By Sherri M. Schroeder, J.D.
Although the ADA and ERISA claims failed, ACA, Rehabilitation Act, and California Unfair Competition Law claims against the pharmacy benefits managers and employer-sponsored health plans were remanded.
A district court’s dismissal of an action brought under the Affordable Care Act (ACA), Americans with Disabilities Act (ADA), Employee Retirement Income Security Act (ERISA), and California’s Unfair Competition Law (UCL) by individuals living with HIV/AIDS and obtaining prescription drugs through employer-sponsored health plans was vacated in part and remanded for further proceedings after a de novo review by the Ninth Circuit appeals court. The ADA claim was vacated for failure to plead the denial of a public accommodation because a benefit is not a place of "public accommodation." The ERISA claim was waived and the district court’s dismissal of the claim affirmed because the plaintiff’s new argument was raised for the first time on appeal. However, the ACA and UCL claims survived to the extent they are predicated on a violation of the ACA under Section 504 of the Rehabilitation Act (Doe v. CVS Pharmacy, December 9, 2020, Smith, M.).
Background. The "John Doe" plaintiffs (Does) are individuals living with HIV/AIDS who have employer-sponsored health plans and who rely on those plans to obtain prescription drugs. Until recently, Does could fill their prescriptions at community pharmacies where they were able to consult knowledgeable pharmacists who were familiar with their personal medical histories and could make adjustments to their drug regimens to avoid dangerous drug interactions or remedy potential side effects. Now, their pharmacy benefits managers require all health plan enrollees to obtains specialty medications, including HIV/AIDS drugs, through their specialty pharmacies for those benefits to be considered "in-network." The in-network specialty pharmacies dispense specialty drugs only by mail or drop shipments to certain pharmacy stores for pickup. If the Does do not obtain their HIV/AIDS medications through the specified specialty pharmacies, those medications are not considered "in-network" benefits covered by the health plans, which results in higher prices amounting to thousands more dollars per month.
The Does alleged that this violated the anti-discrimination provisions of the ACA, ADA, ERISA, and California’s Unruh Civil Rights Act and Unfair Competition Law. They also alleged this forced them to forego essential counseling and consultation from specialty pharmacists who are best-positioned to detect potentially life-threatening dangerous side effects, immediately provide new drug regimens as their disease progresses, and provide essential advice and counseling. It also required them to sometimes split prescription providers since certain prescriptions must be filled at community pharmacies and not through the specialty pharmacies, making it hard to track potentially life-threatening drug interactions. According to the Does, filling their prescriptions through the newly required mail/drop method caused them substantial difficulties and put their privacy at risk.
Section 1557 of the ACA. Section 1557 of the ACA incorporates the anti-discrimination provisions of various civil rights statues (race, color, national origin; sex; age; disability), including prohibiting discrimination on the basis of disability pursuant to Section 504 of the Rehabilitation Act (29 U.S.C. § 794). The Does argued that Section 1557 created a new healthcare-specific anti-discrimination standard that permits a discrimination claim under any of the enforcement mechanisms of the statute regardless of the Does’ protected class status. Finding Doe v. BlueCross BlueShield of Tennessee (926 F.3d 235 (6th Cir. 2019)) persuasive, the appeals court held that Section 1557 does not create a new health-care-specific anti-discrimination standard. Because the Does claim discrimination on the basis of their disability, to state a claim for a Section 1557 violation, they must allege facts adequate to state a claim under Section 504 of the Rehabilitation Act. Plaintiffs are not permitted to pick the statute with the lightest standard from the four Section 1557 options and use that standard of liability in prosecuting a claim for disability discrimination.
Nature of the benefit under Section 504. Turning to the question of whether the Does had a claim under Section 504 of the Rehabilitation Act, the appeals court applied a two-prong test set out in Alexander v. Choate (469 U.S. 287 (1985)). The court first considered the nature of the benefit the Does were allegedly denied. Finding the district court unduly narrowed the benefit to obtaining specialty drugs at favorable prices from certain pharmacies, the appeals court found persuasive the Does’ argument that the new drug program discriminated against them by eliminating various aspects of pharmaceutical care that they deem critical to their health.
Meaningful access under Section 504. The appeals court then turned to the question of whether the new drug program provided meaningful access to the benefit. Here, the court found the Does allegations were sufficient to state an ACA disability discrimination claim. The Does alleged the structure and implementation of the new drug program discriminated against them on the basis of their disability by preventing HIV/AIDS patients from obtaining the same quality of pharmaceutical care that non-HIV/AIDs patients may obtain in filling non-specialty prescriptions, thereby denying them meaningful access to their prescription drug benefit. The fact that the benefit was facially neutral did not dispose of a disparate impact claim based on lack of meaningful access.
The Does alleged that even though the new drug program applied to specialty medications that may not be used to treat conditions associated with disabilities, the program burdened HIV/AIDS patients differently because of their unique pharmaceutical needs. Specifically, they claimed that changes in medication to treat the continual mutation of the virus required pharmacists to review all of an HIV/AIDS patient’s medications for side effects and adverse drug interaction, a benefit they no longer received under the new drug program. Furthermore, the appeals court found the district court erred by requiring that the Does plead allegations showing the new drug program impacted people with HIV/AIDS in a unique or severe manner. The meaningful access standard in Choate did not require the Does to allege that their deprivation was unique to those living with HIV/AIDS, nor that the deprivation was severe. The Does were only required to prove they were not provided meaningful access to the benefit.
ADA claim. The appeals court affirmed the district court’s dismissal of the Does’ ADA claim. Because the Does did not plausibly allege that their benefit plan was a place of public accommodation, they cannot maintain a claim of discrimination under the ADA. Even though the Does may be able to show they are disabled within the meaning of the ADA and that they were denied access to their health plans on the basis of their disabilities, since a benefit plan is not a place of "public accommodation," their argument failed.
ERISA claim. The district court dismissed the Does’ ERISA claim because the Does failed to identify a specific term in their health care plan that conferred the benefits they claim they were denied. This was not challenged by the Does on appeal. Rather, they argued that their health care plans were not "validly amended" to implement the new drug program, and that the corresponding changes to the procedures by which the Does must obtain their HIV/AIDS drugs caused a reduction in or elimination of benefits without a change in actual coverage. This claim was dismissed because the argument was raised for the first time on appeal.
UCL claim. California’s UCL prohibits "unlawful, unfair or fraudulent business act[s] or practice[s]." Each of these adjectives proposes a separate and distinct theory of liability. The Does argued the district court erred by dismissing their UCL claim premised on the "unlawful" and "unfair" prongs. Because the appeals court found that the Does stated a claim under the ACA, the court vacated the district court’s holding on the UCL "unlawful" claim as to the ACA predicate. However, the appeals court affirmed the district court’s denial of the UCL "unfair" claim. The Does alleged no facts that would support their position. The conclusory recitation of one of the UCL’s legal standards did not clarify what conduct they claimed was unfair or on what allegations in the complaint the Does relied for this claim.
This is case No. 19-15074.
Attorneys: Alan M. Mansfield (Whatley kallas, LLP) for John Doe, One and John Doe, Two. Craig D. Singer (Williams & Connolly LLP) for CVS Pharmacy, Inc. and Caremark, LLC.
Companies: CVS Pharmacy, Inc.; Caremark, LLC
Cases: CaseDecisions AccessNews AgencyNews DrugNews EssentialBenefitNews GeneralNews HealthCareWorkforceNews AlaskaNews ArizonaNews CaliforniaNews HawaiiNews IdahoNews MontanaNews NevadaNews OregonNews WashingtonNews
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