Court Opinion

ID: 616705
Source: CourtListenerOpinion
Date Created: 2011-11-03 22:57:10+00
Date Added: 2024-06-11T17:50:38.112854
License: Public Domain

NOT FOR PUBLICATION

                    UNITED STATES COURT OF APPEALS                           FILED
                           FOR THE NINTH CIRCUIT                              NOV 03 2011

                                                                          MOLLY C. DWYER, CLERK
                                                                           U.S. COURT OF APPEALS
AIDS HEALTHCARE                       )      No. 10-55633
FOUNDATION,                           )
                                      )      D.C. No. 2:09-cv-08199-R-PLA
      Plaintiff – Appellant,          )
                                      )      MEMORANDUM*
      v.                              )
                                      )
TOBY DOUGLAS,                         )
Director of the California Department )
of Health Care Services,              )
                                      )
      Defendant – Appellee.           )
                                      )
                                      )

                   Appeal from the United States District Court
                      for the Central District of California
                    Manuel L. Real, District Judge, Presiding

                     Argued and Submitted October 12, 2011
                              Pasadena, California

Before:      FERNANDEZ and CALLAHAN, Circuit Judges, and ERICKSON,**
             District Judge.

      *
       This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
      **
        The Honorable Ralph R. Erickson, Chief United States District Judge for
the District of North Dakota, sitting by designation.
      AIDS Healthcare Foundation (AHF), which is a so-called 340B1 entity (a

safety-net provider) appeals from the district court’s dismissal of its complaint2

with prejudice against The Director of the California Department of Healthcare

Services3 (hereafter the State). We affirm in part, reverse in part, and remand.

      (1)      AHF alleged equal protection claims in its first4 and second5 causes of

action. AHF asserts that the district court erred when it dismissed the causes of

action. We agree. We recognize that rational basis review applies to our

consideration of these constitutional claims.6 Courts are reluctant to overturn a

statute when that level of review applies,7 but, rather, presume that the statute is

      1
          See 42 U.S.C. § 256b.
      2
          Fed. R. Civ. P. 12(b)(6).
      3
       When this action commenced, David Maxell-Jolly was named, but he has
since ceased to be the director and Toby Douglas has taken his place. Pursuant to
Fed. R. Civ. P. 25(d), the latter was automatically substituted for the former.
      4
        This claim was pursuant to Cal. Const. art. I, § 7, but the parties agree that it
is coterminous with the second claim. See Children’s Hosp. & Med. Ctr. v.
Bonta5, 97 Cal. App. 4th 740, 769, 118 Cal. Rptr. 2d 629, 650 (2002).
      5
          U.S. Const. amend. XIV, § 1.
      6
       See Vacco v. Quill, 521 U.S. 793, 799, 117 S. Ct. 2293, 2297, 138 L. Ed. 2d
834 (1997).
      7
       See Gregory v. Ashcroft, 501 U.S. 452, 471, 111 S. Ct. 2395, 2406, 115
L. Ed. 2d 410 (1991).

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valid.8 Nevertheless, AHF has plausibly pled9 that the California statute in

question here10 violates its right to equal protection because the reimbursement

regime it imposes on AHF does not rationally distinguish between AHF and other

similarly situated providers of medications to patients who are covered by Medi-

Cal.11 Moreover, the State does not point us to, nor do we on this record intuit, a

rational basis for that distinction. We do not posit that no rational basis can be

found; we simply have not been made aware of one.12

      (2)    The district court also determined that in causes of action four and

      8
       See City of Cleburne v. Cleburne Living Ctr., 473 U.S. 432, 440, 105 S. Ct.
3249, 3254, 87 L. Ed. 2d 313 (1985); see also Heller v. Doe, 509 U.S. 312, 320,
113 S. Ct. 2637, 2643, 125 L. Ed. 2d 257 (1993).
      9
       See Ashcroft v. Iqbal, ___ U.S. ___, ___, 129 S. Ct. 1937, 1949, 173
L. Ed. 2d 868 (2009); Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S. Ct.
1955, 1974, 167 L. Ed. 2d 929 (2007).
      10
       Cal. Welf. & Inst. Code § 14105.46(b) (requires that safety net providers
“dispense only 340B drugs to Medi-Cal beneficiaries”).
      11
        For example, pharmacies that contract with a 340B entity to provide
medications are not covered. Nor, for that matter, are those that do not participate
in the 340B program.
      12
       See Lazy Y Ranch Ltd. v. Behrens, 546 F.3d 580, 591 (9th Cir. 2008); see
also Gerhart v. Lake Cnty., 637 F.3d 1013, 1023 & n.9 (9th Cir.), cert. denied, 80
U.S.L.W. 3059 (U.S. Oct. 3, 2011).

                                          3
eight AHF had not plausibly pled a claim based on its assertion that the statute13

was preempted14 by federal statutory law designed to preclude so-called double

discounts.15 We agree with that determination. Simply put, no real conflict is

spelled out. There is no actual conflict because the state and federal statutes can

both easily be complied with; the state statute surely does not present an obstacle to

the prevention of double discounts; and there is no indication that Congress

intended to occupy the whole field in this part of the cooperative16 Medicaid

program. AHF argues that the district court should have given it leave to amend,17

even though it did not request that relief.18 However, neither at the district court

nor here did AHF indicate how it could successfully amend,19 and we are satisfied

      13
           Cal. Welf. & Inst. Code § 14105.46.
      14
        See Hillsborough Cnty. v. Automated Med. Labs., Inc., 471 U.S. 707, 713,
105 S. Ct. 2371, 2375, 85 L. Ed. 2d 714 (1985); Chae v. SLM Corp., 593 F.3d 936,
941 (9th Cir.), cert. denied, ___ U.S. ___, 131 S. Ct. 458, 178 L. Ed. 2d 287
(2010).
      15
           See 42 U.S.C. § 256b(a)(5)(A) (prohibiting duplicate discounts or rebates).
      16
        See Or. Ass’n of Homes for Aging, Inc. v. Oregon, 5 F.3d 1239, 1241 (9th
Cir. 1993).
      17
           Eminence Capital, LLC v. Aspeon, Inc., 316 F.3d 1048, 1052–53 (9th Cir.
2003).
      18
           Doe v. United States, 58 F.3d 494, 497 (9th Cir. 1995).
      19
        Metzler Inv. GMBH v. Corinthian Colls., Inc., 540 F.3d 1049, 1072 (9th
Cir. 2008); Janas v. McCracken (In re Silicon Graphics Inc. Sec. Litig.), 183 F.3d
                                                                      (continued...)

                                            4
that amendment would be futile.20 Thus, this claim fails.

      (3)      AHF also asserts that the district court erred when it dismissed causes

of action three,21 five,22 and seven.23 We agree. The State seeks to support the

decision on the basis that § 14105.46 does not on its face make any change to the

rates or reimbursements to AHF and others. But that is an unduly crabbed view of

the matter. AHF has persuasively pled that the statute effectively does exactly that

by severely (if indirectly) reducing reimbursement rates to 340B providers. See

      19
        (...continued)
970, 991 (9th Cir. 1999), abrogation on other grounds recognized in Simmonds v.
Credit Suisse Sec. (USA) LLC (In re Section 16(b) Litig.), 638 F.3d 1072, 1097
(9th Cir. 2011).
      20
           Gompper v. VISX, Inc., 298 F.3d 893, 898 (9th Cir. 2002).
      21
        This is a claim that the rate reduction wrought by § 14105.46 is not
consistent with the requirements of 42 U.S.C. § 1396a(a)(30)(A).
      22
        This is a claim that the rate reduction wrought by § 14105.46 is not
consistent with the requirements of 42 C.F.R. § 447.204.
      23
         This is a claim that the State instituted a reimbursement reduction without
first obtaining a Department of Health and Human Services approval of that
amendment to California’s Medicaid plan. See 42 U.S.C. § 1396a(b); 42 C.F.R.
§§ 430.12, 430.15.

                                           5
Homes for Aging, 5 F.3d at 1241–42.

      AFFIRMED in part,24 REVERSED in part,25 and REMANDED.26

                Each party shall bear its own costs.

      24
           As to rulings regarding causes of action four and eight.
      25
           As to rulings regarding causes of action one, two, three, five, and seven.
      26
        The Supreme Court is now considering whether a private party may bring
an action under the Supremacy Clause, U.S. Const. art. VI, cl. 2, to enforce the
Medicare law. See Douglas v. Indep. Living Ctr., No. 09-958 (U.S. argued Oct.
10, 2011). Its decision might affect the ultimate resolution of this case.

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