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PHARMACEUTICAL RESEARCH & MNFRS. OF AMERICA v. SCULLY

March 28, 2003

PHARMACEUTICAL RESEARCH AND MANUFACTURERS OF AMERICA, PLAINTIFF, AND NATIONAL URBAN INDIAN COALITION, AND NATIONAL ALLIANCE FOR THE MENTALLY ILL OF MICHIGAN, INTERVENOR-PLAINTIFFS
v.
THE HONORABLE TOMMY G. THOMPSON, IN HIS OFFICIAL CAPACITY AS SECRETARY, UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, AND THOMAS A. SCULLY, IN HIS OFFICIAL CAPACITY AS ADMINISTRATOR, CENTERS FOR MEDICARE & MEDICAID SERVICES, DEFENDANTS, AND MICHIGAN DEPARTMENT OF COMMUNITY HEALTH, INTERVENOR-DEFENDANT



The opinion of the court was delivered by: John D. Bates, United States District Judge

MEMORANDUM OPINION

Pharmaceutical Research and Manufacturers of America ("PhRMA) brings this case challenging a Medicaid initiative implemented by the State of Michigan's Department of Community Health ("DCH") and approved by the Secretary of the United States Department of Health and Human Services (the "Secretary" or "HHS") through the Administrator of Centers for Medicare & Medicaid Services ("CMS"). Under the initiative, unless drug manufacturers provide Michigan with rebates on drugs prescribed through Michigan's Medicaid programs (and two non-Medicaid programs) that are greater than the rebates ordinarily required under the Secretary's national Medicaid agreement, DCH may require that doctors prescribing the manufacturers' drugs to Medicaid patients must seek prior authorization from the State.

PhRMA asserts claims against HHS and CMS (the "Federal Defendants") under the Administrative Procedure Act ("APA"), 5 U.S.C. § 701 et seq., for approving portions of the initiative that PhRMA alleges violate the Social Security Act and the Commerce Clause of the Constitution. PhRMA also asserts parallel claims against DCH under the Supremacy Clause and the Commerce Clause. PhRMA is joined in certain of its claims by two plaintiff-intervenors who purport to represent the interests of Medicaid beneficiaries.

Presently before the Court are PhRMA's motion for a preliminary injunction, motions for summary judgment filed by PhRMA and the two plaintiff-intervenors, and cross-motions for summary judgment by the Federal Defendants and DCH. For the reasons stated below, the Court concludes that the challenged portions of DCH's initiative, and the Secretary's approval of those portions, withstand statutory and constitutional challenge. Accordingly, the Court grants the cross-motions for summary judgment filed by the Federal Defendants and DCH and denies PhRMA's and plaintiff-intervenors' motions for summary judgment.

BACKGROUND

A. Statutory Framework

Medicaid is a cooperative federal-state program aimed at "furnish[ing] (1) medical assistance . . . [to] families with dependent children and [to] aged, blind, or disabled individuals, whose incomes are insufficient to meet the costs of necessary medical services, and (2) rehabilitation and other services to help such families and individuals attain or retain capability for independence or self-care." 42 U.S.C. § 1396. A state implementing Medicaid receives federal payments (known as federal financial participation or "FFP") based upon amounts expended by the state as "medical assistance" under the program. Id. §§ 1396b(a)(1), 1396d(b). In order to be eligible for FFP, a state must design, and obtain the Secretary's approval for, a state plan for implementing Medicaid. Id. §§ 1396, 1396a. The state plan must comply with numerous requirements, including that it "provide such safeguards as may be necessary to assure that eligibility for care and services under the plan will be determined, and such care and services will be provided, in a manner consistent with simplicity of administration and the best interests of the recipients." Id. § 1396a(a)(19).

This case centers around 42 U.S.C. § 1396r-8, which establishes a scheme under Medicaid for "Payment for covered outpatient drugs." Subsection (a) of that provision specifies that states are only eligible for FFP with respect to outlays on prescription drugs where the drugs are purchased from a manufacturer that has entered into an agreement with the Secretary on behalf of states (or with a state itself) to provide rebates on its products. See id. § 1396r-8(a)(1). Subsection (d) sets forth the circumstances under which a state may limit coverage of drugs. Among other things, subsection (d) allows a state to "subject to prior authorization any covered outpatient drug." Id. § 1396r-8(d)(1)(A). It also provides that a state may exclude a drug from a "formulary" only if, inter alia, "the excluded drug does not have a significant, clinically meaningful therapeutic advantage." Id. § Id. 1396r-8(d)(4)(C).

B. The Michigan Best Practices Initiative

In an effort to reduce its Medicaid expenditures, the State of Michigan has instituted a prescription drug program known as the Michigan Best Practices Initiative (the "Initiative"). Pursuant to the Initiative, Michigan established a committee of physicians and pharmacists (the "Committee") to review the scientific and clinical information concerning approximately 40 therapeutic classes of drugs on the "Michigan Pharmaceutical Product List" (the "MPPL"), a list of drugs available for reimbursement under Michigan's Medicaid program. Administrative Record ("AR") 373, 395-96. The 40 or so therapeutic classes of drugs reviewed by the Committee "account for the majority of increased drug spending in the Michigan Medicaid Program." Id. at 395.

The Committee sought to identify — based on clinical effectiveness and safety — at least two drugs in each therapeutic class that were the "best in class." Id. at 373, 395. Under the Initiative, these "best in class" drugs may be prescribed by physicians to Medicaid patients without the need for prior authorization. Id. at 395-97.*fn1

In contrast, drugs in each therapeutic class that are priced unfavorably compared to the lowest priced "best in class" drug are designated on the MPPL as subject to prior authorization. Id. at 373-5, 397. That is, in order for a patient's use of an unfavorably priced non-"best in class" drug to be reimbursed under the Medicaid program, a physician must proceed through an administrative process to obtain approval from the State of Michigan's pharmacy benefit manager to prescribe the drug. Id. Requests for prior authorization are processed within a 24-hour period and a 72-hour supply of a medically necessary covered drug is provided in an emergency situation. Id. at 4.

Under the Initiative, manufacturers whose drugs are not identified as "best in class" can still ensure that their drugs are available without prior authorization, provided that they sign two agreements with the State of Michigan. Id. at 304-05, 380. First, a drug manufacturer must sign, on a drug-by-drug basis, an agreement requiring the manufacturer to provide a rebate that effectively reduces the price of its drug to that of the "best-priced clinically selected product" in the class - i.e., to the lowest price available in the United States for the lowest priced "best in class" drug in the relevant therapeutic class. See AR at 7-14; SAR at 307. This agreement is denominated a "Supplemental Drug Rebate Agreement" because the rebate is over and above the rebate that a manufacturer is otherwise required to provide under the rebate agreement negotiated by the Secretary and the manufacturer under the Social Security Act. See 42 U.S.C. § 1386r-8(c)(1); DCH's Statement of Uncontested Facts ¶ 11. Second, a manufacturer must sign a "Non-Medicaid Agreement" requiring it to provide rebates on its drugs prescribed under certain non-Medicaid programs; those rebates effectively reduce the prices for those drugs to the prices of the "best-priced clinically selected product" for each class. See SAR at 306-08, 717-724. Previously, nothing under the Social Security Act or Michigan's Medicaid program required manufacturers to provide any rebates with respect to these non-Medicaid programs.

Pursuant to the requirements of the Social Security Act, see 42 U.S.C. § 1396, in the fall of 2001, DCH submitted to the Secretary for approval a proposed State Plan Amendment ("SPA") to Michigan's State Medicaid Plan that would accommodate the new prescription drug program under the Initiative. CMS thereafter requested that DCH make certain changes to the proposed SPA, including specifically that DCH clarify that "the State Plan Amendment and State of Michigan Supplemental Drug Rebate Agreement . . . require drug rebates with respect to the Medicaid population only." AR at 100. In response, DCH removed from its proposed Supplemental Drug Rebate Agreement "all references to non-Medicaid state funded pharmacy programs" and "included a statement in the SPA that the supplemental rebate contained in the SPA is for the Medicaid population only." Id. at 58.

On January 24, 2002, the Secretary approved the SPA — "SPA 01-015" - and the specific terms of the Supplemental Drug Rebate Agreement. Id. at 1. On February 1, 2002, DCH began pre-implementation testing of the Initiative, and by March 19, 2002, the Initiative was fully operational.

C. Procedural History

On June 28, 2002, PhRMA filed a complaint and a motion for a preliminary injunction in this Court challenging the Secretary's approval of SPA 01-015 on four grounds: (1) that it establishes an "illegal drug formulary" in violation of 42 U.S.C. § 1396r-8(d), Compl. ¶¶ 61-68; (2) that it permits "supplemental rebates" in addition to and above the rebates permitted under the Social Security Act in violation of 42 U.S.C. § 1396r-8(a)(1), Compl. ¶¶ 69-74; (3) that it "imposes prior authorization on Medicaid prescription drugs in the event that manufacturers refuse to provide rebates to members of the non-Medicaid population in Michigan," in violation of the "best interests" requirement of 42 U.S.C. § 1396a(a)(19), Compl. ¶¶ 75-82; and (4) that the "price benchmarking" mechanisms in both the Supplemental Drug Rebate Agreement and the Non-Medicaid Agreement violate the Commerce Clause because they tie in-state drug prices to drug prices outside of Michigan, Compl. ¶¶ 83-88. Pursuant to an agreement of the parties, the Court entered an order for a briefing schedule on the motion for a preliminary injunction and set a hearing date of August 28, 2002.

The subsequent procedural history of this case is complex, but bears review to illustrate the evolution of the claims and defenses in this litigation. On July 25, 2002, DCH moved to intervene as a defendant, claiming that it was the "true party-in-interest" and that it was best situated to explain and defend the Initiative. Mem. Supp. DCH's Mot. Intervene at 2. On July 29, 2002, the Court granted DCH's motion. Three weeks later, the Court granted a motion to intervene as plaintiffs by the National Alliance for the Mentally Ill of Michigan ("NAMI"), an organization that purports to represent the interests of the mentally ill of Michigan and their families, and the National Urban Indian Coalition ("NUIC"), an organization that purports to represent the interests of American Indians living in urban areas, many of whom are Medicaid recipients, and the interests of urban Indian Centers, which provide assistance to those persons. NAMI and NUIC joined in PhRMA's motion for a preliminary injunction but their allegations were (and are) limited to the contention that the Secretary acted unlawfully in approving components of the Initiative because they violate the formulary requirements of § 1396r-8(d)(4) and are contrary to the "best interests" of Medicaid recipients, see 42 U.S.C. § 1396a(a)(19).

On August 27, 2002, one month after DCH intervened in the case, and the day before the hearing on the motion for a preliminary injunction, PhRMA amended its complaint to add claims against DCH under the Supremacy Clause and the Commerce Clause. These claims roughly parallel the claims asserted against the Federal Defendants.*fn2 The Court advised PhRMA that it would not consider the claims against DCH for the purposes of evaluating the motion for a preliminary injunction.*fn3

At the August 28, 2002, hearing, the Federal Defendants took the position that, because SPA 01-015 as approved concerned Michigan's Medicaid population only, there was no agency action for the Court to review with respect to the Initiative's requirement that manufacturers provide rebates for drugs prescribed to non-Medicaid populations in order to avoid Medicaid prior authorization. Counsel for the Federal Defendants explained that "right now there's no requirement for approval of this sort of program by either statute or regulation, and the state had no basis for assuming that approval was required in this sort of case." Tr. of Aug. 28, 2002, Hearing at 65.

One month later, the Federal Defendants had changed course. The Court received notice from the Federal Defendants that on September 18, 2002, the Director of CMS issued a letter to State Medicaid Directors (the "SMD Letter") stating that: (1) "States may enter separate or supplemental drug rebate agreements as long as such agreements achieve drug rebates equal to or greater than the drug rebate set forth in the Secretary's national rebate agreement with drug manufacturers"; (2) "[a] prior authorization program does not need to comply with the requirements for restrictive formularies"; (3) "States may subject covered outpatient prescription drugs to prior authorization as a means of encouraging drug manufacturers to enter into separate or supplemental rebate agreements for covered drugs purchased by Medicaid recipients"; (4) states may establish "a prior authorization program for Medicaid covered drugs to secure drug benefits, rebates or discounts for non-Medicaid populations" where the "prior authorization program will further the goals and objectives of the Medicaid program"; and (5) CMS expects that states seeking to establish prior authorization programs as a means of encouraging rebates for either Medicaid or non-Medicaid populations will submit a proposed state plan amendment for approval by the Secretary. See Fed. Defs.' Notice Supp. Auth. (Sept. 27, 2002), Ex. A. The Federal Defendants further advised the Court that, consistent with the SMD Letter, DCH on September 23, 2002, submitted to the Secretary for review a proposed SPA "regarding its supplemental rebate/prior authorization program for certain groups of non-Medicaid eligible individuals who are either very low income or have extraordinary medical needs." Fed. Defs.' Notice Supp. Auth. (Sept. 27, 2002) at 3. On October 9, 2002, the Federal Defendants explained that CMS anticipated issuing a decision on DCH's proposed SPA within the next three weeks. CMS did not meet that goal.

The Court held a conference with the parties and intervenors several weeks later, on December 6, 2002, to receive an update on the status of the proposed SPA ("SPA 02-019"). The Federal Defendants informed the Court that, on the preceding day, the Secretary had approved SPA 02-019, which required that a manufacturer agree to provide rebates in two of Michigan's non-Medicaid programs, the Elder Prescription Insurance Company Program ("EPIC") and the Maternity Outpatient Medical Service ("MOMS"), in order to guarantee that the manufacturer's drugs would be available to Medicaid recipients without prior authorization. The Federal Defendants submitted an administrative record and a decision letter supporting the Secretary's determination. See SAR at 712-715.

The Federal Defendants further advised the Court that SPA 02-019, as initially submitted, would have required that, as a condition to evading Medicaid prior authorization, drug manufacturers participate in two other non-Medicaid programs in addition to EPIC and MOMS. DCH withdrew the portion of its proposed SPA with respect to these two other programs, the State Medical Program ("SMP") and the Children's Special Health Care Services Program ("CSHCS"), on December 3, 2002. Id. at 708. At the December 6, 2002, conference, DCH nevertheless informed the Court that it had been requiring, and would continue to require, manufacturers to provide rebates with respect to SMP and CSHCS, as well as EPIC, MOMS, and Medicaid itself, in order to guarantee that their drugs would be available to Medicaid recipients without prior authorization. See id. at 708-709. DCH asserted that it did not believe that the Secretary's approval was required for the implementation of the non-Medicaid aspects of the Initiative.

On December 13, 2002, pursuant to a briefing schedule established by the Court, PhRMA and plaintiff-intervenors submitted motions for summary judgment, and PhRMA submitted a supplemental motion for a preliminary injunction. The Federal Defendants and DCH cross-moved for summary judgment one week later. On January 6, 2003, prompted by an argument in DCH's brief that PhRMA's complaint against DCH did not comply with Ex parte Young, 209 U.S. 123 (1908), PhRMA moved for leave to amend its complaint a second time to name the Director of DCH, rather than DCH itself, as the defendant on PhRMA's Supremacy Clause and Commerce Clause claims.

A hearing on the outstanding motions was held on February 5, 2003. At the hearing, the Federal Defendants advised the Court that DCH had recently submitted a new proposed SPA ("SPA 02-21") with respect to the SMP and CSHSC programs. Nevertheless, as before, DCH maintained that it could maintain a linkage between the SMP and CSHCS programs and its Medicaid prior authorization program despite the absence of approval from the Secretary. The Federal Defendants, for their part, argued that there was as yet no agency action for the Court to review with respect to the SMP and CSHCS programs and that the Court lacked authority to order the Secretary to initiate a compliance action against DCH for operating an unapproved program. PhRMA, NAMI, and NUIC took the position that either DCH's implementation of the SMP and CSHCS aspects of the Initiative without the Secretary's approval was unlawful or the Secretary had de facto approved those aspects by declining to halt them. The Court urged CMS to review DCH's proposed amendment concerning the SMP and CSHCS programs expeditiously and expressed its continuing frustration (and skepticism) regarding CMS's piecemeal approach to its review of the Initiative - an approach that had already substantially delayed the progress of this litigation.

Nine days later, the Federal Defendants filed a decision document and supporting administrative record denying approval for SPA 02-21. DCH, in turn, advised the Court that although it expected to appeal the denial to the Sixth Circuit, in the interim it would not continue to require that manufacturers sign rebate agreements concerning the SMP and CSHCS programs as a condition for avoiding Medicaid prior authorization. See Notice of DCH's Discontinuance of Certain Portions of the Mich. Initiative at 1-2.

ANALYSIS

I. Summary Judgment Standard

Summary judgment is appropriate when the pleadings and the evidence demonstrate that "there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment may successfully support its motion by "informing the district court of the basis for its motion, and identifying those portions of `the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." See Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986) (quoting Fed.R.Civ.P. 56(c)). In opposing summary judgment, the "nonmoving party [must] go beyond the pleadings and by [its] own affidavits, or by the `depositions, answers to interrogatories, and admissions on file,' designate `specific facts showing that there is a genuine issue for trial.'" Id. at 324 (quoting Fed.R.Civ.P. 56(c),(e)). In determining whether there exists a genuine issue of material fact sufficient to preclude summary judgment, the court must regard the nonmovant's statements as true and accept all evidence and make all inferences in the nonmovant's favor. See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255 (1986). A nonmoving party, however, must establish more than the "mere existence of a scintilla of evidence" in support of its position. Id. at 252. "If the evidence is merely colorable, or is not significantly probative, summary judgment may be granted." Id. at 249-50 (internal citations omitted).

II. Standing

Before considering the merits of the claims asserted in this litigation, the Court must assess as a threshold matter PhRMA's, NAMI's and NUIC's standing. See La. Envtl. Action Network v. Browner, 87 F.3d 1379, 1382 (D.C. Cir. 1996) ("[B]efore we reach the merits of any claim, we must first assure ourselves that the dispute lies within the constitutional and prudential boundaries of our jurisdiction."). There are, of course, two principal forms of standing, "Article III (case or controversy)" standing and "prudential" standing, each of which must be considered. Mudd v. White, 309 F.3d 819, 823 (D.C. Cir. 2002).

A. Constitutional Standing

Article III standing entails three requirements:

First, the plaintiff must have suffered an "injury in fact" — an invasion of a legally protected interest which is (a) concrete and particularized, and (b) "actual or imminent, not `conjectural' or `hypothetical.'" Second, there must be a causal connection between the injury and the conduct complained of — the injury has to be "fairly . . . trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court." Third, it must be "likely," as opposed to merely "speculative," that the injury will be "redressed by a favorable decision." The party invoking federal jurisdiction bears the burden of establishing these elements. Since they are not mere pleading requirements but rather an indispensable part of the plaintiff's case, each element must be supported in the same way as any other matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of evidence required at the successive stages of the litigation.
Lujan v. Defenders of Wildlife, 504 U.S. 555, 560-61 (1992) (internal citations omitted).

Because PhRMA, NUIC, and NAMI are all associations purporting to bring claims on behalf of their members, a further layer of standing requirements must also be satisfied. Specifically, each association must demonstrate that (a) its members would otherwise have standing to sue in their own right; (b) the interests it seeks to protect are germane to the association's purpose; and (c) neither the claim asserted nor the relief requested requires the participation of individual members in the lawsuit. Hunt v. Wash. State Apple Advert. Comm'n, 432 U.S. 333, 342 (1977).

1. PhRMA

Here, there is no real dispute that PhRMA satisfies the Article III requirements for bringing a case on behalf of its members, who are drug manufacturers seeking to sell their products for use in Michigan's Medicaid program and elsewhere. These drug manufacturers allegedly suffer cognizable injury, specifically, economic harm, as a result of the implementation of the Initiative and the Secretary's approval of components of it. See, e.g., Declaration of John Alivernini ¶¶ 8-11; Declaration of George Bilyk ¶¶ 8-11; Declaration of Russel A. Banthan ¶¶ 11-13, 15. Moreover, this lawsuit is undoubtedly germane to PhRMA's purpose, which is to serve as the pharmaceutical industry's principal policy advocate. Banthan Decl. ¶¶ 4-5; see Humane Soc'y of the U.S. v. Hodel, 840 F.2d 45, 56 (D.C. Cir. 1988) (germaneness prong requires "only that an organization's litigation goals be pertinent to its special expertise and the grounds that bring its membership together"). In addition, PhRMA's claims can be resolved on the basis of the record compiled for the Court without the participation of PhRMA's individual members.

The more challenging questions of constitutional standing concern the plaintiff-intervenors NAMI and NUIC.

2. NAMI

NAMI is an organization representing the interests of Michigan residents who are diagnosed with major mental illnesses. Affidavit of Hubert Huebl, M.D. ¶ 7. It intervened in this lawsuit to assert the interests of Medicaid beneficiaries under 42 U.S.C. § 1396a(a)(19), and, in particular, to assert that the Secretary had approved an illegal formulary that was contrary to the "best interests" of Medicaid beneficiaries. DCH challenges NAMI's constitutional standing to participate in this lawsuit.*fn4

Like PhRMA, NAMI must satisfy the three-part test for associational standing described in Hunt. There is little doubt that the claim asserted by NAMI is germane to its purpose, which includes advocating for policies and legislation that will improve the quality of treatment available to persons with serious mental illness. Id. ¶ 8. Furthermore, there is no need for NUIC's individual members to participate in the lawsuit.

The critical question as to NAMI's standing is whether any of its members would have standing to sue in their own right. DCH argues that NAMI has not demonstrated that it even has members who themselves suffer from mental illness, much less members who participate in the Medicaid fee-for-service program at issue and have suffered or will suffer actual or imminent injury. Notably, the affidavit submitted by NAMI's president in connection with its motion to intervene appears crafted to evade the question whether NAMI's current membership actually includes mentally ill persons or only the family members of such persons. See id. ¶ 5 ("NAMI-Michigan's membership is comprised of family members of persons with several mental illness, and over the past decade, mental health consumers have become members of the organization as well.").

Three weeks after the February 5, 2003, summary judgment hearing, at which the Court expressed some concern on this issue, and two months after DCH first challenged NAMI's standing, NAMI filed with the Court a declaration explaining that NAMI's membership does, indeed, include mental health consumers, in particular "consumer members . . . enrolled in Medicaid fee-for-service." Declaration of Fred Cummins ¶¶ 2-5. Although inexplicably belated, this evidence certainly goes a long way towards remedying a key omission from NAMI's earlier submission.

But still missing in NAMI's materials is any specific factual support that a particular member of NAMI has suffered, or imminently will suffer, concrete harm as a result of the Secretary's approval of components of the Initiative, Although NAMI's president, Dr. Hubert Huebl, affirms that "mental health consumers" and "constituents" have experienced hardships since the Initiative began - delay in approval for (or outright denial of) medications they have been receiving, decompensation, re-hospitalization, and switching of medications without their guardians' knowledge, see Huebl Aff. ¶¶ 10, 15, 23, 25-27 - it remains unclear, even after NAMI's recent submission, whether the particular injured "mental health consumers" and "constituents" referenced by Dr. Huebl are in fact members of NAMI, or whether NAMI is merely alleging an interest aligned with those persons. Moreover, Dr. Huebl's highly generalized description of the injuries suffered by these "mental health consumers" and "constituents" - a description that fails to identify by name any allegedly injured person and lacks supporting details concerning the circumstances of any specific incident of harm - begs the question whether Dr. Huebl even has personal knowledge that enables him to provide competent testimony that individuals have been injured as a result of the Initiative.*fn5 Accordingly, given the late stage of the litigation, NAMI's submissions fall short of meeting its burden to establish standing. See Sierra Club v. EPA, 292 F.3d 895, 899 (D.C. Cir. 2002) ("On a motion for summary judgment . . .`the plaintiff can no longer rest on such `mere allegations,' but must `set forth' by affidavit or other evidence `specific facts.'" (quoting Defenders of Wildlife, 504 U.S. at 561)).

3. NUIC

NUIC is a newly formed non-profit organization purporting to "represent[] a united front of Urban Indians, Urban Indian Centers, urban Tribes and National Urban Indian organizations from across the United States in order that urban Indians do not lose additional programs and services." Declaration of Patricia Newada ¶ 3; see also Declaration of Fay Givens ¶¶ 2-3. NUIC asserts that two elements of its constituency - individual Medicaid beneficiaries and urban Indian Centers that provide services to low-income urban Indians - have been harmed by the Initiative. First Am. Compl. of Pl. Intervenors ¶ 10. Like NAMI, NUIC alleges that the Secretary's approval violates the formulary provisions of 42 U.S.C. § 1396r-8(d) as well as the "best interests" provision of 42 U.S.C. § 1396a(a)(19).

No question has been raised as to whether this lawsuit is germane to NUIC's purpose or whether NUIC's individual members are needed to participate in the litigation. DCH does, however, raise a challenge under the first of the three Hunt criteria, arguing that NUIC has not established that it has members who are Medicaid beneficiaries and thus who could sue in their own right.

The Court agrees with DCH that although NUIC purports to represent a "united front" including "Urban Indians," NUIC has, in fact, failed to demonstrate that its membership includes any individuals who are Michigan Medicaid fee-for-service recipients. Indeed, although NUIC has submitted several declarations from Michigan Medicaid recipients, none of those persons claims to be a member of NUIC.

NUIC has, however, established that its membership includes urban Indian Centers, "stand-alone non-profit Indian controlled organizations" that provide programs and services to urban Indians. Newada Decl. ¶ 3. Among NUIC's members is American Indian Services, Inc. ("AIS"), which provides urban Indians in the Detroit, Michigan, area with food, transportation, housing, help with utility bills and water bills, and financial assistance for prescription drugs. Givens Decl. ¶ 3, 8. AIS's Executive Director, who is also the President of NUIC, explains that many urban Indians rely upon Medicaid to cover their health care needs, and that since the Initiative began, AIS has "noticed a substantial increase in the number of Native Americans asking [AIS] to purchase prescription drugs on their behalf, because these drugs are not available to them through Medicaid." Id. ¶¶ 4, 7. AIS provides the requested assistance with monies from its restricted funds, thus diverting monies that would otherwise be allocated towards providing food, transportation, housing and other assistance. Id. ¶¶ 7-8. If the Initiative is allowed to continue, AIS claims, the provision of prescription medication will ultimately crowd-out AIS's provision of other services for urban Indians. Id. ¶ 8.

Precedents in the Supreme Court and in this Circuit make clear that where an organization is frustrated in its ability to carry out its programs and experiences a drain on its resources due to a defendant's alleged actions, the organization has standing to sue in its own right. See, e.g., Havens Realty Corp. v. Coleman, 455 U.S. 363, 379 (1982) (frustration of organization's ability to carry out its mission, and drain on organization's resources, sufficient to confer standing); Fair Employment Council of Greater Wash., Inc. v. BMC Marketing Corp., 28 F.3d 1268, 1276 (D.C. Cir. 1994) (allegations that defendant's actions interfered with organization's programs and caused organization to expend resources sufficient to confer standing); Nat'l Fair Housing Alliance v. Prudential Ins. Co. of Am., 208 F. Supp.2d 46, 53 (D.D.C. 2002) (expenditure of scare resources as a result of defendant's action sufficient to confer standing). Consistent with these cases, AIS would have standing to sue in its own right because, allegedly as a result of the Initiative, its ability to provide housing, food, ...


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