Over the years, we've written about the difficulties in challenging the entitlement to Medicaid in the federal courts. In light of a series of Supreme Court decisions dating back to 1990, the pathway for an aggrieved Medicaid beneficiary or provider of services to a Medicaid beneficiary to challenge a state Medicaid plan's alleged violation of a requirement of the Medicaid program has become increasingly narrow. A decision by the Supreme Court in 2015 has foreclosed virtually all pathways to federal judicial enforcement of most requirements of the Medicaid program.
So what options remain for an aggrieved beneficiary or provider? Well, the aggrieved party can always complain to CMS. In November of 2015, the Obama Administration published a final rule setting forth a process to assure covered access to Medicaid services and a recent RFI issued by the Biden Administration is soliciting comments on Medicaid access to care. But this process, to say the least, isn't particularly accessible to a Medicaid beneficiary (who almost assuredly isn't aware that the process even exists), and it's not particularly helpful to a provider who may need timely access to services for their patient. And, it's not entirely clear that this rule will remain in place; the Trump Administration proposed to repeal it in 2019 and a future Administration may do so.
We were therefore interested to read a recent decision by the Arkansas Court of Appeals that tried to address the challenge of a state Medicaid agency's decision to deny access to an FDA-approved drug to a patient suffering from a rare medical disease. But before we get into the facts of that case - that, for now, seems to create an alternative means of enforcement of the guarantee to a Medicaid benefit - we thought it would be helpful to briefly explain a little bit of background and why challenging a state's putative violation of a Medicaid requirement is so difficult.
After all, you would think that since the Congress imposed a series of requirements on state Medicaid plans (a state plan for medical assistance must ensure timely access to services; must provide services in the same amount, duration and scope to all Medicaid beneficiaries; must guarantee free access to providers; must provide sufficient payments to attract enough providers; etc. - there are over 80 requirements), and if a state violated one of those requirements, the person harmed by that violation ought to be able to sue the state in federal court, since the supposed violation is a violation of federal law. If I'm a doctor treating a Medicaid beneficiary, and the state Medicaid plan cuts payments for physician services to a level so low that no doctor in my state is willing to treat a Medicaid beneficiary, shouldn't I be able to go into federal court and get my complaint about those payment levels heard?
In fact, in all likelihood, I probably can't. And the reason has its origins in one of the oldest amendments to the United States Constitution, the first amendment ratified after the Bill of Rights were adopted in 1791. In particular, the Eleventh Amendment to the United States Constitution strips the federal courts of jurisdiction to hear a claim against a state by a citizen of another state, or - as the Eleventh Amendment was later interpreted in the years after the Civil War - to hear a claim that a state violated federal law.
Although there are tools to challenge a state's violation of an unambiguous, Constitutionally-guaranteed right to an individual - the right to vote, for instance, or the right to due process under the laws - those tools are considerably weaker when the federal government has merely provided a vague, amorphous benefit ("sufficient payment" to enlist "enough" Medicaid providers) in a federal spending program like Medicaid. That bar presented by the Eleventh Amendment, coupled with an unrealistic enforcement mechanism (complete termination of a state's Medicaid funds), can leave a Medicaid beneficiary or Medicaid provider out in the cold.
But ... even though the Eleventh Amendment acts as a bar to federal enforcement of a violation of a right to Medicaid, nothing in the Constitution or the Medicaid statute prohibits a state court from hearing a challenge to a state's violation of a requirement of the Medicaid program. And that's what happened in Arkansas when the state Medicaid program sought to block approval for coverage of an FDA-approved prescription biological agent.
As my colleagues Alex and Ross have done a great job explaining in the past, if a pharmaceutical manufacturer wants to have its drug covered under a state's Medicaid program, it has to agree to pay a rebate to the state generally equal to 23.1% of the average manufacturer's price of the drug and must agree to participate in the 340B program; in return, the state must agree to cover the drug in almost all instances. A state can require prior authorization before allowing a beneficiary to access a drug but, in general, once the manufacturer has agreed to pay a rebate, the state must cover the drug.
As Alex pointed out in his recent article, there's been a lot of controversy over drugs that are approved not under the FDA's normal approval pathway but rather, under FDA's accelerated pathway mechanism. This accelerated approval pathway permits a manufacturer to seek FDA approval for a drug based on a surrogate endpoint considered to be a predictor of a clinical outcome, even though the company has not completed all of its clinical trials testing the actual endpoint set forth in the trial design. A manufacturer can seek accelerated approval especially in the case of a treatment for a rare medical condition with no treatment options.
This is what happened with a drug called Exondys, a treatment for Duchenne Muscular Dystrophy - a rare and almost always fatal disease affecting young boys due to a defect on the X chromosome. Exondys is prescribed to treat the genetic defect and the FDA approved it using its accelerated pathway mechanism. Once the drug was approved, a physician in Arkansas prescribed Exondys for his patient, an Arkansas Medicaid beneficiary, but Arkansas Medicaid denied coverage, saying that the drug was experimental. In so doing, the state relied on its assertion that Exondys was approved under the accelerated approval pathway and did not undergo traditional FDA review and approval. And because state Medicaid plans are required to ensure that they do not pay for services that are not medically necessary, the state argued that it was justified in denying coverage for Exondys because, in the state's view, the drug was experimental.
Here is a perfect example of why a Medicaid beneficiary or provider might want to challenge a potential state violation of a Medicaid requirement. A state plan for medical assistance must "comply with the applicable requirements of" the Medicaid drug rebate program. Arguably, Arkansas was not "comply[ing] with" those requirements because the manufacturer of Exondys had agreed to pay rebates on its FDA-approved drug, but Arkansas was not covering the drug under its Medicaid program.
The manufacturer could have challenged the Arkansas non-coverage decision by suing in federal court. But if it had done so, it risked a federal court decision concluding that the Medicaid benefit being challenged was too vague or amorphous to be challenged through the federal court system. (There was good reason for the manufacturer to think this; as we've described here, the federal courts in Arkansas take a dim view of enforcing the entitlement to Arkansas Medicaid benefits through the federal court system). The manufacturer could have also gone to CMS under the enforcement mechanism the agency developed in 2015, but doing so could have delayed the patient getting access to the drug while the agency deliberated. Instead, the manufacturer took what it must have believed was the quickest step available to it.
It was a strategic decision that worked. According to the Arkansas Court of Appeals in Arkansas Department of Health v. Sarepta Therapeutics, 2021 Ark. App. 330 (Ark. Ct. App. 2021), the state "impermissibly substituted its judgment about the efficacy of the drug for that of FDA and the patient's prescribing physician." As a result, the state could not deny coverage for Exondys based on its argument that the drug was not medically necessary.
It will be interesting to see whether this pathway to enforcement of benefits under the Medicaid statute - that is, litigating a challenge to the operation of a state Medicaid plan in the state's own court system rather than the federal court system - becomes a growing trend. Given the paucity of alternatives available to a Medicaid beneficiary or provider to assert that a state has violated the federal Medicaid law, it may become more common. We're anxiously waiting to see if Arkansas appeals to its Supreme Court.
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