Does Section 504 of the Rehabilitation Act’s prohibition on discrimination based on disability provide a cause of action for plaintiffs who allege that a neutral policy disproportionately burdened them?
This case would have asked the Court to determine whether Section 504 of the Rehabilitation Act, which prohibits discrimination based on disability, provides a cause of action for disparate impact claims. Numerous John Does use CVS Pharmacy’s prescription plan for medication to treat HIV/AIDS, which only allows drugs to be dispensed through mail or CVS pharmacies. These John Does sued, arguing that this plan had a disparate impact on individuals living with HIV/AIDS and meaningfully impacted their health. Petitioners CVS Pharmacy et al. contend that claims under Section 504, which is incorporated in Section 1557 of the Affordable Care Act, require evidence of discriminatory intent or differential treatment. Respondents John Doe, et al., argue that Section 504 provides for disparate impact claims. Although this case will no longer be argued in front of the Court, due to an agreement for dismissal by the parties, the case could have had implications for the administration of health insurance and pharmacy benefits programs, and the risk of litigation.
Questions as Framed for the Court by the Parties
Whether Section 504 of the Rehabilitation Act of 1973 — and by extension Section 1557 of the Patient Protection and Affordable Care Act, which incorporates the “enforcement mechanisms” of other federal antidiscrimination statutes — provides a disparate-impact cause of action for plaintiffs alleging disability discrimination.
Petitioners, CVS Pharmacy, Inc., Caremark L.L.C. and Caremark California Specialty Pharmacy, L.L.C., (collectively “CVS”) are all affiliates of CVS Health Corporation. Doe v. CVS Pharmacy, at 1207. Respondents John Doe et al. (“Does”) are enrolled in CVS’s prescription benefit plan for medication to treat HIV/AIDS. Id. The CVS plan requires that the Does purchase their HIV/AIDS medication, which is considered a “specialty medication,” through the Caremark California Specialty Pharmacy. Id. This service offers delivery by mail or pickup at a CVS Pharmacy. Id. If Does wish to purchase his medication elsewhere, the medication would not qualify as “in-network” and could cost thousands of dollars in additional charges. Id. Prior to this program, Does were able to fill their prescriptions at any in-network pharmacy, including non-CVS pharmacies. Id.
The Does brought an action in the United States District Court for the Northern District of California (“District Court”) alleging violation of the Affordable Care Act (“ACA”), the Americans with Disabilities Act (“ADA”), the California Unruh Civil Rights Act (“Unruh Act”), the Employee Retirement Security Act (“ERISA”) and California’s Unfair Competition Law (“UCL”). Id. at 1207–1208. The Does claimed that the program has adverse effects on access to adequate healthcare, including putting their safety and privacy at risk as they sought to fill prescriptions. Id.
The District Court granted CVS’s motion to dismiss all claims, finding no violation of the ACA or ADA. Doe v. CVS Pharmacy, at 977. The District Court ruled that, while disparate impact claims could be brought under the ACA, there was no disparate impact in this case because the program applies to all medications, regardless of whether they treat a disability or not. Doe v. CVS Pharmacy, at 977. Additionally, the District Court held that, even if there was a disparate impact, it would not be significant enough to qualify as denial of “meaningful access” under Choate v. Alexander. Id. at 984. The District Court also found no violation of the UCL, as the program was not unfair or unlawful and no violation of the Unruh Act because there was no intentional discrimination. Id.
The Does appealed to the U.S. Court of Appeals for the Ninth Circuit (“Ninth Circuit”). Doe v. CVS Pharmacy, at 1208. The Ninth Circuit found the Does alleged sufficient discrimination to state a claim under Section 504 of the Rehabilitation Act and by extension Section 1557 of the Affordable Care Act. Id. at 1215. The Ninth Circuit found that Section 504 of the Rehabilitation Act reached facially neutral polices, like CVS’s plan, that disparately impacted the disabled. Id. at 1212.
CVS Pharmacy petitioned for a writ of certiorari on March 26, 2021. The Supreme Court granted certiorari to determine whether the ACA allows discrimination claims based on disparate impact. Oral argument was scheduled for December 2021, but the parties settled this case prior to oral argument and the Court dismissed the writ of certiorari on November 11, 2021.
This case would have presented the Court with the opportunity to decide if Section 504 of the Rehabilitation Act, incorporated into the Affordable Care Act, supports a disparate-impact standard to bring a claim of disability discrimination.
THE PLAIN TEXT OF SECTION 504
Petitioner CVS argues that Section 504 of the Rehabilitation Act, as incorporated into Section 1557 of the Affordable Care Act, does not allow for disparate impact claims, but only incorporates discriminatory intent claims. Brief for Petitioner at 13. According to CVS, disparate intent statutes tie statutory prohibitions to motive by requiring complainants to allege discriminatory motive or that the statute facially treats the people differently based on their membership to a protected class. Id. at 14. CVS contends that the plain language of Section 504 does not allow for disparate impact liability claim for three reasons. Id. First, CVS contends that Section 504 contains language that focuses on why the federal funders act, concentrating on discriminatory action. Id. Second, CVS argues the statute creates a sole causation standard, which requires a showing that the funder acted solely because of the person’s protected class. Id. at 17. CVS argues that such a standard is incompatible with disparate impact prohibition, and Congress has never tried to include a sole causation standard for a disparate impact claim. Id. Further, CVS claims that Courts have historically interpreted the sole causation standard to exclude disparate impact liability. Id. at 18–19. Third, CVS contends that the statutory language’s focus on individuals and not groups is evidence the statute targets discriminatory intent because disparate impact liability examines disproportionate burdens on groups. Id. at 21. CVS claims this distinction is crucial because disparate impact only requires the complainant to show a disproportionately adverse effect, even if the statute or entity does not mean to discriminate. Id. at 14.
CVS further contends Section 504 lacks the effects-based language that creates a disparate impact liability standard. Brief for Petitioner at 37. CVS argues that the language of disparate impact liability, such as “otherwise adversely affect,” “otherwise make unavailable,” “results in,” “'have the effect of,” or “tend to screen out” are not present in Section 504. Id. at 39–40.
Respondent Does respond by asserting that the statutory language of Section 504 does not focus on the actions of the wrong doers but on the adverse effects to those with disabilities. Brief for Respondent at 10. Does argue that both statutory sections grant protection against specific ill effects, including exclusion, denial of benefits, and discrimination. Id. at 11. Does claim the passive construction of the grammar in the statutes emphasizes the person who suffered the effects, with no reference to the wrongful actor. Id. According to Does, Section 504 is a result oriented statutes, not focusing on the intent of the federally funded programs. Id. at 13. Does also contend that CVS’s approach to the restrictive reading of the statute defies “multiple canons of construction” in multiple ways. Id. at 14. First, Does argue that CVS violates the principle of supplying words to a statute that have been omitted when they effectively add “intentional” in front of discrimination. Id. Second, Does claims the word “discrimination” can be directed towards both intentional and unintentional actions. Id. Third, Does argue that CVS’s interpretation reads “excluded” and “denied” out of the statute, because exclusion and denial do not require anyone’s motives to be proved. Id. Finally, Does conclude that only protecting disabled people from intentional discrimination and not exclusionary practices falls short of the guarantees of the statute, which include eliminating discrimination continually encountered in health care and other settings. Id. at 14–15.
Moreover, Does claim that the historic use and reuse of the operative words by Congress in Section 504 have established a public meaning extending beyond intentional discrimination to exclusionary effects. Brief for Respondent at 23. Additionally, Does contend that the Rehabilitation Act was amended by Congress to clarify the definition of “handicap,” but Section 504 was not amended to include only intentional discrimination. Id. at 24. Does argue that the finalization of the regulation in 1977 reflected the scope that informed Congress in Title VI and the Department of Health, Education, and Welfare (“HEW”), where the discriminatory effects of the statute was emphasized. Id. at 24–25. According to Does, the HEW promulgated an interpretation of Section 504 that included disparate effects. Id. at 25.
SECTION 504’S RELATIONSHIP TO TITLE VI OF THE CIVIL RIGHTS ACT
CVS compares the language in Section 504 of the Rehabilitation Act to the language in Title VI of the Civil Rights Act and argues the language in the two statutes is nearly identical. Brief for Petitioner at 28. CVS contends that this is strong evidence that Section 504 does not provide for disparate effect claims because the Court has already held that Title VI does not provide for disparate effect claims. Id. at 29. Further, CVS cites the three other Spending Clause antidiscrimination statutes, Title VI, Title IX, and the Age Act, passed around the time of Section 504, which all bar disparate impact liability. Id. at 28.
Does contend that CVS’s reliance on Title VI is misplaced because the limitation to intentional discrimination was a product of constitutional considerations distinct from Section 504’s legislative history. Brief for Respondent at 26. Does argue that stare decisis bound the interpretation of Title VI to unconstitutional racial discrimination, which only includes intentional discrimination, because the purpose of Title VI was to limit racial discrimination. Id. at 27–28. According the Does, that is not applicable to Section 504 because the statute focuses on discrimination due to disability, not explicitly addressed in the Constitution. Id. at 28. Thus, Does argue that there is no basis to apply the Constitutional limits of Title VI on Section 504. Id. at 29.
CVS argues that prior precedent, Alexander v. Choate (“Choate”) does not support holding that Section 504 allows for disparate effect claims. Brief for Petitioner at 24. CVS points out that in Alexander v. Choate, the Court “assume[d] without deciding” Section 504 provided for disparate effect claims. Id. CVS notes that many of the policy concerns identified in Choate, such as access to public transportation and architectural barriers, have been ameliorated by other federal statutes. Id. at 26. CVS also contends that the Americans with Disabilities Act of 1990 (ADA) imposed disparate impact liability because Section 504 did not. Id. at 34. CVS argues that applying disparate impact liability to Section 504 would create different standards of liability between Section 504 and the ADA for the same conduct. Id. at 37.
In response, Does argue that the context of the statutes reinforces their focus on exclusionary effects. Brief for Respondents at 15. Does contend that Choate directly applies because it acknowledged that disability discrimination is both invidious intent and thoughtlessness and indifference. Id. at 16. According to Does, text added to Section 504 after Choate supports a reading of effects-oriented language. Id. Does note that over twenty-four federal agencies have adopted the exclusionary effects reading of Section 504, which remain in force today. Brief for Respondents at 29-30. Additionally, Does argue that both the Supreme Court and the federal courts of appeal have interpreted Section 504 to reach practices that deny meaningful access. Id. at 31. Does claim that Congress has repeatedly signified their approval of an effects- focused reading of Section 504. Id. at 36. Does cite the Congressional amendment of Section 504 to include the entirety of a program receiving federal funding and another amendment in 1992 that did not negate the statute’s reach in denial of meaningful access. Id. at 36–37. Does also claim that at the enactment of the ADA, Congress used the operative language of Title II—which prohibits exclusion, denial of benefits, and discrimination of anyone with a disability—in Section 504. Id. at 37–38. Does conclude that such operative language was also adopted in Section 1557, to give the meaningful access standard to the statute. Id. at 39–40.
This case would have influenced healthcare costs and outcomes. Further, a decision in this case would have had an impact on an individual’s ability to bring discrimination-based claims.
IMPACT ON HEALTHCARE COSTS, QUALITY AND ACCESS
America’s Health Insurance Plans (“AHI”), in support of CVS, argues that network plans like that used by CVS significantly reduce costs for hospitals, consumers and state healthcare programs. Brief of Amicus Curiae America’s Health Insurance Plans, in Support of Petitioners at 14-15. Independent Women’s Law Center echoes this argument, noting that network plans do not redistribute the costs of specialty medicine to all policyholders and accordingly, average consumers do not have to bear the cost. Brief of Amicus Curiae Independent Women’s Law Center, in Support of Petitioners at 16–17. Additionally, AHI asserts that network plans can improve patient care outcomes by ensuring that below standard hospitals and physicians are not included in the plan. Brief of AHI at 16. Network plans are adept at doing this, AHI maintains, because they can compile care assessments and hold providers accountable. Id. at 17. The Pharmaceutical Care Management Association (“PCMA”), expands on this argument, adding that better patient outcomes decrease insurance costs by keeping patients healthier. Brief of Amicus Curiae Pharmaceutical Care Management Association, in Support of Petitioners at 10. Finally, PCMA fears that a disparate impact standard would lead to coverage of all drugs, regardless of their cost, and jeopardize the long accepted structure of insurance plans. Id. at 23.
In support of Does, AIDS Healthcare Foundation, argues that mail-order pharmacies are harmful to HIV/AIDS patients because they do not offer the specialized and personal care necessary to provide beneficial treatment. Brief of Amicus Curiae AIDS Healthcare Foundation, in Support of Respondents at 7. The Center for Health Law and Policy Innovation of Harvard Law School (“the Center”), expands on this argument, explaining that AIDS patients need quick access to new medications to respond to any drug resistance they may develop. Brief of Amicus Curiae Center for Health Law and Policy Innovation of Harvard Law School, in Support of Respondents at 10. Additionally, the Center asserts that mail-order drug deliveries lead to privacy violations that are particularly harmful to AIDS patients who experience stigmatization and bias. Id. at 11-12. Further, the Arc of the United States, notes that a disparate impact standard would help to protect against plans, like the CVS plan, that inadvertently restrict individuals with disabilities from accessing healthcare. Brief of Amici Curiae The Art of the United States et al., in Support of Respondents at 20.
PCMA, in Support of Petitioners, argues that applying a disparate-impact standard would threaten the entire structure of drug benefit plans by increasing the amount of litigation. Brief of Pharmaceutical Care Management Association, at 22-23. Washington Legal Foundation et al. (“WLF”) echoes this argument by noting that individuals could bring actions under this theory against 99% of medical providers. Brief for Amici Curiae Washington Legal Foundation and Cato Institute, in Support of Petitioners at 15. Because companies will fear litigation, WLF asserts that companies will provide prescription drug plans for fewer employees. Id. at 16. Similarly, the Independent Women’s Law Center, contends that education officials would be subject to a myriad of lawsuits under a disparate-impact standard that would make it impossible for them to perform their jobs. Brief for Independent Women’s Law Center, at 19. The States of Louisiana et al. (“Louisiana”), advance the same argument, explaining that a disparate impact standard would open the door to lawsuits against nearly every state agency. Brief for Amici Curiae Louisiana et al., in Support of Petitioners at 4.
The United States, in support of Does, counters by asserting that there are already limits on disparate impact lawsuits that would protect against increased litigation. Brief of Amicus Curiae The United States, in Support of Respondents at 33. Further, the National Health Law Program and Disability Rights California argue that Congress intended to allow a broad range of disparate impact claims to restrict more discriminatory practices. Brief of Amici Curiae The National Health Law Program and Disability Rights California, in Support of Respondents at 3. The NAACP Legal Defense & Educational Fund (“NAACP”), adds to this, asserting that disparate impact lawsuits empower individuals with disabilities in all aspects of their daily lives. Brief of Amici Curiae The NAACP Legal Defense & Educational Fund, in Support of Respondents at 14. Moreover, the NAACP notes that disparate impact lawsuits are crucial for combating racial inequality perpetuated by unconscious bias and inadequate access to healthcare resources. Id. at 17–18.
- Mary Anne Pazanowski, Mail-Order Drug Dispute Could Clarify Obamacare Bias Protections, Bloomberg Law (May 7, 2021).
- Michael Roppolo, CVS withdraws Supreme Court case on disability rights, announces new partnership, CBS News (Nov. 11, 2021).
- Consumer Watchdog, Groups Commend CVS's Withdrawal of U.S. Supreme Court Challenge To HIV Rights, says Consumer Watchdog, PR Newswire (Nov. 11, 2021).