Indiana Family and Social Services Administration v. Walgreen Co.

ATTORNEYS FOR APPELLANTS ATTORNEYS FOR APPELLEES
STEVE CARTER MICHAEL B. MCMAINS
Attorney General of Indiana MATTHEW W. FOSTER
McMains Foster & Morse, P.C.
DAVID L. STEINER Indianapolis, Indiana
Deputy Attorney General
Indianapolis, Indiana ATTORNEYS FOR AMICI CURIAE
AmHealth (Evansville), Inc., et al.
J. MICHAEL GRUBBS
THOMAS F. SHEA
JODY L. DEFORD
Barnes & Thornburg
Indianapolis, Indiana
IN THE
SUPREME COURT OF INDIANA
INDIANA FAMILY AND SOCIAL SERVICES )
ADMINISTRATION, et al., )
)
Appellants (Defendants), )
)
v. ) No. 49S00-0112-CV-647
)
WALGREEN CO., et al., )
)
Appellees (Plaintiffs). )
APPEAL FROM THE MARION SUPERIOR COURT
The Honorable Gary Miller, Judge
Cause No. 49D05-0109-CP-1480
May 28, 2002
SHEPARD, Chief Justice
Common wisdom holds that the most complicated matter in state
government is the school funding formula. This case about Medicaid
administration places that in doubt.
Faced with a sizeable projected financial shortfall, Indiana’s
Medicaid administrators adopted both emergency and permanent rules to pay
pharmacies a dollar less per prescription dispensed and reduce their drug
reimbursement rate by three percent. These measures would save the State
$825,000 per month.
A group of retail drug companies, pharmacy trade associations, and
individual Medicaid recipients (collectively “Walgreens”) obtained a
preliminary injunction preventing these rules from taking effect. For
reasons explained below, we reverse the order granting the preliminary
injunction.
Facts and Procedural History
The Indiana Family and Social Services Administration and its
subdivision, the Office of Medicaid Policy and Planning (collectively
“FSSA”), administer Indiana’s Medicaid program. In December 2000, the
director of that office, Kathleen Gifford, reviewed the forecasts of
Medicaid spending for fiscal year 2002[1] and concluded that appropriations
would not cover program expenditures. Gifford ultimately projected the
fiscal 2002 Medicaid deficit at over a hundred million dollars.
To address this shortfall, Gifford explored various cost containment
measures. Among other things, she recommended reducing the drug dispensing
fee from four dollars to two dollars and decreasing the pharmacy
reimbursement rate from ninety to eighty-seven percent of the average
wholesale price (AWP).[2]
On April 1, 2001, FSSA published a proposed permanent rule reflecting
these reductions, and on April 23rd it conducted a public hearing. Based
upon the hearing and input provided by “members of the pharmacy community,”
FSSA revised the proposed rule to reflect a three dollar dispensing fee.
The Attorney General’s office received the final rule on July 10,
2001, and approved it on August 24th. Governor Frank O’Bannon signed the
rule on August 28th, and the Secretary of State’s office accepted it for
filing on August 29th, with a designated effective date of September 28,
2001.
While the permanent rule was still in the pipeline, FSSA adopted an
emergency rule “to put the cost containment measures in as soon as possible
because of the fiscal crisis.” (T.R. at 56.) On August 20, 2001, State
Budget Director Betty Cockrum exercised recently-enacted statutory
authority and directed FSSA to adopt emergency rules to limit Medicaid
expenditures to the amount of the legislative appropriation. See P.L. 291-
2001 § 48. FSSA officials signed an emergency rule that was substantively
identical to the permanent rule, and notified Medicaid providers that the
new rates would become effective on August 27, 2001.
Walgreens obtained a temporary restraining order to delay
implementation of the emergency rule and sought an injunction against
implementation of both rules. Following a hearing, the trial court granted
the preliminary injunction on October 9th.
We accepted jurisdiction over the ensuing appeal without prior
consideration by the Court of Appeals, to expedite a resolution. See Ind.
Appellate Rule 56(A).
I. The “Per Se” Injunction Standard
The grant or denial of a preliminary injunction rests within the
sound discretion of the trial court, and our review is limited to whether
there was a clear abuse of that discretion. Harvest Ins. Agency, Inc. v.
Inter-Ocean Ins. Co., 492 N.E.2d 686, 688 (Ind. 1986).
To obtain a preliminary injunction, the moving party has the burden of
showing by a preponderance of the evidence the following:
1) [movant’s] remedies at law were inadequate, thus causing
irreparable harm pending resolution of the substantive action; 2) it
had at least a reasonable likelihood of success at trial by
establishing a prima facie case; 3) its threatened injury outweighed
the potential harm to appellant resulting from the granting of an
injunction; and 4) the public interest would not be disserved.
Id. (citations omitted); T.H. Landfill Co., Inc. v. Miami County Solid
Waste Dist., 628 N.E.2d 1237, 1238 (Ind. Ct. App. 1994). If the movant
fails to prove any of these requirements, the trial court’s grant of an
injunction is an abuse of discretion. Boatwright v. Celebration Fireworks,
Inc., 677 N.E.2d 1094, 1096 (Ind. Ct. App. 1997).
The trial court held that FSSA violated several procedural
requirements in adopting the permanent and emergency rules. Having found
statutory violations that demonstrated a likelihood of success, the court
relied on a “per se” rule under which the other elements of the standard
injunction analysis were presumed.
This Court has indicated that a relaxed standard may sometimes be
applied for clear, uncontested unlawful conduct. Schrenker v. Clifford,
270 Ind. 525, 529, 387 N.E.2d 59, 61 (1979). But because parties are
relieved of several showings usually necessary to obtain injunctive relief,
this relaxed standard “is only proper when it is clear that [a] statute has
been violated.” Union Township Sch. Corp. v. State ex rel. Joyce, 706
N.E.2d 183, 192 (Ind. Ct. App. 1998).
In prior Indiana decisions employing the relaxed standard, the “per
se” rule has been used to enjoin activity that is clearly unlawful and
against the public interest, such as the practice of medicine without a
license.[3] The “per se” rule has never been used to permit a private
party to enjoin State action based on an alleged procedural deficiency in
promulgating rules. A private assertion of public interest will rarely
justify enjoining State conduct when it is based only on a procedural
challenge and a prima facie case.
Here, there is no question that FSSA has legal authority to revise
Medicaid dispensing fees and reimbursement rates. The question is whether
it went about the task appropriately. The rules at issue may or may not
have been properly promulgated (as we discuss further below), but the
action itself is one the statute allows.
Absolving Walgreens from proving irreparable injury and a balance of
harm in its favor was error. We therefore proceed to review the standard
proofs necessary for obtaining injunctive relief.
II. Irreparable Harm and Balance of Harms
As noted above, a plaintiff must prove four things to justify a
preliminary injunction, which we caption as (1) irreparable harm, (2)
likelihood of success on the merits, (3) balance of harms, and (4) public
interest. We will proceed to consider each factor.
Walgreens’ initial burden was to demonstrate that “remedies at law
were inadequate, thus causing irreparable harm pending resolution of the
substantive action.” Tilley, 725 N.E.2d at 153-54 (citations omitted). If
an adequate remedy at law exists, injunctive relief should not be granted.
A party suffering mere economic injury is not entitled to injunctive relief
because damages are sufficient to make the party whole. Xantech Corp. v.
Ramco Indus., Inc., 643 N.E.2d 918, 921-22 (Ind. Ct. App. 1994).[4]
The crux of Walgreens’ argument is that a reduction in dispensing
fees and reimbursement rates will cause a handful of pharmacies to close.
Plaintiff Ralph Anderson testified that he owns two Bedford pharmacies: a
retail pharmacy that offers prescription home delivery, among other
services, and an institutional pharmacy that does not conduct business
directly with the public. Anderson said the institutional pharmacy would
likely close and speculated that the other might as well.[5] (T.R. at 212,
227-28.)
Also, a CVS spokesman testified that “some” of the 268 CVS pharmacies
located in Indiana “will ultimately have to be closed” as a result of the
Medicaid cuts. (T.R. at 254, 256, 259.) He cited only three definite
instances, and further testified that closing stores was part of the
ordinary course of business and that customers of the closed stores always
find alternative providers. (T.R. at 259, 267-68, 270-72, 277.)
Walgreens failed to identify any injury beyond purely economic
injury, which is not enough to justify injunctive relief. We conclude that
post-trial damages would adequately compensate for any injuries should
Walgreens prevail at trial. Moreover, the potential harm from the
estimated one hundred million dollar State Medicaid deficit outweighs
Walgreens’ potential injury.
III. Likelihood of Success on the Merits
Walgreens claims that the emergency and permanent rules violated a
number of statutory procedural requirements. Rather than focusing on
whether Walgreens was likely to prevail on each claim, the trial court
flatly held that FSSA violated each cited statute. We therefore review
each of these conclusions for clear error.
A. Statutory Authority for the Emergency Rule
During its 2001 session, the General Assembly gave the state budget
director broad authority, effective July 1, 2001, to cut Medicaid
expenditures to match appropriated funds:
Notwithstanding . . . any other law, or any rule, if the budget
director makes a determination at any time during either fiscal year
of the biennium that Medicaid expenditures to date are at a level that
may cause total expenditures for the year to exceed total Medicaid
appropriations for the year, the budget director may, after review by
the budget committee, direct the secretary to adopt emergency rules to
the Medicaid program to decrease expenditures that have risen
significantly to limit Medicaid expenditures to the Medicaid
appropriations in this act. Adjustments under this subsection may
not:
1) violate a provision of federal law; or
2) jeopardize the state’s share of federal financial participation;
applicable to the state appropriations contained in the biennial
budget for Medicaid assistance and Medicaid administration.
P. L. 291-2001 § 48 (emphasis added).[6]
The legislature explicitly provided that this statute would supplant
all others. Therefore, if the statute’s provisions were met, the emergency
rule is valid.
Walgreens argues that FSSA did not satisfy the statute’s requirement
of review by the budget committee, so the emergency rule is invalid.
Director Gifford testified that in June 2001 she presented the budget
committee with a summary of all pending cost containment rules and advised
them of the likelihood of emergency action. (T.R. at 62.) Gifford said
the committee members “listened to my information and asked questions” and
that there was “discussion about – among the members of the budget
committee about the [dispensing fee and reimbursement rate] reductions.”[7]
(T.R. at 68, 104.) Gifford also gave budget committee members a handout
summarizing the status of Medicaid cost containment proposals. (T.R. at
104, Def. Exh. A.)
Walgreens offered testimony by two budget committee members, Senators
Vi Simpson and Robert Meeks. Senator Simpson testified that only formal
agenda items are “reviewed” by the committee and that “if we don’t want to
review something, we just don’t put it on the agenda.”[8] (T.R. at 186.)
Senator Simpson acknowledged that the committee discussed the proposed AWP
reimbursement and dispensing fee cuts. (T.R. at 188.)
The words of the statute do not bear out Walgreens’ argument that FSSA
can act only after the budget committee lists its proposals for review as a
separate item on the agenda. Public Law 291-2001 § 48 assures budget
committee members advance notice of agency actions and creates an
opportunity for the members to participate in the deliberations. It does
not, however, condition FSSA’s authority to act on approval by the
committee, as certain other statutes do.[9]
Here, Gifford told the committee about the specifics and urgency of
these anticipated measures, and committee members had an opportunity to
express their views. This appears to comply with the straightforward
language of the statute.[10]
We conclude that P.L. 291-2001 § 48 authorized the procedure followed
in adopting the emergency rule, and that budget committee review was
sufficient. The trial court’s findings and conclusions to the contrary
were therefore clearly erroneous. Based on this conclusion, we need not
address Walgreens’ other statutory challenges to the emergency rule.
To expedite resolution of this dispute, we address one practical
consideration that neither party has raised: how long an emergency rule
under P.L. 291-2001 § 48 may remain in effect. Section 48 is silent on
this point, so we rely on the time frame in the general statute on
emergency rules, Ind. Code Ann. § 4-22-2-37.1(g) (West 2001). Under this
statute, emergency rules may generally remain in effect for ninety days
after they are accepted for filing and may be extended by re-adoption for
one additional ninety-day period. Id. Here, the clock will begin to run
when the temporary injunction is lifted and the emergency rule goes into
effect.
B. Challenges to the Permanent Rule
Walgreens claims that the permanent rule violated several procedural
statutes. We will address each in turn.
1. The Survey Statutes. Walgreens bases part of its challenge on
Ind. Code Ann. §§ 12-15-31-1 through 4 (West 2001), which said:
Sec. 1. Not later than October 1 of each year, the office [of
Medicaid Policy and Planning] shall conduct a survey of pharmacy
providers to assess the appropriate level of dispensing fees to be
paid to providers for prescribed drugs.
Sec. 2. A survey under section 1 of this chapter must include an
evaluation of dispensing fees in other states and the policies of the
federal Health Care Financing Administration (HCFA).
Sec. 3. A dispensing fee shall be evaluated based upon the following
information concerning the costs of pharmacy operation:
1) Operational data.
2) Professional services data.
3) Overhead data.
4) Profit data.
Sec. 4. If an adjustment is made following a survey conducted under
section 1 of this chapter, the secretary shall commence the rulemaking
process under IC 4-22-2 to make the adjustment not later than November
1 of the year in which the survey was conducted.
The General Assembly repealed this statute, effective approximately
April 29, 2001. See P.L. 291-2001 § 211. This was after the proposed rule
was published and the public hearing held, but before the rule was
finalized and submitted to the Attorney General.
The trial court held that FSSA’s failure to conduct a survey violated
the statute because the repeal was effective only prospectively. The court
reasoned that the repeal “did not release Defendants’ previously incurred
obligation to conduct the dispensing fee survey” because the requirement
“remain[ed] in force” under Ind. Code § 1-1-5-1, which says “repeal of any
statute shall not have the effect to release or extinguish any penalty,
forfeiture, or liability incurred under such statute.” Ind. Code Ann. § 1-
1-5-1 (West 2001) (emphasis added).
We do not agree that the term “liability,” in this context,
encompasses rule-making procedural requirements. Moreover, the statute
merely established a deadline “if [a dispensing fee] adjustment is made
following [an annual] survey.” Ind. Code § 12-15-31-4 (emphasis added).
The statute did not, by its own terms, preclude the action taken here,
which was an adjustment made independently of this annual market review
process.
2. Administrative Rules Oversight Committee (AROC) Review. Walgreens
argues that FSSA’s failure to obtain pre-adoption AROC review invalidates
the rule. Indiana Code Ann. § 4-22-2-46 (West 2001) requires AROC to
“carry out a program to review each rule adopted under this chapter” if its
fiscal impact exceeds $500,000. The review covers economic impact,
compliance with legislative intent, extent of any unfunded mandate, and
compliance with Ind. Code Ann. § 4-22-2-19.5 (see discussion below). Ind.
Code § 4-22-2-46.
Contrary to Walgreens’ argument and the trial court’s conclusion, this
statute plainly governs only the conduct of AROC, which is not a party to
this action. FSSA did not violate the statute by adopting the rule without
AROC’s review.
3. Standards for Rules. Ind. Code Ann. § 4-22-2-19.5 (West 2001)
says, in part:
(a) To the extent possible, a rule adopted under this article . . .
shall comply with the following:
1) Minimize the expenses to:
A) regulated entities that are required to comply with the
rule
B) persons who pay taxes or pay fees for government services
affected by the rule; and
C) consumers of products and services of regulated entities
affected by the rule.
2) Achieve the regulatory goal in the least restrictive manner.
Walgreens argues that FSSA did not even attempt to meet this
requirement. FSSA counters that this is a very flexible standard, and
correctly points out that while the statute requires “minimiz[ing] the
expenses to regulated entities,” this rule did not affect pharmacy expenses
at all. Ind. Code § 4-22-2-19.5(a)(1)(A); (Appellants’ Br. at 22.).
Rather, it reduced their revenues.
We agree that “to the extent possible” affords the agency broad
latitude in exercising judgment, and that this rule did not alter the
pharmacies’ compliance expenses. Moreover, this Medicaid cost containment
strategy furthered both of the other objectives stated in Ind. Code § 4-22-
2-19.5(a)(1)(B) and (C), i.e., minimizing costs to taxpayers and to
Medicaid recipients. We therefore conclude that FSSA’s failure to offer
evidence of any formal analysis to satisfy this statute does not invalidate
the permanent rule.
4. Payments to Providers Statute. Indiana Code Ann. § 12-15-13-2(a)
(West 2001) requires that payments to Medicaid providers be “(1) consistent
with efficiency, economy, and quality of care; and (2) sufficient to enlist
enough providers so that care and services are available under Medicaid, at
least to the extent that such care and services are available to the
general population in the geographic area.”
Gifford worked with an outside consulting firm in deciding what cuts
to propose and in assessing whether the cuts would leave Medicaid rates
more comparable to non-Medicaid rates. (T.R. at 30.) As we observed
above, Walgreens offered testimony only that a handful of pharmacies around
Indiana would close as a result of these cuts and that some special
services could be eliminated. The record indicates that alternative
providers would be available and that FSSA has committed to take
appropriate steps to ensure access and a quality of care consistent with
that offered to the general public.
On the other side of the coin, revising Medicaid rates so they are
more commensurate with private sector rates is consistent with economy and
efficiency, as the statute requires. FSSA has therefore met its burden of
demonstrating compliance with this statutory requirement.
5. Advice of Medical Staff. Indiana Code Ann. § 12-15-21-2 (West
2001) says, “The secretary shall, with the advice of the office[ of
Medicaid Policy and Planning]’s medical staff, adopt rules under IC 4-22-2
and consistent with . . . the federal Social Security Act.”[11] Indiana
Code Ann. § 12-15-21-3 (West 2001) also requires adoption of Medicaid
rules, including those “establishing limitations that are consistent with
medical necessity concerning the amount, scope, and duration of the
services and supplies to be provided.”
Walgreens argues that FSSA did not prove that Gifford consulted with
the doctor on the Office’s medical advisory panel,[12] but Gifford said
that the doctor participated in discussions and later testified
unequivocally that the Office’s medical advisory committee reviewed the
proposal.[13] (T.R. at 50, 99-100.) Furthermore, these rules did not
eliminate any medically necessary supplies and only potentially eliminated
some services that the program does not guarantee, such as home delivery.
We therefore hold that the trial court committed clear error in concluding
that FSSA violated these statutes.
6. Fiscal Analysis. Indiana Code Ann. § 4-22-2-28(b) (West 2001)
requires that after an agency has preliminarily adopted any rule with an
estimated economic impact on regulated entities exceeding $500,000, it must
submit the proposed rule to the Legislative Services Agency (LSA) so that
LSA can prepare a fiscal analysis on the effect of compliance on the state
and the regulated entities. The analysis must include an estimate of the
proposed rule’s economic impact and a quantification of any unfunded
mandate. Id. The agency “shall consider the fiscal analysis as part of
the rulemaking process.” Id.
FSSA concedes that this was not done, but argues that this
requirement only applies to rules that create unfunded mandates. This
reading contradicts the explicit statutory language that requires “an
estimate of the economic impact of the proposed rule and a determination
concerning the extent to which the proposed rule creates an unfunded
mandate . . . .” Ind. Code § 4-22-2-28(b) (emphasis added). FSSA also
argues that the exclusive focus of the statute is increased regulatory
burdens on businesses, and that this rule does not create such a burden.
Again, however, nothing in the statutory language supports such a narrow
construction.
We agree with the trial court, therefore, that FSSA should have
obtained an LSA fiscal analysis.
The question then becomes, what is the proper remedy. Per Indiana
Code Ann. § 4-22-2-44 (West 2001), “A rulemaking action that does not
conform with this chapter is invalid, and a rule that is the subject of a
noncomplying rulemaking action does not have the effect of law until it is
adopted in conformity with this chapter.” Before the permanent rule may
take effect, therefore, FSSA must obtain LSA’s fiscal analysis.
Because the requirement does not attach until after preliminary
adoption, FSSA need not go all the way back to square one. Rather, once it
has obtained and properly considered an LSA fiscal analysis, it may
resubmit the proposed rule to the Attorney General’s office and proceed
toward permanent adoption should it so choose.
C. Summary – Likelihood of Success on the Merits
To recap, the trial court’s conclusions that the emergency and
permanent rules violated statutory procedural requirements are clearly
erroneous except for the conclusion that FSSA failed to obtain an LSA
fiscal analysis of the permanent rule. As stated above, FSSA will have
ninety days plus one available ninety-day extension with the emergency rule
in effect to rectify this omission.
IV. Public Interest
Finally, we conclude that an injunction in favor of Walgreens would
disserve the public interest. FSSA adopted rules to counteract a one
hundred million dollar projected Medicaid deficit. This action clearly
invoked the public interest.[14] On the other hand, Walgreens asserts that
a reduction in reimbursement rates will cause a handful of store closures
and potential discontinuation of some special services. In essence,
Walgreens identifies its private interest and extrapolates that harm to
the general public interest. We conclude that the public interest weighs
against injunctive relief in favor of Walgreens.
Conclusion
We reverse the trial court’s order of a preliminary injunction.
Dickson, Sullivan, Boehm, and Rucker, JJ., concur.
-----------------------
[1] July 1, 2002, through June 30, 2003.
[2] Gifford developed these recommendations after comparing Indiana’s
Medicaid rates to private sector rates using research from an actuarial
consulting firm, information from health maintenance organizations under
contract to the state, rates for the state employee health insurance plan,
and a newsletter from a pharmacy network. (T.R. at 30.)
[3] We take no position on whether these cases correctly applied our
holding, but note only the Court of Appeals has occasionally invoked the
“per se” standard when faced with clearly unlawful conduct. See, e.g.,
Union Township Sch. Corp., 706 N.E.2d at 192 (defendants violated
construction wage statute); L.E. Servs., Inc. v. State Lottery Comm’n, 646
N.E.2d 334, 338, 349 (Ind. Ct. App. 1995) (company’s plan to provide mail
order service for out-of-state lottery tickets violated anti-gambling
statutes); Kaminsky v. Med. Licensing Bd., 511 N.E.2d 492, 498 (Ind. Ct.
App. 1987) (injunction based on unauthorized practice of medicine); State
ex rel. Med. Licensing Bd. v. Stetina, 477 N.E.2d 322, 327 (Ind. Ct. App.
1985) (denial of injunction for a clear violation of unauthorized practice
of medicine statute was error); State ex rel. Dept. of Natural Resources v.
Mason, 416 N.E.2d 1312, 1315-16 (Ind. Ct. App. 1981) (enjoining improper
construction of boat channel that substantially departed from permit’s
scope); DeMayo v. State ex rel. Dep’t of Natural Res., 182 Ind. App. 241,
244-45, 394 N.E.2d 258, 260-61 (1979) (upholding injunction when property
owner encroached on shoreline without a valid permit).
[4] The great weight of authority holds that merely economic injury does
not warrant injunctive relief because post-trial damages can adequately
compensate the injured party. See, e.g., Ind. Family & Social Servs.
Admin. v. Legacy Healthcare, Inc., 756 N.E.2d 567, 571-72 (Ind. Ct. App.
2001); Jay County Rural Elec. Membership Corp. v. Wabash Valley Power
Ass’n, Inc., 692 N.E.2d 905, 909 (Ind. Ct. App. 1998); Xantech Corp., 643
N.E.2d at 921; Ind. State Dept. of Welfare, Medicaid Div. v. Stagner, 410
N.E.2d 1348, 1352-53 (Ind. Ct. App. 1980) (citation omitted). Imminent
business loss or failure is a form of economic injury. We find the
reasoning of Virginia Petroleum Jobbers Ass’n v. Fed. Power Comm’n, 259
F.2d 921, 925 (D.C. Cir. 1958), persuasive:
The key word in this consideration is irreparable. Mere injuries,
however substantial, in terms of money, time and energy necessarily
expended in the absence of a stay, are not enough. The possibility
that adequate compensatory or other corrective relief will be
available at a later date, in the ordinary course of litigation,
weighs heavily against a claim of irreparable harm.
[5] Walgreens also presented the trial court with the affidavits of six
Medicaid beneficiaries who testified that they would be harmed if the cost
cuts go into effect. The one affidavit presented in the record for our
review is from Inez Rodman, who receives home delivery of her prescriptions
by Ralph Anderson’s pharmacy. (Appellees’ App. at 436.) Rodman stated
that she and others in Bedford would be “hurt if [Anderson’s retail
pharmacy] went out of business.” (Id. at 436-37.)
This showing does not meet Walgreens’ burden in demonstrating irreparable
harm. First, Anderson testified that the home delivery service was not
required by Medicaid and was provided as a “community service.” (T.R. at
216.) Second, Anderson did not testify that either his retail pharmacy
would close or that the home delivery service would terminate. (T.R. at
227-28.) Third, Bedford has at least four other pharmacies. (T.R. at
231.) Finally, Director Gifford testified that the State, through the FSSA
staff and help line, would “do whatever we needed to do to ensure [Medicaid
beneficiaries] had sufficient access.” (T.R. at 114-16.)
[6] Indiana Code Ann. § 4-22-2-37.1(a)(20) (West 2001) already provided an
expedited mechanism for emergency FSSA rules. Public Law 291-2001 § 48
further streamlined this process.
[7] Gifford further testified: “I made it very clear that I understood my
instructions to be to implement these as quickly as possible and to move
forward because I believe it was Senator Simpson who was urging us to hold
off on these cuts. And I told her that my instructions were not to do so
and to move forward as quickly as possible.” (T.R. at 106.)
[8] Senator Simpson preceded this statement by explaining,
[R]eview has, for the purposes of the Budget Committee, . . . a very
specific connotation. . . . And when we do a review, with that
connotation, it is listed as a review item on the agenda, and the
action of the Budget Committee . . . is . . . an explanation . . .
and/or discussion of that particular item. That is like our approval
of that particular item. We don’t actually vote on it. The review is
all that’s required.
(T.R. at 186.) She went on to say:
Remember[] that the majority members of the Budget Committee – in this
case the three Democrats on the Budget Committee – set the agenda, and
we . . . discuss every agenda item prior to it showing up on the
agenda. So it is very much an intentional selection of items that are
put on the agenda.
(T.R. at 188.)
Senator Meeks echoed this view, saying, “There was a report but no
review. If there had been a review, it would have been an item on the
agenda. It was not . . . . What we got was a report on the status of where
they were and where they were expected to go.” (T.R. at 243-44.) He went
on to say, “[T]hey were talking about where the shortfalls were and some
necessary plans that they were going to try to put in place to remedy that
shortfall.” (T.R. at 245.)
[9] See, e.g., Ind. Code Ann. § 11-13-2-1 (West 2001) (requiring budget
committee approval before Indiana’s judicial conference may distribute
state financial aid for court probation services); Ind. Code Ann. § 12-8-1-
12(a) (requiring unanimous budget committee recommendation prior to
appropriation of additional Medicaid funds to supplement the legislative
appropriation, when necessary to avoid violating federal law or
jeopardizing federal Medicaid funding). See also Black’s Law Dictionary
1320 (7th ed. 1999) (defining review as “[c]onsideration, inspection, or
reexamination,” not approval).
[10] Amici curiae argue that the statute requires budget committee review
within the affected fiscal year (in this case, after July 1, 2001), after
the budget director has reviewed fiscal year-to-date expenditures and
identified a problem. (Amicus Br. at 7-8.) We find this too narrow a
construction. The statute only requires that the committee review occur
before the budget director directs the Secretary of FSSA to adopt emergency
rules, which was the case here. See P.L. 291-2001 § 48. In her August 20,
2001 letter, Budget Director Cockrum stated that she had determined, as the
statute requires, “that Medicaid expenditures are at a level that may cause
total expenditures for the year to exceed total Medicaid appropriations for
the year.” See id.; (Def. Exh. B.)
[11] Indiana Code article 15 is titled “Medicaid”; chapter 21 is “Rules”;
section 2 is “Secretary to adopt rules; consistency with Title XIX of
Social Security Act.” This statute is therefore a general legislative
directive to FSSA to adopt rules governing Indiana’s Medicaid program.
[12] Gifford was questioned about this during the hearing before the trial
court:
Q. What medical advice did you obtain?
A. What do you mean by medical advice?
Q. Did you talk to a doctor?
A. . . . No, I didn’t talk to the doctor. But I’m confused about
what what you mean by medical advice. That a doctor might know what a
pharmacist would find sufficient?
Q. Let’s make it simpler. Did you talk with any doctors about what
level would be appropriate for either the drug cost reimbursement or the
dispensing fee level?
A. I don’t believe so. There’s a physician on my staff who would
have been around the table in some of it, but I don’t believe I
specifically addressed the question to her.
(T.R. at 50.)
[13] Q. . . . Was the pharmacy declared reduction reviewed by your medical
advisory committee?
A. Yes.
Q. And to the best of your knowledge is there a physician on that
committee?
A. Yes.
Q. And I believe you testified earlier that OMPP, Office of Medicaid
Policy and Planning, does have a staff pharmacist?
A. Yes.
Q. Did he or she also review the pharmacy declared reduction?
A. Yes.
(T.R. at 99-100.)
[14] The actions of the General Assembly further demonstrate that this
injunction does not better serve the public interest. As described above,
P.L. 291-2001 § 48 gave the state budget director extraordinary emergency
power to cut Medicaid program expenditures in response to a massive looming
deficit.