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Nb, By Her Parent and Next Friend, Michelle Peacock, et al v. District of Columbia

June 8, 2012


Appeal from the United States District Court for the District of Columbia (No. 1:10-cv-01511)

The opinion of the court was delivered by: Tatel, Circuit Judge:

Argued April 16, 2012

Before: TATEL and KAVANAUGH, Circuit Judges, and GINSBURG, Senior Circuit Judge.

Opinion for the Court filed by Circuit Judge TATEL.

Five Medicaid recipients filed this class action against the District of Columbia, alleging that the District systematically denies Medicaid coverage of prescription medications without providing the written notice required by federal and D.C. law. The district court dismissed the case on the pleadings, concluding that plaintiffs lacked standing to pursue their claims for injunctive and declaratory relief. Because we believe that the facts alleged in the complaint are sufficient to establish standing, we reverse.


Medicaid is a "cooperative federal-state program that provides federal funding for state medical services to the poor." Frew v. Hawkins, 540 U.S. 431, 433 (2004). States electing to participate in Medicaid must comply with requirements imposed by federal law. Id. As relevant here, federal regulations mandate procedural protections for Medicaid recipients, including provision of written notice "[a]t the time of any action affecting [a Medicaid recipient's] claim." 42 C.F.R. § 431.206(b), (c)(2). Such notice must contain a statement of what action the state intends to take, the reasons for that action, the specific regulations supporting the action, the individual's right to a hearing, and an explanation of the circumstances under which coverage will be continued if a hearing is requested. Id. § 431.210. District of Columbia law imposes the same requirements. D.C. Code § 4-205.55.

In the District, the Department of Health Care Finance (DHCF) implements much of the Medicaid program, including prescription drug coverage. As permitted under federal law, DHCF places restrictions on the medications covered by Medicaid. In particular, for certain medications-- including medications not on DHCF's Preferred Drug List, medically necessary brand-name medications with generic equivalents, and medications with quantity limits--DHCF imposes a prior authorization requirement, meaning that the prescribing physician must obtain approval from DHCF before it will cover the prescription. See ACS Solutions Center, District of Columbia Pharmacy Benefits Management Prescription Drug Claims System (X2) Provider Manual Version 0.09, at 8, 11-12, 15 (2012), available at r%20Manual%20v9.pdf; see also 42 U.S.C. § 1396r- 8(d)(1)(A), (d)(5) (permitting prior authorization programs, subject to certain requirements). According to the allegations in the complaint, DHCF contracts with a company called Affiliated Computer Services, Inc. (ACS) to process claims for prescription drug coverage using an electronic claims management system. Compl. ¶ 29. Under this system, when a Medicaid recipient presents a prescription to a pharmacy, the pharmacy submits an electronic claim to ACS, and ACS immediately provides an automatic reply indicating whether Medicaid will cover the prescription. If coverage is denied, ACS gives the pharmacy a "rejection code" identifying the reason for the denial. Id. at ¶ 30.

Plaintiffs allege that the District, in violation of both federal and D.C. law, systematically fails to provide Medicaid recipients with timely and adequate written notice of the reasons for prescription coverage denials or reductions, the right to request a hearing, and the circumstances under which coverage will be reinstated if a hearing is requested. Deprived of these procedural protections, plaintiffs claim they have no opportunity to prevent or challenge denials or reductions of coverage or to obtain reinstated coverage pending appeal. This, they argue, leaves them with two choices: (1) forego medically necessary prescriptions, at least temporarily, or (2) pay for the prescriptions with money needed for other life necessities. In their complaint, plaintiffs recount multiple instances in which they were denied prescription coverage without written notice of either the reason for the denial or their procedural rights. In some cases, plaintiffs allege, they had to pay out-of-pocket in order to obtain necessary medications; in other cases, they were eventually able to obtain their medication at a different pharmacy or at a later date. Plaintiffs seek no compensation for either the expense or inconvenience caused by DHCF's failure to provide adequate notice. Instead, they request declaratory and injunctive relief requiring the District to provide the procedural protections that they claim are mandated by statute and by the Due Process Clause.

The district court dismissed the complaint, finding plaintiffs lacked standing to seek such relief. In its view, because "in many of the instances alleged by plaintiffs, they were, in fact, ultimately able to obtain their prescriptions at no cost," there was "no injury." NB v. District of Columbia, 800 F. Supp. 2d 51, 56 (D.D.C. 2011). And though acknowledging that "plaintiffs may have suffered a cognizable injury based on the various out-of-pocket expenses incurred after being denied coverage," the district court concluded that these injuries were neither traceable to defendants nor likely to be remedied by a favorable ruling. Id. at 57. Our review is de novo. LaRoque v. Holder, 650 F.3d 777, 785 (D.C. Cir. 2011) ("We review de novo the district court's dismissal for lack of standing[.]").


Several well-accepted principles of standing govern our review of the district court's decision. As we have explained, "[t]he mere violation of a procedural requirement . . . does not permit any and all persons to sue to enforce the requirement." Fla. Audubon Soc'y v. Bentsen, 94 F.3d 658, 664 (D.C. Cir. 1996) (en banc). Our jurisdiction is limited to "actual cases or controversies between proper litigants," and if this suit is to proceed, plaintiffs must demonstrate that they have "constitutional standing to invoke the authority of an Article III court." Id. at 661. As the Supreme Court explained in Lujan v. Defenders of Wildlife, to establish constitutional standing, plaintiffs must satisfy three elements: (1) they must have suffered an injury in fact that is "concrete and particularized" and "actual or imminent, not conjectural or hypothetical"; (2) the injury must be "fairly traceable to the challenged action of the defendant"; and (3) "it must be likely, as opposed to merely speculative, that the injury will be redressed by a favorable decision." 504 U.S. 555, 560-61 (1992) (alteration, omission, and internal quotation marks omitted). Where, as here, plaintiffs seek to enforce procedural (rather than substantive) rights, they must establish that "the procedures in question are designed to protect some threatened concrete interest of [theirs] that is the ultimate basis of [their] standing." Id. at 573 n.8. Once plaintiffs establish that a law "accord[s] a procedural right to protect [their] concrete interests," however, they "can assert that right without meeting all the normal standards for redressability and immediacy." Id. at 572 n.7; see also Ctr. for Law & Educ. v. Dep't of Educ., 396 F.3d 1152, 1157 (D.C. Cir. 2005) ("Where plaintiffs allege injury resulting from violation of a procedural right afforded to them by statute and designed to protect their threatened concrete interest, the courts relax-- while not wholly eliminating--the issues of imminence and redressability[.]"). In assessing plaintiffs' standing, "we must assume they will prevail on the merits" of their claims, LaRoque, 650 F.3d at 785--in this case, that the Constitution, federal regulations, and D.C. law require written notice when DHCF denies coverage of prescription medications. Moreover, because the district court dismissed the complaint at the pleadings stage, "the burden imposed" on plaintiffs to establish standing "is not onerous," Equal Rights Ctr. v. Post Props., Inc., 633 F.3d 1136, 1141 n.3 (D.C. Cir. 2011), and "general factual allegations of injury resulting from the defendant's conduct may suffice." Lujan, 504 U.S. at 561.

This case turns primarily on the injury element of standing. Because plaintiffs seek only forward-looking injunctive and declaratory relief, "past injuries alone are insufficient to establish standing," and plaintiffs must show that they "suffer[] an ongoing injury or face[] an immediate threat of injury." Dearth v. Holder, 641 F.3d 499, 501 (D.C. Cir. 2011). As the District points out, none of the plaintiffs expressly allege an imminent threat of future injury in the complaint. This failure, however, is not by itself fatal. In reviewing a motion to dismiss, we "treat the complaint's factual allegations as true . . . and must grant [plaintiffs] the benefit of all inferences that can be derived from the facts alleged." In re Interbank Funding Corp. Sec. Litig., 629 F.3d 213, 216 (D.C. Cir. 2010) (omission in original) (internal quotation marks omitted). The question, then, is whether the complaint contains facts that, viewed in the light most favorable to plaintiffs, establish an imminent threat of injury. At least with regard to one plaintiff, John Doe, the facts alleged satisfy this standard. See Comcast Corp. v. FCC, 579 F.3d 1, 6 (D.C. Cir. 2009) ("[I]f one party has standing in an action, a court need not reach the issue of the standing of other parties when it makes no difference to the merits of the case." (internal quotation marks omitted)).

As an initial matter, Doe alleges past injuries that quite clearly constitute injury in fact. The procedural rights at issue are undoubtedly "designed to protect some threatened concrete interest of his," Lujan, 504 U.S. at 573 n.8, namely his interest in timely receiving the Medicaid prescription drug benefits to which he is entitled. As amici curiae explain, DHCF's alleged failure to provide adequate notice describing the reasons for coverage denials, the right to a hearing, and the potential for reinstatement of coverage pending appeal "can prevent a beneficiary from receiving essential medications indefinitely, or at least for some period of time while the individual tries to remedy the cause of denial without adequate information." Legal Aid Soc'y et al. Amicus Br. 12. Moreover, even if recipients are able to pay out-of- pocket for medications, such payments "can result in financial harm to a population acutely vulnerable to such injury." Id. Alleging just such an injury, Doe explains that when DHCF denies coverage, his mother has to pay out-of-pocket for his medications, "typically" causing her to "forego paying a bill or another necessary living expense in order to buy the medication." Compl. ¶ 74. Doe also alleges instances in which his mother paid for medications in response to coverage denials made without adequate notice and in circumstances where notice of the reasons for the denial would likely have enabled him to remedy the problem and obtain coverage. See id. ¶ 73 (explaining that Doe's mother paid $75.99 for a prescribed nasal spray because she was never informed that the prior authorization previously obtained by Doe's physician had ...

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