NABP Legal Briefs: I.N.S.P.E.C.T. . . . Find Out What It Means To Me

May 3, 2011 1:10 pm

Originally published in the May 2011 NABP Newsletter

By Dale J. Atkinson, JD

Providing members of the boards of pharmacy, along with administrative staff, inspectors, and attorneys with certain immunity protections is essential to the efficient and undeterred operations of any such administrative agency. In short, regulatory board personnel acting within the scope of authority and in good faith will likely be provided with protections from liability based upon challenges from disgruntled licensees.

Of course, in addressing complex legal issues as applied to equally complex fact patterns, mistakes may be made in the administrative process providing a basis for challenging the decision of the regulatory board. Substantiating on appeal a legal basis for reversing and/or remanding an administrative ruling does not consequently provide a basis for subjecting the administrative board and/or it members to liability in the form of damages. Importantly, the agency personnel must act within the scope of authority and in good faith. Consider the following.

The Washington State Board of Pharmacy conducts periodic inspections of pharmacy permit holders to determine compliance with applicable laws regulating the practice of pharmacy. Board inspectors assign numeric grades to each facility resulting in recognition as “class A” (score of 90 to 100), “conditional” (score of 80 to 90), or unsatisfactory (score below 80). A pharmacy receiving an unsatisfactory grade is subject to disciplinary action if its score does not increase to 90 or better within 14 days of the unsatisfactory finding. Thus, such pharmacies are subject to re-inspections on short notice. Further, the Board is authorized to summarily suspend a pharmacy’s permit for an unsatisfactory classification if the pharmacy’s conditions “represent a clear and present danger to the public health, safety, and welfare.” A summary suspension results in immediate loss of the permit (or pharmacist’s license) without a hearing. Shortly after such a summary suspension, the licensee and/or permit holder will be afforded a hearing on the merits.

An individual (licensee) was licensed as a pharmacist in 1980. In 1995, the licensee purchased a pharmacy (facility) and acted as its sole pharmacist. In December 1998 while undertaking routine inspections, the facility was the subject of an unsatisfactory score of 79. In February 1999, the facility had improved its conditions and received a class A score of 94. Despite these improved conditions, the Board’s two inspectors (collectively referred to as inspectors) re-inspected the facility in July 1999 and provided an unsatisfactory score of 48. In August 1999, the inspectors graded the facility unsatisfactory with a score of 56.

The licensee alleged that the inspectors subjected him to non-stop harassment, including yelling and pounding on the counters while the licensee was attempting to select, count, and prepare medications. Based upon the record established in the ensuing litigation, the licensee and Board had had numerous interactions related to citations for dispensing in non-child-resistant containers and without a written request, failing to obtain chronic conditions of patients from pharmacy, incorrect National Drug Code numbers, improper recordkeeping, and others. Many of the encounters involved the inspectors and some of the interactions resulted in lost points during the facility inspections.

Based upon the unsatisfactory inspection reports, the executive director of the Board filed an ex parte motion for summary suspension of the facility permit and license, effectively closing the pharmacy. A summary suspension occurs without a hearing and is granted under circumstances whereby the public are placed at serious risk of significant harm. Under circumstances where a summary suspension is granted, the license holder will be provided with a hearing within a time period specified in law. The potential or imminent risk to the public provides a basis for the immediate suspension of the license. On August 17, 1999, and without a hearing, the facility permit and pharmacist license were summarily suspended by the Board. The licensee was notified of the suspensions and the docketing of a September 10, 1999 hearing date. Specifically, the notice provided to the licensee stated that if a written motion to challenge the summary suspension were filed, he would waive his right to the September 10, 1999 hearing.

On August 30, 1999, the licensee waived his right to the expedited hearing by filing a motion to modify and stay the ruling of the Board. This motion was denied and a hearing was eventually set for December 7, 1999. The summary suspension caused the licensee and his business to incur substantial financial losses. Based upon his inability to fund a defense, the licensee entered into a consent agreement whereby the license and facility permit were suspended for a five-year period. In addition, the consent agreement “acknowledge[d] that the evidence is sufficient to justify the . . . findings” and he waived his right to a full hearing and was accepted and entered by the Board in February 2000. The consent agreement did not address a right to sue.

In 2002, the licensee filed suit against the state of Washington, the Washington State Department of Health, the Board, the two inspectors, and the executive director. The lower court granted summary judgment in favor of the defendants on multiple issues, but allowed certain counts against the inspectors in their individual capacities to stand. In addition, counts related to negligent supervision and interference with a business were also allowed to proceed. The Board appealed the lower court ruling and the appellate court dismissed under summary judgment all counts against the defendants based upon immunity, the fact that no due process violations occurred, and failure to exhaust administrative remedies. Note, summary judgment basically means that the litigation can be decided under matter of law in that there are no material issues of fact under dispute. Thus one issue on appeal would be whether there exists a genuine issue of material fact. The licensee appealed the matter to the Washington Supreme Court.

Initially, the Supreme Court noted that the licensee did not appeal the finding of absolute immunity related to the actions of the executive director and affirmed the dismissal of him from the litigation. Next, the court turned to the issue of whether the inspectors were entitled to qualified immunity. The court identified two questions to consider. First, whether the licensee’s allegations establish a connection between the actions of the inspectors and a violation(s) of a constitutional right. Second, whether the conduct of the inspectors was objectively reasonable in light of clearly established law.

Before addressing the specific two questions above, the court analyzed the due process rights to which the licensee may be entitled. In its review, the court held that, in spite of the fact that the inspectors were not the ultimate decision-makers regarding the fate of licensees, such inspectors can cause the violation of due process rights through their actions. That is, the actions of those involved in the investigative process can, under certain circumstances, form the basis for liability. Indeed, the federal statute under which the litigation was pursued states that persons who, under color of any statute subjects or causes to be subjected, any citizen to be deprived of certain rights may be subject to liability. Thus, if the inspectors wrongfully fabricated evidence of an emergency causing the summary suspension of the licenses, such may subject the defendants to liability.

Turning its attention to the issue of whether there exists a genuine issue of material fact, the court held in favor of the licensee/permit holder. The court noted that a reasonable juror could infer that the inspectors arbitrarily lowered the inspection scores of the licensee under the facts known to the court. The opinion reviewed the numerous facts regarding the 1998 and 1999 inspections of the pharmacy and, “in a very close case,” found that a genuine issue of material fact existed as to whether the inspectors wrongfully fabricated an emergency and knew or should have known such fabrication would cause the immediate suspension of the license or permit without a hearing.

Likewise, the court found the existence of issues of material fact when assessing the constitutional claims of the licensee. It noted that the Board did not present irrefutable evidence that the violations discovered by the inspectors during the 1998 and 1999 inspections would have typically resulted in inspections scores of 48 and 56. Based upon the allegations of the complaint, the court held that a reasonable juror may credit the licensee’s version of the events, rather than that of the inspectors.

Next, the court addressed the issue of qualified immunity and whether the defendants should be afforded protections thereunder. It stated that government officials performing discretionary functions are immune “if their conduct is objectively reasonable when measured against clearly established law.” The court held that the inspectors should have known under these circumstances that their actions (perhaps fabricating circumstances which would result in an emergency suspension without a hearing) could reasonably result in a violation of constitutional rights. Accordingly, the court held that the inspectors were not entitled to qualified immunity.

Finally, the court held that the licensee did indeed exhaust his administrative remedies, a prerequisite to pursuing the litigation. It stated that the Board arrived at a final determination defined as a definitive act of the agency, which is binding until and unless set aside by a court. The court noted that the waiver by the licensee of a right to a prompt hearing did not change the fact that the Board reached a final determination as it agreed to the entry of the consent agreement.

Accordingly, the Washington Supreme Court reversed the appellate court and found that there exist genuine issues of material fact, which preclude summary judgment.

Pharmacy board members, staff, and other agency personnel must be aware of their duties and responsibilities and operate under the delineated authority of the board and in good faith at all times. Immunity principles will generally protect regulatory persons who follow this mantra. There are many additional facts surrounding the above case, which cannot be described in this Newsletter article. However, to the extent discretionary acts are undertaken, agency personnel, such as inspectors, need to be fully trained and aware of the application of these acts.

Jones v State of Washington, Department of Health, 2010 WL 4352199 (WA 2010).