Court Opinion

ID: 8963611
Source: CourtListenerOpinion
Date Created: 2022-11-27 09:53:59.247583+00
Date Added: 2024-06-11T17:10:15.762277
License: Public Domain

OAKES, Circuit Judge
(dissenting):
I respectfully dissent.
The major point of contention here is the scope of the Stipulation. The State claims that it referred only to calculation of reimbursement using the estimated acquisition cost (“EAC”) methodology, so that it has no relevance to the “aggregate upper limits” (“AUL”) methodology contained in the new state regulations. The State also argues that it was required to adopt the AUL methodology by the new federal regulations, thereby triggering a provision in the consent order which [¶ 10] allows a “mandated” change. Judge Miner’s careful opinion takes a broader view of the consent decree, holding that these changes are not mandated by the new federal regulations and that the State has failed to maintain a Pharmacists Advisory Committee (“PAC”) as required by paragraph 6 of the consent decree.
*505The clear language of paragraph 6 of the consent order requires the Department of Social Services (“DSS”) to meet with the PAC at least quarterly to discuss “matters relating to the pharmaceutical industry,” not limited to the matters encompassed in the consent order. I agree that the State is in clear violation as to this requirement. However, I do not think that this failure necessarily dooms the new state regulation. If the new regulations were genuinely mandated by the federal authorities, the PAC’s failure to meet would be only incidental, though to the extent that we view the consent order as setting up a flexible mechanism by which drug prices will be set, it may be more significant. But the consent order does not give the PAC any veto power; to the extent it is more than advisory, its power comes only from its ability to enforce (or get the Pharmaceutical Society to enforce) the consent order. So had the PAC been in session, it still could not have halted the enactment of the regulation without a court action.
It is true, as Judge Miner’s opinion states, that the new federal regulations, as explained by HHS, were intended “only to set an upper limit on what the federal government would pay for pharmaceutical products while leaving to the states the opportunity to design a payment methodology that best suited their needs without federal intrusion.” HHS Opinion letter at 2-3. And the preamble to the federal regulations noted that one of the goals was to provide the states with “increased flexibility” in devising their own reimbursement methodology. As such, the new regulations do not expressly mandate a change in methodology. However, they may do so indirectly, by setting reimbursement amounts which are lower than those the State is required to pay pursuant to the consent order. There is conclusory support for this argument in the affidavit of Mary Alice Brankman, a DSS official, who states that the department calculated that it would not receive enough under the new federal regulation to meet its obligations under the terms of the consent order. However, I think we need more than this. A remand to take evidence on this point would, in my view, be appropriate. At that time the district court could also explore the “Physician’s Override” requirement discussed in the HHS Final Rule 147, 52 Fed.Reg. 28,652 (July 31, 1987), something which the parties so helpfully did not explore in their briefs.