Court Opinion

ID: 9898040
Source: CourtListenerOpinion
Date Created: 2023-11-14 19:28:01.419116+00
Date Added: 2024-06-11T09:16:09.333984
License: Public Domain

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          IN THE COURT OF APPEALS OF THE STATE OF WASHINGTON

           PRIME THERAPEUTICS LLC,
                                                            DIVISION ONE
                                Appellant,
                                                            No. 84030-4-I
                         v.
                                                            PUBLISHED OPINION
           WASHINGTON STATE OFFICE OF
           INSURANCE COMMISSIONER,

                                Respondent.

                DWYER, J. — Recognizing the economic challenges faced by retail

          pharmacies, particularly those in rural and underserved communities, our state

          legislature enacted legislation regulating the pharmacy benefit managers that

          contract with such pharmacies. In so doing, our legislature established

          regulatory oversight of pharmacy benefit manager reimbursement decisions and

          an appeals process whereby pharmacies can seek review of such decisions. In

          subsequent amendments to the legislation, our legislature broadened the

          categories of reimbursement decisions within the law’s regulatory reach.

                Here, Prime Therapeutics, a pharmacy benefit manager (PBM), appeals

          from eight final orders of the Office of the Insurance Commissioner (OIC), which

          concluded that the PBM failed to comply with regulatory requirements in

          reimbursing claims submitted by Cle Elem Pharmacy. Prime Therapeutics

          asserts on appeal, as it did during administrative proceedings, that the pertinent
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          No. 84030-4-I/2

          statute is inapplicable to those reimbursement claims. Because the PBM’s

          preferred interpretation of the statute contravenes both the administrative code

          and the statute’s plain language, this contention is unavailing. We additionally

          conclude that Prime Therapeutics’ assertion that the statute contravenes our

          state and federal contract clauses is without merit. Accordingly, we affirm the

          OIC’s final orders.

                                                           I

                                                           A

                  Prime Therapeutics is a PBM that acts as an intermediary between the

          pharmacies with which it contracts and pharmaceutical manufacturers to

          administer the prescription drug benefit portions of health care plans. See H.B.

          REP. ON ENGROSSED SUBSTITUTE S.B. 5857, at 2, 64th Leg., Reg. Sess. (Wash.

          2016). Cle Elem Pharmacy, a retail pharmacy with fewer than 15 retail outlets in

          Washington, contracts with Prime Therapeutics. According to Prime

          Therapeutics, the parties’ agreement provides that claims submitted by Cle Elem

          Pharmacy may be reimbursed pursuant to a maximum allowable cost (MAC) list

          or a reimbursement rate calculated from the Average Wholesale Price (AWP).1

          Pursuant to the contract, the “‘MAC’ means the list delineating the maximum per

          unit reimbursement as established and solely determined by Prime for a multiple

          source prescription drug . . . at the time a claim is processed.” The AWP is “the

                  1 Neither during administrative proceedings nor on appeal did Prime Therapeutics submit

          the portions of the parties’ contract setting forth the terms for reimbursement decisions. Instead,
          the PBM submitted only the definitions for MAC and AWP provided in the agreement.

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          average wholesale price of a Prescription Drug Service at the time a claim is

          processed as established in Prime’s price file for that date of service.”

                 From May 2019 through March 2020, Cle Elem Pharmacy filled 11

          prescriptions for the drug Levorphanol for the same patient. After confirming

          available prices with three national drug wholesalers, the pharmacy obtained the

          drug for the lowest of the three prices. Cle Elem Pharmacy then submitted the

          11 reimbursement claims to Prime Therapeutics.

                 After receiving the claims, Prime Therapeutics reimbursed Cle Elem

          Pharmacy significantly less for each claim than the amount that the pharmacy

          had paid to obtain the drugs. The pharmacy filed appeals of the reimbursement

          decisions to the PBM, and Prime Therapeutics agreed to increase the

          reimbursement amount paid on two of the 11 claims. Those claims, the PBM

          explained, were paid from the “MAC list.” However, Prime Therapeutics asserted

          that the remaining nine claims were “not paid pursuant to the MAC list,” but

          instead “reimbursed pursuant to the parties’ contractual reimbursement rate,

          calculated based off of the agreed-upon AWP price.” Following a further appeal

          on one of the claims, the OIC ordered Prime Therapeutics to reimburse the

          pharmacy for the underpaid amount.

                 In June 2021, Cle Elem Pharmacy submitted to the OIC a small pharmacy

          benefits appeal, challenging Prime Therapeutics’ reimbursement of the remaining

          eight claims. Prime Therapeutics asserted that the statute governing

          reimbursement decisions and appeals resulting therefrom, former RCW

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          19.340.100 (2016)2, did not apply to Cle Elem Pharmacy’s claims. According to

          the PBM, this is so because it reimbursed those claims pursuant to the parties’

          contract, rather than pursuant to a “predetermined list price (also referred to as a

          MAC price).”

                 Administrative law judges (ALJs) with the Office of Administrative

          Hearings thereafter held adjudicative proceedings to determine whether the

          pertinent statute applied to Cle Elem Pharmacy’s eight remaining claims. The

          ALJs issued eight initial orders concluding that the pharmacy, pursuant to former

          RCW 19.340.100, was entitled to reimbursement from Prime Therapeutics for the

          full amount of each claim. The initial orders also imposed on Prime Therapeutics

          a civil penalty of $1,000 for each claim, as authorized by former chapter 19.340

          RCW.

                 Prime Therapeutics filed a petition for review of each of the eight initial

          orders. In August 2021, the OIC’s reviewing officer issued eight final orders

          affirming the initial orders. In each final order, the reviewing officer concluded

          that, pursuant to former chapter 19.340 RCW, Cle Elem Pharmacy is entitled to

          reimbursement for the full amount of each of the eight claims. The reviewing

          officer additionally upheld the civil penalty of $1,000 imposed in each of the initial

          orders.

                 Prime Therapeutics filed a petition for review of the agency’s final orders

          in the superior court. The appeal was ultimately transferred to this court for direct

          review.

                 2 Former RCW 19.340.100 (2016) has been recodified as RCW 48.200.280.

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                                                   B

                The history of our state legislature’s efforts to regulate PBMs informs our

          understanding of the issues in this case. Both the impetus for this legislation and

          our legislature’s later amendments to expand its regulatory scope illuminate the

          circumstances our legislature sought to address.

                In 2014, our legislature sought for the first time to regulate PBMs by

          setting reimbursement standards and providing an appeals process for

          pharmacies to challenge PBM reimbursement decisions. S.B. REP. ON

          ENGROSSED SUBSTITUTE S.B. 6137, 63d Leg., Reg. Sess. (Wash. 2014); H.B. REP.

          ON ENGROSSED SUBSTITUTE S.B. 6137, 63d Leg., Reg. Sess. (Wash. 2014).

          Public testimony evidenced the economic challenges faced by Washington

          pharmacies, especially those in rural and underserved communities, which were

          described as being in a “desperate state.” S.B. REP. ON ENGROSSED SUBSTITUTE

          S.B. 6137, at 3. See also H.B. REP. ON ENGROSSED SUBSTITUTE S.B. 6137, at 2-4.

          Testimony indicated that “[t]he growth of the [PBM] business has resulted in

          business practices . . . that have made it hard for pharmacies to stay in

          business.” H.B. REP. ON ENGROSSED SUBSTITUTE S.B. 6137, at 4. Pharmacists

          reported taking “huge financial losses on some drugs” because “they are

          consistently reimbursed less [than] they paid for the drugs.” S.B. REP. ON

          ENGROSSED SUBSTITUTE S.B. 6137, at 3.

                In response to such testimony, our legislature enacted a bill restricting

          PBMs to setting a “maximum allowable cost” only for drugs falling within certain

          categories. The legislation additionally required PBMs to establish a process

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          whereby pharmacies could appeal PBM reimbursement decisions for such drugs.

          ENGROSSED SUBSTITUTE S.B. 6137, § 10(2)(a), (3), 63d Leg., Reg. Sess. (Wash.

          2014). The 2014 legislation defined “maximum allowable cost” as “the maximum

          amount that a [PBM] will reimburse a pharmacy for the cost of a drug.”

          ENGROSSED SUBSTITUTE S.B. 6137, § 10(1)(b). It provided that a pharmacy “may

          appeal [to the PBM] a maximum allowable cost if the reimbursement for the drug

          is less than the net amount that the . . . pharmacy paid to the supplier of the

          drug.” ENGROSSED SUBSTITUTE S.B. 6137, § 10(3). Thus, pursuant to the 2014

          legislation, when a PBM reimbursed a pharmacy for the cost of a drug for which

          the PBM had set a “maximum allowable cost,” the pharmacy could appeal from

          that decision through an internal appeals process. ENGROSSED SUBSTITUTE S.B.

          6137, § 10(1)(a), (3). The legislation required that, if the PBM denied the

          pharmacy’s appeal, the PBM was required to provide the reason for the denial

          and demonstrate that the pharmacy could obtain the drug “at a price that is equal

          to or less than the maximum allowable cost” set by the PBM. ENGROSSED

          SUBSTITUTE S.B. 6137, § 10(4)(c).

                 Our legislature again addressed the issue of PBM reimbursement

          practices in its 2016 legislative session. Testimony indicated that pharmacies

          continued to be reimbursed by PBMs in amounts substantially less than the

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          purchasing costs for many prescription drugs.3 S.B. REP. ON FIFTH ENGROSSED

          SUBSTITUTE S.B. 5857, at 3, 64th Leg., Reg. Sess. (Wash. 2016); H.B REP. ON

          FIFTH ENGROSSED SUBSTITUTE S.B. 5857, at 5, 64th Leg., Reg. Sess. (Wash.

          2016). Testimony noted “tremendous losses,” particularly for small pharmacies,

          which are “often the only pharmacies available for miles.” H.B. REP. ON FIFTH

          ENGROSSED SUBSTITUTE S.B. 5857, at 5. Our legislature thus adopted

          amendments and additions to the prior law that (1) provide enforcement authority

          to the OIC, (2) expand the PBM reimbursement decisions that are subject to

          regulation, and (3) when certain conditions are met, require PBMs to uphold

          reimbursement appeals of pharmacies with fewer than 15 retail outlets in the

          state. FIFTH ENGROSSED SUBSTITUTE S.B. 5857, § 4(1)(a), (3), (6), 64th Leg., Reg.

          Sess. (Wash. 2016).

                  Pertinent here, the 2016 legislation expanded the categories of PBM

          reimbursement decisions from which a contracting pharmacy may appeal. The

          legislation adopted in 2014 required a PBM to provide an appeals process for

          reimbursement decisions applicable to drugs for which the PBM had set a

          “maximum allowable cost.” ENGROSSED SUBSTITUTE S.B. 6137, § 10(3)

          (emphasis added). In contrast, the current law, adopted in 2016, provides that a

          pharmacy “may appeal its reimbursement for a drug subject to predetermined

                  3 A summary of public testimony on the proposed legislation states:

                 Despite the [2014] law, [pharmacies] continue to be paid below costs for the
                 product and we cannot sustain the business this way. The [PBMs] are not
                 following the law with the appeals process or listing of market prices. They
                 continue to deny requests for reimbursement of the cost of the drugs. The PBMs
                 are not updating the costs of the drugs to reflect the market prices [pharmacies]
                 must pay.
          S.B. REP. ON FIFTH ENGROSSED SUBSTITUTE S.B. 5857, at 3.

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          reimbursement costs for multisource generic drugs.” FIFTH ENGROSSED

          SUBSTITUTE S.B. 5857, § 4(3) (emphasis added). In elsewhere setting forth which

          drugs a PBM may place on a cost-limiting “list,” the 2016 legislation provides that

          a “list” is “the list of drugs for which predetermined reimbursement costs have

          been established, such as a maximum allowable cost or maximum allowable cost

          list or any other benchmark prices utilized by the [PBM].” FIFTH ENGROSSED

          SUBSTITUTE S.B. 5857, § 4(1)(a) (emphasis added).4

                 Thus, in 2016, our legislature expanded the scope of regulation of PBMs’

          reimbursements to contracting pharmacies, particularly those pharmacies in rural

          and underserved communities, which sustain more significant economic loss due

          to under-reimbursement. Our legislature did so by broadening the categories of

          PBM reimbursement decisions encompassed within the law. Whereas only

          reimbursement for drugs subject to a “maximum allowable cost” were previously

          regulated, ENGROSSED SUBSTITUTE S.B. 6137, § 10(3), current law regulates

          reimbursement for all drugs subject to “predetermined reimbursement costs.”

          FIFTH ENGROSSED SUBSTITUTE S.B. 5857, § 4(1)(a). This includes drugs subject

          to a “maximum allowable cost or maximum allowable cost list or any other

          benchmark prices utilized by the [PBM].” FIFTH ENGROSSED SUBSTITUTE S.B.

          5857, § 4(1)(a) (emphasis added).

                 Prime Therapeutics asserts that the reimbursement decisions at issue

          here are not encompassed within the scope of this expanded regulation.

                    4 In contrast, the 2014 legislation, which provided an appeals process only for

          reimbursement decisions for drugs for which a “maximum allowable cost” had been set, defined
          “list” as only “the list of drugs for which maximum allowable costs have been established.”
          ENGROSSED SUBSTITUTE S.B. 6137, § 10(1)(a), (2)(a).

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                                                    II

                 Prime Therapeutics first contends that former RCW 19.340.100 does not

          apply to the eight reimbursement decisions from which Cle Elem Pharmacy

          appealed. This is so, according to the PBM, because it reimbursed the

          pharmacy according to a contractually-agreed upon rate calculated based on the

          AWP, and, thus, there is no list “for which predetermined reimbursement costs

          have been established.” We disagree. The administrative code definition of

          “predetermined reimbursement cost” applies to the challenged reimbursement

          decisions, and the plain language of the pertinent statute demonstrates a clear

          intent to encompass those decisions within the legislation’s regulatory reach.

          Prime Therapeutics’ assertions to the contrary are without merit.

                                                    A

                                                    1

                 Judicial review of a final administrative decision is governed by the

          Washington Administrative Procedure Act (WAPA), chapter 34.05 RCW.

          Chandler v. Office of Ins. Comm’r, 141 Wn. App. 639, 647, 173 P.3d 275 (2007).

          “Reviewing courts may grant relief only if the party challenging the agency order

          shows that the order is invalid for one of the reasons set forth in RCW

          34.05.570(3).” Chandler, 141 Wn. App. at 647. As relevant here, we may grant

          relief due to a “violation of constitutional provisions” or when “[t]he agency has

          erroneously interpreted or applied the law.” RCW 34.05.570(3)(a), (d).

                 We review de novo “an agency’s interpretation or application of the law.”

          Chi. Title Ins. Co. v. Off. of Ins. Comm’r, 178 Wn.2d 120, 133, 309 P.3d 372

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          (2013). Additionally, we “interpret agency regulations as if they were statutes.”

          Shimmick Constr. Co. v. Dep’t of Lab. & Indus., 12 Wn. App. 2d 770, 778, 460

          P.3d 192 (2020). Pursuant to the WAPA, “[t]he error of law standard ‘allows the

          reviewing court to essentially substitute its judgment for that of the administrative

          body, though substantial weight is accorded the agency’s view of the law.’”

          Premera v. Kreidler, 133 Wn. App. 23, 31, 131 P.3d 930 (2006) (quoting Franklin

          County Sheriff’s Office v. Sellers, 97 Wn.2d 317, 325, 646 P.2d 113 (1982)). In

          other words, although we “‘accord[] deference to an agency interpretation of the

          law where the agency has specialized expertise in dealing with such issues,’” we

          are “‘not bound by an agency’s interpretation of a statute.’” Chi. Title Ins. Co.,

          178 Wn.2d at 133 (quoting City of Redmond v. Cent. Puget Sound Growth Mgmt.

          Hearings Bd., 136 Wn.2d 38, 46, 959 P.2d 1091 (1998)).

                                                           2

                  Washington state law regulates PBM reimbursement decisions and

          establishes a process whereby pharmacies may appeal from such decisions. To

          this end, former RCW 19.340.100 restricts which drugs a PBM may place on a

          “list” of drugs and the PBM’s obligations in maintaining and providing

          transparency of that “list.”5 A “list” is defined as

                  the list of drugs for which predetermined reimbursement costs have
                  been established, such as a maximum allowable cost or maximum
                  allowable cost list or any other benchmark prices utilized by the

                  5 For instance, a PBM “[m]ay not place a drug on a list unless there are at least two

          therapeutically equivalent multiple source drugs, or at least one generic drug available from only
          one manufacturer, generally available for purchase by network pharmacies from national or
          regional wholesalers.” Former RCW 19.340.100(2)(a). The PBM must also ensure that all drugs
          on a list are “readily available for purchase” by Washington pharmacies and “are not obsolete.”
          Former RCW 19.340.100(2)(b), (c). The PBM must provide for transparency regarding the list to
          contracting pharmacies and regularly update any list, including “all changes in the price of drugs.”
          Former RCW 19.340.100(2)(d)-(f).

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                  [PBM] and must include the basis of the methodology and sources
                  utilized to determine multisource generic drug reimbursement
                  amounts.

          Former RCW 19.340.100(1)(a) (emphasis added).

                  Pursuant to authority granted by the statute, the OIC has adopted a rule

          defining “predetermined reimbursement cost.” See RCW 48.200.900 (“The

          insurance commissioner may adopt any rules necessary to implement this act.”).

          Thus, consistent with the statute, the administrative code provides:

          “‘Predetermined reimbursement cost’ means maximum allowable cost, maximum

          allowable cost list, or any other benchmark price utilized by the [PBM], including

          the basis of the methodology and sources utilized to determine multisource

          generic drug reimbursement amounts.” WAC 284-180-130(17).

                  In addition to restricting the drugs for which a PBM may set predetermined

          reimbursement costs, the statute requires that a PBM establish a process by

          which a pharmacy “may appeal [the PBM’s] reimbursement for a drug subject to

          predetermined reimbursement costs for multisource generic drugs.”6 Former

          RCW 19.340.100(3). A pharmacy “may appeal a predetermined reimbursement

          cost for a multisource generic drug if the reimbursement for the drug is less than

          the net amount” that the pharmacy paid to the drug supplier. Former RCW

          19.340.100(3). If a pharmacy with fewer than 15 retail outlets in Washington can

          demonstrate that it is unable to purchase a therapeutically equivalent

                   6 “‘Multisource generic drug’ means any covered outpatient prescription drug for which

          there is at least one other drug product that is rated as therapeutically equivalent under the
          [pertinent FDA publication]; is pharmaceutically equivalent or bioequivalent, as determined by the
          [FDA]; and is sold or marketed in the state during the period.” Former RCW 19.340.100(1)(c).
          Prime Therapeutics does not dispute that Levorphanol, the drug at issue here, is a “multisource
          generic drug.”

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          interchangeable product from a supplier doing business in Washington at the

          PBM’s list price, then the PBM “shall uphold the appeal of [the] pharmacy.”

          Former RCW 19.340.100(3); see also WAC 284-180-505(4). In other words, the

          PBM must reimburse small pharmacies, as defined by the statute, at the price

          paid by such pharmacies for those drugs if the pharmacy demonstrates that it

          could not find the drugs at a lower price than it ultimately paid.

                 However, if the PBM does not uphold the pharmacy’s appeal in this “first

          tier appeal,” see WAC 284-180-505, the PBM must provide a reason for the

          denial and the “national drug code of a drug that has been purchased [by other

          Washington pharmacies] at a price that is equal to or less than the

          predetermined reimbursement cost for [that drug].” Former RCW

          19.340.100(4)(b); see also WAC 284-180-505(5). In short, for a drug subject to

          “predetermined reimbursement costs,” the PBM must show that the pharmacy

          could have obtained the drug at a lower price in order to deny the reimbursement

          appeal. If a pharmacy’s appeal to the PBM is denied, the pharmacy “may

          dispute the decision and request review by the commissioner” within 30 days.

          Former RCW 19.340.100(6).

                                                    B

                 Here, in each of the eight final orders, the OIC reviewing officer found that

          Cle Elem Pharmacy had shown that it was unable to purchase a drug

          therapeutically equivalent to Levorphanol at Prime Therapeutics’ list price. The

          reviewing officer further found that, in responding to the pharmacy’s appeal of its

          reimbursement decisions, “Prime Therapeutics did not produce a name of a drug

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          wholesaler in Washington where [the pharmacy] could acquire the drug or its

          therapeutic equivalent at the price [the PBM] reimbursed.” Instead, Prime

          Therapeutics denied the appeal “because the claim was reimbursed according to

          the [parties’] contract.”

                 Indeed, Prime Therapeutics asserted, as it does here, that it “reimbursed

          these claims according to the contract, not according to a predetermined list

          price,” which the PBM defined as “a MAC price.” However, the reviewing officer

          concluded that Prime Therapeutics

                 denied the appeal based on the belief that because it did not
                 reimburse the pharmacy using the maximum allowable cost (MAC)
                 list, the claim was not appealable under RCW 19.340. However,
                 this is not a lawful basis for denial under RCW 19.340, as the
                 definition of “list” specifically references “any other benchmark
                 prices utilized by the [PBM] . . .” in addition to the maximum
                 allowable cost list or maximum allowable cost.

          “[B]ecause the definition of ‘list’ contemplates other benchmarks used instead of

          the MAC list,” the reviewing officer concluded, “the fact that the AWP less 30

          percent was the basis of the reimbursement is not a sufficient basis to deny the

          appeal under RCW 19.340.100.”

                                                  1

                 On appeal, Prime Therapeutics contends that the challenged

          reimbursements do not constitute “predetermined reimbursement costs” pursuant

          to former RCW 19.340.100 and, thus, that the statute is inapplicable to those

          reimbursements. The PBM asserts that, pursuant to the parties’ contract, claims

          can be reimbursed based either on a MAC list or a reimbursement rate

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          No. 84030-4-I/14

          calculated from the AWP.7 According to Prime Therapeutics, reimbursement

          rates calculated from the AWP are not “predetermined” because the AWP is

          subject to change at the behest of drug manufacturers, and such changes are

          outside of the PBM’s control. We disagree. Although the AWP itself is subject to

          change, the formula from which reimbursement rates are calculated is itself

          predetermined. Pursuant to both the administrative code provision defining

          “predetermined reimbursement cost” and the plain language of former RCW

          19.340.100, Cle Elem Pharmacy is entitled to full reimbursement of the eight

          claims at issue here.

                 “The goal of statutory interpretation is to discern and carry out legislative

          intent.” Bennett v. Seattle Mental Health, 166 Wn. App. 477, 483, 269 P.3d 1079

          (2012). We consider the context of the entire statute is effectuating such intent.

          Cannabis Action Coal. v. City of Kent, 180 Wn. App. 455, 469, 322 P.3d 1246

          (2014), aff’d, 183 Wn.2d 219, 351 P.3d 151 (2015). When a statute’s meaning

          “is plain on its face,” we “must give effect to that plain meaning as an expression

          of legislative intent.” Dep’t of Ecology v. Campbell & Gwinn, LLC, 146 Wn.2d 1,

          9-10, 43 P.3d 4 (2002). “We discern a statute’s plain language by considering

          the text itself, amendments to the statute, and related statutory provisions.”

          Columbia Riverkeeper v. Port of Vancouver USA, 188 Wn.2d 421, 437, 395 P.3d

          1031 (2017). Moreover, the “‘[r]ules of statutory construction apply to

          administrative rules and regulations, particularly where . . . they are adopted

                 7 Although Prime Therapeutics did not provide the relevant terms of the contract, the

          record indicates that the PBM reimbursed Cle Elem Pharmacy for the eight claims at issue in an
          amount calculated from the formula “AWP – 30%.”

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          pursuant to express legislative authority.’” City of Kent v. Beigh, 145 Wn.2d 33,

          45, 32 P.3d 258 (2001) (alterations in original) (quoting State v. Burke, 92 Wn.2d

          474, 478, 598 P.2d 395 (1979)).

                 Here, both the administrative code and the pertinent statute contravene

          Prime Therapeutics’ preferred interpretation of “predetermined reimbursement

          cost.” First, the relevant code provision explicitly defines “any other benchmark

          price utilized by the [PBM]” as a “predetermined reimbursement cost.” It

          provides: “‘Predetermined reimbursement cost’ means maximum allowable cost,

          maximum allowable cost list, or any other benchmark price utilized by the

          pharmacy benefit manager.” WAC 284-180-130(17) (emphasis added). To

          “mean” is “to serve or intend to convey, show, or indicate” or to “signify, denote,

          [or] express.” WEBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1398 (2002).

          Accordingly, the plain language of WAC 284-180-130(17) provides that “any

          other benchmark price” is necessarily a “predetermined reimbursement cost.”

                 Prime Therapeutics’ preferred interpretation of former RCW 19.340.100

          conflicts with the code provision defining “predetermined reimbursement cost.”

          The PBM asserts that, in order to be subject to former RCW 19.340.100, a

          reimbursement must qualify as both a “benchmark price” and a “predetermined

          reimbursement cost.”8 In other words, the PBM contends not all “benchmark

          price[s]” constitute “predetermined reimbursement cost[s].” Prime Therapeutics’

          interpretation requires that benchmark prices are simply a subset of

                 8 Prime Therapeutics does not dispute that reimbursement rates calculated from the

          AWP constitute “benchmark price[s].” Rather, the PBM asserts simply that, even as “benchmark
          price[s],” they are not “predetermined reimbursement cost[s].”

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          predetermined reimbursement costs, where some benchmark prices could

          nevertheless not qualify as predetermined reimbursement costs. The

          administrative code, however, indicates that the two are equivalencies—any

          benchmark prices also constitute predetermined reimbursement costs.

                   “We give great deference to [an agency’s] interpretation of its own

          properly promulgated regulations, ‘absent a compelling indication’ that the

          agency’s regulatory interpretation conflicts with legislative intent or is in excess of

          the agency’s authority.’” Litchfield v. KPMG, LLP, 170 Wn. App. 431, 441, 285

          P.3d 172 (2012) (internal quotation marks omitted) (quoting Silverstreak, Inc. v.

          Dep’t of Lab. & Indus., 159 Wn.2d 868, 884, 154 P.3d 891 (2007)). Here, our

          legislature expressly provided that the OIC “shall have enforcement authority

          over [former] chapter 19.340 RCW” and “may adopt rules to implement [that]

          chapter.” FIFTH ENGROSSED SUBSTITUTE S.B. 5857, § 5(2), (3). Prime

          Therapeutics’ preferred interpretation of the pertinent statute contravenes the

          definition of “predetermined reimbursement cost” properly adopted by the OIC.

          Absent an indication that the administrative code provision conflicts with our

          legislature’s intent in enacting that statute, we defer to the OIC’s determination

          that benchmark prices necessarily constitute predetermined reimbursement

          costs.

                   Thus, we next consider the plain language of former RCW

          19.340.100(1)(a) to determine whether the OIC’s definition of “predetermined

          reimbursement cost” is consistent with legislative intent. The statute provides:

                   “List” means the list of drugs for which predetermined
                   reimbursement costs have been established, such as a maximum

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                 allowable cost or maximum allowable cost list or any other
                 benchmark prices utilized by the [PBM] and must include the basis
                 of the methodology and sources utilized to determine multisource
                 generic drug reimbursement amounts.

          Former RCW 19.340.100(1)(a) (emphasis added). “[P]redetermine[d]” means “to

          determine beforehand.” W EBSTER’S, supra, at 1786. “[S]uch” means “of a kind or

          character about to be indicated, suggested, or exemplified,” W EBSTER’S, supra, at

          2283, while “as” means “for instance” or “by way of example.” W EBSTER’S, supra,

          at 125. Thus, the statutory language “such as” indicates that the three categories

          following the term “predetermined reimbursements costs” are encompassed

          within that term. Consistent with the definition set forth in the administrative

          code, the pertinent statutory provision also indicates that “any other benchmark

          prices utilized by the [PBM]” constitute “predetermined reimbursement costs.”

                 Prime Therapeutics nevertheless asserts that reimbursement rates

          calculated from the AWP are not “predetermined” pursuant to the statute.

          According to the PBM, reimbursement rates calculated from the AWP are not

          determined beforehand because the AWP, which is set by drug manufacturers, is

          subject to change. “Predetermined” does not, however, mean “unchanging” or

          within the control of the PBM itself. Moreover, Prime Therapeutics disregards

          that the formula provided in the parties’ contract, which sets forth the method for

          determining reimbursement rates from the AWP, is itself predetermined.

          Although the input to the formula—the AWP—may fluctuate, the formula itself

          does not. The formula is thus a “benchmark” and is “predetermined.”

                 Additionally, our legislature’s amendment in 2016 of the definition of “list”

          demonstrates intent to expand the reimbursement decisions subject to the

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          statute’s regulatory reach. As discussed above, the 2014 legislation defined “list”

          as only “the list of drugs for which maximum allowable costs have been

          established.” ENGROSSED SUBSTITUTE S.B. 6137, § 10(1)(a), (2)(a). However, the

          amended version of the law, adopted in 2016, significantly expanded that

          definition to encompass additional categories of reimbursement decisions.

          Pursuant to the amended definition, a “list” is “the list of drugs for which

          predetermined reimbursement costs have been established, such as a maximum

          allowable cost or maximum allowable cost list or any other benchmark prices

          utilized by the [PBM].” FIFTH ENGROSSED SUBSTITUTE S.B. 5857, § 4(1)(a). We

          may consider amendments to statutory language in analyzing the plain language

          of a statute. Columbia Riverkeeper, 188 Wn.2d at 437. Here, those

          amendments, consistent with the text of the statute itself, indicate an intent to

          expand the reimbursement decisions subject to regulation to include those based

          on “any other benchmark prices utilized by the [PBM].”

                                                    2

                 Thus, the OIC’s definition of “predetermined reimbursement cost,” set forth

          in WAC 284-180-130(17), is consistent with the language employed by our

          legislature in former RCW 19.340.100. We nevertheless recognize that the

          administrative code definition can reasonably be read as more limiting than the

          statutory definition of “list” set forth above. Whereas the administrative code

          states that “‘[p]redetermined reimbursement cost’ means . . . any other

          benchmark price utilized by the [PBM],” WAC 284-180-130(17) (emphasis

          added), the statutory language could be read to encompass not only the three

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          No. 84030-4-I/19

          categories of “predetermined reimbursements costs” explicitly listed, see former

          RCW 19.340.100(1)(a), but also any other category of reimbursement decision

          subject to “predetermined reimbursement costs.” In other words, the language

          “such as” can be interpreted as including the listed categories without indicating

          that those categories are exclusive. Pursuant to such a reading, “[MAC] or

          [MAC] list or any other benchmark prices utilized by the [PBM]” qualify as

          “predetermined reimbursement costs,” but other categories of reimbursement

          decisions may also fall within the statute’s scope. Thus, the statute can

          reasonably be read to be more inclusive than the definition of “predetermined

          reimbursement cost” promulgated by the OIC.

                 However, any possible misstatement in the wording of the administrative

          code provision does not affect the propriety of our ruling here. As did the OIC’s

          reviewing officer, we address only whether the reimbursement decisions

          appealed from by Cle Elem Pharmacy are subject to “predetermined

          reimbursement costs.” Thus, we do not consider whether reimbursement

          decisions subject to a MAC, MAC list, or any other benchmark prices utilized by a

          PBM could also constitute “predetermined reimbursement costs” and, thus, be

          encompassed within the statute’s regulatory reach.

                 Here, whether we rely solely on the plain language of the statute or on the

          definition promulgated by the OIC, we arrive at the same conclusion—the

          reimbursement costs calculated by Prime Therapeutics on the basis of the AWP

          constitute both “benchmark prices” and “predetermined reimbursement costs.” It

          is for another day to consider whether a PBM’s reimbursement decision that

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          does not fall within the ambit of the three categories listed in former RCW

          19.340.100(1)(a) can nevertheless constitute “predetermined reimbursement

          costs” and be thereby subject to regulation.

                                                   3

                 The administrative code provision defining “predetermined reimbursement

          cost,” though perhaps less inclusive, is consistent with the statutory language

          setting forth the categories of reimbursement decisions subject to former chapter

          19.340 RCW. Prime Therapeutics’ interpretation of the statute, which severs the

          term “predetermined” from the term “any other benchmark prices,” is neither

          mandated by the words used nor consistent with our legislature’s purpose in

          enacting that legislation. Furthermore, the PBM’s preferred interpretation is

          inconsistent with our legislature’s intent to broaden the category of

          reimbursement decisions subject to regulation.

                 The eight final orders challenged by Prime Therapeutics, under the facts

          presented to the OIC, were properly decided whether we tether our review to the

          plain language of the statute or to the pertinent administrative code provision.

          We conclude, as did the OIC reviewing officer, that the challenged

          reimbursement decisions are subject to former RCW 19.340.100. We find no

          error in the reviewing officer’s conclusion that the reimbursement decisions at

          issue here fall within the language of “predetermined reimbursement costs” in the

          pertinent statute.

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                                                         III

                  Prime Therapeutics additionally contends that former RCW 19.340.100, as

          applied in the final orders, unconstitutionally impairs the terms of the parties’

          contract. Again, we disagree. Given the highly regulated nature of the

          pharmaceutical industry generally, and our state’s regulation of PBMs

          specifically, the challenged statute does not impair any reasonable contractual

          expectations. Moreover, even were that not so, the statute serves the legitimate

          public purpose of maintaining access to pharmacies in rural and underserved

          communities. Accordingly, the statute is constitutional.

                                                         A

                  Both our state and federal constitutions prohibit our state legislature from

          enacting laws that impair existing contractual obligations. U.S. CONST. art. I, § 10

          (“No State shall . . . pass any . . . law impairing the obligation of contracts.”);

          WASH. CONST. art. I, § 23 (“No . . . law impairing the obligations of contracts shall

          ever be passed.”). As has our Supreme Court, we “read our state contracts

          clause as coextensive with the federal constitution’s contracts clause when

          neither party has argued to the contrary.” Wash. Food Indus. Ass’n v. City of

          Seattle, No. 99771-3, slip op. at 34,

          http://www.courts.wa.gov/opinions/pdf/99771-3.pdf (Wash. Feb. 9, 2023) (lead

          opinion).9 The prohibition against impairment of contractual obligations,

          however, “‘is not an absolute one and is not to be read with literal exactness.’”

                  9 Although we cite here to the lead opinion, our Supreme Court was unanimous in its

          holding regarding the contract clause claim of error. Wash. Food Indus. Ass’n, No.99771-3, slip
          op. at 3 (lead opinion).

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          Tyrpak v. Daniels, 124 Wn.2d 146, 151, 874 P.2d 1374 (1994) (quoting Home

          Bldg. & Loan Ass’n v. Blaisdell, 290 U.S. 398, 428, 54 S. Ct. 231, 78 L. Ed. 413

          (1934)). Rather, it “must be accommodated to the inherent police power of the

          State ‘to safeguard the vital interests of its people.’” Energy Rsrvs. Grp., Inc. v.

          Kan. Power & Light Co., 459 U.S. 400, 410, 103 S. Ct. 697, 74 L. Ed. 2d 569

          (1983) (quoting Blaisdell, 290 U.S. at 434).

                  The “threshold inquiry” in determining whether legislation

          unconstitutionally impairs a contract is “‘whether the state law has, in fact,

          operated as a substantial impairment of a contractual relationship.’” Energy

          Rsrvs., 459 U.S. at 411 (quoting Allied Structural Steel Co. v. Spannaus, 438

          U.S. 234, 244, 98 S. Ct. 2716, 57 L. Ed. 2d 727 (1978)). “To determine whether

          there is a substantial impairment of a contractual relationship, we consider ‘the

          extent to which the law undermines the contractual bargain, interferes with a

          party’s reasonable expectations, and prevents the party from safeguarding or

          reinstating his rights.’” Gonzales v. Inslee, 21 Wn. App. 2d 110, 139, 504 P.3d

          890 (2022) (quoting Sveen v. Melin, ___ U.S. ___, 138 S. Ct. 1815, 1822, 201 L.

          Ed. 2d 180 (2018)). If the legislation constitutes a substantial impairment, “the

          inquiry turns to the means and ends of the legislation.” Sveen, 138 S. Ct. at

          1822.

                  Specifically, we ask whether the legislation “is drawn in an ‘appropriate’

          and ‘reasonable’ way to advance ‘a significant and legitimate public purpose.’”

          Sveen, 138 S. Ct. at 1822 (quoting Energy Rsrvs., 459 U.S. at 411-12).

          “[L]egislation does not unconstitutionally impair contractual obligations where the

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          legislation constitutes an exercise of the police power in advancing a legitimate

          public purpose.” Optimer Int’l, Inc. v. RP Bellevue, LLC, 151 Wn. App. 954, 966,

          214 P.3d 954 (2009). Such legislation “may advance a legitimate purpose by

          remedying a general social or economic problem, and [it] need not only be in

          response to an emergency.” Wash. Food Indus. Ass’n, No. 99771-3, slip op. at

          35-36 (lead opinion). Thus, even if legislation constitutes a substantial

          impairment of contractual obligations, we must uphold that legislation if its

          “adjustment of ‘the rights and responsibilities of contracting parties [is based]

          upon reasonable conditions and [is] of a character appropriate to the public

          purpose justifying [the legislation’s] adoption.’” Energy Rsrvs., 459 U.S. at 412

          (alterations in original) (quoting U.S. Trust Co. of N.Y. v. New Jersey, 431 U.S. 1,

          22, 97 S. Ct. 1505, 52 L. Ed. 92 (1977)).

                                                    B

                 Here, Prime Therapeutics asserts that former RCW 19.340.100, as

          applied in the OIC’s final orders, constitutes a substantial impairment of its

          contract with Cle Elem Pharmacy. According to Prime Therapeutics, this is so

          because the contract “sets forth how reimbursement rates will be calculated and

          the processes for any appeal of those rates.” Br. of Appellant at 23-24. We

          disagree.

                                                    1

                 First, Prime Therapeutics has not demonstrated that former RCW

          19.340.100 interferes with its reasonable contractual expectations. See Sch.

          Dists.’ All. for Adequate Funding of Special Educ. v. State of Washington, 170

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          Wn.2d 599, 605, 244 P.3d 1 (2010) (“In Washington, it is well established that

          statutes are presumed constitutional and that a statute’s challenger has a heavy

          burden to overcome that presumption; the challenger must prove that the statute

          is unconstitutional beyond a reasonable doubt.”). When an industry is heavily

          regulated, such “pervasive regulation” puts the parties on notice that the

          government might further intervene in contractual relationships. Gonzales, 21

          Wn. App. 2d at 140.

                 We find the decision of a federal court upholding similar state legislation

          against a contract clause challenge to be persuasive. See Pharm. Care Mgmt.

          Ass’n v. Rutledge, 240 F. Supp. 3d 951 (E.D. Ark. 2017), aff’d in part, rev’d in

          part and remanded on other grounds, 891 F.3d 1109 (8th Cir. 2018), rev’d and

          remanded on other grounds, ___ U.S. ___, 141 S. Ct. 474, 208 L. Ed. 2d 327

          (2020). There, in concluding that the pertinent legislation had not substantially

          impaired reasonable contractual expectations, the court reasoned that “PBMs

          cannot be surprised by legislative efforts to protect public health and welfare by

          protecting pharmacies.” Pharm. Care Mgmt. Ass’n, 240 F. Supp. 3d at 963. This

          is because “the pharmaceuticals industry is already highly regulated,” and the

          predecessor statute in Arkansas had already regulated PBMs within that state.

          Pharm. Care Mgmt. Ass’n, 240 F. Supp. 3d at 963. The court further reasoned

          that PBMs have “been on notice of the national controversy caused by MAC

          methodology because other jurisdictions have enacted similar laws regulating

          PBMs.” Pharm. Care Mgmt. Ass’n, 240 F. Supp. 3d at 963.

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                  The same is true here. Prime Therapeutics is undoubtedly aware of the

          highly regulated nature of the pharmaceutical industry in general, and of our

          state’s regulation of PBMs in particular. Multiple states had already enacted

          legislation regulating the relationship between PBMs and pharmacies when our

          state legislature, in 2014, first sought to address the economic challenges faced

          by Washington pharmacies due to PBM reimbursement practices. S.B. REP. ON

          ENGROSSED SUBSTITUTE S.B. 6137, at 1. PBMs were thus on notice of such

          regulation when our state legislature, two years later, expanded the scope of

          those reimbursement decisions subject to our state’s law. See FIFTH ENGROSSED

          SUBSTITUTE S.B. 5857. Because the challenged statute did not disrupt Prime

          Therapeutics’ reasonable contractual expectations, it did not substantially impair

          the parties’ contract.10 See Pharm. Care Mgmt. Ass’n, 240 F. Supp. 3d at 962.

                                                          2

                  Furthermore, even if the application of former RCW 19.340.100 in the final

          orders substantially impaired the parties’ contract, the statute is nevertheless

          constitutional because it serves a legitimate public purpose. “[L]egislation does

          not unconstitutionally impair contractual obligations where the legislation

                   10 Further complicating Prime Therapeutics’ assertion of substantial contractual

          impairment is the fact that the PBM has not provided the relevant portions of the contact that, it
          claims, have been substantially impaired by former RCW 19.340.100. Although the excerpts
          provided include the contractual definitions of “‘Average Wholesale Price’ or ‘AWP’” and
          “‘Maximum Allowable Cost’ or ‘MAC,’” the excerpts do not include the reimbursement terms
          purportedly impaired by the challenged legislation.
                   Without the specific contractual terms alleged to be impaired, we cannot assess to what
          extent the law may undermine the contractual bargain. Nw. Grocery Ass’n v. City of Seattle, 526
          F. Supp. 3d 884, 896 (W.D. Wash. 2021) (“[T]he court cannot properly assess whether the statute
          ‘substantially impairs’ Plaintiffs’ members’ contracts, as Plaintiffs have provided no specific
          allegations of contracts or contractual terms which the Ordinance might impair.”). However, even
          were we to hold that the contract has been substantially impaired, we would nevertheless uphold
          the statute’s constitutionality. As explained infra, the legislation advances a legitimate public
          purpose and is, therefore, constitutional.

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          constitutes an exercise of the police power in advancing a legitimate public

          purpose.” Optimer Int’l, Inc., 151 Wn. App. at 966. When the state is not a party

          to the contract alleged to have been impaired, we generally defer to “‘legislative

          judgment as to the necessity and reasonableness of a particular measure.’”

          Energy Rsrvs., 459 U.S. at 413 (quoting U.S. Trust Co. of N.Y., 431 U.S. at 22-

          23). “Moreover, ‘[i]n determining whether . . . particular legislation tends to

          promote the welfare of the people of the State of Washington, we must presume

          that if a conceivable set of facts exists to justify the legislation, then those facts

          do exist and the legislation was passed with reference to those facts.’” Optimer

          Int’l, Inc., 151 Wn. App. at 970 (first alteration in original) (quoting State ex rel.

          Faulk v. CGS Job Ctr., 117 Wn.2d 493, 504, 816 P.2d 725 (1991)).

                 Bill reports from the proposed 2014 and 2016 legislation evidence the

          financial distress facing Washington pharmacies due to PBM reimbursement

          practices. Public testimony showed that small pharmacies in rural and

          underserved communities were, in particular, finding it difficult to stay in

          business. Our legislature, in response, expanded the scope of the

          reimbursement requests that are subject to regulation and, in the 2016

          legislation, set forth specific provisions for the protection of small pharmacies in

          such communities. See former RCW 19.340.100(3).

                 Prime Therapeutics’ suggestion that the challenged legislation is simply

          intended to provide a benefit to pharmacies themselves is supported by neither

          the record nor legislative history. Moreover, the fact that legislation “may

          incidentally benefit pharmacies in the process of protecting the public’s ability to

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          access pharmacies does not render the law an insignificant or illegitimate use of

          the state’s police power.” Pharm. Care Mgmt. Ass’n, 240 F. Supp. 3d at 963.

          Because former RCW 19.340.100 serves a legitimate public purpose, the

          legislation is constitutional even were it to substantially impair Prime

          Therapeutics’ reasonable contractual expectations.

                 Affirmed.

          WE CONCUR:

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