Appeal from the Order of the Department of Public Welfare in the case of In Re: Appeal of Brog Pharmacy, et al., dated January 12, 1983.
Robert G. Bauer, with him, Jane Combrinck-Graham and William Hildenbrand, Abraham, Pressman & Bauer, P.C., for petitioners.
Gwendolyn T. Mosley, Deputy Attorney General, with her, Allen C. Warshaw, Chief, Litigation Section, and LeRoy S. Zimmerman, Attorney General, for respondent.
Judges MacPhail, Colins and Senior Judge Blatt, sitting as a panel of three. Opinion by Judge Blatt.
[ 87 Pa. Commw. Page 182]
The petitioners are pharmacies providing prescription services to Medical Assistance Program recipients pursuant to agreements with the Department of Public Welfare (Department). They appeal here an
[ 87 Pa. Commw. Page 183]
order of the Secretary of the Department which dismissed as untimely a number of reimbursement appeals and remanded the remaining appeals to the Hearing Examiner for recalculation of those payments from which deductions had been improperly taken by the Department during the fiscal years 1976 through 1980.
At the times relevant here, the petitioners were engaged to provide prescription services to Medical Assistance recipients pursuant to agreements with the Department. Regulations in the Department's Medical Assistance Manual (MA Manual)*fn1 provided that participating pharmacies were to be reimbursed for each such prescription by an amount equal to the cost of the drugs dispensed plus a dispensing fee. In July 1976 the Department promulgated, as Section 9413.61 of the MA Manual, a regulation which provided that, in calculating prescription reimbursements, pharmacies grossing over $25,000 per year in reimbursements would be subject to a two percent (2%) deduction of the drug costs, based upon their Average Wholesale Price (AWP)*fn2 and that pharmacies grossing over $50,000 in such reimbursements would be subject to a four percent (4%) deduction.*fn3 The deduction scheme was purportedly intended to take advantage of the discounts provided by wholesalers to pharmacies purchasing drugs in quantity.
[ 87 Pa. Commw. Page 184]
The petitioners challenged the validity of the regulation and requested a hearing by the Department's Office of Hearings and Appeals. This office, however, determined that it lacked jurisdiction. The petitioners then filed a complaint in equity and a petition for relief in our Court. Thereafter, in Brog v. Department of Public Welfare, 43 Pa. Commonwealth Ct. 27, 401 A.2d 613 (1979) (Brog I), we dismissed the complaint while sustaining preliminary objections. We held that an available administrative remedy*fn4 existed in the provisions of Section 9413.9 of the MA Manual, which granted providers an appeals process*fn5 for bills which had been rejected for payment by the Department. The petitioners thereafter appealed to the Department, a Hearing Examiner held hearings and it was recommended that, while all appeals from such reimbursements filed within forty-six (46) days of the invoice dates of the reimbursement checks would be deemed timely,*fn6 all other appeals should be deemed untimely, and that all of the timely appeals should be denied for substantive reasons.
[ 87 Pa. Commw. Page 185]
Following a further appeal to the Secretary of the Department of Public Welfare, a final order was issued accepting the Hearing Examiner's recommendations as to which appeals should be deemed timely or untimely, but rejecting the recommendation to deny the timely filed appeals. The Secretary remanded the matter to the Hearing Examiner with instructions to calculate the amount of the deductions which should be paid back to the petitioners who had taken timely appeals from the prescription reimbursements. The Secretary directed the Hearing Examiner to determine the difference between what the petitioners had received as reimbursements for the drugs' costs, and the amount that should have been ...