2005-765, MAXI DRUG NORTH, INC. d/b/a BROOKS PHARMACY & a. v. COMMISSIONER, NH DEPARTMENT OF HEALTH AND HUMAN SERVICES

The petitioners, five pharmacies participating in New

attorney general, on the brief and orally), for the State. Kelly A. Ayotte, attorney general (Suzanne M. Gorman, senior assistant

S. Krupski orally), for the petitioners. Cook & Molan, P.A., of Concord (Glenn R. Milner on the brief, and John to press. Errors may be reported by E-mail at the following address:

COMMISSIONER, NEW HAMPSHIRE DEPARTMENT OF

page is: http://www.courts.state.nh.us/supreme. v.

MAXI DRUG NORTH, INC. d/b/a BROOKS PHARMACY & a.

editorial errors in order that corrections may be made before the opinion goes No. 2005-765 Hampshire, One Charles Doe Drive, Concord, New Hampshire 03301, of any Merrimack Readers are requested to notify the Reporter, Supreme Court of New ___________________________

THE SUPREME COURT OF NEW HAMPSHIRE

a.m. on the morning of their release. The direct address of the court's home reporter@courts.state.nh.us. Opinions are available on the Internet by 9:00

well as formal revision before publication in the New Hampshire Reports. NOTICE: This opinion is subject to motions for rehearing under Rule 22 as presumption did not reflect its usual and customary charge.

p. 2 exempt itself from the presumed rate upon a clear demonstration that the accordingly. The letter further stated that an individual pharmacy could percent, plus a dispensing fee of $1.75, and would reimburse pharmacies

application. DHHS counterclaimed, alleging that the petitioners refused to

“usual and customary charge” for pharmacies to be the AWP minus sixteen

declared invalid and that they be reimbursed for all losses related to its

months. Pursuant to the “temporary rate change,” DHHS would presume the

Among other things, the petitioners requested that the temporary rate be Procedures Act (APA), RSA 541-A” when it issued the January 8, 2004 letter. 2004, to address the situation, and would remain in effect for a minimum of six adhering to the mandatory rulemaking procedures of the Administrative declaring that a “temporary rate change” would go into effect on January 12, thereafter, on January 8, 2004, the commissioner issued another letter,

promulgated a new reimbursement rate for pharmacy providers without

that DHHS would be “stepping up the audit activity” as a result. Shortly

court pursuant to RSA 541-A:24 (1997), claiming that DHHS “unilaterally

pharmacies indicated overcharges to the State in violation of State law, and issued a letter to pharmacy providers stating that preliminary audits of a dispensing fee of $2.50. On December 15, 2003, the commissioner of DHHS

The petitioners thereafter sought a declaratory judgment in superior

than the provider’s usual and customary charge . . . . pharmacies was the average wholesale price (AWP) minus twelve percent, plus program of [DHHS], no provider shall bill or charge [DHHS] more RSA 167 or any other fee, rate, or payment schedule for any other

including “the usual and customary charge to the general public.”

Prior to January 12, 2004, the standard DHHS reimbursement rate for under the medical assistance program pursuant to RSA 161 and

pharmaceuticals shall be reimbursed at the least of four distinct rates, Hampshire Administrative Rules, He-W 570.14 states that payment for such product or service was provided.” RSA 126-A:3, III(b) (2005). New charge, fee, or rate charged by a provider for any product or service at the time customers, and are reimbursed for the pharmaceuticals by DHHS. Subject to certain exceptions, “usual and customary” means “the lowest petitioners provide pharmaceuticals and pharmacy services to Medicaid

notwithstanding any fee, rate, or payment schedule established Notwithstanding any provision of law to the contrary, and

RSA 126-A:3, III(a) (2005) includes a requirement, which states:

providers of Medicaid goods and services. Pursuant to the state plan, the responsibilities include setting the rates of government reimbursement for disagree. p. 3 power by “presuming a particular rate” in the January 8, 2004 letter. We contracts for the leasing of privileges and concessions.” resorting to formal rulemaking,” and that the commissioner exercised this

Department of Resources and Economic Development (DRED) to “make that RSA 126-A:3, III empowers the DHHS commissioner to enforce it “without

necessary to carry out what a statute authorizes on its face.” determine compliance. We address each issue in turn. members of the general public or personnel in other agencies. only upheld DRED’s actions against the petitioners’ challenge because the pharmacies is unrelated to the government’s interest in conducting audits to purpose,” and that DRED was therefore required to promulgate rules. Id. We nevertheless recognized that it was “not sufficiently detailed to effectuate its 487. Though RSA 227-H:9 grants DRED a specific power “on its face,” we

considered RSA 227-H:9 (2000), which empowers the New Hampshire whether the letter fell within this definition. Rather, the trial court concluded Smith v. N.H. Bd. of Psychologists, 138 N.H. 548, 553 (1994). In Nevins, we Dep’t of Resources and Economic Dev., 147 N.H. 484, 487 (2002); see also

stated that “promulgation of a rule pursuant to RSA chapter 541-A is not Hampshire Department of Resources and Economic Development requirement binding on persons outside the agency, whether, in which we in RSA 541-A:1 (Supp. 2005); and (2) that the invoice information of individual The trial court, in reaching its conclusion, relied upon (b) prescribe or interpret an agency policy, procedure or practice Nevins v. New make specific a statute enforced or administered by such agency or

obtain the petitioners’ acquisition cost records.

RSA 541-A:1, XV (Supp. 2005). The trial court did not reach the issue of

commissioner’s January 8, 2004 letter constitutes an agency “rule” as defined applicability adopted by an agency to (a) implement, interpret or each regulation, standard, or other statement of general

rule when it issued the January 8, 2004 letter, and that DHHS had the right to the APA. For the purposes of the APA, a “rule” is defined as: Accordingly, the superior court ruled that DHHS did not promulgate an invalid 2004 constitutes an agency “rule” subject to the rulemaking requirements of 8, 2004 letter was not a rule, and that it merely implemented RSA 126-A:3, III. The petitioners first assert that the commissioner’s letter of January 8,

On appeal, the petitioners urge this court to find: (1) that the

continuing to do so. The superior court concluded, however, that the January cooperate with its audits and requesting an injunction prohibiting them from exempted DHHS from the rulemaking requirements of RSA chapter 541-A. p. 4 III, we do not believe that the statute authorized such action in a way that

RSA chapters 161 and 167. RSA 161:4, VI(a) (2002). of medical services under the medical assistance program administered under

presumption” binding upon all pharmacy providers, was a “rule” as defined by

represented an effort by DHHS to implement the requirements of RSA 126-A:3,

commissioner is also required to establish rates of reimbursement to providers

(2002); RSA 161:2, VI (Supp. 2005);

believe that the January 8, 2004 letter, insofar as it instituted a “temporary 541-A:3 (1997), which requires: The procedure for adopting rules pursuant to the APA is set forth in RSA

so only by implication. While it may be true that the January 8, 2004 letter statute grants any authority to implement or enforce those obligations, it does “prescribe[s] . . . an agency policy . . . binding on persons outside the agency,” obligations to DHHS when seeking reimbursement under the state plan. If the applicable federal regulations and RSA 161:2, VI . . . .”). The DHHS and administer the federal Title XIX [Medicaid Act] State Plan, pursuant to 520.02(a) (“The department of health and human services shall . . . [d]evelop

the development and administration of the state Medicaid plan. RSA 161:4, I in RSA chapter 161. RSA 161:4-a, IX (2002). Such duties include supervising fee to AWP minus sixteen percent plus a $1.75 dispensing fee. As such, we adopting rules relative to matters necessary to implement the duties set forth The DHHS commissioner must comply with RSA chapter 541-A when

at issue was exempt from the requirements of the APA. applicability adopted by an agency.” RSA 541-A:1, XV. Furthermore, the letter Administrative Rules, He-W 570.14(a), we nevertheless conclude that the rule amending presumptive reimbursement rates. It merely sets forth a provider’s presumptive rate of reimbursement for the purposes of New Hampshire Though we find that DHHS engaged in rulemaking by changing the

pharmacy providers from AWP minus twelve percent plus a $2.50 dispensing id., in that it lowers the presumed “usual and customary charge” for all

reimbursement pursuant to the state plan, it is plainly a “statement of general enforce its provisions, either generally or by the more specific method of temporary rate change” applicable to all pharmacy providers seeking to the definition set forth in RSA 541-A:1, XV. Because it “institut[es] a Thus, we must consider whether the letter was indeed a “rule” pursuant

RSA 126-A:3, III does not, “on its face,” authorize DHHS to implement or

the agency’s failure to adopt rules. Id. at 488. petitioners could not identify any specific way in which they were prejudiced by commissioner pursuant to RSA 161:4, VI invalid. p. 5 A:21, III. As such, they do not render rules adopted by the DHHS

change” language, DHHS established only a chapter 541-A, which the DHHS commissioner is exempt from under RSA 541-

behalf of [DHHS].” In its letter of January 8, 2004, despite the “temporary rate rulemaking requirements of the APA. consequences for failing to adhere to the various filing requirements of RSA copayments or any other charges for services or assistance provided by or on have, pursuant to RSA chapter 541-A, “the authority to establish fees,

from each of that statute’s enumerated provisions and, therefore, the provisions. However, RSA 541-A:22 and RSA 541-A:23 merely set forth DHHS commissioner pursuant to RSA 161:4, VI are not exempt from these 126-A:5, IV (Supp. 2005), which states that the DHHS commissioner shall designated entities will prevent a rule from taking effect. Rules adopted by the

“usual and customary charge” for purposes of reimbursement. It instituted no

pursuant to RSA 161:4, VI are not exempt from RSA 541-A:3, they are exempt of that chapter offered by the petitioners in support of their position is RSA Moreover, RSA 541-A:23 (1997) states that failure to file a rule with certain statutory grant of authority” of RSA chapter 126-A. However, the only section 161:4, VI does not apply in this case because DHHS acted under the “specific The petitioners contend that the exemption for rules adopted under RSA

from the provisions of the APA).

relative to rates of reimbursement, adopted by the DHHS commissioner requirements of RSA 541-A:5 through RSA 541-A:14.” Thus, while rules, services under the medical assistance program, shall be exempt from the any purpose, until it has been filed as required in [RSA chapter 541-A].” effective against any person or party, nor may it be enforced by the state for Pursuant to RSA 541-A:22, I (Supp. 2005), “[n]o agency rule is valid or

rates of reimbursement established pursuant to RSA 161:4, VI(a) is exempt

RSA 161:4, VI, relative to rates of reimbursement to providers of medical However, RSA 541-A:21, III (Supp. 2005) states that “[r]ules adopted under

VII. Adopting and filing a final rule under RSA 541-A:14. A:13; and VI. Responding to the committee when required under RSA 541- V. Filing a final proposal under RSA 541-A:12; 541-A:11; IV. Holding a public hearing and receiving comments under RSA III. Filing the text of a proposed rule under RSA 541-A:10; III; made timely requests for notice as required by RSA 541-A:6, II. Providing notice to occupational licensees or those who have I. Filing a notice of the proposed rule under RSA 541-A:6 . . . ; assuring compliance with RSA 126-A:3, III. p. 6 by conducting reviews of Medicaid provider pharmacies for the purpose of forthcoming. As such, DHHS was acting within its statutorily mandated duties

C.F.R. § 456.23, as well as the Medicaid provider enrollment agreement.”

pharmacies were violating State law, and that investigations would be

J., dissented.

Federal law, including but not limited to RSA 161:2 XV, He-W 570.14(f), and 42

State, including the petitioners, that preliminary audits indicated that many informed all pharmacy providers seeking Medicaid reimbursement from the [DHHS].” RSA 161:2, XV (2002). In December 2003 and January 2004, DHHS and supplies” available to DHHS “for utilization and review purposes.” make “[i]nvoices showing the actual acquisition cost of the pharmaceuticals BRODERICK, C.J., and GALWAY and HICKS, JJ., concurred; DUGGAN,

available under State law. demand any more information than the petitioners were required to make months of July 2000, March 2001, March 2002, March 2003 and 2004 [pharmaceuticals in specific monthly time periods. By doing so, DHHS did not requested “[i]nvoices . . . showing actual acquisition costs” for a certain set of Admin. Rules, He-W 570.14(f)(3). In its letters of March and June 2004, DHHS suspected violations of law or rules relative to programs administered by N.H.

Furthermore, pharmaceutical providers are required by State law to

highest volume pharmaceuticals.” The commissioner noted that DHHS was

RSA 126-A:3, III. The letters requested, among other things, “[i]nvoices for the

Pursuant to RSA 161:2, XV, DHHS is charged with “[i]nvestigat[ing] . . .

showing actual acquisition costs for the fifty (50) highest cost and fifty (50) forth in RSA 161:4, VI. Therefore, the petitioners’ argument must fail. sic] reimbursement to medical providers, DHHS acted pursuant to the mandate set compliance reviews of Medicaid provider pharmacies to ensure compliance with letters to the petitioners informing them that DHHS was conducting On March 31, 2004, and June 1, 2004, the DHHS commissioner sent

reviews.” We disagree. wholly unrelated to the government’s interest in conducting . . . compliance information from individual pharmacies, claiming that such information “is The petitioners next contend that DHHS is not entitled to access invoice

statute does not apply. Rather, by adopting a rule relative to rates of fee, co-payment, or charge as described in RSA 126-A:5, IV, and, as such, that p. 7 7

this ambiguity, I would consider the statute’s legislative history.

adopted under RSA 161:4, VI”). assistance program”) as merely descriptive of the preceding phrase (“Rules

applying only to a Pub. Utils. Comm’n, 152 N.H. 106, 108 (2005).

phrase (description versus limitation) make the statute ambiguous. Faced with of reimbursement.” These two reasonable ways of interpreting the emphasized exempt only those rules adopted under RSA 161:4, VI that are “relative to rates phrase. See id. at 646. Thus, the legislature may have intended the statute to In my view, the emphasized phrase is a limitation on the preceding to rates of reimbursement to providers of medical services under the medical (1988). not inclined to “waste its words.” Glick v. Town of Ossipee, 130 N.H. 643, 645 as mere surplusage in disregard of our prior observation that the legislature is “rules relative to rates of reimbursement,” they do not view the exemption as Tardiff, 11 p. 7 7 N.H. 53, 56 (1977). The majority’s construction treats these words possible, however, every word of a statute should be given effect. State v. change if the emphasized phrase were completely removed from the statute. If Under this construction, the interpretation of the statute would not

RSA 161:4, VI. The majority thus construes the emphasized phrase (“relative majority reads the statute as granting an exemption to all rules adopted under

(Emphasis added.) While the majority views the exemption as applying to

541-A:5 through RSA 541-A:14. assistance program, shall be exempt from the requirements of RSA reimbursement to providers of medical services under the medical dissent. Rules adopted under RSA 161:4, VI, relative to rates of requirements of the APA when it readopted the APA in 1994, I respectfully Transportation, 144 N.H. 555, 556 (1999). RSA 541-A:21, III provides: I begin by examining the language of the statute. Appeal of N.H. Dep’t of

RSA 541-A:21, III (Supp. 2005). N.H. 548, 553 (1994). I disagree, however, with the majority’s interpretation of what a statute authorizes on its face.” Smith v. N.H. Bd. of Psychologists, 138 rule. I also agree with the majority that the rule does not simply “carry out I agree with the majority that the action taken by DHHS constitutes a

intend to exempt all rules adopted under RSA 161:4, VI from all of the DUGGAN, J., dissenting. Because I believe that the legislature did not expressed in statutory language.

p. 8 legislative purpose and may be given effect even if it is imperfectly statement in the principal committee report is powerful evidence of been stated that absent contrary legislative history, a clear

[legislative] intent in enacting a statute. In that light, it has also

that reviewed the legislation. 8

Committee Reports represent the most persuasive indicia of its understanding of the nature and effect of the measure. shall be exempt from the provisions of RSA 541-A. forth its grounds for recommending passage of the proposed bill and

legislature’s intent. I therefore turn to the report of the legislative committee inconsistent language of the two statutes does not clearly establish the same act apparently to create the same exemption. Parsing the somewhat

provides some clarification. this chapter and RSA 167. Publication of rates of reimbursement 2000). The committee report in the House of Representatives on HB 213 (1991) the legislature. This is especially true when the committee sets services under the medical assistance program administered under 2A N. Singer, Statutes and Statutory Construction § 48:06, at 439-41 (6th ed. IV, shall establish rates of reimbursement to providers of medical

other more closely than they currently do. The two statutes were passed in the

requirements of RSA 541-A. consideration is often used as a source for determining the intent of assistance program, shall be exempt from the publication legislature which investigated the desirability of the statute under and developmental services if authorized pursuant to RSA 126-A:4, reimbursement to providers of medical services under the medical The report of the standing committee in each house of the

Laws 1991, 127:2. As originally enacted, these two statutes resembled each

human services and the director of the division of mental health III. Rules adopted under RSA 161:4, VI, relative to rates of

the following after paragraph II: paragraph V: (amended and reenacted as RSA 541-A:21 by Laws 1994, 412:1) by inserting Laws 1991, 127:1. Laws 1991, chapter 127 also amended RSA 541-A:10

VI. Medical Assistance Program. The director of the division of

Laws 1991, chapter 127 amended RSA 161:4 by inserting the following after RSA 161:4, VI and RSA 541-A:21, III share a common legislative history. the same. p. 9 cost. However, the formula that we use to pay a pharmacy stays

depending on the drug manufacturer’s changes in their product

rates will change from anywhere to once a year to a monthly basis

of forty to fifty thousand prescription drugs that we pay for. Those changed one of our rates. We have somewhere in the neighborhood would be tying up the Rules Committee forever every time we

412:1). testified: change constantly. 541-A:10, III (amended and reenacted as RSA 541-A:21, III by Laws 1994, dispensing fee. It is the average wholesale price that is subject to

The average wholesale price, minus ten percent, plus a

The sponsor of the bill, Representative Patricia Fair, testified:

We requested this particular change in the law basically because we

exempt the methodology. (Emphasis added.) Later, Philip Soulé from the division of human services reimbursement” was intended to restrict the breadth of the exemption in RSA published from the Administrative Procedures Act. It does not This would not exempt that. It would only exempt the rates themselves. Methodology definitely has to be a part of rule making and it is now.

Public Institutions, Health and Human Services held a hearing on HB 213. the distinction between methodology and rates: (Emphasis added.) Representative Fair concluded her testimony by reiterating

This is only the publication of the books of rate setting . . . . be part of the rate setting process and the rule making procedure. I believe that the methodology used to set rates for Medicaid needs to

which is not exempt. This also confirms that the emphasized phrase “rates of This bill, as it is written, exempts only the book of rates that are

upon transcript of the committee of conference). The Senate Committee on construing a statute. See Monier v. Gallen, 120 N.H. 333, 336 (1980) (relying The minutes of a committee hearing may serve as an aid to the court in Director of the Division of Human Services

between “rates of reimbursement,” which are exempt, and “methodology,” N.H.H.R. Jour. 152 (1991) (emphasis added). This confirms a distinction

exempts the rates and not the methodology. thousands of rates and costs that fluctuate so frequently. It only reimbursement without the necessity of publication, since there are

put into law a practice which is already in place. It allows the The Committee was unanimous in support of this bill, which would between actual rates and the formula used to arrive at those rates. p. 10 however, change the initial phrases that, in my opinion, create a distinction A:10, III and reenacting it as RSA 541-A:21, III). The legislature did not,

RSA 541-A:5 through RSA 541-A:14,” Laws 1994, 412:1 (amending RSA 541-

adopted in conformity with the provisions of the APA. and the legislative history, that the formula for EAC is a rule that must be I would thus conclude, based upon the ambiguity in RSA 541-A:21, III

minus 12%).

rulemaking process. In 1993, DHHS set EAC at AWP minus 10%. 541-A,” RSA 541-A:10, III (Supp. 1993), to “exempt from the requirements of phrase of the exemption, “exempt from the publication requirements of RSA 541-A. See Laws 1994, 412:1. At that time, the legislature changed the last prescription drugs.” appeared in 1994 when the legislature “repealed and reenacted” RSA chapter Finally, the majority relies upon language in RSA 541-A:21, III that first EAC at AWP minus 12%. own rules.”) 12%. Administrative Procedure Act requires an administrative agency to follow its

See Appeal of Smithfield Dodge, 145 N.H. 23, 25 (2000) (“The

State plan (AWP minus 16%) conflicts with the agency’s current rule (AWP formula through the APA. As a result, the current practice set by letter and the submitted the formula for the estimated acquisition cost (EAC) to the (2003). DHHS has apparently abandoned that effort to change the EAC rulemaking process to set EAC at AWP minus 16%. 86 N.H. Gov. Reg. 36 570.01(g) (Doc. #7805, eff. December 21, 2002). In 2003, DHHS began the established that rate as a rule that remains in effect. N.H. Admin. Rules, He-W statute would only exempt the actual rates for “forty to fifty thousand June 22, 2002, exp. December 19, 2002). At the end of 2002, DHHS dispensing fee”) had to go through the APA process. They anticipated that the N.H. Admin. Rules, He-W 570.01(h) (Doc. #7712, eff. the formula (“average wholesale price [AWP], minus ten percent, plus a exp. December 19, 2002). In 2002, DHHS readopted the interim rule setting N.H. Admin. Rules, He-W 570.01(h) (Doc. #7392, eff. October 28, 2000, 1999). In 2000, DHHS established an interim rule that set EAC at AWP minus Rules, He-W 504.28(a)(7) (Doc. #5742, eff. December 1, 1993, exp. December 1,

replied: Since the passage of RSA 161:4, VI in 1991, DHHS has consistently

(Emphasis added.) Thus, those present at the hearing clearly understood that

have a formula that is in the rules. We have to abide by that formula. No. The rules prohibit us from doing what we want with the rates. We

whether DHHS would “be able to do what you want with the rates,” Mr. Soulé (Emphasis added.) In response to a question from Senator Eleanor Podles