses. The state will appoint a Pharmaceutical and Therapeutic Committee or utilize the drug utilization review committee in accordance with Federal law.
H. The Medicaid program restricts coverage of certain covered outpatient drugs through the operation of a prior authorization program, The prior authorization process provides for a turn-around response by tel-ephone, fax, or other telecommunications device within twenty-four hours of receipt of a prior authorization request. In emergency situations, providers may dispense at least a 72~hour supply of medications in accordance with the provisions of Section '1927(d)(5) of the Social Security Act.

TN No. 05-027
Supersedes TN No. 04-010

Approval Date JUN 0 6 2006 Effective Date: October 1,2005

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 27 of 28 Page ID #:73

Supplement 2 to AlTACHMENT 4.19-8 Page 6
STATE PLAN UNDER TITLE XIX OF THE SOCIAL SECURITY ACT STATE: California
METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS

I.

The State Agency believes reimbursement to long-term pharrn?1cy

providers to be consistent and reasonable with costs reimbursed to other

providers. The State Agency maintains an advisory committee known as

the Medj~Cal Contract Drug Advisory Committee in accordance with

Federal law.

DRUG REBATE PROGRAM

The State Agency is in compliance with Section '1927 of the Sodal Security Act. The State Agency reimburses providers of drugs of manufacturers participating in the drug rebate program and is in compliance with reporting requirements for utilization and restrictions to coverage. Pharmaceutical manufacturers can audit utilization data to the extent allowed under the Health Insurance Portability and Accountability Act (HIPAA) in order to ensure that the Department is protecting information in accordance with HIPAA. The unit rebate amount is confidential and is not disclosed to anyone not entitled to the information for purposes of rebate contracting, invoicing and verification.

SUPPLEMENTAL REBATE PROGRAM

The State Agency negotiates supplemental rebates in addition to the federal rebates provided for in Title XIX. Rebate agreements between the state and a pharmaceutical manufacturer are separately identified from the federal rebates.

Supplemental rebates received by the State Agency in excess of those required under the national drug rebate agreement are shared with the Federal government on the same percentage basis as applied under the national rebate agreement. eMS has

TN No. 05-027 Supersedes TN No. 04·010

0 6 2006 APprovalDateJUN

Effective Date: October '1! 2005

Case 2:09-cv-07097-CAS-MAN Document 11 Filed 10/02/09 Page 28 of 28 Page ID #:74
Supplement 2 to ATTACHMENT 4.19-8
Page 7
STATE PLAN UNDER TITLE XIX OFTHE SOCIAL SECURI1Y ACT STATE: Califomia METHODS AND STANDARDS FOR ESTABLISHING PAYMENT RATES -PRESCRIBED DRUGS'
authorized the State of California to enter into the Medi-Cal Supplemental Drug Rebate )\verage Manufacturer Price (AMP) Agreement. This supplemental drug rebate agreement was submitted to CMS on December 30, 2005 and has been authorized by CMS. CMS has authorized the State of California to enter into the Medi-Cal Net Cost Supplemental Drug Rebate Agreement. This supplemental drug rebate agreement was submitted to CMS on December 30, 2005 and has been authorized by eMS. All drugs covered by the program, notwithstanding a prior authorization agreement, will comply with the provisions of the national drug rebate agreement.

TN No. 05·027 Supersedes TN No. 04-010

JUN 0 6 2006 . Approval Date _ _ _ _ _ Effective Date: October 1, 2005

 
 Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 1 of 12 Page ID #:833

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

Present: The Honorable CHRISTINA A. SNYDER, U.S. DISTRICT JUDGE

PAUL PIERSON Deputy Clerk

NOT PRESENT Court Reporter / Recorder

N/A Tape No.

Attorneys Present for Plaintiffs:

Attorneys Present for Defendants:

Not Present

Not Present

Proceedings:

DEFENDANTS’ MOTION TO DISMISS FIRST AMENDED COMPLAINT (filed 11/20/09)

I. INTRODUCTION

On September 30, 2009, plaintiffs, the National Association of Chain Drug Stores (“NACDS”) and the National Community Pharmacists Associations (“NCPA”), filed the instant action. On October 2, 2009, plaintiffs filed an amended complaint (“FAC”) against defendants Arnold Schwarzenegger, Governor of the State of California; Kim Belshe, Secretary of the California Health and Human Services Agency; David MaxwellJolly, Director the California Department of Health Care Services; and the California Department of Health Care Services (the “Department”). The Department is a California agency charged with the administration of California’s Medicaid program, Medi-Cal. Plaintiffs represent certain Medi-Cal pharmacy providers.

Plaintiffs seek to enjoin defendants from “reducing by, on average, slightly more than four percent (4%) Medicaid reimbursement based on Average Wholesale Price (“AWP”) for drug products paid to pharmacies for dispensing prescription drugs reimbursed” by Medi-Cal (the “AWP reductions”). FAC at 2. Plaintiffs allege that implementation of the AWP reductions violates § 30(A) of the Social Security Act, 42 U.S.C. § 1396a(a)(30)(A) (“§ 30(A)”), because the Department failed to consider the “quality of care” and “equal access” provisions of § 30(A), and that therefore, it is invalid under the Supremacy Clause of the United States Constitution. U.S. CONST. art. VI, cl. 2. Plaintiffs further allege, and seek declaratory judgment, that the Department failed to comply with additional requirements of federal law, state regulations, and the state plan. Specifically, plaintiffs allege that the Department failed to (1) “set payment rates at such a level to ensure that sufficient providers” enlist, pursuant to 42 C.F.R. § 447.204; (2)

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Page 1 of 12

Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 2 of 12 Page ID #:834
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

obtain approval of this “State Plan amendment” from the U.S. Department of Health and Human Services’ Centers for Medicare and Medicaid Services (“CMS”), pursuant to 42 C.F.R. § 430.12(c); (3) give adequate notice or obtain public comment, as required by 42 C.F.R. § 447.205; and (4) make a finding or determination that the reimbursement rate, after the AWP reduction, represents the best estimate of acquisition cost, pursuant to 42 C.F.R. § 447.333; and (5) to administer Medi-Cal in compliance with federal regulations and the California State Plan, pursuant to 22 C.C.R. § 50004(b). FAC ¶¶ 42-47.

On December 7, 2009, the Court held a hearing on plaintiffs’ motion for preliminary injunction, filed November 2, 2009. At the hearing, the United States Department of Justice (“DOJ”) appeared regarding its Statement of Interest filed on December 4, 2009. On December 22, 2009, the Court denied plaintiffs’ request for preliminary injunction.

On November 20, 2009, defendant filed the instant motion to dismiss the FAC. Plaintiffs filed their opposition on November 30, 2009. A reply was filed on December 7, 2009. On December 11, 2009, the Court took the matter under submission and vacated the hearing. After carefully considering the arguments set forth by both parties, the Court finds and concludes as follows.

II. BACKGROUND

Medicaid is a cooperative federal program: the federal government provides federal funding to the states so that states may provide medical care to their needy citizens. State participation is voluntary; however, once a state chooses to participate by accepting federal funds, it must comply with requirements imposed by the Medicaid Act. Because California has elected to participate in the Medicaid program, it must administer its state Medicaid program, Medi-Cal, in compliance with a state plan that has been preapproved by the Secretary of the U.S. Department of Health and Human Services (the “Secretary”), and which complies with the requirements set forth in 42 U.S.C. § 1396a(a)(1)-(70). In accordance with these requirements, California must provide “methods and procedures” for the payment of care and services that (1) are “consistent with efficiency, economy, and quality of care,” and (2) ensure their availability to the Medicaid population to the same “extent as they are available to the general population in the geographic area.” 42 U.S.C. § 1396a(a)(30)(A). These requirements are known,

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 3 of 12 Page ID #:835
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

respectively, as the “quality of care” and “equal access” provisions of § 30(A) of the Medicaid Act. Further, under California law, the Department must administer Medi-Cal in accordance with the state plan; applicable state law, as specified in sections 14000 to 14124 of the Welfare and Institutions Code; and Medi-Cal regulation. Cal. Code Regs. tit. 22, § 50004(b).

The subject of this case is pharmacy reimbursement in the Medicaid program. Medi-Cal reimburses pharmacies that dispense prescription drugs to patients covered by Medicaid. The department reimburses these pharmacies for the “estimated acquisition cost” of drugs along with a fixed dispensing fee per prescription. Cal. Welf. & Inst. Code § 14105.45(b)(1). Pursuant to the California state plan and state law, the reimbursement of drug costs is based on the lesser of four alternatives: (1) AWP minus 17%; (2) the selling price; (3) the federal upper limit; or (4) the maximum ingredient cost (“MAIC”). Id. § 14105.45(b)(2).

In the instant action, plaintiffs challenge an alleged 4% reduction in reimbursements tied to the AWP, which is the “price for a drug product listed as the average wholesale price in the department's primary price reference source.” The Department uses First DataBank, Inc. (“First DataBank”), a drug pricing publisher, as its primary price reference source for determining the AWP. On March 17, 2009, as part of a class action settlement in a separate lawsuit, First DataBank agreed to reduce the markup of 1.25 over the wholesale acquisition cost (“WAC”) to 1.20 over WAC, when setting the AWP for approximately 1,400 drug products.1 See New England Carpenters Health Benefits Fund v. First DataBank, Inc., 602 F. Supp. 2d 277 (D. Mass. 2009) (approving the settlements). The settlement agreements were affirmed by the First Circuit on appeal. See 582 F.3d 30 (1st Cir. 2009). Plaintiffs allege that First DataBank also voluntarily reduced the markup to 1.20 over WAC when setting the AWP for approximately 18,000 additional drug products, where the mark-up previously exceeded 1.20. FAC ¶ 25. Implementation of these AWP reductions occurred on September 26, 2009. Plaintiffs

1 The AWP figure is usually derived by applying a multiplier to the wholesale

acquisition cost (“WAC”). See Nat’l Ass’n of Chain Drug Stores v. New England

Carpenters Health Benefits Fund, 582 F.3d 30, 36-37 (1st Cir. 2009) (providing a

background to drug pricing and the controversy in the underlying case).

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 4 of 12 Page ID #:836
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

contend that the practical effect of these reductions is that the reimbursement for drug products tied to AWP has been reduced by slightly more than 4%. FAC ¶ 26.

III. MOTION TO DISMISS
Defendants move to dismiss plaintiffs’ FAC on the grounds that plaintiffs fail to satisfy the “case or controversy” requirements of Article III constitutional standing, and in any event, fail to state a claim for relief.2 Defendants’ arguments are considered in turn.
A. Constitutional Standing
1. Legal Standard
In order to establish standing to assert a claim, a plaintiff must do the following: (1) demonstrate an injury in fact, which is concrete, distinct and palpable, and actual or imminent; (2) establish a causal connection between the injury and the conduct complained of; and (3) show a substantial likelihood that the requested relief will remedy the alleged injury in fact. See McConnell v. Federal Election Comm’n, 540 U.S. 93, 22526 (2003).
Because standing relates to a federal court’s subject matter jurisdiction under Article III, it is properly raised in a motion to dismiss under Fed. R. Civ. P. 12(b)(1), not Rule 12(b)(6). White v. Lee, 227 F.3d 1214, 1242 (9th Cir. 2000). The Ninth Circuit has noted a distinction between facial and factual jurisdictional attacks under Rule 12(b)(1).

2 Defendants request that the Court take judicial notice of nine filings with the

Court, including sections of Cal. Welf. & Inst. Code, and court filings in First DataBank

and related matters. Under Fed. R. Evid. 201, a court may take judicial notice of “matters

of public record.” Mack v. South Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir. 1986).

As such, judicial notice is proper insofar as judicial notice is taken that these nine court

filings were made. The Court GRANTS defendants’ request.

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 5 of 12 Page ID #:837
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

White, 227 F.3d at 1242 (“Rule 12(b)(1) jurisdictional attacks can be either facial or factual.”). “Where the motion presents a facial jurisdictional attack -- that is, where the motion is based solely on the allegations in the complaint -- the court must accept these allegations as true. Where, however, the challenge is factual -- where it is based on extrinsic evidence, apart from the pleadings -- the court may resolve factual disputes in order to determine whether it has jurisdiction.” Nat’l Licensing Ass’n, LLC v. Inland Joseph Fruit Co., 361 F. Supp. 2d 1244, 1247 (E.D. Wash. 2004) (citing Roberts v. Corrothers, 812 F.2d 1173, 1177 (9th Cir. 1987)). The court, however, may not resolve these disputes “‘if issues of jurisdiction and substance are intertwined,’ that is, if the jurisdictional question is dependent on the resolution of factual issues going to the merits.” Id. (quoting Roberts, 812 F.2d at 1177).

“It is the responsibility of the complainant clearly to allege facts demonstrating that he is a proper party to invoke judicial resolution of the dispute and the exercise of the court’s remedial powers.” Warth v. Seldin, 422 U.S. 490, 518 (1975). “For the purposes of ruling on a motion to dismiss for want of standing, both the trial and the reviewing courts must accept as true all material allegations of the complaint, and must construe the complaint in favor of the complaining party.” Id. at 501; Takhar v. Kessler, 76 F.3d 995, 1000 (9th Cir. 1996). “At the same time, it is within the trial court’s power to allow or to require the plaintiff to supply, by amendment to the complaint or by affidavits, further particularized allegations of fact deemed supportive of plaintiff’s standing. If, after this opportunity, the plaintiff’s standing does not adequately appear from all materials of record, the complaint must be dismissed.” Warth, 422 U.S. at 501-02.

2. Discussion

Defendants contend that plaintiffs lack constitutional standing because they cannot plead “injury in fact.” Mot. at 9. They argue that because the AWP reductions resulted from a class action settlement in First DataBank, a matter in which defendants were not a party, that there is no casual connection between any reduction in Medi-Cal reimbursement based on readjusted AWPs and any action by defendants. Id.; Reply at 3. They further argue that because plaintiffs were members of the class in First DataBank, they are bound by the express terms of the settlement, including the 4% readjustment of the AWP, and thus the action is moot. Mot. at 9-10; Reply at 4-5. Moreover, defendants contend that the principle of non-mutual collateral estoppel bars plaintiffs from

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 6 of 12 Page ID #:838
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

attempting to relitigate the issue of whether the 4% readjusted AWP adequately reflects the actual average wholesale price.3 Mot. at 10-11. Finally, defendants argue that the alleged injury is not redressable because the published AWP is “beyond the control of the parties to this action,” and the federally approved Medi-Cal State Plan requires the Department to use the readjusted AWPs in the methodology for determining reimbursement. Id. at 11-12.

Plaintiffs respond that they have standing to seek injunctive and declaratory relief under the Supremacy Clause, to enjoin implementation of preempted state legislation.4 Opp’n at 4. Plaintiffs argue that they clearly allege “injury in fact” and a “redressable” injury. Id. at 5. Namely, they allege that as a result of defendants’ reimbursement reductions, Medi-Cal now reimburses NACDS and NCPA members below their breakeven cost for many prescription drugs and that this may result in members discontinuing participation in the Medi-Cal program. Id. at 5-6. Furthermore, plaintiffs argue that the Court has authority to order defendants to comply with section 30(A)’s requirements, and thus remedy this injury. Id. As for defendants’ collateral estoppel argument, plaintiffs contend that the settlement in First DataBank does not bar plaintiffs in this matter for two reasons: (1) the cases present entirely different claims and the issues

3 In support of this argument, defendants assert that the settlement agreement in First Databank noted that the underlying class complaint was filed because “First DataBank, wrongly increased the so-called WAC to AWP markup factor applied to numerous prescribed pharmaceuticals through a scheme begun in 2001 and 2002, thereby causing members of the proposed Private Payer Class, whose payments for pharmaceuticals are tied to the published AWP, to make substantial excess payments to those pharmaceuticals.” Mot. at 10-11; Def.’s RJN, Ex. 6 (Settlement Agreement).

4 Plaintiffs allege that defendants failed to comply with the meet and confer

requirements of Local Rule 7-3 before filing the instant motion. Opp’n at 3. Defendants

respond that immediately after plaintiffs filed their FAC, defendants communicated their

intent to file a responsive pleading no later than November 20, 2009. Reply at 1. Despite

these alleged procedural deficiencies, the Court considers the motion. However, the

Court admonishes all parties that they must comply with the Local Rules of Court in the

future.

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 7 of 12 Page ID #:839

UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

are not identical;5 and (2) only one of the plaintiffs, NACDS, was a party in the First DataBank case and the other plaintiff NCPA cannot be barred from asserting its rights. Id. at 8-11.

The Court finds that plaintiffs have standing to pursue this action. In so far as plaintiffs allege that their member pharmacies suffer a direct pecuniary loss resulting from defendants reducing Medicaid reimbursements, without first making certain findings required by section 30(A), plaintiffs sufficiently allege an injury in fact.6 See Indep. Living Ctr. of S. Cal., Inc. v. Shewry, 543 F.3d 1050, 1065 (9th Cir. 2008) (citing Craig v. Boren, 429 U.S. 190, 194-95 (1976), for the principle that direct economic injuries establish the threshold requirements of Article III standing). In addition, the Court finds that the alleged injury would be redressed in the event that this Court were to enjoin defendants from implementing the September 26, 2009 markdown of AWPs, when providing reimbursements based on AWP. In addition, the Court concludes that the First DataBank settlement may not be accorded collateral estoppel effect in the instant case. As the Ninth Circuit recently noted, “settlements generally do not bar claims against non-parties or have issue-preclusive effect (sometimes referred to as ‘collateral estoppel’) on the subsequent litigation of issues not expressly resolved in the settlement.” Cell Therapeutics, Inc. v. Lash Group, Inc., 586 F.3d 1204, 1210 (9th Cir. 2009). Further, “settlement agreements generally preclude further litigation on the claims by and against parties to the initial settlement, but issue preclusion generally does not attach to a settlement agreement.” Id. at 1211 (citing Arizona v. California, 530 U.S. 392 (2000)). The issues presented in this case are not identical to the issue in First DataBank; namely

5 Specifically, plaintiffs contend that the First DataBank action addressed whether First DataBank improperly inflated its reported AWP rates for a small set of drug products, whereas this action addresses whether defendants have met their obligations under state and federal law in administering Medi-Cal. Opp’n at 9.

6 The analysis of Article III standing is “not fundamentally changed” by the fact

that a plaintiff asserts a “procedural,” rather than a “substantive” injury. See City of

Sausalito v. O'Neill, 386 F.3d 1186, 1197 (9th Cir. 2004). In a “procedural injury” case:

to show a cognizable injury in fact, plaintiff must allege that (1) the [agency] violated

certain procedural rules; (2) these rules protect [a plaintiff's] concrete interests; and (3) it

is reasonably probable that the challenged action will threaten their concrete interests. Id.

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 8 of 12 Page ID #:840
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

the issue of whether the State administers Medi-Cal in accordance with applicable federal and state law, was not resolved by the First DataBank settlement. Moreover, plaintiffs are challenging Medi-Cal reimbursement reductions resulting from changes in AWPs allegedly not covered by the terms of the settlement agreement.7 Thus, the Court denies defendants’ motion to dismiss the FAC on these grounds.

B. Legal Sufficiency of the Claims for Relief
1. Legal Standard
A Rule 12(b)(6) motion tests the legal sufficiency of the claims asserted in a complaint. “While a complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations, a plaintiff’s obligation to provide the ‘grounds’ of his ‘entitlement to relief’ requires more than labels and conclusions, and a formulaic recitation of the elements of a cause of action will not do.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555 (2007). “Factual allegations must be enough to raise a right to relief above the speculative level.” Id. Stated differently, only a complaint that states a claim for relief that is “plausible on its face” survives a motion to dismiss. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1949-50 (2009) (quoting Twombly, 550 U.S. at 570). “The plausibility standard is not akin to the ‘probability requirement,’ but it asks for more than a sheer possibility that a defendant has acted unlawfully.” Id.
In considering a motion pursuant to Fed. R. Civ. P. 12(b)(6), a court must accept as true all material allegations in the complaint, as well as all reasonable inferences to be drawn from them. Pareto v. F.D.I.C., 139 F.3d 696, 699 (9th Cir. 1998). The complaint must be read in the light most favorable to the nonmoving party. Sprewell v. Golden State Warriors, 266 F.3d 979, 988 (9th Cir. 2001); Parks Sch. of Bus., Inc. v. Symington, 51 F.3d 1480, 1484 (9th Cir. 1995). However, a court need not accept as true unreasonable inferences or conclusory legal allegations cast in the form of factual allegations. Sprewell, 266 F.3d at 988; W. Mining Council v. Watt, 643 F.2d 618, 624 (9th Cir. 1981).

7 According to plaintiffs, First DataBank voluntarily reduced the AWP for

approximately 18,000 additional drug products. FAC ¶ 25.

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 9 of 12 Page ID #:841
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

Dismissal pursuant to Rule 12(b)(6) is proper only where there is either a “lack of a cognizable legal theory or the absence of sufficient facts alleged under a cognizable legal theory.” Balistreri v. Pacifica Police Dept., 901 F.2d 696, 699 (9th Cir. 1990).

Furthermore, unless a court converts a Rule 12(b)(6) motion into a motion for summary judgment, a court cannot consider material outside of the complaint (e.g., facts presented in briefs, affidavits, or discovery materials). In re American Cont’l Corp./Lincoln Sav. & Loan Sec. Litig., 102 F.3d 1524, 1537 (9th Cir. 1996), rev’d on other grounds sub nom Lexecon, Inc. v. Milberg Weiss Bershad Hynes & Lerach, 523 U.S. 26 (1998). A court may, however, consider exhibits submitted with or alleged in the complaint and matters that may be judicially noticed pursuant to Federal Rule of Evidence 201. In re Silicon Graphics Inc. Sec. Litig., 183 F.3d 970, 986 (9th Cir. 1999); Lee v. City of Los Angeles, 250 F.3d 668, 689 (9th Cir. 2001).

For all of these reasons, it is only under extraordinary circumstances that dismissal is proper under Rule 12(b)(6). United States v. City of Redwood City, 640 F.2d 963, 966 (9th Cir. 1981).

As a general rule, leave to amend a complaint which has been dismissed should be freely granted. Fed. R. Civ. P. 15(a). However, leave to amend may be denied when “the court determines that the allegation of other facts consistent with the challenged pleading could not possibly cure the deficiency.” Schreiber Distrib. Co. v. Serv-Well Furniture Co., 806 F.2d 1393, 1401 (9th Cir. 1986); see Lopez v. Smith, 203 F.3d 1122, 1127 (9th Cir. 2000).

2. Discussion

Defendants move to dismiss the FAC, in its entirety, on the basis that plaintiffs fail to state a claim for relief as to each of their various claims for relief. Mot. at 13. In their first claim for injunctive relief, plaintiffs cite to other cases in which this Court preliminarily enjoined Medi-Cal reimbursement reductions, such as Indep. Living Ctr. of S. Cal., Inc. v. Shewry, Case No. CV 08-3316 CAS (MANx) and Managed Pharmacy Care v. Jolly, Case No. CV 09-0382 CAS (MANx). Defendants contend that those cases are distinguishable because the State conduct consisted of legislatively enacted rate reductions, and accordingly, those injunctions have no binding authority on this case and

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 10 of 12 Page ID #:842
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

the claim should be dismissed. Id. at 13-14. Defendants further contend that plaintiffs’ claims for declaratory judgment, set forth in the second through sixth claims for relief, should be dismissed. As to the second claim, defendants argue that the reductions in AWP do not require public notice, pursuant to 42 C.F.R. § 447.205, because they do not constitute a significant change in “methods and standards.”8 Id. at 14. As for the third claim, in which plaintiffs allege that the State fails to “set payment rates at such a level to ensure that sufficient providers” enlist, pursuant to 42 C.F.R. § 447.204, defendants assert that the State Plan, reflecting the reimbursement formulas codified at Cal. Welf. & Inst. Code § 14105.45, was approved by the federal government on June 6, 2006. Id. at 14. They argue that this claim should be dismissed because it is not directed at the federally approved State Plan methodology but rather the AWP reductions resulting from a private settlement. Id. at 15. In addition, defendants argue that the fourth claim should be dismissed because the cited regulation, 42 C.F.R. § 447.333, was removed effective October 1, 2007. Id. As for the fifth claim, defendants contend that plaintiffs’ “generalized and unsubstantiated reference to 22 C.C.R. § 50004(b), and 42 C.F.R. § 447.204 and § 447.205, is unavailing” because such speculative and conclusory statements are insufficient to establish a right to relief. Id. at 16. Similarly, defendants contend that the sixth claim should be dismissed because plaintiffs’ “threadbare recitals” are insufficient to state a claim for relief under Iqbal, 129 S. Ct. at 1949.9 Id. at 17. They further contend that section 30(A) is inapplicable to the instant suit. Id.

Finally, defendants argue that Arnold Schwarzenegger, Governor of the State of California, and Kim Belshe, Secretary of the California Health and Human Services

8 42 C.F.R. § 447.205 provides that the Department must “provide public notice of any significant proposed change in its methods and standards for setting payment rates for services.” However, public notice is not required if the “change is based on changes in wholesalers’ or manufacturers’ prices of drugs or materials, if the agency’s reimbursement is based on material cost plus a professional fee.” 42 C.F.R. § 447.205(b)(3).

9 In claim VI, plaintiffs seek declaratory relief that “the reimbursement cut violates

both federal and state law as being preempted by Section 30(A) of the Social Security

Act, contrary to Federal Regulations, contrary to state regulations, and contrary to the

Medicaid State Plan.” FAC ¶ 72.

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 11 of 12 Page ID #:843
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

Agency, are not proper parties in this action and should be dismissed. Id. at 17, n.1. They contend that while the Court has jurisdiction to grant prospective relief under the Eleventh Amendment of the United States Constitution against state officials in their “official capacity,” neither the Governor or Agency Secretary have official duties with regard to the Medicaid statutes. Id. According to defendants, the Department is the designated state agency to administer the statutes, and thus, the only defendant to have any official duties is the Director. Id.

Plaintiffs respond that each claim is sufficiently pled. Opp’n at 12. Specifically, as to the first claim, plaintiffs argue that regardless of whether the related cases they cite are distinguishable, they have pled a sufficient claim for injunctive relief. Id. As to the second claim, plaintiffs contend that public notice is required because the AWP reductions at issue are distinguishable from normal price fluctuations and reflect a change in the methods and standards used for setting reimbursement. Id. at 13. Next, regarding the third claim, plaintiffs argue that federal approval of the State Plan does not insulate defendants from their continuing duty to ensure that reimbursements comply with federal law. Id. at 13-14. As to the fourth claim, plaintiffs request that the Court deem the FAC amended nunc pro tunc to cite to section 447.518, because § 447.333 was renumbered as § 447.518. Id. at 14. As for the fifth claim, plaintiffs reiterate that defendants are required to issue public notice regarding the AWP reductions. Id. Finally, plaintiffs contend that count VI does not rely upon “threadbare recitals” because the count incorporates all the previous factual allegations in the FAC. Id. at 15.

The Court finds that all of plaintiffs’ claims are premised on the theory that the Department violated section 30(A) and relevant regulations when it reduced Medicaid payments based on the markdown of AWPs. Assuming the truth of plaintiffs’ allegations, for purposes of this motion to dismiss, namely that the State did not make certain findings and provide public notice prior to implementing these changes, the Court finds that plaintiffs sufficiently state their claims for relief. In any event, the Court finds that defendants’ arguments to be more appropriately decided on a motion for summary judgment.

IV. CONCLUSION

In accordance with the foregoing, the Court DENIES defendants’ motion to

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Case 2:09-cv-07097-CAS-MAN Document 68 Filed 12/22/09 Page 12 of 12 Page ID #:844
UNITED STATES DISTRICT COURT CENTRAL DISTRICT OF CALIFORNIA

Case No. Title

CIVIL MINUTES - GENERAL

CV 09-7097 CAS (MANx)

Date December 22, 2009

NATIONAL ASSOCIATION OF CHAIN DRUG STORES; ET AL. v. ARNOLD SCHWARZENEGGER; ET AL.

dismiss.

IT IS SO ORDERED.

Initials of Preparer

: PDP

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 Case 2:09-cv-07097-CAS-MAN Document 101 Filed 02/22/10 Page 1 of 8 Page ID #:1445

1

2

3

4

5

6

7

8

UNITED STATES DISTRICT COURT

9

CENTRAL DISTRICT OF CALIFORNIA

10

WESTERN DIVISION

11 NATIONAL ASSOCIATION OF

)

CHAIN DRUG STORES; ET AL.

)

12

)

Plaintiffs,

)

13

)

vs.

)

14

)

)

15 ARNOLD SCHWARZENEGGER; ET )

AL.

)

16

)

)

17

Defendants.

)

)

18 ________________________________ )

Case No. CV 09-7097 CAS (MANx) ORDER DENYING PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION PENDING APPEAL

19 I. INTRODUCTION
20 On September 30, 2009, plaintiffs, the National Association of Chain Drug Stores
21 (“NACDS”) and the National Community Pharmacists Associations (“NCPA”), filed the
22 instant action. On October 2, 2009, plaintiffs filed an amended complaint (“FAC”)
23 against defendants Arnold Schwarzenegger, Governor of the State of California; Kim
24 Belshe, Secretary of the California Health and Human Services Agency; David
25 Maxwell-Jolly, Director the California Department of Health Care Services; and the
26 California Department of Health Care Services (the “Department”). The Department is a
27 California agency charged with the administration of California’s Medicaid program,
28 Medi-Cal. Plaintiffs represent certain Medi-Cal pharmacy providers.

Case 2:09-cv-07097-CAS-MAN Document 101 Filed 02/22/10 Page 2 of 8 Page ID #:1446

1

Plaintiffs seek to enjoin defendants from “reducing by, on average, slightly more

2 than four percent (4%) Medicaid reimbursement based on Average Wholesale Price

3 (“AWP”) for drug products paid to pharmacies for dispensing prescription drugs

4 reimbursed” by Medi-Cal (the “AWP reductions”). FAC at 2. Plaintiffs allege that the

5 implementation of the AWP reductions violates Title XIX of the Social Security Act, 42

6 U.S.C. §§ 1396 et seq. (the “Medicaid Act”), and other applicable state and federal

7 regulations. Id.

8

On December 22, 2009, the Court denied plaintiffs’ motion for preliminary

9 injunction. Plaintiffs filed a notice of appeal regarding this order on December 28, 2009.

10 On January 12, 2010, the Ninth Circuit Court of Appeals denied plaintiffs’ request for an

11 injunction pending appeal without prejudice to renewal, if necessary, upon the filing and

12 disposition of such request in the district court, pursuant to Fed. R. App. P. 8(a)(1). See

13 Nat’l Assoc. of Chain Drug Stores v. Arnold Schwarzenegger, No. 09-57051 (9th Cir.

14 Jan. 12, 2010). The Ninth Circuit granted plaintiffs’ request for an expedited briefing

15 schedule and hearing date. Id.

16

On February 1, 2010, plaintiffs filed the instant motion for preliminary injunction

17 pending appeal. Defendants filed their opposition on February 16, 2010. A hearing was

18 held on February 22, 2010. After carefully considering the arguments set forth by both

19 parties, the Court finds and concludes as follows.

20 II. BACKGROUND

21

Medicaid is a cooperative federal program: the federal government provides

22 federal funding to the states so that states may provide medical care to their needy

23 citizens. State participation is voluntary; however, once a state chooses to participate by

24 accepting federal funds, it must comply with requirements imposed by the Medicaid Act.

25 Because California has elected to participate in the Medicaid program, it must administer

26 its state Medicaid program, Medi-Cal, in compliance with a state plan that has been pre-

27 approved by the Secretary of the U.S. Department of Health and Human Services (the

28 “Secretary”), and which complies with the requirements set forth in 42 U.S.C. §

2

Case 2:09-cv-07097-CAS-MAN Document 101 Filed 02/22/10 Page 3 of 8 Page ID #:1447

1 1396a(a)(1)-(70). In accordance with these requirements, California must provide

2 “methods and procedures” for the payment of care and services that (1) are “consistent

3 with efficiency, economy, and quality of care,” and (2) ensure their availability to the

4 Medicaid population to the same “extent as they are available to the general population

5 in the geographic area.” 42 U.S.C. § 1396a(a)(30)(A). These requirements are known,

6 respectively, as the “quality of care” and “equal access” provisions of § 30(A) of the

7 Medicaid Act. Further, under California law, the Department must administer Medi-Cal

8 in accordance with the state plan; applicable state law, as specified in sections 14000 to

9 14124 of the Welfare and Institutions Code; and Medi-Cal regulation. Cal. Code Regs.

10 tit. 22, § 50004(b).

11

The subject of this case is pharmacy reimbursement in the Medicaid program.

12 Medi-Cal reimburses pharmacies that dispense prescription drugs to patients covered by

13 Medicaid. The department reimburses these pharmacies for the “estimated acquisition

14 cost” of drugs along with a fixed dispensing fee per prescription. Cal. Welf. & Inst.

15 Code § 14105.45(b)(1). Pursuant to the California state plan and state law, the

16 reimbursement of drug costs is based on the lesser of four alternatives: (1) AWP minus

17 17%; (2) the selling price; (3) the federal upper limit; or (4) the maximum ingredient

18 cost (“MAIC”). Id. § 14105.45(b)(2).

19

In the instant action, plaintiffs challenge an alleged 4% reduction in

20 reimbursements tied to the AWP, which is the “price for a drug product listed as the

21 average wholesale price in the department's primary price reference source.” The

22 Department uses First DataBank, Inc. (“First DataBank”), a drug pricing publisher, as its

23 primary price reference source for determining the AWP. On March 17, 2009, as part of

24 a class action settlement in a separate lawsuit, First DataBank agreed to reduce the mark-

25 up of 1.25 over the wholesale acquisition cost (“WAC”) to 1.20 over WAC, when setting

26

27

28

3

Case 2:09-cv-07097-CAS-MAN Document 101 Filed 02/22/10 Page 4 of 8 Page ID #:1448

1 the AWP for approximately 1,400 drug products.1 See New England Carpenters Health

2 Benefits Fund v. First DataBank, Inc., 602 F. Supp. 2d 277 (D. Mass. 2009) (approving

3 the settlements). The settlement agreements were affirmed by the First Circuit on

4 appeal. See 582 F.3d 30 (1st Cir. 2009). Plaintiffs allege that First DataBank also

5 voluntarily reduced the markup to 1.20 over WAC when setting the AWP for

6 approximately 18,000 additional drug products, where the mark-up previously exceeded

7 1.20. FAC ¶ 25; Mot. at 6. Implementation of these AWP reductions occurred on

8 September 26, 2009. Plaintiffs contend that the practical effect of these reductions is

9 that the reimbursement for drug products tied to AWP has been reduced by slightly more

10 than 4%. FAC ¶ 26.

11 III. LEGAL STANDARD

12

While an appeal is pending from an interlocutory order or final judgment that

13 grants, dissolves, or denies an injunction, a court may suspend, modify, restore, or grant

14 an injunction on terms for bond or other terms that secure the opposing party's rights.

15 Fed. R. Civ. P. 62(c). Although different rules of procedure govern the power of district

16 courts and court of appeals to stay an order pending appeal, see Fed. R. Civ. P. 62(c) and

17 Fed. Rule App. P. 8(a), the Supreme Court has held that the factors regulating the

18 issuance of a stay are generally the same: (1) whether the stay applicant has made a

19 strong showing that he is likely to succeed on the merits; (2) whether the applicant will

20 be irreparably injured absent a stay; (3) whether issuance of the stay will substantially

21 injure the other parties interested in the proceeding; and (4) where the public interest

22 lies. Hilton v. Braunskill, 481 U.S. 770, 776 (1987); Cal. Pharmacists Ass’n v.

23 Maxwell-Jolly, 563 F.3d 847, 849-50 (9th Cir. 2009).

24

25

26

1 The AWP figure is usually derived by applying a m ultiplier to the wholesale

27 acquisition cost (“WAC”). See Nat’l Ass’n of Chain Drug Stores v. New England Carpenters Health Benefits Fund , 582 F.3d 30, 36-37 (1st Cir. 2009) (providing a
28 background to drug pricing and the controversy in the underlying case).

4

Case 2:09-cv-07097-CAS-MAN Document 101 Filed 02/22/10 Page 5 of 8 Page ID #:1449

1 IV. DISCUSSION

2

Plaintiffs move to preliminarily enjoin reductions based on implementation of the

3 AWP reductions, pending appeal of this Court’s December 22, 2009 order denying

4 plaintiffs’ original motion for preliminary injunction. Plaintiffs contend that under the

5 applicable standard, the degree of irreparable harm in this case tips the sliding scale

6 continuum toward issuance of an injunction. Mot. at 1. According to plaintiffs, the

7 Court cannot truncate the sliding scale analysis and ignore the irreparable harm factor,

8 unless there is a complete lack of probability of success on the merits.2 Id. at 9.

9 Plaintiffs assert this is “simply not the case here.”3 Id. at 9. Accordingly, plaintiffs

10 argue that even if this Court still holds the view that plaintiffs have not established a

11 high likelihood of succeeding on the merits, that immediate injunctive relief is warranted

12 pending the appeal because irreparable harm to Medicaid beneficiaries and plaintiffs’

13 members cannot be ignored. Id. Plaintiffs submit NACDS and NCPA member

14 declarations in support of their contention that plaintiffs’ members and Medi-Cal

15 beneficiaries will suffer irreparable injury absent an injunction of the AWP reductions.

16 Id. at 9-12. For example, plaintiffs assert that Costco Wholesale Corporation

17 (“Costco”), a member of NACDS, has already terminated its participation in the

18

19

2 The Ninth Circuit has held that no determination of irreparable harm or balancing

20 hardships is necessary if “a party has not shown any chance of success on the m erits.”

21 Global Horizons, Inc. v. United States DOL , 510 F.3d 1054, 1058 (9th Cir. 2007). “To reach this sliding scale analysis, . . . a moving party must, at an ‘irreducible minimum,’
22 demonstrate some chance of success on the merits.” Id. (citing Arcamuzi v. Cont'l Air

23 Lines, Inc., 819 F.2d 935, 937 (9th Cir. 1987)).

24

3 Plaintiffs reiterate the sam e arguments raised in their original m otion for

25 preliminary injunction that they have made a strong showing of success on the merits of their claim that implementation of the AWP redutcions violates section 30(A). Mot. at 6-8.
26 Further they argue that by adopting and implementing the reduced AWP, defendants

27 engage in state action. Id. at 13-14. Accordingly, the State’s obligations under § 30(A) were triggered and the Department cannot delegate its duties toconsider the impact of the
28 reimbursement reduction to a private third party, in this case First DataBank. Id.

5

Case 2:09-cv-07097-CAS-MAN Document 101 Filed 02/22/10 Page 6 of 8 Page ID #:1450

1 Medicaid programs.4 Id.; Declaration of Victor Curtis ¶ 5. According to plaintiffs’

2 expert Dr. Kenneth W. Schafermeyer (“Schafermeyer”), because of the AWP reductions

3 “[v]irtually all California pharmacies will have to consider refusing Medicaid

4 prescriptions for which they will experience significant losses.” Schafermeyer Decl.,

5 Ex. 1 at 43.

6

Defendants respond that the Court should deny plaintiffs’ instant motion for the

7 same reasons it denied plaintiffs’ original motion for preliminary injunction — namely,

8 the reduction in AWP was not a result of any state mandated change in the

9 reimbursement methodology.5 Opp’n at 6-9. Further, defendants argue that even

10 assuming that the AWP reductions triggered a new § 30(A) analysis, the Department

11 relied on a responsible cost study to evaluate the impact of the First DataBank AWP

12 reductions to determine that the reimbursement continues to comply with requirements

13 under § 30(A). Id. at 14-18; Declaration of Kevin Gorospe ¶¶ 24-36 & 40.6

14

15 4 A representative from Costco asserts that has “chosen not to participate in the
16 Medicaid programs because the current rateof Medicaid reimbursement for drug products
17 combined with the allowed amount for dispensing fees would not cover Costco’s total cost for drug acquisition and dispensing.” Curtis Decl. ¶ 5. Further, he asserts that the AWP
18 reductions “provides a further disincentive fo r Costco to participate in state Medicaid
19 programs.” Id. ¶ 7.

20

5 Defendants further argue that plaintiffs cannot establish that the AWP reductions

21 are causing irreparable harmbecause the AWPfor several hundreds ofdrugs have already increased, as of October 16, 2009, and any alleged injury is “uncertain and speculative.”
22 Opp’n at 18-20.

23

6 Defendants request that the Court takejudicial notice of the Gorospe Declaration

24 and its attached exhibits. Under Fed. R. Ev id. 201, a court m ay take judicial notice of

25 “matters of public record.” Mack v. South Bay Beer Distrib., 798 F.2d 1279, 1282 (9th Cir.1986). As such, judicial notice is proper insofar as judicial notice is taken that these
26 four court filings were made. The Court GRANTS the Meshkatai defendants’ request for

27 judicial notice to the extent they request th at the Court take judicial notice that the documents were filed with the Court. However, the Court does not take judicial notice of
28 the truth of the matters asserted therein.

6

Case 2:09-cv-07097-CAS-MAN Document 101 Filed 02/22/10 Page 7 of 8 Page ID #:1451

1

There does not appear to be good reason to depart from the reasoning contained in

2 the Court’s December 22, 2009 order denying plaintiffs’ original motion for preliminary

3 injunction. As noted in that order, the Ninth Circuit has held that § 30(A) of the

4 Medicaid Act creates certain duties on behalf of the Department when establishing

5 reimbursement rates. See, e.g., Indep. Living Ctr., 572 F.3d 644, 651 (9th Cir. 2009)

6 (citing Orthopaedic Hospital v. Belshe, 103 F.3d 1491, 1492 (9th Cir. 1997)). However,

7 in the instant case, the challenged reductions in reimbursement are the result of changes

8 in how First DataBank, a private party, establishes wholesalers' prices. For this reason,

9 the Court finds that this case is distinguishable from previous cases in which it

10 preliminarily enjoined implementation of State mandated Medi-Cal rate reductions. See,

11 e.g., Managed Pharmacy Care v. David Maxwell Jolly, 603 F. Supp. 3d 1230 (C.D. Cal.

12 2009) (enjoining the Director from implementing the five percent payment reductions

13 codified in Cal. Welf. & Inst. Code § 14105.191(b)(3), as modified by Assembly Bill

14 1181); see also, Indep. Living Ctr., No. CV 08-3315 CAS (MANx), 2008 WL 3891211

15 (C.D. Cal. Aug. 18, 2008)). In the instant case, the State has not affirmatively acted to

16 create a new, or modified, "method or procedure" for establishing reimbursement rates to

17 provider pharmacies, thus triggering its duties under § 30(a) and relevant regulations.

18 Rather, the Department is making payments pursuant to a preexisting formula codified in

19 Cal. Welf. & Inst. Code § 14105.45(b)(2). Thus, the Court concludes that plaintiffs have

20 not made out a sufficient showing they have a likelihood of success on the merits of their

21 claims.

22

As to plaintiffs’ argument that its showing of irreparable harm tips the sliding

23 scale continuum toward issuance of an injunction, the Court finds that to the extent that

24 the Ninth Circuit’s opinion in Am. Trucking Ass'n Inc. v. City of Los Angeles, 559 F.3d

25 1046, 1052 (9th Cir. 2009), rejected the appropriateness of a sliding scale analysis, this

26

27

28

7

Case 2:09-cv-07097-CAS-MAN Document 101 Filed 02/22/10 Page 8 of 8 Page ID #:1452

1 standard is not applicable to the instant motion.7 Accordingly, the Court denies

2 plaintiffs’ instant motion.

3 V. CONCLUSION

4

In accordance with the foregoing, the Court DENIES plaintiffs’ motion for

5 preliminary injunction pending appeal.

6

7

IT IS SO ORDERED

8 9 Dated: February 22, 2010 10 11

________________________________ CHRISTINA A. SNYDER
UNITED STATES DISTRICT JUDGE

12

13

14

15

16

17

18

19

20

21

22

23

7 In A m. Trucking, the Ninth Circuit summarized the Supreme Court’s recent clarification of the standard for granting preliminary injunctions in Winter v. Natural Res.

24 Def. Council, 129 S. Ct. 365, 374 (2008). 559 F.3d at1052 (“To the extent that our cases

25 have suggested a lesser standard, [than the standard outlined in Winter], they are no longer controlling, or even viable.”). However, if, as suggested by Justice Ginsburg’s dissenting
26 opinion in Winter, 129 S. Ct.at 392, the sliding scale analysis of Rodeo Collection, Ltd. v.

27 West Seventh, 812 F.2d 1215, 1217 (9th Cir. 1987), is still the law, the decision to grant a preliminary injunction, pending appeal, is a m uch closer question given the vast
28 irreparable harm plaintiffs’ members would potentially suffer absent an injunction.

8

 
 Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 1 of 9 Page ID #:1464

UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT

FILED
MAY072010
MOLLY C. DWYER, CLERK U.S. COURT OF APPEALS

NATIONAL ASSOCIATION OF CHAIN DRUG STORES and NATIONAL COMMUNITY PHARMACISTS ASSOCIATION,
Plaintiffs - Appellants,
v.
ARNOLD SCHWARZENEGGER, not individually, but solely in his official capacity as Governor of the State of California; et aI.,
Defendants - Appellees.

No. 09-57051

D.C. No. 2:09-cv-07097-CAS-MAN
U.S. District Court for Central California, Los Angeles

MANDATE

RECEIVED CLERK, U.S. DISTRICT COURT

MAY - 7 2010

CENTRAL DI~CAL/FORNIA

BY

DE?UTY _

The judgment of this Court, entered April 15, 2010, takes effect this date. This constitutes the formal mandate of this Court issued pursuant to Rule 41(a) of the Federal Rules of Appellate Procedure.

FOR THE COURT:
Molly C. Dwyer Clerk of Court /s/ Theresa Benitez Deputy Clerk

Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 2 of 9 Page ID #:1465
FILED

NOT FOR PUBLICATION UNITED STATES COURT OF APPEALS

APR 15 2010
MOLLY C. DWYER, CLERK u.s. COURT OF APPEALS

FOR THE NINTH CIRCUIT

NATIONAL ASSOCIATION OF CHAIN DRUG STORES, and the NATIONAL COMMUNITY PHARMACISTS ASSOCIA TION,
Plaintiffs - Appellants,
v.
ARNOLD SCHWARZENEGGER, not individually, but solely in his official capacity as Governor of the State of California, KIM BELSHE, not individually, but solely in her official capacity as Secretary of the California Health and Human Services Agency, DAVID MAXWELL-JOLLY, not individually, but solely in his official capacity as Director of the California Department of Health Care Services, and THE CALIFORNIA DEPARTMENT OF HEALTH CARE SERVICES,
Defendants - Appellees.

No. 09-57051 D.C. No. 2:09-cv-07097-CASMAN
MEMORANDUM *

Appeal from the United States District Court for the Central District of California
Christina A. Snyder, District Judge, Presiding
This disposition is not appropriate for publication and is not precedent except as provided by 9th Cir. R. 36-3.

Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 3 of 9 Page ID #:1466
Submitted April 5, 2010 Pasadena, California
Before: KOZINSKI, Chief Judge, D.W. NELSON, Circuit Judge, and GERTNER,'* District Judge.
Appellants are not entitled to a preliminary injunction because the balance of equities and considerations of public interest weigh in the appellees' favor. The injunction that the appellants seek would require California to recalibrate its established reimbursement formula to counteract the effect of the reduction in AWPs. This, in turn, would compel California to bear the administrative burdens associated with amending its state Medicaid plan. See 42 C.F.R. §§ 430.12-.20. The state should not be required to take on such burdens before the district court has finally resolved the merits of the appellants' claims. Thus, regardless of the appellants' likelihood of success on the merits of their claims, they are not entitled to the preliminary injunction that they seek. I Cf Winter v. Natural Res. De! Council, Inc., 129 S. Ct. 365,376 (2008) (holding that a preliminary injunction that
•• The Honorable Nancy Gertner, United States District Judge for the District of Massachusetts, sitting by designation.
Whether the appellants are entitled to a permanent injunction that would require California to conduct a study to determine whether its reimbursement formula continues to accord with the factors set forth in 42 U.S.C. § 1396a(a)(30)(A) is a different question. See Orthopaedic Hasp. v. Belshe, 103 F.3d 1491 (9th Cir. 1997). We do not address this issue, leaving it to the district court to decide in the first instance.
-2-

Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 4 of 9 Page ID #:1467 interfered with the Navy's ability to conduct effective, realistic training exercises was an abuse of discretion regardless of the plaintiffs' showing of irreparable injury and likelihood of success on the merits). AFFIRMED.
-3-

Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 5 of 9 Page ID #:1468
United States Court of Appeals for the Ninth Circuit
Office of the Clerk 95 Seventh Street San Francisco, CA 94103
Information Regarding Judgment and Post-Judgment Proceedings (December 2009)
Judgment • This Court has filed and entered the attached judgment in your case. Fed. R. App. P. 36. Please note the filed date on the attached decision because all of the dates described below run from that date, not from the date you receive this notice.
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Petition for Panel Rehearing (Fed. R. App. P. 40; 9th eire R. 40-1) Petition for Rehearing En Bane (Fed. R. App. P. 35; 9th Cir. R. 35-1 to -3)
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grounds exist:
Post Judgment Fonn - Rev. 1212009

Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 6 of 9 Page ID #:1469

Consideration by the full Court is necessary to secure or maintain uniformity of the Court's decisions; or ~ The proceeding involves a question of exceptional importance; or ~ The opinion directly conflicts with an existing opinion by another court of appeals or the Supreme Court and substantially affects a rule of national application in which there is an overriding need for national uniformity.
(2) Deadlines for Filing: • A petition for rehearing may be filed within 14 days after entry of judgment. Fed. R. App. P. 40(a)(1). • If the United States or an agency or officer thereof is a party in a civil case, the time for filing a petition for rehearing is 45 days after entry of judgment. Fed. R. App. P. 40(a)(1). • If the mandate has issued, the petition for rehearing should be accompanied by a motion to recall the mandate. • See Advisory Note to 9th Cir. R. 40-1 (petitions must be received on the due date). • An order to publish a previously unpublished memorandum disposition extends the time to file a petition for rehearing to 14 days after the date of the order of publication or, in all civil cases in which the United States or an agency or officer thereof is a party, 45 days after the date of the order of publication. 9th Cir. R. 40-2.
(3) Statement of Counsel • A petition should contain an introduction stating that, in counsel's judgment, one or more of the situations described in the "purpose" section above exist. The points to be raised must be stated clearly.
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Post Judgment Fonn - Rev. 1212009

2

Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 7 of 9 Page ID #:1470
• The petition or answer must be accompanied by a Certificate of Compliance found at Form 11, available on our website at under Forms.
• You may file a petition electronically via the appellate ECF system. No
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Bill of Costs (Fed. R. App. P. 39, 9th Cir. R. 39-1) • The Bill of Costs must be filed within 14 days after entry of judgment. • See Form 10 for additional information, available on our website at under Forms.
Attorneys Fees • Ninth Circuit Rule 39-1 describes the content and due dates for attorneys fees applications. • All relevant forms are available on our website at under Forms or by telephoning (415) 355-7806.
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Post Judgment Fonn - Rev. 1212009

3

Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 8 of 9 Page ID #:1471 Form 10. Bill of Costs ................................................................................................................................(Rev. 12-1-09)

United States Court of Appeals for the Ninth Circuit

BILL OF COSTS

Note:

If you wish to file a bill of costs, it MUST be submitted on this fonn and filed, with the clerk, with proof of service, within 14 days of the date of entry of judgment, and in accordance with 9th Circuit Rule 39-1. A late bill of costs must be accompanied by a motion showing good cause. Please refer to FRAP 39, 28 U.S.C. § 1920, and 9th Circuit Rule 39-1 when preparing your bill of costs.

Iv. I The Clerk is requested to tax the following costs against:

9th Cir. No.1

Cost Taxable under FRAP 39, 28 U.S.C. § 1920, 9th Cir. R. 39-1

REQUESTED Each Column Must Be Completed

ALLOWED To Be Completed by the Clerk

Excerpt of Record Opening Brief Answering Brief Reply Brief Other**

No. of Pages per Cost per

Docs.

Doc.

Page*

TOTAL COST

I I $1: $1 I I $1: $1 I I $1 $1

I I $1 $1

I L $1 $1 $1 TOTAL:

No. of Pages per Cost per

TOTAL

Docs.

Doc.

Page *

COST

C I··$r--. $1..

I i I :$L $1

L I $1 $t

I I $1 $1

II

$1 $1 $1 TOTAL:

* Costs per page may not exceed .10 or actual cost, whichever is less. 9th Circuit Rule 39-1.
** Other: Any other requests must be accompanied by a statement explaining why the item(s) should be taxed
pursuant to 9th Circuit Rule 39-1. Additional items without such supporting statements will not be considered.

Attorneys' fees cannot be requested on this fonn.

Continue to next page.

Case 2:09-cv-07097-CAS-MAN Document 107 Filed 05/07/10 Page 9 of 9 Page ID #:1472

.Form 10. Bill of Costs - Continued

I•I,

'swear under penalty of perjury that the services for which costs are taxed

were actually and necessarily perfonned, and that the requested costs were actually expended as listed.

I Signature
("s/" plus attorney's name if submitted electronically)
Date
I Name of Counsel:
I~---------------------------------------------------------
Attorney for:

(To Be Completed by the Clerk)
I Date

$1 Costs are taxed in the amount of
Clerk of Court
IBy:

. ,Deputy Clerk

 
 Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 1 of 10 Page ID #:845

1

2

3

4

5

6

7

8

UNITED STATES DISTRICT COURT

9

CENTRAL DISTRICT OF CALIFORNIA

10

WESTERN DIVISION

11 NATIONAL ASSOCIATION OF

)

CHAIN DRUG STORES; ET AL.

)

12

)

Petitioner,

)

13

)

vs.

)

14

)

)

15 ARNOLD SCHWARZENEGGER; ET )

AL.

)

16

)

)

17

Respondent.

)

)

18

________________________________

19

Case No. CV 09-7097 CAS (MANx) ORDER DENYING PLAINTIFFS’ MOTION FOR PRELIMINARY INJUNCTION

20 I. INTRODUCTION

21

On September 30, 2009, plaintiffs, the National Association of Chain Drug Stores

22 (“NACDS”) and the National Community Pharmacists Associations (“NCPA”), filed the

23 instant action. On October 2, 2009, plaintiffs filed an amended complaint (“FAC”)

24 against defendants Arnold Schwarzenegger, Governor of the State of California; Kim

25 Belshe, Secretary of the California Health and Human Services Agency; David

26 Maxwell-Jolly, Director the California Department of Health Care Services; and the

27 California Department of Health Care Services (the “Department”). The Department is a

28 California agency charged with the administration of California’s Medicaid program,

Medi-Cal. Plaintiffs represent certain Medi-Cal pharmacy providers.

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 2 of 10 Page ID #:846

1

Plaintiffs seek to enjoin defendants from “reducing by, on average, slightly more

2 than four percent (4%) Medicaid reimbursement based on Average Wholesale Price

3 (“AWP”) for drug products paid to pharmacies for dispensing prescription drugs

4 reimbursed” by Medi-Cal (the “AWP reductions”). FAC at 2. Plaintiffs allege that the

5 implementation of the AWP reductions violates Title XIX of the Social Security Act, 42

6 U.S.C. §§ 1396 et seq. (the “Medicaid Act”), and other applicable state and federal

7 regulations. Id.

8

On November 2, 2009, plaintiffs filed the instant motion for preliminary

9 injunction. Defendants filed their opposition on November 23, 2009. On November 20,

10 2009, plaintiffs filed a reply. At the hearing, on December 7, 2009, the United States

11 Department of Justice (“DOJ”) appeared regarding its Statement of Interest filed on

12 December 4, 2009. The Court took the matter under submission pending supplemental

13 briefing from the DOJ, which it filed on December 21, 2009. After carefully considering

14 the arguments set forth by the parties and DOJ, the Court finds and concludes as follows.

15

16 II. BACKGROUND

17

Medicaid is a cooperative federal program: the federal government provides

18 federal funding to the states so that states may provide medical care to their needy

19 citizens. State participation is voluntary; however, once a state chooses to participate by

20 accepting federal funds, it must comply with requirements imposed by the Medicaid Act.

21 Because California has elected to participate in the Medicaid program, it must administer

22 its state Medicaid program, Medi-Cal, in compliance with a state plan that has been pre-

23 approved by the Secretary of the U.S. Department of Health and Human Services (the

24 “Secretary”), and which complies with the requirements set forth in 42 U.S.C. §

25 1396a(a)(1)-(70). In accordance with these requirements, California must provide

26 “methods and procedures” for the payment of care and services that (1) are “consistent

27 with efficiency, economy, and quality of care,” and (2) ensure their availability to the

28 Medicaid population to the same “extent as they are available to the general population

2

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 3 of 10 Page ID #:847

1 in the geographic area.” 42 U.S.C. § 1396a(a)(30)(A). These requirements are known,

2 respectively, as the “quality of care” and “equal access” provisions of § 30(A) of the

3 Medicaid Act. Further, under California law, the Department must administer Medi-Cal

4 in accordance with the state plan; applicable state law, as specified in sections 14000 to

5 14124 of the Welfare and Institutions Code; and Medi-Cal regulation. Cal. Code Regs.

6 tit. 22, § 50004(b).

7

The subject of this case is pharmacy reimbursement in the Medicaid program.

8 Medi-Cal reimburses pharmacies that dispense prescription drugs to patients covered by

9 Medicaid. The department reimburses these pharmacies for the “estimated acquisition

10 cost” of drugs along with a fixed dispensing fee per prescription. Cal. Welf. & Inst.

11 Code § 14105.45(b)(1). Pursuant to the California state plan and state law, the

12 reimbursement of drug costs is based on the lesser of four alternatives: 1) AWP minus

13 17%; 2) the selling price; 3) the federal upper limit; or 4) the maximum ingredient cost

14 (“MAIC”). Id. § 14105.45(b)(2).

15

In the instant action, plaintiffs challenge an alleged 4% reduction in

16 reimbursements tied to the AWP, which is the “price for a drug product listed as the

17 average wholesale price in the department's primary price reference source.” The

18 Department uses First DataBank, Inc. (“First DataBank”), a drug pricing publisher, as its

19 primary price reference source for determining the AWP. On March 17, 2009, as part of

20 a class action settlement in a separate lawsuit, First DataBank agreed to reduce the mark-

21 up of 1.25 over the wholesale acquisition cost (“WAC”) to 1.20 over WAC, when setting

22 the AWP for approximately 1,400 drug products.1 See New England Carpenters Health

23 Benefits Fund v. First DataBank, Inc., 602 F. Supp. 2d 277 (D. Mass. 2009) (approving

24 the settlements). The settlement agreements were affirmed by the First Circuit on

25

26

1 The AWP figure is usually derived by applying a m ultiplier to the wholesale

27 acquisition cost (“WAC”). See Nat’l Ass’n of Chain Drug Stores v. New England Carpenters Health Benefits Fund , 582 F.3d 30, 36-37 (1st Cir. 2009) (providing a
28 background to drug pricing and the controversy in the underlying case).

3

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 4 of 10 Page ID #:848

1 appeal. See 582 F.3d 30 (1st Cir. 2009). Plaintiffs allege that First DataBank also

2 voluntarily reduced the markup to 1.20 over WAC when setting the AWP for

3 approximately 18,000 additional drug products, where the mark-up previously exceeded

4 1.20. FAC ¶ 25; Mot. at 6. Implementation of these AWP reductions occurred on

5 September 26, 2009. Plaintiffs contend that the practical effect of these reductions is

6 that the reimbursement for drug products tied to AWP has been reduced by slightly more

7 than 4%. FAC ¶ 26.

8 III. LEGAL STANDARD

9

“A preliminary injunction is not a preliminary adjudication on the merits: it is an

10 equitable device for preserving the status quo and preventing the irreparable loss of

11 rights before judgment.” Textile Unlimited v. A..BMH & Co., 240 F.3d 781, 786 (9th

12 Cir. 2001). The Ninth Circuit summarized the Supreme Court’s recent clarification of

13 the standard for granting preliminary injunctions in Winter v. Natural Res. Def. Council,

14 129 S. Ct. 365, 374 (2008), as follows: “[a] plaintiff seeking a preliminary injunction

15 must establish that he is likely to succeed on the merits, that he is likely to suffer

16 irreparable harm in the absence of preliminary relief, that the balance of equities tips in

17 his favor, and that an injunction is in the public interest.” Am. Trucking Ass’n, Inc. v.

18 City of Los Angeles, 559 F.3d 1046, 1052 (9th Cir. 2009).

19 IV. DISCUSSION

20

Plaintiffs now move to preliminarily enjoin reductions based on implementation

21 of the AWP reductions. The request for a preliminary injunction is predicated on the

22 following claims. Plaintiffs allege that implementation of the AWP reductions violates §

23 30(A) the Social Security Act, 42 U.S.C. § 1396a(a)(30)(A) (“§ 30(A)”), because the

24 Department failed to consider the “quality of care” and “equal access” provisions of §

25 30(A), and that therefore, it is invalid under the Supremacy Clause of the United States

26 Constitution. U.S. CONST. art. VI, cl. 2. Plaintiffs further allege that the Department

27 failed to comply with the additional requirements of federal law, state regulations, and

28 the state plan. Specifically, plaintiffs allege that the Department failed to (1) “set

4

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 5 of 10 Page ID #:849

1 payment rates at such a level to ensure that sufficient providers” enlist in the Medicaid

2 program, pursuant to 42 C.F.R. § 447.204; (2) obtain approval of this “State Plan

3 amendment” from the U.S. Department of Health and Human Services’ Centers for

4 Medicare and Medicaid Services (“CMS”), pursuant to 42 C.F.R. § 430.12(c); (3) give

5 adequate notice or obtain public comment, as required by 42 C.F.R. § 447.205; and (4)

6 make a finding or determination that the reimbursement rate, after the AWP reduction,

7 represents the best estimate of acquisition cost, pursuant to 42 C.F.R. § 447.333; and (5)

8 to administer Medi-Cal in compliance with federal regulations and the California State

9 Plan, pursuant to 22 C.C.R. § 50004(b). Mot. at 1-2; FAC ¶¶ 42-47.

10

As a threshold matter, plaintiffs contend that they have associational standing to

11 invalidate state action under the Supremacy Clause, regardless of whether § 30(A)

12 confers a private right of action.2 Mot. at 8 (citing Indep. Living Ctr. of So. Cal., Inc. v.

13 Shewry, 543 F.3d 1050, 1065 (9th Cir. 2008); Indep. Living Ctr. of So. Cal., Inc. v.

14 Shewry, 543 F.3d 1047, 1048-49 (9th Cir. 2008)). Namely, plaintiffs argue that their

15 member pharmacies will suffer financial loss due to the AWP reductions. Id.

16

Plaintiffs further argue that they meet the requirements for granting a preliminary

17 injunction. Id. at 9. Plaintiffs contend that they are likely to succeed on the merits of

18 each of their claims against defendants. Id. Specifically, they argue that this

19 reimbursement reduction is similar to other Medi-Cal rate reductions that this Court

20 preliminary enjoined. Id. at 10 (citing e.g., Managed Pharmacy Care v. David Maxwell

21 Jolly, 603 F. Supp. 3d 1230 (C.D. Cal. 2009)). In support of this argument, plaintiffs

22 contend that there is no indication that the Department considered “efficiency, economy,

23 and quality of care,” as required by § 30(A), before accepting the reimbursement

24 reductions for drug products tied to AWPs. Id. at 11. Plaintiffs further argue that with

25

26

2 Defendants respond that plaintiffs’ claims fail as a matter of law because § 30(A)

27 is not enforceable by private parties. O pp’n at 12. However, they recognize that Independent Living, 543 F.3d at 1065, is arguably controlling in this case, and thus raise
28 this argument to preserve it for later appellate proceedings. Id. at 13.

5

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 6 of 10 Page ID #:850

1 these recent reductions, the Department fails to offer payments “sufficient to enlist

2 enough providers,” pursuant to 42 C.F.R. § 447.20, because pharmacies will be

3 economically forced to stop serving Medicaid beneficiaries. Id. at 12 (citing attached

4 declarations). Also, according to plaintiffs, there is no indication that the Department

5 obtained CMS approval before implementing this state plan “amendment,” or that it

6 provided public notice of this “significant change” in its methods and standards for

7 setting reimbursement payments. Id. at 12-14. Finally, they argue that by failing to

8 follow these federal regulations and dictates of the state plan, the Department violated

9 California Medi-Cal regulations. Id. at 14.

10

Defendants respond that plaintiffs do not establish a high likelihood of success on

11 the merits for the following reasons. Opp’n at 6. As a general matter, defendants

12 contend that the reduction in AWPs was not a result of any state law or policy mandating

13 a change in reimbursement.3 Id. Rather, they argue that the alleged reduction resulted

14 from an independent lawsuit in which the State played no part, and thus there is no

15 causal relationship between the alleged injury and the wrongful conduct. Id. at 6-7

16 (citing Devose v. Herrington, 42 F.3d 470, 471 (8th Cir. 1994) (“[A] party moving for a

17 preliminary injunction must necessarily establish a relationship between the injury

18 claimed in the party's motion and the conduct asserted in the complaint.”)). Defendants

19 further argue that to the extent plaintiffs rely on past injunctions issued by this Court,

20 those cases are distinguishable because the State conduct consisted of legislatively

21 enacted rate reductions codified in the Welfare and Institutions Code.4 Id.

22

23

3 Defendants assert that the currentreimbursement formula, which includes AWP

as a factor, has been in existence since 2004. Opp’n at 7. Furthermore, they contend that

24 the State Plan, which includes this formula, was approved by CMS on June 6, 2006 and

25 requires the Department to use First DataBank as its primary reference source for AWP. 26 Id. at 8.

27

4 Likewise, defendants contend that Orthopaedic v. Belshe, 103 F.3d 1491 (9th Cir.

1997), is distinguishable because that case invovl ed specific rate changes effected by state

28

(continued...)

6

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 7 of 10 Page ID #:851

1

As to plaintiffs’ specific claims, defendants respond that fluctuations in AWP do

2 not require notice because they do not constitute a significant change in methods or

3 procedures.5 Id. at 8-10 (citing 42 C.F.R. § 447.205). They argue that any required

4 notice was provided in 2004 when the pharmacy reimbursement formula, codified at Cal.

5 Welf. & Inst. Code § 14105.45, was enacted. Id. at 10. In addition, defendants contend

6 that the State Plan was approved by the federal government on June 6, 2006, and that the

7 plan reflects the “AWP minus 17%” drug reimbursement formula. Id. Moreover,

8 defendants assert that on October 28, 2009, the Secretary of Health and Human Services

9 wrote a letter to plaintiffs stating that she “did not think it necessary to instruct the States

10 to take any specific action with respect to the [First DataBank] settlement agreements”

11 that reduced AWPs.6 Id.; Ex. E & F. Finally, defendants argue that the motion should

12 be denied to the extent that the relief sought violates the separation of powers doctrine.

13 Id. at 11. Specifically, they contend that enjoining the definition of AWP would require

14 defendants to violate the State Plan that has been approved by the federal government

15 and would “disrupt over 20 years of established protocol.” Id.

16

17 4(...continued)
18 statutes or regulations. Opp’n at 8.

19

5 The federal regulations provide in pertinent part that public notice is not required

20 if the “change is based on changes in wholes alers’ or manufacturers’ prices of drugs or

21 materials, if the agency’s reimbursement is based on material cost plus a professional fee.”

42 C.F.R. § 447.205(b)(3). 22

23

6 In the letters, the Secretary states that plaintiffs request that CMS “instruct States to modify their reim bursement rates” in light of the First DataBank’s chang e in

24 methodology for determining the AWP. Opp’n; Ex. E & F. In her response, she states that

25 “States continue to have the obligation to appropriately determine [estimated acquisition costs] consistent with the regulations.” Id. However, defendants also argue that to the
26 extent plaintiffs claim thatthe State must make findings that reimbursements represent the

27 estimated acquisition costs, plaintiffs fail to cite to any valid authority for such a proposition because the regulation they cite,42 C.F.R. § 447.333, wasabrogated effective
28 October 1, 2007. Id. at 4. It appears § 447.333 was renumbered as § 447.518.

7

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 8 of 10 Page ID #:852

1

Plaintiffs reply that the reimbursement reductions at issue, admittedly resulting

2 from changes to the AWPs, have brought rates to levels so low they violate Medicaid

3 law. Reply at 1. Accordingly, they argue that there is a casual relationship between the

4 reimbursement reductions and their alleged injury because “Medi-Cal now reimburses

5 pharmacies below their breakeven cost for many prescription drugs and that pharmacies

6 will be forced to reduce patient access in the Medicaid program.” Id. at 5. They

7 reiterate the argument that defendants are required to set reimbursement levels sufficient

8 to enlist an adequate number and quality of providers, and argue that defendants cannot

9 “opportunistically take advantage of the First DataBank settlement.”7 Id. Thus,

10 plaintiffs argue that regardless of whether defendants complied with federal law in

11 setting the reimbursement formulas in 2004, the pertinent question is whether, as of

12 September 26, 2009, the State’s reimbursement fell out of compliance.8 Id. at 1-2.

13 Plaintiffs assert that they are “not asking this Court to tell the State how to set

14 reimbursement, what formulas to use, or what reimbursement should be [but] [r]ather,

15 plaintiffs argue that this Court can enjoin the State from providing reimbursement which

16 is so low that it fails to comply with section 30(A).”

17

The Ninth Circuit has held that § 30(A) of the Medicaid Act creates certain duties

18 on behalf of the Department when establishing reimbursement rates. See, e.g., Indep.

19 Living Ctr., 572 F.3d 644, 651 (9th Cir. 2009) (citing Orthopaedic Hospital v. Belshe,

20 103 F.3d 1491, 1492 (9th Cir. 1997)). Namely, when the State of California seeks to

21 7 Plaintiffs contend that this change to AWP is fundamentally different from the
22 “normal fluctuations in AWP that occur regularly” because it was “an across the board 23 reduction.” Reply at 6-7.

24

8 As to defendants’ argument that the current reduction is not mandated by state law

25 or policy, plaintiffs contend that the Cour t rejected a sim ilar argument in Independent Living, No. CV 08-3315 CAS (MANx) (Aug. 18, 2008) (rejecting the State’s argument
26 that “because the Legi slature, not the Department” made the decision to cut

27 reimbursements, the State’s obligations under§ 30(A) were not compromised because “[i]t is clear that the Departm ent will, and in fact h as, enforced the [reim bursement
28 reduction].”). Reply at 2.

8

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 9 of 10 Page ID #:853

1 modify reimbursement rates for services provided under Medi-Cal, it must consider, 2 among other factors, efficiency, economy, and quality of care, as well as the effect of 3 providers’ costs on those relevant statutory factors. See id. However, in the instant case, 4 the challenged reductions in reimbursement are the result of changes in how First 5 DataBank, a private party, establishes wholesalers’ prices. For this reason, the Court 6 finds that this case is distinguishable from previous cases in which it preliminarily 7 enjoined implementation of State mandated Medi-Cal rate reductions. See, e.g., 8 Managed Pharmacy Care v. David Maxwell Jolly, 603 F. Supp. 3d 1230 (C.D. Cal. 9 2009) (enjoining the Director from implementing the five percent payment reductions 10 codified in Cal. Welf. & Inst. Code § 14105.191(b)(3), as modified by Assembly Bill 11 1181); see also, Indep. Living Ctr., No. CV 08-3315 CAS (MANx), 2008 WL 3891211 12 (C.D. Cal. Aug. 18, 2008)). In the instant case, the State has not affirmatively acted to 13 create a new, or modified, “method or procedure” for establishing reimbursement rates 14 to provider pharmacies, thus triggering its duties under § 30(a) and relevant regulations. 15 Rather, the Department is making payments pursuant to a preexisting formula codified in 16 Cal. Welf. & Inst. Code § 14105.45(b)(2).9 Thus, the Court concludes that plaintiffs 17 have not made out a sufficient showing they have a strong likelihood of success on the 18 merits of their claims.10

19

20

9 The Court finds that plaintiffs are efefctively seeking to change the status quo and

21 obtain affirmative relief that would compen sate them for the loss incurred by the AWP reductions effective September 26, 2009.
22

23

10 At the hearing held on December 7, 2009, the DOJ expressed the view that the State was not required to submit a state pl an amendment, pursuant to 42 C.F.R. §

24 430.12(c), before implementing the reduction inMedi-Cal payments based on the average

25 wholesale price (“AWP”) for drug products. Likewise, in its m emorandum filed on December 21, 2009, the DOJ argues that the Stateis not obligated to performcost studies,
26 pursuant to section 30(A), before the rollback in AWPs could be reflected in the State’s

27 Medi-Cal payments. SeeDOJ Statement of Interest (filed Dec. 21, 2009). The DOJ further

argues that these changes in the reimbursement formula do not implicate section 30(A), and

28

(continued...)

9

Case 2:09-cv-07097-CAS-MAN Document 69 Filed 12/22/09 Page 10 of 10 Page ID #:854

1

In light of the Court’s finding that plaintiffs have not established a high likelihood

2 of succeeding on the merits, the Court, while acutely cognizant of the potential adverse

3 consequences of the AWP reductions, declines to address plaintiffs’ arguments that they

4 have shown irreparable harm and meet the other requirements for a preliminary

5 injunction. See Global Horizons, Inc. v. United States DOL, 510 F.3d 1054, 1058 (9th

6 Cir. 2007) (“Once a court determines a complete lack of probability on the success or

7 serious questions going to the merits, its analysis may end, and no further findings are

8 necessary.”).

9 V. CONCLUSION

10

In accordance with the foregoing, the Court DENIES plaintiffs’ motion for

11 preliminary injunction.

12

13

IT IS SO ORDERED

14 15 Dated: December 22, 2009 16 17

________________________________ CHRISTINA A. SNYDER
UNITED STATES DISTRICT JUDGE

18

19

20

21

22

23

24

25

26

10(...continued)

27 that in any event, the Secreat ry of Health and Human Services has no reason to believe that problems with efficiency, economy, quality of care, or access, exist inCalifornia as a result
28 of the reductions by First Databank in previously overstated published AWPs.

10

 
 Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 1 of 12 (MANx), CLOSED, DISCOVERY, MANADR, RELATED−G
UNITED STATES DISTRICT COURT, CENTRAL DISTRICT OF CALIFORNIA (Western Division − Los Angeles)
CIVIL DOCKET FOR CASE #: 2:09−cv−07097−CAS−MAN

National Association of Chain Drug Stores et al v. Arnold Schwarzenegger et al Assigned to: Judge Christina A. Snyder Referred to: Magistrate Judge Margaret A. Nagle Related Case: 2:08−cv−03315−CAS−MAN
Case in other court: 9th CCA, 09−57051 Cause: 28:1331 Fed. Question
Plaintiff

Date Filed: 09/30/2009 Date Terminated: 05/06/2010 Jury Demand: Defendant Nature of Suit: 890 Other Statutory Actions Jurisdiction: Federal Question

National Association of Chain Drug Stores

represented by Audra Lynn Thompson Duane Morris LLP 633 West 5th Street Suite 4600 Los Angeles, CA 90071 213−689−7423 Fax: 213 689 7401 Email: athompson@duanemorris.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Christopher Petelle Duane Morris LLP 190 South Lasalle Street Suite 3700 Chicago, IL 60603 312−499−6700 Fax: 312−499−1945 Email: cjpetelle@duanemorris.com LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Frederick R Ball Duane Morris LLP 190 South LaSalle Street Suite 3700 Chicago, IL 60603 312−499−6700 Fax: 312−499−1945 Email: frball@duanemorris.com LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Nicholas J Lynn Duane Morris LLP 190 South LaSalle Street Suite 3700 Chicago, IL 60603 312−499−6700 Fax: 312−499−1945 Email: njlynn@duanemorris.com LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Richard P Darke Duane Morris LLP 190 South Lasalle Street Suite 3700 Chicago, IL 60603

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 2 of 12

312−499−6700 Fax: 312−499−1945 Email: rpdarke@duanemorris.com LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Yvette Darilynn Roland Duane Morris LLP 865 South Figueroa Street Suite 3100 Los Angeles, CA 90017−5450 213−689−7416 Fax: 213−689−7401 Email: ydroland@duanemorris.com LEAD ATTORNEY ATTORNEY TO BE NOTICED

Plaintiff
National Cummunity Pharmacists' Association

represented by Audra Lynn Thompson (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Christopher Petelle (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Frederick R Ball (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Nicholas J Lynn (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Richard P Darke (See above for address) LEAD ATTORNEY PRO HAC VICE ATTORNEY TO BE NOTICED

Yvette Darilynn Roland (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

V.
Defendant
Arnold Schwarzenegger not individually, but solely in his official capacity as Governor of the State of California

represented by Ismael A Castro CAAG − Office of Attorney General of California Health Employment &Welfare 1300 I Street Suite 125 P O Box 944255 Sacramento, CA 94244−2550 916−323−8203

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 3 of 12

Fax: 916−324−5567 Email: ismael.castro@doj.ca.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED

Julie Weng−Gutierrez CAAG − Office of the Attorney General 1300 I Street Suite 125 Sacramento, CA 95814 916−445−8223 Fax: 916−324−5567 Email: julie.wenggutierrez@doj.ca.gov LEAD ATTORNEY ATTORNEY TO BE NOTICED

Defendant
David Maxwell−Jolly not individually, but solely in her official capacity as Secretary of the California Deparment of Health Care Services

represented by Ismael A Castro (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Julie Weng−Gutierrez (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Defendant
The California Deparment of Healthcare Services

represented by Ismael A Castro (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Julie Weng−Gutierrez (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Defendant
Kim Belshe not individually, but solely in her official capacity as Secretary of the California Health and Human Services Agency

represented by Ismael A Castro (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Julie Weng−Gutierrez (See above for address) LEAD ATTORNEY ATTORNEY TO BE NOTICED

Date Filed 09/30/2009
09/30/2009 09/30/2009

# Docket Text
1 COMPLAINT against Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services. (Filing fee $ 350 PAID), filed by plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association.(car) (esa). (Entered: 10/02/2009)
20 DAY Summons Issued re Complaint − (Discovery), 1 as to Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services. (car) (Entered: 10/02/2009)
2 CERTIFICATION AND NOTICE of Interested Parties filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association (car) (esa). (Entered: 10/02/2009)

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 4 of 12

09/30/2009 09/30/2009 09/30/2009 09/30/2009
09/30/2009
09/30/2009
09/30/2009
09/30/2009 10/02/2009 10/02/2009

3 NOTICE of Pendency of Other Actions or Proceedings filed by plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (car) (esa). (Entered: 10/02/2009)
4 PLIANTIFFS DISCLOSURE STATEMENT filed by National Association of Chain Drug Stores, National Cummunity Pharmacists' Association (car) (esa). (Entered: 10/02/2009)
5 NOTICE of Related Case(s) filed by plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. Related Case(s): No related cases (car) (esa). (Entered: 10/02/2009)
6 NOTICE OF FILING FEE DUE on Pro Hac Vice Application mailed to attorney Frederick R. Ball for Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. Your Pro Hac Vice application has not been received by the court. Please return your completed Application of Non−Resident Attorney to Appear, form G−64, or a copy of the Notice of Electronic filing of your application and the $185.00 fee and this notice immediately. Out−of−state federal government attorneys who are not employed by the U.S. Departmnet of Justice are required to file a Pro Hac Vice application; no filing fee is required. (car) (Entered: 10/02/2009)
7 NOTICE OF FILING FEE DUE on Pro Hac Vice Application mailed to attorney Nicholas J. Lynn for Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. Your Pro Hac Vice application has not been received by the court. Please return your completed Application of Non−Resident Attorney to Appear, form G−64, or a copy of the Notice of Electronic filing of your application and the $185.00 fee and this notice immediately. Out−of−state federal government attorneys who are not employed by the U.S. Departmnet of Justice are required to file a Pro Hac Vice application; no filing fee is required. (car) (Entered: 10/02/2009)
8 NOTICE OF FILING FEE DUE on Pro Hac Vice Application mailed to attorney Richard P. Darke for Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. Your Pro Hac Vice application has not been received by the court. Please return your completed Application of Non−Resident Attorney to Appear, form G−64, or a copy of the Notice of Electronic filing of your application and the $185.00 fee and this notice immediately. Out−of−state federal government attorneys who are not employed by the U.S. Departmnet of Justice are required to file a Pro Hac Vice application; no filing fee is required. (car) (Entered: 10/02/2009)
9 NOTICE OF FILING FEE DUE on Pro Hac Vice Application mailed to attorney Christopher Petelle for Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. Your Pro Hac Vice application has not been received by the court. Please return your completed Application of Non−Resident Attorney to Appear, form G−64, or a copy of the Notice of Electronic filing of your application and the $185.00 fee and this notice immediately. Out−of−state federal government attorneys who are not employed by the U.S. Departmnet of Justice are required to file a Pro Hac Vice application; no filing fee is required. (car) (Entered: 10/02/2009)
10 NOTICE TO PARTIES OF ADR PILOT PROGRAM filed.(car) (Entered: 10/02/2009)
11 FIRST AMENDED COMPLAINT against defendants Kim Belshe, Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services amending Complaint − (Discovery), Complaint − (Discovery) 1 , filed by plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 20 Days Summons). (jp) (Entered: 10/08/2009)
20 DAY Summons Issued re First Amended Complaint 11 as to Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (jp) (Entered: 10/08/2009)

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 5 of 12

10/13/2009 10/15/2009 10/15/2009 10/15/2009 10/15/2009 10/20/2009
10/20/2009 10/20/2009 10/20/2009 10/20/2009 10/20/2009 10/20/2009 10/20/2009

12 STANDING ORDER by Judge Valerie Baker Fairbank (se) (Entered: 10/13/2009)
13 PROOF OF SERVICE Executed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association, upon The California Deparment of Healthcare Services served on 10/13/2009, answer due 11/2/2009. Original Summons not returned. (Roland, Yvette) (Entered: 10/15/2009)
14 PROOF OF SERVICE Executed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association, upon Kim Belshe served on 10/13/2009, answer due 11/2/2009. Original Summons not returned. (Roland, Yvette) (Entered: 10/15/2009)
15 PROOF OF SERVICE Executed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association, upon Arnold Schwarzenegger served on 10/6/2009, answer due 10/26/2009. Original Summons not returned. (Roland, Yvette) (Entered: 10/15/2009)
16 PROOF OF SERVICE Executed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association, upon David Maxwell−Jolly served on 10/13/2009, answer due 11/2/2009. Original Summons not returned. (Roland, Yvette) (Entered: 10/15/2009)
17 ORDER RE TRANSFER PURSUANT TO GENERAL ORDER 08−05 −Related Case− filed. Related Case No: CV 08−03315 CAS(MANx). Case transferred from Judge Valerie Baker Fairbank and Magistrate Judge Frederick F. Mumm to Judge Christina A. Snyder and Magistrate Judge Margaret A. Nagle for all further proceedings. The case number will now reflect the initials of the transferee Judge CV 09−07097 CAS (MANx).Signed by Judge Christina A. Snyder (rn) (Entered: 10/20/2009)
18 APPLICATION for attorney Frederick R. Ball to Appear Pro Hac Vice (PHV FEE NOT PAID.) filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Proposed Order)(Roland, Yvette) (Entered: 10/20/2009)
19 APPLICATION for attorney Nicholas J. Lynn to Appear Pro Hac Vice (PHV FEE NOT PAID.) filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Proposed Order)(Roland, Yvette) (Entered: 10/20/2009)
20 APPLICATION for attorney Christopher J. Petelle to Appear Pro Hac Vice (PHV FEE NOT PAID.) filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Proposed Order)(Roland, Yvette) (Entered: 10/20/2009)
21 APPLICATION for attorney Richard P. Darke to Appear Pro Hac Vice (PHV FEE NOT PAID.) filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Proposed Order)(Roland, Yvette) (Entered: 10/20/2009)
22 ORDER by Judge Christina A. Snyder granting Application of Non−Resident Attorney Christopher J. Petelle to appear on behalf of Plaintiffs National Association of Chain Drug Stores and National Community Pharmacists Association 20 , designating Yvette D. Roland as local counsel. (gk) (Entered: 10/21/2009)
23 ORDER by Judge Christina A. Snyder granting Application of Non−Resident Attorney Nicholas J. Lynn to appear on behalf of Plaintiffs National Association of Chain Drug Stores and National Community Pharmacists Association 19 , designating Yvette D. Roland as local counsel. (gk) (Entered: 10/21/2009)
24 ORDER by Judge Christina A. Snyder granting Application of Non−Resident Attorney Frederick R. Ball to appear on behalf of Plaintiffs National Association of Chain Drug Stores and National Community Pharmacists Association 18 , designating Yvette D. Roland as local counsel. (gk) Modified on 10/21/2009 (gk). (Entered: 10/21/2009)

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 6 of 12

10/20/2009 10/21/2009 10/27/2009
10/28/2009
10/29/2009 11/02/2009 11/02/2009 11/02/2009 11/02/2009 11/02/2009 11/02/2009

25 ORDER by Judge Christina A. Snyder granting Application of Non−Resident Attorney Richard P. Darke to appear on behalf of Plaintiffs National Association of Chain Drug Stores and National Community Pharmacists Association 21 , designating Yvette D. Roland as local counsel. (gk) (Entered: 10/21/2009)
26 NOTICE TO COUNSEL by Judge Christina A. Snyder: This case has been assigned to the calendar of Judge Christina A. Snyder. This Notice to Counsel shall be to all parties appearing in propria persona, and for purposes of this notice, the term counsel shall include any person appearing in pro per. (see document for details) (kpa) (Entered: 10/22/2009)
27 FIRST STIPULATION Extending Time to Answer the complaint as to Arnold Schwarzenegger answer now due 11/20/2009; David Maxwell−Jolly answer now due 11/20/2009; The California Deparment of Healthcare Services answer now due 11/20/2009; Kim Belshe answer now due 11/20/2009, filed by defendants Arnold Schwarzenegger; David Maxwell−Jolly; The California Deparment of Healthcare Services; Kim Belshe. (Attachments: # 1 Proposed Order for Extension of Time)(Weng−Gutierrez, Julie) (Entered: 10/27/2009)
28 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: Incorrect event selected. Correct event to be used is Stipulations − Extending Time to Answer (More than 30 days). Stipulations − Extending Time to Answer (30 days or less) event was utilized in docketing this filing. The "30 days or less" event is used for Stipulations as to an initial complaint, pursuant to Local Rule 8−3, which do not require an order of the Court RE: Stipulation for Extension of Time to Respond to First Amended Complaint filed 10/27/2009 27 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 10/28/2009)
29 ORDER ON STIPULATION TO EXTEND THE TIME TO RESPOND TO FIRST AMENDED COMPLAINT by Judge Christina A. Snyder: Upon Stipulation 27 , The Court does hereby ORDER that Defendants' response to Plaintiffs' First Amended Complaint 11 is due on or before 11/20/2009. (gk) (Entered: 10/29/2009)
30 NOTICE OF MOTION AND MOTION for Preliminary Injunction re: State Reimbursement Reduction filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. Motion set for hearing on 11/23/2009 at 10:00 AM before Judge Christina A. Snyder. (Roland, Yvette) (Entered: 11/02/2009)
31 MEMORANDUM in Support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)
32 DECLARATION of Yvette D. Roland in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Roland, Yvette) (Entered: 11/02/2009)
33 DECLARATION of Kenneth W. Schafermeyer in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2)(Roland, Yvette) (Entered: 11/02/2009)
34 DECLARATION of William F. Wolfe in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)
35 DECLARATION of John Wilson in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 7 of 12

11/02/2009 11/02/2009 11/02/2009 11/02/2009 11/02/2009 11/02/2009 11/02/2009
11/03/2009 11/04/2009
11/05/2009
11/06/2009 11/09/2009

36 DECLARATION of Laura Miller in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)
37 DECLARATION of John Cronin in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)
38 DECLARATION of Brian Komoto in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)
39 DECLARATION of Victor Curtis in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)
40 DECLARATION of Gary Tewell in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)
41 DECLARATION of John Rector in support of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/02/2009)
42 COMPENDIUM OF CERTAIN AUTHORITIES CITED IN SUPPORT OF PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION re MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D, # 5 Exhibit E)(Roland, Yvette) (Entered: 11/02/2009)
43 NOTICE OF LODGING filed re MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 (Attachments: # 1 Proposed Order)(Roland, Yvette) (Entered: 11/03/2009)
44 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: Separately attached proposed order regarding motion for preliminary injunction is made ready for a Superior Court Judge's signature RE: Notice of Lodging of Proposed Order filed 11/3/2009 43 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 11/04/2009)
45 First EXPARTE APPLICATION for Extension of Time to File Respond to Plaintiff's Motion for Preliminary Injunction filed by defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Attachments: # 1 Memorandum of Points and Authorities, # 2 Declaration iof Julie Weng Gutierrez, # 3 Declaration of Ismael Castro, # 4 Notice of Lodging, # 5 Proposed Order)(Weng−Gutierrez, Julie) (Entered: 11/05/2009)
46 OPPOSITION to First EXPARTE APPLICATION for Extension of Time to File Respond to Plaintiff's Motion for Preliminary Injunction 45 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/06/2009)
47 DECLARATION of Julie Weng−Gutierrez in support of First EXPARTE APPLICATION for Extension of Time to File Respond to Plaintiff's Motion for Preliminary Injunction 45 Supplemental Declaration filed by Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Weng−Gutierrez, Julie) (Entered: 11/09/2009)

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 8 of 12

11/09/2009
11/20/2009
11/23/2009 11/23/2009
11/23/2009 11/23/2009 11/23/2009 11/23/2009
11/30/2009 11/30/2009 11/30/2009 11/30/2009

48 ORDER GRANTING DEFENDANTS' EX PARTE APPLICATION FOR CONTINUANCE AND EXTENSION OF TIME by Judge Christina A. Snyder: Defendants' Ex Parte Application 45 is GRANTED. The hearing on Plaintiffs' Motion for Preliminary Injunction 30 is continued to 12/7/2009 at 10:00 AM. The current hearing date of 11/23/2009 is hereby vacated. Defendants' opposition to the Motion for Preliminary Injunction is due on or before 11/23/2009. (gk) (Entered: 11/09/2009)
49 NOTICE OF MOTION AND First MOTION to Dismiss Case filed by defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. Motion set for hearing on 12/14/2009 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Motion to Dismiss−Points and Authoriities, # 2 Request for Judicial Notice, # 3 Request for Judiical Notice Exhibits 1−6, # 4 Request for Judicial Notice Exhibits 7−9, # 5 Proposed Order)(Castro, Ismael) (Entered: 11/20/2009)
50 MEMORANDUM in Opposition to MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Weng−Gutierrez, Julie) (Entered: 11/23/2009)
51 DECLARATION of Kevin Gorospe in Opposition to MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Attachments: # 1 Exhibit A − part 1, # 2 Exhibit Exhibit A − part 2, # 3 Exhibits B−F, # 4 Exhibits G−I)(Weng−Gutierrez, Julie) (Entered: 11/23/2009)
52 DECLARATION of Susan Flores in Opposition to MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Weng−Gutierrez, Julie) (Entered: 11/23/2009)
53 OBJECTION to Plaintiff's Proposed Order re: MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Weng−Gutierrez, Julie) (Entered: 11/23/2009)
54 OBJECTION to Plaintiff's Evidence re: MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Weng−Gutierrez, Julie) (Entered: 11/23/2009)
55 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents Re: Defendants' Notice of Motion and Motion to Dismiss First Amended Complaint 49 . The following error(s) was found: Local Rule 7.1−1 No Certification of Interested Parties and/or no copies. In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (jre) (Entered: 11/23/2009)
56 MEMORANDUM in Opposition to First MOTION to Dismiss Case 49 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/30/2009)
57 DECLARATION of YVETTE D. ROLAND IN OPPOSITION TO First MOTION to Dismiss Case 49 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/30/2009)
58 REPLY IN SUPPORT OF MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/30/2009)
59 DECLARATION of KENNETH W. SCHAFERMEYER IN SUPPORT OF MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/30/2009)

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 9 of 12

11/30/2009 11/30/2009 12/04/2009 12/06/2009 12/07/2009
12/07/2009 12/11/2009
12/21/2009 12/22/2009 12/22/2009 12/28/2009
12/29/2009 12/29/2009 12/29/2009

60 RESPONSE IN SUPPORT of MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/30/2009)
61 Objections in support of re: MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 11/30/2009)
65 STATEMENT of Interest filed by the United States of America. (gk) (Entered: 12/07/2009)
62 PLAINTIFFS' RESPONSE TO DEPARTMENT OF JUSTICE STATEMENT OF INTEREST re MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 12/06/2009)
63 MINUTES of Hearing on Plaintiffs' Motion for Preliminary Injunction held before Judge Christina A. Snyder: Hearing held and counsel are present. Tentative order provided. The Court confers with counsel and counsel argue. Plaintiffs motion is taken under submission. As discussed in Court, the Court orders the Government to file further briefing as to its Statement of Interest filed on December 4, 2009. Court Reporter: Laura Elias. (jre) (Entered: 12/07/2009)
64 REPLY to Opposition to First MOTION to Dismiss Case 49 filed by Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Castro, Ismael) (Entered: 12/07/2009)
66 MINUTE ORDER (In Chambers) by Judge Christina A. Snyder. On the Courts own motion, the defendants Motion to Dismiss First Amended Complaint 49 (filed 11/20/09) is hereby taken under submission. Pursuant to Federal Rule of Civil Procedure 78 and Local Rule 7−15, the Court hereby dispenses with oral argument on the above motion and will decide the motion on the basis of the papers submitted. Therefore, the parties are not to appear before this Court on December 14, 2009 at 10:00 A.M. (pp) (Entered: 12/11/2009)
67 STATEMENT of Interest of the United States of America MOTION for Preliminary Injunction re: State Reimbursement Reduction 30 filed by Interested Party United States of America. (Davis, Ethan) (Entered: 12/21/2009)
68 MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: denying 49 Motion to Dismiss Case. (See document for details) (kpa) (Entered: 12/22/2009)
69 ORDER DENYING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION by Judge Christina A. Snyder 30 : In accordance with the foregoing, Court DENIES plaintiffs' motion for preliminary injunction. (See Order for details) (kpa) (Entered: 12/22/2009)
70 NOTICE OF APPEAL to the 9th CCA filed by plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. Appeal of Order on Motion for Preliminary Injunction 69 . (Attachments: # 1 Exhibit Exhibit A to Notice of Appeal re Order on Preliminary Injunction, # 2 Exhibit Exhibit B to Notice of Appeal re Order on Preliminary Injunction)(Roland, Yvette) (Entered: 12/28/2009)
71 FILING FEE LETTER issued as to Plaintiff National Association of Chain Drug Stores, National Cummunity Pharmacists' Association, re Notice of Appeal to 9th Circuit Court of Appeals, 70 . (dmap) (Entered: 12/29/2009)
72 APPEAL FEE PAID: re Notice of Appeal to 9th Circuit Court of Appeals, 70 as to Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association; Receipt Number: 128925 in the amount of $455. (dmap) (Entered: 12/29/2009)
73 NOTIFICATION by Circuit Court of Appellate Docket Number 09−57051, 9th CCA regarding Notice of Appeal to 9th Circuit Court of Appeals, 70 as to plaintiff

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 10 of 12

01/12/2010
01/14/2010 01/14/2010 01/14/2010 01/15/2010 01/19/2010 01/20/2010
01/20/2010 01/21/2010
01/21/2010 01/21/2010

National Association of Chain Drug Stores. (lra) (Entered: 12/30/2009)
74 ORDER from 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals, 70 filed by National Association of Chain Drug Stores, National Cummunity Pharmacists' Association, CCA # 09−57051. The motion is denied. order received in this district on 1/12/2010. Appllant's urgen motion to vacate the district court's December 22, 2009 order and to enjoin appellees from continuing to implement prescription drug reimbursement reductions, pending appeal is denied without prejudice to renewal, if necessary, upon the filing and disposition of such request in the district court. Appellant's request for an expedited briefing schedule and hearing date is granted in part. (lra) (Entered: 01/13/2010)
75 EX PARTE APPLICATION to Shorten Time for Hearing filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Proposed Order Proposed Order)(Roland, Yvette) (Entered: 01/14/2010)
76 MEMORANDUM in Support of EX PARTE APPLICATION to Shorten Time for Hearing 75 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 01/14/2010)
77 DECLARATION of Yvette D. Roland in support of EX PARTE APPLICATION to Shorten Time for Hearing 75 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Exhibit A, # 2 Exhibit B, # 3 Exhibit C, # 4 Exhibit D)(Roland, Yvette) (Entered: 01/14/2010)
78 TRANSCRIPT DESIGNATION AND ORDERING FORM For Dates: December 7, 2009; Court Reporter: Laura Elias; Court of Appeals Case Number: 09−57051; Re: 70 (Thompson, Audra) (Entered: 01/15/2010)
79 MEMORANDUM in Opposition to EX PARTE APPLICATION to Shorten Time for Hearing 75 filed by Defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe. (Attachments: # 1 Declaration of Julie WengGutierrez)(Weng−Gutierrez, Julie) (Entered: 01/19/2010)
80 MINUTE ORDER (IN CHAMBERS) by Judge Christina A. Snyder: the Court DENIES plaintiffs' ex parte application to shorten time 75 without prejudice to plaintiffs bringing a request for preliminary injunction pending appeal, pursuant to Fed. R. Civ. P. 62(c), on noticed motion. The hearing date for such a motion may be set for Monday, February 22, 2010, at 10:00 AM. See document for details. (jre) (Entered: 01/20/2010)
81 ANSWER to Amended Complaint, 11 with JURY DEMAND filed by defendants Arnold Schwarzenegger, David Maxwell−Jolly, The California Deparment of Healthcare Services, Kim Belshe.(Castro, Ismael) (Entered: 01/20/2010)
82 TRANSCRIPT for proceedings held on 12−07−09. Court Reporter/Electronic Court Recorder: LAURA ELIAS, phone number 213−620−0890. Transcript may be viewed at the court public terminal or purchased through the Court Reporter/Electronic Court Recorder before the deadline for Release of Transcript Restriction. After that date it may be obtained through PACER. Notice of Intent to Redact due within 7 days of this date. Redaction Request due 2/11/2010. Redacted Transcript Deadline set for 2/21/2010. Release of Transcript Restriction set for 4/21/2010. (Elias, Laura) (Entered: 01/21/2010)
83 NOTICE OF FILING TRANSCRIPT filed for proceedings 12−07−09 (Elias, Laura) (Entered: 01/21/2010)
84 MINUTES (IN CHAMBERS) − ORDER SETTING SCHEDULING CONFERENCE by Judge Christina A. Snyder: Scheduling Conference set for 4/26/2010 11:00 AM before Judge Christina A. Snyder. The parties are reminded of their obligations to disclose information and confer on a discovery plan not later than 21 days prior to the date of the Rule 16(b) Scheduling Conference and to report to the Court not later than 14 days after they confer on a discovery plan and the other matters required by F.R.Civ.P. 26(f) and the Local Rules of this Court. If

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 11 of 12

01/22/2010
01/22/2010 02/01/2010 02/01/2010 02/01/2010 02/01/2010 02/01/2010 02/01/2010 02/01/2010 02/01/2010 02/01/2010 02/01/2010 02/01/2010

this case has been assigned to the ADR Pilot Program, counsel shall concurrently file the ADR Questionnaire. Court Reporter Not Present. (gk) (Entered: 01/22/2010)
85 NOTICE TO FILER OF DEFICIENCIES in Electronically Filed Documents. The following error(s) was found: No Certification of Interested Parties, Local Rule 7.1−1 RE: Answer of Defendants to First Amended Complaint filed 1/20/2010 81 . In response to this notice the court may order (1) an amended or correct document to be filed (2) the document stricken or (3) take other action as the court deems appropriate. (gk) (Entered: 01/22/2010)
86 CERTIFICATE OF RECORD Transmitted to USCA re Notice of Appeal to 9th Circuit Court of Appeals, 70 filed by National Association of Chain Drug Stores, National Cummunity Pharmacists' Association ; Court of Appeals Case Number: 09−50565. (dmap) (Entered: 01/22/2010)
87 NOTICE OF MOTION AND MOTION for Preliminary Injunction re: Pending Appeal filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. Motion set for hearing on 2/22/2010 at 10:00 AM before Judge Christina A. Snyder. (Attachments: # 1 Proposed Order)(Roland, Yvette) (Entered: 02/01/2010)
88 MEMORANDUM in Support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 02/01/2010)
89 DECLARATION of Yvette D. Roland in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Exhibit A)(Roland, Yvette) (Entered: 02/01/2010)
90 DECLARATION of Yvette D. Roland in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Exhibit A, # 2 Exhibit B)(Roland, Yvette) (Entered: 02/01/2010)
91 DECLARATION of Kenneth W. Schafermeyer in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Exhibit 1, # 2 Exhibit 2)(Roland, Yvette) (Entered: 02/01/2010)
92 DECLARATION of William F. Wolfe in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 02/01/2010)
93 DECLARATION of John Wilson in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 02/01/2010)
94 DECLARATION of John Cronin in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 02/01/2010)
95 DECLARATION of Brian Komoto in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 02/01/2010)
96 DECLARATION of Victor Curtis in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 02/01/2010)
97 DECLARATION of Gary Tewell in support of MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain

Case: 2:09-cv-07097-CAS-MAN As of: 10/04/2011 04:21 PM PDT 12 of 12

02/08/2010 02/09/2010
02/16/2010
02/22/2010 02/22/2010 04/09/2010 04/13/2010
05/05/2010 05/06/2010 05/07/2010

Drug Stores, National Cummunity Pharmacists' Association. (Roland, Yvette) (Entered: 02/01/2010)
98 STIPULATION for Hearing re MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Proposed Order)(Roland, Yvette) (Entered: 02/08/2010)
99 ORDER ON STIPULATION RE BRIEFING SCHEDULE AND HEARING ON PLAINTIFF'S MOTION FOR PRELIMINARY INJUNCTION PENDING APPEAL by Judge Christina A. Snyder: Upon Stipulation 98 , IT IS ORDERED that the parties comply with the following briefing schedule: Plaintiffs file the Motion for Preliminary Injunction re: Pending Appeal 87 by 2/1/2010. Defendants file their opposition to the Motion by 2/16/2010. Plaintiffs waive the filing of a reply in support of the Motion and that this Court will maintain the noticed 2/22/2010 hearing dateon the Motion. (gk) (Entered: 02/10/2010)
100 MEMORANDUM in Opposition to MOTION for Preliminary Injunction re: Pending Appeal 87 filed by Defendants Kim Belshe, David Maxwell−Jolly, Arnold Schwarzenegger, The California Deparment of Healthcare Services. (Attachments: # 1 Declaration of Marco Gonzales, # 2 Request for Judicial Notice, # 3 Attachment 1, # 4 Attachment 1−A, part 1, # 5 Attachment 1−A, part 2, # 6 Attachment 1−B, part 1, # 7 Attachment 1−B, part 2)(Weng−Gutierrez, Julie) (Entered: 02/16/2010)
101 ORDER DENYING PLAINTIFFS' MOTION FOR PRELIMINARY INJUNCTION PENDING APPEAL by Judge Christina A. Snyder: The Court DENIES plaintiffs' Motion for Preliminary Injunction Pending Appeal 87 . (gk) (Entered: 02/23/2010)
102 MINUTES OF Motion Hearing held before Judge Christina A. Snyder: The Court invites counsel to argue the tentative ruling, takes Plaintiffs' Motion for Preliminary Injunction Pending Appeal 87 under submission and indicates that a written order will follow. Court Reporter: Laura Elias. (gk) (Entered: 03/03/2010)
103 STIPULATION to Stay Case pending Decision on Appeal of Plaintiffs' Motion for Preliminary Injunction filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association. (Attachments: # 1 Proposed Order)(Roland, Yvette) (Entered: 04/09/2010)
104 ORDER GRANTING STIPULATION 103 RE STAY OF DISTRICT COURT ACTION PENDING DECISION ON APPEAL OF PLAINTIFFS MOTION FOR PRELIMINARY INJUNCTION by Judge Christina A. Snyder. IT IS HEREBY ORDERED that the above−captioned matter shall be stayed until thirty (30) days after a Ninth Circuit decision has been rendered with regard to the appeal of this Courts December 22, 2009 Order denying Plaintiffs NACDS and NCPAs motion for preliminary injunction. The Scheduling Conference is vacated. A Joint Report shall be filed on or before July 13, 2010, and every quarter thereafter until action is reinstated, or by order of the Court. (pp) (Entered: 04/13/2010)
105 STIPULATION to Dismiss Case pursuant to Federal Rule of Civil Procedure 41(a)(1) filed by Plaintiffs National Association of Chain Drug Stores, National Cummunity Pharmacists' Association.(Roland, Yvette) (Entered: 05/05/2010)
106 MINUTES (IN CHAMBERS) by Judge Christina A. Snyder: The Court, having received the parties' Stipulation filed on 5/5/2010 105 , orders this matter dismissed without prejudice pursuant to the Federal Rule of Civil Procedure 41(a)(1). Each party shall bear it respective attorney's fees and costs. (Made JS−6. Case Terminated.) Court Reporter: Not Present. (gk) (Entered: 05/06/2010)
107 MANDATE of 9th CCA filed re: Notice of Appeal to 9th Circuit Court of Appeals, 70 , CCA # 09−57051. The Judgment of the district court is Affirmed. Mandate received in this district on 5/7/10. (car) (Entered: 05/07/2010)