ORAL ARGUMENT IS NOT YET SCHEDULED

No. 14-7054

UNITED STATES COURT OF APPEALS FOR THEDISTRICT OF COLUMBIA CIRCUIT

N.B., by her parent and next friend Michelle Peacock, et al.Plaintiffs-Appellants,

v.

DISTRICT OF COLUMBIA, et al.Defendants-Appellees.

On Appeal from the United States District Courtfor the District of Columbia

BRIEF OFTHE LEGAL AID SOCIETY OF THE DISTRICT OF COLUMBIA,

NEW HAVEN LEGAL ASSISTANCE ASSOCIATION,AARP, BREAD FOR THE CITY, FLORIDA LEGAL SERVICES,

LEGAL COUNSEL FOR THE ELDERLY, THE NATIONAL SENIORCITIZENS LAW CENTER, THE PUBLIC JUSTICE CENTER,

THE TENNESSEE JUSTICE CENTER, ANDUNIVERSITY LEGAL SERVICES AS AMICI CURIAE

IN SUPPORT OF REVERSAL

Sheldon V. Toubman John C. Keeney, Jr.New Haven Legal Assistance Jennifer Mezey

Association, Inc. Karen S. Smith426 State Street Legal Aid Society of theNew Haven, CT 06510 District of Columbia(203) 946-4811 1331 H St. NW, Suite 350Fax: (203) 498-9271 Washington, DC 20005

(202) 661-5966Fax: (202) 727-2132

Attorneys for Amici Curiae

i

CERTIFICATE AS TO PARTIES, RULINGS, AND RELATED CASES

Amici submit the following information in accordance with Circuit Rule

28(a)(1):

A. Parties and Amici. All parties, intervenors, and amici appearing before

the District Court and in this Court are listed in the Brief for Appellants, except

that the amici joining this brief are: the Legal Aid Society of the District of

Columbia, New Haven Legal Assistance Association, Inc., 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.

B. Rulings Under Review. References to the rulings at issue appear in the

Brief for Appellants.

C. Related Cases. This case was previously before this Court as Case No.

11-7084. On June 8, 2012, this Court issued a judgment and opinion, reported at

682 F.3d 77 (D.C. Cir. 2012). Amici are aware of no other related cases.

In Case No. 11-7084, the following organizations participated as amici

curiae in support of Appellants: the Legal Aid Society of the District of Columbia,

the National Senior Citizens Law Center, New Haven Legal Assistance

Association, Inc., the Public Justice Center, the Tennessee Justice Center, and

Florida Legal Services.

ii

CORPORATE DISCLOSURE STATEMENT

Pursuant to Federal Rule of Appellate Procedure 26.1 and Circuit Rule

26.1, counsel certifies that no signatory to this brief has a parent corporation and

that no publicly held corporation owns 10 percent or more of the stock of any of

the signatories.

iii

TABLE OF CONTENTS

Page

INTERESTS OF AMICI CURIAE .............................................................................1

SUMMARY OF ARGUMENT .................................................................................3

ARGUMENT .............................................................................................................5

I. THE MEDICAID STATUTE AND REGULATIONS REQUIRE THATNOTICE BE PROVIDED WHEN A STATE DENIES, TERMINATES,OR REDUCES PAYMENT FOR PRESCRIPTION DRUGS. ......................5

II. THE DISTRICT COURT’S HOLDING FRUSTRATES THEPURPOSE OF THE MEDICAID ACT BY DENYING PROCEDURALSAFEGUARDS NECESSARY TO ENSURE ACCESS TOESSENTIAL MEDICAL CARE INCLUDING PRESCRIPTIONDRUGS..........................................................................................................13

A. Medicaid Is an Important Source of Funding for PrescriptionDrugs for Low-Income, Vulnerable Individuals Who CannotOtherwise Obtain Such Medications...................................................14

B. Medicaid-Covered Drugs Are Subject to Many Restrictions thatIncrease the Likelihood of Payment Being Denied at thePharmacy. ............................................................................................17

C. Medicaid Beneficiaries Face Particular Difficulties UnderstandingUnexplained Denials of Coverage. .....................................................19

D. Research Documents the Harm to Beneficiaries When MedicaidDenies Without Notice Payment for Prescription Drugs Due toPrior Authorization Requirements. .....................................................22

CONCLUSION........................................................................................................27

APPENDIX

iv

TABLE OF AUTHORITIES

Page(s)CASES

Boatman v. Hammons,164 F.3d 286 (6th Cir. 1998) ................................................................................8

Dodson v. Parham,427 F. Supp. 97 (N.D. Ga. 1977)........................................................................19

*Easley v. Ark. Dep’t of Human Servs.,645 F. Supp. 1535 (E.D. Ark. 1986).............................................................11, 13

Edmonds v. Levine,417 F. Supp. 2d 1323 (S.D. Fla. 2006).................................................................9

Goldberg v. Kelly,397 U.S. 254 (1970)..............................................................................................3

Grier v. Goetz,402 F. Supp. 2d 876 (M.D. Tenn. 2005) ............................................................10

Haymons v. Williams,795 F. Supp. 1511 (M.D. Fla. 1992)...................................................................11

Hernandez v. Medows,209 F.R.D. 655 (S.D. Fla. 2002).........................................................................22

*Ladd v. Thomas,962 F. Supp. 284 (D. Conn. 1997)......................................................................10

Nat’l Fed’n of Indep. Bus. v. Sebelius,567 U.S. ___, 132 S. Ct. 2566 (2012).................................................................15

NB v. District of Columbia,No. 10-1511, 2014 WL 1285132 (D.D.C. Mar. 30, 2014)...................................4

NB ex rel. Peacock v. District of Columbia,682 F.3d 77 (D.C. Cir. 2012)................................................................................5

Pharm. Research & Mfrs. of Am. v. Meadows,304 F.3d 1197 (11th Cir. 2002) ........................................................................6, 7

v

Pharm. Research & Mfrs. of Am. v. Thompson,362 F.3d 817 (D.C. Cir. 2004)..............................................................................6

Pharm. Research & Mfrs. of Am. v. Walsh,538 U.S. 644 (2003)............................................................................................18

Schweiker v. Hogan,457 U.S. 569 (1982)............................................................................................14

STATUTES AND REGULATIONS

42 U.S.C. § 1395i-5(c)(2)(B).....................................................................................7

42 U.S.C. § 1396-1...................................................................................................13

42 U.S.C. § 1396a(a)(3) .............................................................................................3

42 U.S.C. § 1396a(a)(10)(A)(i)(VIII) ......................................................................15

42 U.S.C. § 1396a(a)(19).................................................................................. 14, 19

*42 U.S.C. § 1396d(a) ...........................................................................................4, 8

42 U.S.C. § 1396d(y)(1)(A).....................................................................................15

*42 U.S.C. § 1396r-8(d)(1)....................................................................................7, 9

42 U.S.C. § 1396r-8(d)(2)....................................................................................8, 11

42 U.S.C. § 1396r-8(d)(4)..........................................................................................7

*42 U.S.C. § 1396r-8(d)(5)..........................................................................6, 7, 9, 10

*42 U.S.C. § 1396r-8(k)(2)........................................................................................8

D.C. Code § 4-205.55 ................................................................................................4

Pub. L. No. 111-148, 124 Stat. 119 (2010)..............................................................15

42 C.F.R. § 431.200 ...................................................................................................3

*42 C.F.R. § 431.201 .........................................................................................4, 7, 8

42 C.F.R. § 431.205 ...................................................................................................3

vi

42 C.F.R. § 431.206 ...............................................................................................3, 7

42 C.F.R. § 440.225 ...................................................................................................8

42 C.F.R. § 440.230(d) ..............................................................................................9

OTHER AUTHORITIES

Barry D. Weiss et al., Illiteracy Among Medicaid Recipients and itsRelationship to Health Care Costs, 5 J. Health Care Poor Underserved100 (1994)...........................................................................................................21

Conn. Dep’t of Soc. Servs., Provider Bulletin, Pharmacy Guidelines forPrescribing and Dispensing Medication for HUSKY A, HUSKY B andSAGA Clients 3 (2008), available at https://www.ctdssmap.com/CTPortal/Information/Get%20Download%20File/tabid/44/Default.aspx?Filename=pb08_20.pdf&URI=Bulletins/pb08_20.pdf......................................................23

Ctrs. for Medicare & Medicaid Servs., Brief Summaries of Medicare &Medicaid as of November 1, 2013 (2013), available athttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/Downloads/MedicareMedicaidSummaries2013.pdf..............................................................15

Dana P. Goldman et al., Do Strict Formularies Replicate Failure forPatients with Schizophrenia?, 20 Am. J. Managed Care 219 (2014) ................25

Danielle Ofri, Adventures in ‘Prior Authorization’, N.Y. Times, Aug. 3,2014.....................................................................................................................18

District of Columbia Department of Health Care Finance, PharmacyPreferred Drug List (PDL) (effective July 1, 2014),https://dc.fhsc.com/downloads/providers/DCRx_PDL_listing.pdf (lastvisited Aug. 4, 2014)...........................................................................................17

*District of Columbia State Medicaid Plan, available athttp://dhcf.dc.gov/page/medicaid-state-plan. .................................8, 9, 12, 17, 24

Genevieve M. Kenney et al., Urban Inst. Health Policy Ctr., UninsuredAdults Eligible for Medicaid and Health Insurance Literacy 4 (2013),available at http://hrms.urban.org/briefs/medicaid_experience.pdf ..................20

vii

Gilbert Gonzales, State Health Access Data Assistance Ctr., State Estimatesof Limited English Proficiency by Health Insurance Status (2014)...................21

Hewlett Packard, Report to the Consumer Access Subcommittee of theConnecticut Medicaid Care Management Oversight Council (2010),available at http://ctlawhelp.org/files/pdf-files/HP-Denial-Report-MCMOC-Subcomm.pdf ...............................................................................23, 24

Jay M. Margolis et al., Effects of a Medicaid Prior Authorization Policy forPregabalin, 15 Am. J. Managed Care e95 (2009)..............................................26

Jerome Wilson et al., Medicaid Prescription Drug Access Restrictions:Exploring the Effect on Patient Persistence with HypertensionMedications, Am. J. Managed Care (Jan. 15, 2005),http://www.ajmc.com/publications/issue/2005/ 2005 -01-vol11-n1sp/jan05-1984psp027-sp03/1....................................................................18, 24

John A. Vernon et al., George Wash. Univ. Dep’t of Health Policy, LowHealth Literacy: Implications for National Health Policy (2007) ......................20

Joyce C. West et al., Medicaid Prescription Drug Policies and MedicationAccess and Continuity: Findings From Ten States, 60 Psychiatric Servs.601 (2009)...........................................................................................................25

Kaiser Comm’n on Medicaid and the Uninsured, Medicaid Enrollment:December 2013 Snapshot (2014), available athttp://kaiserfamilyfoundation.files.wordpress.com/2014/06/8050-08-medicaid-enrollment-snapshot_december-2013.pdf ..........................................16

Kaiser Family Found., Kaiser Slides, Medicaid Enrollees Are Sicker andMore Disabled than the Privately-Insured (2013), available athttp://kff.org/medicaid/slide/medicaid-enrollees-are-sicker-and-more-disabled-than-the-privately-insured/...................................................................17

Kaiser Family Found., State Health Facts, Medicaid Benefits: PrescriptionDrugs (2012), http://kff.org/medicaid/state-indicator/prescription-drugs/(last visited Aug. 4, 2014).....................................................................................8

Kaiser Family Found., State Health Facts, Status of State Action on theMedicaid Expansion Decision (2014), http://kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/ (last visited Aug. 4, 2014)....................................................................16

viii

Kaiser Family Found., State Health Facts, Total Medicaid and CHIPEnrollment, February – May 2014, http://kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/ (last visited Aug.4, 2014) ...............................................................................................................16

Kaiser Family Found., Where are States Today? Medicaid and CHIPEligibility Levels for Children and Non-Disabled Adults as of April 1,2014, available at http://kaiserfamilyfoundation.files.wordpress.com/2014/06/7993-05-where-are-states-today-fact-sheet-june-2014.pdf.................16

Michael A. Fischer et al., Impact of Medicaid Prior Authorization onAngiotensin-Receptor Blockers: Can Policy Promote RationalPrescribing?, 26 Health Aff. 800 (2007)............................................................18

Michael A. Fischer et al., Medicaid Prior Authorization Programs and theUse of Cyclooxygenase-2 Inhibitors, 351 New Eng. J. Med. 2187 (2004),available at http://www.nejm.org/doi/pdf/10.1056/NEJMsa042770.................18

Michael R. Law et al., A Longitudinal Study of Medication Nonadherenceand Hospitalization Risk in Schizophrenia, 69 J. Clinical Psychiatry 47(2008)..................................................................................................................25

P. David Charles, Botulinum neurotoxin serotype A: a clinical update onnon-cosmetic uses, 61 Am. J. Health-Sys. Pharmacy (2004), available athttp://www.ncbi.nlm.nih.gov/pubmed/15598005...............................................12

Plaintiffs’ Expert Witness Statement: Thomas J. Hamilton, Grier v. Wadley,No. 79-3107 (M.D. Tenn. Aug. 16, 1999), available athttp://ctlawhelp.org/files/pdf-files/TN-Hamilton-Drug-Denial-Rpt.pdf.............23

Seth A. Seabury et al., Formulary Restrictions on Atypical Antipsychotics:Impact on Costs for Patients With Schizophrenia and Bipolar Disorder inMedicaid, 20 Am. J. Managed Care e52 (2014), available athttp://www.ajmc.com/publications/issue/2014/2014-vol20-n2 .........................25

Stephen B. Soumerai et al., Benefits and Risks of Increasing Restrictions onAccess to Costly Drugs in Medicaid, 23 Health Aff. 135 (2004).......................17

Stephen B. Soumerai et al., Use of Atypical Antipsychotic Drugs forSchizophrenia in Maine Medicaid Following a Policy Change, 27 HealthAff. w185 (2008), available athttp://content.healthaffairs.org/content/27/3/w185 ............................................25

ix

Tricia J. Johnson & Stephanie Stahl-Moncada, Medicaid PrescriptionFormulary Restrictions and Arthritis Treatment Costs, 98 Am. J. Pub.Health 1300 (2008) .............................................................................................25

U.S. Dep’t of Educ., Basic Reading Skills and the Literacy of America’sLeast Literate Adults: Results from the 2003 National Assessment ofAdult Literacy (NAAL) Supplemental Studies (2009).......................................21

U.S. Dep’t of Educ., The Health Literacy of America’s Adults: Results fromthe 2003 National Assessment of Adult Literacy (2006), available athttp://nces.ed.gov/pubs2006/2006483.pdf..........................................................20

Xerox Solutions Center, District of Columbia Pharmacy BenefitsManagement Prescription Drugs Claims System (X2) Provider ManualVersion 0.11 (2013), available at http://www.dcpbm.com/documents/DC%20MAA%20Provider %20Manual%20v100412.pdf ...........................5, 11

*Sources marked with an asterisk are ones on which the brief primarily relies

1

INTERESTS OF AMICI CURIAE

Amici are: the Legal Aid Society of the District of Columbia, New Haven

Legal Assistance Association, Inc., 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. All are non-profit organizations that have worked for many years to

protect the rights of Medicaid beneficiaries to due process and health care access.1

This case was previously before this Court as Case No. 11-7084. In Case

No. 11-7084, the following organizations participated as amici curiae in support of

Appellants: the Legal Aid Society of the District of Columbia, the National Senior

Citizens Law Center, New Haven Legal Assistance Association, Inc., the Public

Justice Center, the Tennessee Justice Center, and Florida Legal Services.

Additional non-profit advocacy organizations have now joined the list of amici.

Although some of the material in this brief was presented in the earlier appeal, the

material has been substantially edited and reorganized, with new content added.

Pursuant to Federal Rule of Appellate Procedure 29(c)(5), counsel for amici

represent that no counsel for a party authored this brief in whole or in part and that

none of the parties or their counsel, nor any other person or entity other than amici,

its members, or its counsel, made a monetary contribution intended to fund the

1 See Appendix for full statements of interests for each amicus listed herein.

2

preparation or submission of this brief. All parties have consented to the filing of

this amicus brief, pursuant to Federal Rule of Appellate Procedure 29(a) and

Circuit Rule 29(b).

3

SUMMARY OF ARGUMENT

A Medicaid beneficiary who shows up at the pharmacy with a prescription

could leave empty handed for a variety of reasons, some legitimate (for example,

the drug is subject to an unfulfilled prior authorization requirement) and some in

error (for example, the beneficiary’s provider sought and obtained prior

authorization but the Medicaid agency’s computer records do not show this fact).

Prescription drugs, like other Medicaid services, are often subject to restrictions,

such as prior authorization, that are confusing to beneficiaries. And without written

notice, beneficiaries like N.B. and her mother cannot know why they could not get

their prescriptions and what action is needed to remedy the problem.

Medicaid beneficiaries are entitled to notice of the reasons for a prescription

drug denial under constitutional principles, the federal Medicaid statute and

regulations, and District of Columbia law. See Goldberg v. Kelly, 397 U.S. 254,

266 (1970) (holding that the Due Process Clause requires notice and an

opportunity for a hearing before welfare benefits can be terminated); 42 U.S.C.

§ 1396a(a)(3) (requiring State Medicaid plans to grant an opportunity for a fair

hearing to any individual whose claim for medical assistance is denied); 42 C.F.R.

§§ 431.200 (implementing fair hearing requirement), 431.205 (requiring that

States’ hearing processes comply with the due process standards set forth in

Goldberg), 431.206 (requiring agencies to inform applicants and beneficiaries of

4

their right to a hearing “at the time of any action affecting his or her claim”); D.C.

Code § 4-205.55 (requiring “timely and adequate notice” when the District

discontinues, withholds, terminates, suspends, or reduces assistance or makes

assistance subject to additional conditions). Prescription drugs are a type of

“medical assistance” under the Medicaid statute, 42 U.S.C. § 1396d(a)(12), and

when a State or jurisdiction, like the District, denies a claim for such assistance—

or takes an “action” to “reduce” a “covered service,” 42 C.F.R. § 431.201—the

State or jurisdiction must notify the beneficiary of the reasons for the denial and

the means for challenging or curing it. See Appellants’ Br. at 10–12 (analyzing the

statutory, regulatory, and constitutional notice requirements in the Medicaid

program).

The District Court, however, held that Plaintiffs failed to state a claim that

the District of Columbia violated statutory, regulatory, and constitutional notice

requirements by failing to provide notice upon denial of payment for prescription

drugs. NB v. District of Columbia, No. 10-1511, 2014 WL 1285132, at *4 (D.D.C.

Mar. 30, 2014); Joint Appendix (JA) 148.2 The Court reasoned that, to the extent

the alleged denials resulted from a failure to comply with prior authorization

requirements, Plaintiffs failed to allege any threshold entitlement to “covered

2 Hereinafter this brief cites to the Joint Appendix (JA) when referring to theDistrict Court’s decision.

5

services” sufficient to trigger Medicaid notice requirements.3 JA 153–54. However,

this reasoning rests on a misunderstanding of the text, structure, and purpose of the

Medicaid statute and applicable regulations.

ARGUMENT

I. THE MEDICAID STATUTE AND REGULATIONS REQUIRE THATNOTICE BE PROVIDED WHEN A STATE DENIES, TERMINATES,OR REDUCES PAYMENT FOR PRESCRIPTION DRUGS.

The District Court’s principal rationale for dismissing the statutory Medicaid

claims was its belief that the rejection of a Medicaid claim “when the prescribed

drug requires prior authorization and the prescribing doctor has not submitted one

3 The District Court also held that Plaintiffs failed to allege that the prescriptiondrug denials in question resulted from state action. JA 154–56. Amici agree withPlaintiffs that this holding is erroneous. See Appellants’ Br. at 44–57. In its priorruling, this Court recognized the District’s central role in injuring Plaintiffs,regardless of any actions or inactions by third parties such as doctors orpharmacists. See NB ex rel. Peacock v. District of Columbia, 682 F.3d 77, 86 (D.C.Cir. 2012). As Plaintiffs argue, the District’s Medicaid agency, the Department ofHealth Care Finance (DHCF), determines which drugs are preferred and which aresubject to prior authorization, as well as the criteria for satisfying theserequirements. See Appellants’ Br. at 47. Through its electronic claims managementsystem, DHCF determines whether Medicaid will pay for a drug and transmits thatdetermination to the pharmacist. See Xerox Solutions Center, District of ColumbiaPharmacy Benefits Management Prescription Drug Claims System (X2) ProviderManual Version 0.11 at 13–18, 21–45 (2013), available athttp://www.dcpbm.com/documents/DC%20MAA%20Provider%20Manual%20v100412.pdf (instructing pharmacies about prior authorization codes and how tosubmit payment claims). And it is DHCF’s policies and manuals that fail to requirethat notice be provided when claims are denied at the pharmacy. See id. Amici alsoagree with and will not repeat Plaintiffs’ arguments that the failure to providenotice when Medicaid payment is denied for prescription drugs violates the DueProcess Clause of the Constitution. See Appellants’ Br. at 35–44.

6

. . . is not a legal ‘denial’ of a covered benefit, because such a prescription is not

‘covered’ in the first place—at least not without prior authorization.” JA 152

(citing 42 U.S.C. § 1396r-8(d)(5)). That would not be a valid basis for dismissing

the Complaint in any event, because the Complaint alleges the erroneous rejection

of Medicaid claims for prescriptions that were not subject to prior authorization

requirements or that were improperly processed. See, e.g., JA 54–56, 59, 65–70,

75–78. However, the District Court’s rationale is also contrary to the text and

structure of the statute it cites, as well as fundamental requirements of due process.

First, the statutory provision the District Court cites explicitly differentiates

“coverage or payment” of a particular prescription, which may be conditioned on

prior authorization, from the question of whether the drug is covered by Medicaid.

Congress authorized States to “require, as a condition of coverage or payment for a

covered outpatient drug . . . the approval of the drug before its dispensing.” 42

U.S.C. § 1396r-8(d)(5) (emphasis added); see JA 152 (reproducing same language

with different emphasis).4 This language makes clear that prior authorization

4 In Pharmaceutical Research & Manufacturers of America v. Thompson, 362 F.3d817 (D.C. Cir. 2004), this Court relied in part on an interpretation of section 1396r-8(d)(5) to uphold the Secretary of Health and Human Services’ approval of aMichigan drug rebate program. This Court ruled that a State need not satisfy therequirements for a drug “formulary” in order to impose a prior authorizationrequirement, agreeing with an Eleventh Circuit decision upholding a similarFlorida program. Id. at 823–24 (citing Pharm. Research & Mfrs. of Am. v.Meadows, 304 F.3d 1197 (11th Cir. 2002)). Like this Court, the Eleventh Circuitnoted that there is a difference between a formulary that excludes a drug from

7

requirements impose limitations on drugs that remain covered by Medicaid. See

also 42 U.S.C. § 1396r-8(d)(1)(A) (“A State may subject to prior authorization any

covered outpatient drug.”) (emphasis added). Indeed, in other parts of the Social

Security Act, Congress referred to “conditions or limitations with respect to the

coverage of covered services,” making clear that the term “coverage” and the term

“covered services” can have distinct meanings. See 42 U.S.C. § 1395i-5(c)(2)(B)

(explaining, with reference to certain institutional services covered by Medicare,

that the Secretary may “impose such other conditions or limitations with respect to

the coverage of covered services . . . as may be appropriate to reduce the level of

expenditures”). Thus, denials of prescription drugs subject to preauthorization

requirements are nonetheless denials of “covered services” that trigger Medicaid

notice requirements. See 42 C.F.R. §§ 431.201, 431.206.

That the term “coverage or payment” in section 42 U.S.C. § 1396r-8(d)(5)

has a distinct meaning from the term “covered services” in 42 C.F.R. § 431.201 is

clear when these provisions are interpreted in light of the Medicaid program’s

coverage (unless prior authorization is granted) and a regime where priorauthorization is a condition on coverage or payment. See Meadows, 304 F.3d at1211. However, both types of drugs remain “covered” by Medicaid for purposes oftriggering notice requirements because both formulary exclusions and conditionsapply only to “covered outpatient drugs.” See 42 U.S.C. §§ 1396r-8(d)(1)(A) (“AState may subject to prior authorization any covered outpatient drug.”);1396r-8(d)(4)(C) (explaining, with reference to formularies, that “[a] coveredoutpatient drug may be excluded”) (emphases added).

8

broader statutory and regulatory framework. The term “covered services” refers to

the specific list of categories of medical services (or forms of “medical assistance”)

that are covered under a State’s Medicaid plan. See 42 U.S.C. § 1396d(a); 42

C.F.R. § 440.225. Although prescription drugs are defined as an “optional service”

under the Medicaid regulations, 42 C.F.R. § 440.225, the District of Columbia and

all States cover prescription drugs under their Medicaid plans.5

The Medicaid statute makes clear that a State that has chosen the pharmacy

option must cover all FDA-approved drugs, with the exception of a few narrow

categories of drugs. See 42 U.S.C. §§ 1396r-8(k)(2) (broadly defining “covered

outpatient drug” as a drug that may be dispensed only upon prescription and that

meets certain licensing and regulatory requirements); 1396r-8(d)(2) (specifically

enumerating those drugs that “may be excluded from coverage” and limiting that

list to particular classes of drugs). Therefore, covered outpatient drugs are a

“covered service” because they fall within the scope of the District’s State

Medicaid plan. See Boatman v. Hammons, 164 F.3d 286, 289 (6th Cir. 1998)

(interpreting the term “covered services” in 42 C.F.R. § 431.201 to encompass

those services that the State “has a duty to ensure . . . [are] available to Medicaid

5 See Kaiser Family Found., State Health Facts, Medicaid Benefits: PrescriptionDrugs (2012), http://kff.org/medicaid/state-indicator/prescription-drugs/ (lastvisited Aug. 4, 2014); District of Columbia State Medicaid Plan, Section 3,Attachment 3.1-A ¶ 12, available at http://dhcf.dc.gov/page/medicaid-state-plan.

9

recipients” under applicable regulations); see also Appellants’ Br. at 18 (analyzing

the meaning of “covered services”).

To be sure, the Medicaid Act permits limitations on payment for covered

services, such as covered outpatient drugs, consistent with the principle that States

can “place appropriate limits on a service based on such criteria as medical

necessity or on utilization control procedures.” 42 C.F.R. § 440.230(d). One such

utilization control procedure is the District’s requirement of prior authorization for

drugs not included on its preferred drug list, a requirement that conditions

Medicaid payment for a covered drug upon first obtaining approval for that drug’s

reimbursement. See 42 U.S.C. §§ 1396r-8(d)(1), (d)(5).

The fact that a drug is subject to prior authorization does not affect whether

the drug is a “covered service” for purposes of statutory and regulatory notice

requirements. See District of Columbia State Medicaid Plan, Section 3,

Supplement 1 to Attachment 3.1-A ¶ 12(A)(4), available at

http://dhcf.dc.gov/page/medicaid-state-plan (“All drugs covered by the National

Drug Rebate Agreements remain available to Medicaid beneficiaries, although

some may require prior authorization.”). Instead, under a prior authorization

regime, a State can only condition reimbursement upon a prescribing doctor

contacting the State to request approval for the drug for the patient. See Edmonds

v. Levine, 417 F. Supp. 2d 1323, 1329 (S.D. Fla. 2006) (explaining that the prior

10

authorization regimes contemplated under 42 U.S.C. § 1396r-8(d)(5) “do[] not

authorize a state . . . to deny coverage for a covered drug”) (emphasis added). And

courts have required that notice be provided to beneficiaries when a State denies

Medicaid payment for covered services due to an unfulfilled condition on payment

or reimbursement. See Grier v. Goetz, 402 F. Supp. 2d 876, 915 (M.D. Tenn. 2005)

(finding a statutory right to notice upon denial of a request for prior authorization

for prescription drugs); Ladd v. Thomas, 962 F. Supp. 284, 293 (D. Conn. 1997)

(finding a statutory right to notice upon denial of a request for prior authorization

of durable medical equipment). Thus, the text and structure of the Medicaid statute

and applicable regulations make clear that denials of prescription drugs subject to

prior authorization requirements remain denials of “covered services” that trigger

Medicaid notice requirements.

Second, the District Court’s holding that no notice is required where

prescription drug denials result from an alleged failure to obtain prior authorization

contravenes fundamental due process principles. Notice is essential to a

beneficiary’s ability to challenge—and the ability of courts and administrative

agencies to review—the State’s very assertion that prior authorization had not been

obtained or that the drug in question was subject to a prior authorization

requirement, an assertion that often may be made in error. See Appellants’ Br. at

28–29 (detailing allegations that agents for the District erroneously told Plaintiffs

11

that no prior authorization request had been received or that certain drugs were

subject to prior authorization requirements when in fact they were not). The

District Court’s holding would effectively require Medicaid beneficiaries to prove

their entitlement to a prescription drug before they have the opportunity to contest

or even review the reasons for the denial. See Haymons v. Williams, 795 F. Supp.

1511, 1522–23 (M.D. Fla. 1992) (characterizing as “illogical and contrary to due

process precedent” the defendant’s “assertion that plaintiffs must prove that they

are eligible for benefits before [the State Medicaid agency] must grant them the

right to a hearing in which to prove that they are eligible for benefits”).

Similar illogical results occur when a State fails to provide notice in a

situation where “reasonable minds could disagree as to whether or not a [drug] is

covered” by Medicaid. See Easley v. Ark. Dep’t of Human Servs., 645 F. Supp.

1535, 1543 (E.D. Ark. 1986). For example, the prescription drug Botox can be

“excluded from coverage” when prescribed as a cosmetic drug, see 42 U.S.C.

§ 1396r-8(d)(2)(C)6; but Botox can also be prescribed to treat other conditions such

as cervical dystonia (a neuromuscular disorder involving the head and neck).7 The

6 Xerox Solutions Center, District of Columbia Pharmacy Benefits ManagementPrescription Drug Claims System (X2) Provider Manual Version 0.11 at 14 (2013),available at http://www.dcpbm.com/documents/DC%20MAA%20Provider %20Manual%20v100412.pdf (listing excluded drugs).

12

District’s State Medicaid Plan allows payment for Botox if prescribed for such a

non-excluded purpose. See District of Columbia State Medicaid Plan, Section 3,

Supplement 1 to Attachment 3.1-A ¶ 12(A)(5) (listing criteria for approval of

otherwise excludable drugs). However, under the District Court’s reasoning, if the

District denied payment for a beneficiary’s prescription on the basis that cosmetic

agents are not “covered services,” the beneficiary would have no entitlement to

notice and thus no means to challenge the denial on the grounds that the Botox was

prescribed for a permissible purpose.

Just as the notice requirement is triggered when a State erroneously denies

payment for a prescription, notice must also be provided in the case of a payment

denial resulting from a beneficiary’s lack of knowledge about the need to obtain

prior authorization. Medicaid drug programs are subject to a complex and often

changing set of rules governing limitations on payment for covered services. Just

as notice is required to give the beneficiary the opportunity to challenge (and a

State the opportunity to fix) a denial based on a State’s error (for example, the

failure to note that a prior authorization has been approved), one of the “primary

reasons” for Medicaid notice requirements is to “give the recipient or the provider

7 See P. David Charles, Botulinum neurotoxin serotype A: a clinical update on non-cosmetic uses, 61 Am. J. Health-Sys. Pharmacy S11, S12–S13 (2004), available athttp://www.ncbi.nlm.nih.gov/pubmed/15598005.

13

the opportunity to ‘cure’ any defects that may have resulted in the denial of the

claim.” See Easley, 645 F. Supp. at 1543 (emphasis added).

A system that forces beneficiaries to guess at the reasons for and the means

of challenging a prescription denial plainly contravenes due process principles and

frustrates the Medicaid program’s aim of facilitating access to medical care. The

statute and regulations are therefore written to avoid this result and to require

written notice when payment for prescription drugs is denied.

II. THE DISTRICT COURT’S HOLDING FRUSTRATES THEPURPOSE OF THE MEDICAID ACT BY DENYING PROCEDURALSAFEGUARDS NECESSARY TO ENSURE ACCESS TO ESSENTIALMEDICAL CARE INCLUDING PRESCRIPTION DRUGS.

The District Court’s holding that no notice is required where prescription

drug denials result from a failure to comply with prior authorization requirements

contravenes not only the language and structure of the Medicaid Act but also the

Act’s manifest purpose of promoting access to health care for low-income

individuals and reducing the social costs of unmet healthcare needs. See 42 U.S.C.

§ 1396-1 (authorizing grants to States for Medicaid programs “[f]or the purpose of

enabling each State . . . to furnish . . . medical assistance on behalf of families with

dependent children and of aged, blind, or disabled individuals, whose income and

resources are insufficient to meet the costs of necessary medical services”).

Medicaid is a primary source of funding for prescription drugs for low-income

14

individuals, but the complex rules that govern these funds can pose obstacles to

beneficiaries’ access to necessary medications. These obstacles are exacerbated by

the particular difficulties that many beneficiaries face in navigating the health care

system. Without the individualized notice required by the Medicaid statute and

regulations, Medicaid beneficiaries are frequently unable to access needed

prescription medications, thus thwarting the Medicaid program’s purpose and

creating a system inconsistent with the “best interests” of Medicaid beneficiaries.

42 U.S.C. § 1396a(a)(19) (requiring States to adopt safeguards to ensure that

Medicaid services are provided “in a manner consistent with . . . the best interests

of the recipients”).

A. Medicaid Is an Important Source of Funding for PrescriptionDrugs for Low-Income, Vulnerable Individuals Who CannotOtherwise Obtain Such Medications.

Congress created Medicaid to address the barriers that low-income

individuals face in trying to access health care services. See Schweiker v. Hogan,

457 U.S. 569, 590 (1982) (observing that, in creating the Medicaid program,

Congress recognized that low-income individuals “are the most needy in the

country and it is appropriate for [their] medical care costs to be met, first”)

(quoting H.R. Rep. No. 89-213, at 66 (1965)). Federal and State Medicaid dollars

15

provide the largest source of medical and health-related funding for the poorest

Americans.8

The Patient Protection and Affordable Care Act (the ACA), Pub. L. No. 111-

148, 124 Stat. 119 (2010), further expanded Medicaid’s role in the health care

system. Prior to enactment of the ACA, States had to cover certain low-income

populations—namely, children and their caretaker relatives, pregnant women, and

individuals who were elderly or disabled. As enacted, the ACA required all States

to expand Medicaid income eligibility to all otherwise-eligible individuals with

income less than 133 percent of the federal poverty level, regardless of their age,

disability, or parental status, with 100 percent federal reimbursement available for

the first three years. Id. § 2001, 124 Stat. at 271 (codified at 42 U.S.C.

§§ 1396a(a)(10)(A)(i)(VIII), 1396d(y)(1)(A)). After the Supreme Court ruled in

National Federation of Independent Business v. Sebelius, 567 U.S. ___, 132 S. Ct.

2566, 2607 (2012), that the federal government could not require States to expand

Medicaid eligibility, twenty-six States and the District of Columbia chose to

8 See Ctrs. for Medicare & Medicaid Servs., Brief Summaries of Medicare &Medicaid as of November 1, 2013 at 22, 28 (2013), available athttp://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/MedicareProgramRatesStats/Downloads/MedicareMedicaidSummaries2013.pdf. The federal government pays between 50 and 100 percent of Medicaidcosts depending on certain state and beneficiary characteristics. Id. at 28.

16

expand their Medicaid programs,9 resulting in an increase in the Medicaid rolls

from 48.9 million in 2009 to 65.9 million as of May 2014.10

The District chose to expand its Medicaid program in 2010, soon after

passage of the ACA, and by December 2013 there were 213,800 Medicaid

beneficiaries in the District, half of whom were children or elderly or disabled

adults.11 All of these individuals are likely to need one or more prescriptions drugs

in their lifetime, any one of which may be subject to prior authorization. The

9 See Kaiser Family Found., State Health Facts, Status of State Action on theMedicaid Expansion Decision (2014), http://kff.org/health-reform/state-indicator/state-activity-around-expanding-medicaid-under-the-affordable-care-act/(last visited Aug. 4, 2014).

10 Kaiser Comm’n on Medicaid and the Uninsured, Medicaid Enrollment:December 2013 Snapshot (2014), available athttp://kaiserfamilyfoundation.files.wordpress.com/2014/06/8050-08-medicaid-enrollment-snapshot_december-2013.pdf; Kaiser Family Found., State HealthFacts, Total Medicaid and CHIP Enrollment, February – May 2014,http://kff.org/health-reform/state-indicator/total-monthly-medicaid-and-chip-enrollment/ (last visited Aug. 4, 2014).

11 These figures represent a more than 50 percent increase in District Medicaidenrollees since December 2009. See Kaiser Comm’n on Medicaid and theUninsured, Medicaid Enrollment: December 2013 Snapshot (2014), available athttp://kaiserfamilyfoundation.files.wordpress.com/2014/06/8050-08-medicaid-enrollment-snapshot_december-2013.pdf (calculations performed by the Legal AidSociety of the District of Columbia). The District expanded eligibility standards toinclude childless adults with incomes below approximately 200 percent of thefederal poverty level, while maintaining previously established income standardsfor other eligible groups. See Kaiser Family Found., Where are States Today?Medicaid and CHIP Eligibility Levels for Children and Non-Disabled Adults as ofApril 1, 2014 (2014), available athttp://kaiserfamilyfoundation.files.wordpress.com /2014/06/7993-05-where-are-states-today-fact-sheet-june-2014.pdf.

17

higher prevalence of disability and chronic illness in the Medicaid population, as

compared to the population with similar income and private insurance,12 makes

unimpeded access to Medicaid payment for prescription drugs particularly

important.

B. Medicaid-Covered Drugs Are Subject to Many Restrictions thatIncrease the Likelihood of Payment Being Denied at thePharmacy.

While States use many forms of restrictions in their Medicaid pharmacy

programs, the most common ones—and those used by the District—are prior

authorization requirements and the creation of Preferred Drug Lists (PDLs).13 If a

drug is subject to a prior authorization requirement, the prescribing physician must,

in addition to writing a prescription for the drug, submit patient information to the

12 See Kaiser Family Found., Kaiser Slides, Medicaid Enrollees Are Sicker andMore Disabled than the Privately-Insured (2013), available athttp://kff.org/medicaid/slide/medicaid-enrollees-are-sicker-and-more-disabled-than-the-privately-insured/.

13 Other restrictive policies include increased cost sharing, higher copayments forbrand-name drugs, quantity limits, and step therapy (also known as fail first),unless prior authorization has first been obtained from the prescriber. See StephenB. Soumerai et al., Benefits and Risks of Increasing Restrictions on Access toCostly Drugs in Medicaid, 23 Health Aff. 135, 135–36, 139 (2004); District ofColumbia State Medicaid Plan, Section 3, Supplement 1 to Attachment 3.1-A ¶12(A)(4), available at http://dhcf.dc.gov/node/192082; District of ColumbiaDepartment of Health Care Finance, Pharmacy Preferred Drug List (PDL)(effective July 1, 2014),https://dc.fhsc.com/downloads/providers/DCRx_PDL_listing.pdf (last visited Aug.4, 2014).

18

State Medicaid agency to review and authorize Medicaid payment.14 Under a PDL

regime, drugs that are not on the PDL are excluded, unless the beneficiary secures

prior authorization of the drug. PDLs often select the cheapest available

medication, even when the cheaper drug may have more side effects and be less

effective than more expensive medications.15

The denial of payment at pharmacies for drugs requiring prior authorization

is very common because prescribing doctors often write prescriptions without

going through the prior approval process first. Many physicians care for patients

with a wide variety of insurance coverage options and do not know or simply guess

at which medication is preferred (and thus available without prior authorization)

under a given patient’s insurance plan.16

14 See Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 651 (2003);Michael A. Fischer et al., Medicaid Prior Authorization Programs and the Use ofCyclooxygenase-2 Inhibitors, 351 New Eng. J. Med. 2187, 2188 (2004), availableat http://www.nejm.org/doi/pdf/10.1056/NEJMsa042770.

15 See Jerome Wilson et al., Medicaid Prescription Drug Access Restrictions:Exploring the Effect on Patient Persistence with Hypertension Medications, Am. J.Managed Care (Jan. 15, 2005), http://www.ajmc.com/publications/issue/2005/2005 -01-vol11-n1sp/jan05-1984psp027-sp03/1 (page 5).

16 See Danielle Ofri, Adventures in ‘Prior Authorization’, N.Y. Times, Aug. 3,2014, at A21 (describing the bureaucratic hurdles that physicians face in trying toobtain information about prior authorization requirements and other limitations onpayment); Michael A. Fischer et al., Impact of Medicaid Prior Authorization onAngiotensin-Receptor Blockers: Can Policy Promote Rational Prescribing?, 26Health Aff. 800, 806 (2007) (noting that physicians have trouble keeping track of

19

Prescription drug denials due to lack of prior authorization can be remedied

through action by a physician to provide additional information to support the prior

authorization request or to prescribe a different medication. Alternatively, the

beneficiary can appeal if the State has made an error in denying the request for

prior authorization. But when the State denies payment for a drug without

providing any written notice, the beneficiary will often have no idea why the denial

occurred, much less which remedy to pursue and how to pursue it. Therefore,

given the complexity of Medicaid prescription drug restrictions, the provision of

notice is essential to ensure that prior authorization requirements do not undermine

the “best interests of . . . [Medicaid] recipients.” 42 U.S.C. § 1396a(a)(19).

C. Medicaid Beneficiaries Face Particular Difficulties UnderstandingUnexplained Denials of Coverage.

Because of the complicated set of restrictions on Medicaid drug coverage,

many beneficiaries do not understand what requirements they need to fulfill in

order to obtain their prescription drugs. If their prescription drug claims are then

denied at the pharmacy, they often leave empty handed because they cannot afford

to pay out of pocket. See Dodson v. Parham, 427 F. Supp. 97, 108 (N.D. Ga. 1977)

(noting that Medicaid beneficiaries do not have the financial capability to pay for

prescriptions when Medicaid coverage is denied).

what prescription drugs are covered by their patients’ insurance plans, increasingthe likelihood of denials at the pharmacy).

20

Without notice, the denial at the pharmacy is difficult to remedy. When

Medicaid beneficiaries are told at the pharmacy that coverage for their prescription

drugs has been denied, they often receive no explanation, even orally, of the

reasons for that denial. Without such an explanation, any individual would have

difficulty determining what steps to take to correct a denial. But Medicaid

beneficiaries face many barriers that make this task particularly difficult. One such

barrier is the prevalence of limited health literacy among Medicaid beneficiaries.17

Individuals with limited health literacy have difficulty comprehending basic health

insurance terms and understanding how to work within an insurance system to

access health services.18 Limited overall literacy and limited English proficiency

17 See Genevieve M. Kenney et al., Urban Inst. Health Policy Ctr., UninsuredAdults Eligible for Medicaid and Health Insurance Literacy 4 (2013), available athttp://hrms.urban.org/briefs/medicaid_experience.pdf (“The adult Medicaid targetpopulation exhibits significantly less knowledge of [key] insurance term[s]compared with higher-income uninsured adults.”); U.S. Dep’t of Educ., The HealthLiteracy of America’s Adults: Results from the 2003 National Assessment of AdultLiteracy 10, 14, 17–18 (2006), available athttp://nces.ed.gov/pubs2006/2006483.pdf (summarizing average health literacy bypoverty threshold and finding that 30 percent of the adult Medicaid population had“below basic” health literacy and only 3 percent had proficient health literacy, ascompared to the total adult population, where only 14 percent had “below basic”health literacy and 12 percent had proficient health literacy).

18 For example, a person with “below basic health literacy” would not “be able todetermine from a clearly written pamphlet containing basic information how oftena person might have a specified medical test.” John A. Vernon et al., George Wash.Univ. Dep’t of Health Policy, Low Health Literacy: Implications for NationalHealth Policy 3 (2007).

21

are other barriers that impair many Medicaid beneficiaries’ ability to navigate the

rules and procedures necessary to understand or correct an unexplained denial.19

Thus, without written notice of the reasons for prescription drug payment

denials, Medicaid beneficiaries face formidable obstacles in discerning what steps

they must take to gain or maintain access to medications vital to their health.

Providing written notice ameliorates these problems by giving beneficiaries the

information they need to understand the reasons for the denial and the available

remedies. Written notice would even aid beneficiaries with very limited literacy,

health proficiency, or English proficiency by giving them something to bring to a

doctor or social worker who could help them understand the information provided

and take further action.

19 See Gilbert Gonzales, State Health Access Data Assistance Ctr., State Estimatesof Limited English Proficiency by Health Insurance Status 11 (2014) (finding that,in 2012, 12 percent of Medicaid beneficiaries nationwide and 8 percent ofbeneficiaries in the District have limited English profiency, with a high of 27percent in California); U.S. Dep’t of Educ., Basic Reading Skills and the Literacyof America’s Least Literate Adults: Results from the 2003 National Assessment ofAdult Literacy (NAAL) Supplemental Studies at iv–vi, 31 (2009) (finding thatadults with income at or below 175 percent of the federal poverty level—slightlybelow the income cutoff for Medicaid in the District—constituted 71 percent ofadults who read English prose at a “below basic” level, and 85 percent of the adultswho read too poorly to complete the standard assessment, although they comprisedonly 36 percent of the population) (calculations performed by the Legal AidSociety of the District of Columbia); see also Barry D. Weiss et al., IlliteracyAmong Medicaid Recipients and its Relationship to Health Care Costs, 5 J. HealthCare Poor Underserved 100, 106 (1994).

22

D. Research Documents the Harm to Beneficiaries When MedicaidDenies Without Notice Payment for Prescription Drugs Due toPrior Authorization Requirements.

Data obtained from three States—Florida, Tennessee, and Connecticut—

confirm that many Medicaid beneficiaries cannot obtain medications when

payment for prescription drugs is denied without notice due to prior authorization

requirements or other restrictions. A federal district court in Florida cited state data

showing that, in a single month, over 35,000 Medicaid recipients were denied

coverage for prescription medications due to prior authorization requirements and

other restrictions. See Hernandez v. Medows, 209 F.R.D. 655, 666–67, 669–71

(S.D. Fla. 2002). Among these individuals, 21,974 recipients received no drug at

all in the same therapeutic class.20 Id. The court noted that while the pharmacist

received electronic notice of the Florida Medicaid agency’s decision to deny

payment, there was no provision in the Florida statutes or regulations for notice to

the beneficiary when payment was denied. Id. at 670.

Data from Tennessee and Connecticut document similar harms. When the

Rural Health Outreach Group (RHOG) surveyed enrollees in Tennessee’s

Medicaid managed care program (TennCare), the organization found that 8.9

percent of prescriptions went unfilled because of the prescriber’s failure either to

20 This data excludes situations where generic drugs were substituted for brand-name drugs as well as prescriptions that were eventually filled after an unknownperiod of delay.

23

obtain prior authorization or to prescribe a drug that was on the State’s formulary.21

This equates to an estimated 1.2 million prescriptions per year in the 1997–98

TennCare population that went unfilled for these reasons.22

Similarly, a more recent report from Connecticut tracked the ability of

Medicaid beneficiaries to obtain drugs subject to prior authorization. Over a ten-

month period in 2008 and 2009, the State denied approximately 27,000 claims on

the basis of unfilled prior authorizations and provided a temporary supply of the

drug to the beneficiary.23 Of these denials, 5,142 claims were again denied for

failure to obtain prior authorization when the beneficiary returned to the pharmacy

after the temporary supply ran out; at that time, the beneficiary was not entitled to

another temporary supply. And after four months (not an insignificant amount of

21 See Plaintiffs’ Expert Witness Statement: Thomas J. Hamilton at 5289–90, Grierv. Wadley, No. 79-3107 (M.D. Tenn. Aug. 16, 1999), available athttp://ctlawhelp.org/files/pdf-files/TN-Hamilton-Drug-Denial-Rpt.pdf.

22 Id.

23 See Conn. Dep’t of Soc. Servs., Provider Bulletin, Pharmacy Guidelines forPrescribing and Dispensing Medication for HUSKY A, HUSKY B and SAGAClients 3 (2008), available at https://www.ctdssmap.com/CTPortal/Information/Get%20Download%20File/tabid/44/Default.aspx?Filename=pb08_20.pdf&URI=Bulletins/pb08_20.pdf; Hewlett-Packard, Report to the Consumer AccessSubcommittee of the Connecticut Medicaid Care Management Oversight Council(2010), available at http://ctlawhelp.org/files/pdf-files/HP-Denial-Report-MCMOC-Subcomm.pdf.

24

time to go without prescription drugs), approximately one quarter of these claims

(1,350) were still unresolved. 24

Studies also suggest that denials based on PDL restrictions can cause

beneficiaries to discontinue the use of any medication whatsoever. For example,

one study found that where beneficiaries, due to a preferred drug list, were offered

different medications with significant side effects—which can often be the case

with PDLs25—they often stopped taking any medication at all for their condition.26

Beneficiaries discontinued use despite the fact that medications not listed on the

PDL can still be obtained where providers request prior authorization. See District

of Columbia State Medicaid Plan, Section 3, Supplement 1 to Attachment 3.1-A

¶ 12(A)(4).

The resulting harm from unfilled prescriptions affects both the individual

beneficiary and society as a whole. In particular, the negative health outcomes that

result when beneficiaries are unable to access necessary medications may give rise

to decreased quality of care and increased social costs due to more frequent

24 See Hewlett-Packard Report, supra note 23.

25 See Wilson et al., supra note 15, at 5.

26 See id. at 4 (suggesting that introduction of PDL restrictions on hypertensionmedications resulted in 39 percent greater discontinuation of treatment byMedicaid beneficiaries).

25

“emergency [room] visits, hospitalizations, homelessness, suicidal ideation or

behavior, or incarceration.”27 For example, studies have documented increased

hospitalizations related to restrictions on anti-inflammatory drugs28 and

schizophrenia medications,29 and increased use of opioid medications related to

restrictions on seizure and neuropathic pain medications.30

27 Joyce C. West et al., Medicaid Prescription Drug Policies and MedicationAccess and Continuity: Findings From Ten States, 60 Psychiatric Servs. 601, 601(2009) (“[P]atients with medication access problems had 3.6 times greaterlikelihood of [the listed] adverse events . . . .”); see also Seth A. Seabury et al.,Formulary Restrictions on Atypical Antipsychotics: Impact on Costs for PatientsWith Schizophrenia and Bipolar Disorder in Medicaid, 20 Am. J. Managed Caree52, e58 (2014), available at http://www.ajmc.com/publications/issue/2014/2014-vol20-n2 (finding patients from Maine with schizophrenia or bipolar disorder“significantly more likely to discontinue therapy after prior authorization wasintroduced”); Dana P. Goldman et al., Do Strict Formularies Replicate Failure forPatients with Schizophrenia?, 20 Am. J. Managed Care 219, 225–26 (2014)(suggesting that formulary restrictions may reduce drug spending while increasingother health care costs).

28 See Tricia J. Johnson & Stephanie Stahl-Moncada, Medicaid PrescriptionFormulary Restrictions and Arthritis Treatment Costs, 98 Am. J. Pub. Health1300, 1302–03 (2008) (finding that a restrictive preferred drug list resulted in 29percent and 52 percent more hospitalizations for patients with rheumatoid arthritisand osteoarthritis, respectively).

29 See Michael R. Law et al., A Longitudinal Study of Medication Nonadherenceand Hospitalization Risk in Schizophrenia, 69 J. Clinical Psychiatry 47 (2008)(noting that patients with schizophrenia are at increased risk for hospitalization amere ten days after a missed medication refill); Stephen B. Soumerai et al., Use ofAtypical Antipsychotic Drugs for Schizophrenia in Maine Medicaid Following aPolicy Change, 27 Health Aff. w185, w189, w193 (2008), available athttp://content.healthaffairs.org/content/27/3/w185 (noting that individuals withchronic mental illness were at a higher risk of being confused by administrativebarriers to care than those without mental illness, and finding individuals 29

26

Thus, prior authorization requirements and other drug restrictions often

result in low-income individuals going without needed medications. These

restrictions create added confusion for individuals who already face many

challenges navigating the medical system and meeting their health care needs. In

order to promote the Medicaid statute’s goal of facilitating access to needed

medical care, beneficiaries must be able to understand why a denial has occurred so

that they can work to remedy or challenge it. Without the individualized written

notice required by the Medicaid statute and regulations, beneficiaries will lack any

such explanation and will have no recourse to correct or challenge denials of

essential medications.

percent more likely to discontinue treatment under a prior authorizationrequirement on atypical antipsychotics than before the regime was implemented).

30 See Jay M. Margolis et al., Effects of a Medicaid Prior Authorization Policy forPregabalin, 15 Am. J. Managed Care e95, e101 (2009) (“[T]he overall effect [ofthe prior authorization requirement] was an increase in the use of opioidmedications and alternative therapies associated with increased disease-relatedhealthcare costs.”) (emphasis added).

27

CONCLUSION

The District of Columbia’s failure to provide written notice to Medicaid

beneficiaries when DHCF denies payment for prescription drugs violates the

Medicaid statute and regulations and thwarts the program’s purpose by making it

harder for low-income children and adults to obtain medications that are necessary

for their health and well-being. Therefore, amici respectfully urge this Court to

reverse the District Court’s decision and to find that Plaintiffs have stated a claim

for relief in their challenge to the District’s failure to provide this legally required

notice.

Respectfully submitted,

/s/ John C. Keeney, Jr.Sheldon V. Toubman John C. Keeney, Jr.New Haven Legal Assistance Jennifer Mezey

Association, Inc. Karen S. Smith426 State Street Legal Aid Society of theNew Haven, CT 06510 District of Columbia(203) 946-4811 1331 H Street NW, Suite 350Fax: (203) 498-9271 Washington, DC 20005

(202) 661-5966Fax: (202) 727-2132

Attorneys for Amici Curiae

CERTIFICATE OF COMPLIANCE WITH RULE 32(a)

1. This brief complies with the type-volume limitation of Fed. R. App. P.

32(a)(7)(B) because this brief contains 6339 words, excluding the parts of the brief

exempted by Fed. R. App. P. 32(a)(7)(B)(iii), such as the Appendix.

2. This brief complies with the typeface requirements of Fed. R. App. P.

32(a)(5), the paper size/line spacing/margins requirement of Fed. R. App. P.

32(a)(4), and the type style requirements of Fed. R. App. P. 32(a)(6) because it has

been prepared in a proportionally spaced typeface using Microsoft Word 2007 in

Times New Roman, 14-point font. The brief is double spaced except for the

headings and footnotes, as permitted by Fed. R. App. P. 32(a)(4).

/s/ John C. Keeney, Jr.

John C. Keeney, Jr.Counsel for Amici CuriaeAugust 7, 2014

CERTIFICATE OF SERVICE

I hereby certify that on August 7, 2014, I caused the foregoing Amicus Brief

in Support of Reversal to be filed with the Court through the Court’s CM/ECF

system. Hard copies of this brief will also be filed with the Court. Counsel of

record are registered CM/ECF users and will be served by the appellate CM/ECF

system.

/s/ John C. Keeney, Jr.

John C. Keeney, Jr.Counsel for Amici CuriaeAugust 7, 2014

APPENDIX

INTERESTS OF AMICI CURIAE

The Legal Aid Society of the District of Columbia was formed in 1932 to

provide legal aid and counsel to indigent persons in civil law matters and to

encourage measures by which the law may better protect and serve their needs.

Legal Aid By-Laws, Art. II, Sec. 1. Legal Aid is the oldest general civil legal

services program in the District of Columbia. Legal Aid has long represented

individuals seeking Medicaid and other public health insurance coverage as well as

services funded through this coverage. The resolution of this case will impact our

clients who face the same barriers that Plaintiffs here face—poverty, ill health, and

limited health literacy.

New Haven Legal Assistance Association, Inc. is a non-profit legal

services organization, founded in 1964, which represents low-income individuals

in the greater New Haven, Connecticut area. Many of these individuals rely upon

the Medicaid program for all of their health care needs. These beneficiaries have a

direct interest in this litigation because, as in the District of Columbia, prior

authorization in Connecticut has resulted in significant restrictions in access to

prescription drugs for needy Medicaid beneficiaries, and no written notice is

provided when covered drugs are denied to them at the pharmacy. Enforcement of

the basic constitutional and statutory obligation to provide written notice when this

occurs will significantly protect these beneficiaries from harm.

AARP is a non-profit, nonpartisan organization with a membership that

helps people turn their goals and dreams into real possibilities, strengthens

communities, and fights for the issues that matter most to families such as health

care, employment and income security, retirement planning, affordable utilities,

and protection from abuse. Since its founding in 1958, AARP has advocated for

older adults’ access to affordable prescription medications. Founded in 1975,

Legal Counsel for the Elderly (LCE), an affiliate of AARP, is the leading

provider of free legal services and advocacy for vulnerable District seniors. LCE’s

mission is to improve the quality of life for older District residents, and its primary

goals are to serve and empower thousands of low-income District seniors each year

in those areas of law involving “basic human needs”: income, housing, long-term

care, personal autonomy, and consumer protection. AARP and LCE have a

substantial interest in safeguarding due process protections for Medicaid

beneficiaries upon a reduction, termination, or denial of a claim for medically

necessary health care, including prescription drugs.

Bread for the City (BFC) is a non-profit organization that provides low-

income residents of the District of Columbia with supplemental food, clothing,

primary medical care, social services, and civil legal services. Among other things,

BFC has helped District residents obtain and maintain Medicaid and other public

health insurance coverage. BFC’s Medical Clinic has observed first-hand the

challenges of patients who receive Medicaid and experience prescription drug

denials at pharmacies. BFC and the community members it serves have an interest

in this case to ensure all the due process rights of Medicaid beneficiaries in the

District are protected.

Florida Legal Services (FLS) is a non-profit legal services organization

founded in 1973 by the Florida Bar and supported by the Florida Bar Foundation to

provide civil legal assistance to low-income individuals in Florida. Many of these

individuals rely upon the Medicaid program for all of their health care needs. FLS

represents a certified class of current and future Medicaid recipients whose

prescription coverage is denied, delayed, reduced, or terminated without adequate

notice and the opportunity for a fair hearing. See Hernandez v. Meadows, 209

F.R.D. 665 (S.D. Fla. 2002). These beneficiaries have a direct interest in this

litigation because, as in the District of Columbia, the lack of adequate due process

in Florida’s Medicaid prescription drug program resulted in restrictions in access to

medically necessary prescription drugs for needy Medicaid beneficiaries.

The National Senior Citizens Law Center (NSCLC) is a non-profit

organization that advocates nationwide to promote the independence and well-

being of low-income older persons and people with disabilities. For more than

forty years, NSCLC has served these populations through litigation, administrative

advocacy, legislative advocacy, and assistance to attorneys in legal aid programs.

NSCLC works to ensure access to the federal courts to enforce safety net and civil

rights statutes, particularly the Medicaid Act, a critical source of health insurance

for millions of older persons and people with disabilities. NSCLC has participated

as counsel in numerous lawsuits regarding Medicaid and is profoundly concerned

about the impact that the Court’s decision may have on its clients’ rights.

The Public Justice Center (PJC), a non-profit civil rights and anti-poverty

legal services organization founded in 1985, has a longstanding commitment to

safeguarding and promoting the rights of poor people and recipients of public

benefits, especially Medicaid. The PJC is a founder of Medicaid Matters!

Maryland (MM!MD), through which more than eighty consumer and advocacy

groups representing persons with disabilities, children, seniors, and low-income

families and individuals have joined forces to ensure that state and federal

policymakers understand the importance of Medicaid to low-income or medically

vulnerable Marylanders. In 2009, the PJC obtained a permanent injunction

requiring Maryland to provide Medicaid, food stamps, and other benefits to

eligible applicants within legally mandated timeframes. The PJC has an interest in

the issues presented in this appeal because the District Court’s decision severely

undermines the rights of Medicaid beneficiaries not to be denied vital medication

without due process.

The Tennessee Justice Center (TJC) is a non-profit public interest law

firm, founded by Tennessee bar leaders in 1996 and supported by the Tennessee

Bar Foundation, that advocates on behalf of Tennessee families in need. As

plaintiff class counsel in Daniels v. Wadley, 926 F. Supp. 1305 (M.D. Tenn. 1996),

vacated in part sub nom. Daniels v. Menke, 145 F.3d 1330 (6th Cir. 1998), TJC

represents 1.2 million low-income children and adults enrolled in Tennessee’s

Medicaid program, which is known as TennCare. TJC’s TennCare clients have an

interest in this litigation because they, like their counterparts in the District of

Columbia, will benefit from a ruling that vindicates Medicaid beneficiaries’

constitutional and statutory right to timely, individualized written notice when a

Medicaid program or its contractor electronically denies medically necessary

prescription drugs at the pharmacy due to lack of prior authorization.

University Legal Services, Inc. (ULS) is a private, non-profit legal services

agency that serves as the federally mandated protection and advocacy (P&A)

program for individuals with disabilities in the District of Columbia. Congress

vested the P&As with authority and responsibility to investigate allegations of

abuse and neglect of individuals with disabilities. Annually, ULS provides legal

advocacy to protect the civil rights of hundreds of individual District residents with

disabilities, with thousands more benefiting from investigations, institutional

reform litigation, outreach, education and group advocacy efforts. The

overwhelming majority of individuals ULS assists are District of Columbia

Medicaid beneficiaries seeking quality services to enable them to live in the most

integrated settings appropriate to their needs.