The Ninth Circuit has held that plan participants who required drugs for treatment of HIV/AIDS stated a claim for disability discrimination under Section 1557 of the Affordable Care Act (ACA) resulting from a pharmacy benefit manager's (PBM's) access barriers to prescription drug medications under their employer-sponsored health plans. Specifically, the PBM required the participants to obtain specialty medications through its designated specialty pharmacy for those medications to be considered in-network benefits and available at a lower price under the plans. Previously, the participants could obtain their medications at any in-network pharmacy.

The Ninth Circuit also held that Section 1557 did not create a new anti-discrimination standard specific to health care. To assert a disability discrimination claim under Section 1557, the participants therefore needed to allege facts adequate to state a claim under Section 504 of the Rehabilitation Act of 1973 (Section 504).

(Doe v. CVS Pharmacy, Inc., (9th Cir. Dec. 9, 2020); see Practice Notes, Nondiscrimination in Health Programs and Activities Under the ACA and ERISA Litigation: Preemption of Select State Laws: Pharmacy Benefit Manager Laws.)

The plaintiffs in this case are participants who obtained prescription drug medications for HIV/AIDS through their employers' health plans. Previously, the participants could obtain their HIV/AIDS medications from community pharmacies, where they could consult pharmacists who were familiar with their medical histories and drug regimens, and who could identify potential drug interaction issues. However, the PBM that administered the prescription drug programs adopted a new policy under which specialty drugs, including HIV/AIDS medications, had to be obtained from one of the PBM's designated specialty pharmacy for the drugs to be priced at lower, in-network rates.

As a result, the participants asserted that they had to forego consultations with pharmacists who could identify potentially harmful drug interactions and side effects and provide new drug regimens to help manage HIV/AIDS. Also, the specialty pharmacy dispensed medications only by mail or drop shipments to the affiliated retail pharmacy stores for pickup. These delivery methods raised medical privacy issues and could result in stolen medications and long trips to distant pharmacies to correct incorrectly filled prescriptions. Requests from some participants to opt out of this arrangement were denied.

The participants sued the PBM and its affiliated retail pharmacy chain and specialty pharmacies, as well as several plan sponsors, alleging violations of ACA Section 1557, ERISA, the Americans with Disabilities Act (ADA), and several California statutes.

The district court dismissed the participants' complaint, and the participants appealed.

On appeal, the Ninth Circuit first addressed the participants' argument that ACA Section 1557 created a new discrimination claim specific to health care using the enforcement mechanisms available under any of the four statutes referenced under Section 1557 (see Practice Note, June 2020 Final Regulations Under ACA Section 1557: Nondiscrimination in Health Programs and Activities: Four Civil Rights Laws Cross-Referenced Under Section 1557). The participants argued that they could raise their claim under Section 504 of the Rehabilitation Act (one of the four statutes referenced in Section 1557) regardless of whether a disparate impact claim was otherwise allowed under Section 504, including a disability discrimination claim on a disparate impact theory. The Ninth Circuit rejected this claim, applying the reasoning from a 2019 Sixth Circuit ruling that addressed the same issue and involved similar facts (Doe v. BlueCross BlueShield of Tennessee, Inc., 926 F.3d 235 (6th Cir. 2019); see Legal Update, Sixth Circuit Rejects HIV/Genvoya Claim Under ACA Section 1557). As a result, the Ninth Circuit held that:

Applying the Section 504 framework, the Ninth Circuit held that the participants stated a claim for disability discrimination under Section 1557. Under a Supreme Court decision addressing Section 504, the Ninth Circuit considered whether the participants were denied meaningful access to the benefits at issue (Alexander v. Choate, 469 U.S. 287, 302 (1985)). In the Ninth Circuit's view, the participants adequately alleged that they were denied meaningful access to prescription drug medications because the PBM's specialty pharmacy program prevented them from receiving effective treatment for HIV/AIDS.

The district court had dismissed the participants' ERISA claim for benefits because they had failed to identify a specific term in their health care plans that conferred the benefits they claim were denied. The participants did not challenge this holding on appeal, and the Ninth Circuit affirmed.

The Ninth Circuit also affirmed the district court's dismissal of the participants' ADA claim, but vacated the participants' unfair competition claim under state law to the extent it was based on a violation of the ACA.

In re-proposed regulations issued this summer under Section 1557, the Trump administration's HHS criticized its own regulatory interpretation under earlier Section 1557 regulations of blending substantive requirements and enforcement mechanisms of the four civil rights laws underlying Section 1557 (which HHS now referred to as a "hodgepodge approach"). Like the Ninth and Sixth Circuits, HHS (under its re-proposed regulations) would not allow claimants to mix-and-match the substantive requirements and enforcement mechanisms under the four laws cross-referenced in Section 1557.