Original jurisdiction in cases of Samuel D. Brog, t/a Brog Pharmacy et al. v. Commonwealth of Pennsylvania, Department of Public Welfare and Frank S. Beal, Secretary of Public Welfare.
Gerald F. Tietz, with him Robert G. Bauer, and Abraham, Pressman, Tietz & Seidman, for plaintiffs.
Robert E. Kelly, Deputy Attorney General, with him Norman J. Watkins, Deputy Attorney General, and J. Justin Blewitt, Acting Attorney General, for respondents.
President Judge Bowman and Judges Crumlish, Jr., Wilkinson, Jr., Rogers, Blatt, DiSalle and Craig. Judges Mencer and MacPhail did not participate. Opinion by Judge Craig.
Plaintiffs, operators of pharmacies in Philadelphia filed a complaint in equity and a petition for declaratory judgment against the Department of Public Welfare (DPW) in this Court, invoking our original jurisdiction. The actions challenge the validity of Section 9413.61 of DPW'S Medical Assistance (MA) regulations, which provides a discount pass-through to pharmacies which do a large volume of medical assistance business.
The two actions were ordered by the court to be treated as petitions for review. They were then consolidated and DPW filed preliminary objections, which are presently before this Court.
The portion of Section 9413.61 being challenged by plaintiffs states:
However, there will be a 4% discount off the average wholesale price (AWP) for pharmacies grossing over $50,000.00 per year under the Medical Assistance Program and a 2% discount off the AWP for pharmacies grossing between $25,000.00 and $50,000.00 per year. Those pharmacies receiving less than $25,000.00 will be reimbursed up to the full AWP plus the $2.00 dispensing fee.
DPW argues in its brief in support of preliminary objections that the petition for review brought by plaintiffs must be dismissed because plaintiffs have failed to exhaust the administrative remedies available within DPW. However, DPW did not raise that question anywhere in its preliminary objections.
Therefore, we are faced with two separate issues. First, we must determine whether DPW's failure to raise plaintiffs' failure to exhaust administrative remedies by preliminary objection is a waiver of that defense. If not, we must then determine whether there was a failure by plaintiffs to exhaust administrative remedies, requiring us to remand to DPW for further administrative action.
Taking the second issue first, it is apparent that had DPW raised plaintiffs' failure to exhaust administrative remedies in its preliminary objections, we would have been compelled to dismiss plaintiffs' petitions, as we did in Delaware Valley Convalescent Center, Inc. v. Beal, 34 Pa. Commonwealth Ct. 177, 382 A.2d 1290 (1978). There, the petitioner sought to enjoin DPW from applying the reimbursement ceilings to nursing homes which it had established by regulation, contending they were unlawful. DPW, by preliminary objection, argued that the petitioner had failed to exhaust an adequate administrative remedy by failing to appeal its reimbursement as ...