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Pharmaceutical Care Management Association v. District of Columbia

March 6, 2007

PHARMACEUTICAL CARE MANAGEMENT ASSOCIATION, PLAINTIFF,
v.
DISTRICT OF COLUMBIA ET AL., DEFENDANTS.



The opinion of the court was delivered by: Ricardo M. Urbina United States District Judge

Document Nos.: 47, 50

MEMORANDUM OPINION

GRANTING THE DEFENDANTS'MOTION TO VACATE THE PRELIMINARY INJUNCTION AND SUPPLEMENTAL MOTION FOR SUMMARY JUDGMENT

I. INTRODUCTION

This matter comes before the court on remand from the Court of Appeals for the District of Columbia Circuit. The issue before the court is whether the First Circuit decision in Pharmaceutical Care Management Association v. Rowe, 429 F.3d 294 (1st Cir. 2005), cert. denied, 126 S.Ct. 2360 (2006) ("Rowe"), precludes the plaintiff from litigating the validity of Title II of the AccessRx Act of 2004, D.C. Code §§ 48-831.01 et seq. ("Title II") in this court.*fn1

Because the issues raised by the plaintiff in the instant case were already contested by the parties and decided by a court of competent jurisdiction, the plaintiff is precluded from litigating the validity of Title II in this court. Accordingly, the court grants the defendants' motion to vacate the injunction and its supplemental motion for summary judgment.

II. BACKGROUND

A. Factual Background

The plaintiff, the Pharmaceutical Care Management Association ("PCMA"), is a national trade association representing pharmaceutical benefit management companies ("PBMs"). Mem. Op. Granting the Pl.'s Mot. for Interim Injunctive Relief (Dec. 21, 2004) ("Mem. Op.") at 1. PBMs process drug benefit claims and payments on behalf of health benefit providers, such as Employment Retirement Income Security Act ("ERISA") health plans, government entities, and insurance companies. Compl. ¶ 14. In this capacity, PBMs serve as intermediaries between drug suppliers (e.g., pharmaceutical companies and pharmacies) and health benefit providers. Rowe, 429 F.3d at 298. Additionally, PBMs provide discounted drugs to plan members, negotiate rebate arrangements with drug manufacturers, and establish generic drug substitution programs. Compl. ¶ 15.

Central to this case is the District of Columbia's Council's attempt to lower the cost of prescription drugs by unanimously passing the AccessRx Act of 2004, D.C. Code §§ 48-831.01 et seq. ("AccessRx Act" or "Act" or "D.C. statute"). Mem. Op. at 2. The Act took effect on May 18, 2004. Id. Title II of the Act regulates PBMs by imposing fiduciary duties on them and requiring them to disclose certain financial information. Id. Specifically, Title II requires that PBMs: (1) discharge their fiduciary duties in accordance with all applicable laws, (2) disclose to their customers information about the quantity of drugs purchased by the covered entity and the cost to the covered entity for the drugs, and (3) disclose all financial arrangements between the PBM and drug manufacturers. Id. While Title II allows a PBM to substitute one therapeutically equivalent drug for another, the PBM must transfer to the covered entity any benefit or payment received as a result of the drug substitution. Id. at 3. A violation of Title II constitutes a violation of the District of Columbia Consumer Protection Procedures Act ("DCCPPA"), D.C. Code § 48-832.03. Id.

The District of Columbia's attempt to regulate PBMs is not novel. In 2003, the Maine Legislature enacted the Unfair Prescription Drug Practices Act ("UPDPA" or "Maine statute"), Me. Rev. Stat. Ann. tit. 22, ("Me.") § 2699 (2006). Rowe, 429 F.3d at 298-99. The Maine legislature passed the UPDPA in an attempt to place Maine health benefit providers in a better bargaining position relative to PBMs, as well as to control prescription drug costs and to increase access to prescription drugs. Id. PCMA challenged the constitutionality of the Maine statute in the federal district court in Maine. In March 2004, that court granted PCMA's motion for a preliminary injunction. Defs.' Mot. to Vacate Prelim. Inj. & Suppl. Mot. for Summ. J. ("Defs.' Suppl. Mot.") at 2.

In response to the preliminary injunction, the Maine legislature amended the UPDPA to address the constitutional infirmities discussed by the Maine district court in its memorandum opinion. Pl.'s Mem. in Opp'n to Defs.' Mot. to Vacate Prelim. Inj. & in Support of PCMA's Suppl. Mot. for Summ. J. ("Pl.'s Suppl. Opp'n") at 2. After the Maine legislature amended the statute, the district court in Maine granted summary judgment in favor of the state in April 2005. Pharm. Care Mgmt. Ass'n v. Rowe, 2005 WL 757608, at *1 (D. Me. Feb. 2, 2005), aff'd, 429 F.3d 294 (1st Cir. 2005). On November 8, 2005, the First Circuit affirmed the district court's grant of summary judgment on all claims. Rowe, 429 F.3d 294.

B. Procedural Background

Because the Act imposes fiduciary duties and disclosure requirements on PBMs, as described supra, the plaintiff moved this court to enjoin the defendants from enforcing Title II. The court granted preliminary injunctive relief to the plaintiff on December 21, 2004, concluding that the plaintiff demonstrated a substantial likelihood of success on the merits of its takings claim.*fn2 Mem. Op. at 1, 5. The defendants appealed the court's decision to the D.C. Circuit, and additionally, the parties filed cross motions for summary judgment before this court.

On appeal, the defendants argued that the First Circuit's ruling in Rowe precluded the plaintiff from further litigating the validity of Title II under principles of collateral estoppel. Because the defendants raised the issue for the first time on appeal, the D.C. Circuit remanded the case to this court on March 27, 2006 for consideration of that issue. Subsequent to the remand, on June 26, 2006, the District of Columbia passed temporary legislation amending the Title II to "conform the District's law to the Maine law to withstand constitutional and other legal ...


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