New Mexico Statutes
Article 2 - Public Assistance Act
Section 27-2-16 - Compliance with federal law.

A. Subject to the availability of state funds, the human services department may provide assistance to aged, blind or disabled individuals in the amounts consistent with federal law to enable the state to be eligible for medicaid funding. Individuals shall be determined to be aged, blind or disabled according to regulations of the human services department.
B. If drug product selection is permitted by Section 26-3-3 NMSA 1978, reimbursement by the medicaid program shall be limited to the wholesale cost of the lesser expensive therapeutic equivalent drug generally available in New Mexico plus a reasonable dispensing fee of at least three dollars sixty-five cents ($3.65).
History: 1953 Comp., § 13-17-18, enacted by Laws 1974, ch. 31, § 1; 1982, ch. 26, § 2; 1984, ch. 27, § 1.
Cross references. — For medical assistance programs generally, see 27-2-12 NMSA 1978.
For programs for persons with special medical needs generally, see Chapter 27, Article 4 NMSA 1978.
Subsection B of Section 27-1-16 does not apply to New Mexico's managed health system or to managed care organizations. Starko, Inc. v. N.M. Human Servs. Dep't, 2014-NMSC-033, rev'g 2012-NMCA-053, 276 P.3d 252.
Subsection B of Section 27-2-16 NMSA 1978 applies to managed care organizations and the medicaid managed care program. Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, 276 P.3d 252, cert. granted, 2012-NMCERT-003.
Subsection B of Section 27-2-16 NMSA 1978 creates a private right of enforcement against managed care organizations. Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, 276 P.3d 252, cert. granted, 2012-NMCERT-003.
Subsection B applies whenever a substitution is possible. — Subsection B of Section 27-2-16 NMSA 1978 applies whenever a pharmacist has the discretion to issue a lesser expensive drug that is the therapeutic equivalent to the prescribed drug even if a substitution does not occur. Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, 276 P.3d 252, cert. granted, 2012-NMCERT-003.
Statutory rights not waived by entering into managed care contracts. — Where, in a class action, pharmacists sued to enforce their rights to reimbursement under Subsection B of Section 27-2-16 NMSA 1978; when the state converted the medicaid program from a fee-for-service program to a managed care program, pharmacists were required to enter into new contracts with managed care organizations; the new contracts required the organizations to reimburse pharmacists at the current and applicable medicaid reimbursement rates which were less than the required rates under Subsection B; pharmacists who refused to participate in the new contracts were terminated from the active provider list by the human services department; and when the state converted the medicaid program to a managed care program, pharmacists sought a temporary restraining order to determine the effect of entering into the new contracts and pursuant to the court's order, the department entered into provider contracts with the organizations which provided that the new contracts with pharmacists did not waive pharmacists' statutory rights to sue under Subsection B, pharmacists did not waive their statutory rights to sue pursuant to Subsection B by entering into the new contracts. Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, 276 P.3d 252, cert. granted, 2012-NMCERT-003.
Reduction of reimbursement rates without federal approval. — Where, in a class action, pharmacists sued to enforce their rights to reimbursement under Subsection B of Section 27-2-16 NMSA 1978, alleging that the human services department failed to reimburse pharmacists in accordance with medicaid legislation for drug ingredient costs; from January 1, 1991 through June 30, 1997, the department reimbursed pharmacists at the rate of the average wholesale price, minus ten and one-half percent; effective June 30, 1997, the department reduced the ingredient cost to the average wholesale price, minus twelve and one-half percent; federal approval of the reduction, which was necessary, was given in April 1998, retroactive to January 1, 1998; and pharmacists claimed that the department did not have authority to reduce the reimbursement rate during the six-month period prior to federal approval, the federal statute did not require prior approval of state plans, retroactive approval was sufficient, and pharmacists did not have a cause of action against the department for reimbursement for the six-month period when reimbursement rates had been reduced without federal approval. Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, 276 P.3d 252, cert. granted, 2012-NMCERT-003.
Breach of contract claim against the Human Services Department. — Where, in a class action, pharmacists sued to enforce their rights to reimbursement under Subsection B of Section 27-2-16 NMSA 1978; when the state converted the medicaid program from a fee-for-service program to a managed care program, the human services department entered into provider contracts with managed care organizations that required the organizations to provide medical care and pharmacy services, explicitly incorporated all applicable statutes, and provided that contracts between the organizations and pharmacists would not waive pharmacists' statutory rights to sue pursuant to Subsection B; Subsection B's requirement that pharmacists be reimbursed with the average wholesale price, plus a reasonable dispensing fee when pharmacists dispense lesser expensive, therapeutic equivalent drug, was a term of the provider agreements and pharmacists could bring a breach of contract action against the department for the medicaid program's failure to reimburse pharmacists in accordance with Subsection B. Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, 276 P.3d 252, cert. granted, 2012-NMCERT-003.
Unjust enrichment claim against managed care organizations. — Where, in a class action, pharmacists sued to enforce their rights to reimbursement under Subsection B of Section 27-2-16 NMSA 1978; the human services department entered into provider contracts with managed care organizations that required the organizations to pay pharmacists in accordance with Subsection B; and pharmacists alleged that the department paid the organizations in compliance with the statute and that the payments were partially retained by the organizations, pharmacists stated a claim in equity for unjust enrichment. Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, 276 P.3d 252, cert. granted, 2012-NMCERT-003.
Class certification was proper. — Where, in a class action, pharmacists sued the human services department and managed care organizations to enforce pharmacists' rights to reimbursement under Subsection B of Section 27-2-16 NMSA 1978; the department entered into provider contracts with the organizations to provide medical care and pharmacy services; the organizations entered into contracts with pharmacists to provide pharmacy services; the number of pharmacist who were class members was between two and three hundred; the pharmacists were widely dispersed across the state; the relationship of each pharmacist to the department and the organizations and the facts necessary to decide the case as to each class member were essentially the same; each class member sought an interpretation of Subsection B that required either the department or the organizations to pay; there was no evidence that the interests of any individual class member were contrary to those of the entire class; to prevail, each class member needed a holding on all critical issues common to all class members; judicial resources would be saved by certification; the number of class members was manageable; and the damages of each class member could be calculated in a similar manner, the court did not abuse its discretion in finding that the requirements of Paragraph A of Rule 1-023 NMRA were met. Starko, Inc. v. Presbyterian Health Plan, Inc., 2012-NMCA-053, 276 P.3d 252, cert. granted, 2012-NMCERT-003.
No denial of due process. — Where human services department executives contracted with managed care organizations in such a way that resulted in pharmacists being paid a dispensing fee of less than the statutory amount of $3.65, the pharmacists were not denied due process by the state because the pharmacists were being paid the dispensing fee under contracts the pharmacists voluntarily entered into with the managed care organizations and because the violation of the substance of the state law is not a violation of a procedural guarantee. Starko, Inc. v. Gallegos, 2006-NMCA-085, 140 N.M. 136, 140 P.3d 1085, cert. denied, 2006-NMCERT-007, 140 N.M. 279, 142 P.3d 360.
Am. Jur. 2d, A.L.R. and C.J.S. references. — 79 Am. Jur. 2d Welfare Laws §§ 15, 32 to 41, 43.
Residence required for purpose of old-age assistance, 43 A.L.R.2d 1427.
What constitutes "disability" within federal Social Security Act, 77 A.L.R.2d 641.
Use of medical-vocational guidelines (20 CFR Part 404, Subpart P, Appendix 2) in determining disability of social security benefits claimant, 60 A.L.R. Fed. 796.
81 C.J.S. Social Security and Public Welfare §§ 94 to 112.

Structure New Mexico Statutes