Case 2:20-cv-00647-JDC-KK Document 1 Filed 05/21/20 Page 1 of 14 PageID #: 1
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`UNITED STATES DISTRICT COURT
`FOR THE WESTERN DISTRICT OF LOUISIANA
`LAKE CHARLES DIVISION
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`LOUISIANA INDEPENDENT
`PHARMACIES ASSOCIATION
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`Plaintiff
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`EXPRESS SCRIPTS, INC (ESI)
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`Civil Action No.______________
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`COMPLAINT FOR DECLARATORY JUDGMENT
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` NOW INTO COURT, through undersigned counsel, comes Plaintiff, Louisiana
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`Independent Pharmacies Association, a Louisiana non-profit corporation with its registered
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`office in the City of Baton Rouge, Parish of East Baton Rouge who respectfully represents the
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`following upon information and belief:
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`NATURE OF ACTION
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`1.
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`This is a request for declaratory judgment by the Louisiana Independent Pharmacies
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`Association (LIPA) on behalf of its members against Express Scripts, Inc. (ESI). Pursuant to
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`28 U.S.C. § 2201-2202, LIPA asks this Court to determine whether or not Medicare preempts
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`La. R.S. § 46:2625 and La. R.S. § 22:1860.1.
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`2.
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`La. R.S. § 46:2625(A)(1), as part of Louisiana’s Medicaid plan, requires each in-state
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`and out-of-state pharmacy to remit ten cents ($.10) to the Louisiana Department of Health
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`(LDH) on each prescription filled for a Louisiana citizen. LDH then uses those funds (along
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`with other fees from other medical providers) to match resources from the federal government
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`to fund the State’s Medicaid program.
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`3.
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`La. R.S. § 46:2625(A)(2) provides that the “ten cent provider fee” is an allowable cost
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`for purposes of insurance or third party reimbursements. La. R.S. § 22:1860.1 specifically
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`states that a health insurer or its agent has the obligation to reimburse a pharmacy for fees
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`remitted by the pharmacy in compliance with R.S. § 46:2625.
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`4.
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`ESI, the country’s largest pharmacy benefits manager, takes the position that the “ten
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`cent provider fee” is preempted by Medicare. In a May 12, 2020 communication to Louisiana
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`pharmacies, ESI states that “Due to federal preemption, Express Scripts is not required to
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`reimburse pharmacies the $0.10 fee for claims paid by Medicare (MA Plans or Part D
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`Plans).”1 Thus, ESI will not reimburse Louisiana pharmacies this amount (even though
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`Louisiana pharmacies are obligated to remit the ten cents on each prescription it fills,
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`regardless of payor source, to LDH). Presumably, ESI is also not remitting the ten cent fee
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`to LDH on prescriptions its mail order pharmacy fills for Louisiana Medicare recipients
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`either.
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`5.
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`Thus, despite the fact that pharmacies are required to remit ten cents to the LDH on
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`every prescription filled, regardless of payor source, ESI refuses to reimburse pharmacies the
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`ten cent fee on Medicare prescriptions, As shown below, the Louisiana Department of
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`1 Exhibit 1, May 12, 2020 “Reminder on the appropriate use of tax submission fields for
`reimbursement of Louisiana fees and taxes”
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`Insurance also agrees that the ten cent fee is due and should be reimbursed to pharmacies.
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`The contrary positions taken by LDH and LDI, on the one side, and ESI, on the other, on
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`two specific statutes — La. R.S. § 46:2625 and La. R.S. 22:1860.1 — require the filing of this
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`action since Louisiana independent pharmacies are caught in the middle.
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`THE DEFENDANT
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`6.
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`The defendant in this action is:
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`Express Scripts, Inc. (“ESI”), a foreign corporation authorized and doing business in
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`this State. ESI is a Delaware corporation with its principal place of business in St. Louis,
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`Missouri, with its principal business establishment in Louisiana at 501 Louisiana Avenue,
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`Baton Rouge, LA 70802.
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`JURISDICTION AND VENUE
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`7.
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`This Court has jurisdiction pursuant to 28 U.S.C. § 1331.
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`8.
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`Venue properly lies within this district pursuant to 28 U.S.C. § 1391 because a
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`substantial part of the events and omissions giving rise to this action occurred in this district
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`and ESI is subject to personal jurisdiction with respect to the action in question.
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`LOUISIANA INDEPENDENT PHARMACIES
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`9.
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`LIPA is a member-based organization which advocates on behalf of the needs, issues,
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`and concerns of Louisiana independent pharmacies. Since 2001, LIPA has been providing
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`services that benefit its membership of independent pharmacies in order to promote and
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`advance the interests of the Louisiana independent pharmacy community.
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`10.
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`Louisiana independent pharmacies are small business entrepreneurs as well as multi-
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`dimensional health care providers. Independent pharmacists play a critical role in Louisiana's
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`health care delivery system. Independent pharmacists are focused on improving the overall
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`quality of health care in their communities in order to realize the best possible outcomes. As
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`such, independent pharmacies represent a vital resource to their patients. Oftentimes, the
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`independent pharmacies serve historically underserved or rural areas and are the only
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`healthcare providers in many communities across Louisiana. Louisiana independent
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`pharmacies historically fill 45% of all prescriptions filled in Louisiana.
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`11.
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`In furtherance of its mission on behalf of Louisiana independent pharmacies, LIPA
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`seeks a declaration of the rights, status and other legal relations by, between, and among
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`LIPA’s members and ESI pursuant to 28 U.S.C. § 2201-2202. A declaratory judgment
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`proceeding will promote the simple, expedient resolution of whether Medicare preempts La.
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`R.S. § 46:2625 and La. R.S. 22:1860.
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`OVERVIEW OF THE ISSUES TO BE DECIDED HERE
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`12.
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`The Louisiana Legislature has recognized the important role that pharmacies play in
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`healthcare and has passed numerous statutes that impact Louisiana pharmacies. One such
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`statute is La. R.S. § 46:2625. That statute puts the onus of Louisiana pharmacies to collect
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`ten cents for every prescription filled and to remit that money to the LDH. LDH then uses
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`those funds to help draw down federal dollars to help fund Louisiana’s Medicaid program.
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`But the ten cents is not to come from the pharmacies. Instead that is an allowable cost that is
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`to be reimbursed by plan sponsors. While it is believed that ESI typically reimburses
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`pharmacists for the ten cent fee on most prescriptions, it refuses to do so for Medicare plans,
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`taking the position that Medicare preempts the state statues. If ESI is correct, the LIPA
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`member pharmacies should not have to remit the ten cent prescription to LDH. If ESI is
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`incorrect, then LIPA member pharmacies should be reimbursed the cent fee on Medicare
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`prescriptions. And ESI should remit ten cents to LDH on each Medicare prescription it fills
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`for Louisiana Medicare recipients. But this Court should rule one way or the other.
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`THE TEN CENT PROVIDER FEE AND ITS PURPOSE
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`13.
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`In 1992, the Louisiana Legislature passed Act 260, which included, among other
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`things, an authorization for LDH to impose fees for healthcare services provided by the
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`Medicaid program on various healthcare providers. The operative provisions of Act 260
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`became effective on June 10, 1992.
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`14.
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`In pertinent part, La. R.S. § 46:2625 A.(1) snow reads:
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`A. (1) The Department of Health and Hospitals is hereby authorized to adopt and
`impose fees for health care services provided by the Medicaid program on every
`nursing facility, every intermediate care facility for people with developmental
`disabilities, every pharmacy in the state of Louisiana and certain out-of-state
`pharmacies, dispensing physicians, and medical transportation providers. The
`amount of any fee shall not exceed the total cost to the state of providing the health
`care service subject to such fee. In addition, the amount of the fees imposed under
`the rules and regulations adopted shall not exceed the following:
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`(c) Ten cents per out-patient prescription.
`(d) Ten cents per out-patient out-of-state prescription.
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`15.
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`Louisiana pharmacies are thus required to pay to the LDH the $.10 fee mandated by
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`La. R.S. § 46:2625 (A)(1) on every prescription the pharmacy fills, irrespective of the plan
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`which may cover the patient. The pharmacy remits, on a quarterly basis, the $.10 provider fee
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`to LDH. There is no markup of the $.10 fee (i.e., no profit is made).
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`16.
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`However, in an effort to allow recoupment of this variable expense, the Louisiana
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`Legislature specifically allowed that fee to be passed on to third-party administrators such as
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`pharmacy benefit managers and/or health insurance plans, under section (2) of that statute:
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`(2) Any fee authorized by and imposed pursuant to this Section shall be considered
`an allowable cost for purposes of insurance or other third party reimbursements and
`shall be included in the establishment of reimbursement rates.
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`17.
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`Under this law, Louisiana pharmacies collect a $.10 fee on each prescription filled.
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`Those pharmacies then remit those fees on a quarterly basis to LDH. And LDH then uses
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`that money to draw down federal funds under the Medicaid program.
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`18.
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`It is thus critical to also understand the interrelationship between state and federal
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`Medicaid programs and the various states’ plans for Medicaid services to understand the
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`requirement that the $.10 provider fee be collected from all plans.
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`19.
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`Medicaid is the government health insurance program for the indigent, which is
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`administered by the state and funded jointly by the federal and state governments. Each state
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`has its own unique Medicaid program.
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`20.
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`In order for the state to obtain federal funding of the Medicaid program, the state’s
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`Medicaid system must be memorialized in a State Plan for Medicaid services which must be
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`approved by the federal government and/or follow the confines of the regulations set out by
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`the federal government. Thus, there is an interrelationship between state and federal Medicaid
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`programs and various states’ plans for Medicaid services, which are a prerequisite for federal
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`funding, known as federal financial participation (FFP).
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`21.
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`One of the things a state may do in order to obtain FFP is to enact a provider
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`assessment program. A provider assessment program allows the state to generate funds from
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`providers or other sources that will be matched by the federal government. Louisiana has
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`enacted such a program through La. R.S. § 46:2625.
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`22.
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`The federal government has mandated that in order to charge a provider fee such as
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`the one established in La. R.S. § 46:2625, however, the fee must be both uniform and broad-
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`based. Through its state plan, Louisiana has elected to charge a fee for every prescription that
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`is filled in Louisiana, irrespective of the plan to which the patient may belong. In fact,
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`charging the fee for every prescription is actually required to obtain full reimbursement from
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`the federal programs.
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`23.
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`The relevant federal requirements for a provider assessment program are:
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`A. The fee is broad-based. All members of a class must be subject to the fee. 42 CFR
`433.56 (B). A specific example of a separate class of healthcare items or services is
`outpatient prescription drugs. 42 CFR 433.56 (A) (7). This means that if a provider,
`such as a pharmacy, falls into a class of providers that is subject to the fee, it must pay
`the fee assessed. Providers cannot opt out of the provider fee program, depending on
`the plan to which the patient belongs to.
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`B. The fee is uniform. The fee is considered to be uniform if it is imposed on a class that
`is the same for every provider in the class, the fee is imposed on the provider’s revenue
`receipts with respect to a class of items or services, and it is the same for each provider
`of such items or services. 42 CFR 433.68 (D) (1) (iv).
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`24.
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`Act 260 of the 1992 Louisiana Legislative Regular Session specifically directed the
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`LDH to impose such uniform and broad-based fees to obtain FPP. The Department did so in
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`Title 48 Chapter 40, Section 4001
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`D. That regulation reads:
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`Pharmacy Services. A prescription fee shall be paid by each pharmacy and dispensing
`physician for each out-patient prescription dispensed. The fee shall be $0.10 per
`prescription dispensed by a pharmacist or dispensing physician Where a prescription
`is filled outside of Louisiana and not shipped or delivered in any form or manner to
`a patient in the state, no fee shall be imposed. However, out-of-state pharmacies or
`dispensing physicians dispensing prescriptions which are shipped, mailed or delivered
`in any manner inside the state of Louisiana shall be subject to the $0.10 fee per
`prescription. The fee only applies to prescriptions which are dispensed and sold for
`human use. Pharmacies and dispensing physicians subject to prescription fees shall
`provide documentation quarterly, on a form provided by the department, of
`utilization for all medications dispensed in conjunction with payment of fees.
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`25.
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`That regulation complies with La. R.S. § 46:2625 A.1(c). Under both the statute and
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`regulation, the prescription fee “shall be paid by each pharmacy and dispensing physician for
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`each out-patient prescription dispensed.” That requirement is irrespective of insurer, plan, or
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`administrator. La. R.S. § 46:2625 A. (2) provides for reimbursement of that fee and mandates
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`that the reimbursement “shall be considered an allowable cost for purposes of insurance or
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`other third party reimbursements.”
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`26.
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`Further, La. R.S. § 22:1860.1 A. states that, “It is the obligation of a health insurance
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`issuer or its agent to reimburse a pharmacist or his agent for fees remitted by a pharmacy or
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`pharmacist or his agent in compliance with R.S. § 46:2625.”
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`27.
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`The payment, collection, and remittance of the $.10 provider fee is critical for the
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`proper functioning of Louisiana’s healthcare budget. There are approximately 90 million
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`prescriptions filled each year in Louisiana. The $.10 provider fee thus represents around
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`$9,000,000.00 in remittances to LDH. But as detailed above, LDH uses those funds to help
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`draw down federal dollars to help fund Louisiana’s healthcare budget. Given the federal
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`match, the $.10 provider fee represents around $24,750,000.00 to Louisiana’s healthcare
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`budget.
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`28.
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`Despite the requirement that any fee be broad-based and uniform, the Louisiana
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`Department of Insurance (LDI) issued Advisory Letter 2016-01 on July 1, 2016. That letter
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`stated that
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`. . the LDI does not believe it can require that health insurance issuers, health
`maintenance organizations, pharmacy benefit managers, or third party administrators
`of Medicare Advantage plans to comply with either the levying of the fee under La.
`R.S. § 46:2625 or the provision of the same statute requiring contractual
`reimbursement...2
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`2 Exhibit 2.
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`Thus under that letter, prescriptions that were paid for by Medicare Advantage plans
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`were not subject to imposition of the ten cent provider fee mandated by La. R.S. § 46:2625.
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`And under this analysis, health insurers need not reimburse a pharmacist for such fees as
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`mandated by La. R.S. § 22:1860.1.
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`29.
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`But the LDH disagreed with this interpretation and responded on September 16
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`2016 with a Memorandum addressed to “All Pharmacies Dispensing Prescriptions to
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`Louisiana Residents.” That Memorandum stated that,
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`There has been some recent confusion about the provider fee that Louisiana imposes
`on all prescriptions regardless of payor source. In accordance with
`Louisiana R.S. § 46:2625, the Louisiana Department of Health want to remind all
`pharmacy staff who dispense prescriptions to Louisiana residents of the requirement
`to remit the $0.10 per prescription provider fee. Every pharmacy in the state of
`Louisiana, certain out of state pharmacies and dispensing physicians in Louisiana
`must remit this fee for each prescription filled including Medicare, Medicaid, other
`third party prescriptions and cash.3
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`30.
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`Thus under the LDH’s interpretation, all prescriptions “regardless of payor source”
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`are subject to imposition of the ten cent provider fee mandated by La. R.S. § 46:2625. And
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`LDH places the onus on pharmacists to collect the fee, regardless of whether those
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`pharmacists are reimbursed. Based on LDI’s July 1, 2016 Advisory Letter 2016-01, certain
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`plan administrators began to refuse to reimburse the fee or attempted recouping prior
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`payments of it.
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`3 Exhibit 3.
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`31.
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`Louisiana independent pharmacies were thus caught in the middle. On the one hand,
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`LDI took the position that prescriptions filled under the Medicare Advantage plan were not
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`subject to La. R.S. § 46:2625. In taking that position, LDI ignored the requirement for “broad
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`based” and “uniform” fees under Louisiana’s FPP plan. It also ignored the plain language of
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`La. R.S. § 22:1860.1 requiring “health insurance issuer or its agent to reimburse a pharmacist
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`or his agent for fees remitted by a pharmacy or pharmacist or his agent in compliance with
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`R.S. § 46:2625” and La. R.S. § 46:2625 A.(2) which provides for reimbursement of that fee
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`and that the reimbursement “shall be considered an allowable cost for purposes of insurance
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`or other third party reimbursements.” On the other side, LDH ordered collection by
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`pharmacies and remittance to it of the ten cent provider fee on all prescriptions, irrespective
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`of payor source. But LDH also ignored La. R.S. § 22:1860.1 and La. R.S. § 46:2625 A.(2)
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`which requires that pharmacies be reimbursed this fee. This conflict put an unfair onus on
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`Louisiana independent pharmacies and necessitated the filing of a Petition for Declaratory
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`Judgment, asking the state district court to decide who was right. If the statutes were in fact
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`preempted, then it was unfair to make the pharmacies collect and remit a fee for which it
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`would never be reimbursed.
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`32.
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`Subsequent to the filing of that lawsuit, the LDI issued a revised letter. More
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`particularly, in Advisory Letter 2016-01, Revised and Reissued, dated March 5, 2018, James
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`J. Donelon, Louisiana Commissioner of Insurance, states that the intent of the original
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`Advisory Letter 2016-01 was “to notify industry that, due to federal preemption under 42
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`U.S.C.A. §1395w-26(b)(3) [codified at 42 C.F.R 422.402], the LDI's authority over Medicare
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`Advantage (MA) Plans is limited to licensing and plan solvency.” The March 5, 2018
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`Advisory Letter 2016-01 Revised and Reissued further states that LDI “maintains its position
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`that Congress restricted its ability to regulate MA plans outside of these specific areas and that
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`it is preempted from taking action under La. RS. 22: 1860.1 by federal law governing MA
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`plans.”
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`Further, Commissioner Donelon stated in Advisory Letter 2016-01 Revised and
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`Reissued "Effective
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`immediately, all health
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`insurance
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`issuers, health maintenance
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`organizations, third party administrators, group self-insurers, and any other affected persons
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`are ordered and directed to comply with all applicable state and federal laws pertaining to the
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`provider fee authorized by La. RS. § 46:2625.”4 Thus, there was no longer a conflict between
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`the positions of LDI and LDH.
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`33.
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`The LDH says that federal law does not preempt La. R.S. § 46:2625 regardless of the
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`payor source. LDI “ordered and directed” companies like ESI “to comply with all applicable
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`state and federal laws pertaining to the provider fee authorized by La. R.S. § 46:2625.” LDH
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`and LDI agreed to a Consent Judgment in state court, stating that there was no conflict
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`between the two state agencies’ positions.5
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`34.
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`But according to the May 12, 2020 communication, ESI still takes the position that
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`federal law preempts La. R.S. § 46:2625 and refuses to reimburse Louisiana independent
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`pharmacies the ten cent provider fee on Medicare plans. At the bottom of the May 12, 2020
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`communication, ESI includes this disclaimer:
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`4 Exhibit 4.
`5 Exhibit 5.
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`DISCLAIMER: THIS REMINDER IS BEING PROVIDED IN CONNECTION WITH REQUIREMENTS SET BY THE LOUISIANA
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`DEPARTMENT OF HEALTH AND/OR THE LOUISIANA DEPARTMENT OF INSURANCE. THIS REMINDER IS NEITHER AN
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`ENDORSEMENT NOR AGREEMENT BY EXPRESS SCRIPTS REGARDING WHETHER ANY FEE OR SALES TAX IS
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`APPROPRIATE OR REQUIRED BY LAW TO BE REIMBURSED BY EXPRESS SCRIPTS. EXPRESS SCRIPTS RESERVES ALL OF
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`ITS RIGHTS TO DISPUTE ENTITLEMENT TO ANY SUCH REIMBURSEMENT.
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`ESI thus refuses to acknowledge that any fee is due. As a result, this request for
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`declaratory judgment is timely, appropriate and needed. Either federal law preempts La. R.S.
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`§ 46:2625 or it does not. Louisiana independent pharmacies should not be caught in the
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`middle.
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`PRAYER
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`WHEREFORE, plaintiff, Louisiana Independent Pharmacies Association, prays that
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`this Complaint be deemed good and sufficient and that after due proceedings are had that
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`there be judgment rendered in its favor and against ESI and that this Court:
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`A. Declare whether or not the $.10 per prescription fee as mandated by La. R.S.
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`§ 46:2625 is due on all prescriptions regardless of payor; and
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`B. Declare that if the $.10 per prescription fee as mandated by La. R.S. § 46:2625 is
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`not due on all prescriptions regardless of payor, that its member pharmacies not be
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`required to remit ten cents on every prescription filled.
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`C. Declare whether La. R.S. § 22:1860.1 requires ESI or its agent to reimburse a
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`pharmacist or his agent for fees remitted by a pharmacy or pharmacist or his agent
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`in compliance with R.S. § 46:2625, irrespective of the plan the patient is a member.
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`Respectfully submitted,
`WHALEY LAW FIRM
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`___________________________
`JOHN RANDALL WHALEY #25930
`jrwhaley@whaleylaw.com
`6700 Jefferson Highway
`Building 12, Suite A
`Baton Rouge, LA 70806
`Telephone: 225.302.8810
`Facsimile: 225.302.8814
`ATTORNEYS FOR PLAINTIFF
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