J. DYAL, d/b/a DYAL'S PHARMACY, )
vs. ) CASE NO. 84-0526RX
Respondent. )
Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, William E. Williams, held a public hearing in this cause on March 22, 1984, in Tallahassee, Florida.
For Petitioner: William L. Grossenbacher, Esquire
For Respondent: Theodore E. Mack, Esquire
Rehabilitative Services 1323 Winewood Boulevard Building One, Suite 407 Tallahassee, Florida 32301
By petition filed with the Division of Administrative Hearings on February 14, 1984, Petitioner challenged the validity of Rule 10C-7.42(4)(b) and 10C- 7.42(5)(m), Florida Administrative Code, as being arbitrary and capricious and an invalid exercise of delegated legislative authority pursuant to Section 120.56, Florida Statutes. However, during the course of the final hearing in this cause, Petitioner abandoned his challenge to Rule 10C-7.42(5)(m). The remaining rule challenged in this cause, Rule 10C-7.42(4)(b), requires that any non-steroidal anti-arthritic drug, other than buffered aspirin, must have "medically necessary" written on the prescription form by the practitioner in his own handwriting before Medicaid will reimburse for the drug.
Final hearing in this cause was held on March 22, 1984, pursuant to a Notice of Hearing dated March 12, 1984. At the final hearing, Petitioner testified in his own behalf and offered Petitioner's Exhibit 1, which was received into evidence. Respondent called Judy Mitchell and Red Presnell as its witnesses, and offered Respondent's Exhibits 1 through 3, which were received into evidence.
Both Petitioner and Respondent have submitted proposed findings of fact for consideration by the Hearing Officer. To the extent that those proposed findings are not included in this order, they have been specifically rejected as being either irrelevant to the issues involved in this proceeding, or as not having been supported by evidence of record.
Petitioner is a pharmacist doing business as Dyal's Pharmacy in Daytona Beach, Florida. Petitioner is a Medicaid provider under the rules of the Respondent, operating under Provider No. 1018147.
Respondent is a department of the State of Florida, with its principal office in Tallahassee, Leon County, Florida. Respondent is designated as the state agency responsible for the administration of Medicaid funds, and is authorized to provide payments for medical services, pursuant to Section 409.266, Florida Statutes.
Pursuant to his responsibilities as a Medicaid provider and a pharmacist, Petitioner has, during the period of March, 1982, through August, 1983, filled 43 prescriptions for nonsteroidal anti-arthritic drugs other than buffered aspirin, which did not have the words "medically necessary" written on the prescription form by the prescribing physician in his own handwriting.
Petitioner filed claims with Respondent with regard to the aforementioned prescriptions, and Respondent paid $854.44 to Petitioner as reimbursement. By letter received by Petitioner on December 27, 1983, Respondent has notified Petitioner of its intention to seek repayment of that amount pursuant to Rule 10C- 7.42(4)(b), Florida Administrative Cede.
Rule 10C-7.42, Florida Administrative Code, provides, in pertinent part, as follows:
(4) Covered Benefits
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(b) All prescriptions for buffered or enteric coated aspirin must indicate that an arthritic condition is being treated and dispensed in quantities no less than 200. Any nonsteroidal anti-arthritic drug, other than buffered aspirin, must have `medically
necessary' written on the prescription by the practioner in his own handwriting.
Noncompliance will warrant recoupment.
Petitioner has sought an informal hearing regarding Respondent's attempt to recoup amounts previously paid to Petitioner, but in light of the provisions of the challenged rule it is unlikely that he can prevail. The existence of Rule 10C- 7.42(4)(b) is the only basis upon which repayment could be demanded by Respondent from Petitioner.
The Florida Medicaid Program is administered through Respondent. In order to receive federal matching funds, Respondent must implement certain mandatory services for indigent. Other services which may qualify for federal funds are optional, and the state may cheese not to implement those programs. The pharmacy program, which this rule purports to regulate, is one such optional service which the State of Florida has chosen to implement.
Funds utilized in the Medicaid Program are controlled by the legislature through funding of Respondent's budget. To regulate its budget, Respondent regularly reviews utilization and implements cost containment in various program. In 1981, Respondent was required to reduce its budget, and approximately $2 million of that reduction was required to be made in the Medicaid Program. In considering various options to reduce the Medicaid budget by this amount, the Department reviewed the pharmacy program budget which is the third largest in the Medicaid Program. Options such as limiting the number of prescriptions and requiring full payment were considered since these options had been implemented in other states. Such restrictions were not initiated, however, because Respondent felt that the large elderly population in Florida would forego taking necessary medication and endanger their health.
Specific medications which were being paid for through the prescribed drug program were reviewed and certain drugs were eliminated from reimbursement under the program when prescribed for specified reasons, and other drugs were eliminated completely. These categories eliminated were chosen which would have the least detrimental effect on recipients.
Additionally, Respondent, in consultation with physicians and pharmacists, considered the use of nonsteroidal anti-inflammatory drugs for the treatment of arthritis. While the drug of choice for treatment of arthritis is aspirin, because it is more effective than most nonsteroidal anti-arthritics, these nonsteroidal anti-arthritic drugs may be necessary for some patients who can't take aspirin. The number of persons who require such drugs instead of aspirin is small, however, and would not justify the large percentage of prescriptions for the nonsteroidal anti-arthritics which Respondent had observed through administering the pharmacy program. Because of their relatively high cost, nonsteroidal anti-arthritic drugs were accounting for 9.6 percent of the pharmacy program budget. Instead of eliminating the entire category of nonsteroidal anti- arthritic drugs from reimbursement under the program, which some states have implemented, Respondent opted to add aspirin to the list of covered benefits when prescribed for arthritis, and to require that the term "medically necessary" be written by the physician on the prescription form for nonsteroidal anti- arthritic drugs in order to be eligible for Medicaid reimbursement. This procedure was initiated in an effort to direct physicians' attention to the cost differential between the two types of drugs to ensure that a physician was making a conscious decision when prescribing the more expensive nonsteroidal anti-arthritic medication.
The term "medically necessary" was chosen because physicians were familiar with that phrase through its use under the Florida Generic Drug statute. In response to an inquiry from the Florida Medical Association concerning the use of the term "medically necessary, Respondent indicated to that group that the term "drug of choice" would be an acceptable alternative. The challenged rule had not been amended at the time of final hearing in this cause to reflect this alternative term, nor was there any indication of record that any group other than the Florida Medical Association had been notified of Respondent's policy choice in this regard.
CONCLUSIONS OF LAW
The Division of Administrative Hearings has jurisdiction over the subject matter of, and the parties to, this proceeding. Section 120.56, Florida Statutes.
Section 409.026(1), Florida Statutes, provides that:
The department shall conduct, supervise, and administer all social and economic services within the state which are or will be carried on by the use of Federal or state funds or funds from any other source and receive and distribute feed stamps and commodities designated by the United States or any agency thereof. The department shall determine the benefits each applicant or recipient of assistance is entitled to receive under this chapter. . . . (Emphasis added.)
Section 409.026(6)(b), Florida Statutes, empowers Respondent to: Act as agent of, or contract with, the
Federal Government, state government, or any county or municipal government in the conduct and administration of social and economic services activities in securing the benefits of any public assistance that is available from the Federal Government or any of its agencies and in the disbursement of funds received from the Federal Government, state government or any county or municipal government for social and economic services purposes in the state. . . .
Section 409.266, Florida Statutes, provides, in pertinent part, as follows:
The department is designated as the state agency responsible for the administration of Medicaid funds under Title XIX of the Social Security Act and, to the extent moneys are appropriated, is authorized to provide payment for medical services to any person. . . .
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The department is authorized to:
(a) Enter into such agreements with appropriate agents, other state agencies, or any agency of the Federal Government and accept such duties in respect to social welfare or public aid as may be necessary or needed to implement the provisions of Title XIX of the Social Security Act pertaining to medical assistance. . . .
As held by the court in Williams v. Florida Real Estate Commission,
232 So. 2d 239, 240 (Fla. 4th DCA 1970), a state agency has only these powers expressly mentioned in the statute or reasonably implied there from to carry out the responsibilities imposed upon it by the legislature. Here, Respondent
clearly has implied rulemaking authority by virtue of the aforementioned provisions of Chapter 409, Florida Statutes. Petitioner has not, however, challenged the existence of Respondent's rulemaking authority, but instead has contended only that Rule 10C-7.42(4)(b), Florida Administrative Code, is arbitrary and capricious. In Agrico Chemical Company v. State, 365 So. 2d 759, 763 (Fla. 1st DCA 1979), the court held that in a rule challenge proceeding:
. . . the hearing officer must leek to the legislative authority for the rule and determine whether or not the rule is encompassed within that grant. The burden is upon one who attacks the rule to show that the agency . . . [has exceeded] its authority; that the requirements of the rule are not appropriate to the end specified in the legislative act; that the requirements contained in the rule are not reasonably related to the purpose of the enabling legislation or that the . . . rule or the requirements thereof are arbitrary or capricious.
A capricious action is one which is taken without thought or reason or irrationally.
An arbitrary decision is one not supported by facts or logic, or despotic. Administrative discretion must be reasoned and based upon competent substantial evidence. Competent substantial evidence has been described as such evidence as a reasonable person would accept as adequate to support a conclusion.
It is specifically concluded, as a matter of law, that Respondent possessed adequate authority for adoption of the challenged rule, that the requirements of the rule are appropriate for the administration of the Medicaid program and that Petitioner has failed to show, as it must, that the rule is either arbitrary or capricious.
