TPM Wins Ruling that Plaintiffs Have Stated a Claim that Due Process Requires Individualized Written Notice When Prescribed Drugs Denied Medicaid Coverage at Pharmacy

On March 26, 2017, the United States District Court for the District of Columbia issued a decision in N.B. v. District of Columbia in favor of plaintiffs represented by Terris, Pravlik & Millian, LLP, and the National Health Law Program.  Plaintiffs allege that the District of Columbia has systematically failed to provide Medicaid recipients with due process when a prescribed medication is denied Medicaid coverage at the pharmacy.  Defendants, the District of Columbia and the Department of Health Care Finance, had filed a renewed motion to dismiss on a second remand from the United States Court of Appeals for the District of Columbia Circuit (“the D.C. Circuit”).  The district court partially denied defendants’ renewed motion to dismiss, finding that plaintiffs have stated a claim that the District’s current system violates the Fifth Amendment’s Due Process Clause by not providing individualized written notice to Medicaid recipients.  

Plaintiffs filed their complaint on September 7, 2010.  On August 8, 2011, the district court granted defendants’ first motion to dismiss on the ground that plaintiffs lacked standing.  On June 8, 2012, the D.C. Circuit reversed the district court’s decision and remanded the case for further proceedings.  In March 2014, the district court granted defendants’ second motion to dismiss because, inter alia, it determined that the plaintiffs lacked a protected property interest (i.e., a legitimate claim of entitlement to the prescribed medication) and therefore had no protections under the Due Process Clause.

In July 2015, the D.C. Circuit reversed in part, holding that under the U.S. Constitution plaintiffs have a protected property interest in Medicaid coverage of any prescribed medication not completely excluded from coverage under Medicaid.  The D.C. Circuit cited the “mandatory, non-discretionary terms” used in the District’s Medicaid regulations (29 D.C.M.R. 2700, et seq.).  The D.C. Circuit remanded the case to the district court.

On March 23, 2016, defendants filed a third motion to dismiss, arguing, inter alia, that plaintiffs failed to state a Due Process Clause claim because the District’s current Medicaid pharmacy program provides sufficient notice to Medicaid recipients.  Defendants argued, inter alia, that Medicaid recipients who are denied prescription drug coverage could learn the reason for the denial by asking the pharmacist or calling District officials.  Plaintiffs contended that the system’s reliance on affirmative inquiry was inadequate to protect the due process rights of Medicaid recipients under the Constitution.

The district court agreed with the plaintiffs. The court found that requiring Medicaid recipients to ask the pharmacist or call District officials to learn the reason for the prescription denial “is constitutionally insufficient, and thus, the fact that a Medicaid plaintiff could conduct such an inquiry is irrelevant to the constitutional analysis” (emphasis in original).  The district court concluded that plaintiffs have stated a claim under the Due Process Clause of the Fifth Amendment and that the District’s current practice “simply cannot constitute adequate notice.  * * * [I have] concluded that defendants have failed to provide adequate initial written notice that reasonably apprises plaintiffs of the reasons for the prescription denial.”  The case now proceeds to discovery and a determination on class certification.

Click here for the decision.

TPM Wins Ruling in Federal Appeals Court that Denial of Plaintiffs’ Prescription Drug Benefits at Pharmacy Is a Deprivation of a Protected Property Interest that Triggers Due Process

On July 17, 2015, the United States Court of Appeals for the District of Columbia Circuit issued a decision in N.B. v. District of Columbia in favor of Plaintiffs represented by Terris, Pravlik & Millian, LLP and the National Health Law Program. Plaintiffs allege that the District of Columbia has systematically failed to provide Medicaid recipients with due process when prescription drug benefits are denied at the point-of-sale. The Court partially reversed and remanded a March 31, 2014, decision from the district court granting defendants’ motion to dismiss.

Amici curiae in support of reversal included the Legal Aid Society of the District of Columbia, New Haven Legal Assistance Association, American Association of Retired Persons (AARP), Bread for the City, Florida Legal Services, Legal Counsel for the Elderly, the National Senior Citizens Law Center, The Public Justice Center, The Tennessee Justice Center, and University Legal Services.

Plaintiffs filed their complaint on September 7, 2010. On August 8, 2011, the district court granted defendants’ first motion to dismiss on the ground that plaintiffs lacked standing. On June 8, 2012, the Court of Appeals for the District of Columbia Circuit reversed the district court’s decision and remanded the case for further proceedings. The Court of Appeal’s July 2015 decision, therefore, is the second reversal of the district court in this case. 

Plaintiffs contend that the existing point-of-sale prescription drug system violates Title XIX of the Social Security Act and its implementing regulations (“Title XIX”), the Due Process Clause of the Fifth Amendment, and D.C. law by failing to provide adequate and timely written notice of the basis for denial, the opportunity for a fair hearing, and the opportunity for reinstated coverage pending a hearing decision. Based on a computerized reply from an electronic claims system, a pharmacist will either fill a prescription or tell an individual that they will have to pay out-of-pocket to receive their prescribed medications. Many individuals, without the ability to pay for their prescription drugs on their own, leave the pharmacy without these medically necessary treatments. 

The district court granted defendants’ second motion to dismiss in March 2014, because, inter alia, it determined that many of the plaintiffs lacked a “legitimate claim of entitlement to the drugs” and had no protections under the Due Process Clause, nor were they “denied” a covered Medicaid benefit under Title XIX. The district court also held that in cases where there was a legitimate claim, plaintiffs failed to allege adequately that any “state action” caused the denials. The D.C.-law claims were dismissed by the district court for lack of pendant jurisdiction as no federal causes of action remained in the case.

The Court of Appeals for the District of Columbia Circuit, in its July 2015 decision, found that, inter alia, plaintiffs and all other D.C. Medicaid recipients have a “legitimate claim of entitlement” to the reimbursement of any prescription drug prescribed for a medical purpose and not completely excluded from coverage under Medicaid. The Court found that the District’s arguments “misapprehend[ ]” the meaning of a “legitimate claim of entitlement” by “incorrectly skip[ping] ahead to the plaintiff’s ultimate eligibility for a government benefit instead of asking whether she would be entitled to the benefit if she were to satisfy the preconditions to obtaining it.” Instead, the Court found a “ ‘legitimate claim of entitlement’ means that a person would be entitled to receive the government benefit assuming she satisfied the preconditions to obtaining it” (emphasis in original). 

The Court explained that plaintiffs and all other D.C. Medicaid recipients are entitled to receive prescription drug benefits upon satisfaction of all preconditions, because the language of the District’s Medicaid regulations (29 D.C.M.R. 2700, et seq.) provides for prescription drug coverage using “mandatory, non-discretionary terms.” The eligibility requirements place “substantive limitations on official discretion” to withhold a benefit upon satisfaction of the eligibility criteria.

In addition, the Court found that plaintiffs adequately alleged that the electronic claims system “determined their eligibility for benefits while acting as an agent of the District” and the Due Process Clause’s state action requirement was satisfied. However, the Court’s decision does affirm the district court’s dismissal of the Title XIX claims.

In conclusion, the Court found that plaintiffs’ constitutionally protected property interest triggers the District’s obligation to provide due process and that the case must be remanded for “further proceedings to determine what process is ‘due’ to the plaintiffs.” The Court also noted that on remand, the district court could reconsider its jurisdiction over the D.C.-law claims in light of its partial reversal.

Click here for the decision.