### T E X A S C O U R T O F A P P E A L S , T H I R D D I S T R I C T , A T A U S T I N

NO. 03-12-00293- CV

South west P harm acy Solution s, Inc. d/b /a Am eric an Pharm acies, Appellant

v. Texas Health and Human Servic es Com m ission and T hom as Su ehs, solely in h is Of fi cial Capacity as Executive C om m ission er of the Texas Health and Hu m an

Service s Com m ission , Appellees

F ROM TH E DISTRI CT COURT O F TRAVIS CO UNTY, 419 TH JUDICI AL DISTRICT NO. D-1 -GN-1 2-0 0046 9, H ONO RAB LE JO HN K. DIETZ, JUDGE PRESI DING

O P I N I O N

Southwest Pharmac y Soluti ons, I nc. d/b/a Americ an P harma cies appea ls the trial court’s judgme nt g ranting the plea t o t h e j urisdiction of the Texas Hea lth and Human Service s Commi ssion ( HHSC) and Thomas Suehs, Ex ecutive Commi ssioner of HHSC ( jointly HHSC) and deny ing its reque sts for decla ratory and injunctive relief

. Americ an Pharmac ies challeng ed HHSC’s rulemaking obliga tions and cer tain rules promulg ated by HHSC rela ted to pharma cy benef its under Texas’s Medica id manag ed ca re ( MMC) prog ram. F or the re asons that follow, we aff irm the trial court’s judg ment.

STATUT ORY AND REGULATORY F RAMEWORK

Medica id is a cooper ative fede ral-stat e p rog ram that provides health car e to needy individuals. See generally 42 U.S.C. §§ 1396–1396w (Gra nts to St at es fo r Medica l AssistancePro g r a

ms )

. Wh il e fede ral law establishes Medica id’s basic para meters, eac h state decide s the nature 1 and scope of its Medica id prog ram and submits a S t at e p l an descr ibing its prog ram to the fede ral Center for Medica

re and Medica id Service s, which must approve the plan and any amendments. See 42 U.S.C. §1396a(a ), (b); 42 C.F.R. § 430.10. The fede ral g over n m en t agr ees to pay a specifie d perc entag e of a st ate’ s expenditures for covere d service s prov i d ed b y t h e st ate under an approve d State plan. See 42 U.S.C. §§ 1396b(a) , 1396c, 1396d(b). Outpatient pharma cy service s are among the cover ed service s. See id. § 1396r-8. I n Texas, HHSC is the ag ency design at ed to administer fede ral medic al assistance prog rams, including M edica id. See Tex. Hum. Res. Code § 32.021(a) ; Tex. Gov’t Code § 531.021(a)

.

Traditionally , health car e providers enrolled in t he Medica id prog ram

wer e reimburse d by HHS C o n a fe e- for- service basis at rate s set by HHSC, with pharma cies being reimburs ed u nder the Vendor Drug Prog ram. See Act of May 26, 1979, 2 66th L eg ., R.S., ch. 842, §§ 32.028, .029, 1979 Tex. Gen. L aws 2333, 2351 (cur rent versions at Tex. Hum. Res. Code §§ 32.028, .029); see also Tex. Gov’t Code § 531.021(b)( 2); 1 Tex. Admin. Code

Be cause there have be en no substantive cha ng es to the rele vant state and fe dera l statutes 1 and rules since the filing of this case , we cite to the cu rr en t v ersions except wher e we cite for historical fa ct of pa ssag e or a mendment. Under a traditional fee -for -ser vice a rra ng ement, a health care provider is reimburse d for 2 all proce dures that are provided, at a price controlled by the hea l t h ca re providers. See Hawkins v. El Paso First Health Plans, Inc. , 214 S.W .3d 709, 713 n.5 (Tex. App.—Austin 2007, pet. denied) ; Vista Health Plan, Inc. v. Texas Health & Human Servs. Comm’n , No. 03-03-00216- CV, 2004 Tex. App. L EXI S 4529, at *6 n.6 (Tex. App.—Austin May 20, 2004, pet. d en i ed ) (mem. op.) (citing Andre w Ruskin, Capitat ion: the Legal Implications of Using Capitat ion t o Affect Physician Dec ision-making Proce

sses , 13 J . Contemp. Health L . & Pol’y 391, 392–93 (1997))

.
2§ § 3 5 4.1801–.1928 (Tex. Hea lth and Hum. Servs. Comm’n, Pharmac y Service s), 355.201 3 (Establishment and Adjustment of Reimbursement Rates by the Hea lth an d Human Service s Commi ssion), 355.8541–.8551 (Pharmac y Service s: R eim bursement)

. HHSC is char g ed with adopting rules for

deter mining re imbursement ra tes for me dical assist ance pay ments. Act of Ma

y 26, 1979, 66th L eg ., R.S., ch. 842, § 32.028(a) (cur rent version at Tex. Hum. Res. Code § 32.028(a) ); Tex. Gov’t Code § 531.021(b)(2)

.

Since 1997, HHSC has had statutory authority to implement an MMC prog ram for providing Medica id service s in Texas. See Act of May 28, 1 9 9 7 , 75th L eg ., R.S., ch. 1262, § 2, 1997 Tex. Gen. L aw s 4 7 8 0, 4781 (cur rent version at Tex. Gov’t Code §§ 533.001–.063) (I mplementation of Medica id Manag ed Care Pr o gra m ); T ex. Gov’t Code § 533.002 (“The commission shall implement the Medica id manag ed car e prog ram as part of the health car e delivery sy stem

. . . .”). Under MMC, HHSC contra cts with manag ed car e org anizations (MCOs) to provide M ed i ca i d health services under a manag ed care plan. See Tex. Gov’t C ode §§ 533.001–.002; see

a l s o 4 2 U.S.C. § 1396b (authorizing fede ral reimburse ment to state for costs of contra cting with el i gible MCOs). The MMC prog ram in Texas operates as a Medica id “demonstra tion projec t ” authorized by cer

tain waiver s from the require d provisions of the State p l an gra n ted by the fe d era l g overnme nt and monitored by the U.S. Depa rtment of Hea lth and Human Service s. See 42 U.S.C. § 1315; Tex . Hum. Res. Code § 32.041 (author izi ng planning and evalua tions of MMC demonstration projec t for implementation in 1996–97 biennium).

All c ites to title 1, chapte rs 353–55 of the Te x as Administrative Code ar e to rules issued 3 by the Texas Hea lth and Human Servic es Commissi on. 3HHSC’s contra cts with M C Os m u st include “ca pitation rate s that ensure the costeff ective provision of quality health car e.” Tex

. Go v’t Code § 533.005(a) (2). “Capitation is a method of financ ing that distinguishes manag ed car e service plans from traditional fee -for -ser vice plans.” Hawkins v. El Paso First Health Plans, Inc. , 214 S. W

. 3 d 7 0 9 , 712 (Tex. App.—Austin 2007, pet. denied)

. Under a “ca pitated” pay

ment sy stem, healthca

re pay ers like Medica id purcha se service s at a per person/per month rate from providers like the MCOs in return for pay ment pursuant to a capitate d rate schedule

. Id. The capitation rate s are fix ed sums that are calc ulated monthly for

eac h enrolled member reg ardle s s o f the amount of covered service s used by the m ember and thus p ro v i d e budget certa inty to the s tate. Id. Capitated pay ment arr ang ements are termed “full risk” 4 beca use the MCO bear s the risk that the capitate d pay ment rec eived for an insured member may be insufficient to c over that member’ s medical needs for any g iven month. See 42 C.F.R. 438.2 (risk
contra ct means contra ct under which contra ctor assumes risk for cost of cover ed service s and incurs loss if c ost e x cee ds pay

ments); Vista He alth Plan, Inc . v. Texas H ealth & Human Serv

s. Comm’n , No. 03-03-00216- CV, 2004 Tex. App. L EXI S 4529, at *6 n.4 (Te x . App.—Austin May 20, 2004, pet. denied) (mem. op.) (citing David M. Studdert, Direct Contracts, Data Sharing and Employee Risk Selec tion: New Stakes for Patient Privacy in Tomorrow’s Health Insurance Markets ,

See also Tex. I ns. Code § 843.002(4) ( defining capitation as “ a method of compensa ting 4 a phy sician or provider for arr ang ing for or providing a define d set of cove red he alth car e ser vices to cer tain enrollee s for a specifie d period that is based on a prede termined pay ment per enrollee for the specifie d period, wi t h o u t reg ard to the quantity of service s actua lly provided” ); 4 2 C .F.R. § 422.208(a) (def ining capitation as “a set dollar pay ment per patient per uni t o f t i m e (usually per month) paid to a phy sician or phy sician group to cover a spec ified set of se rvice s and admi n i s t rative costs without reg ard to the actua l number of service s provided

. . . includ[i ng ] the phy sician’s own se rvice s, ref err al servic es, or a ll medical servic es”)

.

425 Am. J

. L

. & Med. 233, 236 (1999)) ; s ee a l s o 42 U.S.C. § 1395mm(b)(2)( D) (to be eligible for fede ral reimburse ment, MCO must assume full financ ial risk on prospec tive basis for provision of health ca re se rvice s). Prior to Marc h 1, 2012, outpatient pharma cy benef its wer e excluded from MMC, and Medica id rec ipients obtained their outpatient drug s throug h pharma cies enrolled in the Vendor Drug Prog ram. See 1 T ex . Ad m in. Code § 354.1873 (F ree dom of Choice). I n 2011, the leg islature expanded t h e M MC prog ram to include outpatient pharma cy benef its. See Act of J une 27, 2011, 82d L eg ., 1st C.S., ch. 7, § 1.02(d), 2011 Tex. Gen. L aws 5390, 5393 (SB 7) (codifie d at Tex. Gov’t Code § 533.005(a) (23)) (contra ct betwee n HHSC and MCO must includ e o u tpatient pharma cy benef it plan). I n Dec ember 2011, HHSC obtained a waiver from the fede ral g overnme nt for its new Medica id Demonstration Project, entitled “Te x as Hea lthcare Transformation and Quality I mprovement Prog ram.” The waiver authorized HHSC, among other things, “to restric t fre edom of choice of provider throug h the us e of mandatory enroll ment in manag ed care plans for the rec eipt of covered service s[,] ” including pharmacy service s . S ee 42 U.S.C. 1315(a) (wa iver of state pl an require ments for demonstration projec ts); see also 42 U.S.C. §1396a(a )(23) (A) (re quiring State plan
to provide that individuals elig ible for medical assista n ce, including drug s, may obtain such

as s i s t ance from any qualified provider) ; 1 Tex. Admin. Code § 354.1873 (af fording Medica id

rec ipients rig ht to obtain pharma cy service s from any pharma cy enrolled in Drug Vendor Prog ram). Under MMC, MCOs g ener ally contra ct wi t h p harma cy benef it manag ers (PBMs) to act as intermediar ies betwee n MCOs and pharma cies. The PBMs es t ab l i s h networks of providers and proce ss prescr iption drug c laims submit ted by provider pha

rmac ies.

5HH S C s u b sequently proposed rules to comply with SB 7. See 36 Tex. Reg

. 8667

(2011), adopted 37 Tex. Reg

. 1 2 92 (2012) (codifie d at 1 Tex. Admin. Code § 353.901–.915 (Outpatient Pharmac y Service s) (“Subcha pter J ”). The prea m b l e s t ated that the new rules wer e proposed to comply with SB 7 an d t h e cost-saving initiatives of the 2012–2013 Gene ral Appropria tions Act and to implement the statutory mandates consistent with the fede rally -appr oved demonstration projec t waiver

. See id. at 8667–68; see also 42 U.S.C. §§ 1315, 1396a. I ncluded in the proposed rules was a S mall Business and Micro-business I mpact Analy sis require d by section 2006.002 of the Gover

nment Code. See 36 Tex. Reg

. 8668–70; Tex. Gov’t C o d e § 2006.002(c) (re quiring state ag ency to prepa re economic impact statement and reg u l at o ry flexibi lity analy sis befor e adopting rule that may have adver se economic eff ect on small businesses). I n the economic impact s tatement, HHSC conclude d t h at t he proposed rules would aff ect independent pharmacie s that may be small businesses and tha t they may experience adver se economic eff ects as a r esult of their inclusion in MMC, as require d by SB 7. I n its reg ulatory flexibi lity analy sis, HHSC considere d three alternative methods for achie ving the purpo s es o f t h e proposed rules, see Tex. Gov’t Code § 2006.002(c) (2), but declined to implement them, observing that participa tion in the prog ram was voluntary and any alterna tive to including pharma cy service s in MMC would fail to comply with the mandates of SB 7, see 36 Tex. Reg

. 8669–70. I n Fe bruar y 2012, HHSC adopted the proposed rules without rele vant chang es. See 37 Tex. Reg

. 1292. The stated p u rp o s e o f the new rules is “to implement the require ments of Texas Gover nment Code § 533.005, which establishes require ments for providing outpatient pharma cy benef its throug h Medica id manag ed care .” See 1 Tex. Admin. Code § 353.901; see also Tex

. Go v ’t Code § 533.005. The new rules did not include provisions

6reg ulating reimburse ments to pharma cy benef its under MMC car e. See 1 T ex . Ad m in. Code §§ 353.901–.915.

F ACTUAL AND P ROCEDURAL BACK GR OUND

Americ an Pharmac ies is a for- profit, member- owned cooper ative of in d ep en dent pharma cies operating in Texas and other states. Most of its members are small businesses as define d in se ction 2006.001(2) of the Gover nment Code, see Tex. Gov’ t Code § 2006.001(2), that provide outpatient drug s to benef

iciarie s of the Texas Medica id prog ram administered throug h HHSC. See Tex. Hum. Res. Code § 32.021(a) ; Tex. Gov’t Cod e § 5 3 1

. 0 2 1 (a). I n J anuar y 2012, Americ an Pharmaci es fi l ed comments to HHSC’s proposed rules, objecting to the lack of minimum reimburse ment rate s for pharma cy claims paid by MCOs and contending that HHSC had not complied with section 2006.002 of the Gover nment Code. I n adopting the rules, HHSC responde d
to the comments of America n Pharmac ies and others, but as previously stated, di d not modify the rules in response . See 37 Tex. Reg

. 1292. Americ an Pharmac ies filed suit seeking decla ratory relief under the Uniform Dec lara tory J udgm en t s Ac t (UDJA), see Tex. Civ. Prac. & Rem. Code §§ 37.001–.011, a

n d th e d e c la

r a to ry judgme nt provision of the Administrative Procedur e Act (APA),

see Tex. Gov’t Code § 2001.038. Americ an Pharmac ies asked the trial court to construe the rele vant statutes and decla

re that HHSC is require d to reg ulate reimburse ment rate s of pharma cies under the MMC prog ram and that HHSC had failed to perf orm a proper impact analy si s u n d er section 2006.002 of the Gover

nment Code beca

use it had failed to a dopt a leg al and fea sible alterna tive to the proposed rules. Americ an Pharmac ies also soug ht decla rations that Suehs’s failure to adopt rules g over n i n g pharma cy reimburse ments and to tailor the new rules so as to reduc e their adver se
7economic impact on small business pharma cy providers was ultra vires and that the new rules wer e

conseque ntly

void. HHSC filed a plea to the jurisdiction asser ting that (1) Americ an Pharmac ies lacke d standing beca

use it had asser

ted no justiciable interest and (2) Suehs had not acte d ultra vires beca use HHSC had no duty to set pharma cy provider rate s under MMC and HHSC had fully complied with section 2006.002 in perf

orming the impact analy sis. The trial court found that it had jurisdiction to construe the statut es and rules at issue under the UDJA to deter mine if Suehs’s actions were ultra vires, conducte d a hear ing on the merits, and rende red fi n al j u d gm ent holding that (1) Americ an Pharmac ies had failed to alleg e or prove a justiciable interest; (2) Americ an Pharmac ies had failed
to al l ege o r p ro ve that HHSC had any rate -setting duty in the MMC context; (3) HHSC had substantially complied with section 2006.002; and (4) Suehs had rea sonably construed the statutes g overning Texas Medica id and acte d within his discretion and authority , and Americ an Pharmac ies had fa iled to alleg e or prove that Suehs acte d ultra vi res with respe ct t o implementation of MMC. The trial court g rante d HHSC’s plea to the jurisd i ct i o n an d rende red judgme nt for HHSC in all respe cts. This appea l followed.

STANDARD OF REVIEW

A plea to the jurisdiction challeng es the court’s authority to decide a case . Hec kman

v. W illiamson Cnty. , 369 S.W .3d 137, 149 (Tex. 2012). A plea questioning the plaintiff’s standing , which is a component of subject matter jurisdiction, raises questions of law that we revie w de novo. W estbrook v. Penley , 231 S.W .3d 3 8 9 , 394 (Tex. 2007); Texas Dep’ t of Transp. v. City of Sunset Valley , 146 S.W .3d 637, 646 (Tex. 2004). When a plea to the jurisdiction challeng es the pleading s, 8we look to the plea der’ s intent, c onstrue the pleading s liberally in f avor of jurisdiction, and acc ept the alleg ations in the pleading s as true to deter mine if the pleade r has alleg ed s u ff i ci en t fa cts to aff irmatively demonstrate the trial court’s jurisdiction to hear the cause . Hec kman , 369 S.W .3d at 150; City of

El Paso v. Heinrich , 284 S.W .3d 366, 378 (Tex. 2009); Texas Dep ’ t of Parks & W

ildlif e v. Miranda , 133 S.W .3d 217, 226 (Tex. 2004)

. I f the plea dings a ffirma tively neg ate the e x istence of jur i s d iction, then a plea to the jurisdiction may be g rante d without allowing the plaintiff an opportunity t o am end. Miranda, 133 S.W .3d at 227. When the pl ea challeng es t he jurisdi ctional fac ts, the trial court may consider any evidenc e the parti es have submitt ed and must do so when

nece ssary to resolve the jurisdictional inquiry

. Id. ; Bland Indep. Sch. Dist. v. Blue , 34 S.W .3d 547, 555 (Tex. 2000).

When, as here , the jurisdictional fac ts implicate the merits of the plaintiff’s cause of action, t h e p ar ty challeng ing jurisdiction has a burden simil ar to that in a traditional summary j udg ment. Miranda , 133 S.W .3d at 227–28; Good Shepherd Med. Ctr

. v. Stat e , 306 S.W .3d 825, 831 (Tex. App.—Austin 2010, no pet.). I f the evidenc e cre ates a fac t issue as to jurisdiction, the trial
court cannot g rant the plea to the jurisdiction, and the fac t issue must be resolved by the fac t finder
at trial. Miranda , 133 S.W .3d at 227–28; Uni ve r s i t y o f T ex. v. Poindexte r , 306 S.W .3d 798, 807 (Tex. App.—Austin 2009, no pet.). On the other hand, if the evidenc e is undisputed or fails to raise

a fac t issue, the trial co u rt rules on the plea to the jurisdiction as a matter of law. Miranda , 133 S.W .3d at 228; Poindexte r , 306 S.W .3d at 807. We revie w t he trial court’s determinat i on de
novo, indulging ever

y rea sonable infere nce and resolving any doubts in t h e p l ai n tiff’s favor

. Miranda , 133 S.W .3d at 228; Poindexte r , 306 S.W .3d at 807.

9I n its plea to the juri sdiction, HHSC challeng es Americ an Pharmac ies’ standing ,

contending that it failed to asser t a justiciable interest. The gen eral test for standing is whether ther e is a rea l controve rsy betwee n the parties that will actua lly be deter mined by the judicial determ i n at i on soug ht. Texas Ass’n of Bus. v. Texas Air Control Bd. , 852 S.W .2d 440, 443–45 (Tex. 1993); City of W aco v. Texas Comm’n on Envtl. Quality , 346 S.W .3d 781, 801 (Tex. App.—Austin 2011, pet. g rante d). A justiciable interest with reg ard to a sta t u t e o r rule require s “some actual o r t h re at ened restric tion” under the statute or rule. See Brantley v. Texas Y outh Comm’n , 365 S.W .3d 89, 102 (Tex. App.—Austin 2011, no pet.) (citing Texas W orkers Comp. Comm’n v. G arcia , 893 S.W .2d 504, 517–18 (Tex. 1995)).

HHSC’s plea to the jurisdiction also challeng es Am er i can Pharmac ies’ ultra vires claims. Whil e sovere ign immunit y bars actions ag ainst the state absent a leg islative waiver , Harris Cnty. v. Syke

s , 136 S.W .3d 635, 638 (Tex. 2004), reque sts for decla ratory relief that do not attempt to c ontrol state action do not implicate g overnme ntal immunit y at all, see Heinrich , 284 S.W .3d at 3 7 2 (T ex . 2009). Suits ag ainst g overnme ntal officia ls alleg ing that they “ac ted without leg al authority or failed to perf

orm a purely minist eria l act” and seeking to compel the officia ls “to comply with statutory

or constitutional provisions” fall within the “ultra vires” e x ception to g overnme ntal immunit y beca

use they “do not attempt to exert control over the state—they attempt to rea ssert the control of the state.” Id. To deter mine whether a party h as as s erted a valid ultra vires claim, we construe t h e re l evant statutory provisions, apply them to the facts alleg ed, and deter mine whether those fac ts co n s titute acts bey ond the official’s authority or establish a failure to perf orm a purely minist eria l act. See Texas Dep’ t of Transp. v. Sunset Transp., Inc. , 357 S.W .3d 691, 701–02 (Tex.

10App.—Austin 2011, no pet.); Creedmoor-M aha W ater Supp l

y C o r p. v. Texas Comm’n on Envtl. Quality , 307 S.W .3d 505, 516 n.8 (Tex. App.—Austin 2010, no pet.) (quoting Hende e v. Dewhurst , 228 S.W .3d 354, 368–69 (Tex. App.—Austin 2007, pet. denied) ) (whe n analy zing whether plaintiff has alleg ed ultra vires acts, we const rue statutes defining officia l’s authority , apply provisions to pleade d and unneg ated fac ts, and deter mine whether those fac ts fall within or outside that authority ). The resolution of Americ an Pharmac ies’ ul tra vires claims turns on statutory construction, which is a question of law t h at we revie w de novo. See Railroad Comm’n v. Texas Citi zens for a Safe Future & Clean W ater , 336 S.W .3d 619, 624 (Tex. 2011). Of primary

conce rn is the express statutory lang uag e. S ee Ga l b r aith Eng’g Consultant s, Inc. v. Pochuc ha , 290 S.W .3d 863, 867 (T ex . 2009). We apply the plain meaning of the text unless a differ ent meaning is supplied by leg islative definition or i s appar ent from the contex t or t h e p l ai n m eaning leads to absurd results. Marks v. St. Luke’s Episco p a l Ho s p . , 3 1 9 S.W .3d 658, 663 (Tex. 2010). “We g ener ally avoid construing individual pr ovisions of a statute in isolation from the statute a s a whole[,] ” Texas Citi

zens , 336 S.W .3d at 628, we m u st consider a provision’s role in the broade r statutory scheme , see 20801, Inc. v. Parker , 249 S.W .3d 392, 396 (Tex. 2008), and we presume that “the en t i re s t at u te is intended to be eff ective[,]” Tex. Gov’t Code § 311.021(2). A court may consider the law’s objective, the circ umstances under which it was enac ted, the leg islative history , former statutory provisions, and the conseque nces of a particula r construction when construing statutes, whether or not the statute is ambig uous. Tex. Gov’t Code § 311.023(1)–( 5); Atmos Energy Corp. v. C i ties of Allen , 353 S.W .3d 156, 160 (Tex. 2011). “Construction of a statute must be

11consistent with its underlying purpose and the policies it promotes.” Northw estern Nat’l Cnty. Mut.

Ins. Co. v. Rodriguez , 18 S.W .3d 718, 721 (Tex. App.—San Antonio 2000, pet. denied)

.

Her e, we must construe statutes and rules that HHSC is char g ed with administering

. See Tex. Hum. Res. Code § 32.021(a) ; Tex. Gov’t Code § 531.021(a)

. “[A]n ag ency ’s interpre tation of a statute it is char g ed with enfor cing is entitled to ‘ser ious consideration,’ so long as the
const ruction is rea sonable and does not conflict with the statute’s lang uag e.” Texas Ci t i z en s , 336 S.W .3d at 624. When a statutory scheme is subject to multipl e interpre tations, we must uphold

an enfor cing ag ency ’s constru ct i on if it is rea sonable and in harmony with the statute. Id. at 629 (obser ving that “g overnme ntal ag encie s h av e a ‘u nique understanding ’ of the statutes they administer”) (quoting W

yeth v. Levine , 555 U.S. 555 (2009))

. This defe ren ce i s particula rly important in construing a complex statutory scheme like that g overning Texas Medica id. See id. at 629–30. W e const rue administrative rules in the same manner as statutes. TGS-NOPEC Geophy sical Co. v. Combs , 340 S.W .3d 432, 43 8 (T ex . 2011). We defe r to an ag ency ’s interpre tation of its own rules unless it is plainly err oneous or cont ra d i ct s t h e text of the rule or underly i n g s t at u te. Public Util. Comm’n v. Gulf States Utils. Co. , 809 S.W .2d 201, 207 (Tex. 1991); Texas Bd. of Chirop r a ct i c Exam’ rs v. Texas Med. Ass’n , 375 S.W .3d 464, 475 (Tex. App.—Austin 2012, pet. denied)

. Wit h these rules o f construction in mind, we turn to Americ an Pharmac ies’ issues.

12DISCUSSIO N

HHSC’s Duty to Regulate R eim bursem ent Rate s un der Managed Car e

I n its first three issues, Americ an Pharmac ies arg ues that the trial court err ed in construing the rele vant statutes so as to find that HHSC was not obliga ted to reg ulate pharma cy reimburse ment rate s under MMC and that Suehs’s actions in implementing MMC without doing so

wer e not ultra vires. The crux of the parties’ dispute conce rning HHSC’s duty to reg ulate pharma cy benef its under MMC is their conflicting interpre tations of four s t at utory provisions. Americ an Pharmac ies arg ues that sections 531.0055(b)( 1) and 531.021(b)( 2) of the Gover nment Code and sections 3 2

. 0 2 8(a) and 32.003(4) of the Human Resource s Code, rea d toge ther, demonstrate that HHSC has the obliga

tion to adopt rea sonable rate s and standar d s g overning “medica l assistance pay ments,” which include pharma cy benef its. See Tex. Gov’t Code §§ 531.021(b)( 2), .0055(b)( 1); Tex. Hum. Res. Code §§ 32.003(4), .028(a)

. Gover nment Code section 531.0055(b)( 1) require s HHSC to manag e Medica id, including MMC, in acc ordanc e with section 531.021. See Tex. Gov’t Code § 531.0055(b)( 1). Section 531.021(b)( 2) require s HHSC to adopt rules for deter mination of
rate s for medical assistance pay ments under chapte r 32 of the Human Resource s Code. See id. § 532.012(b)( 2). Human Resourc es C ode section 32.028(a) require s HHSC to adopt rules for deter mination of rates f

or medica l assistance pa

y ments. See Tex. Hum. Res. Code § 32.038(a). Whil e “medica l a ssistance” is de fined as “all of the health car e and rela ted service s and benef its authorized or provided under fede ral law for needy indiv i d u al s of this state,” see id. § 3 2

. 003(4); Tex. Gov’t Code § 533.0025(a) (adopting meaning assig ned by section 32. 0 0 3 ), “medica l assistance payme nts ” is not defined. ( Emphasis added.) Americ an Pharma cies c ontends

13that the plain meaning of the term includes pay ments under both fee -for -ser vice and MMC and that nothing specific ally excludes pay ments under MM C from the scope of the term. Americ an Ph a r ma c ie s a ls o cites rule 355.201(b), which g overns HHSC’s establishment o f r e im b u r s e me n t r a te s , states that its purpose is to implement Gover nment Code section 531.021(d) (g uidelines for setting
rate s under section 531.021(b)( 2)), and ex pressly applies to all prog rams that provide medical assistance

. See 1 Tex. Admin. Code § 355.20 1 (b), Tex. Gov’t Code § 531.021(d). Americ an Pharmac ies thus a

rg ues that the term includes pay ments to pha

rmac ies by MCOs and PBMs in the MMC model. Americ an Pha rm acie s also contends that the leg islative history of section 531.021 supports its construction of these provis i ons. Prior to 1997, when MMC was adopted, section 531.021 provided only that “[HHSC] is the state ag ency d es i gn at ed to administer fede ral medical assistance funds.” See Act of Apr. 2 1 , 1995, 74th L eg ., R.S., ch. 76, § 8.002, 1995 Tex. Gen. L aws 458, 589 (cur rent version at Tex. Gov’t Code § 531.021(a) ). I n 1997, as part of the act implementing MMC, subsection (b) was added to section 531.021, making HHSC responsible for adopting rules for rate s for medical assistance pay ments under chapte r 32. See Act of May 28, 1997, 75th L eg ., R.S., ch. 1262, § 1, 1997 Tex. Ge n. L aws 4780, 4781 (cur rent version
at Tex. Gov’t Code § 531.021(b)(2) ). B eca use this rulemaking authority was g rante d to HHSC in

an act the purpose of which was to “provide [] for the authority of [HHSC ] to administer and operate [MM C] ,” see Senate Resear ch Center, Bill Analy sis, Tex. H.B

. 2913, 75th L eg . R.S. (1997), Americ an Pharma cies a

rg ues that it is clea

r that the leg islature intended to r equire HHSC to a dopt rules to deter

mine rate s even in the MMC context.

14Americ an Pharmac ies also arg ues that section 531.021(b) must be considere d in its

entirety in the MMC context. Am erican Pharmac ies contends that beca use Gover

nment Code section 533.0055(b)( 1) require s HHSC to manag e M M C in acc ordanc e with Gover nment Code section 521.02 1 , an d s ubsections (1)–( 3) of section 521.021(b) are joined by “and,” HHSC must comply with all three subsections in the MMC context, including subsection (2), which require s the reg ulation of rate s. Consequently , Americ an Pharmac ies arg ues, HHSC’s position that subsection (2) does not apply in MMC destroy s the meaning of the statute, and the trial court err ed in deter mining that HHSC’s interpre tation of the statute was r e a s o nable. Rather, Americ an Pharmac ies contends, when all the provisions are rea d toge ther, it is clea r that HHSC is obliga ted to adopt rules for pha rmac y benef it reimbursements under

MMC, and Suehs’s failure to do so was ultra vire s. HHSC has adopted a differ ing interpre tation of these g overning s t at u tes. HHSC contends that the statutory provisions are not as “intertwine d” as Americ an Pharmac ies claims and that the rate -setting require ments of chapte r 32 of the Human Resource s Code do not apply to MMC

as Am er i ca n Pharmac ies arg ues. HHSC points out that chapte r 32, which provides rate -setting proce dures unde r the fe e-f or-se rvice model, was enacte d befor e MMC was adopted in Texas and 5

was not repe aled by SB 7—as Americ an Pharmac ies arg ues would have been nece ssary for it not to ap ply to MMC—because it still applies t o fee -for -ser vice pay ments. HHSC contends that S u eh s

6 interpre ts “medica l assistance pay ments” t o mean pay

ments made by HHSC to providers and that

Section 32.028 was e nacte d in 1979. See Act of May 26, 1979, 66th L eg ., R.S., ch. 842, 5 § 32.028, 1979 Tex. Gen. L aws 2333, 2351. Twenty perc ent o f M ed i ca i d rec ipients are not enrolled in manag ed car e, and pharma cy 6 reimburse ment rate s set under c hapter 32 and adopted under the Vendor Drug Prog ram still apply to them. 15he did not abuse his discretion in so interpre ting the term. See 1 Tex. Admin. Code § 355.201(a) (2)

(def ining medical assistance as health car e rela ted service delivere d to Medica id rec ipient and auth orized for pay

ment or reimburse ment by HHSC or a health and human service s agency ); 37 Tex. Reg

. 1294 (explaining ag ency ’s long- standing interpre tation that section 32.028 of Human Resource s Code applies only to pay ments made by state to providers in fe e-f or-se rvice model). Reg arding section 531.021(b) , HHSC contends that the leg islative history does not support Americ an P harma cies’ construction. I t states t hat i n 1999, following t h e i m p l ementation of MMC in 1997, subsection (b)( 1) was ad d ed t o addre ss HHSC’s new duties to manag e MMC. 7 See Act of May 30, 1999, 76th L eg ., R.S., ch. 1460, § 3.0 1 , 1999 Tex. Gen. L aws 4953, 4961. HHSC arg ues that the separ ation of its duty to manag e MMC contra cts, require d by (b)( 1), from the duty to se t r ates for fee -for -ser vice, r equire d by

(b)( 2), ca rries ove r the fede ral distinction betwe en MMC and fee -for -ser

vice. See 42 C.F.R. 438 (Mana g ed Care) ; 42 C.F.R. 447 (Pay ments for Service s). HHSC c ontends that in this context and from its plain lang uag e, it is clea r Gover nment Code section 531.021(d), providing g uidelines for s et t i n g rate s, ref ers only to 531.021(b)( 2), or fee -for -ser

vice, and not to (b)( 1), or MMC. Thus, HHSC contends, (b)( 2) does not apply to MMC,

an d n o t h i n g in Human Resource Code chapte r 32, or elsewhe re, empower s HHSC to dictate the financ ial terms of contra cts betwee n pharma cies and MCOs or PBMs, to which HHSC is not a party

.

HHSC also contends that Americ an Pharmac ies’ construction of th e s ta tu te s c onflicts with the conce pt of MMC, fede ral law, and the leg islative history and intent of SB 7. HHSC arg ues

Subsection (3), requiring HHSC to establish g uidelines for evalua ting MM C , 7 was also added in 1999. See Act of May 30, 1999, 76th L eg ., R

. S

. , ch. 1460, § 3.01, 1999 Tex. Gen. L aws 4953, 4961. 16that under MMC, it pay s capitation rate s throug h its co n t ra ct s wi th MCOs as require d by

Gover nment Code sectio n 533.005(a) (23) (re quiring HHSC contra ct with MCO to include “outpatient pharma cy benef it plan”) , and under traditional fee -for -ser vice Medica id, it pay s provider reimburse ment, and that the two models are mutually exclusive. HHSC cites the fede ral reg ulation requiring it to ensure that the capitation rate s paid to MCOs are actua rially sound, see 42 C.F.R. § 438.6(c) (2)( I ), which is incorporated into the d em o n s t ration waiver under which the MMC plan operates, and contends that requiring MCOs or PBMs to incre ase pay ments to pharma cy providers w ould violate section 438.6 and the wa iver by compromising the actua

rial soundness of the capitation rate s. HHSC also ref ers to the fiscal note to SB 7—which indicates a leg islative intent
to save money by moving pharma cy benef its into MMC from a fee -for -ser vice model and estimates the cost saving s of including presc ription drug cover ag e in MMC, see Fisca l Note, Tex. S.B. 7, 82d L eg., 1st C.S. (2011)—a nd arg ues that reg ulating rate s paid by MCOs and PBMs to p h ar m ac y providers would neg a

te th e le g is la

tu r e ’ s in te n d e d s aving s. There fore , HHSC conclude s, not adopting rules reg ulating reimburse ment rate s for pharma cy benef its under MMC is consistent with its leg islative mandate a

nd fede ral lawand wa s not ultra vires. We ag ree with the rea soning of HHSC. Although Americ an Pharmac ies’ analy sis of the interplay betwee n the rele vant provisions appea rs rea sonable on its fa ce, its c onstruction of the provisions depends on rea ding them in isolation from the rema inder of the statute s i n wh i ch t h ey appea r and the s tatutory scheme surrounding them. We must analy ze the gover

ning provisions in the context of the statutes as a whole, see Texas Citi zens , 336 S.W .3d at 628, presuming the statutes

are intended to be eff

ective in their entirety , see Tex. Gov’t Code § 311.021(2). We must consider

17the role of the provisions in the full Medica id statutory scheme and in the context in which SB 7 was

enac ted. See 20801, Inc. , 249 S.W .3d at 396; Creedmoor-M aha W ater Supply Corp. , 307 S.W .3d
at 555. We may consider, as well, the g oals of MMC and SB 7, the leg islative history , the rele vant prior provisions, and the conseque nces of Americ an Pharmac ies’ construction, see Tex. Gov’t Code § 311.023(1)–( 5); Atmos Energy Corp. , 353 S.W .3d at 160. And we must c onstrue the provisions in a way that is consistent with their underly ing purpose and t h e p o l i cies they are intended to promote. See R odriguez , 18 S.W .3d at 721.

I n SB 7, the leg islature expressly moved, or “ca rved in,” pharma cy benef

its from the fee -for -ser

vice model to MMC with the g oal of saving state funds. See Tex. Gov’t Code § 533.005(a) (23)) ; Fisca l Note, Tex. S.B. 7, 82d L eg ., 1st C.S.; Confere nce Comm. Report, H.B

. 1, 82d L eg ., R.S. (Sept. 20, 2011) (R i d er 81 to Gene ral Appropria tions Act) (“Pre scription Drug Carve in to Manag ed Care Org anizations”). Under MMC, HHS C co n t ra ct s with MCOs that provide all cover ed service s to Medica id rec ipients. See Tex. Gov’t Code §§ 533.001, .002; see also 42 U.S.C. § 1396b. Direc tly or throug h PBMs, the MCOs contra ct with the provider pharma cies and neg otiate the terms of reimburse ment. Under this model, HHSC’s contra ct with the MCO includes

a capitation rate to ensure cost-ef fec tiveness, see Tex. Gov’t Code § 533.005(2), and the MCO bear s the risk that the capitation pay ment will be sufficie nt to cover the service s it provides to rec ipients. S ee 4 2 C.F.R. 438.2; Vista Health Plan , 2004 Tex. App. L EXI S 4529, at *6 n.4. To impose o n HHSC the duty to reg ulate the rate the MCOs pay the provider pharma cies would cont ra v en e the “full risk” nature and intent of the manag ed car e model, see id. , contra vene the clea r leg islative intent to “ car ve” pharma cy benef

its into MMC, a

nd call for state intervention into pr ivate contra cts. See

18Medica id Prog ram; Medica id Manag ed Care: New Provisions, 67 Fe d. Reg

. 40,989, 40,998

(June 14, 2002) (c odified at 42 C.F.R. pts. 400, 430–31, 434–35, 438, 440, & 447) (r esponding to comment s u g g esting require ment for actua rial soundness be extended to pay ment rate s betwee n MCOs and providers by stating that “[with the exception of pay ments inapplicable here ], we do not reg ulate the pay

ment rate s betwee n MCOs and subcon t ra ct i n g providers” and that “one of the eff iciencie s of manag ed car e is premised on an MCO’s ability to neg otiate favor able pay ment rate s wi th network providers”)

. Construing the g overning statutes and rules in their entirety an d i n t h e context of the g oals and policies they are intended to promote, a s well as in light of the leg islative history and prior provisions, we conclude that the pl ain l ang uag e o f t h e re l evant statutes does not impose on HHSC the duty to set rates f

or phar macy reimburse ments in the MMC contex t. Even if we wer e to conc lude that there is vag ueness, ambiguity , or room for policy d et er m i n at i ons in these statute and rules, we would conclude that HHSC’s interpre tation of th e rele vant code provisions and ag ency rules is rea sonable, in harmony with the statutes and rules, and entitled to defe renc e. S ee Texas Citi

zens , 336 S.W .3d at 629. We defe r to the ag ency ’s interpre tation unless it is plainly err oneous or inconsistent with the lang uag e of the statute or rule

. S ee TGS-NOPEC Geophy

sical Co. , 340 S.W .3d at 438. As the ag ency desig nated to administer Medica id, HHSC is char g ed with over s eeing a complex reg ulatory scheme , and defe renc e to its construction is particula

rly i m p o rtant. See Texas Citi zens , 336 S.W .3d at 629. An ag ency ’s construction does not have to be “the only —or the best—interpre tation in order to war rant

. . . defe renc e.” Id. at 628. Considering the entire statutory scheme , the g oals and policies behind it, and the leg islative history and intent, we would conclude that HHSC’s interpre tation is rea sonable, does

19not conflict with the provisions’ lang uag e, and is entitled to defe renc e. See id. at 628. We there fore

conclude that the t rial court did not err in finding that Suehs has re asonably construed the statutes g overning Texas Medica id a nd that Americ an Pharmac ies failed to a lleg e or prove that HHSC has any rate -setting duty in MMC or that Sueh s’s failure to adopt rules for setting pharma cy reimburse ment rate s in M MC was ultra vires. We overr ule Americ an Pharmac ies’ first throug h third issues.

Com plian ce with Gove rnm ent Code Sec tion 2006.002

I n its fourth issue, Americ an Pharmac ies contends the trial court err ed by finding that in proposing Subchapter J to implement SB 7, HHSC substantially complied with section 2006.002 of t he Government Code, which gover ns an age ncy ’s adoption of rules with an adverse economic impact on small businesses. SeeTex. Gov’t Code § 2006.002. Section 2006.002(a) require s that 8

an ag ency considering adoption of a rule that would have an adver se eff ect on small businesses “shall reduc e the eff

ect if doing so is leg al and fea sible considering the purpose of the statute under which the rule is to be adopted.” Id. § 2006.002(a) . Be fore adopting such a rule, the ag ency must prepa re (1) an economic impact statement estimating the number of businesses aff ecte d, projec ting the economic impact, and descr ibing alternative methods of achie ving the purpose of the proposed rule a nd (2) a reg ulatory

flexibi lity

analy sis that includes the ag ency ’s consider ation of alter native methods of achie ving the purpose of the proposed rule. Id. § 2006.002(c) (1), (2). Section 2001.024 of the APA require s that the published notice of a rule include cer tain statements and “a ny other

The parties do not dispute that Americ an Pharmac ies’ members qualify as small businesses 8 within the meaning of sec tion 2006.002. 20statement require d by law.” Id. § 2001.024(a) (8). Am o n g t h e o ther statements require d to be

included in the notice are the economic impact statement and reg ulatory flexibi lity analy sis require d by section 2006.002. Id. § 2006.002(d); Unified Loan, Inc. v. Pettijohn , 955 S.W .2d 649, 651 (Tex. App.—Austin 1997, no pet.). Fa ilure to substantially comply with section 2001.024 rende rs a rule voidable. Tex. Gov’t Code § 2001.035(a) (r u l e v o i dable unless ag ency adopts it in substantial compliance with APA sections 2001.0225 throug h 2001.034).

Americ an Pha rm ac i es contends that HHSC failed to consider and adopt leg al and fea sible alterna tives to reduc e the adver se economic eff ect of Subchapter J on small pharma cies. I t cites the Texas Attorney Gene ral’s g uidelines on implementation of section 2006.002’s reg ulatory flexibi lity analy sis, which sug g ests that among the alternat i v es ag encie s may consider are (1) differ ent rules for small businesse s, (2) exemptions for cer tain small businesses, and (3) a “‘no action’ alterna

tive.” Americ an Pharmac ies arg ue s th a t a le g al and fea sible alternative was to include 9

a provision in Subchapter J requiring MCOs and PBMs to reimburse pharma cies utiliz ing rate s established under Human Resource s Code section 32

. 0 2 8 a n d G o v e rnment Code section 531.021(b). Americ an Pharmac ies also contends that HHSC considere d only three alterna tives that it knew wer e obviously illega l and then reje cted th em o n t h e ground that they wer e illega l. Be cause they wer e adopted without the proper flexibi lity study and wi t h o ut the adoption of “less onerous rules,” Americ an Pharma cies urg es, the rule s in Subchapter J are invalid.

See HB 3440 Small Business I mpact Final Guidelines, April 2008, availab l e 9 at https:/ /www.oag .state.tx .us/AG_Publications/pdfs/hb3430guidelines2 008.pdf (last visited J une 24, 2013). 21I n its reg ulatory fl ex ibilit y analy sis, HHSC considere d three alterna tives:

(1) mail- o rd er presc riptions, (2) selec tive contra cting with larg e chain pharma cies, and (3) su p plemental reimburse ments to some pharma cies. See 36 Tex. Reg

. 8669–70. Contrary to Americ an Pharmac ies’ asser tion, HHSC did not conclude th a t th e s e a lt e r

n a tives wer e illega l. Rather, it conclude d that (1) limit ations in SB 7 and Rider 81 to the Gene ral Appropria tions Act allowed the inclusion of mail-order presc riptions but prec luded HHSC from requiring rec ipients to use them, see 36 Tex. Reg

. 8669; Fisca l Note, Tex. S.B. 7, 82d L eg ., 1st C.S.; (2) selec tive contra cting could result in a gre ater adver se impact on small pharma cies; id. at 8670; and (3) requiring MCOs to pay providers a cer

tain am o u n t wo u ld conflict with the conce pt of a “risk contra ct,” and fede ral limit ations prec luded supplemental reimburse ments, id. ; 42 C.F.R. 438.60. Thus, the rec ord shows that HHSC considere d alterna tives that wer e leg al and potentially viable but that it conclude d there

wer e leg al and pr actica l barrie rs making them infea sible.

Fur ther, the alterna tive Americ an Pharmac ies proposes—including in Subchapter J

a provision requiring MCOs and PBMs to reimburse pharma cies usi n g rate s established under chapte r 32 of the Human Resource s Code and section 531.021(b) of the Gover nment Code—would
not opera te to achie ve the purposes of the rule, i.e., to implement the “ca rve in” of pharma cy benef its into the MMC model, as provided by SB 7, and there fore is not an alternative method of achie ving
t h e purpose of the rule withing the meaning of section 2006.002(c) (2). See Tex. Gov’t C o d e § 2006.002(c) (2). Any other alterna tive HHSC might h av e co n s i d ered that would fail to include pharma cy benef

its in its contrac ts with MC Os, including those sug g ested in the a ttorney g ener al’s g uidelines, would fail to comply with SB 7 and would likewise not constitute an alternative method

22of achie ving the purpose of the proposed rules. S ee id. ; see also Medica id Prog ram; Medica id Manag ed Care : New Provisions, 67 Fe d. Reg . 40,998.

Americ an Pharmac ies also complains that HHSC did not adopt “less onerous rules.” Howeve r, that i s n o t t h e standard of section 2006.002, which require s an ag ency to reduc e the adver se economic impact “if doing so is leg al and fea sible con s i d er i n g t he purpose of the statute under which the rule is to be adopted.” See Tex. Go v ’t C o d e § 2006.002(a)

. HHSC considere d alterna tives but conclude d that none wer e fea sible to achie ve the purpose of implementing MMC as to pharmac y

benef its. There fore , we conclude that the t rial court did not err in finding that Suehs substant i al l y co mplied with section 2006.002 and did not act ultra vires in failing to adopt an alterna tive method that would reduc e the economic impact on Americ an Pharmac ies. We overr ule Americ an Pharma cies’ f

ourth issue.

Justiciable In ter est I n its fifth issue, Americ an Pharmac ies arg ues that the trial court err ed in finding that it failed
to asser t a justiciable interest as to HHSC. Under the UDJA and APA, Am erican Pharmac ies 1 0 soug ht to have the rele vant statutory provisions construed and Subchapter J decla red void as in violation of Gover

nment Code section 2006.002. Whil e HHSC is a proper party t o an ac t i o n 1 1

Havin g resolved the issue of Americ an Pharmac ies’ ultra vires claims ag ainst Suehs in 1 0 issues one throug h four, we construe this issue to rela te to Americ an Pharmac ies’ claims for decla ratory relief ag ainst HHSC. The UDJA provide s that “[a] per son . . . whose rig hts, status, or other leg al rela tions a re 1 1 aff ecte d by a statute

. . . may have deter mined any question of construction or validity arising under the

. . . statute

. . . and obtain a decla ration of rig hts, status or other leg al rela tions there under.” Tex. C i v . P ra c. & Rem. Code § 37.004(a)

. Section 2001.038 of the APA provides for a decla ratory judgme nt action to deter

mine the “va lidity

or applica

bility of a r ule . . . if it is a lleg ed that the r ule 23construing and challeng ing the validity of statutes it enfor ces or its rules, see Tex. Civ. Prac. & Rem.

Code § 37.006(b); Tex. Gov’t Code § 2001.038(c) ; Heinrich , 284 S.W .3d at 373 n.6, there must be

a justiciable controve rsy as to the rig hts and status of the parties that wi l l be resolved by the decla ration soug ht. See Bonham State Bank v. Beadle , 907 S.W .2d 465, 467 (Tex. 1995); Texas Health Care Info. Council v. Seton Health Plan , 94 S.W .3d 841, 846 (Tex. App.—Austin 2002, pet. denied)

. A controve rsy is consid er ed justiciable if there is a rea l and substantial controve rsy involving a g enuine conflict of tang ible interest s an d n o t m ere ly a theore tical dispute. Beadle , 907 S.W .2d at 467; Texas He alth Care Info. Council , 94 S.W .3d at 846.

Americ an Pha

r ma c ie s c o n te n d s th a

t th e u n d is p ute d e c o n o mi c lo s s es its members have suffe red under MMC is sufficie nt to establish a justiciable interest and standing

. Howeve r, althoug h Americ an Pharmac ies has suffe red economic losses, they are the result of the leg islature’s decision to “ca rve” pharma cy

benef its into MMC—what Americ an P harma cies calls “the new unreg ulated reg ime”—not the result of Subchapter J , which was adopted to implement the leg islative action. As

we have alre ady deter

mined, Americ an Pharmac ies h as n o t s h o wn that Suehs acte d ultra vires in adopting rules to implement SB 7, and it has not ch al l en ged SB 7. There fore , we conclude that Americ an Pharma cies ha s failed to asser t tha t its rig hts, status, or other leg al rela tions are a ffe cted by the rules it se eks to ha ve decla red void a nd thus has not asserte d a justiciable intere st under the UDJA. See Tex. Ci v. Prac. & Rem. Code § 37.004(a)

.

Under the APA, Americ an Pharmac ies must alleg e that the challeng ed rules interfe re with or impair, or threa ten to interfe re with or impair, a rig ht or privileg e belong ing to it. See Tex.

or its threa tened application interfe res with or impairs, or threa tens to interfe re with or impair, a leg al rig ht or privileg e of the plaintiff.” Te x . Gov’t Code § 2001.038(a ). 24Gov’t Code § 2001.038(a)

. Americ an Pharmac ies contends that HHSC’s failure to reg ulate

pharma cy benef

its under MMC “ef

fec tively preve nts [i t] from participa ting in the fede ral Medica id prog ram a s provided for

by the statute” a

nd that the ec onomic harm it has suffe red under MMC is sufficie nt to establish a justiciable int er es t an d standing under section 2001.038. I n essenc e, Americ an Pharmac ies arg ues that the rig ht or privileg e that is impaired by the rules is i t s rig ht to participa te as a provider in the Medica id prog ram u n d er the Vendor Drug Prog ram or simil arly reg ulated reimburse ment rate s that will mitigate the losses it has sustained under MMC. We do not find this arg ument persua sive.

Nothing in Subchapter J preve nts Americ an Pharmac ies from p ar t i cipating in the Medica id prog ram. For the 20% of Me dicaid re cipients who ar e not enr olled in MMC and util ize the service s of Americ an Pharmac ies’ members, HHSC will continue to reimburse the members on

a fee -for -ser

vice basis under the Vendor Drug Prog ram, and Americ an Pharmac ies’ rig hts under the prog ram are not af

fec ted. For

the 80% of r ecipients who are now enrolled in MMC for pharmac y benef its pursuant to SB 7, reimburse ment rate s are deter mined by the contra cts betwee n the MCOs

or PBMs and the provider pharma cies. Americ an Pharmac ies has cited no authority , and we know of none, f or the proposition that it is entitled to be paid the s ame r ate unde r any MMC contracts it chooses to e nter into with MCOs a nd PBMs that it wa s paid by HHSC unde r fee -for -ser vice—a nd still is for 20% of the re ci p i en t s

— o r that it is entitled to be paid any minimum rate under those privately neg otiated contra cts. At most, Americ an Pharmac ies had an “expectation based upon the anticipated continuance ” of the prior law. See Butler W eldments Corp. v. L i b erty Mut. Ins. Co. , 3 S.W .3d 654, 659 (Tex. App.—Austin 1999, no pet.). Any rig ht or privileg e it may have had to be

25paid on a fee -for -ser vice basis exis ted solely by statute, an d that statutory rig ht was modified by SB 7. Although by their n at u re, the fee -for -ser vice and MMC models have differ ent rules for participa ting providers, Americ an Ph ar m ac i es maintains its rig ht or privileg e to participa te in the Medica id prog ram following the adoption of Subcha

pter J. Fur ther, to the extent the economic losses Americ an Pharmac ies has experience d can be said to interfe re with or impair its rig ht or privileg e to participa te in the Medica id prog ram, those losses, as previously discussed, have resulted from leg islative chang es to the structure of the Texas Medica id prog ram, not from the proper ly implemented rules eff ecting those cha ng es. Subchapte r J does not reg ulate the reimburse ment rate s paid to Americ an Pharmac ies under MMC; its contra cts with MCOs and P BMs do. I n short, Am er i ca n P h ar macies has not asser ted any rig ht or privil eg e aff ecte d by the rules it challeng es. See Tex. Gov’t Code § 2001.038(a) ; Texas Dep’ t of Pub. Safety

v. Salazar , 304 S.W .3d 896, 907 (Tex. App.—Austin 2009, no pet.) (plaintiff whose cre dentials met require ments of rules for issuance of non-citizen driver’ s license but was denied license for unknown

rea sons did not show that rules interfe red with or impaired privileg e of obtaining driver’ s license) ; cf. State Bd. of Ins. v. Deffebac h , 631 S.W .2d 794, 797 (Tex. A pp.—Austin 1982, writ ref ’d n.r.e.) (insuranc e ag ent had standing to challeng e board rule, implemented in ab s ence of underlying statutory chang e, that place ceilin g o n insurance rate and lowere d ag ent’s commission). We there fore conclude that the trial court did not err in finding that Americ an Pharmac ies failed to alleg e or prove a justiciable intere st, and we ove rrule A merica n Pharmac ies’ fifth issue. 1 2

I n its six th issue, Americ an Pharmac ies arg ues that its pleading s wer e sufficie nt to asser t 1 2 a justiciable in t er es t and Suehs’s ultra vires actions. We find this issue duplicative of issues one throug h five a

nd do not rea ch it. See Tex. R. App. P . 47.1. 26CONCLUSION Having overr

uled Americ an Pharmac ies’ issues, we aff irm the trial court’s final judg ment.

_______________________________________ Melissa Goodwin, Jus tice Be fore Chief J ustice Jones, J ustices Goodwin and F ield Affir med Filed: Jul y

12, 2013

27