Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-00435/USCOURTS-caed-2_06-cv-00435-0/pdf.json

Nature of Suit Code: 444
Nature of Suit: Civil Rights Welfare
Cause of Action: 42:1983 Civil Rights Act

---

1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

INDEPENDENT LIVING CENTER OF No. 2:06-cv-0435-MCE-KJM

SOUTHERN CALIFORNIA, INC., a 

nonprofit California 

corporation; MARGARET DOWLING, 

NATHAN THORNTON, SYLVIA HEDBIG, 

LINDA BLOCK, HECTOR REYES, 

MICHAEL FERONA, HOMA KARIMZAD, 

and BLANE BECKWORTH,

Plaintiffs,

v. MEMORANDUM AND ORDER

MICHAEL LEAVITT, Secretary of

U.S. Department of Health and

Human Services; SANDRA SHEWRY,

Director of California

Department of Health Services;

and STEVE WESTLY, Controller

of the State of California,

Defendants.

----oo0oo----

///

///

///

///

/// 

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 1 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Plaintiffs include the Independent Living Center of 1

Southern California, Inc. (“ILC”), an independent living center

established under the auspices of California Welfare and

Institutions Code § 19801 to provide services to disabled

persons, as well as eight individuals who qualify as dual

eligibles and who claim to have been impacted by implementation

of the MMA. While Defendants argue that these Plaintiffs lack

standing to bring the present action, the Court is not persuaded

on the basis of the record before it that standing is entirely

absent. Accordingly it will proceed to deciding this matter on

the merits.

2

Through the present motion, Plaintiffs seek to enjoin

implementation of the Medicare Prescription Drug, Modernization

and Improvement Act of 2003, 42 U.S.C. § 1395w-101, et seq.

(“MMA”) to the extent that changes in prescription drug coverage

available to individuals who are both eligible for benefits under

Medicare and Medicaid (so-called “dual eligibles”) are

unconstitutional. Plaintiffs argue they will suffer irreparable 1

harm unless this Court issues a mandatory injunction preventing

implementation of the MMA, which became effective on January 1,

2006. They seek an order requiring the State’s Medicaid program

to continue to provide prescription drug coverage to dual

eligibles as if the MMA had never been enacted. Finally,

Plaintiffs argue that the copayment provisions for drugs

dispensed to dual eligibles under the MMA must also be enjoined.

For the reasons outlined below, Plaintiffs’ Motion for

Preliminary Injunction is denied.

///

///

///

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 2 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

3

STATUTORY FRAMEWORK

Title XVIII of the Social Security Act, commonly known as

the Medicare Act, establishes a program of federally subsidized

health insurance for the elderly and disabled. 42 U.S.C. §§

1395, et seq. Coverage available under Medicare includes

hospital inpatient and related care (Part A), supplemental

coverage for outpatient services (Part B), and a managed-care

alternative to Part B (known as Part C). Through enactment of

the MMA, Congress provided Medicare coverage for drugs under what

is now referred to as Part D of the Medicare program. As

indicated above, Part D became effective on January 1, 2006.

Another portion of the Social Security Act, Title XIX,

establishes a separate federal-state program providing medical

assistance for categorically low-income persons. 42 U.S.C. §§

1396, et seq. This coverage, known as Medicaid, or MediCal in

California, is administered by the states and funded in part

through federal aid so long as each state’s program complies with

applicable Medicaid laws and regulations. See Alexander v.

Choate, 469 U.S. 287, 289 n.l (1985).

About 6 million dual eligibles qualify for both Medicare and

Medicaid benefits. For those individuals, Medicare generally

pays first and Medicaid provides protection for services not

covered under Medicare. Prior to enactment of the MMA, Medicaid

paid for dual eligibles’ prescription drugs. 

///

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 3 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

4

In addition to receiving a fifty percent contribution from the

federal government for benefits provided under Medicaid,

including prescription drugs, the Medicaid Act also required

pharmaceutical companies to make substantial rebate payments in

return for dispensing their products under Medicaid.

Exclusive provision of prescription drugs through Medicaid

has changed with the advent of the MMA. Under Part D, Medicare

becomes the primary payer for dual eligibles as to all drugs

covered under Medicare. The Medicaid Act was consequently

amended to provide that Medicaid is not available for such drugs. 

42 U.S.C. § 1396u-5(d)(1). The State of California similarly

enacted Welfare and Institutions Code § 14133.23, which

eliminated the provision of drug benefits under MediCal to dualeligible beneficiaries that would otherwise now be covered under

Medicare, Part D.

The Enrollment Clause of the MMA requires that all dual

eligibles be automatically enrolled into private-entity

prescription drug plans on a random basis, with MediCal drug

coverage to cease on enrollment. 42 U.S.C. § 1395w-101(b)(1)(C). 

The formularies for such plans are to be approved by the

Secretary of the U.S. Department of Health and Human Services

(“Secretary”). 42 U.S.C. § 1395w-111(e)(1). Each drug plan must

include drugs within each therapeutic category and class of

covered Part D drugs, although not necessarily all drugs with

such categories or classes. 42 U.S.C. § 1395w-104(b)(3)(C)(i). 

If a particular drug is not covered under the assigned formulary

and a prescription is accordingly denied, a dissatisfied enrollee

can request review by an independent, outside entity. 

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 4 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

This is a change from prior coverage available to dual 2

eligibles under Medicaid, which provided that no services would

be denied on account of a beneficiary’s “inability to pay a

deduction, cost sharing, or similar charge...” 42 U.S.C. §

1396o(e).

5

42 U.S.C. § 1395w-22(g)(4). 

In essence, the MMA shifts the cost of providing

prescription drugs to dual eligibles from Medicaid at Title XIX

to Medicare at Title XVIII. In exchange for assuming this

obligation, under the so-called “clawback” provision of the MMA,

the states must reimburse the federal government for fifty

percent of the cost of providing dual eligibles prescription

drugs, which mirrors the fact that prior to the enactment of the

MMA the states were required to provide such drugs, with a fifty

percent contribution from the federal government. 42 U.S.C. §§

1396u-5(c)(1)-(2). Under the MMA, unlike Medicaid,

pharmaceutical companies no longer are required to make rebate

payments. In addition, under Part D, even dual eligibles with

incomes not exceeding the poverty level must make a modest copayment for needed drugs, ranging from $1 for generic medicines

to $3 for name brands.2

Because certain drugs that had been covered under MediCal

are not included under Medicare Part D, states may continue to

provide Medicaid coverage for such drugs, and California has so

elected. The federal government has approved this extension. 

(Decl. of Teresa Miller, ¶ 9) 

///

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 5 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

6

In order to ease transition difficulties between drug

payment under MediCare and reassignment of dual eligibles to

coverage under Medicare Part D, the California Legislature

enacted legislation on an emergency basis to pay for Part D

drugs. California Welfare and Institutions Code § 14133.23(f). 

That emergency legislation was subsequently extended until May

16, 2006. 

On February 16, 2006, the federal government notified the

State of California that it would provide reimbursement for

payments made under the emergency program enumerated above. Id.

at ¶ 7.

In addition to California’s provision of drugs on an

emergency basis under Medicaid, Part D also incorporates a “first

fill” policy designed to ensure that during the first three

months of Part D coverage, all drug plans must pay on a one-time

basis for any medications unavailable under the assigned Medicare

formulary but previously available under Medicaid. (Culotta

Decl., ¶ 17). 

FACTUAL BACKGROUND

Plaintiffs contend that transfer of dual eligibles’

prescription drug coverage to Medicare has created a “dire

situation” rife with the potential for irreparable harm given

potential damage to dual eligibles’ health if needed medications

cannot be obtained. Plaintiffs contend that formularies assigned

by Medicare are less comprehensive than the drug benefits

formerly available under MediCal. 

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 6 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

7

Although they concede that dual eligibles can apply for a

waiver/exception if drugs not on the formulary are determined to

be necessary, Plaintiffs contend that because the pharmacy cannot

represent the dual eligible in obtaining such a waiver/exception,

the process is too cumbersome inasmuch as treating physicians

simply will not take the time necessary to make such an appeal. 

Plaintiff contends that this creates an “extraordinary barrier”

for dual eligibles to obtain necessary medicine.

Plaintiffs further contend that many dual eligibles have not

in fact been automatically enrolled into a drug formulary under

Medicare, which also poses a significant obstacle in obtaining

needed drugs. Plaintiffs have provided declarations from two

pharmacists indicating that as many as 20-25 percent of dual

eligibles were not auto enrolled during the two weeks following

January 13, 2006 (See Declarations of Boo Nam Shin, R.Ph, and

Armen Tatevossian, R.Ph, ¶ 14), but have provided little evidence

that any widespread problem in this regard has persisted

throughout the transition period.

Finally, Plaintiffs argue that the co-payment requirement

imposed by Part D (whether $1 or $3) is impermissible because

many dual eligibles simply cannot afford any co-payment.

According to Plaintiffs, the State emergency legislation

which provides for payments to be made under MediCal pending the

transition to Medicare is simply a “band-aid” measure that does

not provide any lasting solution.

Defendants respond to these concerns by pointing out that

any transition of the scope contemplated by the MMA will

necessarily include certain “glitches.” 

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 7 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

8

They argue that the emergency provisions provided under both

state and federal law, as enumerated above, are designed to

minimize any disruption to dual eligible beneficiaries. They

further contend that requiring minimal co-payments, for purposes

of fostering patient involvement in the system, is not

constitutionally impermissible. Finally, they point out that

Medicare’s reimbursement arrangements are overwhelmingly

automated, and that ordering any change at this point in the

transition process would cause substantial systems revisions and

result in vast confusion –- an outcome antithetical to the access

issues Plaintiffs presumably seek to address through their

lawsuit. (See Culotta Decl., ¶ 19). Defendants state that

Plaintiffs themselves have not suggested any mechanism superior

to what has already been implemented, other than to advocate a

wholesale return to the previous status quo. See id.

STANDARD

A preliminary injunction is an extraordinary remedy, and the

moving party has the burden of proving the propriety of such a

remedy by clear and convincing evidence. See Granny Goose Foods,

Inc. v. Teamsters, 415 U.S. 423, 442 (1974). In order to warrant

issuance of a preliminary injunction, under the so-called

“traditional” criteria the moving party must show (1) a strong

likelihood of success on the merits; 2) the possibility of

irreparable harm if relief is not granted; 3) that the balance of

hardship weights in its favor; and 4) an advancement of the

public interest in certain cases. 

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 8 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

9

Johnson v. State Bd. of Accountancy, 72 F.3d 1427, 1430 (9th Cir.

1995). Alternatively, a party seeking injunctive relief may also

demonstrate either: 1) a combination of probable success on the

merits and the possibility of irreparable injury; or 2) that

serious questions are raised and the balance of hardships tips

sharply in favor of granting the requested injunction. See LGS

Architects, Inc. v. Concordia Homes of Nevada, 434 F.3d 1150,

1155 (9th Cir. 2006); Stuhlbarg Int’l Sales Co., Inc. v. John D.

Brush & Co., Inc., 240 F.3d 832, 839-40 (9th Cir. 2001). Both

analytical frameworks “represent ‘extremes of a single

continuum,’ rather than two separate tests.” Clear Channel

Outdoor, Inc. v. City of Los Angeles, 340 F.3d 810 (9th Cir.

2003). Under either formulation, however, the moving party must

show that it is likely to prevail on the merits. Ashcroft v. Am.

Civil Liberties Union, 542 U.S. 656, 666 (2004). While certainty

in this regard is not required, at an irreducible minimum at

least a “fair chance of success on the merits” has to be

demonstrated. Johnson v. State Bd. Of Accountancy, 72 F.3d at

1429.

A preliminary injunction, in general, is considered an

extraordinary remedy that should not be granted unless the moving

party clearly establishes its entitlement to relief. Mazurek v.

Armstrong, 520 U.S. 968, 972 (1997). Here, Plaintiffs seek a

mandatory injunction because they ask for judicial intervention

to actually change the status quo by returning to an earlier

state of affairs (the pre-MMA framework) rather than simply

asking that the status quo be maintained pending resolution of

the case. 

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 9 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

10

Courts should be extremely cautious about granting such a

preliminary injunction (Martin v. Int’l Olympic Comm., 740 F.2d

670, 675 (9th Cir. 1984)), with mandatory injunctive relief

considered “particularly disfavored” and warranted only where the

facts and law clearly favor the moving party. Anderson v. U.S.,

612 F.2d 1112, 1114 (9th Cir. 1980).

ANALYSIS

A. Likelihood of Success on the Merits

As indicated above, the starting point in analyzing the

propriety of preliminary injunctive relief in this matter

involves an assessment of whether Plaintiffs can establish a

likelihood that they will prevail on the merits. Examination of

the legal bases upon which Plaintiffs’ claims are premised show

that no such likelihood of success is present. Each of the

primary legal bases for the relief sought by Plaintiff will now

be addressed.

1. Tenth Amendment Concerns. Plaintiffs assert, in their

First Claim, that by shifting the provision of prescription

medications away from the states, the federal government has

interfered with state sovereignty over administration of states’

own poverty drug programs for its poorest citizens. 

///

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 10 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Plaintiffs also make a related argument that the same 3

conduct violates the Necessary and Proper Clause of Article I,

section 8 of the Constitution, on grounds that the Constitution

permits Congress only to make laws as “necessary and proper” to

effectuate the powers granted to the federal government by the

Constitution. Plaintiffs appear to assert that because the care

of the poor is reserved to the states under the Tenth Amendment,

federal enactment of laws intruding on such sovereignty is also

impermissible under the Necessary and Proper Clause.

11

Plaintiffs contend that such conduct runs afoul of the Tenth

Amendment’s reservation, to the states, of powers not delegated

to the United States by the Constitution. Plaintiffs 3

specifically contend that the MMA’s clawback provision, in

requiring state participation in payment for Part D Medicare

costs incurred for dual eligibles, is impermissible. Plaintiffs

argue that the federal government has no power to command such an

involuntary payment from the states, despite the fact as

indicated above that the switch from Medicaid to Medicare appears

to have simply entailed a change from states’ direct

responsibility under Medicaid for fifty percent of expenditures

to a new system whereby, in exchange for federal assumption of

payment responsibility, the state simply pays the federal

government the same fifty percent it would otherwise have had to

incur.

Defendants oppose Plaintiffs’ Tenth Amendment challenge

primarily on grounds that private individuals like Plaintiffs

herein simply lack standing to raise any question under the Tenth

Amendment, pursuant to well-established precedent dating back to

Tenn. Elec. Power Co. v. TVA, (“TVA”) 306 U.S. 118, 144 (1939). 

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 11 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

12

While Plaintiffs do not dispute the import of the TVA holding in

this regard, they argue that it has been overruled by a

subsequent Supreme Court decision, N.Y. v. U.S., 505 U.S. 144

(1992). In passing, the Court’s N.Y. decision noted that “the

Constitution divides authority between federal and state

governments for the protection of individuals” (Id. at 

181), and while one Seventh Circuit decision has deemed that

pronouncement to have effectively overruled TVA (see Gillespie v.

City of Indianapolis, 185 F.3d 693, 700-03 (7th Cir. 1999), other

courts have concluded just the opposite, reasoning that because

the N.Y. decision does not even mention TVA, it cannot be

construed as effectively overruling it. See Medeiros v. Vincent,

431 F.3d 25, 34 (1st Cir. 2005). In Artichoke Joe’s California

Grand Casino v. Norton, 278 F. Supp. 2d 1174, 1181 (E.D. Cal.

2003), the court found that the Supreme Court has not overruled

its TVA holding while noting other cases, including the Seventh’s

Circuit’s Gillespie opinion, that reached the opposite

conclusion.

In addition, because N.Y. involved only a claim asserted by

the State of New York, the question of private party standing

under the Tenth Amendment was simply not an issue in that case,

and the word standing was never even mentioned in the N.Y.

decision. Id. 

It is well-recognized that only the Supreme Court itself has

the prerogative of overruling its own decisions. City of

Roseville v. Norton, 219 F. Supp. 2d 130, 147-48 (D.D.C. 2002). 

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 12 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

13

The N.Y. decision is not sufficient to overrule a longestablished lack of standing on the part of private litigants to

enforce sovereignty issues under the Tenth Amendment. As the

government points out, California has ample resources to object

to the provisions of the MMA should it choose to do so.

Even aside from standing, which the Court believes is fatal

to Plaintiffs’ Tenth Amendment claims in this case, Congress has

in any event authority under the Tax and Spending Clause to urge

states to adopt legislative programs consistent with federal

interests. N.Y., 505 U.S. at 166-67. See also S.D. v. Dole, 483

U.S. 203, 207 (1987) (condition imposed on receipt of federal

funding upheld against Tenth Amendment challenge). Congress thus

has the “power to fix the terms upon which its money allotments

to states shall be disbursed.” Mayweathers v. Newland, 314 F.3d

1062, 1069 (9th Cir. 2002). 

By providing services to states’ citizens under Medicare

that formerly were provided by the states, the federal government

simply is asking that monies the state formerly paid be

transferred to it. The government hence links its provision of

prescription drug coverage to such payment. While the states

could presumably elect to continue to provide such coverage with

no contribution whatsoever from the federal government,

government funding is linked to its recoupment of a portion of

its expenses from the states. This appears to be permissible

under the Tenth Amendment under the above-cited cases.

///

///

/// 

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 13 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

14

2. Unlawful Delegation of Legislative Powers. Plaintiffs

allege, in their Second Claim, that the MMA’s delegation of

responsibility, to the Secretary, for approval of drug

formularies amounts to an abdication of its own legislative

responsibility. According to Plaintiffs, this violates the so

called non-delegation doctrine identified by the Supreme Court in

Panama Refining Co. v. Ryan, 293 U.S. 388, 421-22 (1935).

This argument is patently untenable. It has long been

settled that to burden Congress with all federal rulemaking would

defeat the concept of a workable national government. Loving v.

U.S., 517 U.S. 748, 758 (1996). Hence Congress passes

constitutional muster by legislating in broad terms and leaving a

certain degree of discretion to executive or judicial actors. 

Touby v. U.S., 500 U.S. 160, 165 (1991). To survive a challenge

under the non-delegation doctrine, Congress only has lay down an

intelligible principle pursuant to which a person authorized to

act must conform. Whitman v. Am. Trucking Ass’ns, 531 U.S. 457,

474-75 (2001).

Here, while Congress has given the Secretary discretion to

approve Part D private drug formularies, it has directed that

each formulary include drugs within each therapeutic category and

class of covered Part D drugs, although not necessarily all drugs

with such categories or classes. 42 U.S.C. § 1395w104(b)(3)(C)(i). Hence the Secretary has been given broad

guidelines from which to exercise his discretion in approving

such formularies. 

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 14 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

15

In addition, in disapproving drug plans, Congress has indicated

that there must be some evidence that the plan’s practices

discourage enrollment, and that this discouragement will likely

have a substantial effect on certain Medicare beneficiaries. 42

U.S.C. § 1395w-111(e)(2)(D)(I). All of this provides enough

direction to the Director to survive challenge under the nondelegation doctrine.

3. Violations of Fifth Amendment Rights. Plaintiffs

contend that their due process rights as protected by the Fifth

Amendment are violated by the MMA’s requirement that dual

eligibles make nominal co-payments for needed prescriptions. 

Plaintiffs appear to argue that requiring such payments is not

only unjustifiable and in derogation of Fifth Amendment due

process but also amounts to discrimination against the poor in

violation of equal protection concerns also guaranteed by the

Fifth Amendment.

It has long been held that the due process clauses of both

the Fifth and Fourteenth Amendments are intended to prevent

governmental abuse of power, and “generally confer no affirmative

right to governmental aid”. DeShaney v. Winnebago County Dep’t

of Soc. Servs., 489 U.S. 189, 196 (1989). Moreover, with respect

to equal protection, the constitutionality of the co-payment

provision must be judged under a rational basis standard, since

poverty alone is not a suspect classification demanding strict

scrutiny. See Harris v. McCrae, 448 U.S. 297, 323 (1980). 

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 15 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

16

Consequently the government need only show a rational

relationship between its requirement of co-payments and a

legitimate governmental purpose. Bd. Of Trs. Of Univ. Of Ala. v.

Garrett, 531 U.S. 356, 367 (2001).

Here, the government can show a rational relationship

between allocating limited aid dollars and fostering investment

by dual eligibles in the efficiency of their own medical care

through demanding small co-payments as a demonstration of

accountability.

Plaintiffs also appear to argue that their due process

rights are infringed by the delegation to privately administered

drug formularies of control over their ultimate drug benefits,

and by participants’ random assignment to such formularies. 

Plaintiff ILC, for example, contends that some drug plans are

more comprehensive than others, and some authorize fewer drugs

than would have previously available under MediCal. Plaintiffs

also assert that to the extent dual eligibles are enrolled in a

“bottom” plan, their Fifth Amendment rights are violated. 

Plaintiffs ignore the fact, however, that all drug formularies

must include medications across the therapeutic spectrum. See 42

U.S.C. § 1395w-104(b)(3)(C)(i). In addition, participants who

still claim that they need a particular drug not on the formulary

can apply for a waiver through the appeal process. These

safeguards adequately protect participants’ rights. Plaintiffs

are not entitled to optimal coverage so long as the coverage they

are afforded is adequate, as the Court believes to be the case

here. 

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 16 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Although Steve Westly has not submitted any direct 4

opposition to Plaintiff’s Motion, and while Plaintiffs try to

make much of that omission, as the person directly responsible

for administering California’s MediCal program it would appear

that Ms. Shewry is in fact the proper party to advance

California’s interest in this matter.

17

As indicated above, due process rights are not impinged simply

because of limitations in governmental aid implicit in coverage

that falls short of offering unrestricted access to all

prescription drugs. 

4. Automatic Enrollment Provision. For a Third Claim,

Plaintiffs appear to assert that dual eligibles who for whatever

reason have not successfully enrolled in Medicare Part D

coverage, despite the automatic enrollment provisions of the MMA,

should be permitted to retain coverage under MediCal on an

indefinite basis if no enrollment occurs. This argument is

disingenuous in light of the stopgap measures provided by both

California and the federal government in paying claims

temporarily under MediCal (on the state’s part) and in allowing

dual eligibles the right to at receive refills of their

medications on a one-time basis even if not yet effectively

enrolled in Medicare (through the federal government).

 

5. Eleventh Amendment Immunity. Defendant Sandra Shewry,

as Director of the California Department of Health Services, is

named as a Defendant in this action, as is California State

Controller Steve Westly. Defendant Shewry’s focus in opposing 4

this motion is that state immunity under the Eleventh Amendment

bars this action in the first instance. 

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 17 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

18

Defendant Shewry position appears to be correct. 

The Eleventh Amendments bars federal courts for exercising

jurisdiction over a suit brought against a state in federal court

by its own citizens. A state is immune from such an action. 

Papasan v. Allain, 478 U.S. 265, 276 (1986). In addition, naming

a state official rather than the state itself does not save a

lawsuit from the bar imposed by the Eleventh Amendment if the

state is deemed the real party in interest. Idaho v. Coeur

d’Alene Tribe, 521 U.S. 261, 277-78 (1997). Where a lawsuit

seeks relief that must be paid by the state treasury, the state

is deemed the real party in interest even though individual

officials are denominated as nominal defendants. Ford Motor Co.

v. Dep’t of Treasury, 323 U.S. 459, 464 (1945).

The State of California argues that this lawsuit effectively

seeks monetary relief because Plaintiff seek reversion to the

previous system under which dual eligibles received prescription

drugs under MediCal, a program funded in part by state dollars. 

They argue that such a result would unquestionably impact the

state treasury, and could have an even more pronounced result

than the previously administered MediCal system for two reasons. 

First, with the dismantling of the Medicaid drug reimbursement

system, the State argues that rebates previously required from

pharmaceutical companies might no longer available. Secondly, if

California were to pay for dual eligible provisions in

contravention of Part D Medicare, it might no longer be entitled

to the matching federal funds it had previously received under

the old system. Both these factors could well make exclusive

state payment for prescriptions considerably more expensive.

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 18 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

19

Plaintiffs try to avoid the import of these concerns by

arguing that this case falls within the limited exception to

Eleventh Amendment preclusion established by Ex Parte Young, 209

U.S. 123 (1908). In that case, suit against a state was

permitted where only prospective equitable relief was sought as

opposed to any form of money damages or other legal relief. 

Plaintiffs here argue that the relief requested is prospective

and equitable only despite the obvious fiscal impact as well as

the fact that individual Plaintiffs would appear to seek the

equivalent of money damages in the form of co-pay recoupment.

In determining whether the Ex Parte Young exception applies,

courts should look to the substance rather than the form of the

relief sought. Papasan, 478 U.S. at 278-79. As the State points

out, the primary purpose driving this lawsuit is State payment

for prescription drugs. That goes beyond mere equitable relief,

as does the Plaintiffs’ demand that no co-payments be required.

If any doubt remained as to the propriety of maintaining

this action under Ex Parte Young on the basis of the relief

sought, that doubt is put to rest by the additional requirement

of the Young doctrine that “the underlying authorization upon

which the named official acts is asserted to be illegal.” Id. at

277. Here there can be no doubt that the Director acted legally

in coordinating California’s MediCal system with the changes

authorized by Congress in enacting Medicare’s new Part D

provision for providing prescription drugs. 

///

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 19 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

It should also be noted that even aside from Eleventh 5

Amendment concerns, granting the relief sought by Plaintiffs

would amount to a mandate that the State of California reinstate

MediCal coverage to dual eligibles when it has already, in the

wake of MMA, enacted legislation withdrawing such coverage. See

California Welfare and Institutions Code § 14133.23(a) and

(b)(1). This court cannot issue a mandate to compel fiscal

appropriations; only the state legislature can authorize such

expenditures. Hopkins v. Saunders, 93 F.3d 522, 527 (8th Cir.

1996).

20

Plaintiffs cannot dispute this, and consequently Plaintiffs

cannot show any likelihood of success as to their claims against

the State of California.5

B. Irreparable Harm

The irreparable harm alleged by Plaintiffs in this case is

premised almost entirely on speculation as to what could happen

if certain Plaintiffs cannot obtain needed medicines, or what

could occur if other individuals qualifying as dual eligibles are

not in fact enrolled in Medicare Part D prescription coverage. 

Irreparable injury for purposes of qualifying for injunctive

relief, however, cannot be based on sheer speculation. Goldie’s

Bookstore, Inc. v. Super. Ct. Of State of Cal., 739 F.2d 466, 472

(9th Cir. 1984).

To the extent that any Plaintiff (or other dual eligible for

that matter) needs medication not included within his or her

assigned formulary, an “exception” or appeal from a denial of

coverage as to the non-included drug may be filed. 

///

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 20 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

In some 90 percent of cases a doctor can successfully 6

prescribe a different drug that is on a plan formulary. (See

Decl. of Paul Lofholm, ¶ 8).

While the Court recognizes that Defendants also claim that 7

Plaintiffs’ failure to exhaust their administrative remedies in

this regard is yet another bar to this lawsuit, the Court does

not believe that argument is dispositive in ruling on the present

motion for injunctive relief and consequently will not address it

here except insofar as it bears on the irreparable harm issue as

discussed in this section.

21

This assumes that generic or other drugs that are available on

any given formulary do not meet patient needs. No Plaintiff has 6

shown that they have exercised such appeal options

unsuccessfully, and consequently no irreparable injury beyond

impermissible speculation has been demonstrated.7

Plaintiffs’ additional contention that minimal co-payments

constitute irreparable harm also cannot be sustained given the

fact that an attack on the propriety of such payments amounts, in

essence, to a challenge to amounts awarded in governmental aid. 

As indicated above, there is generally no constitutional right to

governmental aid. DeShaney, 489 U.S. at 196. Moreover, because

any equal protection argument in this case requires scrutiny only

under a rational basis, and because requiring such co-payments

withstands such analysis, there can be no irreparable harm

founded on an equal protection analysis, either.

Finally, Plaintiffs’ challenges to the automatic enrollment

provisions are unpersuasive. 

///

///

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 21 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

Only about 6 million of the 42 million individuals who 8

qualify for coverage under Medicare Part D are dual eligibles. 

(See Federal Defs.’ Opp’n, pp. 1-2).

22

While Plaintiffs have produced evidence to show that automatic

enrollment had not been completed within the first two weeks

after implementation of the new Medicare Part D program, they

have presented no competent evidence of ongoing failure during

the remaining transition process that would constitute

irreparable harm, particularly given the assistance provided by

both the state and federal governments to aid that process as

discussed above.

C. Balance of Hardships

Any new legislation with the sweep of the MMA inevitably

requires adjustment. As discussed above, provisions have been

made to ease that adjustment process, and Plaintiffs have failed

to produce convincing evidence that measures undertaken have been

ineffective. Plaintiffs would advocate throwing the entire

Medicare Part D program into jeopardy because of alleged

inconvenience to a small portion of the 42 million Americans

entitled to the new prescription drug coverage. Practical 8

difficulties in trying to return to the old Medicaid system not

now that the Medicare drug program is in operation would be

immense. (See Culotta Decl., ¶ 18-19). The balance of hardship 

tips overwhelmingly in favor of continuation of the Medicare

drug-benefit program without interruption.

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 22 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

23

CONCLUSION

The dispositive issue in denying injunctive relief rests in

this case with the fact that Plaintiffs have not shown any

likelihood of success on the merits. Plaintiffs lack standing to

pursue any constitutional challenge to the MMA premised on the

Tenth Amendment. In addition, Plaintiffs are wrong in claiming

that discretion given under the MMA to the Secretary in approving

drug plans violates the non-delegation doctrine. Plaintiffs

similarly have not established viable Fifth Amendment due

process/equal protection claims stemming either from co-payment

provisions or from operation of drug plans/formularies under Part

D of Medicare.

Moreover, with respect to the injunctive relief sought,

Plaintiff’s demand that the State of California continue

providing prescription drug coverage under MediCal is barred by

the Eleventh Amendment. Furthermore, and in any event, this

Court lacks power to compel a state to make what amounts to

fiscal appropriations necessary to fund a reversion to the old

MediCal system. Only the California legislature may make such

appropriations. Hopkins v. Saunders, 93 F.3d at 527.

For all these reasons, the likelihood of Plaintiffs’

prevailing on the merits here is slim. In addition, the

irreparable injury identified by Plaintiffs is largely

speculative, and the balance of hardships tip squarely against

granting preliminary injunctive relief. 

///

///

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 23 of 24
1

2

3

4

5

6

7

8

9

10

11

12

13

14

15

16

17

18

19

20

21

22

23

24

25

26

27

28

24

Because Plaintiffs in essence seeks a reversion to the pre-MMA

state of affairs, the mandatory injunction they seek is

particularly disfavored and must be denied unless both the facts

and law clearly favor the moving party. Stanley v. Univ. of S.

Cal., 13 F.3d 1313, 1320 (9th Cir. 1996). Here that high

threshold has not been met.

Much of the potential harm identified by Plaintiff consists

of transition difficulties that both the state and federal

governments have attempted to remedy through emergency and/or

short term legislation. Mechanisms are in place that allow

flexibility in drug formularies which are already designed to

encompass the therapeutic spectrum. On the other hand,

disrupting the transition to Medicare at this point could entail

enormous logistical challenges and throw the entire system into

disarray once again, as opposed to allowing transition issues to

simply resolve with the passage of additional time post-enactment

of Part D.

For all the foregoing reasons, Plaintiffs’ Motion for

Preliminary Injunction is DENIED.

IT IS SO ORDERED.

DATED: May 19, 2006

_____________________________

MORRISON C. ENGLAND, JR

UNITED STATES DISTRICT JUDGE

Case 2:06-cv-00435-MCE -KJM Document 36 Filed 05/19/06 Page 24 of 24