Starko, Inc. v. PRESBYTERIAN HEALTH PLAN
276 P.3d 252
N.M. Ct. App.2011Background
- Plaintiffs allege Medicaid pharmacists were not properly reimbursed under Section 27-2-16(B) and sue HSD and MCOs under four claims.
- Transition from fee-for-service to SALUD! managed care made MCOs conduits for Medicaid funds; disputes arose over whether 27-2-16(B) required payment of statutory rates.
- Contracts between HSD and MCOs included Starko clauses mandating compliance with 27-2-16(B); pharmacists argued these did not waive their rights.
- District court dismissed several claims; class certification was contested; three judges issued multiple rulings over years.
- New Mexico Court of Appeals held 27-2-16(B) creates an implied private right of action against MCOs, survives managed care, and allows several contract and equitable claims to proceed, with remand for further proceedings.
- Key factual issues include whether $3.65 is a reasonable dispensing fee, whether retroactive federal approval suffices for past reimbursements, and the scope of breach/third-party beneficiary theories.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether 27-2-16(B) creates a private right of action. | Starko argues statute creates private enforcement against MCOs/HSD. | Defendants claim no private right or waivers apply. | Implied private right of action recognized against MCOs. |
| Whether 27-2-16(B) survived the transition to managed care. | statute applies to MCOs as Medicaid conduits post-transition. | MCOs/contract changes could bypass the statute. | Survives transition; applies to MCOs and the managed-care framework. |
| Whether 27-2-16(B) applies when substitution is possible, even if not made. | Dispensing fee and AWP apply whenever a permissible substitution is available. | Only when substitution actually occurs. | Applies whenever substitution would be permissible, not only when actually made. |
| Whether Plaintiffs may pursue breach of contract against HSD under provider agreements. | Provider agreements incorporate 27-2-16(B); HSD must reimburse. | Third-party liability and payment-in-full clauses foreclose recovery against HSD. | Plaintiffs may pursue breach of contract against HSD; remanded to determine deficiency. |
| Whether unjust enrichment claims against MCOs are viable. | Even with contracts, unjust enrichment may lie for excess retained payments. | Contracts provide adequate remedy at law; no equitable relief. | Unjust enrichment claim viable; remanded for further development. |
Key Cases Cited
- Gonzaga Univ. v. Doe, 536 U.S. 273 (U.S. Supreme Court, 2002) (rights-creating language required for private causes of action)
- Wilder v. Va. Hosp. Ass’n, 496 U.S. 498 (U.S. Supreme Court, 1990) (Boren Amendment-created private rights to reasonable reimbursement)
- National Trust for Historic Preservation v. City of Albuquerque, 117 N.M. 590 (Ct. App. 1994) (test for implied private remedies factors)
- Starko II, Inc. v. Gallegos, 140 P.3d 1085 (N.M. Ct. App. 2006) (addressed non-delegable duty and private action framework in Starko line)
- Starko, Inc. v. Cimarron Health Plan, Inc. (Starko I), 137 N.M. 310 (N.M. Ct. App. 2005) (class certification and Rule 1-023(F) discussion)