Judge Says HMO Cannot Be Forced to Issue Drug

A state judge in Sacramento ruled Tuesday that HMO regulators cannot force Blue Shield of California to provide a weight-loss drug to an obese member.

Superior Court Judge Joe S. Gray issued a preliminary injunction that prevents the state from penalizing the HMO for not covering the drug Xenical. The state had proposed to fine Blue Shield $270,000 for refusing to participate in an independent medical review that later determined that the patient should receive the medicine.

Gray’s ruling marks the second time in less than a year that a court has rebuked the state for ordering a health maintenance organization to provide prescription drugs. In the first case, in July, another Sacramento judge said the state could not require Kaiser Permanente to cover Viagra or other sexual-dysfunction drugs.

The state is appealing the Viagra decision. Officials said Tuesday that they had not decided yet whether to back down, push for a full trial or seek an expedited appeal in the Xenical case.

If the state had succeeded in ordering Blue Shield to pay for Xenical, the HMO’s contracts with employers would have been in jeopardy, said Blue Shield spokesman Tom Epstein. The member’s HMO policy specifically excludes coverage for weight-loss drugs, Epstein said.

“If a state agency can come in and rewrite a valid contract that they’ve already approved, that will create great uncertainty and is unfair to insurers and will result in higher premiums,” he said. “In the long run, that’s bad for most consumers.”

That said, Blue Shield decided to pay for Xenical for its Southern California member before filing its lawsuit. The HMO will continue paying for the drug despite the ruling, Epstein said, because the case is likely to continue.

The California Department of Managed Health Care claimed that a November 2000 regulation mandates coverage for “all medically necessary outpatient prescription drugs,” which would include Xenical in this case. The woman’s doctor said the drug was necessary, as did an independent reviewer.

The agency’s director, Daniel Zingale, said he was particularly disappointed that Blue Shield refused to participate in that independent medical review, which is a core component of the state’s managed-care reform. The review process allows HMO members to appeal treatment denials to a medical expert not affiliated with the insurer.

“I don’t have any regret for siding with the patient in this case,” Zingale said.

But Zingale said he understands the fiscal concerns raised by HMOs.

“We need to strike a balance that does require HMOs to provide truly medically necessary drugs, particularly life-preserving drugs, but at the same time does not break the bank,” he said. “There’s a reasonable disagreement about how to strike that balance.”

Blue Shield said it would like to work with the state to avoid future confrontations.

“We would be delighted to sit down and talk to the department about how to best handle cases like this and to assure that our members are getting the treatment they deserve,” Epstein said.