Defendant, the Michigan Department of Community Health (DCH), appeals by leave granted the trial court’s issuance of a preliminary injunction against implementation of a prescription drug rebate and preauthorization policy. We reverse.
The dch administers Medicaid and non-Medicaid programs that provide prescription drug coverage for eligible Michigan residents. Under the Medicaid program, the federal government and the state share responsibility for reimbursing pharmacists the costs of covered drugs. See 42 USC 1396r-8. The manufacturer of the drug then rebates a portion of that cost to the state. The state’s payments for medications dispensed under a non-Medicaid program were not rebated by drug manufacturers.
On October 9, 2001, the dch announced its intention to implement a policy expanding the rebate requirement to “[programs funded in all or in part by State dollars,” which included, at least, the Medicaid Fee for Service Program (non-HMO recipients), the Children’s Special Health Care Services Basic Health Plan (cshcs), the Refugee Assistance Program, 1 and the State Medical Program (smp). The new policy requires that prior authorization be obtained by the prescribing physician before the cost of certain identified medications would be reimbursed by the state under the affected programs. However, the prior authorization requirement would be waived if the drug manufacturer agreed to pay the state a “supplemental” rebate in addition to the “basic,” or Medicaid-level, rebate already required under federal law as a condition of participation in the Medicaid program. The combined supplemental and basic rebate payments would reduce the state’s cost for the identified drug to the level of that of an equivalent or “preferred” drug, thereby drastically reducing the state’s prescription drug expenses.
On November 30, 2001, plaintiff, Pharmaceutical Research and Manufacturers of America (phrma),
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brought this action seeking declaratory and injunctive
relief alleging, in pertinent part, that (1) the basic and supplemental drug rebates and prior authorization requirements with regard to drugs dispensed under non-Medicaid programs were not statutorily authorized, (2) the supplemental rebate policy with regard to drugs dispensed under the Medicaid (non-HMO) program was not statutorily authorized, and (3) the alleged authority under which defendant sought to implement the proposed policy,
On December 28, 2001, motions to intervene and for preliminary injunction were filed by the intervening plaintiffs, mental health care consumers. With the filing of
On appeal, the dch argued that the preliminary injunction was improperly issued because PhRMA did not establish the requirements for such extraordinary relief. We agree. This Court reviews for an abuse of discretion the trial court’s decision to grant or deny a preliminary injunction.
Alliance for Mentally Ill of Michigan v Dep’t of Community Health,
Injunctive relief is an extraordinary remedy.
Fancy v Egrin,
First, we consider the trial court’s conclusion that PhRMA was likely to prevail on the merits of its case because the dch did not have the authority to implement the drug rebate and preauthorization policies with regard to Medicaid and non-Medicaid, state-funded, health care programs. On appeal, PhRMA, the intervening plaintiffs, and amici curiae
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argue that the dch was not so empowered because
In considering this issue, we must examine general principles of administrative law. The DCH is a principal department in the executive branch. MCL 330.3101. The functions, powers, and duties of the DCH, as an executive agency, are allocated by law, i.e., by executive order or legislation. See Const 1963, art 5, § 2;
Straus v Governor,
Pursuant to the Social Welfare Act (swa), MCL 400.1
et seq.
the DCH is responsible for establishing and administering medical assistance programs in the state, including the Medicaid program. See MCL 330.3101. Consistently with separation of powers principles and in light of the complex nature of the endeavor, the Legislature has delegated broad authority to the DCH to enable it to accomplish its statutory responsibilities. For example, MCL 400.105(1) provides that the DCH “shall establish a program for medical assistance for the medically indigent under title XIX [42 USC 1396
et seq.].”
However, consonant with
the delegation doctrine, such authority is circumscribed by the addition of substantive standards, including, for example, eligibility requirements, types of services provided, and the directive to develop policies and procedures regarding the participation of, and reimbursement to, health care service providers. See MCL 400.106, 400.109, 400.111a. In a similar manner,
At issue here, first, is whether the dch had the authority to implement a supplemental rebate and preauthorization policy with regard to drugs dispensed under the Medicaid program. PhRMA argues that the Legislature did not authorize the imposition of such rebate and preauthorization requirements. We disagree. Pursuant to MCL 400.109(l)(d), eligible persons “may receive pharmaceutical services from a licensed pharmacist of the person’s choice as pre
scribed by a licensed physician or dentist and approved by the department of community health.” Further, MCL 400.111a provides for the establishment of appropriate policies and procedures relating to the participation of health care service providers and the reimbursement of costs.
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Specifically, policies and procedures are mandated to assure that “reimbursement is not made to those providers whose services, supplies, or equipment cost the program in excess of the reasonable value received” and that “the state is a prudent buyer.” MCL 400.111a(3)(d) and (e). Consequently, by the plain language of the statutes, the Legislature granted the dch the authority to require preauthorization and required the dch to implement appropriate payment and reimbursement policies. See
Danse Corp v Madison Hts,
PhRMA, the intervening plaintiffs, and their supportive amici curiae claim that if the Legislature intended to permit the DCH to implement such policies, it would have given an express grant of authority in its annual appropriation acts. We disagree. Although the Legislature effectively retains the power to limit and modify the delegated authority through annual appropriation acts or other subsequent legislation, its failure to do
so is not construed as negating the authority already granted to the dch. See MCL 400.1b;
Here, the Legislature, in its annual appropriations act, did include a directive to the dch to “submit changes to pharmacy policies for Medicaid recipients not enrolled in Medicaid hmos to the chairpersons.” See
Next, we consider whether the preauthorization and drug rebate policies are authorized with regard to prescription drugs dispensed through the non-Medicaid health care programs. Similarly to the delegation of authority granted to the dch by the SWA, the DCH has been granted broad authority to establish and develop several health care programs to assist our disadvantaged citizens. Under the SMP,
The DCH has been provided specific directives, primarily through appropriations legislation, regarding preauthorization and rebate policies applicable to these programs. In particular, with regard to the SMP and cshcs programs,
(1) The department shall use procedures and rebates [sic] amounts specified under section 1927 of title XIX of the social security act, 42 U.S.C. 1396r-8, to secure quarterly rebates from pharmaceutical manufacturers for outpatient drugs dispensed to participants in state medical program and children’s special health care services.
(2) For products distributed by pharmaceutical manufacturers not providing quarterly rebates as listed in subsection (1), the department may require preauthorization.
With regard to the EPIC program, MCL 550.2006 provides that the dch may:
(b) Use procedures and rebate amounts specified under section 1927 of title XIX of the social security act, 42 U.S.C. 1396r-8, to secure quarterly rebates from pharmaceutical manufacturers for outpatient drugs dispensed to participants in epic.
(c) For products distributed by the pharmaceutical manufacturers not providing quarterly rebates as listed in subdivision (b), require preauthorization.
Further,
The department shall immediately establish a pharmaceutical rebate recovery initiative for the epic program. This initiative shall be based on, and be no more restrictive than, the existing Medicaid pharmaceutical rebate program.
Accordingly, both a preauthorization policy and a rebate policy that is consistent with 42 USC 1396r-8 are expressly mandated. The Medicaid pharmaceutical rebate program does not establish a maximum rebate amount. See 42 USC 1396r-8(c). Further, state-imposed supplemental rebate policies are not prohibited by title XIX of the Social Security Act. In fact, the United States Department of Health and Human Services (hhs), the administrator of the federal component of the Medicaid program, released guidelines dated November 15, 2000, entitled “Medicaid Drug Rebate Program Release No. 102,” which
In sum, the dch is statutorily authorized to implement preauthorization and drug rebate policies with regard to medications dispensed through Medicaid and non-Medicaid programs, including smp, cshcs, and epic. In the absence of a specifically defined legislative limitation, when the dch is delegated the responsibility of establishing and administering health care programs, it must also be accorded concomitant powers to implement policies that promote that endeavor, including preauthorization and drug rebate policies. On the record before the trial court, Phrma was not likely to prevail on the merits; therefore, the preliminary injunction was improperly issued and must be vacated. In consideration of our holding, we decline to address the issues whether
Reversed and remanded for proceedings consistent with this opinion. We do not retain jurisdiction.
Notes
The Refugee Assistance Program is federally funded, as provided by 8 USC 1522(e), entitling eligible persons to the same services as provided under the state’s Medicaid program, 45 CPR 400.105, pursuant to the Social Welfare Act, MCL 400.10(3).
Phrma is an organization whose members are the suppliers of more than seventy-five percent of the sales of brand name prescription drugs in the United States.
The Seniors Coalition, Washington Legal Foundation, Allied Educational Foundation.
Pursuant to MCL 24.207(q), such policies are not “rules” within the contemplation of the Administrative Procedures Act, MCL 24.201 el seq.