Starko, Inc. v. Presbyterian Health Plan, Inc.
1 N.M. Ct. App. 707
N.M. Ct. App.2012Background
- Starko, Inc. and Jerry Jacobs represent a certified class of Medicaid pharmacists alleging underpayment under NMSA 1978 § 27-2-16(B) by HSD and the MCOs (Presbyterian Health Plan, Cimarron Health Management).
- Historically NM Medicaid moved from fee-for-service to managed care via SALUD!, with MCOs administering pharmacy services under MMCS Agreements incorporating applicable statutes and rules.
- Section 27-2-16(B) requires reimbursement limited to the wholesale cost of the lesser expensive therapeutically equivalent drug plus a dispensing fee of at least $3.65, when drug product selection is permitted by § 26-3-3.
- Plaintiffs allege MCOs and HSD paid under contracts at rates potentially below § 27-2-16(B), and that contracts and waivers did not extinguish rights conferred by the statute.
- District court orders dismissed claims against MCOs and HSD on various theories, including breach of contract, unjust enrichment, and declaratory/injunctive relief; class certification and implied rights issues were contested on appeal.
- This Court affirms in part, reverses in part, and remands for proceedings consistent with the opinion, including recognizing an implied private right of action under § 27-2-16(B) against MCOs and applying the statute to the managed-care framework.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 27-2-16(B) create a private right of action? | Starko argues the statute implies a private right against MCOs and HSD. | MCOs/HSD contend no private remedy or enforceable right exists. | Implied private right of action recognized against MCOs; not preserved against HSD on remand. |
| Did § 27-2-16(B) survive the transition to managed care? | Statute remains applicable to MCOs as part of the Medicaid program. | Managed care framework could render the statute inapplicable or superseded. | Survives; statute applies to MCOs and the managed-care program. |
| Does § 27-2-16(B) apply only when a substitution actually occurs? | The dispensing-fee and AWP apply whenever substitution is permissible, not only when made. | Only when substitution occurs should the provision apply per § 26-3-3 mechanics. | Applies whenever substitution is permissible, even if not actually made; brand and generic substitutions included. |
| Is the $3.65 dispensing fee reasonable and enforceable on summary judgment? | Evidence shows cost structures and expert data suggesting unreasonableness. | District court properly deemed fee reasonable based on state and federal factors. | Reasonableness is a factual question; remanded for proceedings to determine a reasonable dispensing fee per pharmacy. |
| Can Plaintiffs bring a breach of contract claim against HSD under provider agreements incorporating § 27-2-16(B)? | Provider agreements incorporate § 27-2-16(B) and require payment of shortfalls. | Third-party liability provisions and payments in full constrain further recovery. | Yes; contract claims against HSD survive where provider agreements incorporate § 27-2-16(B) and payments fall short. |
Key Cases Cited
- Gonzaga Univ. v. Doe, 536 U.S. 273 (Supreme Court 2002) (FERPA rights lack rights-creating language; no private action)
- Wilder v. Va. Hosp. Ass’n, 496 U.S. 498 (Supreme Court 1990) (Boren Amendment creates enforceable private right for providers)
- National Trust for Historic Pres. v. City of Albuquerque, 874 P.2d 798 (N.M. Ct. App. 1994) (three-factor test for implied private remedy in statute)
- Sims v. Sims, 930 P.2d 153 (N.M. Ct. App. 1996) (equitable relief remains available alongside statutory remedies)
- Hydro Conduit Corp. v. Kemble, 110 N.M. 173 (N.M. 1990) (unjust enrichment as independent equitable remedy)