Case: 1:12-cv-06697 Document #: 1 Filed: 08/21/12 Page 1 of 37 PageID #:1
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF ILLINOIS K-V PHARMACEUTICAL COMPANY and ) THER-RX CORPORATION, ) ) ) Plaintiffs, ) v. ) ) JULIE HAMOS, in her official capacity as Director ) Case No. ______of the Illinois Department Healthcare and Family ) Services, THERESA A. EAGLESON, in her ) official capacity as Administrator of the Division of ) Medical Programs of the Illinois Department of ) Healthcare and Family Services, RANDY D. ) MALAN, R.Ph., FASCP, in his official capacity as ) Bureau Chief of the Illinois Bureau of Pharmacy and ) Clinical Support Services, MICHELLE R.B. ) SADDLER, in her official capacity as Secretary of ) the Illinois Department of Human Services, DEBBY ) SAUNDERS, in her official capacity as Bureau ) Chief of the Illinois Bureau of Maternal and Child Health Promotion, and GINA RUTHER, in her official capacity as Acting Chief of the Illinois Bureau of Child Care & Development
Defendants.
COMPLAINT AND APPLICATION FOR PRELIMINARY INJUNCTION
Stephen D. Libowsky (IL 6187081) Margaret “Peg” Donahue Hall Katharine E. Mellon (IL 6287468) (TX 05968450) SNR DENTON US LLP SNR DENTON US LLP 233 South Wacker Drive, Suite 7800 2000 McKinney Avenue, Suite 1900 Chicago, IL 60606-6306 Dallas, TX 75201-1858 Telephone: (312) 876-8000 Telephone: (214) 259-0900 Facsimile: (312) 876-7934 Facsimile: (214) 259-0910 [email protected] [email protected] [email protected] pro hac vice application to be filed
Drew Marrocco (DC 453205) Erin M. Shoudt (DC 489515) SNR DENTON US LLP 1301 K Street, NW, Suite 600, East Tower Washington, DC 20005 Telephone: (202) 408-6400 Case: 1:12-cv-06697 Document #: 1 Filed: 08/21/12 Page 2 of 37 PageID #:2
Facsimile: (202) 408-6399 [email protected] pro hac vice application to be filed
Attorneys for Plaintiffs
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GLOSSARY OF TERMS
Term Meaning
17P hydroxyprogesterone caproate — the active ingredient used in Makena®
API active pharmaceutical ingredient
CMS Centers for Medicare & Medicaid Services
FDA United States Food and Drug Administration
FDCA Federal Food, Drug, and Cosmetic Act
GMP good manufacturing practice standards promulgated by FDA
HHS United States Department of Health and Human Services
HFS Illinois Department of Healthcare and Family Services
MCO managed care organization
MDRA Medicaid Drug Rebate Agreement
NDA New Drug Application
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I. INTRODUCTION
1. This case involves the refusal of the Illinois Department of Healthcare and Family
Services (HFS) to cover and pay for Makena® (sterile injections of hydroxyprogesterone caproate) in compliance with federal law. Makena® is the only U.S. Food and Drug
Administration (FDA) approved drug for pregnant women with a rare, but severe, condition causing life-threatening spontaneous preterm birth.
2. Preterm birth is a terrible medical condition. It is the leading cause of newborn deaths in the United States, and afflicts thousands of women in Illinois each year. Even where death is avoided, premature birth often results in life long and expensive medical complications.
3. In February 2011, FDA, in what FDA Commissioner Margaret Hamburg, M.D., heralded as an important advance, approved Makena®. Citing “fiscal considerations,” HFS announced that it would continue to pay for cheaper, unapproved compounded preparations of hydroxyprogesterone caproate (commonly referred to as, “compounded 17P”) while subjecting
Makena® to a so-called “prior authorization” policy. In reality, HFS’s prior authorization policy is a de facto, highly burdensome and effective but unlawful exclusion of Makena® that, on information and belief, has resulted in coverage of Makena® for only three Medicaid beneficiaries in the entire State of Illinois. This systemic denial of medical care to the poor and vulnerable is not only unlawful, but defies recent warnings by the two lead federal agencies—
FDA and Centers for Medicare & Medicaid Services (CMS)—regarding states’ legal obligation to cover the FDA-approved drug and to stop encouraging and paying for unlawful preparation of compounded versions of the drug that are not customized to meet the documented special medical needs of individual patients.
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4. Plaintiffs KV Pharmaceutical Company (K-V) and its wholly-owned subsidiary
Ther-Rx Corporation (“Ther-Rx,” collectively, “KV”) hold the exclusive rights to market and sell Makena®. KV seeks a preliminary and permanent injunction prohibiting the defendants, in their official capacities at HFS, from using sham restrictions (1) to deny women on Medicaid in
Illinois who have high-risk pregnancies access to Makena®—women already burdened with the many difficulties and costs associated with at least one other preterm child, and (2) to require these underprivileged pregnant women and their clinicians to use untested and unapproved compounded preparations or to forego treatment for their medical condition altogether.
5. HFS’s policy and actions violate and are in direct conflict with the drug-access provisions of Title XIX of the Social Security Act, 42 U.S.C. § 1396a et seq. (the “Medicaid
Act”). HFS is knowingly promoting and paying for unlimited use of compounded 17P -- conduct that violates and conflicts with the Federal Food, Drug, and Cosmetic Act’s drug- approval requirement (21 U.S.C. § 355(a), 353(a)) and the Illinois Practice of Pharmacy Act.
Finally, HFS -- in denying pregnant women on Medicaid who are at risk for a second premature birth access to this important FDA approved drug -- is acting in a manner contrary to the best interests of Medicaid beneficiaries in Illinois in violation of and in conflict with the requirements of 42 U.S.C. §§ 1396r-8 and 1396a(a)(19). These unlawful actions by Illinois and similar unlawful actions by other states,1 have placed KV, which has recently filed for bankruptcy protection and hopes to reorganize under Chapter 11 of the U.S. Bankruptcy Code, on the verge of financial failure. KV is almost entirely dependent upon sales of Makena®. Illinois has a significant Medicaid population, and Illinois’s systemic failure to cover Makena® has contributed
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materially to the company’s looming potential failure. Further, because KV holds the exclusive rights to market and sell this important product, the injunctive and declaratory relief sought is necessary to ensure that Medicaid beneficiaries in Illinois have the same chance to improve the health of their unborn children as women with private insurance.
II. BACKGROUND
6. Preterm birth is the number one cause of newborn death in the United States. It is a terrible medical condition, which often has life-long ramifications for the child, his or her family, and the affected health care, educational, and social security systems. This condition plagues the United States as a whole. According to a widely acclaimed report published by the
March of Dimes in May 2012—Born Too Soon: The Global Action Report on Preterm Birth — the United States ranked an abysmal 131st in the world (12 preterm births per 100 births), below countries such as Somalia and Afghanistan.
7. Prematurity costs the United States more than $26 billion annually, a large portion of which is borne by Medicaid, which covers an estimated 50 percent or more of Makena®- eligible patients. (Sadly, preterm birth affects the already vulnerable poor even more than the general population.) The March of Dimes reports that the “[m]edical costs of a preterm baby are much, much greater than they are for a healthy newborn.” Citing a report published by the
Institute of Medicine (2006), the March of Dimes noted that the cost of preterm birth in the
United States was at least $26.2 billion in 2005, an average of $51,600 per infant born prematurely, and that the average first-year medical costs were about 10 times greater for a preterm infant ($32,325) than for a full-term infant ($3,325).
1 Georgia’s similar policy was recently held to be in violation of federal law. See August 9, 2012 Order on Motion for Preliminary Injunction in K-V Pharmaceutical Co, et al. v. Cook et al., No. 12-CV-
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8. Preterm birth plagues the State of Illinois as well. In its most recent (2011) annual report, the March of Dimes gave Illinois an overall grade of “C”, reflecting the state’s preterm birth rate of 12.4 percent (slightly more than one out every eight births).
9. Since March 2011, FDA-approved Makena® has been available. Clinical studies have shown that Makena® reduces the risk of preterm birth in women who have (i) a pregnancy in which a single baby develops in the uterus (a “singleton pregnancy”) and (ii) a history of singleton spontaneous preterm birth. Despite the poor record in Illinois in preventing preterm births, HFS adopted a so-called “prior authorization” policy on May 9, 2011 (updated in May
2012) that requires Medicaid beneficiaries to use untested and unapproved therapies and virtually foreclosing access to FDA-approved Makena® (the “Makena® prior authorization policy”).
10. Compounded formulations, including compounded 17P, are not generic drugs.
Like Makena®, generic drugs are FDA regulated and approved and are manufactured in accordance with strict FDA good manufacturing practice (GMP) standards. Compounded products, however, are prepared in individual pharmacies without regard to these standards.
Federal law requires that where an FDA approved product exists, compounding of the same or copies of the drug must stop with limited and narrow exceptions. 21 U.S.C. § 353(a). FDA has repeatedly cautioned that compounded 17P has never been studied for clinical effectiveness or safety, and lacks an FDA finding of “manufacturing quality.”2
11. In November 2011, and on two separate occasions in June 2012, FDA reminded the public that FDA-approved drugs such as Makena® “provide a greater assurance of safety and
2491-CAP, attached as Exhibit 1.
2 FDA, Questions and Answers on Updated FDA Statement on Compounded Versions of hydroxyprogesterone caproate (June 29, 2012), available at
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effectiveness than do compounded drugs.”3 Most recently, FDA issued Makena®-specific
Questions and Answers (the “June 29 Makena® FAQs”), which stated: (1) when “there is an
FDA-approved drug that is medically appropriate for a patient, the FDA-approved product should be prescribed and used,” and (2) that the compounding of any drug, including hydroxyprogesterone caproate, should not exceed the scope of traditional pharmacy compounding. Ex. 2. FDA cautioned that compounding is appropriate only:
to produce a drug tailored to an individual patient’s particular medical needs, based on a valid prescription from a licensed medical practitioner. For example, compounding may occur if a patient needs a medication to be produced without a dye or preservative due to an allergy, or needs a medication in a liquid or suppository form because the patient cannot swallow a pill. Id. (Emphasis added).
In the June 29 Makena® FAQs and in a statement it released on June 15, 2012 (the “June 15 FDA
Statement”), FDA stated that it looks to see “whether the prescribing practitioner has determined that a compounded product is necessary for the particular patient and would provide a significant difference for the patient as compared to the FDA-approved commercially available drug product.” Exs. 2, 6.
http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm310215.htm (last visited August 21, 2012), a true and correct copy of which is attached as Exhibit 2.
3 Id.; see also FDA, FDA Statement on Makena, (Mar. 30, 2011), available at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm249025.htm (last visited August 21, 2012); a true and correct copy of which is attached as Exhibit 3; Fiscal Year 2012 Budget Request for FDA: Hearing Before the Subcommittee on Agriculture, Rural Development, Food and Drug Administration, and Related Agencies, 112th Cong. 10 (Mar. 17, 2011) (Statement of Margaret A. Hamburg, M.D., Commissioner of the U.S. Food And Drug Administration, Department Of Health And Human Services), a true and correct copy of which is attached as Exhibit 4; FDA, FDA Statement on Makena, (Nov. 8, 2011), available at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm279098.htm (last visited August 21, 2012), a true and correct copy of which is attached as Exhibit 5; FDA, Updated FDA Statement on Compounded Versions of hydroxyprogesterone caproate, (June 15, 2012), available at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm308546.htm (last visited August 21, 2012), a true and correct copy of which is attached as Exhibit 6.
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12. CMS issued a companion statement on June 15 (the “June 15 CMS Statement”) that cross-referenced the June 15 FDA Statement and reminded state Medicaid agencies that they must cover Makena® in compliance with federal law and “without imposing unreasonable conditions.”4
13. Despite coverage requirements under the Medicaid Act, these recent federal statements, and KV’s repeated offers to pay substantial supplemental rebates, HFS has refused to change its unlawful policy. HFS’s refusal makes it necessary for Plaintiffs to seek this Court’s intervention for a preliminary injunction and a final judgment: (1) declaring that HFS’s policy regarding Makena® violates the requirements of the Medicaid Act and ordering HFS immediately to rescind and revise its policy; (2) declaring that HFS must cover Makena® without unreasonable restrictions or conditions; (3) declaring that HFS may cover and pay for compounded 17P only in those limited situations where the treating physician documents that his or her patient has a specific medical need for a compounded variation rather than Makena®; (4) declaring that HFS must ensure that all Medicaid managed care organizations in Illinois make
Makena® available to their Medicaid beneficiaries without unlawful restrictions or conditions;
(5) declaring that HFS must ensure that all Medicaid managed care organizations in Illinois limit their coverage of compounded 17P to those limited situations where the treating physician demonstrates that his or her patient has a specific medical need for a compounded variation rather than Makena®; and (6) ordering all ancillary relief necessary to allow clinically-eligible
Medicaid beneficiaries in Illinois access to Makena®, including an order that HFS notify all relevant persons of the court-mandated changes to its coverage policy.
4 CMS, Updated FDA Statement on Compounded Versions of hydroxyprogesterone caproate, June 15, 2012, a true and correct copy of which is attached as Exhibit 7.
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III. THE PARTIES
A. Plaintiffs K-V and Ther-Rx
14. Plaintiff K-V is a corporation organized under the laws of the state of Delaware, and maintains its principal place of business at 2280 Schuetz Road, St. Louis, Missouri 63146.
K-V advertises, sells and distributes its drugs through Ther-Rx. Under Medicaid law, K-V is considered a pharmaceutical manufacturer and distributor, and holds the rights to Makena® and its regulatory approval by FDA. K-V has committed over a quarter of a billion dollars to acquire and develop Makena® and to bring it to market with FDA approval.
15. Plaintiff Ther-Rx is a corporation organized under the laws of the state of
Missouri, is a wholly-owned subsidiary of K-V, and is a pharmaceutical distributor. Ther-Rx has its principal place of business at the same address as K-V. For ease of reference, Plaintiffs K-V and Ther-Rx are referred to collectively as “KV.”
16. KV is a participant in the Medicaid program. K-V’s wholly-owned subsidiary
Ther-Rx has entered into a Medicaid Drug Rebate Agreement (MDRA) with the Department of
Health and Human Services (HHS). Pursuant to that agreement, KV pays significant rebates to the Medicaid program for covered outpatient drugs dispensed to Medicaid beneficiaries. In return, KV’s FDA-approved drugs, including Makena®, must be covered by state Medicaid agencies, including HFS.
17. Because KV is almost entirely dependent on sales of Makena® to generate income, HFS’s so-called prior authorization policy has caused KV to lose significant revenue it would have received from sales of Makena® in Illinois—revenue that is very much needed to allow the company to reorganize and restructure and to sustain the company’s operations. As a result, and unless injunctive relief is ordered, KV’s available cash will soon be depleted, KV may cease to exist, and Makena® may no longer be available to pregnant women.
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B. Defendants
18. Defendant Julie Hamos currently serves as the Director of HFS, with an office located at 401 South Clinton, Chicago, Illinois 60607. In that capacity, Ms. Hamos oversees the
Medicaid Division of HFS, the government agency of the state of Illinois that administers the state of Illinois’s Medicaid program. Ms. Hamos is being sued in her official capacity.
19. Defendant Theresa Eagleson currently serves as the Division Chief of the
Medicaid Division for the Illinois Department of Community Health, with an office located at
401 South Clinton, Chicago, Illinois 60607. In that capacity, Ms. Eagleson directs the administration of Illinois’s Medicaid program. Ms. Eagleson is being sued in her official capacity.
20. Defendant Randy D. Malan, R.Ph., FASCP, is currently the Bureau Chief of the
Illinois Bureau of Pharmacy and Clinical Support Services, with an office at 401 North 4th Street,
1st Floor, Springfield, Illinois 62702. In that capacity, Mr. Malan oversees the administration of
Illinois’s Bureau of Pharmacy. Mr. Malan is being sued in his official capacity.
21. Defendant Michelle R.B. Saddler, is currently the Secretary of the Illinois
Department of Human Services, with an office at 100 South Grand Avenue East, 3rd Floor,
Springfield, Illinois 62762. In that capacity, Ms. Saddler oversees the principal governmental agency in the state of Illinois responsible for the public health of the citizens of Illinois. Ms.
Saddler is being sued in her official capacity.
22. Defendant Debby Saunders, is currently the Bureau Chief of the Illinois Bureau of
Maternal and Child Health Promotion, with an office at 607 E. Adams, Springfield, Illinois
62701. Ms. Saunders is being sued in her official capacity.
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23. Defendant Gina Ruther, is currently the Acting Chief of the Illinois Bureau of
Child Care & Development, with an office at 10 Collinsville Ave., Suite 203, East Saint Louis,
Illinois 62201. Ms. Ruther is being sued in her official capacity.
24. Upon information and belief, Defendants have taken, or are otherwise responsible for, the actions challenged here.
IV. JURISDICTION AND VENUE
25. This case arises under the Supremacy Clause of the United States Constitution.
U.S. Const. art. VI, cl. 2. Jurisdiction in this Court is founded upon 28 U.S.C. § 1331, which affords original jurisdiction of all civil actions arising under the Constitution, Laws or Treaties of the United States, including the Supremacy Clause of the United States Constitution.
Preliminary and permanent declaratory and injunctive relief are authorized by 28 U.S.C. §§ 2201 and 2202, Rules 57 and 65 of the Federal Rules of Civil Procedure, and the inherent equitable powers of this Court.
26. Venue in this district is proper under 28 U.S.C. § 1391(b) because Defendants reside in this judicial district and a substantial part of the events or omissions giving rise to the claims occurred in this district.
V. ALLEGATIONS COMMON TO ALL COUNTS
A. The Medicaid Act Significantly Restricts States’ Ability to Deny Coverage of FDA-Approved Medications.
1. Federal Requirements for Drug Coverage
27. Medicaid is a joint federal-state program established by Congress in 1965 for the purpose of providing medical assistance to underprivileged Americans. The federal agency responsible for administering the Medicaid program is CMS, a component part of HHS. CMS
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promulgates regulations and policy guidance governing the administration of the Medicaid program.
28. States are not required to participate in the Medicaid program. If a state chooses to participate in the program, however, the state must comply with the requirements of the
Medicaid Act.
29. Section 1396a(a)(10) of the Medicaid Act requires each participating state to make certain services available to all individuals who are covered by the state’s Medicaid plan.
Sections 1396a(a)(10), 1396(a)(54), and 1396d(a)(12) authorize states to voluntarily cover specified services, including outpatient prescription drugs. Where a state chooses to provide outpatient prescription drug services, those services become part of the state plan and are subject to all applicable requirements of federal law.
30. The Medicaid Act’s provisions governing coverage of outpatient drugs generally require state plans to provide coverage for the “medically acceptable indication” of any “covered outpatient drug.” 42 U.S.C. § 1396r-8(d)(1)(B)(i). “Covered outpatient drugs” are those drugs
(a) that may be dispensed only upon a prescription and (b) that have been approved for safety and effectiveness as a prescription drug under the Federal Food, Drug, & Cosmetic Act
(“FDCA”). 42 U.S.C. § 1396r-8(k)(2)(A). The term “medically accepted indication” includes any use approved under the FDCA. 42 U.S.C. § 1396r-8(k)(6). Compounded preparations are not FDA-approved and, accordingly, are not “covered outpatient drugs.”
31. Federal Medicaid law (Section 1396a(a)(19) of the Medicaid Act) also requires state plans to provide Medicaid services “in a manner consistent with . . . the best interests of the recipients.”
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2. Illinois is Required to Cover Makena® Prescriptions
32. Illinois participates in Medicaid. Illinois also offers Medicaid beneficiaries a pharmacy benefit that covers outpatient drugs as part of Illinois’s state plan.
33. CMS recently reminded Illinois and other states that Makena®, as an FDA approved drug that is subject to an MDRA, is a “covered outpatient drug” under the Medicaid
Act, and therefore must be covered.5
34. The Medicaid Act’s drug rebate program requires that manufacturers and distributors, such as KV, that wish to participate in the Medicaid program enter into a written
MDRA with the Secretary of HHS “on behalf of the states.” 42 U.S.C. § 1396r-8(a)(1). The
MDRA, in turn, requires KV to pay a rebate (currently in the amount of 23.1 percent) to every participating state on all of its covered outpatient drugs paid for by Medicaid. Id.
35. In return for KV entering into the MDRA, federal law requires the various states, including Illinois, to cover and pay for KV’s covered outpatient drugs under their state plan. 42
U.S.C. § 1396a(a)(54) (providing that a state plan that “provides medical assistance for covered outpatient drugs” must “comply with the applicable requirements of Section 1396r-8.”). HFS does not appear to dispute that Makena® is a “covered outpatient drug.”
36. Likewise, HFS must ensure that Managed Care Organizations (MCOs) with whom it has contracted comply with federal law. 42 C.F.R. § 438.210 provides that contracted services provided by a MCO must be furnished in an amount, duration, and scope that is no less than the amount, duration, and scope for the same services furnished to beneficiaries
5 See Ex. 7 (“We would like to remind States of their responsibility to cover FDA approved products, such as Makena, that qualify as covered outpatient drugs under the Medicaid drug rebate program.”)
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under fee-for-service Medicaid. 42 C.F.R. § 438.206 requires HFS to ensure that all services under the State Medicaid plan are available and accessible to enrollees of any MCO.
37. The Medicaid Act allows states to exclude, i.e., not to pay for a “covered outpatient drug” under very limited circumstances. 42 U.S.C. § 1396r-8(d)(1)(B). Illinois’s exclusion of Makena®, however, does not fall into any of the narrow statutory exclusion categories. It is, after all, the only FDA-approved drug (and, hence, the only “covered outpatient drug”) in its therapeutic category.
3. Compounded Preparations are Neither FDA-Approved Nor Covered Outpatient Drugs
38. Both prior to and since the approval of Makena®, pharmacists have made compounded preparations using hydroxyprogesterone caproate. Importantly, compounded preparations of 17P are not generic versions of, and are not pharmaceutically equivalent or bioequivalent to, Makena®. In fact, compounded preparations are not subject to FDA regulation or approval.
39. FDA recently defined “compounding” as “the combining or altering of the ingredients of a drug by a licensed pharmacist to produce a drug tailored to an individual patient’s particular medical needs, based on a valid prescription from a licensed medical practitioner.” Ex. 2. Compounding of a copy of an FDA approved drug such as Makena is prohibited under the Federal Food, Drug and Cosmetic Act, 21 U.S.C. § 353(a), except under limited and narrow exceptions.
40. Thus, compounded preparations are intended to be individually prepared, not mass produced for large portions of the eligible population. As FDA has repeatedly cautioned, compounded products are not subject to Good Manufacturing Practices standards and, as such, are vulnerable to variability from dose to dose, which variability may manifest itself through
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different levels of potency, purity and sterility. In FDA’s own words, compounded 17P formulations do “not undergo the same premarket review” as Makena® and thus “lack an FDA finding of safety and efficacy and lack an FDA finding of manufacturing quality.” Ex. 2.
41. Improper compounding can and does (with some frequency) result in contaminated, ineffective (sub-potent), or too-potent products. Government tests by FDA and state Boards of Pharmacy have found that significant percentages – often in the 20 percent to 33 percent range – of numerous types of compounded products failed quality tests, primarily due to
“potency” failures (i.e., too much or too little active ingredient in the compounded product).
42. The safety, effectiveness, and quality of compounded 17P have not been studied and are therefore unknown. On information and belief, none of the commercially available compounded 17P formulations have been used in any randomized clinical trial, and none have any supporting effectiveness, safety, or stability information that have been reviewed by FDA.
43. Further, on information and belief, much if not all of the active pharmaceutical ingredient (API) used in compounded 17P comes from non-FDA approved or regulated factories in China, the country where drug manufacturing facilities exporting to the United States are least inspected by FDA.6
44. In testimony before Congress, the FDA stated:
FDA remains immensely concerned about unapproved, imported pharmaceuticals whose safety and effectiveness cannot be assured because they originate outside
6 A GAO Report found that as of 2009, China had the highest percentage (88 percent) of drug manufacturing establishments known to FDA that may never have been inspected. See U.S. Government Accounting Office, Drug Safety: FDA Has Conducted More Foreign Inspections and Begun to Improve Its Information on Foreign Establishments, but More Progress Is Needed, GAO-10-961 (Sept. 2010), (Table 2) at 18, available at http://www.gao.gov/new.items/d10961.pdf (last visited August 21, 2012).
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the closed legal structure and regulatory system we are fortunate to have in the United States.7
45. FDA’s concerns are legitimate and are borne out by testing of compounded 17P.
At KV’s request, independent laboratories tested 10 samples of 17P API.8 Seven of the suppliers were original manufacturers of the API and are located in unapproved facilities in China. The remaining three suppliers, based in the United States, were identified as “resellers” of API that, on information and belief, also originated in China. In addition, the independent laboratories tested 30 vials of compounded 17P prepared by 30 different compounding pharmacies from 15 states.9
46. The independent laboratories evaluated the API samples and compounded 17P vials against United States Pharmacopeia (USP) standards and the more rigorous FDA quality standards for Makena® to assess potency, chemical impurities, and drug identity.
47. The testing identified significant variability in the API samples and compounded
17P vials. A majority of the API samples failed the impurity specifications FDA set for
Makena® and approximately half of the API samples failed the USP minimum potency standard.
One API sample contained no active ingredient at all (instead, it contained glucose that was labeled as hydroxyprogesterone caproate).
7 Testimony of Randall W. Lutter, Ph.D., Acting Deputy Commissioner for Policy at the U.S. Food and Drug Administration before the Subcommittee on Interstate Commerce, Trade and Tourism, Senate Committee on Commerce, Science and Transportation (Mar. 7, 2007), available at http://www.fda.gov/NewsEvents/Testimony/ucm154233.htm (last visited August 21, 2012).
8 See Press Release, K-V Pharmaceutical Company, Independent Laboratory Testing Demonstrates Important Quality Differences Between FDA-Approved Makena® and Compounded 17P Formulations (Nov. 8, 2011), available at http://www.kvpharmaceutical.com/news_center_article.aspx?articleid=353 (last visited August 21, 2012).
9 Id.
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48. Of the samples of finished dosage form, a significant percentage failed to meet the
USP potency standards. The samples’ potency ranged from well below to significantly above the labeled potency. In addition, over one-half of the samples had levels of unknown purities that exceeded FDA impurity standard required for Makena®. Thus, approximately two-thirds of the compounded 17P vials failed to meet at least one USP requirement or at least one FDA quality standard required for Makena® for potency and/or purity.10
49. KV submitted to FDA the results of the laboratory testing and supporting documentation. Upon careful review of the independent laboratory testing that KV provided, including chain of custody, storage, and laboratory procedure, FDA issued a statement confirming that “there is variability in the purity and potency of both the bulk APIs and compounded hydroxyprogesterone caproate products that were tested.”11
50. In June of this year FDA published findings of its own study which noted that 100 percent (16 of 16) of the API samples procured and tested by FDA failed Makena®’s standards for unidentified impurities. FDA also found potency and unidentified impurity issues in compounded 17P finished goods samples. According to FDA requirements, if Makena® were to have these deficiencies, it would be considered adulterated.12 FDA’s testing of the compounded
17P samples provided by KV also confirmed variability in potency and purity.
10 Id.
11 See Ex 5.
12 See FDA, Guidance for Industry, Investigating Out-of-Specification (OOS) Rest Results for Pharmaceutical Production, available at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm07028 7.pdf (last visited August 21, 2012).
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51. In March 2011, FDA Commissioner, Margaret Hamburg, M.D., testified before
Congress to the importance of Makena®’s approval: “I think it is important and an advance that we have an FDA-approved drug to prevent preterm pregnancy and all of its consequent serious medical concerns for both mother and infant. And while the drug has been available through compounding, . . . compounding as a practice has been associated with serious health risks . . .
.” Ex. 4 (emphasis added).
52. However, less than two weeks later, on March 30, 2011, FDA, in apparent reaction to the unduly high list price of Makena®, publicly stated that it was not going to apply to compounded versions of 17P its longstanding enforcement policy regarding compounding when an FDA-approved drug is available in the market. (Under that policy, FDA allows compounding only in those limited circumstances where there is a documented medical need for the compounded variation—i.e., where the treating physician determines that a patient has a medical need for a compounded variation of the FDA-approved drug because the FDA-approved drug is clinically inappropriate for the patient. Ex. 3.). FDA now has publicly contended that the March
30, 2011 statement has been superseded by its June 15, 2012 and June 29, 2012 updates, described below.
53. Although KV promptly cut its list price by more than 55 percent, many state
Medicaid agencies, including HFS, used FDA’s March 30, 2011, statement to justify their implementation of harsh coverage policies which (a) required Medicaid beneficiaries to use the cheaper and unapproved compounded preparations and (b) erected insurmountable barriers to accessing the FDA approved drug, the medical judgment of the treating clinician notwithstanding. In time, these policies have created a new patient “access” problem which is
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different from the one originally mentioned by FDA. Specifically, in many states, including
Illinois, women on Medicaid have been unable to gain access to FDA-approved Makena®.
54. Since that time, however, FDA issued the June 15 FDA Statement on Makena®.
The June 15 FDA Statement reiterated that compounded preparations, including compounded
17P, “are not FDA approved” and “do not undergo premarket review . . .” or “have an FDA finding of safety and efficacy.” Ex. 6. Thus, FDA noted, “approved drug products, such as
Makena, provide greater assurance of safety and effectiveness . . . .” Id.
55. FDA reminded the public of the limits on lawful compounding: (a) “the compounding of any drug, including hydroxyprogesterone caproate, should not exceed the scope of traditional pharmacy compounding[,]” and (b) “[c]ompounding large volumes of drugs that are copies of FDA-approved drugs circumvents important public health requirements, including the Federal Food, Drug, and Cosmetics Act . . .”. Id.
56. The June 15 FDA Statement stated that the scope of traditional compounding includes the situation where “the prescribing practitioner has determined that a compounded product is necessary for the particular patient and would provide a significant difference for the patient as compared to the FDA approved commercially available drug . . . .” Ex. 6. The most common example of lawful compounding, FDA explained, is where a patient has an allergy to an ingredient in the FDA-approved product or cannot tolerate the form of the FDA product, i.e., cannot swallow a pill. Subsequently, in the June 29 Makena® FAQs, FDA reiterated that the agency “does not consider compounding large volumes of copies, or what are essentially copies, of any approved commercially-available drug to fall within the scope of traditional pharmacy practice.” Ex. 2.
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57. As FDA explained in the June 29 Makena® FAQs, “Makena was approved based on an affirmative showing of safety and efficacy” and the premarket review included a review of the manufacturing process, the source of the API used, and adherence to GMP standards. Ex. 2.
Specifically, Makena® is manufactured in a GMP-compliant manufacturing facility that is inspected by FDA. The approved manufacturing process uses API made in another FDA- compliant API manufacturing facility that is regularly inspected by FDA and by European Union health authorities to FDA-approved specifications. By the end of the approval process, KV had invested or committed over a quarter of a billion dollars in bringing Makena® to market, including more than $80 million in research and clinical trials.
58. Healthcare professionals and their Medicaid patients have no ability: (a) to assess the potency, safety, or quality of compounded 17P; (b) to assess the quality of the people or facilities that produce the API used in compounded 17P or the quality of those that produce the compounded 17P, itself; or (c) to assure themselves that the compounded product being injected into any given pregnant woman was prepared, stored and transported in a proper manner.
59. In August 2010, CMS announced that compounded products should not be considered “covered drugs” under the Medicaid program.13 At the time, CMS reaffirmed its position that Medicaid coverage of compounded therapies is limited to “extemporaneous” prescriptions where no commercially available drug is medically appropriate. Id. Thus, consistent with FDA law and policy, CMS has limited Medicaid coverage of compounded
13 See Centers for Medicare and Medicaid Services, Medicaid Drug Rebate Program Notice, CMS Release No. 155 (Aug. 11, 2010), at 4, available at: http://www.dhs.state.or.us/policy/healthplan/guides/pharmacy/cms_releases/cms_rel155.pdf (last visited August 21, 2012).
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products to those that are made pursuant to a documented individualized need for the compounded product in place of the FDA-approved, commercially available drug.
60. The June 15 CMS Statement reiterated the need to limit compounding of 17P to the traditional scope of compounding and reminded states of their legal obligation to cover
Makena® without unreasonable restrictions.14
61. HFS’s coverage policy does not limit the use of compounded 17P to
“extemporaneous” compounding that is customized to meet the needs of particular patients who have the condition for which Makena® is meant to treat but for whom Makena® is medically inappropriate. In fact, it does not limit the compounding of 17P at all. Rather, HFS, in complete disregard of federal law and the recent and repeated public statements of the lead federal agencies, mandates the widespread use of compounded 17P and pays for compounded preparations without any prior authorization or any other requirements or limitations. Makena®, by contrast, is subject to a truly unreasonable prior authorization process (discussed immediately below).
B. HFS’s Makena® Coverage Policy is Unlawful Because it Operates as an Exclusion.
1. The State’s Requirements for Coverage of Makena®
62. Illinois voluntarily chooses to participate in the Medicaid Program and to provide a prescription drug benefit. Although HFS appears to concede that Makena® is a “covered
14 In July 2011, CMS also clarified that compounded drugs are not “covered outpatient drugs” subject to section 1927(d) of the Medicaid Act. See Centers for Medicare and Medicaid Services, Medicaid Drug Rebate Program Notice, CMS Release No. 158, (July 13, 2011), at 1, available at http:/www.dhs.state.or.us/policy/healthplan/guides/pharmacy/cms_releases/cms_rel158.pdf (last visited August 21, 2012).
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benefit,” in practice it avoids covering Makena® by imposing undue and unachievable conditions on access to it.
63. As described in more detail below, a state may condition coverage of covered outpatient drugs on a “prior authorization” if the state meets the requirements in 42 U.S.C.
§§ 1396r-8(d)(1)(A), 1396r-8(d)(5). However, a state may not use a prior authorization policy to bar access to an otherwise covered drug where, as here, there is no FDA-approved alternative.
64. HFS has issued two statements regarding the coverage of hydroxyprogesterone caproate. The first was published on May 9, 2011.15 Under that policy, HFS established vaginal and oral suppository compounded formulations as the “preferred products,” starting in week 16 of gestation. FDA-approved Makena®, by contrast, was subject to a prior authorization policy which provided that HFS would not approve payment for the FDA-approved drug until and unless the Medicaid mother tried, but could not tolerate, a four week trial of vaginal suppositories and a four week trial of an oral suppositories. Then, and only then, i.e., in week 24 of gestation, would Makena® be approved. Makena®’s label, however, requires that treatment
(weekly injections) commence between weeks 16 and 20. HFS’s May 9, 2011 policy thus ensured that no Medicaid beneficiary in Illinois would ever get Makena® in a manner consistent with the drug’s clinical label.
65. The May 9, 2011 policy contained yet another provision designed to deter use of
Makena®. That policy stated that HFS would not pay pharmacies for Makena® and would require the treating physician to acquire and bill for Makena®. HFS hastened to add, however,
15 May 9, 2011 HFS Informational Notice, available at : http://www.hfs.illinois.gov/assets/050911n3.pdf (last visited August 21, 2012).
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that it would only pay $40 per injection, knowing full well that physicians had to pay substantially more to acquire the FDA-approved drug.
66. Effective May 2012, HFS issued a document setting forth the prior authorization criteria for Makena®. It is not clear whether the May 2012 supersedes the May 9, 2011, policy in its entirety or is to work in tandem with the earlier document. In any event, the May 2012 policy states that compounded 17P will continue to be available without prior authorization. The policy states that Makena® will only be approved if the treating physician can (a) demonstrate that compounded 17P is contraindicated or (b) “document compelling and decisive medical and clinical factors necessitating Makena®” for his or her Medicaid patient.16
67. As set forth above, it is unclear whether a Medicaid patient must still undergo the two four week trials of oral and vaginal suppositories and whether HFS will only pay $40 for a
Makena® injection.
68. HSF has established a regime that turns federal law and regulations on their head.
Specifically, HFS’s coverage policy is to prefer, cover and routinely pay for unapproved compounded formulations without any prior authorization requirements and to cover Makena® only if compounded 17P is contraindicated or cannot be tolerated or the treating physician is able to offer “compelling and decisive” medical evidence why his or her patient requires the FDA- approved drug.
69. The Medicaid Act requires HFS to provide Illinois Medicaid beneficiaries services “in a manner consistent with . . . the best interests of the recipients.” To date, only three
Medicaid patients (or treating physicians) have managed to navigate successfully through HFS’s
16 May 2012 HFS Policy, available at : http://www.hfs.illinois.gov/assets/makena_pa.pdf (last visited August 21, 2012).
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labyrinth and obtain FDA-approved Makena®, notwithstanding FDA’s repeated reminders that approved drugs such as Makena® provide greater assurance of efficacy and safety.
70. Illinois’s policy also ignores FDA’s position that in determining whether a drug may be lawfully compounded, it is necessary to consider “whether the prescribing practitioner has determined that a compounded product is necessary for the particular patient and would provide a significant difference for the patient as compared to the FDA-approved commercially available drug product.” Ex. 6 (emphasis added). In the June 29 Makena® FAQs,
FDA went further, stating that not only should compounding of 17P be limited to the scope of traditional compounding, but practitioners should “prescribe the FDA-approved drug rather than a compounded drug unless the prescribing practitioner has determined that a compounded product is necessary for the particular patient and would provide a significant difference for the patient as compared to the FDA-approved commercially available drug product.” Ex. 2.
71. The pharmacy laws of the State of Illinois are in full accord with FDA law and policy, limiting the ability of Illinois pharmacies to compound a “commercially available drug” such as Makena®. Specifically, under the Illinois Pharmacy Practice statute commercially available products may be compounded for dispensing to individual patients only if all of the following conditions are met: (i) the commercial product is not reasonably available from normal distribution channels in a timely manner to meet the patient’s needs and (ii) the prescribing practitioner has requested that the drug be compounded.
72. Makena® plainly is a commercially available drug, and there is no evidence that it is not reasonably available from normal distribution channels in a timely manner to meet patient needs. Under such circumstances, the continued and unrestricted compounding of 17P is in violation of Illinois law.
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73. HFS has also entered into contracts with MCOs to facilitate the delivery of
Medicaid health benefits to the Medicaid-eligible population in Illinois. Each MCO must comply with federal Medicaid laws and regulations and HFS is ultimately responsible for ensuring such compliance.
74. Both federal regulations and HFS’s contracts with its MCOs require that HFS ensure that its MCOs comply with federal law. 42 C.F.R. § 438.210 provides that each contract
HFS has with a MCO must require that services provided by the MCO be furnished in an amount, duration, and scope that is no less than the amount, duration, and scope for the same services furnished to beneficiaries under fee-for-service Medicaid. 42 C.F.R. § 438.206 requires that HFS ensure that all services under the State Medicaid plan are available and accessible to enrollees of any MCO. The State of Illinois’s Model Contract between HFS and a MCO for Furnishing Health Services states:
“The Contractor’s obligations and services hereunder are hereby made and must be performed in compliance with all applicable federal and State laws, including, but not limited to, applicable provisions of 45 C.F.R. Part 74 not hereto specified. In the provision of services under this Contract, the Contractor and its subcontractors shall comply with all applicable Federal and state statutes and regulations, and all amendments thereto, that are in effect when this Contract is signed, or that come into effect during the term of this Contract. This includes, but is not limited to Title XIX of the Social Security Act and Title 42 of the Code of Federal Regulations….”17
75. On information and belief, several MCOs have denied prior authorization requests for Makena® in violation of the Medicaid Act. Despite their obligation to do so, HFS
17 See State of Illinois Department of Health Care and Family Services Model Contract for Furnishing Health Services by a Managed Care Organization, Article IX, § 9.14, available at: http://www2.illinois.gov/hfs/ManagedCare/Documents/mco.pdf (last visited August 21, 2012).
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has failed to adequately monitor these MCOs to ensure that they are not violating federal laws by unlawfully denying prior authorization requests for Makena®.
2. Illinois’s Use of a Prior Authorization Requirement is Unlawful.
76. Under the Medicaid Act, a state may impose a reasonable prior authorization procedure to require a provider to go through certain procedural steps before getting access to a particular drug.
77. Section 1927(d)(5) of the Medicaid Act provides that “a state plan . . . may require, . . . as a condition of coverage or payment for a covered outpatient drug . . . the approval of the drug before its dispensing for any medically accepted indication . . . only if the system providing for such approval (A) provides response by telephone . . . within 24 hours of a request for prior authorization; and (B) . . . provides for the dispensing of at least 72-hour supply of a covered outpatient prescription drug in an emergency situation . . ..”
78. Historically, prior authorization requirements have been used to ensure the medical appropriateness and safety of a drug for a particular beneficiary and to avoid harms such as drug-drug interaction, therapeutic duplication, overuse by beneficiaries and, occasionally, off label prescribing by practitioners. A prior authorization policy may provide for “conditions of coverage” based on satisfaction of approriate medical criteria — cost cannot be a factor.
79. HFS’s “Makena® prior authorization policy,” is not a mere “procedural hurdle” or
“condition of coverage” that must be met to obtain Makena® — it has been structured to promote and pay for the unfettered use of compounded 17P formulations and to exclude coverage for
Makena® entirely. By setting up a policy that “prefers” compounded formulations, requires pregnant women to undergo “trials” of untested and unapproved therapies, requires physicians to provide “compelling and decisive” evidence of why their patient needs the only FDA-approved
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product and, finally, provides woefully inadequate reimbursement for Makena®, Illinois’s “prior authorization” maze acts as an impermissible de facto exclusion of Makena®.
80. As set forth above, HFS’s “prior authorization” policy is a rather transparent attempt to exclude coverage for Makena® without adhering to the formulary provisions of the
Medicaid Act. Under the Medicaid Act, an FDA-approved drug cannot be excluded unless the drug “does not have a significant, clinically meaningful therapeutic advantage in terms of safety, effectiveness or clinical outcome, over other drugs included in the formulary.” 42 U.S.C. §
1396r(d)(4)(C). For example, if there are certain covered drugs that each treat a particular condition, such as elevated blood cholesterol, the Medicaid Program need not cover all of them.
But, if a certain drug has a meaningful therapeutic advantage over other covered outpatient drugs, it must be included in the formulary—regardless of cost.
81. A lawful formulary creates one or more tiers of preference among two or more therapeautically equivalent covered outpatient drugs. A lawful formulary cannot exist, however, where, as here, there is only one FDA-approved drug because under the law formularies involve therapeutically equivalent covered outpatient drugs, and compounded preparations are not covered outpatient drugs. Thus, HFS’s effort to establish unapproved suppositories or compounded 17P as the “preferred products” that must be used first is a patent violation of
Medicaid law.
82. Where, as here, there is no existing FDA-approved drug that is an alternative to
Makena®, there simply is no lawful basis to exclude Makena® from the state formulary. Title 42
U.S.C. § 1396r-8(d)(4)(C) requires the inclusion of covered outpatient drugs in a formulary, unless a permissible exclusion applies.
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C. Illinois’s Policy Unlawfully Supplants the Medical Judgment of Practitioners.
83. Despite the daunting policy, physicians still have attempted to prescribe Makena® to 71 Medicaid beneficiaries in Illinois. To date, however, HFS has effectively overridden those physicians’ medical judgments and approved coverage of Makena® for only three Medicaid beneficiaries.
84. On information and belief, there are many physicians in Illinois who would prefer to prescribe and obtain Makena® for their patients because of the assurance of safety and efficacy that accompanies an FDA-approved drug, but are discouraged from even trying to do so by
HFS’s unreasonable policy.
85. This state of affairs is evidenced by the fact that Makena® is prescribed in much larger numbers by providers in states that do not have an impermissible prior authorization process. For example, since October 2011, when KV and Florida Medicaid entered into a coverage contract, 829 Medicaid patients have been prescribed Makena®, and 812 vials have been provided to 444 Medicaid patients in Florida (compared to ten vials provided to three
Medicaid beneficiaries in Illinois in over 16 months).
86. The HFS’s Makena® prior authorization policy, which appears based solely on cost, unlawfully disregards and overrides the clinical judgments of practitioners who believe that
Makena® is medically necessary or preferable for their patients.
D. HFS Has Ignored Recent Statements Issued by FDA and CMS.
87. The HFS’s Makena® prior authorization policy is inconsistent with the June 15
FDA Statement reiterating the greater assurance of safety and efficacy of Makena® as compared with compounded 17P formulations, and stating that large-scale compounding of drugs that are
“copies” of FDA-approved drugs goes beyond the scope of traditional pharmacy compounding
“circumvents important public health requirements. . . .” Ex. 6.
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88. HFS also continues to ignore the June 15 CMS Statement reminding states of their responsibility to cover FDA-approved products, such as Makena®, that qualify as covered outpatient drugs under the Medicaid drug rebate program. CMS cautioned states that any prior authorization procedures for such drugs must be administered in accordance with Section
1927(d) of the Social Security Act, 42 U.S.C. § 1396r-8, without imposing unreasonable conditions. Ex. 7.
89. Several days after the June 15 FDA and CMS Statements, Joseph Auci, a National
Account Director for Ther-Rx, sent an email to Sheri Dolan of HFS to inform her and HFS of the
June 15 FDA and CMS Statements. Mr. Auci sent the email in the hope that it would cause HFS to re-open a dialogue with KV regarding Makena® , a dialogue that had long been shut down by
HFS. Toward that end, Mr. Auci offered to work with the State of Illinois to assist it in providing access to Makena® and offered a substantial supplemental rebate on the drug for
Illinois Medicaid patients.
90. As with many of KV’s previous efforts to engage HFS, Mr. Auci’s overtures have been ignored.
91. Since Makena®’s launch, KV has met with Illinois representatives on at least three separate occasions to discuss Makena®’s efficacy and benefits and attempt to persuade HFS to reconsider its policy of effectively not covering Makena®.
92. On July 25, 2011, Scott Goedeke, Senior Vice President-Marketing of Ther-Rx, met with Lisa Arndt, a Bureau Chief for the Bureau of Pharmacy Services at HFS and following the meeting, Mr. Goedeke extended a supplemental rebate offer to HFS, which Ms. Arndt rejected. Mr. Goedeke also sought to understand how the coverage policy made sense clinically or otherwise, and Ms. Arndt simply stated “you don’t like our policy, we don’t like your price.”
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Ms. Arndt further stated that HFS has no intention of changing its policy unless it is directed to do so.
93. Efforts to resolve Illinois’s continuing violation of Medicaid law and FDA and
CMS policies just prior to the filing of this suit were also fruitless. In particular, on July 18,
2012, representatives from KV again met with representatives of HFS to discuss the Makena® prior authorization policy and to explain how it violates federal law. Despite several follow up attempts to negotiate a solution, HFS refused to change its policy.
94. Thus, despite the clear requirements for coverage under the Medicaid Act, the reiteration of these requirements in the June 15 FDA and CMS Statements, and the June 29
Makena® FAQs, HFS has not removed the unreasonable and unlawful conditions imposed by its
Makena® prior authorization policy. If a preliminary injunction is not entered, HFS will continue to deny Illinois’s Medicaid beneficiaries access to the only FDA-approved drug to treat their condition and will compel them to take an unapproved compounded formulation of uncertain origin, quality and potency — or no drug for their condition at all.
E. Harm to Plaintiffs and the Public Resulting From HFS’s Policy
95. KV has invested or committed over a quarter of a billion dollars to acquiring
Makena®, obtaining approval for it, and bringing it to market as an “orphan drug” that would enjoy seven years of market exclusivity under the Orphan Drug Act.18 Makena® is KV’s most signficant product, and was expected to account for the vast majority of KV’s projected revenue during the remaining Makena® exclusivity period.
18 The Orphan Drug Act of 1983’s seven year exclusivity period is meant to incentivize pharmaceutical companies to expend the large amounts of time and money necessary to obtain FDA approval of, and to comply with FDA post-approval requirements applicable to, drugs that address relatively small patient populations.
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96. KV’s survival as a going concern is now dependent on Makena®’s success, with a substantial portion of its potential market being for the treatment of Medicaid patients. KV’s
June 14, 2012 SEC disclosures include a prominent reference to substantial doubt regarding
KV’s ability to continue as a “going concern,” and KV’s independent auditor opined that it is probable that KV will cease to exist within 12 months.
97. KV had engaged financial advisors and outside counsel to explore strategic alternatives. Based on their advice, on August 3, 2012 KV filed for bankruptcy protection and reorganization under Chapter 11 of the U.S. Bankruptcy Code. As a result of Illinois (and other states’) refusal to cover Makena®, KV cannot currently demonstrate the financial prospects necessary to raise the financing it needs to operate during a period of restructuring. Unless
Illinois and other states begin covering Makena® as required by law, KV’s currently available cash will soon be depleted and its ability to generate sufficient cash to reorganize.
98. Due to unreasonable prior authorization policies such as Illinois’s, KV’s revenue from sales of Makena® is far below what it should be. Absent a preliminary injunction, KV will be irreparably harmed because KV will be unable to maintain its operations and meet its financial commitments.
99. Medicaid beneficiaries will also be irreparably harmed because if HFS’s policy continues in force, the health and safety of women with high-risk pregnancies and their unborn children will continue to be subjected to the significant, avoidable risks posed by compounded
17P products as compared to the FDA-approved Makena®.
100. Absent a preliminary injunction, HFS will continue to ignore federal regulations and the recent directives of FDA and CMS. It is certainly in the public interest that state agencies such as HFS act in compliance with the statutes they are governed by and administer.
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101. Plaintiffs have no adequate remedy at law to make themselves whole for the injury to KV’s business resulting from HFS’s Makena® prior authorization policy. They cannot recoup past, present or future sales from the state and, without a reversal of Illinois’s policies,
Plaintiffs are unlikely to be in existence for the length of time a trial on the merits would take to complete.
102. Accordingly, Plaintiffs need preliminary and permanent declaratory and injunctive relief.
I. COUNTS
F. Count I (Violation of §§ 1396r-8(a) and (d)(1)(A) of the Medicaid Act and the Supremacy Clause of the United States Constitution; Seeking Injunctive and Declaratory Relief)
103. Paragraphs 1 through 102 of this Complaint are incorporated by reference as if set forth fully herein.
104. Section 1396r-8(a) of the Medicaid Act provides that a state must provide access to and coverage for the “covered outpatient drugs” of a manufacturer that has entered into a
Medicaid Drug Rebate Agreement with HHS, subject to certain limitations. 42 U.S.C. § 1396r-
8(a).
105. Makena® is a “covered outpatient drug” as defined in Section 1396r-8(k), and is subject to a Medicaid Drug Rebate Agreement executed between Ther-Rx and HHS. HFS has agreed that Makena® is a covered drug.
106. None of the bases for excluding coverage of a “covered outpatient drug” set forth in § 1396r-8(a) apply to Makena®.
107. HFS’s policy purports to establish a prior authorization policy as to Makena®.
108. HFS’s Makena® prior authorization policy as written and implemented serves as an exclusion of Makena®, rather than as a “condition of coverage.” No legitimate prior
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authorization policy, other than to ensure that the clinical criteria for use are met, could lawfully be conducted in these circumstances, given that Makena® is the only FDA-approved drug for its approved indication.
109. As a result of HFS’s Makena® prior authorization policy, a Medicaid beneficiary generally cannot obtain the FDA-approved Makena® even if the beneficiary’s provider believes it is in his or her patient’s best interests.
110. Therefore, HFS’s Makena® prior authorization policy violates and is in conflict with section 1396r-8(a) of the Medicaid Act, which requires HFS to provide access to “covered outpatient drugs.”
111. Plaintiffs KV and Ther-Rx have been, are being, and will continue to be, irreparably harmed by HFS’s violation of section 1396r-8(d)(1)(A) of the Medicaid Act.
G. Count II (Violation of § 1396a(a)(19) of the Medicaid Act and the Supremacy Clause of the United States Constitution; Seeking Injunctive and Declaratory Relief)
112. Paragraphs 1 through 111 of the Complaint are incorporated by reference as if set forth fully herein.
113. Section 1396a(a)(19) of the Medicaid Act requires that any state participating in the Medicaid program “provide such safeguards as may be necessary to assure that eligibility for care and services under the plan will be determined, and such care and services will be provided in a manner consistent with simplicity of administration and the best interest of the recipients.”
114. HFS’s refusal to provide coverage for an FDA-approved drug for its stated indication and HFS’s policy that Medicaid beneficiaries be treated with an unapproved, non-
FDA-regulated substitute made through an inherently variable process or have no treatment at all for their condition is not in the best interest of the Medicaid beneficiaries for whom Makena® is indicated.
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115. HFS’s Makena® prior authorization policy is not based on any clinical or medical evaluation of a particular patient’s needs, but, instead, is based solely on the lower cost of compounded 17P. Thus, the prior authorization operates to deny Medicaid beneficiaries access to the most reliably effective, safe and high-quality product, FDA-approved Makena® — indeed, the only FDA-approved drug for women at high risk of preterm birth and the consequent infant deaths or long term illnesses that are associated with this condition.
116. HFS’s Makena® prior authorization policy results in the state overriding the medical judgments of Medicaid beneficiaries’ physicians.
117. Accordingly, HFS is not providing care and services in a manner consistent with the best interests of Illinois’s Medicaid recipients, and is in violation of and in conflict with section 1396a(a)(19) of the Medicaid Act.
118. Plaintiffs KV and Ther-Rx have been, are being, and will continue to be, irreparably harmed by HFS’s violation of section 1396a(a)(19) of the Medicaid Act.
VI. RELIEF REQUESTED
WHEREFORE, Plaintiffs respectfully request that this Court, pursuant to the Supremacy
Clause, 28 U.S.C. §§ 1331, 28 U.S.C. §§ 2201 and 2202, and Rules 57 and 65, Fed. R. Civ. P.:
a) Issue preliminary and permanent relief that:
(1) Enjoins HFS from further implementing its Makena® prior authorization policy;
(2) Enjoins HFS from denying coverage for any prescription of Makena® made by a health care provider for its indicated use;
(3) Requires HFS to take all steps necessary to ensure that MCOs and all of HFS’s agents or other parties under its power or acting by or under its authority or on its behalf provide coverage for any prescription of Makena® made by a health care provider for its indicated use;
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(4) Prohibits HFS from covering and paying for compounded hydroxyprogesterone caproate except where the treating physician documents that his or her patient has a specific medical need for a compounded variation rather than Makena®;
(5) Requires that HFS ensure that all Medicaid MCOs limit their coverage of compounded hydroxyprogesterone caproate to those situations where the treating physician documents that his or her patient has a specific medical need for a compounded variation rather than Makena®; and
(6) Requires HFS to take all steps necessary to ensure that notice of this change in the prior authorization policy is communicated to all affected individuals, including providing a notice in the same manner its prior policy was communicated.
b) Issue a judgment declaring that:
(7) HFS acted in violation of the Medicaid Act by subjecting Makena® to an impermissible prior authorization process structured with the intent and effect of excluding access by Medicaid beneficiaries to this FDA-approved “covered outpatient drug”;
(8) HFS’s requirement that physicians obtain a prior authorization for prescriptions of FDA-approved Makena® while reimbursing for compounded substitutes for the indicated treatment violates the Medicaid Act;
(9) HFS must cover Makena® in accordance with Ther-Rx’s Medicaid Drug Rebate Agreement when it is prescribed by a health care practitioner for his or her Medicaid patient who has the condition for which Makena® is indicated, and must take all steps necessary to ensure that MCOs and all of its agents or other parties under its power or acting by or under its authority or on its behalf do likewise;
(10) HFS may cover and pay for compounded hydroxyprogesterone caproate only where the treating physician documents that his or her patient has a specific medical need for a compounded variation rather than Makena®; and
(11) HFS must ensure that all Medicaid MCOs limit their coverage of compounded hydroxyprogesterone caproate to those situations where the treating physician documents that his or her patient has a specific medical need for a compounded variation rather than Makena®.
c) Grant such other and further relief as the Court may deem just and proper.
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Dated: August 21, 2012 Respectfully submitted,
By: /s/ Stephen D. Libowsky______Stephen D. Libowsky (IL 6187081) Katharine E. Mellon (IL 6287468) SNR DENTON US LLP 233 South Wacker Drive, Suite 7800 Chicago, IL 60606-6306 Telephone: (312) 876-8000 Facsimile: (312) 876-7934 [email protected] [email protected]
Margaret “Peg” Donahue Hall (TX 05968450) SNR DENTON US LLP 2000 McKinney Avenue, Suite 1900 Dallas, TX 75201-1858 Telephone: (214) 259-0900 Facsimile: (214) 259-0910 [email protected] Pro hac vice application to be filed
Drew Marrocco (DC 453205) Erin Shoudt (DC 489515) SNR DENTON US LLP 1301 K Street, NW, Suite 600, East Tower Washington, DC 20005 Telephone: (202) 408-6400 Facsimile: (202) 408-6399 [email protected] Pro hac vice application to be filed
Attorneys for Plaintiffs
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