Leo Parrino v. HHS
869 F.3d 392
6th Cir.2017Background
- Leo Parrino, a licensed pharmacist, pleaded guilty in 2011 to a strict‑liability misdemeanor for introducing misbranded drugs into interstate commerce; he received probation and restitution.
- HHS (via OIG) notified Parrino that, under 42 U.S.C. § 1320a‑7(a), he was required to be excluded from participation in Medicare, Medicaid, and federal health programs for five years.
- Parrino sought ALJ and Departmental Appeals Board review; both upheld the mandatory five‑year exclusion.
- He sued in federal district court alleging (1) violation of Fifth Amendment substantive due process (no mens rea; punishment for strict liability offense) and (2) agency action arbitrary and capricious under the APA.
- The district court dismissed, holding Parrino had no protected property or liberty interest in participation in federal health programs and HHS’s action was not arbitrary or capricious.
- The Sixth Circuit affirmed: no protected interest (so only rational‑basis review applies), the exclusion furthers legitimate government interests, and the exclusion followed the unambiguous statutory mandate.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Parrino has a property interest in continued participation/reimbursement in federal health programs | Parrino: exclusion deprives him of a property interest tied to his ability to practice and be paid as a provider | HHS: providers are not intended beneficiaries of federal programs; no clear government promise creating a property right | Held: No property interest; courts of appeals persuasive that providers lack such interest |
| Whether Parrino has a liberty interest (reputation/good name) | Parrino: exclusion stigmatizes him and effectively forecloses practice | HHS: Parrino did not allege public disclosure of stigmatizing information; exclusion alone insufficient | Held: No protected liberty interest because no allegation of public disclosure of stigmatizing information |
| Proper level of constitutional review of the exclusion | Parrino: exclusion severe and punitive; challenges substantive due process | HHS: only rational‑basis review is required because no fundamental right implicated; exclusion serves patient safety and fiscal interests | Held: Rational‑basis review applies; exclusion is rationally related to legitimate government interests (patient safety, preventing improper reimbursement) |
| Whether HHS’s use of the mandatory exclusion was arbitrary, capricious, or contrary to statute | Parrino: statute should be read to permit exclusion under the permissive provision; mandatory application is arbitrary and renders portions superfluous | HHS: statute unambiguously requires exclusion for convictions related to delivery of items/services; agency followed clear congressional mandate | Held: HHS acted consistently with the statute; exclusion was not arbitrary or capricious and did not violate substantive due process |
Key Cases Cited
- Washington v. Glucksberg, 521 U.S. 702 (1997) (standard for identifying fundamental rights in substantive due process)
- United States v. Salerno, 481 U.S. 739 (1987) (discussion of substantive and procedural due process)
- Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (agency must follow unambiguous statute; deference framework)
- Erickson v. United States ex rel. Dep’t of Health & Human Servs., 67 F.3d 858 (9th Cir. 1995) (no property interest for providers in program participation)
- Koerpel v. Heckler, 797 F.2d 858 (10th Cir. 1986) (no property interest absent clear government promise)
- Joelson v. United States, 86 F.3d 1413 (6th Cir. 1996) (elements for liberty‑interest stigma claims)