private right of action

Armstrong v. Exceptional Child Center, Inc.

Issues

Does section (30)(A) of the Medicaid Act provide a private right of action for Medicaid providers against states under the Supremacy Clause, even when Congress has not explicitly created the right?

Court below

United States Court of Appeals for the Ninth Circuit

The Supreme Court will consider whether individual Medicaid providers have a private right of action under the Supremacy Clause to enforce section (30)(A) of the Medicaid Act (“§ (30)(A)”), which requires state Medicaid agencies to take provider costs into account when setting reimbursement rates, when Congress has not explicitly granted a private right of action. Richard Armstrong, the Director of Idaho’s Department of Health and Welfare, argues that individuals do not have a private right of action under § (30)(A) or the Supremacy Clause because a private remedy cannot exist without congressional intent and private litigants should not play a role in determining whether a state gets federal funding. According to Exceptional Child Center, however, when a state law conflicts with federal law, individuals have a private right of action under the Supremacy Clause to bring an injunction and prevent harm that would result from the conflicting state statute. The Court’s ruling will impact the right of individuals to recover under the Supremacy Clause as well as the administration of Medicaid and other statutory schemes that provide funding to states as long as they comply with federal law.

Questions as Framed for the Court by the Parties

Does the Supremacy Clause give Medicaid providers a private right of action to enforce § 1396a(a)(30)(A) against a state where Congress did not expressly create enforceable rights under that statute?

Exceptional Child Center, Inc., and four other companies (collectively, “ECC”) offer in-home healthcare and other services for those who are Medicaid-eligible in Idaho. See Inclusion, Inc. v. Armstrong, 835 F. Supp. 2d 960, 961 (D.

Written by

cmorales

smartinez

Edited by

rpetoskey

Additional Resources

• Robert Pear: As Medicaid Rolls Swell, Cuts in Payments to Doctors Threaten Access to Care, The New York Times (Dec. 27, 2014).

• Peyton M. Sturges: High Court to Review Medicaid Dispute, Providers' Rights to Force Higher Payments, Bloomberg BNA's Health Law Reporter (Oct. 9, 2014).

• Steve Vladeck: Enforcing Medicaid Against Recalcitrant States: The Former HHS Officials' Amicus Brief in Armstrong, PrawfsBlawg (Dec. 23, 2014).

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Astra USA v. Santa Clara County, CA

Issues

Where the federal government contracted with private corporations to create drug price reductions for certain organizations, may third-party beneficiaries of the agreements sue for violations of the agreements despite the lack of explicit federal statutory authority to do so?

Court below

United States Court of Appeals for the Ninth Circuit

Congress enacted Section 602 of the Veterans Health Care Act (“Act”) in 1992 in order to provide relief to certain federally funded organizations for the cost of prescription drugs. The Act requires the federal government and drug manufacturers to enter into pricing agreements which set price ceilings for the drugs. The County of Santa Clara and several other third-party beneficiaries of the pricing agreement (collectively “Santa Clara”) filed suit against several drug manufacturers (“Manufacturers”) under the Act, alleging that the Manufacturers had overcharged them for prescription drugs. The District Court for the Northern District of California dismissed Santa Clara’s claim, but the Ninth Circuit reinstated the claim, holding that third-party beneficiaries of the Act have the right to sue for violations of the Act. The Manufacturers subsequently appealed the ruling to the Supreme Court on the grounds that, because there was no federal statutory right of action, Santa Clara lacked standing to sue. The Supreme Court’s decision will affect the rights of third-party beneficiaries of a federal contract, states’ rights to make decisions regarding prescription drugs, and the litigation burden of companies that contract with the federal government.

Questions as Framed for the Court by the Parties

In the absence of a private right of action to enforce a statute, do federal courts have the federal common law authority to confer a private right of action simply because the statutory requirement sought to be enforced is embodied in a contract?

In 1992, Congress enacted Section 602 of the Veterans Health Care Act (“Act”), which is entitled “Limitations on Prices of Drugs Purchased by Covered Entities.” See County of Santa Clara v. Astra USA Inc., 588 F.3d 1237, 1241 (9th Cir.