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New Jersey Education Association v. Fred Beaver

April 20, 2011

NEW JERSEY EDUCATION ASSOCIATION, APPELLANT,
v.
FRED BEAVER, DIRECTOR OF THE DIVISION OF PENSIONS AND BENEFITS, SCHOOL EMPLOYEES HEALTH BENEFITS COMMISSION AND STATE HEALTH BENEFITS COMMISSION, RESPONDENTS.



On appeal from Administrative Actions of the Director of the Division of Pensions and Benefits, of the School Employees Health Benefits Commission and of the State Health Benefits Commission.

Per curiam.

NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION

Argued March 28, 2011

Before Judges Rodriguez, Grall and C.L. Miniman.

Pursuant to Rule 2:2-3(a)(2), the New Jersey Education Association (Association) invokes this court's jurisdiction to review agency action and inaction. Pascucci v. Vagott, 71 N.J. 40, 52 (1976); Hospital Ctr. at Orange v. Guhl, 331 N.J. Super. 322, 329 (App. Div. 2000). The Association challenges a contract for pharmacy benefit management services between Medco Health Solutions, Inc. (Medco) and the Department of Treasury.*fn1

The respondents are the School Employees' Health Benefits Commission (SEHBC), which is charged with establishing a health benefits program for the school employees of the State, N.J.S.A. 52:14-17.46.3, -17.46.4; the State Health Benefits Commission (SHBC), which is charged with establishing a health benefits program for the employees of the State, N.J.S.A. 52:14-17.27; and Fred Beaver, the Director of the Division of Pensions and Benefits in the Department, who serves ex-officio as the secretary of both the SHBC, N.J.S.A. 52:14-17.27, and the SEHBC, N.J.S.A. 52:14-17.46.4.

The SEHBC was established in the School Employees' Health Benefits Program Act, L. 2007, c. 103, §§ 31-41 (codified at N.J.S.A. 52:14-17.46.1 to -17.46.11), and that Act made school employees ineligible for participation in the State Health Benefits Program. N.J.S.A. 52:14-17.27. Previously, when school employees participated in the State Health Benefits Program, the Association "represent[ed] the largest number of employees of employers other than the State participating in the State Health Benefits Program." Ibid. Recognizing the Association's interest in the Program's operations, the Act requires that the Governor nominate three of the SEHBC's nine members from a list of five nominees proposed by the Association. N.J.S.A. 52:14-17.46.3(9)(4).

The Association filed this appeal because the SEHBC did not respond to its letters asking the SEHBC to invalidate changes in the school employees' prescription drug program effectuated through the Medco contract. The Medco contract was procured pursuant to a memorandum of understanding (MOU) between the SEHBC and the SHBC authorizing the SHBC and Division of Purchase and Property (Division) "to include participation by school employees in the [request for proposals (RFP)] and anticipated contract for Pharmacy Benefits Manager which shall continue for the duration of the contract term and any extensions set forth in the RFP." The SEHBC discussed the MOU at its January 28, 2009 meeting and approved its final form at the February 25 meeting, and the chairman of the SEHBC signed the MOU on that date.

The minutes of the February 25, 2009 meeting reflect that a representative of the Division was present. "She indicated that neither [the SHBC nor the SEHBC] would have direct input in the RFP, but that they could pose questions once the RFP is posted on the [Division's] website." Minutes of subsequent meetings provided to us, January 14 and 27, July 14 and 21, and September 22, 2010, include no reference to the RFP, the Medco contract or its implementation. The only exception is a reference to an oral report provided to the SEHBC by its manager of policy, planning and operations noting that "Medco's transition is moving along relatively smoothly with a few bumps in the road."

The Association's letters objecting to the prescription drug program as managed by Medco were sent on February 4 and 19, 2010. In the second letter, the Association advised that it would deem silence a denial if it did not have a response by March 4. Receiving no response by that date, on March 12, the Association filed a notice of appeal.

Subsequent to the filing of the notice of appeal, on March 15, the chairperson of the SEHBC wrote to the Association and advised that he would distribute the February 4, 2010 letter to the members and the SEHBC would receive "an update on [the] implementation of the Plan" at a meeting on March 24, 2010. Thereafter, the Association did not withdraw its appeal, and no respondent moved to dismiss it. The SEHBC later cancelled its March 24 meeting for reasons unknown to us.

On appeal, the Association raises issues that substantially mirror the specific charges raised in its February 4, 2010 letter. The challenges do not deal with a particular individual's denial of coverage for medication. They address the legality of the process by which the contract was awarded to Medco and the changes in prescription benefits allegedly implemented through that contract. The Association argues:

1) Medco's step-therapy criteria and procedure, relevant to coverage for and access to "nonpreferred" medications effectively changed the level of co-payments and benefits in violation of N.J.S.A. 52:14-17.46.6(f)(2)(b) and N.J.A.C. 11:24-18.2;

2) The changes effectuated through the Medco contract imposing "limitations, exclusions or waiting periods" can only be made by the SEHBC and only if the SEHBC finds them to be necessary or desirable, but the SEHBC impermissibly delegated that responsibility ...


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