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Mail-Order Drug Dispute Could Clarify Obamacare Bias Protections

May 7, 2021, 2:10 PM

The U.S. Supreme Court should review a decision that clears the way for people with disabilities to sue drug benefit plan administrators for bias based on how their plans operate, partly because it may limit discretion in how plans are structured, trade groups are saying.

Friend of the court briefs say the U.S. Court of Appeals for the Ninth Circuit got it wrong when it held that HIV/AIDS patients in California could bring a disparate impact claim under Section 504 of the Rehabilitation Act and, by extension, Section 1557 of the Affordable Care Act, against plan administrators based on provisions that require specialty drugs to be mailed to patients.

The case raises important issues about how broadly the ACA’s anti-discrimination section should be applied, especially in light of the Trump administration’s narrowing of its scope through actions such as removing gender identity protections, Elizabeth Pendo said. Pendo is a law professor at Saint Louis University Law School, who specializes in disability discrimination.

If the top court chooses to answer the disparate impact question, the decision also will affect any Section 504 disability discrimination claim, including those outside the health-care context, said Nathaniel Glasser, a Washington-based member of Epstein Becker Green.

CVS’s petition for review also asked the court to decide if, assuming a disparate impact claim can be brought under Sections 504 and 1557, it can be used to challenge a benefit plan’s facially neutral terms and conditions, Glasser said.

The answer will affect a wide array of entities, as Section 1557 “exploded the range of potential defendants” under Section 504 to include virtually any public or private health-care program that receives federal funds, a category that includes hospitals, pharmacies, insurers, and pharmacy benefit managers, CVS said.

Circuit Split, Open Question

The Ninth Circuit’s decision conflicts with one from the U.S. Court of Appeals for the Sixth Circuit in Doe v. Blue Cross Blue Shield of Tenn., Inc. that involved similar circumstances, CVS said in its petition for review. The top court must resolve the split, it said.

Ending a circuit split is a traditional reason for granting review, but the split here is a pretty uneven one, Glasser said. The Second, Seventh, and Tenth circuits, like the Ninth, have recognized disparate impact claims under Section 504.

Even without a split, Supreme Court review is necessary, because the top court left open the very question at issue here in Alexander v. Choate, CVS said.

There, the Supreme Court assumed without deciding that a disparate impact claim lies under Section 504, the U.S. Chamber of Commerce said in an April 30 brief supporting CVS. A definitive answer is needed, it said.

Pendo disagreed with that characterization. The Choate court determined that a disparate impact claim is possible under Section 504 when a policy or practice deprives people with disabilities of meaningful access to a benefit they are otherwise qualified to receive, she said.

The meaningful access question requires an analysis of the goals of the underlying law. Here, that’s the ACA, and the Ninth Circuit properly considered its underlying goals to make health care more accessible and affordable, Pendo said.

Threat to Insurers, Employers

The Ninth Circuit’s decision also threatens insurers’ and employers’ ability to structure their health plans to provide high-quality health care and keep the cost of prescription drugs affordable, the Pharmaceutical Care Management Association said in a friend of the court brief supporting CVS filed April 30.

The disparate impact theory, whatever its scope, “is an exceptionally ill fit when it comes to health plan benefits,” America’s Health Insurance Plans said.

The Washington Legal Foundation, joined by the Independent Women’s Law Center, also urged the court to take the case. They argued Section 504’s plain language requires proof of intentional discrimination and therefore forecloses a disparate impact claim.

“Courts should not take it upon themselves to redefine illegal discrimination in a way that Congress did not intend,” Jennifer C. Braceras, director of IWLC said in a statement announcing the filing.

Mail-Order, Drop-Ship Only

The HIV/AIDS patients alleged plans administered by CVS Pharmacy Inc., Caremark LLC, and Caremark California Specialty Pharmacy LLC discriminate against them because the plans pay in-network rates for specialty drugs only if they are delivered by mail or drop-shipped to a local CVS store for pick up.

The patients want to be able to get the drugs from pharmacists who know them and can provide advice, but doing so would cost them significantly more because they’d be required to pay out-of-network rates, they said.

CVS argued that mail-order delivery is required for all specialty drugs. The plans don’t distinguish HIV/AIDS drugs for different treatment, it said.

The patients’ response is due June 1.

Williams & Connolly LLP represents CVS. Consumer Watchdog represents the patients. Latham & Watkins LLP represents the Chamber. McDermott Will & Emery LLP represents PCMA. Washington Legal Foundation represents WLF. Akin Gump Strauss Hauer & Feld LLP represents AHIP.

The case is CVS Pharm., Inc. v. Doe, U.S., No. 20-1374, briefs filed 4/30/21.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at

To contact the editors responsible for this story: Rob Tricchinelli at; Patrick L. Gregory at