University of Michigan Law School
Civil Rights Litigation Clearinghouse
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Case Name California Pharmacists Association v. Maxwell-Jolly PB-CA-0028
Docket / Court 2:09-cv-08200 ( C.D. Cal. )
State/Territory California
Case Type(s) Public Benefits / Government Services
Case Summary
The California Pharmacists Association and several pharmacies filed this suit against David Maxwell-Jolly, then-Director of the California Department of Health Care Services. The suit was filed on November 11, 2009 in the United States District Court for the Central District of California. ... read more >
The California Pharmacists Association and several pharmacies filed this suit against David Maxwell-Jolly, then-Director of the California Department of Health Care Services. The suit was filed on November 11, 2009 in the United States District Court for the Central District of California. Plaintiffs brought the action under the Supremacy Clause of the U.S. Constitution, arguing that two provisions a bill passed by the California Assembly on July 28, 2009 were contrary to and preempted by federal Medicaid law. Assembly Bill ("AB") X4 5, sections 38 and 39 would reduce the reimbursement rate paid to pharmacies for drugs provided to Medicaid recipients. This legislation was passed without prior approval from the United States Department of Health and Human Services' Centers for Medicare & Medicaid Services ("CMS"), which the plaintiffs argued was contrary to federal law. The California Legislature had also failed to study the potential effects of the rate reductions on the level of access to and quality of care available to Medi-Cal recipients, contrary to the requirements of § 1902(a)(30)(A) of the Social Security Act.

A related case between the same two parties was also filed and which eventually reached the Supreme Court (California Pharmacists Association v. Maxwell Jolly, Clearinghouse code PB-CA-0020.)

The plaintiffs also contested an additional 4% drop in the reimbursement rate, which was the result of changes to the Average Wholesale Prices (AWPs) for several thousand pharmaceuticals, as determined by data from First DataBank, Inc. California based its formula for calculating prescription drug reimbursement rates on these AWPs. A lawsuit filed against First DataBank alleging the company had set AWPs at artificially high levels had resulted in a consent decree wherein the company agreed to reduce the AWPs for more than 2000 drugs by five percent. New England Carpenters Health Benefits Fund et al v. First Databank, Inc., 582 F.3d 30 (1st. Cir. 2009). First DataBank had voluntarily reduced its AWP for many thousand more drugs. The plaintiffs argued that California accepted the reduced reimbursement rates that resulted from the lowering of the AWPs without first considering the affects this would have on the "efficiency, economy, and quality of care," provided to Medicaid recipients as required by § 30(A).

Plaintiffs sought restraining orders and preliminary and permanent injunctions preventing the contested provisions of AB X4 5 from being implemented and preventing the State from using the reduced AWPs as the basis for its reimbursement rates. They also sought declaratory judgments holding the contested rate reductions to be unlawful.

On December 28, 2009 the Court declined to grant a temporary restraining order preventing the implementation of the rate reductions. The plaintiffs appealed the decision to the Ninth Circuit Court of Appeals, and then voluntarily dismissed the appeal when that Court found that it probably lacked jurisdiction to consider the appeal while the plaintiffs' motion for a preliminary injunction was still pending in the lower court.

On May 5, 2010, the Court granted in part and denied in part the plaintiffs' motion for a preliminary injunction, granting preliminary injunctions against the implementation of the contested effects of AB X4 5. Both parties filed appeals to the Ninth Circuit Court of Appeals. The appeals were stayed pending the petitions for certiorari review by the Supreme Court of several related cases involving the question whether the Supremacy Clause could serve as a basis for a private suit to enforce the Medicaid Act against a state. This stay was continued after review was granted in these cases and while they remained pending before the Supreme Court. See, for instance, Douglas v. Independent Living Center of Southern California (Clearinghouse code PB-CA-0016), and the other California Pharmacists Association v. Maxwell-Jolly case, mentioned above (PB-CA-0020.)

The District Court proceedings were also stayed pending the outcome of these Supreme Court cases. CMS approved most of the California Medicaid plan amendments while the Supreme Court cases were still awaiting adjudication. In light of this, on February 22, 2012, the Supreme Court declined to issue a ruling on the Supremacy Clause question. Instead, the Supreme Court vacated the Ninth Circuit Court's decision in the cases before it and remanded those cases to the Ninth Circuit for reconsideration. Douglas v. Independent Living Center of Southern California, 132 S. Ct. 1204 (U.S. 2012).

Apparently because those cases are still ongoing at the Appellate Court level, the instant case has not been reopened. This summary is up-to-date as of July 2013.

Alex Colbert-Taylor - 07/26/2013


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Issues and Causes of Action
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Issues
Benefit Source
Medicaid
Content of Injunction
Preliminary relief denied
Defendant-type
Hospital/Health Department
Jurisdiction-wide
General
Funding
Payment for care
Public benefits (includes, e.g., in-state tuition, govt. jobs)
Plaintiff Type
Private Plaintiff
Causes of Action Title XIX of the Social Security (Medicaid) Act, 42 U.S.C §1396
Defendant(s) State of California
Plaintiff Description The California Pharmacists Association and several pharmacies.
Indexed Lawyer Organizations None on record
Class action status sought No
Class action status granted No
Prevailing Party None Yet / None
Public Int. Lawyer No
Nature of Relief None yet
Source of Relief None yet
Form of Settlement None on record
Order Duration not on record
Case Closing Year n/a
Case Ongoing Yes
Case Listing PB-CA-0017 : California Association For Health Services At Home v. Shewry (C.D. Cal.)
PB-CA-0018 : California Medical Transportation Association, Inc. v. Shewry (C.D. Cal.)
PB-CA-0019 : Managed Pharmacy Care v. Maxwell-Jolly (C.D. Cal.)
PB-CA-0020 : California Pharmacists Association v. Maxwell-Jolly (C.D. Cal.)
PB-CA-0016 : Independent Living Center of Southern California v. Maxwell-Jolly (C.D. Cal.)
PB-CA-0024 : National Association of Chain Drug Stores v. Schwarzenegger (C.D. Cal.)
DR-CA-0030 : Independent Living Center v. Maxwell-Jolly (C.D. Cal.)
Docket(s)
2:09-cv-08200 (C.D. Cal.) 07/12/2011
PB-CA-0028-9000.pdf | Detail
PACER [Public Access to Court Electronic Records]
General Documents
Complaint for Injunctive and Declaratory Relief 11/09/2009
PB-CA-0028-0001.pdf | Detail
Document Source: PACER [Public Access to Court Electronic Records]
First Amended Complaint 12/05/2009
PB-CA-0028-0002.pdf | Detail
Document Source: PACER [Public Access to Court Electronic Records]
Order Granting in Part and Denying in Part Plaintiffs' motion for Preliminary Injunction 05/05/2010 (C.D. Cal.)
PB-CA-0028-0003.pdf | Detail
Document Source: PACER [Public Access to Court Electronic Records]
(In Chambers:) Order Denying Motion to Alter, Amend, Modify, and Reconsider 07/06/2010 (C.D. Cal.)
PB-CA-0028-0004.pdf | Detail
Document Source: PACER [Public Access to Court Electronic Records]
Judges Nagle, Margaret A. (C.D. Cal.) [Magistrate]
PB-CA-0028-9000
Snyder, Christina A. (C.D. Cal.)
PB-CA-0028-0003 | PB-CA-0028-0004 | PB-CA-0028-9000
Monitors/Masters None on record
Plaintiff's Lawyers Carman, Lynn S. (California)
PB-CA-0028-0001 | PB-CA-0028-0002 | PB-CA-0028-9000
Friedman, Stanley Lester (California)
PB-CA-0028-0001 | PB-CA-0028-0002 | PB-CA-0028-9000
Defendant's Lawyers Dhadwal, S. Andrew (California)
PB-CA-0028-9000
Kim, Jennifer M. (California)
PB-CA-0028-9000
Wong, Michele Li (California)
PB-CA-0028-9000
Other Lawyers None on record

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