For Compounding Pharmacy, it Pays to be a “Health Care Provider” in Texas

What’s in a name? Quite a bit if you are in the business of dispensing prescription medications in Texas. Last week, the Texas Supreme Court overturned the decisions of two lower courts and ruled in favor of a compounding pharmacy and several of its licensed pharmacist employees who claimed that they are “health care providers” entitled to protections under the Texas Medical Liability Act (“MLA”). Randol Mill Pharmacy et al. v. Miller et al., No. 13-1014 (April 24, 2015).

Plaintiff, Stacey Miller, alleged she suffered blindness in both eyes as the result of a severe adverse reaction to a compounded drug, lipoic acid, administered via weekly injections by her physician as a course of treatment for Hepatitis C. Defendants moved to dismiss on the grounds that plaintiffs failed to serve expert reports early in the litigation process as required by the MLA. Specifically, the Act requires that a plaintiff serve an expert report “for each physician or health care provider against whom a [health care] liability claim is asserted.” Tex. Civ. Prac. & Rem. Code § 74.351(a). Plaintiffs argued in opposition that their claims did not constitute “health care liability claims” subject to the statute’s requirements. This argument passed muster in the two lower tribunals but did not convince the Texas Supreme Court, which examined the issue for the first time.

The MLA expressly provides that pharmacies and licensed pharmacists are “health care providers” with respect to “those activities limited to the dispensing of prescription medicines which result in health care liability claims.” Tex. Civ. Prac. & Rem. Code §74.001(22). They are not considered health care providers with respect to any other common law cause of action, including “for the sale of mishandled or defective products.” Id. In interpreting the statute, the court also examined the Texas Pharmacy Act and regulations thereunder and agreed with defendants that the act of compounding the injectable lipoic acid administered to plaintiff constituted the “dispensing of prescription medicines” (Opinion, p. 10). Noting that the Pharmacy Act permits a pharmacy to dispense and deliver a reasonable quantity of a compounded drug for office use, the court was not persuaded, as the lower courts were, to make a technical distinction based on the fact that plaintiff’s physician’s order for the compounded lipoic acid did not identify the particular patients to whom the drug would be administered. Id. at 11.

The final disputed question before the court was whether the defendants’ complained-of actions resulted in “health care liability claims,” which turned on whether plaintiffs asserted a cause of action for a “claimed departure from accepted standards of medical care, or health care, or safety or processional or administrative services directly related to health care,” which proximately resulted in Miller’s injury. Tex. Civ. Prac. & Rem. Code §74.001(13). The court determined that plaintiffs’ claims that defendants were negligent in compounding the drug and including inadequate warnings and instructions, whether stated as negligence or breach of warranty, “rather clearly allege that the pharmacist defendants departed from accepted standards of health care” (Opinion, p. 15). Despite plaintiffs’ urging, the court would not permit claims that were arguably “in the nature of product-liability claims,” and thus outside the purview of the MLA, to “swallow” the MLA’s application to causes of action involving negligent compounding. Id. Because Miller’s claims “implicate[d] a host of complex regulations governing compounding practices in Texas,” the court concluded that the testimony of experts in the field would inevitably be required. Id. at 16.

Whether or not the idea of calling a pharmacy a “health care provider” sits well with you, this result makes sense given the nature of plaintiffs’ allegations and the statutory framework at issue. Allowing plaintiffs to sidestep the requirement of providing an expert report in the limited context of negligent compounding claims would be a risky proposition in light of the Texas regulatory scheme.[1] This is particularly true since there is generally no dispute among the Texas appellate courts that the MLA applies to a typical case against a pharmacy alleging misfilled prescriptions. See id. at 7. To the extent Texas has enacted special protections to limit frivolous lawsuits alleging departures from standards of health care, the licensed pharmacy and pharmacists who compounded the drug administered to Ms. Miller should be afforded those protections.

[1] Notably, compounding pharmacies in and out of Texas are subject to federal regulation thanks to the ongoing implementation of the Compounding Quality Act, signed into law following a 2012 fungal meningitis outbreak, traced back to a Massachusetts-based drug compounder, which was allegedly responsible for 64 deaths.