Opinion ID: 6352525
Heading Depth: 3
Heading Rank: 1

Heading: Act 82 and Act 138

Text: Because the communications regarding these two healthcare-related laws were intertwined, we discuss them together. Act 82, signed into law on July 30, 2019, creates a new regulatory scheme and establishes an Office of the Regulatory Commissioner of Pharmacy Services and Benefit Managers within the Puerto Rico Department of Health to regulate Pharmacy Benefit Managers (PBMs) and Pharmacy Benefit Administrators (PBAs), entities that negotiate medication costs between pharmaceutical companies and third-party payers, including the Commonwealth. As the district court explained, Act 82 changes the arrangements between [these entities] and pharmacies to require that pharmacies be reimbursed for at least their cost of acquisition of medications. The Commonwealth asserts that this change is necessary to allow pharmacies to recover their actual drug acquisition costs, ensuring that they continue to acquire necessary medications for the people of Puerto Rico. Act 138, signed into law on August 1, 2019, amends the Insurance Code of Puerto Rico to (1) prohibit health care insurers from denying provider enrollment applications submitted by qualified health care professionals in Puerto Rico, and (2) prohibit Managed Care Organizations from unilaterally terminating or rescinding contracts with health care providers. The Commonwealth asserts that the law was enacted to discourage the - 10 - mass exodus of health professionals [from Puerto Rico] and increase the availability of health care services throughout the Island. The Commonwealth did not submit any section 204(a)- required materials on Act 82 within the statutory seven-day period. On September 12, 2019, more than a month after Act 138 was signed into law, the Commonwealth submitted to the Board a copy of the Act with a certificate reading as follows: Legislative Measure Number: • Act No. 138-2019 (Act 138), herein attached. Estimate of Impact of the Legislative Measure on Expenditures and Revenues: • Act 138 has no impact on expenditures or revenues. Determination of the Legislative Measure's Compliance with the Fiscal Plan: • Act 138 is not significantly inconsistent with the New Fiscal Plan for Puerto Rico. On November 15, 2019, the Board notified the Commonwealth by letter of several concerns it had regarding both Act 82 and Act 138: (1) it still had not received any materials regarding Act 82; (2) the copy of Act 138 and certificate had been submitted after the seven-business-day period mandated by statute; (3) the Commonwealth had failed to provide the required formal estimate for Act 138; and (4) both Acts may be preempted by federal law. The Board requested that the Commonwealth submit the missing materials, including, specifically, a formal estimate of the - 11 - impact each Act will have on expenditures and revenues, including the impact on the government's medical insurance plan ('Vital') and an analysis of [the Acts] in relation to the corresponding federal statutes to ascertain there are no conflicting provisions that may jeopardize the grant of federal funds to the [Department of Health]. The Board noted that it reserve[s] the right to take such actions as we consider necessary . . . including preventing the enforcement or application of the Acts if it ultimately determines the Commonwealth has failed to comply with our directive . . . or that [the] law[s] impair[] or defeat[] the purposes of PROMESA. On November 18, 2019, more than three months after it was due, the Commonwealth submitted the following certification for Act 82: Legislative Measure Number: • Act No. 82-2019 (Act 82), herein attached. Estimate of Impact of the Legislative Measure on Expenditures and Revenues: • Act 82 has an approximate impact of $475,131.47 in the Department of Health's budget. However, Act 82 will be implemented using budgeted resources. If reprogramming of budgeted resources is needed, the appropriate agency will submit to the [Board] a formal request. • Act 82 has no impact on revenues. Determination of the Legislative Measure's Compliance with the Fiscal Plan: - 12 - • Act 82 is not significantly inconsistent with the 2019 Fiscal Plan for Puerto Rico. A few days later, the Commonwealth responded to the Board's November 15 letter. The Commonwealth began by emphasizing its commitment to complying with section 204(a) of PROMESA, noting the then-Governor's recent Executive Order mandating compliance with that provision. However, the Commonwealth did not address the substance of the Board's concerns in its November 15 letter other than to vigorously contest the Board's ability to press the Commonwealth as to whether Acts 82 and 138 are preempted by federal law. In making its point that the consideration of possible federal preemption was outside the scope of the certification process, the Commonwealth insisted that Section 204(a)(3) only allows the Board to send notifications to the elected government under limited circumstances, specifically, if no certifications are sent or, if the Board understands an enacted law is significantly inconsistent with the certified fiscal plan. In a December 18 response letter, the Board reiterated its concern that the Commonwealth was not complying with the section 204(a) requirements by failing to submit all required materials and submitting some materials after the seven-businessday deadline. The Board further asserted that the impact estimate for Act 82 was not sufficiently formal and was not accurate because it provide[d] only an 'approximate impact' of the law on - 13 - the Department of Health's budget and was dramatically at odds with other authority on the subject; specifically, the Health Insurance Administration's recent testimony at [a] public hearing that [Act 82] would increase the Government's health plan budget by $27 million. Regarding the preemption issue, the Board insisted that requiring a preemption analysis was consistent with section 204(a) because if an enacted law negatively impacts the Commonwealth's budget because of conflicts with federal statutes, the law would not be consistent with the certified Fiscal Plan. In a subsequent letter, the Commonwealth continued to assert that it had complied with its obligations under section 204(a) because it had not received any notification [from the Board] that [the Acts] are significantly inconsistent with the Fiscal Plan. The Commonwealth also maintained that the Board had no authority to either determine that the Acts are preempted by federal law or require the Commonwealth to consider whether they are so preempted. Finally, the Commonwealth rejected the suggestion that Act 82's estimate was not accurate because it was dramatically at odds with the Health Insurance Administration's testimony at the public hearing. Rather, it asserted, any statement by an agency during the legislative process is subordinate to the determination of the appropriate government entities -- AAFAF, OMB, and Treasury -- in charge of issuing the [section 204(a)] certifications. - 14 - In a letter dated April 27, 2020, the Board stated that it had conducted its own analysis of the Acts because the Commonwealth had so far failed to confirm that its analysis took into account germane factors pertaining to [the Acts] and their impact on federal funding. Based on its own analysis, the Board posed a series of detailed questions regarding the financial assumptions on which the laws appear to be based. For example, for both Acts, the Board asked, How will the potential impact from increases in PMPM [Per Member Per Month] rates be mitigated to maintain compliance with the Certified Commonwealth Fiscal Plan?7 The Board requested that the Commonwealth address its specific questions as part of formal estimates to be submitted no later than May 8, 2020. The Board further noted that implementation of [the Acts] prior to satisfaction of the requirements of Section 204 would impair and defeat the purposes of PROMESA and warned that it could take further action, including seeking remedies for preventing the Acts from being implemented. The Commonwealth again responded that no revised certifications are necessary because, among other contentions, 7Generally, the PMPM rate is the predetermined amount that managed healthcare plans are paid . . . per member per month [to] manage and pay for all services included in the benefit package. Bellin v. Zucker, 6 F.4th 463, 468 n.2 (2d Cir. 2021)(quoting Antonia C. Novello, N.Y. State Dep't of Health, New York State Management Long-Term Care, Interim Report to the Governor and Legislature at 20 (May 2003)). - 15 - section 204(a) requires only a 'good faith' effort to determine the financial effects of a new law and the certifications include[d] all of the required elements under section 204(a)(2) and were provided in good faith. The Commonwealth also asserted, despite its mention in the certification of possible reprogramming, that because Act 82 would be implemented using budgeted resources, a formal request for reprogramming would not be required.