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Apollo Enterprises, Inc. v. Scripnet, Inc.
December 4, 2009
301 S.W.3d 848
Published Opinion

Apollo Enterprises, Inc. v. Scripnet, Inc.

Court of Appeals of Texas,


APOLLO ENTERPRISES, INC. and WorkingRx, Inc., Appellants,


SCRIPNET, INC., Appellee.

No. 03–07–00551–CV.


Dec. 4, 2009.

Attorneys & Firms

*851 Brendan A. Day, Baker Botts, L.L.P., Austin, TX, for Appellants.

Robert D. Stokes, Flahive, Ogden & Latson, Austin, TX, for Appellee.

Before Chief Justice PEMBERTON and WALDROP.



This appeal requires us to consider the breadth of the exclusive jurisdiction that the legislature has vested in the Division of Workers’ Compensation, Texas Department of Insurance (the Division)1 to determine “disputes over the amount of payment due” from workers’ compensation insurance carriers to reimburse pharmacies for health care provided to workers’ compensation claimants. See Howell v. Texas Workers’ Comp. Comm’n, 143 S.W.3d 416, 428–29, 434–38 (Tex.App.-Austin 2004, pet. denied). Specifically, we must consider whether this jurisdiction extends to certain tort claims asserted against a pharmacy benefits manager by a pair of competitive rivals that contract with pharmacies to purchase assignments of workers’ compensation reimbursement claims. In response to a plea to the jurisdiction based on exclusive jurisdiction and exhaustion-of-remedies grounds, the district court dismissed all of these tort claims. While we agree that some of the tort claims fall within the Division’s exclusive jurisdiction and affirm the district court’s judgment to that extent, we conclude that others do not, and reverse and remand the judgment as to those claims.


Under Texas’s workers’ compensation system, the exclusive remedy of an injured worker against an employer who has workers’ compensation insurance coverage is the recovery of “workers’ compensation benefits.” See § 408.028 (West 2006).

Like other health care providers who serve workers’ compensation claimants, pharmacies that provide pharmaceuticals and services to claimants have a statutory claim for reimbursement from the workers’ compensation carrier that covers the employee. See id. § 408.027(a) (West Supp. 2009). The legislature has delegated broad authority to the Division to regulate the amounts of reimbursement that health care providers, including pharmacies, *853 can recover from carriers. See id. 28 Tex. Admin. Code § 134.503(a) (2009).

The parties to this appeal are businesses that compete in selling services to pharmacies to aid the pharmacies’ recovery of workers’ compensation reimbursement claims from carriers. Appellants Apollo Enterprises, Inc. and WorkingRx, Inc. are affiliated companies whose interests generally align in this case (collectively, “WorkingRx” except when the distinction between the companies is relevant). To simply describe WorkingRx’s business model, it enters into contracts with pharmacies whereby the pharmacies agree to present their individual workers’ compensation reimbursement claims to WorkingRx for possible purchase. If a claim meets certain specified criteria, WorkingRx accepts an assignment of the claim and pays the pharmacy an amount determined by its contract with the pharmacy. Then, WorkingRx, as the assignee of the pharmacy, presents the reimbursement claim to the appropriate carrier, billing the carrier an amount purportedly based on its calculation of the applicable MAR.

WorkingRx explains that it earns its revenues in part from a margin between each reimbursement payment it obtains from a carrier and the amount it pays the pharmacy for the claim assignment. In other words, a pharmacy sells a reimbursement claim to WorkingRx for less than the amount WorkingRx bills the carrier. In return, the pharmacy is able to recover at least some of the value of the reimbursement claim while shifting to WorkingRx the administrative burdens, risks, and delays associated with obtaining payment on the claim from the carrier.3 In addition to these margins, WorkingRx also earns revenue by obtaining rebates from pharmaceutical companies.

Appellee ScripNet, Inc. is a pharmacy benefits management company, or “PBM.” ScripNet contracts with certain workers’ compensation insurers to process and pay pharmacy reimbursement bills on their behalf. ScripNet also enters into contracts with certain pharmacies, which it terms “network pharmacies,” to pay the pharmacy reimbursement bills owed to the pharmacies by the carriers with which ScripNet contracts. When a network pharmacy fills a prescription for an injured worker whose employer has workers’ compensation insurance with a carrier with which *854 ScripNet has a contract, the pharmacy bills ScripNet and ScripNet, on behalf of the carrier, reimburses the pharmacy. ScripNet then bills the carrier for the amount it paid the network pharmacy, plus an additional service fee specified in ScripNet’s contract with the carrier.

ScripNet’s contracts with its network pharmacies specify reimbursement rates that are generally lower than the MAR the pharmacies would derive from U & C or AWP. Somewhat similar to pharmacies who contract with WorkingRx, ScripNet network pharmacies accept reimbursement rates lower than those to which they would otherwise be entitled under the pharmacy fee guidelines in exchange for quicker or surer payment.4 The pharmacies also obtain the benefit of access to the customer base of workers whose employers have workers’ compensation coverage with carriers who have contracted with ScripNet.

Disputes have arisen when WorkingRx, as the assignee of pharmacy reimbursement claims, has presented those claims to carriers with which ScripNet has contracted to serve as a PBM. WorkingRx alleges that “[f]rom early 2000 to the present, ScripNet has remitted payment” to it in its capacity as a PBM. Many of these claims have originated from pharmacies that have contracted with both WorkingRx and ScripNet. In numerous instances, ScripNet, on the carriers’ behalf, has taken the position that these claims are subject to a ScripNet contract with the originating pharmacy and paid WorkingRx only the contract reimbursement rates rather than the typically higher U & C– or AWP-based rates at which WorkingRx bills the carrier.

WorkingRx has disputed whether these reimbursement claims are subject to ScripNet’s contract rates. Among other contentions, it has alleged that its “claim adjudication system” is “in preference to, and to the exclusion of, all other third-party billing companies, including ScripNet” and that ScripNet’s contracts with pharmacies apply only to reimbursement claims generated by customers who present a ScripNet ID card at the point of sale. To the extent that any of its pharmacy reimbursement claims are in fact subject to ScripNet’s contract rates as a matter of contract construction, WorkingRx alleges that ScripNet tortiously interfered with WorkingRx’s pharmacy contracts by executing its contracts with the originating pharmacies while knowing they were already under contract with WorkingRx.

WorkingRx has also asserted that ScripNet, individually or in combination with others, has unlawfully caused pharmacies under contract with WorkingRx to breach their obligations to submit their reimbursement claims to WorkingRx and instead seek reimbursement directly from ScripNet. By “diverting” these claims around it, WorkingRx complains, ScripNet has deprived it of the entire benefit of claim assignments to which WorkingRx was contractually entitled. These benefits, WorkingRx contends, include not only any payments it would have received from the carriers but rebates it would have obtained from pharmaceutical companies.

WorkingRx has also accused ScripNet of unlawfully causing Texas Mutual Insurance Company to reduce its payments on reimbursement claims originating from pharmacies not under contract with ScripNet. In addition to serving as a PBM for Texas Mutual with respect to claims originating from its network pharmacies, the *855 services ScripNet has provided the carrier include estimating the U & C charges the carrier is required to pay on pharmacy reimbursement claims originating from pharmacies that are not ScripNet network pharmacies (“non-network” pharmacies). WorkingRx alleges that ScripNet and Texas Mutual “conspired” to “unlawfully injure” it by creating an estimated U & C for Texas Mutual to apply to these reimbursement claims that is lower than that to which WorkingRx is actually entitled under the statutes and rules governing pharmacy reimbursements.5

The present litigation between WorkingRx and ScripNet began after WorkingRx sent an August 2006 demand letter to ScripNet complaining that ScripNet was “systematically reduc[ing] WorkingRx bills to a contract rate that does not apply” to claims WorkingRx had submitted for payment. WorkingRx’s letter further asserted that “there is over $1.3 million owing to WorkingRx on behalf of our insurance carriers and employers (this amount does not include penalties and interest nor claims from our sister company Apollo Enterprises).” In response, ScripNet filed a declaratory-judgment action in Travis County District Court against WorkingRx. It also named as defendants the Division and Texas Mutual Insurance Company, citing their interests in the proceeding.6 As it later amended its petition, ScripNet sought declarations that its contract rates applied to any reimbursement claims originating from one of its network pharmacies, regardless whether the pharmacy had also contracted with WorkingRx or whether WorkingRx had billed the claim as the pharmacy’s assignee; that ScripNet’s contract rate was a “negotiated or contract *856 rate” under the Division’s rules, or, if not, that the controlling “negotiated or contract rate” was the amount WorkingRx had agreed to pay the pharmacy; and that WorkingRx’s purported assignments were void on several grounds. Among these grounds, ScripNet asserted that any purported assignments to WorkingRx that were executed before September 1, 2005, were prohibited by statute. See Tex. Lab.Code Ann. § 413.0111 (West 2006)) (requiring that Division’s rules for reimbursement of prescription medication and services “must authorize pharmacies to use agents or assignees to process claims and act on the behalf of the pharmacies under terms and conditions agreed on by the pharmacies”). In the alternative, ScripNet pled that WorkingRx was required to exhaust its administrative remedies before claiming any reimbursement or “other remedy ... predicated upon any right to reimbursement” and that WorkingRx’s claims for any additional reimbursement for claims originating at either ScripNet network or non-network pharmacies falls within the Division’s exclusive jurisdiction.

WorkingRx responded by removing ScripNet’s suit to federal court on diversity grounds.7 The federal court ultimately remanded the case, holding that the claims at issue “arose under” Texas workers’ compensation laws. See 28 U.S.C.A. § 1445(c) (West 2006). After remand, WorkingRx asserted counterclaims against ScripNet and a cross-claim against Texas Mutual. Against ScripNet, WorkingRx pled causes of action for tortious interference with its contracts with pharmacies, tortious interference with its prospective business relationships with pharmacies, civil conspiracy, business disparagement, and defamation. It also sought a declaratory judgment that none of ScripNet’s network contracts applied to pharmacy reimbursement claims submitted by pharmacies to WorkingRx or submitted by WorkingRx to a carrier. Similarly, against both ScripNet and Texas Mutual, WorkingRx sought declarations that ScripNet’s contracts did not grant Texas Mutual the right to pay WorkingRx at a ScripNet contract rate.

ScripNet filed a plea to the jurisdiction that was ultimately limited to challenging jurisdiction over WorkingRx’s tortious interference and civil conspiracy causes of action. ScripNet contended that the district court lacked subject-matter jurisdiction over these causes of action because they were medical fee disputes that the Division had exclusive jurisdiction to determine. See 28 Tex. Admin. Code § 133.307(c)(1)(A) (2009) (generally-applicable deadline of one year after date of disputed service to submit medical fee dispute to Division). Consequently, ScripNet argued, the district court was required to dismiss WorkingRx’s claims.

Following a hearing at which only argument and no evidence was presented, the district court granted the plea without *857 stating specific grounds and dismissed WorkingRx’s tortious interference and conspiracy causes of action.8 The district court later severed out the three dismissed causes of action into a separate cause and rendered final judgment. WorkingRx appealed.


In a single issue, WorkingRx contends that the district court erred in dismissing its tortious interference and civil conspiracy causes of action against ScripNet. It argues that these causes of action do not present medical fee disputes within the Division’s exclusive jurisdiction, but are instead common-law claims that properly invoked the district court’s subject-matter jurisdiction.

Standard and scope of review

To analyze WorkingRx’s appellate complaint, we apply the same standard of review as with other jurisdictional challenges. See Id.

When resolving issues presented by the plea to the jurisdiction, we may consider evidence that the parties have submitted. Id.

Although both ScripNet and WorkingRx presented evidence in connection with the plea to the jurisdiction, ScripNet challenged only the sufficiency of WorkingRx’s pleadings and did not attempt to negate specific facts that WorkingRx pled. ScripNet did, however, rely on certain evidence it viewed as relevant to whether WorkingRx’s pleadings implicated the Division’s exclusive jurisdiction over medical fee disputes: (1) admissions by WorkingRx that as an assignee of pharmacies’ reimbursement claims, its rights against carriers were limited to whatever rights the pharmacies themselves possessed; (2) evidence that WorkingRx billed carriers and their PBMs a higher amount that WorkingRx pays to purchase assignments of the reimbursement claims from pharmacies; and (3) evidence that WorkingRx had attempted to invoke the Division’s jurisdiction in various other contexts.9 ScripNet also presented evidence that WorkingRx had not exhausted its administrative remedies with respect to any of the claims on which *858 it was basing its alleged damages in the suit. None of these facts appear to be disputed by WorkingRx for purposes of this proceeding.

WorkingRx’s claims

Liberally construing WorkingRx’s live pleadings, its factual allegations supporting its tortious interference and conspiracy causes of action assert essentially four claims against ScripNet:

Incorrect U & C estimates. With respect to reimbursement claims originating from non-network pharmacies that WorkingRx submitted to Texas Mutual, WorkingRx alleges that ScripNet has furnished “false information” to Texas Mutual and, with the carrier, “conspired to unlawfully injure Apollo and WorkingRx by agreeing to create an ‘estimated usual and customary reimbursement’ ... in order to reimburse WorkingRx, Apollo, and pharmacies at a rate lower than to which they were entitled by law.” WorkingRx complains that these actions have caused it injury and damage through Texas Mutual’s payment of the incorrect lower rate.

Erroneous application of ScripNet contract rates. With respect to pharmacy reimbursement claims originating from both ScripNet network and non-network pharmacies that WorkingRx has billed to carriers for which ScripNet serves as a PBM, WorkingRx alleges that ScripNet has wrongly provided “false information” to the carriers that the ScripNet contract rate applies when it does not.10 This, in turn, has caused the carrier or ScripNet, on its behalf, to pay WorkingRx an inapplicable ScripNet contract rate that is lower than the U & C or AWP-based rates to which WorkingRx is actually entitled.

Causing ScripNet contract rates to apply. With respect to any of WorkingRx’s assigned pharmacy reimbursement claims that are in fact subject to a ScripNet contract with the originating pharmacy, WorkingRx alleges that ScripNet tortiously interfered with WorkingRx’s “valid and enforceable agreements” (or the prospect of same), and/or conspired with Texas Mutual or other carriers to do so, by inducing pharmacies through “misrepresentations,” unlawful coercion, and other wrongful acts to breach their contracts with WorkingRx by signing contracts with ScripNet. WorkingRx alleges that these acts, in turn, injured it by causing the ScripNet contract rate to be imposed on the pharmacy reimbursement claims that WorkingRx owns, thereby “reduc[ing] the value of Claims to be assigned.”

This claim is distinguished from the preceding one in presuming that ScripNet contracts actually apply to the underlying pharmacy reimbursement claims in question and that the carrier (or ScripNet as its agent) thus complied with the statutes and rules governing pharmacy reimbursement in paying the contract rates.

Diverting pharmacy reimbursement claims. WorkingRx alleges that ScripNet unlawfully and intentionally caused pharmacies under contract with WorkingRx to breach those contracts by submitting their pharmacy reimbursement claims directly to ScripNet, bypassing WorkingRx altogether. It complains that ScripNet’s actions caused “impairment of the value of ... WorkingRx’s assignments” by this “diversion” of pharmacy *859 reimbursement claims to which WorkingRx was contractually entitled.

The Division’s exclusive jurisdiction

Whether the Division has exclusive jurisdiction over these claims is a question of law that we review de novo. See Subaru, 84 S.W.3d at 220.

By contrast, “there is no presumption that administrative agencies are authorized to resolve disputes. Rather, they may exercise only those powers the law, in clear and express statutory language, confers upon them.” Id. “Courts will not imply additional authority to agencies, nor may agencies create for themselves any excess powers.” Id. at 221.

Whether the legislature has vested exclusive jurisdiction in the agency is determined by examination and construction of the relevant statutory scheme. Cash Am. Int’l, Inc. v. Bennett, 35 S.W.3d 12, 15–17 (Tex.2000).

In the workers’ compensation act, as noted, the legislature has created a comprehensive scheme whereby employees who are covered by workers’ compensation insurance and incur “compensable” injuries are provided the exclusive remedy of “workers’ compensation benefits” (including “medical benefits” that encompass pharmaceuticals and pharmacy services) in lieu of common-law remedies. See § 408.028(g); see also id. § 413.015(a) (West 2006) (requiring that “[i]nsurance carriers shall make appropriate payment of charges for medical services provided under this subtitle”). In addition to regulating reimbursement amounts, the legislature has imposed statutory deadlines for health care providers to submit reimbursement claims to carriers, as well as deadlines for the carrier to pay or take other prescribed actions in response to the claim. See id. § 408.027. Furthermore, the legislature has provided for administrative review and auditing of carriers’ compliance with these requirements, as well as administrative enforcement of carriers’ payment obligations. See id. §§ 413.015(b)-(c), .016 (West 2006).

The legislature has also charged the Division with making an initial determination in certain disputes over the amounts carriers pay health care providers under the statutes and rules governing reimbursement. Under section 413.031, “[a] party, including a health care provider, is entitled to a review of a medical service provided or for which authorization of payment is sought if a health care provider is: (1) denied payment or paid a reduced amount *861 for the medical service rendered12; (2) denied authorization for the payment for the service requested or performed if authorization is required or allowed ...; (3) ordered by the commissioner to refund a payment received; or (4) ordered to make a payment that was refused or reduced for a medical service rendered.” Id. Generally speaking, there are two types of “review of a medical service” that can be conducted under this section.13 The first is a review of the “medical necessity” of a health care service, which is currently performed by an independent review organization (IRO). See id. § 413.031(d)–(e–3), (g)-(I). The other type of review concerns “disputes over the amount of payment due for services determined to be medically necessary and appropriate for treatment of a compensable injury,” commonly termed “medical fee disputes.” Id. § 413.031(c). In resolving medical fee disputes, “the role of the division is to adjudicate the payment given the relevant statutory provisions and ... rules.” Id.

Following review of medical necessity or medical fee disputes, the legislature has provided during most of the time period relevant to this case that an aggrieved party may obtain a contested-case hearing before the State Office of Administrative Hearings. Act of May 3, 1995, 74th Leg., R.S., ch. 980, § 1.43, 1995 Tex. Gen. Laws 4912, 4923 (eff. Sept. 1, 1995) (providing for contested-case hearing before SOAH); Act of May 29, 2005, 79th Leg., R.S., ch. 265, § 3.245, 2005 Tex. Gen. Laws 553, 554 (eff. Sept. 1, 2005) (repealing SOAH contested-case hearing provision); see also Act of May 18, 2007, 80th Leg., R.S., ch. 1007, § 2, 2007 Tex. Gen. Laws 3525, 3525 (eff. Sept. 1, 2007) (again providing for a SOAH contested-case hearing). A party who has exhausted the administrative remedies and is aggrieved by the final administrative decision has had the right to seek judicial review under the substantial evidence standard of the Administrative Procedures Act. Id. §§ 413.031(k–1), .0311(d). Summarizing this statutory framework, the Texas Supreme Court has observed:

Carriers do not make the final determination of the fees for disputed claims. If a carrier and a provider disagree on the reimbursement amount, [the Division], not the carrier, makes the decision on the proper payment, subject to review. Any party that is not satisfied with the outcome may continue the review process through SOAH and then the courts.

section 413.031) (“The [Division] has jurisdiction of disputes over ... preauthorization of medical care, and reimbursement of medical expenses.”) (footnotes omitted).

*862 As the Texas Supreme Court has emphasized, “The Workers’ Compensation Act vests the power to award compensation benefits solely in the [Division], subject to judicial review.” 239 S.W.3d at 836.

Applying the rationale of Fodge to the statutory framework governing review of medical fee and medical necessity disputes, this Court has held that the Division had exclusive jurisdiction over claims that a chiropractor had filed in justice court against workers’ compensation insurance carriers seeking payment of health care reimbursement claims that the carriers had either partially paid or denied. See Id. at 434–38.

Subsequently, in Eckerd, we considered whether the Division had exclusive jurisdiction over causes of action for negligent misrepresentation and money had and received that Texas Mutual had asserted against Apollo and various pharmacy chains to recover alleged past over-payments the carrier had made. Cash Am., 35 S.W.3d at 16–18. In the Court’s view, “Texas Mutual’s claims are ‘common law’ in name only,” reasoning:

Texas Mutual alleges that Defendants over-charged it and negligently misrepresented to Texas Mutual that they were charging the correct amount. Both of *863 these claims derive from the statutory provision setting the maximum allowable reimbursement for pharmaceuticals. At common law, there is no standard or duty to charge a particular amount for prescription drugs; only the statute provides a standard for determining whether Defendants charged Texas Mutual an excessive amount. Therefore, the supreme court’s concern in Cash America for preserving consumers’ common law claims is inapposite to the context of this case, where we have two claims that cannot be adjudicated without also adjudicating the proper meaning of the “maximum allowable reimbursement” provided in the Pharmaceutical Fee Guideline.

Cash America ).

WorkingRx argues that its claims are distinguishable from those at issue in Howell and Eckerd, as well as those in Fodge and other cases involving analogous disputes over workers’ compensation benefits. It contrasts those claims, which WorkingRx characterizes as disputes over a workers’ compensation carrier’s liability for benefits or reimbursement under the workers’ compensation act and rules, to its claims against ScripNet, which it views as turning on the parties’ respective rights and duties under contract or tort principles. And ScripNet, WorkingRx adds, is not a workers’ compensation insurance carrier like the defendants in Howell and Fodge or the plaintiff in Eckerd, but a PBM, and has no duties under workers’ compensation law to pay pharmacies. Similarly, WorkingRx asserts, neither the legislature nor the Division has provided a procedure whereby a pharmacy (much less WorkingRx, as its assignee) could prosecute medical fee disputes against ScripNet in the Division, much less claims sounding in tort or contract. To the contrary, WorkingRx asserts, the relevant statutes and rules require that the respondent in a medical fee dispute initiated by a health care provider is the carrier, not a PBM or other agent of the carrier. See Eckerd Corp., 162 S.W.3d at 266 n. 12 (citing, as additional support for its conclusion that the Division had exclusive jurisdiction over Texas Mutual’s claims, the fact that the Division could provide the remedies Texas Mutual was seeking).

ScripNet contends that WorkingRx’s claims are merely artfully pled medical fee disputes, observing that Fodge and progeny like Eckerd and Pickett have looked past common-law labels to consider whether the pleadings, in substance, present disputes falling within the Division’s exclusive jurisdiction. ScripNet characterizes WorkingRx’s claims, in substance, as simply the converse of the claims in Eckerd ‘s carrier’s suit against pharmacies complaining of over payments under the guidelines.14

ScripNet dismisses the notion that WorkingRx’s claims are distinguishable on the basis that WorkingRx sued ScripNet rather than a workers’ compensation carrier. While WorkingRx has nominally named a third party as a defendant, ScripNet reasons, it remains that WorkingRx’s claims require determination of whether WorkingRx was paid the correct amount on its pharmacy reimbursement claims by a workers’ compensation carrier or agent of a carrier. ScripNet further cautions that if WorkingRx can circumvent the Division’s exclusive jurisdiction merely by suing it rather than a carrier, “[i]t opens the door for anyone, injured worker or provider, to clam that because the insurance carrier paid less than the workers’ compensation contract of insurance requires because of advice, recommendations, decisions, or actions by any vendor, bill review company, medical bill processing agent, Utilization Review Agent ..., third party administrator, or adjustor that a tortious interference claim is proper since exhaustion is not required.”

We conclude that two of WorkingRx’s four claims present medical fee disputes and therefore implicate the Division’s exclusive jurisdiction. WorkingRx’s claim that ScripNet injured it by furnishing “false information” to or “conspiring” with Texas Mutual so as to cause the carrier to apply an improperly calculated U & C and “reimburse WorkingRx, Apollo, and pharmacies at a rate lower than to which they were entitled by law”—the first claim described in the list above—is a claim based on Texas Mutual’s denial or reduction of payment for the pharmaceutical services in a manner allegedly depriving WorkingRx of amounts the carrier owed it under the statutes and rules governing pharmacy fee reimbursement—a medical fee dispute. See Pickett, 239 S.W.3d at 836.

The same is true of WorkingRx’s claim that ScripNet wrongfully caused its contract rate to be applied to pharmacy *865 reimbursement claims submitted by WorkingRx when a higher U & C- or AWP-based rate instead applied (its second claim in the above list). We acknowledge that resolution of this claim may turn to some extent on whether ScripNet’s contract rates apply to pharmacy reimbursement claims assigned to WorkingRx, an issue of contract construction that is traditionally for the courts. In fact, as WorkingRx points out, ScripNet itself has requested declaratory relief from the district court on the same issue. Nonetheless, it remains that WorkingRx is complaining that carriers (or ScripNet, as the carriers’ agent) have paid it the wrong amount (a contract rate rather than a U & C– or AWP-based rate) under the statutes and rules governing pharmacy reimbursement. See Tex. Gov’t Code Ann. § 2001.174(2)(D) (West 2008) (on judicial review, party aggrieved by agency order can challenge it as “affected by other error of law”).

WorkingRx, in fact, “agrees that it has a potential medical fee dispute with insurance carriers” with respect to these claims, but insists that it “does not have a medical fee dispute with ScripNet.” However, the fact that WorkingRx has opted to sue a third party rather than the carriers, as ScripNet suggests, does not in itself control whether its claims are medical fee disputes that fall within the Division’s exclusive jurisdiction. What matters is whether the claims are based on the alleged failure of carriers to pay WorkingRx in compliance with the statutes and rules governing pharmacy fee reimbursement. That is precisely the basis for these claims—ScripNet is alleged to have injured WorkingRx by causing carriers (or ScripNet, in its capacity as their agent) to pay less reimbursement than WorkingRx is entitled to under the statutes and rules. Only the Division has power to initially determine the amounts WorkingRx is entitled to be paid by the carriers.

The First Court of Appeals applied a similar analysis in rejecting an argument that the Division’s exclusive jurisdiction did not extend to tort claims asserted by a workers’ compensation claimant against doctors who allegedly provided false information causing a carrier to deny the claim. See Id. The same logic applies to WorkingRx’s first and second claims here.

Finally, in a post-submission brief, WorkingRx argues that a recent decision of this Court involving Apollo and Texas Mutual establishes that, for a different reason, it “did not have any administrative remedies to exhaust” with respect to any medical fee disputes it had with carriers during most of the time period at issue here. Id. at *3–6, 2009 Tex.App LEXIS 8315, at *10–17.

Effective September 1, 2005, the legislature enacted Public *867 Util. Comm’n v. Pedernales Elec. Coop., Inc., 678 S.W.2d 214, 220 (Tex.App.-Austin 1984, writ ref’d n.r.e.) (“The doctrine [of exhaustion of administrative remedies] comes into effect only if the administrative remedy is realistically adequate to protect the asserted claims.”). We disagree.

WorkingRx’s argument presumes that it has a cause of action against carriers to recover particular pharmacy reimbursement amounts that exists independently from the workers’ compensation act. It does not. As we explained in Eckerd, the right to recover any particular amount of reimbursement from a workers’ compensation insurance carrier for services provided by a pharmacy to an injured worker is entirely a function of the workers’ compensation act and Division rules. This, in fact, is precisely what the Division did in Apollo. See 2009 WL 3486380, at *2, 2009 Tex.App. LEXIS 8315, at *4–5.

In essence, WorkingRx reasons that it is excused from exhausting its administrative remedies against the carriers because Apollo implies that those proceedings would have yielded only final orders that WorkingRx lacked standing to pursue additional reimbursement amounts from the carriers. However, the significance of such an outcome is not that it would excuse WorkingRx from exhausting its administrative remedies, but that it would establish that WorkingRx had no right under the workers’ compensation statutes and rules to compel additional payments from the carriers (which in turn would mean that WorkingRx could not prove that ScripNet’s conduct injured it by causing carriers to pay less reimbursement than they were obligated to pay). Parties cannot avoid exhaustion-of-remedies requirements merely because they might be unsuccessful before the agency. See In re Liberty Mut. Fire Ins. Co., 295 S.W.3d 327, 328–29 (Tex.2009) (orig. proceeding).

Because WorkingRx’s first and second claims present medical fee disputes that implicate the Division’s exclusive jurisdiction, the district court did not err in granting ScripNet’s plea to the jurisdiction to that extent. In the district court, ScripNet advocated that the court dismiss rather than abate WorkingRx’s claims because the deadline for WorkingRx to file these medical fee disputes in the Division had already expired, precluding WorkingRx from curing the jurisdictional defect. See Fodge, 63 S.W.3d at 805. On appeal, WorkingRx does not dispute that it is time-barred from initiating medical fee-dispute proceedings before the Division with respect to the underlying pharmacy reimbursement claims at issue. Accordingly, the district court did not err in dismissing WorkingRx’s first and second claims for want of subject-matter jurisdiction.

However, we reach a different conclusion with respect to WorkingRx’s remaining two claims—that ScripNet wrongfully caused pharmacies under contract with WorkingRx to bind themselves to ScripNet contract rates (its third claim), and that ScripNet wrongfully “diverted” pharmacy reimbursement claims to which *868 WorkingRx was contractually entitled (its fourth claim). These claims, unlike the first two, are not based on the failure of carriers to pay WorkingRx pharmacy fee reimbursements in compliance with the workers’ compensation statutes and rules. To the contrary, both presume that the carriers paid WorkingRx the correct amounts, if any, that the carriers owed it. With respect to WorkingRx’s third claim, WorkingRx concedes that the pharmacies (and thus WorkingRx, as assignee) are bound to the ScripNet contract rates and that the carriers (or ScripNet, as their agent) paid it in accordance with those rates. Similarly, regarding its “diversion” claim, WorkingRx concedes that it has no right under the workers’ compensation statutes and rules to recover anything from the carriers for the pharmacy services at issue because the pharmacies never assigned their reimbursement claims to WorkingRx. In either case, there is no “dispute[ ] over the amount of payment due for services determined to be medically necessary and appropriate for treatment of a compensable injury.” Tex. Lab.Code Ann. § 413.031(c). The legal injury that is the basis for WorkingRx’s claims is not a carrier’s failure to pay it pharmacy reimbursements in compliance with the workers’ compensation statute and rules, but the loss of contractually-guaranteed opportunities to seek such reimbursement from carriers allegedly due to ScripNet’s tortious conduct.

In these respects, these claims are analogous to the negligence claim we addressed in id. at 81.

Also instructive is Id. Similarly, WorkingRx’s third and fourth claims presuppose that it was paid the correct amount of reimbursement by carriers and their agents, and does not assert an entitlement to any additional reimbursement from them.

WorkingRx offers perhaps an even better analogy. It compares its claims to allegations that ScripNet deprived it the opportunity to recover all or part of the *869 value of its pharmacy reimbursements by stealing WorkingRx’s outgoing mail, destroying WorkingRx’s computer system, or burning down WorkingRx’s building. We agree with WorkingRx that the legislature could not have intended “disputes over the amount of payment due for services determined to be medically necessary and appropriate for treatment of a compensable injury” to sweep so broadly.

On the other hand, ScripNet observes that WorkingRx cannot recover on its claims without prevailing on several of what it terms “workers’ compensation threshold issues.” It points out that WorkingRx cannot prove legal injury from alleged interference with its contracts with pharmacies if the ScripNet contracts are illegal or void under public policy. See labor code section 413.0111 and the May 2, 2006 Division rule amendments, certain provisions in WorkingRx’s contracts with pharmacies were illegal: (1) terms providing for assignments of pharmacy reimbursement claims; (2) terms contemplating that WorkingRx, rather than pharmacies themselves, would submit bills to carriers; (3) terms contemplating that WorkingRx could “mark up” pharmacy bills; and (4) terms permitting WorkingRx to remit to pharmacies less than the full amount of reimbursement it collected from carriers. Similarly, ScripNet observes that WorkingRx’s alleged damages consist principally of amounts it alleges it would have recovered from carriers had ScripNet not “diverted” potential assignments or caused the application of the ScripNet contract rates. To recover such damages, ScripNet urges, WorkingRx must prove the MAR that would have applied absent ScripNet’s conduct, which in turn raises the same issues over the choice of alternative measures, proper calculation of U & C, etc., that arise in medical fee disputes. ScripNet further suggests that Apollo is relevant to WorkingRx’s ability to prove the reimbursements that might have been, inasmuch as it establishes that WorkingRx would have been unable to initiate medical review proceedings in the Division if a carrier underpaid it for reasons independent of ScripNet’s conduct.

ScripNet argues that the Division has exclusive jurisdiction to decide each of these “workers’ compensation threshold issues,” and that WorkingRx accordingly was required to exhaust these administrative remedies before proceeding in court.16 Similarly, Texas Mutual, in an amicus brief, argues that if we conclude WorkingRx’s “diversion” claim falls outside the Division’s exclusive jurisdiction, the Division nonetheless has primary jurisdiction to determine “several core issues of workers’ compensation law” raised by that claim: (1) the validity of WorkingRx’s assignments from pharmacies; (2) WorkingRx’s right to “mark up” pharmacy bills and make carriers pay them; (3) the amounts due WorkingRx under the workers’ *870 compensation act and Division rules; and (4) the standing issue addressed in Apollo. In response, WorkingRx urges that “the Division has exclusive jurisdiction over types of disputes, rather than types of issues.” The Division’s jurisdiction, WorkingRx reasons, “is exclusive with respect to particular issues only to the extent those issues arise in the context of a particular dispute over which the Division has exclusive jurisdiction.”

In id. at 654 (also drawing a comparison to the suit-within-a-suit analysis in legal malpractice cases). Nor has the legislature provided a mechanism through which the Division could determine the various subsidiary issues that might bear upon this what-might-have-been inquiry, such as the legality of WorkingRx’s pharmacy contracts and assignments.

The absence of mechanisms for deciding these “workers’ compensation threshold issues” convinces us that the legislature did not intend for the Division to have sole authority to initially determine them outside of the context of medical fee disputes. See Subaru, 84 S.W.3d at 220.

At most, ScripNet’s arguments regarding “workers’ compensation threshold issues” might go to whether the Division has primary jurisdiction to decide that, as Texas Mutual suggests. Primary jurisdiction applies when (1) an agency is “staffed with experts trained in handling the complex problems in the agency’s purview” and (2) “great benefit is derived from an agency’s uniformly interpreting its laws, rules, and regulations, whereas courts and juries may reach different results under similar fact situations.” Id. Thus, primary jurisdiction, assuming it applies here, would not divest the district court of its subject-matter jurisdiction over WorkingRx’s claims.

On the other hand, the specific grounds asserted in ScripNet’s plea to the jurisdiction—that WorkingRx failed to “exhaust administrative remedies” and can no longer do so—could conceivably refer to an agency having either exclusive jurisdiction or primary jurisdiction. See Tex.R.App. P. 38.1(i). Texas Mutual’s amicus brief notwithstanding, the question of whether primary jurisdiction applies to the two WorkingRx claims falling outside the Division’s exclusive jurisdiction is not yet before us. On remand, the parties will have the opportunity to address the applicability of primary jurisdiction (and any exceptions to that doctrine), among other issues bearing on the ultimate viability of WorkingRx’s third and fourth claims.

For these reasons, the district court erred in granting ScripNet’s plea to the jurisdiction as to WorkingRx’s third and fourth claims and dismissing them. Consequently, we reverse the district court’s judgment of dismissal as to those two claims and remand them for further proceedings.


We affirm the district court’s judgment dismissing WorkingRx’s claims that ScripNet injured it by wrongfully causing application of incorrect U & C estimates (WorkingRx’s first claim) or inapplicable ScripNet contract rates to pharmacy reimbursement claims (second claim). We reverse the judgment dismissing WorkingRx’s other claims—that ScripNet injured it by diverting claims (fourth claim) or causing WorkingRx client pharmacies to bind themselves (and WorkingRx) to *872 ScripNet contract rates (third claim)—and remand them for further proceedings.

Chief Justice LAW Not Participating.



Prior to September 1, 2005, this jurisdiction was vested in the Texas Workers’ Compensation Commission. Effective on that date, the legislature abolished the Commission and transferred its statutory responsibilities and rules to the Division. See Act of May 29, 2005, 79th Leg., R.S., ch. 265, §§ 8.001(b), .004(a), 2005 Tex. Gen. Laws 607, 608. For clarity, we will use “the Division” to refer to both the former and successor entities.


We will cite to the current versions of statutes and rules except where the parties have identified intervening substantive amendments that are material to our analysis.


These burdens and risks include uncertainties in determining coverage and the appropriate carrier when workers cannot present proof of coverage at point of service, as well as delays or denials of payment by the carrier.


However, WorkingRx contends that pharmacies realize this benefit only when an injured worker can present a ScripNet ID card at point of service. Further, as discussed below, WorkingRx maintains that ScripNet’s contracts apply only to pharmacy reimbursement claims originating under those circumstances.


Texas Mutual and WorkingRx (or Apollo, specifically) have a history of disputes regarding the amounts Texas Mutual has paid it on the pharmacy reimbursement claims it submits to the carrier. In 2001, the carrier sued Apollo and four pharmacy chains alleging that the defendants had been over-billing pharmacy reimbursement claims based on improperly calculated U & C estimates. Texas Mutual asserted causes of action for negligent misrepresentation and money had and received, and sought recovery of the alleged overpayments. As we detail below, the defendants successfully argued that the district court lacked subject-matter jurisdiction over the suit on the basis that Texas Mutual’s claims were medical fee disputes that fell within the Division’s exclusive jurisdiction. See Texas Mut. Ins. Co. v. Eckerd Corp., 162 S.W.3d 261, 263–67 (Tex.App.-Austin 2005, pet. denied).

In addition to suing to recover alleged overpayments on past pharmacy reimbursement claims, Texas Mutual took action in response to pharmacy reimbursement claims being presented by Apollo on an ongoing basis. Texas Mutual began paying these claims based on its own estimate of the originating pharmacies’ U & C for prescription drugs. This prompted Apollo to file several thousand medical fee-dispute proceedings in the Division between February 2003 and November 2004. These proceedings gave rise to the litigation addressed in Texas Mutual Insurance Co. v. Apollo Enterprises., Inc., No. 03–09–00054–CV, 2009 WL 3486380, at *6, 2009 Tex.App. LEXIS 8315, at *17 (Tex.App.-Austin Oct. 29, 2009, no pet. h.) (mem. op.), discussed below.

ScripNet and Texas Mutual, which has filed an amicus brief, emphasize this history in suggesting that WorkingRx is artfully pleading causes of action against ScripNet in an attempt to re-litigate the same pharmacy reimbursement claims at issue in Apollo. At this juncture, however, there are no issues before us regarding whether Apollo’s prior litigation gives rise to claim or issue preclusion barring WorkingRx’s claims against ScripNet. Rather, our sole question, which we address above, is whether the Division has exclusive jurisdiction over those claims.


ScripNet pled that Texas Mutual “is one of the primary carriers with whom ScripNet has a contract to administer claims for reimbursement of pharmacy prescription charges” and that “[w]ith respect to the controversy in this case, the large majority of the cases presented by WorkingRx involve pharmacy claim payments by Texas Mutual.”


WorkingRx initially filed a separate suit in Nevada federal court, but ultimately dismissed this action.


Although the Hon. Stephen Yelenosky signed the final judgment, the Hon. Darlene Byrne signed the order granting ScripNet’s plea to the jurisdiction.


ScripNet also presented evidence concerning Apollo and WorkingRx’s corporate relationship.


E.g., because the pharmacy is not actually a ScripNet network pharmacy, because the WorkingRx contract controls, or because the ScripNet contract otherwise did not apply to the transaction.


Statutory construction presents a question of law that we review de novo. See In re Estate of Nash, 220 S.W.3d 914, 917 (Tex.2007)).


If, in response to a reimbursement claim from a health care provider, “an insurance carrier disputes the amount of payment or the health care provider’s entitlement to payment,” the carrier is required to send to the Division, the provider, and the injured employee “a report that sufficiently explains the reasons for the reduction or denial of payment for health care services provided to the employee.” section 413.031 of the act. See id. § 413.031(a).


See section 413.031 governs “certain types of medical benefits disputes ... fee disputes and preauthorization disputes,” and that the general dispute resolution procedures of chapter 410 of the act would govern “when the carrier denies liability for payment of medical benefits on the basis that the injury is not compensable”).


In this connection, ScripNet also emphasizes that Apollo was one of the prevailing parties in Eckerd who argued that the Division had exclusive jurisdiction over Texas Mutual’s claims.


In 2006, the Division amended its rules to require dismissal of medical fee disputes where “the Division determines the medical fee dispute is for health care services provided pursuant to a private contractual fee arrangement.” 31 Tex. Reg. 10314 (Dec. 22, 2006) (codified at 28 Tex. Admin. Code § 133.307(e)(3)(F) (2009)). While excluding disputes arising under the contracts themselves, we observe that this rule, consistent with our analysis above, contemplates that the Division will determine the threshold question of whether or not the contract applies to the health care services at issue.


ScripNet also identifies three other “workers’ compensation threshold issues”: (1) “Do the ScripNet contracts apply to any or all of the WorkingRx assigned pharmacy claims?”; (2) “Will DWC determine the proper amount of reimbursement if the amount to be paid is based on contracts?”; and (3) “Are the WorkingRx claims barred under the one-year rule for requesting dispute resolution [in the Division]?” The first two issues are subsumed within WorkingRx’s second claim but are conceded for purposes of its third and fourth claims. The third issue arises only if the Division has exclusive jurisdiction over a particular claim.

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