Supreme Court Set to Review Section 1557 Disability Discrimination Case

On December 7, 2021, the Supreme Court of the United States (SCOTUS or the Supreme Court) will hear oral arguments in CVS Pharmacy, Inc. v. John Doe. The case involves claims by the plaintiffs, named John Doe to protect their anonymity, against their employer health plans’ pharmacy benefits manager (PBM) CVS Caremark. According to the claimants’ filings, changes to the PBM’s policy on in-network access to specialty drugs disproportionately affects individuals with human immunodeficiency virus (HIV) or acquired immunodeficiency syndrome (AIDS). The Supreme Court accepted the case for review to settle the alleged disparate-impact cause of actions protected under the disability anti-discrimination provisions of Section 504 of the Rehabilitation Act of 1973 (Section 504) and by extension Section 1557 of the Patient Protection and Affordable Care Act (Section 1557 of the ACA). After oral arguments, SCOTUS will release a decision, likely sometime in the Spring of 2022. The Supreme Court’s decision in CVS Pharmacy, Inc. v. John Doe will impact group health plan costs and plan limitations, exclusions and utilization management policies.

The CVS Pharmacy, Inc. v. John Doe plaintiffs filed a disparate-impact suit against their employers’ health plan PBM, CVS Caremark.

The lawsuit alleged that CVS Caremark’s policy on network access to specialty drugs disproportionally affects individuals with HIV and AIDS. The employees’ complaint said that the policy denied them meaningful access to the pharmacy benefit under their plan, preventing them from receiving effective HIV/AIDS treatment. The enrolled employees filed the discrimination action under Section 1557 of the ACA, the Americans with Disabilities Act (ADA), the California Unruh Civil Rights Act (CUCRA), the California Unfair Competition Law (UCL) and the Employee Retirement Income Security Act (ERISA).

The plaintiffs challenged the amended plan provision requiring enrollees to obtain specialty drugs through the designated specialty pharmacy to get in-network coverage for those benefits.

The suing employees represent a class of individuals diagnosed with HIV or AIDS. Until recently, CVS Caremark allowed enrollees to fill specialty prescriptions at any in-network pharmacy and receive in-network benefit coverage. The PBM changed its policy as to what it considers in-network specialty pharmaceuticals. Now, CVS Caremark plan enrollees must use a designated specialty pharmacy to dispense specialty drugs for those benefits to be considered in-network. Moreover, the network specialty pharmacies only dispense specialty drugs in two ways; (a) by mail to the participant’s address or (b) by drop shipments to CVS pharmacy stores for pickup. The plaintiffs argued that the new design was prohibitive of their HIV/AIDS treatment. The plan participants explained that filling their prescriptions at community pharmacies allowed them to participate in the holistic treatment of HIV/AIDS. They stated that a local pharmacy gives them the chance to consult knowledgeable pharmacists familiar with their personal medical histories. The plaintiffs noted that an individualized pharmacist-patient relationship is essential when dealing with a chronic illness like HIV/AIDS because care may require adjustments to drug regimens to avoid dangerous drug interactions or remedy potential side effects. According to the plaintiff enrollees, the specialty drug pharmacies policy denied them meaningful access to their prescription drug benefits and effective HIV/AIDS treatment, violating the various listed nondiscrimination statutes.

The United States District Court for the Northern District of California (District Court) dismissed the plaintiffs’ suit.

Judge Edward Chen granted CVS Pharmacy’s motion to dismiss the lawsuit. According to the District Court, CVS Caremark was correct in its assertion that the plan enrollees failed to state a claim that a court could remedy. The District Court ruled that the benefit plan policy, which only permitted plan participants to obtain HIV/AIDS medications for in-network prices at in-network specialty pharmacies, was not actionable under the nondiscrimination provisions of Section 1557 of the ACA, the ADA, the UCL, or ERISA. The District Court reasoned that the enrollees still had access to HIV/AIDS medications, and the policy did not impact people with HIV/AIDS in a unique or severe manner. The plaintiffs appealed the District Court’s opinion.

The United States Court of Appeals, Ninth Circuit (Circuit Court), only partially upheld the District Court’s ruling on appeal.

The Circuit Court reviewed the case in a de novo gearing, meaning that the Circuit Court could review the case without giving deference to the District Court’s ruling. The Circuit Court agreed with the lower court that the plaintiffs failed to allege facts substantiating their claims under the ADA and ERISA. The Circuit Court also upheld the District Court’s ruling that the plaintiffs failed to offer evidence on a UCL claim, stating that CVS violated regulations requiring it to provide essential benefits to allow enrollees to access prescription drug benefits at in-network retail pharmacies. The Circuit Court did not rule on the plaintiffs’ claims under Section 504 because they raised the claim for the first time during their appeal.

The Circuit Court vacated the lower court’s ruling on the disparate impact ACA Section 1557 claim and the UCL claim that stemmed from their ACA claims.

The Circuit Court stated that it did not agree with the District Court’s ruling on the ACA claims based on the nature of the benefit that the John Does claim the PBM’s policy denied them. Though the specialty pharmacy requirement did not deny the plaintiffs meaningful access to their prescription drugs, it did deny them access to their prescription drug benefit as a whole. The plaintiffs persuaded the Circuit Court with their argument that the design of the specialty pharmacy program eliminated aspects of the pharmaceutical care that were critical to the health of HIV/AIDS patients. Further, the narrowed benefits had a disparate impact on plan enrollees with HIV/AIDS in violation of the disability discrimination provisions under Section 1557 of the ACA and Section 504.

CVS Caremark appealed the case to the Supreme Court and SCOTUS accepted the case for review to settle the disparate-impact cause of actions Section 1557 of ACA and Section 504.

The Supreme Court will hear oral arguments on the case on December 7, 2021, and lawyers from both sides will be given time to state their case for whether the new policy is, or is not, discriminatory towards the plaintiff class. Should SCOTUS rule in favor of the John Does, it would mean that plans would need to amend their quantitative and nonquantitative treatment limitations on benefits that could be construed to disproportionally impact a protected covered group. In addition, plan exclusions that limit access to treatment for certain conditions may also need to be revisited. Once the Supreme Court hears an argument for a case, it usually issues a decision after the following term. Therefore, third-party administrators (TPAs), PBMs and plan sponsors may want to pay attention to updates on CVS Pharmacy, Inc. v. John Doe to prepare for any impact the case may have on benefits plans.