Walgreen Co. v. Hood

UNITED STATES COURT OF APPEALS
For the Fifth Circuit

No. 01-30314

WALGREEN CO.,

Plaintiff-Appellant,

VERSUS

DAVID W. HOOD, in his official capacity as Secretary of the
Louisiana Department of Health and Hospitals,

Defendant-Appellee,

Appeal from the United States District Court
For the Western District of Louisiana
December 20, 2001

Before DUHÉ, WIENER, and BARKSDALE, Circuit Judges.

DUHÉ, Circuit Judge:

Walgreen Company (“Walgreen”) appeals the district court’s

denial of its motion for a preliminary injunction barring the

Louisiana Department of Health and Hospitals (“the Department”)

from using tiered Medicaid pharmacy-reimbursement rates to

calculate payments to pharmacies serving Louisiana Medicaid

recipients. Because we find that Walgreen does not have a

substantial likelihood of success on the merits, we AFFIRM.

FACTUAL AND PROCEDURAL BACKGROUND

Walgreen claims a cause of action under 42 U.S.C. § 1983

(“section 1983") seeking declaratory and injunctive relief against
the Secretary of the Louisiana Department of Health and Hospitals

(“the Secretary”) for alleged violations of Title XIX of the Social

Security Act § 1902, 42 U.S.C. § 1396a(a)(30)(A) (“Section 30(A)”).

Section 30(A) requires that states’ Medicaid plans:

provide such methods and procedures relating to the
utilization of, and the payment for, care and services
available under the plan... as may be necessary to
safeguard against unnecessary utilization of such care
and services and to assure that payments are consistent
with efficiency, economy, and quality of care and are
sufficient to enlist enough providers so that care and
services are available under the plan at least to the
extent that such care and services are available to the
general population in the geographic area.

42 U.S.C. § 1396a(a)(30)(A). Walgreen claims that the reimbursement

rates used to calculate payments to pharmacies that provide

prescription drugs to Louisiana Medicaid recipients violate Section

30(A). Walgreen argues that those rates discriminate against chain

pharmacies, thereby violating the requirement of Section 30(A) that

states “assure that payments are consistent with efficiency,

economy, and quality of care.”1

Walgreen filed a motion for preliminary injunction requiring

the Secretary to cease using the challenged reimbursement rates to

calculate payments to pharmacies serving Louisiana Medicaid

1
Walgreen complains that the Department reimburses independent
pharmacies for brand name prescription drugs at a rate of the
average wholesale price for the drug less 15%, and that for the
same drugs, the Department reimburses chains at the rate of average
wholesale price less 16.5%.

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recipients. The district court denied that motion.2 In relevant

part, it held that this case is governed by Evergreen Presbyterian

Ministries, Inc. v. Hood, 235 F.3d 908 (5th Cir. 2000), where a

panel of this court determined that Medicaid providers do not have

a right to bring suit under § 1983 to remedy violations of Section

30(A). Walgreen filed timely notice of appeal.

STANDARD OF REVIEW

We review the district court’s denial of a motion for

preliminary injunction for abuse of discretion. See Ganther v.

Ingle, 75 F.3d 207, 212 (5th Cir. 1996). Questions of statutory

interpretation, however, are reviewed de novo. See Evergreen, 235

F.3d at 918.

DISCUSSION

In order to prevail on a motion for preliminary injunction,

Walgreen must establish that (1) there is a substantial likelihood

that it will prevail on the merits, (2) there is a substantial

threat that the party will suffer irreparable injury if the

preliminary injunction is denied, (3) the threatened injury to the

party seeking the injunction outweighs the threatened injury to the

party to be enjoined, and (4) granting the preliminary injunction

will not disserve the public interest. See Sierra Club v. FDIC, 992

F.2d 545, 551 (5th Cir. 1993). The district court determined that

2
Wal-Mart Stores, Inc. also filed a motion for preliminary
injunction making similar arguments, which the district court also
denied. Wal-Mart did not appeal that ruling.

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there is no substantial likelihood that Walgreen will prevail on

the merits because Walgreen does not have a right to bring suit

under § 1983 to remedy violations of Section 30(A). Because we

affirm the district court on this ground, we need not reach the

other three criteria for granting a preliminary injunction.

Section 1983 provides a cause of action against a state

official for “the deprivation of any rights, privileges, or

immunities secured by the Constitution and laws.” 42 U.S.C. § 1983.

But § 1983 only provides redress for a plaintiff who asserts a

“violation of a federal right, not merely a violation of federal

law.” Blessing v. Freestone, 520 U.S. 329, 340 (1997). To establish

that a federal statute creates an enforceable right, a plaintiff

must show (1) that Congress intended to confer on plaintiff the

benefit it claims, (2) that the asserted right is not so “vague and

amorphous” as to strain judicial competence, and (3) that the

asserted right is unambiguously imposed as a binding obligation on

the states. See Blessing, 520 U.S. at 340-341; see also Evergreen,

235 F.3d at 925.

As a Medicaid provider, Walgreen does not appear to be an

intended beneficiary of Section 30(A). When faced with the

question whether Medicaid providers are intended beneficiaries of

Section 30(A), a panel of this court recently answered in the

negative. See Evergreen, 235 F.3d at 928. “[S]ection 30(A) does not

create an ‘individual entitlement’ for individual providers to a

particular level of payment because it does not directly address

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those providers.” Id. at 928. Walgreen contends that Evergreen is

not dispositive, because the plaintiffs in that case based their

challenge on the “equal access” provision of Section 30(A), while

Walgreen’s challenge is based on the “efficiency, economy, and

quality of care” provisions. We read Evergreen as applying to the

entirety of Section 30(A).

The holding of Evergreen is phrased in terms of Section 30(A),

not merely the “equal access” provision. Evergreen held that the

district court “erred as a matter of law in finding that providers

also have a right to bring suit to remedy violations of [S]ection

30(A).” Id. at 924. The statute directly benefits recipients, but

while “it may be true that health care providers as a group are

indirectly benefitted.... it cannot be said that [S]ection 30(A)

necessarily confers upon each provider an individual right to a

particular payment....” 235 F.3d at 928-29.

Because Walgreen does not appear to be an intended beneficiary

of Section 30(A), we need not address the other two prongs of the

Blessing test.

CONCLUSION

Because Walgreen does not have a substantial likelihood of

success on the merits of its underlying claim we affirm the

district court’s denial of Walgreen’s motion for preliminary

injunction.

AFFIRMED.

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