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Click here for the full text of this decision FACTS:Medicaid is a health insurance program, jointly operated and funded by the federal and state governments for the medical care of low-income and other eligible persons. In Texas, the Texas Health and Human Services Commission is the agency charged with the responsibility for operating the program to conform with the federal guidelines. In 1998, the Texas Medicaid Vendor Drug Program rules were transferred administratively by the Texas Register from Title 25 of the Texas Administrative Code to Title 1. Former 25 Texas Administrative Code �35.611(6), which provided a delivery fee of $.15 per prescription on all Medicaid prescriptions filled, became 1 Texas Administrative Code �355.8551(6) without change. Former �35.611(6) and its replacement, �355.8551(6), provided: “A delivery fee shall be paid to approved providers offering no-charge prescription to all Medicaid recipients requesting delivery. The delivery fee is $.15 per prescription and is to be paid on all Medicaid prescriptions filled. This delivery fee is not to be paid for over-the-counter drugs, which are prescribed as a benefit of this program.” In 2002, HHSC proposed and adopted several changes to �355.8551, including one that would have completely eliminated the $.15 delivery fee in �355.8551(6). HHSC stated that the adopted rule made several changes to �355.8551, changing “the method of reimbursement for prescription delivery by eliminating the delivery fee and including prescription delivery expenses in the overall fixed component of the dispensing fee for all providers. The Texas Pharmacy Association, the National Association of Chain Drug Stores and the Long Term Care Pharmacy Alliance (appellants) opposed the adoption of the proposed amendments. The revised �355.8551 was to become effective on Dec. 16, 2002. To prevent the revisions from becoming effective, the Texas Pharmacy Association and other pharmacies filed a declaratory judgment action contending that the revisions were not adopted in compliance with the Administrative Procedures Act (APA) and seeking an injunction to keep in place the last valid rule. The district court entered a temporary restraining order that enjoined HHSC and its commissioner from implementing the rule amendments. The organizations nonsuited their suit on May 20, 2003, because HHSC filed a new proposed rule on May 12, 2003, that would repeal �355.8551 (as revised in 2002) and promulgate a new �355.8551. On May 12, 2003, HHSC proposed a repeal of the 2002 version of �355.8551 and the adoption of a new �355.8551. The proposed new �355.8551 was to include a change to �355.8551(6) that would read as follows: “A delivery fee shall be paid, subject to the availability of appropriated funds, to approved providers offering no-charge prescription to all Medicaid recipients requesting delivery. The delivery fee is $.15 per prescription and is to be paid on all Medicaid prescriptions filled. This delivery fee is not to be paid for over-the-counter drugs, which are prescribed as a benefit of this program.” In its preamble to the new �355.8551, HHSC stated that “[t]he changes are intended to reinstate program policy in effect before December 15, 2002.” HHSC made it clear that it was repealing the 2002 version of �355.8551(6) and returning to the language of former �35.611(6) and its replacement, �355.8551(6), except that HHSC was adding the emphasized phrase “subject to the availability of appropriated funds.” Thus, in the proposed 2003 rule, deliveries to nursing homes and other institutions were included in the $.15 delivery fee. But in the adopted 2003 rule, those deliveries were eliminated from the delivery fee. In their original petition for declaratory judgment filed in December 2003, the appellants claimed that HHSC deprived the appellants of an opportunity to argue against the new rule provision that became the 2003 rule and eliminated the $.15 delivery fee for deliveries to nursing homes and other institutions. In its original answer, HHSC set forth a plea to the jurisdiction, contending that HHSC was immune from suit for the appellants’ breach of contract claim. HHSC asserted that any action involving a claimed breach of contract by an agency must be brought before the state agency. HHSC also pleaded an affirmative defense, asserting that the appellants’ claims for damages and attorneys’ fees were barred by sovereign immunity. In August 2004, HHSC proposed an amendment to �355.8551(6) that changed the term “delivery fee” to “delivery incentive,” delineated “legend drugs” as the type of drugs that qualify for a delivery incentive, and added a provision for a “generic drug dispensing incentive.” The amended �355.8551(6) was adopted in November 2004. The elimination of the $.15 delivery fee for deliveries to nursing homes and other institutions was not dealt with in the 2004 amendment, and that provision remained unchanged. In April 2005, the appellants filed a motion for partial summary judgment, asking the trial court to enter judgment that HHSC had eliminated the $.15 delivery fee for deliveries to nursing homes and other institutions by adopting a rule that did not comply with the terms and provisions of the Administrative Procedures Act (APA). In their motion, the appellants also requested a judgment that the �355.8551(6) that existed prior to the 2003 rule be declared to be in effect and asked for the injunction sought in their original petition. The appellants then filed an amended original petition for declaratory judgment and an application for injunctive relief that essentially tracked their original petition. HHSC filed a plea to the jurisdiction and response to the appellants’ motion for partial summary judgment. In its plea to the jurisdiction, HHSC first urged that sovereign immunity barred the appellants’ contract and damage claims. HHSC then raised a standing issue, claiming that the appellants could not establish a vested interest in the delivery fee incentive because: 1. the vendor drug program is limited by the availability of appropriated funds; and 2. the delivery fee is only available to “approved providers” who are classified according to Pharmacy Delivery Evaluation Forms that provide that a delivery “to nursing homes or other similar group facilities does not constitute delivery.” Finally, HHSC asserted that this case was moot because the 2004 version of �355.8551(6) replaced the 2003 rule. The trial court granted HHSC’s plea to the jurisdiction, stating to the parties that the matter was moot. HOLDING:Reversed and remanded. The trial court stated that it considered the matter moot because the 2004 amendment to �355.8551(6) replaced the 2003 rule and the 2003 rule no longer existed. Both parties have treated the trial court’s ruling as having been based on mootness. In reviewing the record, the court did not see any other applicable theory that would support the trial court’s ruling. First, HHSC argued that the trial court was correct, because the appellants sought to invalidate an expired agency rule. The court, however, disagreed. The October 2003 version of �355.8551(6) still exists in an amended form, the court stated. The minor amendments in 2004 did not repeal or replace the portion of �355.8551(6) that the appellants complained about. The appellants’ complaint, the court stated, is that the substantive change in the 2003 rule was not adopted pursuant to the requirements of the APA. The question is whether the minor amendments to the 2003 rule that were made in 2004 rendered this matter moot. The court concluded that the matter was not moot, because the minor amendments in 2004 neither repealed the 2003 version of �355.8551(6) nor substantively changed the portion of the 2003 version that is the subject of appellant’s complaint. To adopt the trial court’s approach, the court stated, would mean that an agency can moot any challenge to a substantive change in a rule, made without following the requirements of the APA, by adopting a minor amendment to the new rule after a suit is filed. To allow such an easy way for an agency to moot a challenge would defeat the purposes of the APA, the court stated. OPINION:McCall, J.; Wright, C.J., and McCall and Strange, JJ.

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