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Stanton-Negley Drug Co. v. Pennsylvania Dep't of Public Welfare

April 24, 2008


The opinion of the court was delivered by: Hon. Nora Barry Fischer U.S. District Judge



Plaintiffs Stanton-Negley Drug Companyand Meyer and Steve Simon (hereinafter "Plaintiffs" or "Stanton-Negley) brought this lawsuit naming the following agencies and individuals as Defendants: (1) Pennsylvania Department of Public Welfare; (2) Estelle B. Richman, Secretary of Pennsylvania Department of Public Welfare; (3) Office of Medical Assistance Programs; (4) James L. Hardy,*fn1 Acting Deputy Secretary of the Office of Medical Assistance Programs; (5) Office of Administration, Contract Policy, Management and Procurement, a subdivision of the Department of Public Welfare; and (6) Daniel R. Boyd, Official-In-Charge, Division of Procurement, Department of Public Welfare (hereinafter "Defendants"). (Docket No. 1).


Stanton-Negley is a Pennsylvania corporation owned and operated by Plaintiffs Meyer and Steven Simon, who are licensed pharmacists. (Docket No. 1, at ¶ 1). Stanton- Negley and Plaintiffs are participants in the Pennsylvania Medicare and Medical Assistance Programs ("MA"), providing products and drugs to the recipients of such programs as directed and requested by the receipient's medical providers or the beneficiaries. Id.

Plaintiffs brought this action in response to a program for "Specialty Pharmacy Drugs" scheduled to be implemented by Defendants. (Docket No. 5, at 1). On October 5, 2006, the Defendants issued a Request for Proposals ("RFP") No. 31-06 seeking the creation and implementation of its proposed Specialty Pharmacy Drug Program. (Docket No. 1, at ¶ 9). Pursuant to RFP No. 31-06, MA recipients that are prescribed one or more specialty drugs covered by the Specialty Pharmacy Drug Program would be required to secure the drugs from preferred providers, selected through the RFP. (Docket No. 1, at ¶ 13). RFP No. 31-06 limits the number of preferred providers of specialty pharmacy services for MA recipients to two (2) contractors selected through a bidding process. (Docket No. 1, at ¶ 10). The deadline for the submission of bids was November 9, 2006. (Docket No. 1, at ¶ 32).

Stanton-Negley Drug Company has existed as a pharmacy for a period in excess of 40 years. (Docket No. 1, at ¶ 14). From July 1, 2006 through June 30, 2007, it received $700,000 of its $2.7 million in revenue from specialty drugs which will be covered by the new Specialty Pharmacy Drug Program. (Docket No. 5, at 5). Until the issuance of RFP No. 31-06, pharmacies were not required to receive accreditation by the Defendants to provide specialty drugs to MA recipients. (Docket No. 1, at ¶ 22). Under the new program accreditation was required to enter a bid. Id. The accreditation process takes eight to fifteen months to complete. (Docket No. 1 at ¶ 18).

Plaintiffs assert that the turn around time from the issuance of the RFP to the submission of offers rendered it impossible for small community pharmacies, like Stanton-Negley, to submit a bid in response to the RFP. (Docket No. 10, at 23). The first public notice that RFP No. 31-06 might contain an accreditation requirement was not made until a draft of the RFP was published in June of 2006. (Docket No. 10, at 6). After this publication, Plaintiff's counsel sent correspondence to the Defendants concerning issues raised by the anticipated RFP, including accreditation, but no response was ever made by the Defendants. (Docket No. 1, at ¶ 17). Final notice that accreditation would be required was given on October 5, 2006, when the RFP was issued. (Docket No. 1, at ¶ 17). Plaintiffs commenced the accreditation process, when they determined that accreditation was necessary, even though there was not enough time to complete the accreditation process and submit a bid to the RFP before the November 9, 2006 deadline. (Docket No. 1, at ¶ 19). In response to the RFP, seven (7) bids were received with zero (0) bids submitted from any existing providers in the program. (Docket No. 1, at ¶ 30).

Plaintiffs assert that the implementation of RFP No. 31-06 would significantly and adversely affect them in their ability to conduct business as a community pharmacy and their ability to practice their professions as pharmacists. (Docket No. 1, at ¶ 35). Plaintiffs assert that RFP No. 31-06 and the envisioned Specialty Pharmacy Drug Program violate the due process and equal protection clauses of the Fourteenth Amendment and 42 U.S.C. 1396a(a)(10)(B) and 1396a(a)(23)(A) of the Medicare Act. (Docket No. 1, at ¶ 8). Plaintiffs seek a preliminary injunction against the Defendants to enjoin them from: considering any offers received in response to RFP No. 31-06, selecting any offerors as providers pursuant to RFP No. 31-06, and implementing the Specialty Pharmacy Drug Program. (Docket No. 1, at 12). Plaintiffs also seek a Rule to Show cause why a Permanent Injunction should not be entered. Id. Lastly, they seek costs, reasonable counsel fees, and such other relief as is just and appropriate. Id.


On September 9, 2007, Plaintiffs Stanton-Negley Drug Company, Meyer Simon and Steven Simon commenced this due process and equal protection action on their own behalf and on behalf of MA recipients as third parties, by filing a Complaint against Defendants. (Docket No. 1). On December 20, 2007, Defendants filed a Motion to DismisstheComplaintand Memorandum of Law in Support. (Docket Nos. 4 (See errata at 8) and 5). On January 16, 2008, Plaintiffs filed a Response to said Motionand Brief in Support. (Docket Nos. 9 and 10).

The Court conducted a Case Management Conference in this matter on February 7, 2008, during which counsel for Defendants made an oral motion, which was granted, to file a reply brief relating to the pending Motion to Dismiss and counsel for Plaintiffs made an oral motion, which was granted, to file a sur-reply brief. [22]. Thereafter, on March 8, 2008, Defendant filed a Reply Brief. (Docket No. 25). On March 13, 2008, this Court ordered that "because Plaintiffs conceded that the present action should be dismissed as to Defendants Pennsylvania Department of Public Welfare, Office of Medical Assistance Programs, and the Office of Administration, Contract Policy, Management and Procurement, the same are hereby dismissed with prejudice."*fn2 (Docket No. 26).

Said Order disposed of the 12(b)(1) aspect of Defendants' Motion which addressed this Court's jurisdiction over the state agency Defendants. On March 21, 2008, this matter was fully briefed once Plaintiffs filed their Sur-Reply Brief. (Docket No. 29).

Presently before the Court is Defendants' Motion to Dismiss the Complaint pursuant to Federal Rules of Civil Procedure 12(b)(3) and (6), asserting venue does not lie in this district; the Plaintiffs do not have third party standing to assert the rights of MA recipients; and the Plaintiffs have failed to state a claim upon which relief can be granted. (Docket No. 4, at 1). In the event that this Court declines to rule on the abstention issue presented by this matter, Defendants next move pursuant to the Federal Rule of Civil Procedure 12(b)(3) for the Court to dismiss or, in the alternative, transfer the case given that venue is improper under 28 U.S.C. ยง 1406(a). (Docket No. 5, at 2). ...

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