October 10, 2001

Mr. Steve Aragón
General Counsel
Texas Health and Human Services Commission
P.O. Box 13247
Austin, Texas 78711

OR2001-4587

Dear Mr. Aragón:

You ask whether certain information is subject to required public disclosure under chapter 552 of the Government Code. Your request was assigned ID# 152428.

The Texas Department of Health (the "department") received a written request for certain information in connection with its administration of the Medicaid Vendor Drug Program. Specifically, the requestor seeks the following categories of information:

• •Questionnaires that [the department] receives from pharmaceutical drug manufacturers that provide pricing information associated with the Medicaid vendor drug program. . . . (I am seeking all questionnaires submitted from Jan. 1, 1998 through the present.)

• •Any pricing updates received by the department that drug manufacturers are required to submit subsequent to the questionnaire. I am seeking all updates submitted from Jan. 1, 1998 through the present.

The department submitted to this office as responsive to the request nine boxes of documents containing the records at issue. The department did not contend that the requested information is excepted from public disclosure, but rather sought a decision from this office pursuant to section 552.305 of the Government Code, which allows governmental bodies to rely on third parties having a privacy or property interest in the information to submit their own arguments as to why the requested information is excepted from public disclosure. Because the administration of the Vendor Drug Program has been transferred to the Texas Health and Human Services Commission (the "commission"), we direct this open records ruling to the commission.

In accordance with section 552.305(d), the department was required to notify each of the drug manufacturers of the request and of their right to submit arguments to this office as to why their respective records should not be released. See Gov't Code § 552.305(d); Open Records Decision No. 542 (1990) (determining that statutory predecessor to Gov't Code § 552.305 permits governmental body to rely on interested third party to raise and explain applicability of exception to disclosure under Public Information Act in certain circumstances). An interested third party is allowed ten business days after the date of its receipt of the governmental body's notice under section 552.305(d) to submit its reasons, if any, as to why information relating to that party should be withheld from public disclosure. See Gov't Code § 552.305(d)(2)(B). Because of the large number of interested third parties associated with this ruling, we have attached a chart that summarizes the parties who have been notified by the department, whether the department submitted responsive documents related to those companies, whether the respective companies responded to the notification, the exceptions raised, if any, by the responding companies, and the exception granted, if any, that protects the company's pricing information.

In this instance, it appears that the department notified approximately 452 drug manufacturers of the current request for their respective records. As of the date of this letter, however, 354 of the notified drug manufacturers have not submitted comments to this office explaining why their respective records should or should not be released. Consequently, this office has no basis on which to conclude that the requested information pertaining to these drug manufacturers is excepted from disclosure. We therefore conclude that these companies' records, to the extent those records come within the scope of the request, must be released in their entirety.

Additionally, after reviewing the documents at issue, it appears the department failed to notify the following drug manufacturers that their respective records are subject to the records request, and consequently did not submit briefing to this office regarding their pricing information: Allison Medical; Altana, Inc.; Athena Neuroscience; Bioglan Pharmaceuticals; Brightstone Pharmaceuticals; Ciba Vision; D.J. Pharmaceuticals; G.D. Searle; Glenwood, L.L.C; Greenstone Limited; Iomed Labs; Ion Labs; Medeva Pharmaceuticals; Oakwood Labs; Ortho-McNeil; Owen Mumford; Pharmaceutical Consultants; Purdue Frederick; Rexall Sundown; Rugby Labs; Sherwood-Davis; Unigen Pharmaceuticals; and U.S. Bioscience.⁽¹⁾ Because this office did not receive any briefing on these companies' records, we have no basis on which to conclude that these drug manufacturers' pricing information is excepted from disclosure. This office therefore has no choice but to conclude that these companies' records are not excepted from public disclosure. Accordingly, the commission must release these companies' records to the extent they are responsive to the request.

We now address the arguments raised by the drug manufacturers that responded to the department's notification letter as to why their respective records are excepted from required public disclosure. As a threshold issue, we first note that several of the drug manufacturers contend that their records are excepted from public disclosure because their records are the subject of a confidentiality agreement with either the federal government, the State of Texas, or with other parties. Information is not confidential under the Public Information Act simply because the party that submitted the information to the department anticipates or requests that it be kept confidential. Industrial Found. v. Texas Indus. Accident Bd., 540 S.W.2d 668, 677 (Tex. 1976), cert. denied 430 U.S. 931 (1977). In other words, a governmental body cannot, through a contract, overrule or repeal provisions of the Public Information Act. Attorney General Opinion JM-672 (1987). Consequently, unless the requested information falls within an exception to disclosure, it must be released, notwithstanding any contract between the drug manufacturer and another party specifying otherwise.

Another threshold argument raised by some of the drug manufacturers is that the requested pricing information is not subject to the provisions of the Public Information Act because the information is commercially available from other sources. Section 552.027(a) of the Government Code provides:

A governmental body is not required under this chapter to allow the inspection of or to provide a copy of information in a commercial book or publication purchased or acquired by the governmental body for research purposes if the book or publication is commercially available to the public.

You have informed this office, however, that although drug manufacturers do allow certain pricing information to be contained in publications such as "Redbook," that information differs from the pricing information submitted in connection with the Vendor Drug Program, and that the pricing information at issue here does not appear in any commercially available publication. Based on your representations to this office, we conclude that the pricing information at issue here is not commercially available and therefore is not exempt from the provisions of the Public Information Act under section 552.027 of the Government Code.

We now address the applicability of the exceptions to required public disclosure under the Public Information Act raised by the responding drug manufacturers. Many of the responding drug manufacturers contend that their pricing information contained in the requested records is excepted from public disclosure pursuant to section 552.101 of the Government Code, which excepts from public disclosure "information considered to be confidential by law, either constitutional, statutory, or by judicial decision." One statute that several of the drug manufacturers raised in connection with section 552.101 is the federal Freedom of Information Act, 5 U.S.C., § 552(b). In Attorney General Opinion MW-95 (1979), this office held that the Freedom of Information Act "appl[ies] only to an 'agency' which is defined as an authority of the Government of the United States. See 5 U.S.C. §§ 551(1), 552(e), and 552a(a)(1). . . . Thus . . . the federal Freedom of Information Act . . . [does not] appl[y] to records held by an agency of this state or its political subdivisions." Because neither the department nor the commission is subject to the provisions of this federal statute, none of the records at issue may be withheld under the Freedom of Information Act.

Another federal statute raised by many of the responding drug manufacturers is section 1396r-8 of the federal Social Security Act, which makes confidential certain pricing information collected by the Secretary of the United States Department of Health and Human Services. In response to this office's request for clarification of the applicability of this statute to the records at issue, see Gov't Code § 552.303(b), (c), the department declined to provide such briefing, and instead referred this question to the commission. Accordingly, you have provided the following information:

This section of the Social Security Act deals with "payment for covered outpatient drugs," and requires manufacturers to enter into rebate agreements with the Center for Medicare and Medicaid Services ("CMS") . . . . to receive payment. 42 U.S.C. § 1396r-8(a)(1).

. . . .

After entering into the agreements, manufacturers must provide the CMS with quarterly average manufacturer pricing ("AMP") information. Id. at § 1396r-8(k)(8). The Social Security Act provides that information submitted pursuant to its provisions "is confidential and shall not be disclosed" by the CMS, state agencies, or contractors therewith in a form that "discloses the identity of a specific manufacturer or wholesaler, [or] prices charged for drugs by such manufacturer or wholesaler . . . ." Id. at § 1396r-8(b)(3)(D). Thus, the Social Security Act provides that AMP information gathered pursuant to a rebate agreement is confidential as a matter of law.

Texas law allows for the collection of pricing information for a different reason - to determine whether certain medications fall within the Texas maximum allowable cost ("TMAC") Medicaid reimbursement limits. 1 T.A.C. § 355.8545. In accordance with state law, the [Vendor Drug Program] obtains wholesale estimated acquisition cost ("WEAC") or direct estimated acquisition cost ("DEAC") data from drug manufacturers to determine appropriate Medicaid reimbursement limits. Id. at § 355.8545(a). Unlike the Social Security Act, the Texas Administrative Code does not specify whether WEAC or DEAC information is confidential as a matter of law.

Thus, the collection, content, use and confidentiality of pricing data under federal and state law are substantively different. . . . The CMS uses manufacturers' average drug prices to calculate rebates, while the [Vendor Drug Program] uses wholesale or direct acquisition costs to determine how to set reimbursement limits. Furthermore, unless manufacturers accidentally submit AMP numbers to the [Vendor Drug Program], the [Vendor Drug Program] never actually sees the confidential pricing information sent to the CMS. Instead, the CMS simply provides the [Vendor Drug Program] with a calculated list of rebate rates. Finally, while the Social Security Act provides that information collected pursuant to its rebate provisions is confidential, the Texas Administrative Code does not specify whether information gathered to establish TMAC's reimbursement limits is also protected from disclosure.

I understand some of the confusion surrounding the status of the pricing information may be due to statements on the [department's] web site relating to the [Vendor Drug Program]. In particular, the web site includes a statement to the effect that "[t]he Vendor Drug Program adheres to the confidentiality requires of 42 U.S.C. § 1396r-8(b)(3)(D) concerning drug pricing information."

This statement should only apply, of course, to information that is encompassed by the provision of the Social Security Act. [Emphasis in original.]

After reviewing your representations and the cited provisions of the Social Security Act, we agree with your conclusion that the information at issue here is not subject to, and therefore is not made confidential by, section 1396r-8. Accordingly, none of the pricing information at issue may be withheld under this federal provision.

Two of the responding drug manufacturers cite Open Records Decision No. 652 (1997) as authority for withholding its pricing information pursuant to section 552.101 of the Government Code. Open Records Decision No. 652 addressed under what circumstances "trade secret" information held by the Texas Natural Resource Conservation Commission must be withheld from the public pursuant to section 382.041 of the Health and Safety Code. By its terms, section 382.041 pertains only to information submitted to the Texas Natural Resource Conservation Commission, not the department or the commission. Consequently, none of the information at issue is made confidential by section 382.041 of the Health and Safety Code.

Some of the drug manufacturers argue that their pricing information comes under the protection of section 552.103 of the Government Code. Section 552.103 excepts from public disclosure information that "relates" to litigation to which a governmental body is or may be a party. To secure the protection of section 552.103, a governmental body must demonstrate that the requested information relates to pending or reasonably anticipated litigation to which the governmental body is a party. University of Tex. Law Sch. v. Texas Legal Found., 958 S.W.2d 479 (Tex. App.-Austin 1997, no pet.); Open Records Decision No. 588 at 1 (1991).

Section 552.103 applies to information only where the litigation involves or is expected to involve the governmental body that is claiming the exception. Open Records Decision No. 392 (1983). Section 552.103 requires that a governmental body be a party to litigation; this exception does not extend to litigation involving only private parties. Open Records Decision No. 575 (1990). In this instance, neither the department nor the commission has raised section 552.103 on its own behalf, and the drug manufacturers lack standing to raise this exception on behalf of either the department or the commission. Consequently, to the extent that this exception would have applied to the information at issue, the exception has been waived. See Gov't Code § 552.301, .302; see also Open Records Decision No. 542 (1990) ("litigation exception" does not implicate third party rights and is waivable by a governmental body).

Some of the drug manufacturers contend that their pricing information is excepted from public disclosure pursuant to section 552.104 of the Government Code. Section 552.104 of the Government Code protects from required public disclosure "information that, if released, would give advantage to a competitor or bidder." Section 552.104 was not intended to protect business entities that are in competition in the private sector. The primary purpose of section 552.104 is to protect the government's purchasing interests by preventing a competitor or bidder from gaining an unfair advantage over other competitors or bidders. Consequently, none of the pricing information is excepted from public disclosure under section 552.104.

Finally, many of the responding drug manufacturers contend that their pricing information is excepted from public disclosure pursuant to section 552.110 of the Government Code. Section 552.110 of the Government Code protects the property interests of private persons by excepting from disclosure two types of information: (1) trade secrets obtained from a person and privileged or confidential by statute or judicial decision, and (2) commercial or financial information for which it is demonstrated based on specific factual evidence that disclosure would cause substantial competitive harm to the person from whom the information was obtained.

The Texas Supreme Court has adopted the definition of trade secret from section 757 of the Restatement of Torts. See Hyde Corp. v. Huffines, 314 S.W.2d 763 (Tex.), cert. denied, 358 U.S. 898 (1958); see also Open Records Decision No. 552 at 2 (1990). In determining whether particular information constitutes a trade secret, this office considers the Restatement's definition of trade secret as well as the Restatement's list of six trade secret factors.⁽²⁾ See id. This office has held that if a governmental body takes no position with regard to the application of the trade secret branch of section 552.110 to requested information, we must accept a private person's claim for exception as valid under that branch if that person establishes a prima facie case for exception and no argument is submitted that rebuts the claim as a matter of law. See Open Records Decision No. 552 at 5-6 (1990). The commercial or financial branch of section 552.110 requires the business enterprise whose information is at issue to make a specific factual or evidentiary showing, not conclusory or generalized allegations, that substantial competitive injury would result from disclosure. See Open Records Decision No. 661 (1999); see also National Parks and Conservation Association v. Morton, 498 F.2d 765, 770 (D.C. Cir. 1974); Open Records Decision No. 639 at 4 (1996) (to prevent disclosure of commercial or financial information, party must show by specific factual or evidentiary material, not conclusory or generalized allegations, that it actually faces competition and that substantial competitive injury would likely result from disclosure).

Many of the responding drug manufacturers have demonstrated how the release of their pricing information would result in competitive injury if their pricing information was released to the public; consequently, these companies' pricing information must be withheld from the public pursuant to section 552.110(b). On the other hand, none of the remaining drug manufacturers demonstrated the applicability of either aspect of section 552.110. Please refer to the attached chart, which is incorporated into this ruling. The commission must withhold the drug manufacturers' pricing information contained in the records at issue where we have indicated that the respective drug manufacturer met its burden under section 552.110(b). However, the remaining information contained in the requested questionnaires and pricing updates must be released. The requested questionnaires and pricing updates of all remaining drug manufacturers, including those that did not receive notice of the records request, must be released in their entirety.

This letter ruling is limited to the particular records at issue in this request and limited to the facts as presented to us; therefore, this ruling must not be relied upon as a previous determination regarding any other records or any other circumstances.

This ruling triggers important deadlines regarding the rights and responsibilities of the governmental body and of the requestor. For example, governmental bodies are prohibited from asking the attorney general to reconsider this ruling. Gov't Code § 552.301(f). If the governmental body wants to challenge this ruling, the governmental body must appeal by filing suit in Travis County within 30 calendar days. Id. § 552.324(b). In order to get the full benefit of such an appeal, the governmental body must file suit within 10 calendar days. Id. § 552.353(b)(3), (c). If the governmental body does not appeal this ruling and the governmental body does not comply with it, then both the requestor and the attorney general have the right to file suit against the governmental body to enforce this ruling. Id. § 552.321(a).

If this ruling requires the governmental body to release all or part of the requested information, the governmental body is responsible for taking the next step. Based on the statute, the attorney general expects that, within 10 calendar days of this ruling, the governmental body will do one of the following three things: 1) release the public records; 2) notify the requestor of the exact day, time, and place that copies of the records will be provided or that the records can be inspected; or 3) notify the requestor of the governmental body's intent to challenge this letter ruling in court. If the governmental body fails to do one of these three things within 10 calendar days of this ruling, then the requestor should report that failure to the attorney general's Open Government Hotline, toll free, at 877/673-6839. The requestor may also file a complaint with the district or county attorney. Id. § 552.3215(e).

If this ruling requires or permits the governmental body to withhold all or some of the requested information, the requestor can appeal that decision by suing the governmental body. Id. § 552.321(a); Texas Dept. of Public Safety v. Gilbreath, 842 S.W.2d 408, 411 (Tex. App.--Austin 1992, no writ).

Please remember that under the Act the release of information triggers certain procedures for costs and charges to the requestor. If records are released in compliance with this ruling, be sure that all charges for the information are at or below the legal amounts. Questions or complaints about over-charging must be directed to Hadassah Schloss at the General Services Commission at 512/475-2497.

If the governmental body, the requestor, or any other person has questions or comments about this ruling, they may contact our office. Although there is no statutory deadline for contacting us, the attorney general prefers to receive any comments within 10 calendar days of the date of this ruling.

Sincerely,

Nathan E. Bowden
Assistant Attorney General
Open Records Division
NEB/RWP/seg
Ref: ID# 152428
Enc: Submitted documents

c: Mr. Russell Gold
Wall Street Journal
1005 Congress Avenue, Suite 800
Austin, Texas 78701
(w/o enclosures)

Ms. Mary Ann Slavin
Assistant General Counsel
Texas Department of Health
1100 West 49^th Street
Austin, Texas 78756-3199
(w/o enclosures)

305 parties
(w/o enclosures)

* Pricing information only

1. These twenty-three drug manufacturers are not listed in the chart accompanying this ruling.

2. The six factors that the Restatement gives as indicia of whether information constitutes a trade secret are: "(1) the extent to which the information is known outside of [the company]; (2) the extent to which it is known by employees and others involved in [the company's] business; (3) the extent of measures taken by [the company] to guard the secrecy of the information; (4) the value of the information to [the company] and [its] competitors; (5) the amount of effort or money expended by [the company] in developing the information; (6) the ease or difficulty with which the information could be properly acquired or duplicated by others." Restatement of Torts § 757 cmt. b (1939); see also Open Records Decision Nos. 319 at 2 (1982), 306 at 2 (1982), 255 at 2 (1980).
 

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