kv v fda-alere amicus
TRANSCRIPT
Case 1:12-cv-01105-ABJ Document 9 Filed 07/24/12 Page 1 of 7
Case 1:12-cv-01105-ABJ Document 9 Filed 07/24/12 Page 2 of 7
Case 1:12-cv-01105-ABJ Document 9 Filed 07/24/12 Page 3 of 7
Case 1:12-cv-01105-ABJ Document 9 Filed 07/24/12 Page 4 of 7
Case 1:12-cv-01105-ABJ Document 9 Filed 07/24/12 Page 5 of 7
Case 1:12-cv-01105-ABJ Document 9 Filed 07/24/12 Page 6 of 7
Case 1:12-cv-01105-ABJ Document 9 Filed 07/24/12 Page 7 of 7
EXHIBIT A
Case 1:12-cv-01105-ABJ Document 9-1 Filed 07/24/12 Page 1 of 2
Amici Physicians
John P. Elliott, M.D. Medical Director – Women’s Hospital Saddleback Memorial Medical Center Laguna Hills, California
and
Clinical Professor, Department of OB/GYN University of Arizona Medical School Tucson, Arizona Michael Gordon, M.D. Center for Maternal Fetal Care San Antonio, Texas Michael Moretti, M.D. Chairman, Department of Obstetrics & Gynecology New York Medical College/Richmond Program Staten Island, New York
and
Chairman, Department of Obstetrics & Gynecology St. Vincent’s Medical Center Staten Island, New York Jack Graham, M.D. Clinical Faculty, Associate Attending Department of Obstetrics and Gynecology The University of Texas Southwestern Medical School Dallas, Texas
Sue Palmer, M.D. Maternal Fetal Medicine Houston, Texas
Kenneth Higby, M.D. Center for Maternal Fetal Care San Antonio, Texas Peter S. Sanfilippo, M.D. Comprehensive Care Medical Staten Island, New York Stephen Jones, M.D. Christus Schumpert Health System Shreveport, Louisiana Phillip Shubert, M.D. Mt. Carmel St. Ann’s Maternal Fetal Medicine Westerville, Ohio Christopher Lang, M.D. Mt. Carmel St. Ann’s Maternal Fetal Medicine Westerville, Ohio
Dr. Michael Ruma Perinatal Associate of New Mexico 6100 Pan American East Fwy NE Albuquerque, NM 87109
Case 1:12-cv-01105-ABJ Document 9-1 Filed 07/24/12 Page 2 of 2
EXHIBIT B
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 1 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 2 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 3 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 4 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 5 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 6 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 7 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 8 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 9 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 10 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 11 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 12 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 13 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 14 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 15 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 16 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 17 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 18 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 19 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 20 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 21 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 22 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 23 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 24 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 25 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 26 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 27 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 28 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 29 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 30 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 31 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 32 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 33 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 34 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 35 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 36 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 37 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 38 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 39 of 40
Case 1:12-cv-01105-ABJ Document 9-2 Filed 07/24/12 Page 40 of 40
APPENDIX 1
Case 1:12-cv-01105-ABJ Document 9-3 Filed 07/24/12 Page 1 of 2
APPENDIX 1
Amici Physicians
John P. Elliott, M.D. Medical Director – Women’s Hospital Saddleback Memorial Medical Center Laguna Hills, California
and
Clinical Professor, Department of OB/GYN University of Arizona Medical School Tucson, Arizona Michael Gordon, M.D. Center for Maternal Fetal Care San Antonio, Texas Michael Moretti, M.D. Chairman, Department of Obstetrics & Gynecology New York Medical College/Richmond Program Staten Island, New York
and
Chairman, Department of Obstetrics & Gynecology St. Vincent’s Medical Center Staten Island, New York Jack Graham, M.D. Clinical Faculty, Associate Attending Department of Obstetrics and Gynecology The University of Texas Southwestern Medical School Dallas, Texas
Sue Palmer, M.D. Maternal Fetal Medicine Houston, Texas
Kenneth Higby, M.D. Center for Maternal Fetal Care San Antonio, Texas Peter S. Sanfilippo, M.D. Comprehensive Care Medical Staten Island, New York Stephen Jones, M.D. Christus Schumpert Health System Shreveport, Louisiana Phillip Shubert, M.D. Mt. Carmel St. Ann’s Maternal Fetal Medicine Westerville, Ohio Christopher Lang, M.D. Mt. Carmel St. Ann’s Maternal Fetal Medicine Westerville, Ohio
Dr. Michael Ruma Perinatal Associate of New Mexico 6100 Pan American East Fwy NE Albuquerque, NM 87109
Case 1:12-cv-01105-ABJ Document 9-3 Filed 07/24/12 Page 2 of 2
APPENDIX 2
Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 1 of 52
983525.1
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA
K-V PHARMACEUTICAL COMPANY, THER-RX CORPORATION,
Plaintiffs,
v.
DAVID A. COOK, in his official capacity as Commissioner of the Georgia Department of Community Health and, JERRY DUBBERLY, MD, in his official capacity as Division Chief of the Medicaid Division of the Georgia Department of Community Health
Defendants.
))))))))))))))))))))
Case No. _____________
COMPLAINT AND APPLICATION FOR PRELIMINARY INJUNCTION
John E. Floyd (GA 266413) Manoj S. Varghese (GA 734668) BONDURANT, MIXSON & ELMORE LLP 1201 W. Peachtree Street, N.W. Suite 3900 Atlanta, GA 30309 Telephone: (404) 881-4100 Facsimile: (404) 881-4111 [email protected] [email protected]
Margaret “Peg” Donahue Hall, Esq. (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 pending
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 1 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 2 of 52
983525.1
Drew Marrocco, Esq. (DC 453205) 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 pending Stephen D. Libowsky (GA 451965) SNR DENTON US LLP 233 South Wacker Drive, Suite 7800 Chicago, IL 60606 Telephone: (312)-876-8000 Facsimile: (312)-876-7934 [email protected]
Attorneys for Plaintiffs
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 2 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 3 of 52
983525.1
- i -
GLOSSARY OF TERMS
Term Meaning
17P hydroxyprogesterone caproate — the active ingredient used in Makena®
API active pharmaceutical ingredient
CMO care management organization
CMS Centers for Medicare & Medicaid Services
DCH Georgia Department of Community Health
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
MDRA Medicaid Drug Rebate Agreement
NDA New Drug Application
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 3 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 4 of 52
983525.1
- 1 -
This case involves Georgia Medicaid’s refusal, in flagrant violation of
federal law, to cover the only Food and Drug Administration (“FDA”) approved
drug for pregnant women with a rare, but severe, condition causing life-threatening
spontaneous preterm birth. Although an FDA-approved drug has been available
since March 2011 and thousands of women in Georgia seek treatment for this
condition each year, on information and belief, Georgia has not approved payment
for any vials of the medication for any Medicaid patients. This denial of medical
care to the poor and vulnerable is not only unlawful, but it is in defiance of
statements recently issued 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 supporting the unlawful preparation
of compounded copies of the drug that are not customized to meet the special
medical needs of individual patients.
Plaintiffs KV Pharmaceutical Company (“K-V”) and its wholly-owned
subsidiary Ther-Rx Corporation (“Ther-Rx”) (together, “KV”) hold the exclusive
rights to market and sell Makena® (sterile injections of hydroxyprogesterone
caproate) – the only U.S. FDA-approved drug in its therapeutic category. KV
seeks a preliminary and permanent injunction prohibiting the defendants, in their
official capacities as officials of the Georgia Department of Community Health
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 4 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 5 of 52
983525.1
- 2 -
(“DCH”), from using sham restrictions (1) to deny women on Medicaid in Georgia
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 direct these underprivileged pregnant women and their clinicians
to use unapproved (and, hence, much cheaper) compounded preparations or to
forego treatment for their condition altogether.
DCH is violating the drug-access provisions of Title XIX of the Social
Security Act, 42 U.S.C. § 1396a et seq. (hereinafter “the Medicaid Act”), it is
paying for violations of the Federal Food, Drug, and Cosmetic Act’s drug-approval
requirement (21 U.S.C. § 355(a)), and its actions are contrary to the best interests
of Medicaid beneficiaries in Georgia, in violation of 42 U.S.C. §§ 1396r-8 and
1396a(a)(10). These unlawful actions by Georgia, and similar unlawful actions by
other states, have placed KV on the verge of financial failure. KV is almost
entirely dependent upon sales of Makena® and has significant and imminent
payment obligations related to its investment in the drug. Georgia is a large state
with a significant Medicaid population; thus, Georgia’s failure to cover Makena®
has contributed substantially 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 herein is necessary
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 5 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 6 of 52
983525.1
- 3 -
to ensure that Georgia women on Medicaid have the same chance to improve the
health of their unborn children as is afforded to women with private insurance.
I. Introduction
1. Preterm birth 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
and the state of Georgia. And, sadly, it affects the already vulnerable poor even
more than the general population. In fact, in 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.
2. Each year, in the state of Georgia, thousands of pregnant women on
Medicaid are at risk of having a preterm birth. Preterm birth is especially
troublesome in Georgia, which received a grade of “F” from the March of Dimes
in 2010 because of its 13.4 percent rate of premature births. These women and
their unborn children are at significant risk of severe negative health care
outcomes, and the very high costs that go with them. 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 the Makena®-eligible
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 6 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 7 of 52
983525.1
- 4 -
patients. 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).
3. Since March 2011, a new FDA-approved drug called Makena® has
been available. Makena® has been shown through regulated clinical studies to
reduce 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. Unfortunately for these women and their
families and despite the State’s poor record in preventing preterm births, on June 1,
2011, Georgia Medicaid instituted a so-called “prior authorization” policy that
denies Medicaid beneficiaries access to this critical drug (the “Makena® prior
authorization policy”). Defendants have directed Medicaid beneficiaries to accept
treatment with non FDA-approved compounded formulations or forego treatment
altogether.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 7 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 8 of 52
983525.1
- 5 -
4. Compounded formulations are not generic drugs. Like Makena®,
FDA-approved generic drugs are regulated to be manufactured in accordance with
strict FDA good manufacturing practice (“GMP”) standards. Compounded
preparations, by contrast, are not required to be made in compliance with those
standards. Moreover, as FDA has repeatedly cautioned, compounded preparations,
including compounded hydroxyprogesterone caproate, have never been studied for
clinical effectiveness and safety, and they lack an FDA finding of “manufacturing
quality.”1
5. Since March 2011, FDA has consistently informed the public that
FDA-approved drugs, such as Makena®, “provide a greater assurance of safety and
effectiveness than do compounded products.”2 More recently, FDA has become
1 FDA, Questions and Answers on Updated FDA Statement on Compounded Versions of hydroxyprogesterone caproate (June 29, 2012), available at http://www.fda.gov/newsevents/newsroom/pressannouncements/ucm310215.htm (last visited July 15, 2012), a true and correct copy of which is attached hereto as Exhibit 1. 2 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 July 1, 2012), a true and correct copy of which is attached hereto as Exhibit 2; see also FDA, FDA Statement on Makena, (Mar. 30, 2011), available at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm249025.htm (last visited July 1, 2012); a true and correct copy of which is attached hereto 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.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 8 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 9 of 52
983525.1
- 6 -
more direct in its statements. On June 29, 2012, in Makena®-specific Questions
and Answers (the “June 29 Makena® FAQs”), FDA 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. 1. FDA explained 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). FDA went on to state that it:
may take enforcement action against pharmacies that compound large volumes of drugs that are essentially copies of commercially available products and for which there does not appear to be a medical need for individual patients to whom the drug is dispensed.
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 hereto as Exhibit 4; FDA, FDA Statement on Makena, (Nov. 8, 2011), available at
http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm279098.htm (last visited July 1, 2012), a true and correct copy of which is attached hereto as Exhibit 5.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 9 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 10 of 52
983525.1
- 7 -
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 the agency
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. 1 & 2.
6. Also on June 15, CMS issued a companion statement (the “June 15
CMS Statement”) that cross-referenced the June 15 FDA Statement and reminded
states that they must cover Makena® in compliance with federal law and “without
imposing unreasonable conditions.”3
7. Despite the directives of CMS and FDA, DCH has refused to remove
the unreasonable conditions it imposes on access to Makena® in violation of
federal law. DCH’s refusal makes it necessary for Plaintiffs to seek this Court’s
intervention for a preliminary injunction and a final judgment: (1) declaring that
DCH’s policy regarding Makena® violates the requirements of the Medicaid Act
and ordering DCH immediately to rescind the June 1, 2011 changes to its policy;
(2) declaring that DCH must defer to treating healthcare practitioners’ clinical
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 10 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 11 of 52
983525.1
- 8 -
judgment and cover Makena® without unreasonable restrictions or conditions; (3)
declaring that DCH 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®; (4)
declaring that DCH must ensure that all Medicaid care management organizations
in Georgia make Makena® available to their Medicaid beneficiaries without
unlawful restrictions or conditions; (5) declaring that DCH must ensure that all
Medicaid care management organizations in Georgia limit their coverage of
compounded hydroxyprogesterone caproate to those 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 Georgia access to
Makena®, including an order that DCH notify all relevant persons of the court-
mandated changes regarding its coverage of Makena®.
3 CMS, Updated FDA Statement on Compounded Versions of hydroxyprogesterone caproate, June 15, 2012, a true and correct copy of which is attached hereto as Exhibit 6.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 11 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 12 of 52
983525.1
- 9 -
II. The Parties
A. Plaintiffs K-V and Ther-Rx
8. 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.
9. 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 herein
collectively as “KV.”
10. 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”).
Through that agreement, KV provides significant rebates to the Medicaid program
for prescriptions written for Medicaid beneficiaries. In return, KV’s FDA-
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 12 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 13 of 52
983525.1
- 10 -
approved drugs, including Makena®, must be covered by state Medicaid agencies,
including DCH.
11. Because KV is almost entirely dependent on sales of Makena® to
generate income, DCH’s so-called prior authorization policy has caused KV to lose
significant revenue it would have received from sales of Makena® in Georgia –
revenue that is very much needed to sustain the company’s operations. As a result,
and unless injunctive relief is ordered, KV’s available cash will be depleted within
a few months, KV may cease to exist, and Makena® may no longer be available to
pregnant women.
B. Defendants
12. Defendant David A. Cook currently serves as the Commissioner of
the Georgia Department of Community Health, with an office at 2 Peachtree
Street, NW, Atlanta, Georgia 30303-3159. In that capacity, Mr. Cook oversees the
Medicaid Division of DCH, the government agency of the state of Georgia that
administers the state’s Medicaid program. Mr. Cook is being sued in his official
capacity.
13. Defendant Jerry Dubberly, MD currently serves as the Division Chief
of the Medicaid Division for DCH, with an office at 2 Peachtree Street, NW,
Atlanta, Georgia 30303-3159. In that capacity, Dr. Dubberly directs the
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 13 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 14 of 52
983525.1
- 11 -
administration of Georgia’s Medicaid program. Dr. Dubberly is being sued in his
official capacity.
14. Defendants Mr. Cook and Dr. Dubberly have taken, or are otherwise
responsible for, the actions challenged here.
III. Jurisdiction and Venue
15. 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.
16. 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.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 14 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 15 of 52
983525.1
- 12 -
IV. 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.
17. 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. As part of HHS, CMS promulgates regulations and policy
guidance governing the administration of the Medicaid program.
18. Although states are not required to participate in the Medicaid
program, if a state chooses to participate in the program, it must comply with the
requirements of the Medicaid Act.
19. 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), 1396a(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.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 15 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 16 of 52
983525.1
- 13 -
20. 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 (1) that may be
dispensed only upon a prescription and (2) 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, which are not FDA-approved, are not
“covered outpatient drugs”.
21. 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.”
2. Georgia is Required to Cover Makena® Prescriptions.
22. CMS recently reminded Georgia and other states that Makena®, which
was approved by FDA in February 2011 and is subject to an MDRA, is a “covered
outpatient drug” under the Medicaid Act, and therefore must be covered.4
4 See Ex. 6 (“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.”)
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 16 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 17 of 52
983525.1
- 14 -
23. The Medicaid Act’s drug rebate program requires manufacturers and
distributors, such as KV, that wish to participate in the Medicaid program to 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.
24. In return for KV entering into the MDRA, federal law requires the
states, including Georgia, to provide coverage of all of KV’s covered outpatient
drugs, including Makena®, 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”). DCH
has recognized that Makena® is a “covered benefit under the Medicaid Fee-for-
Service pharmacy program.”5
25. Likewise, DCH must ensure that Care Management Organizations
(“CMOs”) with whom it has contracted comply with federal law. 42 C.F.R. §
438.210 provides that contracted services provided by a CMO must be furnished in
an amount, duration, and scope that is no less than the amount, duration, and scope
5 DCH, Makena Position Statement, a true and correct of which is attached hereto as Exhibit 7.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 17 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 18 of 52
983525.1
- 15 -
for the same services furnished to beneficiaries under fee-for-service Medicaid. 42
C.F.R. § 438.206 requires DCH to ensure that all services under the State Medicaid
plan are available and accessible to enrollees of any CMO.
26. The Medicaid Act does allow states in very limited circumstances to
exclude, i.e., refuse to pay for a “covered outpatient drug.” 42 U.S.C. § 1396r-
8(d)(1)(B). Georgia’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.
Therefore, Georgia must make the medication available to Medicaid beneficiaries.
3. Compounded Preparations are Neither FDA-Approved Nor Covered Outpatient Drugs.
27. Both prior to and since the approval of Makena®, pharmacists have
made compounded preparations using hydroxyprogesterone caproate, commonly
referred to as “17P”, the active ingredient in Makena®. Importantly, compounded
preparations of 17P are not approved as generic versions of, and are not
pharmaceutically equivalent or bioequivalent to, FDA-approved Makena®.
28. 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. 1.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 18 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 19 of 52
983525.1
- 16 -
29. Thus, compounded preparations are intended to be individually
prepared, not manufactured, let alone manufactured under FDA’s GMP standards.
As a consequence, and as FDA has repeatedly stated, compounded products are
vulnerable to variability from dose to dose, which variability may manifest itself
through different levels of potency, purity and sterility. According to FDA,
compounded versions of 17P, in contrast to Makena®, do “not undergo the same
premarket review and thus lack an FDA finding of safety and efficacy and lack an
FDA finding of manufacturing quality.” Ex. 1. Such products lack FDA approval
of the process by which they are produced, and they are not labeled in accordance
with the stringent FDA requirements applicable to Makena®.
30. In March of 2011, FDA Commissioner, Margaret Hamburg, M.D.,
testified before Congress to the importance of Makena®’s approval, and stated as
part of the reason for that importance concern about the safety of compounded
17P: “I think it is important and an advance that we have an FDA-approved drug to
prevent pre-term pregnancy and all of its consequent serious medical concerns for
both mother and infant. And while the drug had been available through
compounding, . . . compounding as a practice has been associated with serious
health risks . . . .” Ex. 4 at 10 (emphasis added).
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 19 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 20 of 52
983525.1
- 17 -
31. However, less than two weeks later, on March 30, 2011, FDA
publicly stated that, “to support access” to hydroxyprogesterone caproate injection,
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 typically clears the marketplace to
remove compounded copies of an FDA-approved drug and 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.
32. Many state Medicaid agencies, including DCH, used FDA’s March
30, 2011 statement to justify their actions in unlawfully substituting their judgment
for the medical judgment of physicians, directing or requiring their beneficiaries to
use unapproved and cheaper compounded 17P, and thereby creating, over time, a
new “access” problem different from the one originally mentioned by FDA.
Specifically, in many states, including Georgia, women on Medicaid have been
unable to gain access to FDA-approved Makena®.
33. After KV met with FDA and CMS and explained the issue of denial
of Makena® to Medicaid patients in Georgia and other states, FDA issued a new
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 20 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 21 of 52
983525.1
- 18 -
statement on Makena® on June 15, 2012. As FDA explained in its June 15
statement, compounded preparations, including 17P, “are not FDA approved” and
“do not undergo premarket review nor do they have an FDA finding of safety and
efficacy.” Ex. 2 at 2. To the contrary, FDA noted that “approved drug products,
such as Makena, provide greater assurance of safety and effectiveness . . .” Id. at
1. The agency also reminded the public of the limits on lawful compounding: (1)
“[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[] . . .” and (2) “[t]he compounding of any drug, including
hydroxyprogesterone caproate, should not exceed the scope of traditional
pharmacy compounding.” Id. at 2. Subsequently, on June 29, 2012, FDA also
stated that it “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. 1.
34. The June 15 FDA statement explained again, and consistent with
FDA’s longstanding policy, 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
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 21 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 22 of 52
983525.1
- 19 -
available drug . . .” Ex. 5. The most common such situation 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. FDA repeated these
statements in the June 29 Makena® FAQs. Ex. 1.
35. 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
active pharmaceutical ingredient (“API”) used, and adherence to GMP standards.
Ex. 1. 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.
36. 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
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 22 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 23 of 52
983525.1
- 20 -
products failed quality tests, primarily due to “potency” failures (i.e., too much or
too little active ingredient in the compounded product).
37. The safety, effectiveness, and quality of compounded 17P have not
been studied and are therefore unknown. 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.
38. Further, on information and belief based on extensive investigation,
much if not all of the 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
39. In testimony before Congress, FDA stated:
FDA remains immensely concerned about unapproved, imported pharmaceuticals whose safety and effectiveness cannot be assured
6 A GAO Report found that as of 2009, China had the highest percentage (88%) 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 July 11, 2012).
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 23 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 24 of 52
983525.1
- 21 -
because they originate outside the closed legal structure and regulatory system we are fortunate to have in the United States.7
40. 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
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
41. The independent laboratories evaluated the API samples and
compounded 17P vials - against United States Pharmacopeia (“USP”) standards
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 July 11, 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 July 11, 2012).
9 Id.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 24 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 25 of 52
983525.1
- 22 -
and the more rigorous FDA quality standards for Makena® to assess potency,
chemical impurities, and drug identity.
42. 80% of the API samples failed the impurity specifications FDA set for
Makena®; 50% failed the USP minimum potency standard; and one contained no
active ingredient at all (instead, it contained glucose that was made to look like
hydroxyprogesterone caproate).10
43. Of the samples of finished dosage form, 27% failed to meet the USP
potency standards. The samples’ potency ranged from just 57% to 252% of the
labeled potency. In addition, 53% had levels of unknown purities that exceeded
FDA impurity standard required for Makena®. Thus, 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.11
44. 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
10 Id.
11 Id.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 25 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 26 of 52
983525.1
- 23 -
purity and potency of both the bulk APIs and compounded hydroxyprogesterone
caproate products that were tested.”12
45. In June of this year, FDA published findings of its own study which
noted that 100% (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.13 FDA's testing of the compounded 17P samples
provided by the Company also confirmed variability in potency and purity.
46. Healthcare professionals and their Medicaid patients have no ability:
(i) to assess the potency, safety, or quality of compounded 17P; (ii) 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 (iii) to assure
12 See U.S. Food and Drug Administration, FDA Statement on Makena (Nov. 8, 2011), available at http://www.fda.gov/NewsEvents/Newsroom/PressAnnouncements/ucm279098.htm (last visited July 15, 2012).
13 See FDA, Guidance for Industry, Investigating Out-of-Specification (OOS) Test Results for Pharmaceutical Production, available at http://www.fda.gov/downloads/Drugs/GuidanceComplianceRegulatoryInformation/Guidances/ucm070287.pdf (last visited July 11, 2012).
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 26 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 27 of 52
983525.1
- 24 -
themselves that the compounded product being injected into any given pregnant
woman was prepared, stored and transported in a proper manner.
47. As a result, and faced with growing evidence that compounding
pharmacies and state Medicaid agencies alike were disregarding the June 15
statements, FDA spoke again in the June 29 Makena® FAQs: “[i]f there is an
FDA-approved drug that is medically appropriate for a patient, the FDA-
approved product should be prescribed and used.” Ex. 1 (emphasis added). To
leave no room for doubt, FDA reiterated in the same June 29 Makena® FAQs:
when an FDA-approved drug is commercially available, the FDA recommends that practitioners 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.
Id. (emphasis added).
48. In August 2010, CMS announced that compounded products should
not be considered “covered outpatient drugs” under the Medicaid program.14 At
the time, CMS reaffirmed its position that Medicaid coverage of compounded
therapies is limited to “extemporaneous[]” prescriptions where no commercially
14 See Centers for Medicare & Medicaid Services, Medicaid Drug Rebate Program Notice, CMS Release No. 155 (Aug. 11, 2010), at 4, available at
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 27 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 28 of 52
983525.1
- 25 -
available drug is medically appropriate. Id. Thus, consistent with FDA law and
policy, CMS has limited Medicaid coverage of compounded 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.
49. The June 15 CMS Statement cross-referenced the June 15 FDA
Statement, reiterated the need to limit compounding of 17P to the traditional scope
of compounding (i.e., customized to meet the need of an individual patient for
whom the FDA-approved drug is medically inappropriate) and reminded states of
their legal obligation to cover Makena® without unreasonable restrictions.15
50. DCH’s so-called Makena® prior authorization 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 attempt to limit the compounding of 17P at all. Rather, DCH ignores federal
http://www.dhs.state.or.us/policy/healthplan/guides/pharmacy/cms_releases/cms_rel155.pdf (last visited July 15, 2012). 15 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 & 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 July 15, 2012).
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 28 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 29 of 52
983525.1
- 26 -
law and the recent and repeated public statements of the lead federal agencies by
effectively requiring the use of compounded 17P (or nothing) instead of the FDA-
approved drug.
B. DCH’s Makena® Prior Authorization Policy is Unlawful Because it Operates as an Exclusion.
1. The State’s Requirements for Coverage of Makena®
51. The state of Georgia voluntarily chooses to participate in the Medicaid
Program and to provide a prescription drug benefit. Although DCH concedes that
Makena® is a “covered benefit,” in practice it effectively refuses to cover Makena®
by imposing undue and unachievable conditions on access to it.
52. As described in more detail below, a state may condition coverage of
covered outpatient drugs on a “prior authorization” if the state meets certain
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 there is no FDA-approved alternative, as is the case here.
53. On June 1, 2011, DCH issued a “Makena PA Summary” (the “PA
Summary”), which states that to obtain prior authorization for Makena®, the
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 29 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 30 of 52
983525.1
- 27 -
beneficiary must have a history of at least one preterm birth “and be unable to
obtain or not able to use compounded hydroxyprogesterone”.16
54. In its “Makena Position Statement” DCH acknowledges that
Makena® is a “covered benefit under the Medicaid Fee-for-Service program,” but
discourages providers from prescribing it: “Medicaid Division encourages
providers to rely on their prior success with compounded [17P] when making
decisions for their patients.” Ex. 7. In addition, DCH invited pharmacies and
physicians to contact the Pharmacy Unit for “assistance with locating a
compounding pharmacy.” Id.
55. DCH’s policy places further unlawful and insurmountable obstacles
between Medicaid patients and Makena®:
As a matter of policy, the Medicaid Division will require prior authorization for any prescription for Makena™. The physician will be required to demonstrate the medical necessity of the manufactured product, Makena™, over the compounded [17P] product to obtain a prior authorization.
Id. (emphasis added).
16 See Makena PA Summary, a true and correct copy of which is attached hereto as Exhibit 8 (emphasis added). In addition, the beneficiary must be between ages 16-43 and have a confirmed pregnancy with one fetus with a gestational age between 16 weeks, 0 days and 20 weeks, 6 days.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 30 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 31 of 52
983525.1
- 28 -
56. These requirements — that a beneficiary (i) show that she is “unable
to obtain” compounded 17P; and (ii) demonstrate the “medical necessity” of
Makena® over compounded 17P preparations — turn the federal regulatory scheme
on its head by preferring unapproved drugs of unknown composition and produced
by unknown and unapproved processes over the only FDA-approved drug for this
condition.
57. DCH’s provision that a patient may obtain Makena® if she shows that
she is unable to obtain compounded 17P is a sham because it requires a showing
that cannot be made. There are many compounders throughout Georgia (and mail
order compounders located in other states) that are willing and able to compound
17P and provide it to physicians and patients in Georgia. Because Medicaid
beneficiaries can always obtain an unapproved compounded 17P preparation, the
so-called “prior authorization” is, in operation, a drug formulary exclusion, and is
an attempted end-run around state’s obligation under federal law to “cover” FDA-
approved drugs.
58. Similarly, the requirement that a patient demonstrate “medical
necessity” for the use of Makena® over compounded preparations is a further
unlawful refusal to reimburse for a covered outpatient drug – notwithstanding the
fact that federal law requires DCH to provide Georgia beneficiaries services “in a
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 31 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 32 of 52
983525.1
- 29 -
manner consistent with . . . the best interests of the recipients” and the fact that
FDA has made it clear on multiple occasions that Makena® is more reliable,
effective, safe and of requisite overall quality, than are unapproved compounded
versions of 17P.
59. In addition, Georgia’s policy is the direct opposite of FDA’s position
that in determining “whether a drug may be compounded,” one shall 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. 2 at 2 (emphasis added). Indeed, on June 29, FDA went further by
stating that 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. 1 at 1.
60. Thus, whereas FDA and Medicaid law require a showing of medical
necessity for the unapproved, compounded product, DCH policy requires such a
showing for the FDA-approved product.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 32 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 33 of 52
983525.1
- 30 -
61. DCH has provided no standards for establishing such “medical
necessity,” and no guidance is available for physicians to understand what proof or
documentation is necessary. It is also unclear how a patient could prove she
cannot use compounded 17P or that it is ineffective for her. This policy suggests
that a woman on Medicaid must first try compounded 17P preparations, have them
“fail” by going into early labor and risking or having a preterm birth, before
Georgia will consider approving coverage of the FDA-approved product. In short,
she probably would have to have a third high-risk pregnancy to be eligible for
Makena®. Plainly, such a policy unecessarily endangers the health of the unborn
children of women in Georgia who are eligible for Makena®. Georgia has rendered
federal law requiring coverage meaningless by the imposition of arbitrary and
insurmountable barriers to access to Makena®.
62. DCH has also entered into contracts with CMOs to facilitate the
delivery of Medicaid health benefits to the Medicaid-eligible population in
Georgia. Each CMO must comply with federal Medicaid laws and regulations and
DCH is ultimately responsible for ensuring such compliance.
63. Both federal regulations DCH’s contracts with its CMOs require that
DCH ensure that its CMOs comply with federal law. 42 C.F.R. § 438.210
provides that each contract DCH has with a CMO must require that services
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 33 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 34 of 52
983525.1
- 31 -
provided by the CMO 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
DCH ensure that all services under the State Medicaid plan are available and
accessible to enrollees of any CMO. DCH’s Amended and Restated Contract
Between the Georgia Department of Communicated Health and Care Management
Organization for Provision of Services to Georgia Families (the “Model Contract”)
states:
“The Contractor agrees that all work done as part of this Contract is subject to CMS approval and will comply fully with applicable administrative and other requirements established by applicable federal and State laws and regulations and guidelines…and assumes responsibility for full compliance with all such applicable laws, regulations, and guidelines…”17
The Model Contract also obligates DCH to monitor CMO compliance with
federal Medicaid laws: “DCH will comply with, and will monitor the
17 See Amended and Restated Contract Between the Georgian Department of Community Health and Care Management Organization for Provision of Service to Georgia Families (the “Model Contract”), ¶ 27.2.1, available at: www.dch.georgia.gov/vgn/images/portal/cit_1210/27/43/164261788CMO_Restatement_12-General.pdf (last visited July 14, 2012).
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 34 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 35 of 52
983525.1
- 32 -
Contractor’s compliance with, all applicable State and federal laws and
regulations.”18
64. On information and belief, several CMOs have denied prior
authorization requests for Makena® in violation of the Medicaid Act. Despite their
obligation to do so, DCH has failed to adequately monitor these CMOs to ensure
that they are not violating federal laws by unlawfully denying prior authorization
requests for Makena®.
2. Georgia’s Use of a Prior Authorization Requirement is Unlawful
65. 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. 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 program may provide for
“conditions of coverage” based on satisfaction of approriate medical criteria.
18 Id. ¶ 2.2 (emphasis added).
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 35 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 36 of 52
983525.1
- 33 -
66. DCH’s “prior authorization,” is not a mere “procedural hurdle” or
“condition of coverage” that must be met to obtain Makena® — it has been
structured to exclude coverage for Makena® entirely. By setting up a condition
precedent that cannot be met (i.e., inability to obtain compounded 17P or
undefined “medical necessity”), and that is unrelated to clinical criteria for use of
Makena®, Georgia’s “prior authorization” requirement acts as an impermissible de
facto exclusion of Makena® from DCH’s drug formulary in favor of unapproved,
injectible compounded products of unknown potency, safety, and quality.
67. Georgia’s Makena® prior authorization policy is, in reality, an attempt
to exclude coverage for Makena® without adhering to the formulary provisions of
the Medicaid Act, which prohibit a formulary exclusion of an FDA-approved drug
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 drugs, it must be
included in the formulary — cost is irrelevant in that circumstance.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 36 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 37 of 52
983525.1
- 34 -
68. A lawful formulary creates one or more tiers of preference among two
or more therapeautically equivalent covered outpatient drugs. A lawful formulary
restriction cannot exist where there is only one FDA-approved drug, however,
because formularies cannot involve anything other than covered outpatient drugs,
compounded preparations are not covered outpatient drugs.
69. Where, as here, there is no existing FDA-approved drug that is an
alternative to Makena®, there 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.
C. Georgia’s Policy Unlawfully Supplants the Medical Judgment of Practitioners.
70. On information and belief, of the approximately 2,500 to 3,000
Medicaid recipients in Georgia who have been eligible to receive Makena® since it
became available, DCH has not approved any vials of the medication for any
Medicaid patient.
71. Notwithstanding the apparent hurdles to obtaining approval, KV is
generally aware of at least 79 Makena® prescriptions written by healthcare
providers in Georgia for their Medicaid patients that have, on information and
belief, been denied coverage by DCH despite the prescribing physicians’ decisions
to try to show medical necessity. The physicians writing these prescriptions
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 37 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 38 of 52
983525.1
- 35 -
undoubtedly were discouraged from writing additional prescriptions in light of the
categorical denials they received from DCH.
72. On information and belief, there are many more physicians in Georgia
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 DCH’s requirements of “medical
necessity” and unavailability of compounded 17P.
73. 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, KV estimates that in
Florida, approximately 3,100 Medicaid patients are eligible for Makena®. Since
October 2011, 521 Medicaid patients have been prescribed Makena® and 429 vials
have been provided to Medicaid patients in Florida (compared to two vials
provided to Medicaid beneficiaries in Georgia during a longer period in which
Makena® was available).
74. DCH’s Makena® prior authorization policy, based solely on cost,
unlawfully overrides the clinical judgments of practitioners who believe that
Makena® is medically necessary or preferable for their patients.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 38 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 39 of 52
983525.1
- 36 -
D. DCH Has Ignored Recent Statements Issued by FDA and CMS.
75. DCH’s Makena® prior authorization policy is inconsistent with FDA’s
June 15 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” and “circumvents
important public health requirements. . .” Ex. 2 at 2.
76. DCH also continues to ignore CMS’s June 15 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. 6.
77. On June 19, 2012, two business days after FDA and CMS statements,
Joseph Auci, a National Account Director for Ther-Rx, sent an email to Defendant
Dr. Jerry Dubberly to inform him and DCH of the June 15, 2012 FDA and CMS
statements. Mr. Auci sent the email in the hope that it would cause DCH to re-
open a dialogue with KV regarding Makena®, a dialogue that had long been shut
down by DCH. Toward that end, Mr. Auci offered to work with the state of
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 39 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 40 of 52
983525.1
- 37 -
Georgia to assist it in providing access to Makena®, and offered a substantial rebate
on the product for Georgia Medicaid patients.
78. Dr. Dubberly rejected the offer, and responded, “I believe the [FDA]
statement affirms our current position on this matter.”
79. On June 22, 2012, Scott Goedeke, Senior Vice President of Marketing
for Ther-Rx, sent a detailed follow up email to Dr. Dubberly seeking further
explanation of his seemingly indefensible position.
80. Dr. Dubberly responded in less than one hour, as follows: “There is
really nothing to explain. We will not be entertaining any policy or coverage
changes as a result of the release. Have a great weekend.”
81. Efforts to resolve Georgia’s continuing violation of Medicaid law and
FDA and CMS policies just prior to the filing of this suit were also fruitless.
82. Thus, despite the June 15 statements by FDA and CMS, DCH has no
intention of removing the unreasonable and unlawful conditions imposed by its
prior authorization policy. If a preliminary injunction is not entered, DCH will
continue to deny Georgia’s Medicaid beneficiaries access to the only FDA-
approved drug to treat their condition, and will compel them to take an unapproved
compound of uncertain origin, quality and potency — or no drug for their
condition at all.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 40 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 41 of 52
983525.1
- 38 -
E. Harm to Plaintiffs and the Public Resulting From DCH’s Policy.
83. 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.19 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.
84. KV’s survival as a going concern is now dependent on Makena®’s
success in the marketplace. 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.
85. KV has engaged financial advisors and outside counsel to explore
strategic alternatives, including the possibility of restructuring its debt. Unless
Georgia and other states begin covering Makena® as required by law, (and thereby
give KV’s creditors a reason to believe that KV is likely to be able to meet its
19 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.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 41 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 42 of 52
983525.1
- 39 -
financial obligations if given more time), KV will not be able to attract new capital
at a cost that is reasonable, and is likely to exhaust its working capital within 3 to 6
months and be forced to file for bankruptcy protection before then.
86. However, due to unreasonable prior authorization policies such as
Georgia’s, KV’s revenue from sales of Makena® is far below what it should be.
87. Absent a preliminary injunction, KV will be irreparably harmed
because, absent immediate action by the Court to address Georgia’s actions, KV
will be unable to maintain its operations and meet its financial commitments.
88. Medicaid beneficiaries will also be irreparably harmed because if
DCH’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®.
89. Absent a preliminary injunction, DCH 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 DCH act in compliance with the statutes they
are governed by and administer.
90. Plaintiffs have no adequate remedy at law to make themselves whole
for the injury to KV’s business resulting from DCH’s prior authorization policy.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 42 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 43 of 52
983525.1
- 40 -
They cannot recoup past, present or future sales from the state and, without a
reversal of Georgia’s policies, Plaintiffs are unlikely to be in existence for the
length of time a trial on the merits would take to complete.
91. Accordingly, Plaintiffs need preliminary and permanent declaratory
and injunctive relief.
V. Counts
A. 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)
92. Paragraphs 1 through 91 of this Complaint are incorporated by
reference as if set forth fully herein.
93. 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).
94. 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. DCH has agreed that Makena® is a covered drug.
95. None of the bases for excluding coverage of a “covered outpatient
drug” set forth in § 1396r-8(a) apply to Makena®.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 43 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 44 of 52
983525.1
- 41 -
96. DCH’s PA Summary purports to establish a prior authorization policy
as to Makena®.
97. DCH’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 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.
98. As a result of DCH’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.
99. Therefore, DCH’s Makena® prior authorization policy violates section
1396r-8(a) of the Medicaid Act, which requires DCH to provide access to “covered
outpatient drugs.”
100. Plaintiffs KV and Ther-Rx have been, are being, and will continue to
be, irreparably harmed by DCH’s violation of section 1396r-8(d)(1)(A) of the
Medicaid Act.
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 44 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 45 of 52
983525.1
- 42 -
B. 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)
101. Paragraphs 1 through 91 of the Complaint are incorporated by
reference as if set forth fully herein.
102. 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.”
103. DCH’s refusal to provide coverage for an FDA-approved drug for its
stated indication and DCH’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.
104. DCH’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
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 45 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 46 of 52
983525.1
- 43 -
for women at high risk of preterm birth and the consequent infant deaths or long-
term illnesses that are associated with this condition.
105. DCH’s Makena® prior authorization policy results in the state
overriding the medical judgments of Medicaid beneficiaries’ physicians.
106. Accordingly, DCH is not providing care and services in a manner
consistent with the best interests of Georgia’s Medicaid recipients, and is in
violation of section 1396a(a)(19) of the Medicaid Act.
107. Plaintiffs KV and Ther-Rx have been, are being, and will continue to
be, irreparably harmed by DCH’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 DCH from further implementing its Makena®
prior authorization policy;
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 46 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 47 of 52
983525.1
- 44 -
(2) Enjoins DCH from denying coverage for any prescription
of Makena® made by a health care provider for its
indicated use;
(3) Requires DCH to provide written notice to those whose
prescriptions were denied since June 1, 2011 that they
can obtain Makena® if it is needed for its approved
indication;
(4) Requires DCH to provide written notice to all health care
practitioners whose prescriptions of Makena® since June
1, 2011 have been denied, that Makena® is now covered
and that DCH no longer applies the unlawful obstacles to
coverage that it previously applied;
(5) Requires DCH to take all steps necessary to ensure that
CMOs and all of DCH’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;
(6) Prohibits DCH from covering and paying for
compounded hydroxyprogesterone caproate except where
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 47 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 48 of 52
983525.1
- 45 -
the treating physician documents that his or her patient
has a specific medical need for a compounded variation
rather than Makena®;
(7) Requires that DCH ensure that all Medicaid CMOs 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®;
(8) Requires DCH 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:
(1) DCH 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”;
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 48 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 49 of 52
983525.1
- 46 -
(2) DCH’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;
(3) DCH 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
CMOs and all of its agents or other parties under its
power or acting by or under its authority or on its behalf
do likewise;
(4) DCH 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
(5) DCH must ensure that all Medicaid CMOs limit their
coverage of compounded hydroxyprogesterone caproate
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 49 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 50 of 52
983525.1
- 47 -
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.
Dated: July 17, 2012 Respectfully submitted, s/ John E. Floyd John E. Floyd (GA 266413) Jeffrey O. Bramlett (GA 075780) Manoj S. Varghese (GA 734668) BONDURANT, MIXSON & ELMORE LLP 1201 W. Peachtree Street, N.W. Suite 3900 Atlanta, GA 30309 Telephone: (404) 881-4100 Facsimile: (404) 881-4111 [email protected] [email protected] Margaret “Peg” Donahue Hall, Esq. (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 pending
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 50 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 51 of 52
983525.1
- 48 -
Drew Marrocco, Esq. (DC 453205)
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 pending
Stephen D. Libowsky (GA 451965) SNR DENTON US LLP 233 South Wacker Drive, Suite 7800 Chicago, IL 60606 Telephone: (312)-876-8000 Facsimile: (312)-876-7934 [email protected]
Attorneys for Plaintiffs
Case 1:12-cv-02491-CAP Document 1 Filed 07/17/12 Page 51 of 51Case 1:12-cv-01105-ABJ Document 9-4 Filed 07/24/12 Page 52 of 52
APPENDIX 3
Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 1 of 43
983479.1
- 1 -
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA
K-V PHARMACEUTICAL COMPANY, THER-RX CORPORATION,
Plaintiffs,
v.
DAVID A. COOK, et al., Defendants.
)))))))))))
Case No. _____________
MOTION FOR PRELIMINARY AND PERMANENT INJUNCTION
Pursuant to Rule 65 of the Federal Rules of Civil Procedure, Plaintiffs K-V
Pharmaceutical Company and Ther-Rx Corporation (collectively, “KV”) seek
preliminary and permanent injunctive relief from Defendants David A. Cook, in
his official capacity as Commissioner of the Department of Community Health
(“DCH”), and Jerry Dubberly, M.D., in his official capacity as Division Chief of
the Medicaid Division of DCH.
Plaintiffs seek to enjoin the defendants from (i) directing Medicaid
beneficiaries to use non-FDA approved compounded copies of a drug meant for
pregnant women with a rare, but severe, condition that can cause life-threatening
spontaneous preterm birth and (ii) denying these women access to Makena®, the
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 1 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 2 of 43
983479.1
- 2 -
only drug approved by the U.S. Food & Drug Administration (“FDA”) to treat
their condition. The actions sought to be enjoined are in clear violation of federal
Medicaid laws.
Preterm birth is a serious condition that affects the well-being of both
mothers and their babies and is associated with exorbitant health care costs. The
problem is particularly acute in Georgia, which has a 13.4% preterm birth rate and
received a failing grade for preterm health from the March of Dimes in 2010.
Plaintiffs hold the rights to, and distribute, Makena®. When Makena® was
approved as an orphan drug in February 2011, the FDA Commissioner lauded its
approval, stating that “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.”
Despite the exceptionally high rate of preterm births and particular need for
an FDA-approved drug in Georgia, DCH has instituted an impermissible prior
authorization program that acts as a complete barrier to Makena® for pregnant
women in the state’s Medicaid program. In a transparent effort to avoid having to
cover the cost of Makena®, the DCH policy requires a patient to show that she is
either unable to obtain a cheaper, non-FDA approved compounded product or that
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 2 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 3 of 43
983479.1
- 3 -
she has a “medical need” that requires use of the FDA-approved drug over the non-
FDA approved compounded product.
Likelihood of Success on the Merits
DCH’s preauthorization requirements — that a beneficiary (i) show that she
is “unable to obtain” compounded 17P (the active ingredient in Makena®); and (ii)
demonstrate the “medical necessity” of Makena® over compounded 17P
preparations — turn the federal regulatory scheme on its head by preferring
unapproved drugs of unknown composition and produced by unknown and
unapproved processes over the only FDA-approved drug for this condition.
Plaintiffs are substantially likely to succeed on the merits because Makena®
is a “covered outpatient drug” under the Medicaid Act, is subject to a Medicaid
Drug Rebate Agreement, and there is no FDA-approved alternative (compounded
products are not FDA-approved). Thus, federal law requires Georgia to cover
Makena®. 42 U.S.C. § 1396r-8(a). In violation of this federal law, DCH’s policy
excludes virtually all access to the FDA-approved drug and acts as an
impermissible formulary exclusion.
Access to Makena® is denied by DCH’s policy because there are
compounders throughout the state (as well as mail order compounders outside the
state) that are willing and able to create compounded products at any time.
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 3 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 4 of 43
983479.1
- 4 -
Moreover, by requiring a showing of medical necessity for Makena® over
compounded 17P without any guidance as to what that “need” could be based on,
DCH effectively supplants its judgment for the medical judgment of the treating
physician. Although couched as a “prior authorization,” it is not; prior
authorizations are not permitted under federal law to be used in such a restrictive
and exclusionary manner.
Plaintiffs’ records show that in practice, since February 2011, DCH has not
approved a single prescription of Makena®. Georgia’s at-risk pregnant women on
Medicaid have been treated with non-FDA approved compounds or, where their
physicians are reluctant to prescribe a non-FDA approved product, nothing at all.
In addition to violating the drug access provisions of the Medicaid Act,
DCH’s prior authorization policy violates section 1396a(a)(19), which requires
state plans to provide care and services “in the best interests of the recipients.”
Since DCH directs the use of unapproved compounded products when an FDA-
approved drug is available, Medicaid beneficiaries’ best interests are clearly being
ignored.
In addition to violating the letter and spirit of the Medicaid Act, the DCH
program is in direct conflict with FDA’s recent pronouncement: “[i]f there is an
FDA-approved drug that is medically appropriate for a patient, the FDA-approved
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 4 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 5 of 43
983479.1
- 5 -
product should be prescribed and used” and the Centers for Medicare and
Medicaid’s (“CMS”) directive that all states cover FDA approved drugs and that
they cover Makena® without imposing “unreasonable conditions.”
Irreparable Harm to Plaintiffs
Plaintiffs are being irreparably harmed by DCH’s violation of federal law
because not only does the Eleventh Amendment preclude any recovery of losses
from Georgia, but DCH’s policy (along with the policies of several other states)
threatens KV’s continued existence. In fact, auditors have predicted that if KV’s
financial situation does not improve immediately; KV will cease to exist as soon as
August 2012. Makena® is KV’s primary product. However, due to these unlawful
prior authorization programs, KV has lost significant revenue from sales of
Makena® during the exclusivity period granted to orphan drugs and cannot cover
the cost of developing the drug and ongoing research & development and operating
expenses. KV’s stock price has dropped dramatically, KV is unable to attract
investors and unless immediate action is taken by the Court, KV will run out of
cash before this case ends. KV’s impending demise, in addition to the potential
harms to Medicaid beneficiaries from being denied access to the FDA-approved
drug for their condition, clearly outweighs the added expenditure Georgia will
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 5 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 6 of 43
983479.1
- 6 -
need to make in order to act in the best interests of its Medicaid recipients and to
comply with federal law.
The Public Interest
Injunctive relief is in the public interest because it would bring the state into
compliance with federal law and enable the state to provide an underprivileged
portion of its population access to an FDA-approved drug that may significantly
improve outcomes for the lives of pregnant women and their unborn children.
Injunctive relief would also allow doctors to exercise their independent medical
judgment as to what is best for their patients. The public interest strongly favors
providing Georgia’s most vulnerable population the healthcare that they are
entitled to under federal law.
Accordingly, Plaintiffs respectfully request that a preliminary and permanent
injunction be issued enjoining DCH from continuing to deny Medicaid
beneficiaries access to Makena® through its prior authorization program and
requiring DCH to comply with the Medicaid Act. A Proposed Order is submitted
herewith.
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 6 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 7 of 43
983479.1
- 7 -
Dated: July 17, 2012
Respectfully submitted, s/ John E. Floyd John E. Floyd (GA 266413) Jeffrey O. Bramlett (GA 075780) Manoj S. Varghese (GA 734668) BONDURANT, MIXSON & ELMORE LLP 1201 W. Peachtree Street, N.W. Suite 3900 Atlanta, GA 30309 Telephone: (404) 881-4100 Facsimile: (404) 881-4111 [email protected] [email protected]
Margaret “Peg” Donahue Hall, Esq. (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 pending
Drew Marrocco, Esq. (DC 453205)
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 pending
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 7 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 8 of 43
983479.1
- 8 -
Stephen D. Libowsky (GA 451965) SNR DENTON US LLP 233 South Wacker Drive, Suite 7800 Chicago, IL 60606 Telephone: (312)-876-8000 Facsimile: (312)-876-7934 [email protected]
Attorneys for Plaintiffs
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 8 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 9 of 43
983479.1
- 9 -
CERTIFICATE OF SERVICE
I hereby certify that I have this day electronically filed Motion for
Preliminary and Permanent Injunction and all supporting documents with the Clerk
of Court using the CM/ECF system and certify that I will cause a true and correct
copy of the foregoing to be served with the Complaint.
This 17th day of July, 2012 s/ John E. Floyd John E. Floyd
Case 1:12-cv-02491-CAP Document 2 Filed 07/17/12 Page 9 of 9Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 10 of 43
983477.1
IN THE UNITED STATES DISTRICT COURT FOR THE NORTHERN DISTRICT OF GEORGIA
K-V PHARMACEUTICAL COMPANY, ) and THER-RX CORPORATION, ) ) Plaintiffs, ) ) v. ) Case No.: ________________ ) DAVID A. COOK, et al., ) ) Defendants. ) )
MEMORANDUM IN SUPPORT OF APPLICATION FOR PRELIMINARY INJUNCTION
__________________________________________________________________
John E. Floyd (GA 266413) Manoj S. Varghese (GA 734668) BONDURANT, MIXSON & ELMORE LLP 1201 W. Peachtree Street, N.W. Atlanta, GA 30309 Telephone: (404) 881-4100 Facsimile: (404) 881-4111 [email protected] [email protected]
Margaret “Peg” Donahue Hall, Esq. (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 pending Drew Marrocco, Esq. (DC 453205) SNR DENTON US LLP 1301 K Street, NW, Suite 600, East Tower Washington, DC 20005 Telephone: (202) 408-6400
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 1 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 11 of 43
983477.1
Facsimile: (202) 408-6399 [email protected] pro hac vice application pending Stephen D. Libowsky (GA 451965) SNR DENTON US LLP 233 South Wacker Drive, Suite 7800 Chicago, IL 60606 Telephone: (312)-876-8000 Facsimile: (312)-876-7934 [email protected]
Attorneys for Plaintiffs
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 2 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 12 of 43
983477.1
i
TABLE OF CONTENTS
GLOSSARY OF TERMS ........................................................................................ iii
INTRODUCTION ..................................................................................................... 1
FACTUAL BACKGROUND .................................................................................... 4
I. Preterm Birth. ........................................................................................ 4
II. FDA Approval of Makena®. .................................................................. 5
III. Georgia’s Unlawful Restriction on Patients’ Access to Makena®. ............................................................................................... 6
IV. Makena® and Compounded Versions of 17P Are Not Equivalent. ............................................................................................. 8
V. KV’s Effort to Engage With DCH. ..................................................... 10
VI. KV’s Financial Condition. .................................................................. 11
ARGUMENT ........................................................................................................... 11
I. Standard for Injunctive Relief. ............................................................ 12
II. Plaintiffs Have a Substantial Likelihood of Success on the Merits. .................................................................................................. 12
A. Federal Law Requires Georgia to Cover Makena®. ................. 12
B. DCH’s Prior Authorization Program Imposes Unreasonable Conditions on Access to Makena®. ................... 14
C. None of the Medicaid Act’s Exclusions Apply Here. .............. 15
1. DCH’s Policy Acts as an Impermissible Formulary Restriction. ...................................................................... 16
2. Georgia’s Exclusion of Makena® Is Not a Valid Prior Authorization. ........................................................ 19
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 3 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 13 of 43
983477.1
ii
D. Defendants’ Restrictions on Access to Makena® Violate Section 1396a(a)(19) of the Medicaid Act. .............................. 21
III. Plaintiffs Will Be Irreparably Harmed If Injunctive Relief Is Denied.................................................................................................. 23
IV. Injunctive Relief Will Not Result In Greater Harm To Georgia. ....... 24
V. Injunctive Relief Is in the Public Interest. ........................................... 25
CONCLUSION ........................................................................................................ 25
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 4 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 14 of 43
983477.1
iii
GLOSSARY OF TERMS
Term Meaning
17P hydroxyprogesterone caproate — the active ingredient used in Makena®
API active pharmaceutical ingredient
CMO care management organization
CMS Centers for Medicare & Medicaid Services
DCH Georgia Department of Community Health
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
MDRA Medicaid Drug Rebate Agreement
NDA New Drug Application
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 5 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 15 of 43
983477.1
1
INTRODUCTION1
K-V Pharmaceutical Company (“K-V”) and Ther-Rx Corporation (“Ther-Rx”),
the owners of Makena®, the only FDA-approved drug that treats a rare, but severe,
condition which can cause spontaneous preterm birth ask the Court for injunctive relief
against the Georgia Department of Community Health (“DCH”) to prevent DCH
officials from continuing to deny this critical drug to pregnant women on Medicaid
(for ease of reference, Plaintiffs K-V and Ther-Rx are referred to herein collectively as
“KV”). This refusal to provide required medical care to the poor and vulnerable is not
only unlawful, but flies directly in the face of recent warnings by the two lead federal
agencies—the U.S. Food and Drug Administration (“FDA”) and Centers for Medicare
& Medicaid Services (“CMS”)—regarding states’ legal obligation to cover FDA-
approved drugs. Further, DCH is preventing Plaintiffs from recouping their significant
investment in making this safe and reliable drug available to at-risk pregnant women.
Without immediate relief, DCH’s unlawful acts (combined with those of other states)
threaten Plaintiffs’ financial existence.
The Medicaid Act requires DCH to cover and pay for “covered outpatient
drugs.” Although Makena® is a covered outpatient drug, DCH has devised and is
1 Plaintiffs rely upon and incorporate by reference herein the allegations set forth in their Complaint and the Declarations and Exhibits filed herewith.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 6 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 16 of 43
983477.1
2
attempting to hide behind a sham prior authorization policy that systemically denies all
prescriptions for Makena®. DCH’s policy has been so effective that Plaintiffs’ records
show the agency has not paid for any vials of Makena® since it was launched.
Despite receiving written prescriptions for Makena®, DCH overrides the medical
judgment of Georgia physicians and forces those on Medicaid to use cheap,
compounded formulations that are not subject to Food and Drug Administration
(“FDA”) approval or to use nothing at all—an untenable choice those with private
insurance are generally not required to make. Compounds are not generic drugs: they
are not made using FDA’s rigorous good manufacturing practices (“GMP”) standards;
and, as FDA recently noted, “[c]ompounded drugs do not undergo the same premarket
review and thus lack an FDA finding of safety and efficacy and lack an FDA finding
of manufacturing quality.”
On information and belief, nearly all of the active pharmaceutical ingredient
(“API”) used by US compounders comes from factories in China. At Plaintiffs’
request, independent laboratories tested ten samples of Chinese API for compounded
17P and 30 samples of US-compounded 17P in finished dosage form. The majority of
tested API samples failed at least one of the specifications FDA set for Makena®, and
one contained no 17P at all. Of the finished compounded samples, the majority failed
at least one of the specifications FDA set for Makena®, including unacceptable potency
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 7 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 17 of 43
983477.1
3
and/or impurities—in an injectable drug intended for women with high-risk
pregnancies.
Under federal law, compounds cannot be used as cheaper substitutes for an
FDA-approved, commercially available drug. If an FDA-approved drug is available,
compounding may be used only for the limited purpose of meeting the specific medical
need (e.g., as an allergy to an ingredient) of a particular patient for whom the FDA-
approved drug is medically inappropriate. DCH has turned this long-standing legal
structure on its head by openly soliciting and paying for unrestricted unlawful
compounding and failing to cover FDA-approved Makena®.
Because Georgia and other states effectively continue to refuse to cover
Makena®, on June 15, 2012, the two affected federal agencies—FDA and CMS—
issued two separate but related statements specific to Makena®. FDA cautioned that:
FDA-approved drugs, such as Makena®, “provide a greater assurance of safety and effectiveness than do compounded drugs”;
Compounded copies of Makena® are appropriate only in limited circumstances – e.g., when a treating physician determines that a patient has a specific medical need for a compounded variation as opposed to the FDA-approved drug; and
Compounding large volumes of drugs that are copies of an FDA-approved drug “circumvents” important public health requirements under FDA law.
CMS, in turn, reminded states that they must cover Makena® in compliance with
federal Medicaid law and “without imposing unreasonable conditions.”
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 8 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 18 of 43
983477.1
4
Despite these directives, DCH informed KV that it will not change its policy.
The open defiance of federal law appears to have prompted FDA to issue yet another
statement on June 29. FDA did not mince words: “if there is an FDA-approved drug
that is medically appropriate for a patient, the FDA-approved product should be
prescribed and used.”
The inability of Georgia’s underprivileged women to access FDA-approved
Makena® requires immediate intervention by this Court—not only because DCH is
violating federal law, but also because its unlawful conduct (along with that of other
states) has put Plaintiffs into a dire financial position that threatens their existence, and
thus threatens the ability of women to ever obtain Makena®.
FACTUAL BACKGROUND
I. Preterm Birth.
Prematurity costs the United States more than $26 billion annually, a large
portion of which is borne by Medicaid, which covers an estimated 50% or more of the
Makena®-eligible patients. See Declaration of Michael Jozwiakowski (“Jozwiakowski
Decl.”) ¶ 2. On average, the cost of a preterm birth in the United States is
approximately $51,600; and, the average medical costs for a preterm infant’s first year
of life are about 10 times greater ($32,325) than for a full-term infant ($3,325). Id. ¶ 3.
Georgia is no exception. Thousands of pregnant Medicaid women in Georgia are at
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 9 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 19 of 43
983477.1
5
risk of having preterm births. In fact, the March of Dimes gave Georgia an “F” in
2010 in view of its 13.4% rate of preterm birth. See Declaration of Thomas McHugh
(“McHugh Decl.”) ¶ 21.
II. FDA Approval of Makena®.
The FDA-approved Makena® (sterile injections of hydroxyprogesterone
caproate) on February 3, 2011, as an orphan drug under the Orphan Drug Act of 1983.
McHugh Decl. ¶ 8. Makena®’s orphan drug status entitled Plaintiffs to a seven-year
exclusivity period, which is intended to reward pharmaceutical companies for the
extraordinary time and money necessary to obtain FDA approval for drugs that are
vital, but benefit relatively small patient populations. 21 U.S.C §§ 360bb(a)-360cc(a).
KV invested or committed over a quarter of a billion dollars to bring Makena® to
market. McHugh Decl. ¶ 10.
Prior to FDA approval of Makena®, women with a history of spontaneous
preterm singleton birth had two options: use unapproved, non-federally regulated
compounded formulations of hydroxyprogesterone caproate (“17P”) or nothing at all.
See Declaration of Scott Goedeke (“Goedeke Decl.”) ¶ 10. Although versions of
compounded 17P are made with versions of the same active pharmaceutical ingredient
(“API”) used in Makena®, compounded 17P is not a generic version of Makena®.
Jozwiakowski Decl. ¶¶ 14-15. Like Makena®, generic drugs are manufactured under
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 10 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 20 of 43
983477.1
6
rigorous FDA-mandated good manufacturing practices standards. Id. Compounds are
not; they are made by processes that are neither regulated nor approved by FDA; and
those processes can give rise to unknown variability in purity, potency and even
sterility. Id. ¶¶ 14-16.
Makena® is both FDA-approved and covered by a Medicaid Drug Rebate
Agreement (“MDRA”) between Ther-Rx and the U.S. Department of Health & Human
Services (“HHS”). Goedeke Decl. ¶¶ 8-9. It is considered a “covered outpatient drug”
under the Medicaid Act. States must cover and pay for “covered outpatient drugs” that
are subject of an MDRA. 42 U.S.C. §§ 1396r-8(a)(1), (k)(2).
III. Georgia’s Unlawful Restriction on Patients’ Access to Makena®.
DCH concedes that Makena® is a “covered benefit.” McHugh Decl. at Ex. 10.
On June 1, 2011, however, DCH issued a “Makena PA Summary” (the “PA
Summary”) that instituted unachievable prior authorization requirements for Makena®.
McHugh Decl. at Ex. 9. To obtain Makena®, a treating physician must “be unable to
obtain or not able to use compounded hydroxyprogesterone.” Id. (emphasis added).
Because versions of compounded 17P are available directly or by mail, this so-called
preauthorization “condition” essentially precludes Medicaid beneficiaries from ever
accessing Makena®. Goedeke Decl. ¶ 12. Indeed, DCH expressly invited pharmacies
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 11 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 21 of 43
983477.1
7
and physicians to contact its Pharmacy Unit for “assistance with locating a
compounding pharmacy.” McHugh Decl. at Ex. 10.
In its “Makena Position Statement,” DCH “encourages providers to rely on their
prior success with compounded [17P] when making decisions for their patients.”
McHugh Decl. at Ex. 10. DCH further states:
As a matter of policy, the Medicaid Division will require prior authorization for any prescription for Makena. The physician will be required to demonstrate the medical necessity of the manufactured product, Makena, over the compounded [17P] product to obtain prior authorization.….
Id. (emphasis added). DCH provides no indication or guidance regarding what would
be sufficient to show “a need” for Makena® over compounded 17P.
KV estimates that, since the FDA approval of Makena®, approximately 2,500 to
3,000 Medicaid patients in Georgia have been eligible for Makena®. McHugh Decl. ¶
21. Despite DCH’s policy, physicians have attempted to prescribe Makena® to 79
Medicaid patients in Georgia. Id. However, DCH has overridden physicians’ medical
judgment (plaintiffs records show no approvals of Makena®) and likely caused many
physicians to give up trying to get Makena® for their patients. See Declaration of Dr.
Lawrence Robillard.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 12 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 22 of 43
983477.1
8
IV. Makena® and Compounded Versions of 17P Are Not Equivalent2.
In testifying before Congress in March 2011, FDA Commissioner, Margaret
Hamburg M.D., drew a sharp distinction between FDA-approved Makena® and
compounded 17P:
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….
Goedeke Decl. ¶ 16 (emphasis added). On November 8, 2011, the FDA stated: we remind physicians and patients that before approving the Makena new drug application, FDA reviewed manufacturing information, such as the source of the API used by its manufacturer, proposed manufacturing processes, and [KV’s] adherence to current good manufacturing practice. Therefore, as with other approved drugs, greater assurance of safety and effectiveness is generally provided by the approved product than by a compounded product.
Id. ¶ 17 (emphasis added). On June 15, 2012, the FDA reiterated that:
. . . approved drug products, such as Makena, provide a greater assurance of safety and effectiveness than do compounded products. Before approving the Makena [New Drug Application (“NDA”)], FDA reviewed manufacturing information, such as the source of the API used by its manufacturer, proposed manufacturing processes, and the firm’s adherence to current good manufacturing practice.
Id. ¶ 18 (emphasis added).
2 Even if they were equivalent, coverage is required for the FDA-approved product.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 13 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 23 of 43
983477.1
9
FDA highlighted that compounded products are not FDA-approved and warned
that “compounding large volumes of drugs that are copies of FDA-approved drugs
circumvents important public health requirements . . .” Id. ¶ 19. Under FDA’s normal
policy as to compounded drugs, the compounding of drugs, including 17P, “should not
exceed the scope of traditional pharmacy compounding.” Id. at Ex. 8. Compounding
is appropriate only 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 product.” Id. ¶ 21.
Also on June 15, 2012, CMS issued a companion statement on Makena®:
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. Any prior authorization procedures for such drugs must be administered in accordance with Section 1927(d) of the Social Security Act, without imposing unreasonable conditions.
Id. ¶ 24 (emphasis added).
Faced with open defiance of the FDA and CMS June 15 statements, on June 29,
FDA got right to the point: “when an FDA-approved drug is commercially available,”
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
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 14 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 24 of 43
983477.1
10
the patient as compared to the FDA-approved commercially available drug product.
Id. ¶ 21 (emphasis added).
Despite these federal statements, DCH continues to impose unreasonable
conditions on access to Makena®. McHugh Decl. ¶¶ 16, 21.
V. KV’s Effort to Engage With DCH.
On February 15, 2012, KV wrote Defendant Cook a letter explaining the
significance of FDA approval, how the DCH prior authorization policy is inconsistent
with federal law, and reminding DCH of its obligation to provide access to covered
outpatient drugs. Goedeke Decl. ¶ 26. DCH did not reply. Id.
On June 19, 2012, KV contacted DCH again, drew the agency’s attention to the
two June 15th statements, and requested the opportunity to address Makena® coverage
with DCH. Goedeke Decl. ¶ 27. Defendant Dr. Dubberly, the Division Chief of
DCH’s Medicaid Division, inexplicably responded that the FDA’s June 15, 2012
statement actually “affirms our current position on this matter.” Id. When KV
requested an explanation, Dr. Dubberly stated there was nothing to explain: “[DCH]
will not be entertaining any policy or coverage changes as a result of the [FDA]
release.” Id. ¶ 28. Evidently, Dr. Dubberly saw no need to address the CMS statement
or explain why a policy effectively barring access to Makena® is reasonable.
Additional attempts to resolve this dispute have likewise failed.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 15 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 25 of 43
983477.1
11
VI. KV’s Financial Condition.
KV’s loss of revenue from the lack of use of Makena® by Medicaid patients in
Georgia (and other states) threatens to cripple the company. McHugh Decl. ¶¶ 21-23.
Potential future sales of Makena® account for the vast majority of KV’s projected
revenue. Id. ¶ 22.
Without Court intervention to address unlawful Medicaid restrictions on
Makena®, KV’s current cash will continue to be rapidly depleted and the company’s
survival threatened. Id. ¶¶ 22-24. 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. Id. ¶ 25.
ARGUMENT
DCH has effectively turned Medicaid drug coverage law on its head by denying
underprivileged pregnant women access to FDA-approved Makena® (a “covered
outpatient drug”) and directing them, instead, to unapproved compounded products
(which are not covered outpatient drugs). Taken in concert with the actions of several
other states with large Medicaid populations, this end-run around federal Medicaid law
is economically crippling Plaintiffs.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 16 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 26 of 43
983477.1
12
I. Standard for Injunctive Relief.
To succeed on a motion for a preliminary injunction, Plaintiffs must show: (a) a
substantial likelihood of success on the merits; (b) irreparable injury will be suffered
unless the injunction is issued; (c) the threatened injury to the moving party outweighs
any injury to the non-moving party; and (d) the injunction would not be adverse to the
public interest. See BellSouth Telecomms., Inc. v. MCIMetro Access Transmission
Servs., LLC, 425 F.3d 964, 968 (11th Cir. 2005). Here, all factors overwhelmingly
support granting Plaintiffs’ application.
II. Plaintiffs Have a Substantial Likelihood of Success on the Merits.
A. Federal Law Requires Georgia to Cover Makena®.
Medicaid is a joint federal-state program that was established to provide medical
assistance to financially needy patients, including pregnant women. See 42 U.S.C.
§ 1396a(a)(10). Any state participating in the Medicaid program must comply with the
Medicaid Act and its implementing regulations. Martes v. Chief Executive Officer of
S. Broward Hosp. Dist., No. 11-12464, 2012 WL 2161280, at *1 (11th Cir. June 15,
2012).
Section 1396r-8 of the Medicaid Act outlines a state Medicaid agency’s legal
obligations to cover outpatient prescription drugs. Edmonds v. Levine, 417 F. Supp. 2d
1323, 1326 (S.D. Fla. 2006). Pursuant to § 1396r-8, “covered outpatient drug[s]” are
drugs that are dispensed only upon a prescription and that have been approved for
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 17 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 27 of 43
983477.1
13
safety and effectiveness by the FDA under the Federal Food, Drug, & Cosmetic Act
(“FDCA”). 42 U.S.C. § 1396r-8(k)(2)(A). To receive payment for “covered
outpatient drugs,” manufacturers must enter into an MDRA with HHS and pay the
various states rebates (of at least 23.1 percent) on the sale of outpatient prescription
drugs to their respective Medicaid beneficiaries. 42 U.S.C. § 1396r-8(a); Pharm.
Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 652 (2003). In return, a state must
provide coverage under its state plan, unless a specific statutory exclusion or restriction
applies. 42 U.S.C. § 1396a(a)(10),(54); 42 U.S.C. § 1396r-8(a); Walsh, 538 U.S. at
652.
There is no dispute that Makena® is a “covered outpatient drug” covered by an
MDRA. Goedeke Decl. ¶¶ 8-9. It follows, therefore, that DCH is required to cover
Makena®, subject only to the limited statutory exceptions described below. 42 U.S.C.
§ 1396r-8(k)(2)(A).
Unlike Makena®, compounded versions of 17P are not “covered outpatient
drug[s].” The FDA has not reviewed or approved any version of compounded 17P
either as a branded or generic drug. Jozwiakowski Decl. ¶ 15. In August 2010, CMS
clarified that Medicaid will cover compounded products under very limited
circumstances only, i.e., when they are made extemporaneously for a particular patient
who is unable to take the corresponding FDA-approved drug. See Goedeke Decl. ¶¶
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 18 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 28 of 43
983477.1
14
22-23. This position was confirmed in the June 15 CMS statement as to Makena® and
compounded 17P. Id. ¶ 24.
B. DCH’s Prior Authorization Program Imposes Unreasonable Conditions on Access to Makena®.
DCH’s prior authorization program is transparently set up to block physicians
who seek coverage for Makena®. Because no Medicaid patient can actually meet
DCH’s “prior authorization” conditions, the process is in reality a de facto and
improper formulary exclusion.
The requirement that a patient be “unable to obtain” an unapproved
compounded 17P product before she can be considered for Makena® is farcical. Many
compounders in Georgia (and mail-order compounders elsewhere) are willing and able
to provide compounded 17P. Goedeke Decl. ¶ 12. Consequently, this requirement
acts as a complete bar to access to Makena® and puts Defendants in clear violation of
the requirement that Georgia cover FDA-approved Makena®.
With respect to the requirement that a patient show that she is “not able to use”
compounded 17P or that she has a “medical necessity” for Makena® over compounded
17P, DCH has not provided any standards or criteria as to when it would consider
Makena® “medically necessary” over the compounded product. It is unclear how a
patient (or her doctor) could establish she cannot use compounded 17P (or that it is
ineffective for her) without going into early labor while using compounded 17P. Such
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 19 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 29 of 43
983477.1
15
a requirement unnecessarily endangers the health of the unborn child and, as a public
policy, is unconscionable.
FDA approval is based on specific FDA findings that a drug is effective and safe
for its intended indication(s). To require Medicaid beneficiaries to demonstrate they
are entitled to FDA-approved products when federal law mandates they receive them is
patently unreasonable.
In addition, in violation of FDA law and policy, DCH, by mandating universal
usage of compounded 17P, is encouraging unrestricted compounding not customized
to meet the need of an individual patient who has the conditions for which Makena® is
indicated but for whom Makena® is medically inappropriate. As FDA stated on June
15, the compounding of 17P “should not exceed the scope of traditional pharmacy
compounding”—namely, to meet the specific medical need of a particular patient.
Goedeke Decl. at Ex. 8. Given FDA’s reminder that unrestricted compounding
“circumvents important public health requirements,” DCH’s policy is “unreasonable”
within the meaning of the CMS June 15 statement. Goedeke Decl. at Exs. 8, 12.
C. None of the Medicaid Act’s Exclusions Apply Here.
The Medicaid Act specifies five bases pursuant to which states may exclude,
i.e., refuse to pay for, “covered outpatient drugs”: when they (1) are not prescribed for
a “medically accepted indication”; (2) are either listed in the statute or subsequently
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 20 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 30 of 43
983477.1
16
determined by HHS regulation to be subject to clinical abuse or misuse; (3) are
excluded pursuant to an agreement between the manufacturer and the state; (4) have
been excluded pursuant to a drug formulary,3 provided that the state takes a set of
procedural steps specified at 42 U.S.C. § 1396r-8(d)(4); or (5) are prescribed in
quantities that exceed the refill limits imposed by the state. 42 U.S.C. §§ 1396r-
8(d)(1)(B)(i)-(iv), (d)(6). As one federal court has stated:
The statutory scheme is carefully constructed in such a way to precisely circumscribe the only methods by which a state may remove a Medicaid eligible drug from coverage and prevent it from either arbitrarily removing a drug or adopting its own ad hoc procedure for removing a drug from coverage.
Edmonds, 417 F. Supp. 2d at 1330-31. DCH’s Makena® policy does not meet any of
the permissible exclusion criteria set forth above.
1. DCH’s Policy Acts as an Impermissible Formulary Restriction.
Congress was careful to distinguish a prior authorization process from a drug
formulary. “A prior authorization program established by a State under paragraph (5)
is not a formulary . . .” 42 U.S.C. § 1396r-8(d)(4). DCH’s policy, however, acts as a
3 See U.S., ex rel., Foster v. Bristol-Myers-Squibb Co., 587 F. Supp. 2d 805, 809 (E.D. Tex. 2008) (“‘For the uninitiated, a formulary is a list of medications for which an HMO provides coverage.’ Formularies come in a variety of shapes and sizes. . . ‘Because a drug’s inclusion on an [HMO’s] formulary can dictate prescription choices for patients covered by [HMOs], drug manufacturers seek to secure inclusion on [HMO] formularies as well as favorable placement within those formularies through financial rewards, including rebates, to [HMOs].’” (quoting J.B.D.L. Corp. v. Wyeth-Ayerst Labs., Inc., 485 F.3d 880, 884 (6th Cir. 2007)).
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 21 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 31 of 43
983477.1
17
de facto—and unlawful—formulary exclusion of Makena® without having met any of
the requirements for such an exclusion. In fact, DCH’s Makena® prior authorization
procedures contain exactly the kind of unreasonable prior authorization conditions
CMS warned against. See Goedeke Decl. at Ex. 12.
A lawful formulary must: (1) be developed by a committee comprised of
physicians, pharmacists, and others appointed by the Governor; and (2) include the
“covered outpatient drugs” of any manufacturer that has entered into and complied
with an MDRA. 42 U.S.C. §§ 1396r-8(d)(4)(A)-(B). Obviously, neither of those
requirements have been met by DCH.
A state may exclude a “covered outpatient drug” from a formulary only if there
is a written finding that the excluded drug “does not have a significant, clinically
meaningful therapeutic advantage in terms of safety, effectiveness, or clinical outcome
of such treatment for such population over other drugs included in the formulary.” Id.
§§ 1396r-8(d)(4)(C)-(D); Pharm. Research & Mfrs. of Am. v. Meadows, 304 F.3d
1197, 1207 (11th Cir. 2002) (as compared to a prior authorization program, a
formulary could have the more stringent consequence of excluding coverage for
certain covered outpatient drugs only if certain clinical criteria are adhered to).
No other “covered outpatient drug” has a “clinically meaningful therapeutic
advantage” over Makena®. Therefore, Makena® cannot be excluded from any
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 22 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 32 of 43
983477.1
18
formulary. Indeed, a formulary requires two or more therapeutically equivalent
covered outpatient drugs. Here, for reducing the risk of pre-term birth in pregnant
women with a prior pre-term birth, there is only one “covered outpatient drug” –
Makena®. Because compounded 17P products are not covered outpatient drugs, they
cannot be included in a formulary. Nor could DCH plausibly contend that an FDA-
approved drug has no “meaningful therapeutic advantage” over unapproved, non-
federally regulated compounded products. Indeed, although compounded 17P was
available when FDA was reviewing the application for approval of Makena®, Goedeke
Decl. ¶ 10, FDA designated the NDA for Priority Review, Jozwiakowski Decl. ¶ 6. “A
Priority Review designation is given to drugs that offer major advances in treatment, or
provide a treatment where no adequate therapy exists.” Id. at n.9. Thus, FDA
considered Makena® a “major” advance on compounded 17P and/or considered
compounded 17P inadequate therapy.
Finally, a state is not permitted to base a formulary restriction on economics or
price when no other drug on the formulary has a “meaningful therapeutic advantage.”
Meadows, 304 F.3d at 1201. The Medicaid Act limits the criteria for formulary
restrictions to clinical (i.e., medical) justifications. Id. at 1203. DCH’s exclusion of
Makena® is based solely on price. Thus, DCH has purported to effectuate an improper
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 23 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 33 of 43
983477.1
19
formulary-like exclusion of Makena® without satisfying any of the statutory criteria for
an exclusion.
2. Georgia’s Exclusion of Makena® Is Not a Valid Prior Authorization.
In contrast to “excluding” a drug, Section 1396r-8(d)(1)(A) of the Medicaid Act
allows a state to require that a healthcare provider obtain prior authorization from
Medicaid before administering a particular drug. Prior authorizations are strictly
procedural, and may be used only to “condition,” but not to “exclude” coverage.
Edmonds, 417 F. Supp. 2d at 1329.4 Prior authorization requirements generally are
used as a means for implementing elements of a drug-utilization program to ensure the
medical appropriateness and safety of a drug for a specific beneficiary, and to avoid
harms such as drug-drug interaction, therapeutic duplication, over-prescribing by
providers, and overuse by beneficiaries. They also have been used to inform providers
about more cost-effective or therapeutically advantageous alternatives. Meadows, 304
F.3d at 1208 n.9.
DCH’s program is specifically designed to exclude coverage of Makena®. As
the Edmonds court stated:
4 As Justice O’Connor explained in Walsh, “[p]rior authorization is, by definition, a procedural obstacle to Medicaid beneficiaries’ access to medically necessary prescription drugs covered under the Medicaid program.” 538 U.S. at 685 (emphasis added).
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 24 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 34 of 43
983477.1
20
While [State Medicaid] may condition drug coverage for medically accepted indications upon certain prior authorization procedures being followed, the agency may not exclude coverage, i.e., deny reimbursement, for a covered drug under these subsections pursuant to the type of prior authorization program established by the state. To do so clearly violates the federal act.
417 F. Supp. 2d at 1336 (emphasis in original). Georgia’s program excludes coverage
of Makena® in exactly the manner the Edmonds court said “clearly violates the federal
act.” Id.
In Meadows, the Eleventh Circuit determined a state program was a valid prior
authorization because “approval of the prescribing doctor’s first choice drug is
guaranteed in 100 percent of all cases, provided only that he or she make [a telephone
call.]” 304 F.3d at 1198. “[T]he state may try to persuade a doctor to use an
alternative drug, but ultimately the doctor retains the final word on use of the drug.”
Edmonds, 417 F. Supp. 2d at 1329 (emphasis added). The prior authorization program
at issue in Meadows was held to be valid precisely because it did not exclude any drug
from coverage. Meadows, 304 F.3d at 1208.
In Edmonds, the Court distinguished between a formulary and a prior
authorization program, and explained that one of the factors for distinguishing between
the two was “who retains the final authority with regard to coverage of a Medicaid-
eligible drug.” 417 F. Supp. 2d at 1330. The court was clear that in the case of a prior
authorization, “the prescribing doctor retains the authority to override any suggestions
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 25 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 35 of 43
983477.1
21
made by the state pharmacist”; but in the case of a formulary, the state retains the last
word as to whether a drug will be covered. Id. at 1329. As the court explained:
the state can require a prescribing doctor seek approval of a particular drug as a condition of Medicaid coverage. Ultimately, though, the doctor retains the authority to override any suggestions made by the [State] and obtain approval of, and eventual reimbursement for, the doctor’s first choice drug. However, under the formulary prior authorization program, a prescribing doctor may ask the state to cover a Medicaid-eligible drug that has been excluded from the formulary, but ultimately, the state can deny the request for coverage, meaning it is the state which retains the final authority over coverage of non-formulary drugs.
Id. at 1330 (emphasis/bolding added; italics in original).5
Here, the DCH policy provides no deference to a physician’s view as to when
Makena® would be considered “medically necessary.” Given that virtually no
Makena® prescriptions have been approved in Georgia, it is clear DCH uses its
unfettered discretion systematically to deny coverage of and access to Makena®.
D. Defendants’ Restrictions on Access to Makena® Violate Section 1396a(a)(19) of the Medicaid Act.
DCH’s policies also conflict with Section 1396a(a)(19) of the Medicaid Act,
which requires a state plan to:
[P]rovide such safeguards as may be necessary to assure that eligibility for care and services under the plan will be determined and such care and
5 Indeed, Edmonds allowed coverage for off-label use (i.e., use for which FDA has not approved the drug at issue); here, DCH is denying coverage even for Makena’s® FDA-approved use, instead favoring a non-FDA approved drug.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 26 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 36 of 43
983477.1
22
services will be provided, in a manner consistent with simplicity of administration and the best interests of the recipients.
42 U.S.C. § 1396a(a)(19) (emphasis added). The analysis in Grier v. Goetz is
instructive: “a prior authorization regime must not severely curtail access to
prescription drugs, as that may violate the best interests of Medicaid recipients...” 402
F. Supp. 2d 876, 905 (M.D. Tenn. 2005) (citing Walsh, 538 U.S. at 655)).
In addressing a claim under section (a)(19) that states should not be permitted to
deprive Medicaid beneficiaries of FDA-approved drugs, the First Circuit stated, “the
possibility that first-choice drugs will not be readily approved where second-choice
inferior alternatives exists concerns us.” Pharm. Research & Mfrs. of Am., v.
Concannon, 249 F.3d 66, 78 (1st Cir. 2001), aff’d sub nom, Pharm. Research & Mfrs.
of Am. v. Walsh, 538 U.S. 644 (2002). The First Circuit ultimately upheld the program
under review because it concluded that Medicaid patients were not being denied any
“first-choice” drugs. Id. Here, DCH plainly is denying beneficiaries coverage of a
“first-choice” drug.
DCH’s denial of coverage here is based on perceived (short term) cost savings
to Medicaid. “[B]udgetary considerations may not be the sole basis for a [Medicaid
related decision] . . .” Rite Aid of Pa., Inc. v. Houstoun, 171 F.3d 842, 856 (3d Cir.
1999). This is an additional reason to hold DCH’s policies unlawful.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 27 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 37 of 43
983477.1
23
III. Plaintiffs Will Be Irreparably Harmed If Injunctive Relief Is Denied.
DCH’s (and other states’) refusal to cover Makena® threatens KV’s economic
survival. The threat of corporate extinction is a well-established form of irreparable
harm and warrants immediate injunctive relief. Doran v. Salem Inn, Inc., 422 U.S.
922, 932 (1975) (a substantial loss of business and perhaps even bankruptcy
sufficiently meet the standards for granting interim relief); see also Roland Mach. Co.
v. Dresser Indus., Inc., 749 F.2d 380, 386 (7th Cir. 1984) (“A damages remedy can be
inadequate [if] the damage award may come too late to save the plaintiff’s business.”).
Under present circumstances, sales of Makena®, on which KV is highly
dependent, cannot generate the cash KV needs to meet its ongoing cash operating
expenses and the material, near term payment obligations KV faces beginning in
August 2012. McHugh Decl. ¶ 27. Makena®—as stated in the Declaration of KV’s
Chief Financial Officer—is KV’s only hope for survival. Id. ¶ 22.
KV cannot recoup its ongoing losses from the state even if a Court determines
that the defendants unlawfully restricted access to Makena® because the Eleventh
Amendment “precludes an award of retroactive payment by a federal court.” James v.
Richman, 465 F. Supp. 2d 395, 407 (M.D. Pa. 2006), aff’d 547 F.3d 214 (3d Cir.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 28 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 38 of 43
983477.1
24
2008).6 Thus, injunctive relief is the only means by which KV’s injury can be
redressed. See Temple Univ. v. White, 941 F.2d 201, 215 (3d Cir. 1991); see also Cal.
Pharmacists Ass’n v. Maxwell-Jolly, 596 F.3d 1098, 1113-14 (9th Cir. 2010) (citations
omitted), vacated and remanded on other grounds 132 S.Ct. 1204 (2012), (finding that
“Medicare providers” had suffered irreparable harm where “they will lose considerable
revenue through the reduction in payments that they will be unable to recover due to
the State’s Eleventh Amendment sovereign immunity”).7
IV. Injunctive Relief Will Not Result In Greater Harm To Georgia.
If relief is granted, Georgia would be required to pay (as it is legally required to
do) the state portion of the cost of providing Makena®. This “harm” is far outweighed
by the risk of survival KV faces from Georgia’s (and other states’) refusal to cover
Makena®. This type of irreparable harm tips the scales in favor of KV’s position. See
Guidance Endodontics, LLC v. Dentsply Int’l, Inc., 633 F. Supp. 2d 1257, 1279
6 See also Temple Univ. v. White, 941 F.2d 201, 215 (3d Cir. 1991) (“[T]he Eleventh Amendment bar to an award of retroactive damages against the Commonwealth . . . clearly establishes that any legal remedy is unavailable and that the only relief available is equitable in nature”); W. Va. Univ. Hosps., Inc. v. Rendell, No. 1:cv-99-1684, 2009 WL 3241849, at *14 (M.D. Pa. Oct. 2, 2009) (finding irreparable harm “[i]n light of the absolute bar on damages imposed by the Eleventh Amendment…”); see also Edelman v. Jordan, 415 U.S. 651, 678 (1974). 7 In any event, “[d]epending on circumstances, evidence of price erosion, loss of market share, loss of profits, loss of research opportunities, and possible layoffs may constitute irreparable harm.” Research Found. of State Univ. of N.Y. v. Mylan Pharm., Inc., 723 F. Supp. 2d 638, 658 (D. Del. 2010).
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 29 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 39 of 43
983477.1
25
(D.N.M. 2008) (“Guidance . . . stands on the brink of bankruptcy and going out of
business. The scales thus already tip in Guidance’s favor.”).8
V. Injunctive Relief Is in the Public Interest.
Requiring DCH to provide pregnant women on Medicaid and at high risk for
preterm birth access to an effective and safe treatment obviously is in the public
interest. The “primary purpose of Medicaid is to enable states to provide medical
services to those whose ‘income and resources are insufficient to meet the costs of
necessary medical services.’” Concannon, 249 F.3d at 75; 42 U.S.C. § 1396. The
public has a significant interest in being assured that DCH is meeting that standard.
See Edmonds, 417 F. Supp. 2d at 1342 (“the public interest would be advanced by
[DCH’s] compliance with the outpatient prescription drug coverage requirements of
the Medicaid Act.”).
CONCLUSION
For the foregoing reasons, Plaintiffs’ Application for a Preliminary Injunction
should be granted.
Respectfully submitted this 17th day of July, 2012.
8Moreover, as the Edmonds court stated in granting preliminary relief, “the harm to Plaintiffs of being deprived of essential medical services outweighs any harm to the state…”. Edmonds, 417 F. Supp. 2d at 1342. Here, the denial of relief to KV is, in essence, denial of access to an important therapy for Medicaid beneficiaries.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 30 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 40 of 43
983477.1
26
Margaret “Peg” Donahue Hall, Esq. TX Bar No: 05968450 SNR DENTON, US, LLP 2000 McKinney Avenue, Suite 1900 Dallas, TX 75201-1858 Telephone: (214) 259-0900 Facsimile: (214) 259-0910 [email protected] Stephen D. Libowsky GA Bar No: 451965 SNR DENTON, US, LLP 233 South Wacker Drive, Suite 7800 Chicago, IL 60606 Telephone: (312) 876-8000 Facsimile: (312) 876-7934 [email protected]
s/ John E. Floyd_________________ John E. Floyd (GA 266413) Jeffrey O. Bramlett (GA 075780) Manoj S. Varghese (GA 734668) BONDURANT, MIXSON & ELMORE LLP 1201 W. Peachtree Street, N.W 3900 One Atlantic Center Atlanta, GA 30309 Telephone: (404) 881-4100 Facsimile: (404) 881-4111 Drew Marrocco, Esq. DC Bar No: 453205 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]
Attorneys for Plaintiffs
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 31 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 41 of 43
983477.1
27
CERTIFICATION REGARDING COMPLIANCE WITH LOCAL RULE 7.1 Pursuant to Local Rule 7.1(D), this Memorandum was prepared using Times
New Roman, 14-point font.
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 32 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 42 of 43
983477.1
28
CERTIFICATE OF SERVICE
I hereby certify that I have this day electronically filed this MEMORANDUM
OF LAW IN SUPPORT OF APPLICATION FOR PRELIMINARY
INJUNCTION with the Clerk of Court using the CM/ECF system and certify that I
will cause a true and correct copy of the foregoing to be served with the Complaint.
This 17th day of July, 2012 s/ John E. Floyd_____________
Case 1:12-cv-02491-CAP Document 2-2 Filed 07/17/12 Page 33 of 33Case 1:12-cv-01105-ABJ Document 9-5 Filed 07/24/12 Page 43 of 43