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New Jersey Pharmaceutical Association v. Klein

Decided: March 8, 1976.

NEW JERSEY PHARMACEUTICAL ASSOCIATION, NORMAN KRITZ, LEONARD LENZEN, JR., AARON SILNUTZER AND NATHAN SINGER, APPELLANTS,
v.
ANN KLEIN, COMMISSIONER OF INSTITUTIONS AND AGENCIES, AND NEW JERSEY DEPARTMENT OF INSTITUTIONS AND AGENCIES, RESPONDENTS. JOSEPHINE DAVIS, ELOISE AIKENS AND RUBY GRACE, INDIVIDUALLY AND ON BEHALF OF ALL OTHERS SIMILARLY SITUATED, APPELLANTS, V. ANN KLEIN, COMMISSIONER OF THE NEW JERSEY DEPARTMENT OF INSTITUTIONS AND AGENCIES, AND NEW JERSEY DEPARTMENT OF INSTITUTIONS AND AGENCIES, RESPONDENTS



Kolovsky, Bischoff and Botter. The opinion of the court was delivered by Kolovsky, P.J.A.D.

Kolovsky

Although these appeals were submitted to us separately, they appropriately may be disposed of in one opinion since both challenge regulations adopted by the Commissioner of Institutions and Agencies (Commissioner), effective August 1, 1975, in order to reduce payments to be made by the State under its Medicaid program.

Appellants Davis et al. are Medicaid recipients. Their brief challenges only the regulation which requires a co-payment by the Medicaid recipient of 25 cents per prescription, to be collected by the pharmacist.

The appellants in the other appeal are an association of pharmacists and four individual pharmacists. They challenge not only the 25-cent co-payment regulation but also two others which reduce the amount they will receive from the New Jersey Health Service Program for medicines or drugs and prosthetic devices sold to Medicaid recipients.

Prior to the adoption of the challenged regulation the permissible charge for most medicines or drugs was the "maximum cost" thereof (as defined in the regulations) plus a "dispensing fee" of $2.15 in the case of a pharmacy providing a 24-hour a day, 365 days a year service, and $2.05 in the case of other pharmacies. The revised regulation reduces the "dispensing fee" with respect to each class of pharmacy by 25

cents, from $2.15 to $1.90 and from $2.05 to $1.80, respectively. The final regulation challenged reduces the reimbursement to be made for prosthetic devices by 10%.

We find no need to resolve whether the pharmacists have standing to challenge regulations adopted solely for the benefit of Medicaid recipients. Assuming that they do have standing, we have concluded from our review of the record and the arguments presented that there is no merit to any of the criticisms of the new regulations advanced either by them or by appellants in the Davis case.

The statutory impetus for the establishment of federally-assisted, state-administered programs of medical assistance to needy persons (Medicaid) is found in Subchapter XIX of the Social Security Act. 42 U.S.C. § 1396. The act mandates the inclusion of several broad categories of medical services in Medicaid plans submitted by participating states to the United States Department of Health, Education and Welfare, including in-patient and out-patient hospital services and physicians' services. 42 U.S.C.A. § 1396a(a)(13). In addition, a state plan may also provide certain optional services to eligible recipients, including prescribed drugs and prosthetic devices. 42 U.S.C.A. § 1396a(a)(10)(C). The act provides that the mandatory and optional services included in a state plan shall be provided "as far as practicable under the conditions in [each] State * * *." 42 U.S.C.A. § 1396. Cf. 42 U.S.C.A. § 601 (welfare). The "medical assistance" authorized by the act is defined as "payment of part or all of the cost" of the included mandatory or optional services. 42 U.S.C.A. § 1396d(a).

In New Jersey the Medicaid program came into being with the enactment of the New Jersey Medical Assistance and Health Services Act," L. 1968, c. 413 (now N.J.S.A. 30:4D-1 et seq.), with an effective date of January 1, 1970. It is evident from the provisions of that act that assistance is to be provided only within the limits of available appropriations.

So N.J.S.A. 30:4D-2 provides (in language comparable to 42 U.S.C.A. § 1396) that

It is the intent of the Legislature to make statutory provision which will enable the State of New Jersey to provide medical assistance, insofar as practicable, on behalf of persons whose resources are determined to be inadequate to enable them to secure quality medical care at their own expense, and to enable the State, within the limits of funds available for any fiscal year for such purposes , to obtain all benefits for medical assistance provided by the Federal Social Security Act as it now reads or as it may hereafter be amended, or by any other Federal act now in effect or which may hereafter be enacted. [Emphasis supplied]

And N.J.S.A. 30:4D-7 provides in pertinent part that

The commissioner is authorized and empowered to issue, or to cause to be issued through the Division of Medical Assistance and Health Services all necessary rules and regulations and administrative orders, and to do or cause to be done all other acts and things necessary to secure for the State of New Jersey the maximum Federal participation that is available with respect to a program of medical assistance, consistent with fiscal responsibility and within the limits of funds available for any fiscal year, and to the extent authorized by the medical assistance program plan; to adopt fee schedules with regard to medical assistance benefits and otherwise to accomplish the purposes of this act, including specifically the following:

It is undisputed that the state appropriation for the Medicaid program for the fiscal year 1975-1976 -- $202,404,000 -- necessitated that approximately $26,400,000 of state funds and $26,400,000 of federal funds be eliminated from prior projected Medicaid expenditures for that fiscal year. Appellants do not challenge the Commissioner's conclusion that what she describes as the "budgetary shortfall" made it necessary to make changes in the existing programs pending resolution of the funding problem.

Their challenges are to the legality and reasonableness of the ...


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