Medicare Can Exclude HIV-Biased Insurer

(CN) - An insurance company that delayed and denied life-sustaining drugs to HIV and cancer patients properly lost its spot in Medicare's prescription drug program, the 9th Circuit ruled Tuesday.

Fox Insurance Co.'s case marks the first time a Medicare Part D contract termination has reached a federal appeals court.

That's not surprising, though, as Fox is also the first provider to have had its prescription coverage contract terminated by The Centers for Medicare & Medicaid Services (CMS). The agency announced the break in March 2010 after an investigation into a spate of patient complaints.

A CMS audit revealed that Fox, which had about 123,000 enrollees, had consistently failed to follow Medicare regulations, imposing "unapproved prior authorization and step therapy criteria that made it more difficult for beneficiaries to get drugs that are protected by law," including HIV, cancer, and seizure medications. The provider also subjected its enrollees to "improper hurdles, such as unnecessary tests and invasive medical procedures, as a condition to receiving their already delayed medications for serious medical conditions," according to the ruling.

After losing its administrative appeals, Fox filed two federal complaints in Arizona, one challenging the termination and the other objecting to a separate order that would have it repay the government a pro-rated amount of funding. U.S. District Judge Robert Bryan ruled for the government on both issues in Phoenix, and the 9th Circuit affirmed Tuesday.

The San Francisco-based panel found that CMS had every right to immediately terminate Fox's contract because to do otherwise would have endangered lives.

"The government's actions were more than justified, as Fox had risked permanent damage to its enrollees by ... improperly denying coverage of critical HIV, cancer, and seizure medications, and having no compliance structure in place," Judge Mary Schroeder wrote for the panel.

"The evidence supporting CMS's noncompliance conclusion ... is more than substantial," Schroeder added. "CMS found that Fox imposed unauthorized prior-authorization and step-therapy as conditions on various drugs up through the audit that took place March 2-4. These additional conditions could only properly have been imposed if CMS had pre-approved them."

In a 2012 statement, Fox blamed the problems on its former pharmacy benefit manager ProCare's failure "to upgrade its software in order to satisfy CMS requirements and instructions regarding prior authorization and protected class drugs."

"These claim denials drove CMS to take action against Fox in 2010, which resulted in the termination of its contract as a Medicare Part D provider," Fox said after a federal judge in Atlanta upheld a $3.3 million arbitration award. "Fox maintained that these denied claims, which were the impetus behind CMS's actions, were caused by ProCare's negligence and not any direct actions by Fox itself."

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