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Cutie v. Sheehan

United States District Court, N.D. New York

September 25, 2014

DANIEL J. CUTIE, and CUTIE PHARMA-CARE, INC. Plaintiffs,
v.
JAMES G. SHEEHAN, former New York State Medicaid Inspector General, in his individual; ANGELO J. RUPERTO, in his individual and official capacities; MARTIN MCMAHON, in his individual and official capacities; JOHN AND JANE DOES #1-20; and JAMES C. COX, Acting New York State Medicaid Inspector General, in his official capacity, Defendants.

DAVID M. COST, ESQ., LINDA J. CLARK, ESQ., HISCOCK & BARCLAY, Albany, New York, Attorneys for Plaintiffs.

C. HARRIS DAGUE, AAG, OFFICE OF THE NEW YORK, STATE ATTORNEY GENERAL, Albany, New York, Attorneys for Defendants James G. Sheehan, Angelo J. Ruperto, James C. Cox.

DENNIS A. FIRST, ESQ., MARGARET E. DUNHAM, ESQ., O'CONNOR, O'CONNOR, BRESEE & FIRST, PC, Albany, New York, Attorneys for Defendant, Martin McMahon.

MEMORANDUM-DECISION AND ORDER

MAE A. D'AGOSTINO, District Judge.

I. INTRODUCTION

On January 18, 2011, Plaintiffs commenced the present civil rights action pursuant to 42 U.S.C. § 1983. In their first amended complaint, Plaintiffs allege violations of their Due Process and Equal Protection Rights, "Stigma Plus" defamation, and various state law claims sounding in common law defamation, slander, liable per se, tortuous interference with contracts/business relations, and prima facie tort. See Dkt. No. 22.

Currently before the Court are Defendants' motions for summary judgment. See Dkt. Nos. 47 & 49.

II. BACKGROUND[1]

The New York State Department of Health ("DOH") is the single state agency responsible for supervising the administration of the Medical Assistance ("Medicaid") program in New York State. See Dkt. No. 47-1 at ¶ 1 (citing N.Y. Social Service Law ("SSL") § 363-a).[2] The Office of the Medicaid Inspector General ("OMIG") is an independent office within DOH that is responsible for the prevention, detection, and investigation of fraud and abuse in the Medicaid program and for sanctioning any person who commits unacceptable practices. See id. at ¶ 2 (citing N.Y. Public Health Law §§ 30 et seq. ). Under State law, the DOH and the OMIG are separate agencies with separate reporting responsibilities to the governor. See id. at ¶ 3. The OMIG's efforts are directed at preserving the integrity of the Medicaid program and ensuring provider compliance with applicable laws, regulations, rules and policies of the Medicaid program, as set forth in the New York Public Health Law, the New York Social Services Law, the regulations of the DOH, and the Department's Medicaid Provider Manuals and Medicaid Update publications. See id. at ¶ 5.

In advance of its mandate, OMIG possesses regulatory authority to sanction providers determined to be abusing the Medicaid program. See id. at ¶ 5. In this context, abuse can include, among other things, fraud and professional misconduct. See id. at ¶ 6. Sanctions available to OMIG include censure, reprimand, conditional or limited participation and exclusion from the Medicaid program. See id. at ¶ 7. An excluded provider is unable to bill Medicaid services during the pendency of its exclusion. See id. at ¶ 8.

Plaintiff Daniel Cutie is a licensed pharmacist in New York and co-owner of Plaintiff Cutie Pharma-Care, Inc. ("Pharma-Care"). See id. at ¶ 22. Plaintiff Pharma-Care is a Medicaid provider pharmacy located in Greenwich, New York. See id. at ¶ 10. Pharma-Care is a closed door, long term care provider pharmacy. See id. at ¶ 11. In this context, "closed door" means that the pharmacy does not service walk-in customers, and only services specific facilities. See id. at ¶ 12. Although Pharma-Care services individuals, it primarily services "long term care providers, " such as assisted living facilities, enriched living or group home residents, and facilities that are under the regulations of the Department of Social Services, children's homes, Office of People With Developmental Disabilities ("OPWDD") facilities, rehabilitation centers under the auspice of the Office of Alcohol and Substance Abuse Services ("OASAS"), and home health care individuals. See Dkt. No. 56-2 at ¶ 12.

During the relevant time period, 2005-2010, the majority of Pharma-Care's customers resided at Adult Care Facilities ("ACFs") and OPWDD facilities. See id. at ¶ 13. An OPWDD facility is generally a State run group home populated by individuals with developmental disabilities. See id. at ¶ 14. An ACF is an assisted living facility servicing individuals that require assistance in daily living due to age, condition or disability. See Dkt. No. 47-1 at ¶ 14. ACFs differ from nursing homes insofar as nursing homes require nursing care 24-hours a day and have more restrictions and guidelines regarding monitoring, while ACFs have less institutional controls, including less nursing presence. See id. at ¶ 15.

Plaintiff Pharma-Care utilizes a prescription dispensing mechanism called the Medicine-on-Time system. See id. at ¶ 18. The system is a multi-dose, commingled packaging system where medicines that are given at certain times of day are packaged together in individual cells and placed together in monthly trays, such that the individual taking the medication or the aide, or nurse administering the medication can break out the cell containing all of the medications the person requires at the particular time of day needed. See id. at ¶ 19. The Medicine-on-Time frames are packaged by Pharma-Care's pharmacists or pharmacy technicians at the pharmacy and delivered to the facilities. See id. at ¶ 20. Before the frames are delivered to the customers, a pharmacist checks each cell to ensure that the medications are correct. See Dkt. No. 56-2 at ¶ 20.

As a licensed pharmacy and pharmacist within the State of New York, Plaintiffs are subject to the jurisdiction of the New York State Department of Education ("SED"). See Dkt. No. 47-1 at ¶ 23. Pursuant to this jurisdiction, the SED maintains authority to conduct investigations of its pharmacy licensees for professional misconduct. See id. at ¶ 24. SED maintains statutory and regulatory power to discipline its professional licensees for any activity deemed "unprofessional conduct." Id. at ¶ 25.

On June 14, 2006, SED conducted a pharmacy inspection of Pharma-Care in Greenwich, New York. See id. at ¶ 26.[3] According to Plaintiffs, the SED inspection was the result of a complaint filed by Pharma-Care's competitor, Omnicare, concerning their use of the multi-dose system. See Dkt. No. 56-2 at ¶ 27. The initial on-site visit was conducted by SED Senior Investigators Steve Grogan and David Smith. See Dkt. No. 47-1 at ¶ 28.

During the on-site inspection, Defendants contend that the investigators discovered activities which they deemed to constitute unprofessional conduct. See id. at ¶ 29. The alleged misconduct was set forth in the Final Investigative Report issued by Senior Investigator Grogan. See id. at ¶ 30. The Final Investigation Report alleged the following violations against Pharma-Care, Daniel Cutie and Wayne Thygesen, a pharmacist at Pharma-Care:

A) Placing in stock any pharmacy any part of a Rx compounded or dispensed drug which is returned by a patient in violation of 29.7(a)(14), evidenced by receiving patient's medication from their accounts, repackaging them and maintaining the balance of the script among the stock of the registered pharmacy.
B) Outdated/misbranded/adulterated drugs maintained in stock in violation of 29.7(a)(16)(17); 6811(9)(11)(12) as evidenced by rx vials and bottles found to contain drug tablets that had been cut in half that lacked any type of identification, manufacture[rs'] lot number and expiration date as required while being maintained in the drug stock.
C) Adulterating drugs in stock in violation of 29.7(a)(16); 6811(10); 6815(1), as evidenced by rx vials found at work stations and filling area, that contained medications that had been cut in half or smaller by staff employees.
D) Sale of a misbranded/adulterated or outdated drug in violation of 29.7(a)(16)(17); 6811(9)(11)(12) based on admissions during taped interviews that employees would rummage through bins containing adulterated/misbranded drugs as documented in item A, to fill patients orders on occasion from medications contained in the 6-plastic bins found on a work counter in the registered pharmacy.
E) Rx's for controlled substances filled/refilled in excess of legal quantities in violation of 6509(2); 80.70; 80.71; 80.72, as evidenced by controlled faxed prescriptions found during the inspection that had been filled over the 5 day allowed limit and the admission by pharmacists Cutie and Thygesen that faxed controlled scripts were filled at their face value when received.
F) Oral prescriptions (controlled substances) procedures do not comply with regulations of the Education Department and PHL in violation of 29.7(a)(2); 80.68; 80.70; 80.73(g) as evidenced by controlled phone-ins and faxed controlled scripts that lacked the required hard cover attached to the oral order and the required information documented on the scripts. This based upon violations noted at the time of inspection and oral admissions by the pharmacists that the required procedures were not being followed.
G) Dispensing pursuant to an invalid Rx in violation of 29.7(a)(1); 6810(1); PHL 80.67; 80.69; 80.70; 80.74 as evidenced at time of inspection physician orders being filled in lieu of a required prescription and faxed memos from facilities indicating new orders on a patient that were filled without an official prescription being received. Oral admissions by both pharmacists acknowledged this was a common practice and samples taken to show violations.

Dkt. No. 47-13 at 16-17. The investigators confiscated the drugs they deemed to be misbranded or adulterated. See Dkt. No. 47-1 at ¶ 32. During an interview with Senior Investigator Grogan, Wayne Thygesen admitted that when they were "in a pinch" because they had run out of a drug, they would use the drugs returned from other patients to fill at least one day of the prescription so that they could reorder the drug and fill the remainder of the prescription. See Dkt. No. 47-14 at 3-5.

Following the conclusion of their investigation, disciplinary recommendations were made and the matter was referred to the prosecutions unit for review and determination of disciplinary measures. See Dkt. No. 47-1 at ¶ 37. The SED prosecutions unit thereafter engaged in settlement discussions with Plaintiffs and their then counsel regarding the charged violations over the next few years. See id. at ¶ 38. In furtherance thereof, a draft Consent Order was proposed which would have been in full satisfaction of the professional misconduct. See id. at ¶ 39. As part of the draft Consent Order, Plaintiffs would have pled guilty to, among others, the following charge: "Pharmacists received returned drugs from the facility accounts (such as adult homes), and repackaged and/or dispensed the drugs, and/or maintained the balance of the prescriptions among the pharmacy stock, in violation of 8 NYCRR section 29.7(a)(14)." Id. at ¶ 40; see also Dkt. No. 47-15 at 4-5.

Prior to finalization or execution, the draft Consent Order was sent by Plaintiffs' then counsel to OMIG for review seeking an advisory opinion as to whether OMIG would take any of its own disciplinary measures if the draft Consent Order was executed. See id. at ¶ 41. Specifically, Plaintiffs' counsel asked OMIG whether the pharmacy would be excluded from the Medicaid program if they entered in to the draft Consent Order. See id. at ¶ 42; see also Dkt. No. 47-6 at 1. In response, Deputy Medicaid Inspector General Michael Little stated that "the specification of misconduct that has been charged.... are of such significant concern to the OMIG that an administrative investigation would be initiated and an exclusion by our office is the probable outcome." Id. at ¶ 43; see also Dkt. No. 47-6 at 9.

On May 28, 2009, a revised final Consent Order was executed between SED's State Board of Pharmacy and Plaintiffs. See id. at ¶ 44. The final Consent Order was ultimately approved by the SED Board of Regents on or around November 17, 2009. See id. at ¶ 45. Although the final Consent Order charged Plaintiffs with eight separate counts of misconduct, Plaintiffs only admitted guilt to three of the charges in order to resolve the matter. See Dkt. No. 56-2 at ¶ 46. Specifically, Plaintiffs admitted guilt to the following:

Pharmacists received returned drugs from the facility accounts (such as adult homes) and/or maintained the balance of the prescriptions among the pharmacy stock, in violation of 8 NYCRR section 29.7(a)(14).
* * * * *
Pharmacists dispensed oral prescriptions for controlled substances that lacked required information documented on the oral prescriptions and/or lacked the required hard cover prescription attached to the oral prescription or order, in violation of 8 NYCRR section 29.7(a)(2) by failing to comply with 10 NYCRR section 80.68 and/or 80.70 and/or 80.73(g).
Pharmacists dispensed drugs without valid prescriptions, in that physician orders and/or faxed memos were used instead of required official prescriptions, in violation of 8 NYCRR section 29.7(a)(1) by failing to comply with 10 NYCRR section 80.67 and/or 80.68 and/or 80.69 and/or 80.70 and/or 80.74.

Dkt. No. 47-16 at 3, 5-7. Regarding the first charge to which Plaintiffs admitted guilt, the regulation at issue provides that "[u]nprofessional conduct in the practice of pharmacy shall include... [p]lacing in stock of any pharmacy any part of any prescription compounded or dispensed which is returned by a patient[.]" 8 N.Y.C.R.R. § 29.7(a)(14).[4] Additionally, by virtue of the final Consent Order, Plaintiffs agreed to the following penalties: (1) Registration to operate a pharmacy in the State of New York subject to a Censure and Reprimand; (2) Placement on probation for a period of two (2) years; and (3) A fine of ten thousand dollars ($10, 000). See Dkt. No. 47-1 at ¶ 50.

Following approval of the final Consent Order by the Board of Regents, the disciplinary resolution was placed on the SED's public website in the Office of the Professions, Professional Misconduct Enforcement, Summaries of Regents Actions on Professional Misconduct and Discipline section. See id. at ¶ 51; see also www.op.nysed.gov/opd/nov09.htm#cuti2 (last visited September 18, 2014). The entries read as follows:

Cutie Pharma-Care, Inc., 114 Main Street, Greenwich, NY Profession: Pharmacy; Reg. No. 025438; Cal. No. 24134 Regents Action Date: November 17, 2009 Action: Application for consent order granted; Penalty agreed upon: Censure and Reprimand, 2 years probation, $10, 000 fine. Summary: Registrant admitted to the charge of violating pharmacy laws and regulations.
Daniel J. Cutie, Greenwich, NY Profession: Pharmacist; Lic. No. 039311; Cal. No. 24133 Regents Action Date: November 17, 2009 Action: Application for consent order granted; Penalty agreed upon:
Censure and Reprimand, 2 years probation, $5, 000 fine. Summary: Licensee admitted to the charge of violating pharmacy laws and regulations.

Id.

The OMIG Administrative Remedies Unit ("ARU") is the unit within the agency that handles recommendations of disciplinary sanctions for providers committing misconduct and/or fraud. See id. at ¶ 53. One of the methods the ARU uses to identify providers who may have engaged in misconduct warranting OMIG disciplinary action is to review SED's public website for reports of professional misconduct. See id. at ¶ 54. In November of 2009, the ARU became aware of Plaintiffs' admitted violations of pharmacy laws and regulations and their disciplinary censure by SED. See id. at ¶ 55.

As per agency practice, upon learning of potential violations, fraud or abuse of Medicaid, the ARU initiated an inquiry and referred the matter to the specific unit within OMIG that handled pharmacies and pharmacists. See id. at ¶ 56. Accordingly, the matter was referred to Defendant Angelo Ruperto, OMIG's pharmacist supervisor. See id. at ¶ 57. As one of the agencies lead investigators of pharmacies, Defendant Ruperto was asked to provide an opinion based on his professional knowledge, his background as a licensed pharmacist, and his own findings, as to the severity and/or degree of the professional misconduct committed by Plaintiffs. See id. at ¶ 58.[5]

At some point following the request from ARU for his opinion regarding the nature and severity of Plaintiffs' admitted violations of pharmacy laws and regulations, Defendant Ruperto contacted the lead investigator of SED's investigation of Pharma-Care, Steve Grogan. See id. at ¶ 61; see also Dkt. No. 56-2 at ¶ 62. Investigator Grogan eventually provided Defendant Ruperto with a copy of the investigation report. See id. at ¶ 63. Defendant Ruperto also obtained a copy of the final Consent Order, detailing the allegations and charges of professional misconduct to which Plaintiffs pled guilty, and SED's subsequently imposed sanction. See Dkt. No. 47-1 at ¶ 64. Defendant Ruperto contends that, based upon his review and knowledge of the violations to which Plaintiffs pled guilty, his discussions with SED investigator Grogan, his review of the SED investigative materials, his own knowledge of the pertinent regulations and his experience as a pharmacy investigator, he determined that the violations of law and professional misconduct admitted were "severe in nature." Dkt. No. 47-1 at ¶ 65. Plaintiffs, however, contend that Defendant Ruperto's motivation for his actions was his "dislike for Cutie and its medication distribution system." Dkt. No. 56-2 at ¶ 65. Plaintiffs assert that, up to and including ...


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