BEFORE THE BOARD OF TAX APPEALS

STATE OF WASHINGTON

WELLPARTNER
3

INCORPORATED
Docket No 10 228

Appellant
4
V

RE Excise Tax

Appeal

FINAL DECISION

STATE OF WASHINGTON
6

DEPARTMENT OF REVENUE

Respondent
This matter
came

before the Board ofTax

Appeals Board procedures

on

August 24 25

and

26

2011

for

formal

hearing pursuant

to the rules and

set forth in

09 chapter 456 Perry

10

Washington
Attorneys

Administrative Code

WAC

John

Ridge

G Kim Risenmay and Michael

11

with Stoel Rives LLP

represented Appellant Wellpartner Incorporated Wellpartner Zaleskey

Assistant

Rebecca R
12

Glasgow

and Charles

Attorneys General represented Department

and considered the arguments
as

Respondent
13

State of Washington

Department

of Revenue

The Board heard the made

on

testimony

reviewed the
now

evidence

14

behalf of both parties The Board

makes its decision

follows

15

ISSUES
16

Sebrin
17

Issue 1 Under WAC

18

c 7 c 7 197 20 458 Rule 197 does Wellpartner have

of B taxes O
on some

sufficient

nexus

for

payment

of its transactions with

Washington

19

customers
Answer

20

Wellpartner

concedes this issue per its

Trial

Brief The

nexus

issue is

withdrawn
21

by Wellpartner
Wellpartner qualify
persons
use

Issue 2 Does
22

for the lower B tax rate O

provided

in RCW

272 04 82that

applies to

engaged
to
a

within the state in the business of warehousing and

23

reselling drugs

for human

pursuant

prescription

The

higher

471 rate 0percent is for

24

1 250 04 general retailing classification RCW 82 and 272 04 pharmacies RCW 82

1

138 0 percent is for warehouse

25

Because of

illness Kay S Slonim Chair

did not

participate

in this

hearing

or

decision

FINAL DECISION

Page

Docket No 10 228

Answer No
1

Wellpartner

does

not

qualify

for the lower tax rate

Wellpartner does

not

resell
2

drugs

to

qualifying entity

The Uniform Medical Plan

UMP

or and its

subcontractors
are

Oregon Dental

Service ODS and

MedImpact

Health Care
are

Systems MedImpact

not

healthcare service from

providers
The

Enrollees in the UMP or and its

the

purchasers

of the

prescription drugs
are

Wellpartner
care

UMP

subcontractors
do not

ODS and

MedImpact
treatment

involved in

the health
5

insurance from

business they

provide

healthcare

and

they do not
to

purchase drugs
6

Wellpartner

The UMP

only

reimburses

Wellpartner

for

drugs provided

the UMP s
7

enrollees

the persons insured

MOTIONS OF THE PARTIES Motion in Limine 1

Wellpartner

filed

motion in limine to exclude and TBD with

two

ofthe

s Department

witnesses

10

TBD2
11 12

with

MedImpact specific

Washington Department
were not

of Health the

because the

names

ofthe witnesses order The

provided by

designated
a

date in the Board s

scheduling

Department only

furnished

general

13

description
o

of the persons

by employer
that it

and

topic
with the

14

The Department

replies

complied

spirit

of the order and

to it

provided the
15

names

ofthe witnesses the issue in

as soon as

they were available

Per the
16

Department

dispute

was

not raised

by Wellpartner

until late in the

discovery

process

during

deposition
drugs

of Ms Addington
were

17

s Wellpartner Controller

who claimed that the such

as

sold to

18

pharmacy benefits managers

whom the

MedImpact

not the clients to

prescription

is made out to and mailed to

delivered
Vice President

19
o

The Board denies the motion to exclude James Controller with

Gollaher

20

MedImpact
part ofthe testimony of Gilbert Brewer
as an

21

Department

moves

to exclude

22

employee
beginning

of the ofthe

Department hearing

irrelevant The Board denies the motion at the

Note the

23

testimony was point

the

later excluded when counsel made and

Wellpartner
24

called Mr Brewer At that

as

s Department
on

further
25
2

representations

to the

s Department position

its

practices

agreed

TBD is

apparently

short hand for to be determined

FINAL DECISION

Page

228 Docket No 10

state of that out warehouses

1

were

covered under RCW

272 04 82 the

same as

in

state warehouses
2

Motions
1

to Exclude Exhibits
moves

Wellpartner

to exclude Exhibit

R42 the

declaration of James Gollaher

Vice President Controller with

notes Mr Gollaher will be
a

MedImpact

The Board denies the motion and

witness

2
6

The Department

moves

to exclude Exhibit

A17 unless it is for demonstrative

purposes
7

only Wellpartner stipulates

as an

Exhibit A17 is for demonstrative purpose

only

Exhibit A17 is admitted

illustrative exhibit

UNDISPUTED FACTS

10

The
11

following facts
is
an

are

not

disputed by

the

parties
with

Wellpartner
sells

order Oregon mail pharmacy

a

headquarters

in

Portland Oregon

It

12

prescription drugs

and

few overOTC medications to counter the in other states

Washington

13

consumers
with
one

it also sells to

consumers

Wellpartner
a

is

only order mail pharmacy

in

14

physical building in Portland Oregon

a

it is not

physical pharmacy Walgreens

Washington buildings
and

State such as
15
a

local

pharmacy

like

Safeway Costco

and

that have

supply of drug inventory in Washington

s Wellpartner
annual 2005

16

Washington through

destination sales range from 2 million to 5

million

17

per year for the million in 2008

period

2007 Its

Washington

sales increased to

approximately 50
s State

18

when Wellpartner became

order the mail pharmacy for

Washington

Uniform Medical Plan UMP

19

The UMP is
20

one

of several health insurance under the Public

plans

offered to state Benefit Board

employees enrollees
PEBB
ofthe State of of the

also referred to

as

patients
a

Employees

21

Washington
I

The PEBB is

board established under the Health Care

Authority HCA

22

State of Washington

The UMP contracts with

Wellpartner

via

two

subcontractors

3 1 ODS

23
3

24

Brief page 8 The Organization HMO that

Trial

UMP contracted with ODS has offices in Washington benefits and

a

an

based Oregon and

and Alaska

licensed Health Maintenance

Idaho

Under the contract ODS is

required
a

25

provide
price

both

prescription drug
It is
a

its enrollees

wide range of other healthcare services and products to the UMP and fee for services contract with UMP reimbursing ODS separately for each drug dispensed using

scheme based upon the wholesale value of

drugs dispensed

FINAL DECISION

Page

228 Docket No 10

which contracts with

1

2 MedImpact

California based

corporation MedImpact

then contracts

with
2

Wellpartner
The

Department

discovered that

Wellpartner was making Wellpartner had

O B tax
for

sales to

consumers

in and

Washington
assessed

The Department determined that Business and

a nexus

with

Washington

retailing

Occupation

tax

Washington

destination retail sales

to the

for 2005 based upon 2008

information provided by Wellpartner Wellpartner appealed

which

s Department Appeals Division

6

upheld

the assessment in Determination Nos 09 and 179

179R This
7

appeal

followed
as

The assessment is

follows

2006 2005 2007 2008

50 459 37

17 774 18 94 599 249

the tax

10

Per
11

Wellpartner

interest

and

penalty amounts

for the above assessments

total
12

66 813 319 Wellpartner paid

the total amount before the due date of June

correct amount of tax

18

2010

Wellpartner states however the

are

interest
a

and

13

penalties
the

55 731 actually 90 under the

lower tax rate It requests

refund of

14

4 overpayment
CONTENTIONS OF THE PARTIES

15

16

uments s Wellpartner arp

17

Wellpartner initially appealed required

and

argued

that its sales to

Washington

consumers

lacked the 430

18

transactional nexus for taxation under

Complete Auto Transit

Inc

Brady

19

S U 274 97 S Ct

1076

51 L Ed 2d 326

1977

For this reason it did not After further

originally
on

register
20 21

or

file tax returns with the State of Washington

investigation

the

extent ofits activities in nexus

22
see

Washington Wellpartner
Footnote

decided to withdraw the issue oflack of

statement at the

s Wellpartner Trial Brief

1 and

beginning ofthe

hearing

23

Wellpartner agencies
4

claims that

lower

tax rate

applies because

it sold

drugs

to

governmental agencies
and

and

private

businesses that had entered into contracts with it The

24

25

In

closing argument Wellpartner

for
a

states

that the correct refund amount is about

000 2less

or

about

000 227 plus

adjustments

recalculation of interest and

penalties

on

the

adjusted

amounts

FINAL DECISION

Page

Docket No 10 228

businesses through
1 2

their contracts control which

drugs Wellpartner

will

dispense

to

patients drugs

and the UMP subcontractors determine the s that

3
were

prices they

will pay Wellpartner for the

dispensed

to the enrollees of the UMP

The Department s

position
The

in this

appeal

is contrary to its
a

legal

conclusion in

recently

published
to
an

tax

case

Department

ruled that

order mail pharmacy sold

prescription drugs

unlicensed

private business that dispensed

0111 08
two

those

drugs

to

Washington residents see

Determination No
6

27 WTD 221

2008

Wellpartner operates
7

separate and distinct lines ofbusiness

services for entities

It

provides pharmacy management

eligible

to

access

Section
a

340B

programs drug pricing

Under this program

Wellpartner dispensed

small Tribe

amount of prescription
on

drugs 33 135

to members of the
was

Snoqualmie Indian
to

behalf ofthe federal health clinic that care

10

designated

provide public

healthcare services for the tribe under the federal Public Health Service Act
11

Under the
12

pharmacy contract agreement Facility dispenses

then it

the covered

entity Snoqualmie

Tribe Health Care The covered

own

inventory to eligible patients

for its

13

entity

replaces

those

dispensed drugs
The

inventory by
were sent

14

using Wellpartner discounted prices s

replacement

orders

directly
15 16

to the contract pharmacy

by Wellpartner

Under this

common

pharmacy purchasing and pharmacy

covered

sales

model

the covered ofthe

entity is not

licensed the

and does not take the

possession

drug inventory By law drugs

17

entity remains

purchaser

seller of prescription

under

18

Section 340B 2 It

19

provides prescription drug

services

through

order its mail pharmacy

dispensing

prescription drugs via prescription benefit management firms

20

Medicare and Medicaid United

plans
States The vast

funded self employer groups and insurers located

throughout the

21

22

majority

ofthe

drugs

it

dispensed 55 million
serve as

in

Washington

resulted from

23

Wellpartner being

subcontracted to

the

dispensing pharmacy

for the UMP

24
5

To

25

Health Services Act

provide prescription drugs to distressed or underserved people Congress enacted section C S 42 U section 256 Hereinafter referred to as 340B program b

340B of the Public

FINAL DECISION

Page

Docket No 10 228

Wellpartner dispensed
Northwest

much smaller amount of drugs Inc

approximate 2 million unrelated pharmacy

via the

Pharmacy Services Washington

also

NWPS

which is

an

benefit

manager in
3

Wellpartner

dispensed approximately 9 million

enrolled with various
or

in

prescription drugs

to

Washington

residents who

are

Washington non healthcare organizations primarily

other states has
now

through

their current
states

former

employers located in
that the

Wellpartner
6

Trial Brief page 18

requirements
to

Department

accepted

the fact that it

fulfills all ofthe statutory

7

under RCW

272 04 82 except

Whether it resold
8

drugs

person

selling prescription drugs

to

retail i other pharmacies e

hospitals clinics
healthcare

10

provider or
ofhealthcare services is that

11

other
12

providers

Per

Wellpartner
1

the

s Department position
is

13

Wellpartner
for

selling drugs
or

to individual UMP enrollees because it would be

illegal

14

MedImpact

ODS the

to

purchase

these
or

prescription drugs

and resell them to

anyone
15

including

UMP HCA
were

the individual enrollees

2
16

MedImpact ODS

and UMP

neither healthcare

providers

nor

other

providers

ofhealthcare services under the intended

meaning

ofthose terms

17

Wellpartner argues
1

that the facts show law allows sold to

18

Washington
time

prescription drugs
else

to be

dispensed

to

one

person at the

same

19

they are

someone

Washington law

makes

distinction between the

dispensing
20 21

of prescription confuses the

drugs

versus

the sale of prescription

drugs

The

Department
No

dispensing 2008

of drugs with the sale of drugs In Determination

0111 08

27 WTD 221

the

Department recognizes
for their

that many classes of

as

22

licensed entities

purchase prescription drugs dispensed by

to

employees
licensed

long

as

those

23

drugs
2

are

handled and sells

those

purchasers

by pharmacies

Wellpartner

drugs
no

the UMP not its enrollees the persons

to

24

3
25

RCW 82has 272 04

requirement regarding

whom the that

drugs

in resell

question

are

dispensed

or

delivered The statute

only requires

Wellpartner

FINAL DECISION

Page

Docket No 10 228

the
1

drugs

to

one

of the five

qualifying categories drugs

to
a

listed The

Department by arguing
a

that
2

Wellpartner

must also deliver the

qualified purchaser is adding

requirement
3

that is not found in the statute

The term resell is not defined in the statute

therefore

it has its

ordinary meaning

s Wellpartner witnesses
1 Jason

Hardaway

is Wellpartner Senior Director of Contract s

Pharmacy Programs

for

its section 340B

7

prescription drug program

administers the 340B program
are

Mr

Hardaway

Drugs

sold under this program

price limited by the

Medicaid rebate rates

Wellpartner only Tribe during

contracted these services

through

the

Snoqualmie Tribe the

the audit

10

period Wellpartner
is Exhibit AT

The Tribe contract with s

11

Wellpartner
the

is the

contract pharmacy for the Tribe The Tribe

purchases

drugs

and

12

Wellpartner dispenses the drugs only to paragraph

2a The

Tribal

members

see

Exhibit A74

13

drugs

sold

are

only 340B

program

drugs preapproved by

14

the program The program is

only

via mail order for services

by Wellpartner

which fills the

15

prescription
16

from its

Portland Oregon facility

The Tribe is located in

Carnation Washington

If the Tribal member wants to

or

physically get

the which

17

drugs

at

pharmacy
Carnation
in

he
or

she must go to

Wellpartner non pharmacy

does not have
use an

18

is local in

nearby Wellpartner

site on

pharmacy
19 20

Washington for

Tribal members to

When the Tribal member

mail purchases by non order meaning

at

local

pharmacy

he or she pays for 100 percent ofthe cost and is not reimbursed

by

21

the 340B program ofthe Tribe

22

Wellpartner

is

paid

fee per

prescription plus
ofthe

an

administration fee
not

Wellpartner
23

takes

possession

drugs

but does

purchase
a

or

resell the

drugs
24

in the 340b program

When the

prescription
fills the in

order from

Tribal loans

member arrives
25

by mail

and

Wellpartner

order Wellpartner
to

the

drugs

it has in

s Wellpartner inventory

Oregon

the Tribe

FINAL DECISION

Page

Docket No 10 228

Wellpartner
1

then

shortly thereafter

orders to refill the

dispensed drugs

and

refills its
2

general inventory
on

the Tribe pays for the

replacement drugs

ordered

by Wellpartner
3

the Tribe account at Wellpartner s

s Typically the Tribe there is

a

drugs

are

not

stored
on a

separately drug

when

they

arrive

Occasionally

great price
of a Tribal

routine

and the

drug

is purchased bulk in advance in

prescription arriving

When this occurs the

drug is

stored in

physically separated
6

shelf or space at

s Wellpartner Portland facility dispensed

from

Otherwise drugs
7

to Tribal members

are

s Wellpartner general
on

inventory
account is

with

later replacement ordered The later ordering

not

the Tribe s

only tracked electronically

by physical inventory segregation

Larry Cartier

is Wellpartner Vice President of Pharmacy s

a

Mr Cartier is
10

licensed

pharmacist in Oregon
call center and

and he

supervises
its Portland

s Wellpartner pharmacists
11

purchasing at

facility

Exhibit A27 is his Exhibit A18

resume

12

wholesale license

and A19

resident non pharmacy license

are

13

s Wellpartner Washington licenses

The patient is the end of the user

14

prescription
of drugs

Wellpartner
15

takes
a

physical possession

Exhibit
16

A17

chart

is illustrative for the UMP and

s partner Well processing

of prescription

drugs
does business with UMP enrollees

17

Wellpartner only
order
or

patients
is
a

who chose to

18

get their drugs via mail order

one

Wellpartner

only order mail

it is not like
a

pharmacy with
19 20

physical building
such

in

Portland Oregon

physical

pharmacy in Washington State

Costco
and

as a local

pharmacy
and
a

Safeway
in

Walgreens

that have

physical buildings

supply of drugs

21

Washington
Most of the medications ordered by mail from

22

Wellpartner
to

are

maintenance

or

occurring medications re
23

The UMP offers from from

discount

the enrollee

patient

for many of the

24

drugs purchased
are

Wellpartner Wellpartner

The UMP also

saves

money when
25

drugs

purchased

FINAL DECISION

Page

Docket No 10 228

The
1

patient

orders the

prescription
the

from

Wellpartner by asking
Wellpartner
a

their doctor to email via

a

electronically transmit
2
secure

prescription

to

via

fax by

link

or

by mailing regular postage mail Wellpartner formulary that

lists the

hardcopy

ofthe

prescription

to

The UMP has

drugs

for which UMP will If the

reimburse
wants the

and the amount of the reimbursement to the

5

patient

patient

drug
6 7

not

in the

formulary

he or she must pay 100 percent of the cost without

reimbursement from the UMP The

formulary

is

preferred drug

list of

generic drugs
on

and

preferred drugs

The reimbursement rates vary

depending

the

drug
administers the UMP enrollee information and information

MedImpact

plan restrictions
that

10

MedImpact provides Wellpartner with

includes UMP enrollee

electronically

eligibility

UMP

formulary how much co is payment drugs

The

11

required
the

and what Wellpartner will be reimbursed for the and the

drugs

in

12

formulary

reimbursement

amounts

change

over

time The

13

spayment patient co is typically by check

and in
rare cases

made

by

credit card card debit mailed by the

occasionally

14

by

cash

paper money

patient prescribed

Step therapy
15

is when other

drugs

must be tried first before the

drug
16

is reimbursed

by

the UMP The patient

always
or

can

decide to pay 100

percent for the

drugs

and over ride Patients

the formulary
to

other UMP UMP

restrictions restrictions

17

including step therapy

rarely decide

reject the drugs

18

for reimbursement and to pay 100 percent ofthe PNT is the

cost

Pharmacy

and

Therapy Committee
Exhibit A30 is 1 from
a

which decides which

drugs

19
are

in the UMP

formulary

shot computer screen of a These messages

20

message
21

rejecting a prescription drug

MedImpact
patient
can

require Wellpartner
doctor

to communicate with the

or and the

s patient
100

22

Wellpartner tells

the

patient

that

you
or

pay
can

cash meaning
get

23

percent ofthe cost without reimbursement

you

your doctor to

adjust
24

the

prescription Occasionally MedImpact

contacts the

s patient

doctor and

to
25

see

if a different

formulary drug

or

amount of the

drug

is

appropriate

authorized The processing ofthe UMP

formulary

and other restrictions is

FINAL DECISION

Page 9

Docket No 10 228

similar to communication
1

local

pharmacy

would

perform

for

patient

prescription
2

it is not is

unique

to just

Wellpartner
a

Wellpartner
3

physically

different than

local

pharmacy one physically

in

Washington
It is located in indicate that

Portland Oregon
are

in

business

park Signs

do not

drugs

kept

at

or

dispensed

from the

facility

Patients cannot walk in to the

6

facility and

order their prescription

drugs
7

It is

physically large

warehouse of the

facility 34 000

square feet

Exhibit A26 has

It has It
a

photos

facility

warehouse for

drugs

10

buys drugs

from wholesalers and resells those and limited

drugs
ODS MedImpact reimbursed
or

Wellpartner is controlled
11

by its

contracts with

and the UMP

12

on

how it processes

prescriptions

and how it is

paid for drug prescriptions Wellpartner dispenses

pay co is

that it fills for UMP enrollees

patients
The enrollee
In Mr

13

to the enrollee and is

paid by MedImpact Wellpartner

14

processed by Wellpartner and opinion Wellpartner resells

then paid to

s Cartier
15

the

drugs

to

MedImpact
for
an

Exhibit
16

66 Al is an invoice from Wellpartner

to

MedImpact

enrollee of

the UMP It lists the amount

17

Wellpartner will be paid the

enrollee pays any

balance
The

as a

payment co

18

patient

can

purchase drugs
the

from

Wellpartner

without UMP credit

19

reimbursement
means

patient must
is

pay in full

by cash

card

or

other

when the

prescription

dispensed
MedImpact
on

20

s Wellpartner interaction is
21

with

filling prescriptions

under the

UMP

22

The UMP administers the

pharmacy benefit

via

MedImpact

for the enrollees

23

Cross examination
24

25

s payment Exhibit Al does not show the amount of the enrollee co or the amount 6

MedImpact

pays to

Wellpartner

FINAL DECISION

Page

10

Docket No 10 228

The patient must pay the co if one is pay

due

before the

drug

will be relies
on

dispensed mailed by Wellpartner

2

to

the

patient Wellpartner

MedImpact
3

for this information stocks

Wellpartner mostly
has

drugs

listed in the UMP

formulary Wellpartner inventory

to the

possession

ofthe

inventory

of drugs for the UMP in its the cost of shipping the

are

in

Portland
5

Wellpartner pays for

selects how the
seen

drugs

patient

Wellpartner
6

drugs

shipped
ODS agreement with

Mr Cartier has not

7

Exhibit

7 Al the
a

MedImpact

Mr Cartier does not know how in the

s patient credit
Wellpartner

card shows the co payment

prescription transaction
means a

with

Out of pocket
cost

patient

will pay for

some or

all ofthe

prescription

10

Out ofbenefit
11

means

the

drug

is probably

not

in the the

s plan formulary patient

pays 100
a

Under the

Washington Prescription Drug Program

cost

12

percent of the

provided by MedImpact

but

Wellpartner

files

claim for

13

the discount with Exhibit R47is

a

MedImpact
Mr Cartier for
a

14

job description signed by

customer service

representative
15

of Wellpartner The

employee position
supervises

is part of Wellpartner s

call center The

16

department

Mr Cartier

includes

pharmacists

and

technicians customers

In its

documents Wellpartner

refers to enrollees

patients

as

17

Reimbursement and
18

payment

mean

the

same

thing provide
for

The term not covered

19

typically

means

the UMP does not

reimbursement
20

or

payment for the

drugs
by the formulary
and the

When the decides to

prescribed drug is
purchase

not covered

patient

21

without reimbursement from the

UMP Wellpartner

22

determines the amount to be UMP contract

charged

the

patient

without any reference to the

23

24

Redirect
25

The customer is the

patient

or

enrollee

FINAL DECISION

Page

11

Docket No 10 228

In Mr Cartier
1

opinion Wellpartner true customer s

is

MedImpact

Reimbursement is what Wellpartner gets

2

paid by MedImpact

An enrollee
3

can

appeal

the

drug

disallowance to the UMP

Robert

Judge is

founding member

of Wellpartner He is its Executive Vice

President

Wellpartner
It is
an

was

founded in 2001

Oregon corporation
a

Its
7
on

primary business is as

order mail home

are

delivery business
need these

It focuses

chronic mediations that and

can

occurring re Customers

drugs

on a

regular basis

get them by mail order

with

Wellpartner partners drugs

There is
a a

statecorporations Washington

for the
on our

delivery

of

brandedness co We put their label

contract with
a

drugs

10

Exhibit Al is
11

typical

Pharmacy Benefit Manager PBM

a

PBM is

an

industry term
a PBM

it does not refer to

specific entity or corporation formulary

and verifies who is

12

MedImpact is
eligible

The PBM manages the of payment

an

13

and the

amount

A review of a claim is called

14

adjudication managed Wellpartner

agreement
It is

Exhibit Al describes how co are pays

15

is required to
an

collect the
16

amount

of the co per the payment

offset

against

the total amount due to

cannot

Wellpartner by the UMP

via

MedImpact

17

Wellpartner

change

or

waive the amount ofthe copayment The UMP

sets the reimbursement rate for the

18

drugs

it is

discount off a reference

price
19

The UMP does

20

not

allow the PBM to

pocket

the difference

spread
for the

between the reference price of drugs and what is

actually paid

drugs

21

s Wellpartner agreement Exhibit Al

with

is with

MedImpact

which

contracts

22

ODS

which

contracts

with the UMP and Procedures Manual

to be

Exhibit A2 is
23

s MedImpact Policy

Wellpartner
24

submits claims to

MedImpact
a

adjudicated drugs
The it

Under the
25

UMP Wellpartner
on

cannot seek

manufacturer rebate for

to

submits rebate claims

behalf ofthe UMP

the

drug manufacturer

FINAL DECISION

Page

12

Docket No 10 228

UMP is
1

paid the rebate directly by

of a manufacturer rebate

the

drug

manufacturer

Lipitor is an
by Pfizer Many
of

example
2

drug

it is manufactured

the
3

formulary drugs

have manufacturer rebates See Exhibit A5 51 shows that ODS

was

Exhibit A5 a 6
was

contract

awarded the contract ODS and

a

required

to contract with

both local

pharmacies in Washington
as

order mail pharmacy ODS ODS set up

picked Wellpartner

the mail pharmacy order ODS administers the

MedImpact

as

its on processing line

entity

pharmacy benefit
7

for the UMP it has be

a

In Mr

s Judge opinion Wellpartner warehouses drugs specific drug

can

warehouse
to
a

Prior authorization limits whether the

dispensed

patient Wellpartner must get drug

does not have

additional documentation from the doctor if the

prior

authorization

Step therapy

is

similar program

10

See Exhibit A5
11

Wellpartner typically gets paid shipped

Mr
to the

30 days after the

prescription

is issued

or

12

patient
use

13

Judge references the

ofthe term

purchase

in Exhibit A15

Performance Audit ofthe

14

Prescription Drug Purchasing Consortium Report

to

1 08 dated October 22 2008

15

the

Washington legislature

referred

to as

the JLAR
16

Report

17

Cross examination Northwest

18

Pharmacy
own

Services is

PBM located in

Puyallup Washington

it

does not have its

19

order mail pharmacy

Under the contract Exhibit

20

Al MedImpact

acts

as

the intermediator for

payment to Wellpartner

ODS is the administrator for

prescription drugs
a

21

MedImpact MedImpact

is

subcontractor to ODS

Wellpartner

is

subcontractor

to

22

23

Wellpartner has the

the

risk of loss under the contract for all

are

drugs shipped patient

then

to

patient

11 Exhibit Al If drugs

not received

by

the

24

Wellpartner
25

will

not

be

paid

Under Exhibit A2 8

MedImpact charges

FINAL DECISION

Page

13

Docket No 10 228

Wellpartner
1

an

administration fee The contract does say that

Medlmpact is

the
2

purchaser ofthe drugs

from manufacturers and wholesalers Its

Wellpartner purchases drugs

3

inventory of drugs

is in its Portland

facility Wellpartner

sells brand

name

drugs generic drugs

and over OTC items counter the covered non item is

a

or

medications An the audit

example
no

of an OTC

or

syringe During

period

OTC items could be purchased

by the

UMP enrollees from

Wellpartner

this
7

changed

in 2009 the convenience ofmail drugs order

as

Wellpartner markets Prescriptions

WERX
for
are

home

delivery

entered into

s Wellpartner computer system

prescription

called the

adjudication

After the enrollee s

order is

authorized
10

it is entered into and R16

s Wellpartner prescription dispensing system

Exhibit
11

147 A24

are

examples

of documents

typically

sent with the

drug shipment
Exhibit ofthe

to the

patient
example
of a co amount payment of the

12

18 R16

is

an

exceeding the
not listed

total cost the

13

drug

The

adjudicated price

drug is typically

on

invoice to the enrollee because the reimbursement

14

amount can

change

and

typically
15

comes

15

to

30

days

later is

Mr
16

Judge argues

that
no

MedImpact knowledge

purchasing the drug Medlmpact

for the enrollees of

the UMP He has

ofhow

accounts for the money

or

17

paid to them by the

takes

UMP He agrees that

MedImpact

the

PBM

never

18

possession drugs

ofthe

drugs
the

Mr

Judge opines
are

that the PBM is the

purchaser
Even

ofthe
19

even

though

drugs

delivered

mailed

to the

patient

when the
20

patient pays

100 percent ofthe cost of the

drugs

the PBM is the

purchaser Wellpartner dispenses

the

21

drugs

which

are

goods

It is not in the business of

22

providing services Wellpartner gets paid

based upon

goods drugs

that it

23
7

dispenses
The exhibits contain information about the
are

24
8

brochures 25

printed

with
an

drugs and the dispensing ordering s Wellpartner name displaced

process with

Wellpartner

the

The exhibit is labeled

Invoice in its top

PRESCRIPTION SERVICES above

and in the top left The label reads WASHINGTON STATE in Portland Oregon s Wellpartner name with its mailing address a PO

right

Box

The Patient Amount is 13 for this 81

exhibit

the

s patient name

is blacked out for

confidentially

reasons

FINAL DECISION

Page

14

Docket No 10 228

Exhibit R7 is
I

signed by

the CFO of Wellpartner Mr

Judge agrees

that he has

greater understanding
2

of Wellpartner saccounting than other witnesses

MedImpact patients

never

takes

possession

ofthe

drugs dispensed

to the UMP

A small number of drugs

are

warehoused for 340B

clients

and stored Tribe The

separately

as

the property ofthe 340B

client

the

Snoqualmie

UMP is not a 340B

6

entity
are

The sales to the

7

Washington Prescription Drug Program WPDP

the

100

percent
WPDP

paid by

patients

at

discounted

price preby the negotiated

MedImpact enrollee

tells

Wellpartner

the amount of the co from the payment

patient

ofthe UMP

10

11

12

Cash payment claims program A cash

pays 100

are

external to the UMP and its

occurs

prescription drug
enrollee
or

13

payment

when the from

customer

patient

14

percent ofthe
is not

cost ofthe

drugs

Wellpartner
claims

Wellpartner
15

claiming

that the cash

are

pay

qualify

for the lower

O B
16

tax rate

Cash payments

currently

less than 1 percent of 0

revenues

s Wellpartner revenues they were about

the years at issue

3 percent of its

in

one

of

17

18

MedImpact
loses money

sets the

price for

all

drugs
as a

sold

through the

UMP

Wellpartner

on some

ofits sales

result
mean

19

Both reimbursement and

20

payment

the

same

Both

are a

sale of

drugs

Mr

Judge does

not agree

with the characterization

by the
for the

21

s Department
sale of drugs

witnesses that the UMP the UMP enrollees s

just

reimburses

Wellpartner

22

to

23

24

Mr
25

Judge

has

never seen

1 Exhibit A73 before he does not know if it

subtracts

out

the cash payments

FINAL DECISION

Page

15

Docket No 10 228

4
1

Angela Addington
Ms

is

s Wellpartner Controller
handles the accounts receivable and

Addington

budgeting functions
but she is not
a

in

addition to other duties Her

3

training

is in

accounting

CPA or

tax

expert

Exhibit A70 contains several invoices filed

case

by

the

Department

related to this

Exhibit A73 is
6

summary chart of taxes

interest

and

penalties
an

in this

case

Column 3 lists the OTC sales

7

156 14 in Washington

example

would be
on

the sale of aspirin

66 813 Wellpartner paid 319 to the Department

a

the

assessment The bottom half of the exhibit is

recalculation of the

assessment

using

the lower

warehousing

rate it shows the revised amount due and the

amount ofrefund claimed

10

The recalculation includes the OTC sales at the

lower
11

warehousing rates

it states Total Amount

Actually Due

is

10 082 229
Exhibit A71 is
a

12

copy of

June

4 2010

check for

66 946 303 paid

to the

13

Department

14

Wellpartner paid the Department

the assessments in full

15

Cross examination and direct examination

16

as

the

s Department

witness

Wellpartner has
Brand

four accounts for

revenues

17

name

drugs

18

Generic OTC

drugs
and

19

counter the over

340B accounts
20

s Wellpartner drug inventory

21

is accounted for

as

owned

by Wellpartner
accounts

The copayments received from

patients

are

part of Wellpartner s

22

The reimbursement from insurance is the

typically paid within

15 to 30

days

after

23

dispensing
a

and

billing
PK Schiffer

5
24

Peter Buss is

partner with the accounting firm

Kiechkhafer

Schiffer

Company LLP
25

Mr Buss handles state and federal

corporate income

tax returns

for clients

FINAL DECISION

Page

16

Docket No 10 228

He and his firm did

1

s Wellpartner tax

2007 returns from

through

2010 See

Exhibit A66 and later numbers

2

Exhibit A68 lists the

apportionment

schedules for 2007

Washington

throw
to

backs were not included in the of nexus Exhibit A69 lists the
same

Oregon apportionment

calculation due

lack

information included in

as

Exhibit A68

Hence

the

Washington
6

sales

were

not

Oregon the

state tax calculations

Rebuttal Mr Buss reviewed the Form 1 OKs federal government

an annual public

document filed with the ofMedico and

FCC by

all

public corporations

Express

Scripts competitors of MedImpact

10

He states these two

competitors handled
than

the
11

accounting

of their

pass through payments differently

come

MedImpact
reports do

He read the notes in the Form I OKs to not call the

to this conclusion the

as

12

payments pass throughs but

refer to them proper

principal and

13

agent
for

transactions

MedImpact
as

does not

use

accounting procedures
Standards
was

14

through pass payments

set

by

the Financial

Accounting

Board in his expert

15
an

opinion

The

Department
and

notes Mr Buss

not listed

as

expert witness

by Wellpartner 9 OK

objects to

his expert

opinions and

16

interpretations
6

of Form I

17

Raymond Hanley Washington

Mr State

is Senior

Manager

with the Healthcare

Authority HCA

of

18

Hanley

drafted Exhibit A21 for the the exhibit is

an

Washington Prescription Drug

Washington
State The

19

Program WPDP
20

overview ofthe

Northwest Prescription Drug

exhibit bears his
name as

Purchasing Consortium Consortium

21

its author

22

23

24

The Board finds that Mr Buss s His

as

testimony

about the Form IOK is expert in nature and he

was

not disclosed

as an

expert witness
25 disclosed as know what
a an

the Form I OK is not considered because it is expert in nature and he was not testimony A lay person would not be able to look at a Form I OK and tell what the footnotes meant expert
to

nor

pass through payment was or if

it

might be

the

same as a

principal and agent

transaction

FINAL DECISION

Page

17

228 Docket No 10

Mr
1

Hanley is familiar with

Senate Substitute Bill

an

SSB 5471

which created

the Consortium The law is

2

initiative to

save

money in

purchasing drugs

It is In

an

effort the

to

get the best

you
are

prices
the better

theory

larger
The

price
the

you should be able to get in the discounts for the

market

place

goal

is to

negotiate

largest possible

State and its

5

agencies

The Consortium

can

include other state governments

and
6

agencies
of state

A
7

variety

agencies purchase drugs

as

Some
can

agencies

such

the

Washington

State

Department

of Health DOH

DOH

get

drugs cheaper than the

Consortium For
a

example

purchases

drugs
ODS

for its HIV program via

was

federal government

subsidy

the successful bidder for the Consortium first contract ODS s

as a

10

included
11

MedImpact
one

partner

The UMP is just

ofthe

agencies that

established

relationship with ODS

12

a PBM contractor
Mr

13

Hanley

is familiar with the Exhibits A14 and A15 He does not know if
an

the UMP had

14

actual cost

savings by using the

Consortium and its contracts

The UMP
15
see

purchases approximately 158

million in annual

drug prescriptions

Exhibit A15 The PDL is the Preferred 10 it is also known

as

Drug List

which is authorized

16

by the legislation
was

the

formulary
on

A PNT Committee
can

17

created and makes recommendations

which drugs

be used

as

substitutes for other

18

drugs

19

Cross examination
20

The

Prescription Drug Program

was

created to

insured help under or un

21

insured residents of Washington The program is 100 percent copayment for the resident State
or

22

enrollee fall into

two

agencies

categories
For to

those that the its

purchase drugs directly Department prisoners

and

23

those that reimburse for

24

drugs

example
to

of Correction
an

DOC purchases drugs directly

25

provide

The UMP is

FINAL DECISION

Page

18

Docket No 10 228

example

ofthe other type of agency it

just

reimburses claims for

drugs

The

UMP does not

2

purchase drugs directly

like DOC

Mr
see

Hanley

is the contract manager for the umbrella contract that he

rates

signed
for mail

Exhibit A3 Exhibit A3 sets forth the reimbursement 57 8

order

pharmacies

The participating groups include ODS BPD is the

abbreviation for Benefit Plan

5

Design

Under

pay self program

like the

Washington
6

State

Prescription Drug Program

the enrollee is the card holder

The contract
7

Exhibit A3 only

talks about reimbursement for

claims
The contract
as a

including
talks

reimbursement to the mail vendor order for

Wellpartner

only about reimbursement

claims

it does not refer to the UMP

purchaser of drugs
Exhibit A5 is
a

contract for the

10

UMP specifically

Donna

Sullivan

an

employee
11

of HCA is the manager for this contract

The JLARC

Report Report Exhibit A15

catch all

and Mr

Hanley both use

Report
later

the

term

12

purchase

as a

phrase

Mr

Hanley

says the

13

distinguishes purchase via

between those

agencies

that

purchase directly

and those that

reimbursement The UMP does not it

14

directly purchase purchases

In

prescription drugs
15

just

reimburses for its enrollees

a

contrast

DOC is
16

an

example

of a state agency that is

direct

drug purchaser

of

prescription drugs

17
R AA vAnf

18

The prices for the

19

Prescription Drug Program

The

discount program
set

are

set

by

the PBM
20

Medlmpact

price

discounts

are

by the

umbrella contract

between ODS and the States ofWashington and The PNT

Mr

Oregon

21

Committee

referred

to

above

is not part ofthe Consortium

22

Hanley

is familiar with the rebate programs of Medicaid and the UPM The UPM rebates
are

Department

of

Labor
23

Industries
as a

from manufacturers

of drugs
24

result of contract

negotiations

between the UMP and the

to the UMP in
a manner

manufacturers The rebates

25

are

passed through
or

to

benefit the UMP and its enrollees

participates

the

state

employees

FINAL DECISION

Page

19

Docket No 10 228

AWP is the
1

Average Wholesale discount

Price of drugs from manufacturers An

means a

example
2

of a

termed AWP 24

discount of24 percent of

the AWP
3

Gilbert Brewer is

policy employee of the Department

testimony based
upon

The

Department again

objects to

Mr Brewer s

relevancy
an

Wellpartner

states Mr Brewer is

being called as

expert

on

statutory

interpretation
6

and the

s Department practices

reference other taxpayers and

Wellpartner
7

The

Department

agrees the statute RCW

as

272 04 82 applies

to

state of out

located warehouses has made

no

well

as

state in located warehouses The

as

Department providers

prior

written

interpretations

to the

meaning

of other

ofhealth care services under RCW 82 The Department admits it 272 04

10

changed
11

its internal the

interpretation to

include out warehouses state of the statutory the

Initially

Department only interpreted

Exhibit R18 is

language

to

mean

in

12

state warehouses

provided by

Department

it reflects this

13

interpretation change
The Board

14

changes
He is

its earlier

ruling
an

and

now

excludes Mr Brewer s

testimony
15

being called as

expert

to

testify
to

as

to the law and its to the

meaning
16

The Board does not allow

legal experts

testify

meaning

of

statutes

regardless

ofwhich party calls the witness

It is the Board role to s

17

decide the law and the the

numerous

meaning

of statutes and

regulations
case

The Board notes

times it sustained

18
as

objections

in this

to witnesses

testifying

to

legal conclusions
is

rather than just facts and Chief Executive Officer

19

8
20

Mike

Wright

s Wellpartner President

CEO

also

one

of its founders
Mr

21

Wright testifies

about Exhibit

A35

the exhibit relates

to

s Wellpartner

22

claim of underpayments

reimbursement under from

the UMP via ODS and

23

MedImpact
Mr

Wright

says the enrollee is not his customer in his

opinion

the UMP is

24

the customer under the contract

Wellpartner

cannot claim further

payment
cites

25

from the enrollees after the initial co is collected Mr pay

Wright

FINAL DECISION

Page

20

228 Docket No 10

correspondence
1

between himself and the

UMP ODS

and

MedImpact

as

set

forth in Exhibit A36 and A39 The contract

2

dispute

was

about 5 million of

underpayments between Wellpartner

9

and the UMP

Wellpartner Department

will ask

questions
as

ofwitnesses Donna Sullivan and Tom Davis when the

calls them

witnesses in the

s Department

case

s Department arguments
6

Wellpartner
7

argues that sales in

Washington

should be taxed under the lower B rate O the state in the To

provided

in RCW 82 The statute 272 04

applies to persons engaged within

for human
a use

business of warehousing and

reselling drugs
the

pursuant
or

to

prescription

qualify drugs
to

the person must

a

buy
at

drugs
or

from

manufacturer

wholesaler
care

and then resell the

or

persons selling

retail

to

hospitals clinics

health

providers

other

10

providers
11

of healthcare services See RCW is

b 2 272 04 82
enrollees
not to

Wellpartner
12

selling prescription drugs

health care

to the ultimate consumer

or

retailers

hospitals clinics

providers
for the
a

similar

providers

ofhealthcare services Hence

13

Wellpartner
It is

does not

qualify

special warehousing

rate

14

generally understood

that

alone stand pharmacy benefit manager

PBM

does

not

purchase prescription drugs

15

from its network

pharmacies

See

Drug

Mart

Pharmacy Corp

Am Home Prods
16

Corp

472 F

Supp
10

2d 385 413

Y N D E2007 stand PBMs do alone pharmacy makes

See sales of

notipurchase prescription drugs

Instead

the network

17

prescription drugs
Pharm Indus in

to the

patients

that order and receive those drugs

generally In re
2005 describing

18

Average

Wholesale Price

Litig

D R 230 F

61

69

Mass

general

how the

19

health PBM pharmacy plan relationship works

name drugs both brand and generic

the federal district court

are

found that self administered

20
consumer

typically bought by

through

retail

or

order mail pharmacy which is then sometimes reimbursed This

by a

21

party third payor

amount

or

11 PBM

relationship
comes

is

so

described

even

though part
or

ofthe

22

paid for
Id

those

prescription drugs

from

an

insurance company

other third

23

party payor

Wellpartner

contends that its business

operations

differ from this normal

circumstance
24

25

10 11

Copy attached Copy attached

to to

the the

s Department materials s Department materials

as as

Appendix
Appendix

A B

FINAL DECISION

Page

21

Docket No 10 228

Wellpartner patients
2
are

is incorrect when it contends that the

prescription drugs

it sells and sends to

to be
a

actually

sold to the PBM that has contracted with

Wellpartner

order mail

pharmacy
3

for enrollees does

not meet to

Wellpartner

the

requirements
or

under RCW 82since it is 272 04

as

selling

prescription drugs
clinics
healthcare

the

patient
or

enrollee

the consumer not to

retailers hospitals

providers

similar

providers activity

of healthcare services sale of prescription

In its effort to characterize its business

6

as a

drugs

to

PBMs
this
a

Wellpartner
7

confuses the term sale with the term contract for sale

Wellpartner does

several times in its

8

hearing brief

For

example

at page 21 ofits

brief Wellpartner provides

1364

dictionary definition
On the

of the term sale

s citing Black Law Dictionary contends that it made

no no

81h ed 2004
who

next page page

22 Wellpartner

sales to

patients

ordered and received the

10

drugs

because it had

contracts

with them

Emphasis added
demonstrate that

From this initial

11

premise Wellpartner
contract

contends that with

he t

facts of this

case

each element ofthe

12

of sale

was

the PBM

rather than the individual enrollees

Id

Emphasis added By switching 12

or

from the concept ofsale to the concept of contract

to

13

of sale

sales

contract Wellpartner attempts

prove that there

was no

sale to the contract

14

patients

that ordered and received the

prescription drugs

because there

was no

with that
15

patient Prescription Drug Purchasing

Consortium
uses

The Performance Audit ofthe

16

Audit Report

Exhibit Al 5 is

report

to the

legislature

The Audit

Report
is not

the term

purchase

in

17

generic

sense or

catch all

sense

The Audit

Report

attempting

to describe the
or

legal

or

18

statutory relationship of Wellpartner ODS

or

MedImpact

to the UMP

other state under the

tax

19

agencies
statute

to

address who is the

legal purchaser ofthe prescription drugs

at the cost effectiveness of drugs

The Audit

Report

is

looking

purchases

that

are

20

administered
21

by

state

agencies where public beneficiary

as

or and state direct

employee

funds
as

are

used in

drug payments

reimbursements
like the PEBB

or

occasionally
the

purchasers

such

the

22

DOC Most state

agencies

or

UMP

an

insurance program of the

or

PEBB

23

only provide

reimbursement for

drugs purchased by their enrollees

beneficiaries

24
12

Another

25

example

where

Wellpartner

relies

on

1 B III of its

hearing brief There Wellpartner argues

the concept of a contract for sale is found in its heading to Part that a of ll the legal elements of a sales contract existed brief at 21

between UMP and

Wellpartner Wellpartner hearing s

Emphasis added

FINAL DECISION

Page

22

Docket No 10 228

The Department witnesses s

1 Tom Davis is Senior Revenue

Agent

for the

Department
master business

Exhibit R3 is
3

s Wellpartner Washington

application

On page

R34 box 3c

only Retail is checked by Wellpartner

and Service
are

the boxes for

Wholesale Manufacturing

not checked for the State

question apply

Indicate the business activities in

Washington

check

all that

The
7

Department

assessment is

correct and is based upon information

was

provided by Wellpartner
2

A normal audit

not conducted

Donna Sullivan is Director of Pharmacy Services for the HCA

Ms Sullivan

was

the contract manager for

see

pharmacy

services for the

HCA

UMP
10

and ODS contracts

a

Exhibit A5

The UMP is
11

Preferred Provider Organization

PPO

not

Health

Maintenance Under the

Organization HMO
pay
a

12

UMP enrollees

deductible for

prescription drugs

The UMP

13

has three tiers of drug classifications and reimbursements Tier 1 is

generic drugs
Under
or

14

drugs
Drugs

Tier 2 is brand name that

are

drugs
one

Tier 3 is

preferred non brand

are

name

not included in

ofthe Tiers

covered non

drugs

15

the UMP
16

plan

enrollees pay

an

annual deductible of 100 per person

300

per
17

family pharmacies
was

The contract has different rates for mail versus retail order because different discounts describe
are

18

available The term retail

used

only

to

pharmacies physically located in Washington that

order
it
was

did not do business

19

by
20

mail

not used to

mean

that

Wellpartner

did not sell at retail

The process is related to claims that of the UMP The UMP does not buy or sell
circumstances

are

reimbursed under the insurance policy

21

22

drugs

under the contracts

or

under any other

23

Under the
24

contract

in Exhibit A5 the UMP is

contracting in part

for

pharmacy network specialty pharmacies formulary management

25

and claim its

services The UMP reimburses for

prescription drugs purchased by

FINAL DECISION

Page

23

Docket No 10 228

enrollees who
1

are

patients

The UMP does not

purchase drugs

it reimburses

for
2

drugs purchased by

its enrollees The UMP did not own any The UMP does control the

drugs

in

s Wellpartner inventory
3

drug purchasing

process

of its

enrollees
in the

it tries to

guide the

enrollees and their medical

providers

doctors

prescription purchasing

process Control is exercised via the

reimbursement process
5

The rebate checks from

6

drug manufacturers

are

placed

in

UMP fund that is

used
7

to

reimburse for

prescription drugs

in this way the rebates benefit the

s UMP enrollees The enrollee pays the

drug

pay co directly to Wellpartner not to

MedImpact

The UMP receives the rebate from the

MedImpact
requires

who receives the rebate from this transfer

drug manufacturers

The contract

by MedImpact

to

10

the UMP Enrollees do not pay the

11

premiums directly to

the UMP enrollee

premiums

are

paid

to their state

employer by payroll
to

deduction The state

12

employer then pays the premiums

contribution and the

the PEBB from the

s employee

13

s employer benefit
as

contribution The PEBB then pays

14

money to the UMP if it is chosen

the enrollee benefit s

one

plan

The for Primera

employee
15

may choose coverage from

of several insurance

plans

example UMP Group

16

Health

a HMO

Kaiser Permanente

a HMO

Blue

Cross

etc

17

The UMP reimburses for the enrollees for the

drug purchases purchaser

it does not pay

18

drugs

The UMP is not

buyer
a

or

of drugs

3
19

James Gollaher is Controller of MedImpact

Pharmacy Benefits Management

PBM
20

company located in San

Diego
its

California order mail pharmacy Some PBMs

MedImpact

does not

own

own

21

competitors MedImpact

do have their

own

order mail pharmacies that sell claims for its

drugs

22

processes

drug benefit

clients

who

are

typically

care managed organizations

23

health plans and their members

Mr Gollaher is familiar with

24

Wellpartner
on

Mr Gollaher

signed

the declaration at Exhibit R42

July 12

2011 It is

25

true and accurate

FINAL DECISION

Page

24

228 Docket No 10

s MedImpact accounting practices

sell

reflect that it does not records reflect

no

purchase
inventory

or

prescription drugs

Its

accounting

of

prescription drugs
3

s MedImpact accounting
drugs
from

records reflect no
any other

purchases
nor

of prescription

Wellpartner

or

seller

do

they reflect income

arising

from the sale of prescription is not licensed

as a

drugs
and it does not
or

MedImpact
sell

pharmacy
retailer

dispense or

prescription drugs either

as a

wholesaler

Cross examination
Mr Gollaher is not

knowledgeable

about how

s MedImpact competitors

10

handle their accounting for

In Mr Gollaher s

pass through payments

uses

opinion MedImpact

the proper

accounting procedures
not a

11

for
12

pass through payments

is reviewed

Mr Gollaher states he is outside CPA firm that

CPA

but

MedImpact

by

an

does

its annual audited

not

13

financial statements and taxes

s MedImpact

CPA firm has

noted any of pass

14

problem with accounting including its accounting s MedImpact

through payments
15 16

ANALYSIS

17

RCW 82 250 Tax 04

18

on

retailers

Effective

until July 1

2011
at

19

1 Upon

every person

engaging

within this state in the business of making sales

retail

20

except persons taxable as retailers under other provisions ofthis chapter as to such persons the amount of tax with respect to such business is equal to the gross proceeds of
sales of the

business multiplied by the

rate of 0 471

percent

21

2 Upon every person engaging

22

within this state in the business of making sales at

retail that

are 08 exempt from the tax imposed under chapter 82 RCW by reason ofRCW 0261 0262 08 08 82 82 or 82 except persons taxable under RCW 0263 08

23

l 260 04 82 0
respect

or

subsection

ofthis

section

as

to such persons the amount of tax with

to such business is

equal to

the gross

proceeds

of sales of the

business multiplied

24

by

the rate of 0 percent 484

25

a 3 Until July 1 2024

upon every person classified by the federal aviation

FINAL DECISION

Page

25

228 Docket No 10

regulation part 145 certificated repair station and that is engaging within this state in the business of making sales at retail that are exempt from the tax imposed under chapter 82 RCW by reason of RCW 82 82 or 08 0261 0262 08 08 0263 08 82 as to such persons the amount of tax with respect to such business is equal to the gross proceeds ofsales ofthe business multiplied by the rate of2904 percent
as a

administration

federal aviation

A person

reporting

under the tax rate

provided

in this subsection

must file

complete

annual report with the

department

under RCW 82 534 32

Emphasis added

RCW 82 Tax 272 04

on

warehousing

and

reselling prescription drugs

1 Upon every person engaging within this state in the business of warehousing and reselling drugs for human use pursuant to a prescription as to such persons the amount
of the tax shall be 138 0 percent

equal to

the gross income ofthe business

multiplied by the

rate of

10

2 For

the purposes ofthis section and and

11

a Prescription b Warehousing
the

drug

have the

same

meaning
use

as

in RCW

0281 08 82
a

and

12

reselling drugs
use

for human
to
a

pursuant

to

prescription
or

means

buying

of drugs for human

care

pursuant

13

another

wholesaler

and reselling ofthe

or

drugs

to

prescription persons selling

ofhealth care

from

manufacturer
to
a

or

at retail

hospitals

clinics health
14
or

providers

other

providers

services by

wholesaler

retailer who is

registered

with the federal

drug

enforcement administration and

15

licensed

by the state board of pharmacy

Emphasis added

16

The
17

case

presents

fairly simple question

whether

Wellpartner qualifies
rate

for

reduced B O
18

tax rate

under RCW 82versus the 272 04

higher

applicable

to most

business under RCW 82 250 04

19

Wellpartner attempts
entities in
a

to characterize its

relationship

with various insurance

to the

20

unique fashion Wellpartner

are

claims it resells

drugs

UMP MedImpact

21

and ODS

who it then claims

a

other

providers

ofhealth

care

services under RCW

272 04 82 The UMP is

22

insured self insurance

one

entity under

the PEBB ofthe State of

Washington
23

The UMP

being

ofseveral

plans

offered to state

employees

via the

PEBB

24

The PEBB

provides

health insurance

to state

employees

as

part oftheir benefit

in addition to the

25

package

State

employees

pay

part ofthe

cost via

payroll deduction

FINAL DECISION

Page

26

Docket No 10 228

many restrictions
1

deductibles
are

and co required ofthe enrollees under the payments

a

plan

The UMP enrollees

2

issued

certificate of insurance

or

coverage The PEBB via the

UMP does not

3

buy drugs

it reimburses for medical care

including prescription drug the patients

are

s coverage like other insurance entities The UMP enrollees

or consumers

the

buyers

ofthe

prescription drugs dispensed by Wellpartner

and other local

pharmacies under

the UMP insurance program

The UMP and its

6

subcontractors

ODS and

MedImpact

are

administrators that
as a

have contractual duties in the insurance process

7

Wellpartner
also called

is the seller of drugs

a

order mail pharmacy to functions

or no

one

customer

an

enrollee

patient Wellpartner
as

differently
who fill

that other in or local state

pharmacies

such

Safeway Costco
is physically

Walgreens

prescriptions

for enrollees The fact that

a

Wellpartner

located in
10

Oregon

and that it may have

larger warehouse
a

than the local in state

to

pharmacy
11

does not
are

change

the fact that it is still

retail

provider of prescription drugs

pay the
same

enrollees who O B tax

as

located in

Washington Wellpartner is required to

that

rate

of

12

other retail

pharmacies

happen to

be physically located in

Washington

13

and get reimbursed via the coverage ofthe UMP The statute RCW

14

272 04 82 does

not create

special

tax rate for all retail

pharmacies
15

it

only applies to

warehouse sellers who resell to

hospitals
to

and other

healthcare
16

providers providers

If Wellpartner resold its warehoused

or

drugs

hospitals clinics

health lower

care

other

providers
so

ofhealth

care

services

it would

qualify for

the

17

tax rate

It does not do

18

Wellpartner

is

no

different than the

typical

local

pharmacy

in its

legal relationship qualified for qualify

if

with the enrollee the consumer for purposes ofthe

19

statute

If Wellpartner

tax treatment under RCW

20

272 04 82 then

any local do have

pharmacy

would likewise

it had

warehouse Most
are

pharmacy chains
or

warehouses although

it is unknown

21

if those warehouses is immaterial

to

smaller

larger

than Wellpartner The size ofthe warehouse s

22

the statutory

language Wellpartner
resells
to

The first issue here is whether

23

the UMP and its other healthcare service

subcontractors The
24

secondary issue is whether

the UMP is

an

provider
25

FINAL DECISION

Page

27

Docket No 10 228

s Wellpartner arguments
characterize the nature of its
2

and the

testimony

of its witnesses

are

attempts

to

re

relationship

with and the role ofthe UMP and its These entities
are

subcontractors
3

including

ODS and
or

MedImpact purchase

all involved in the reimbursement role of money

insurance
not
a

business

not the sale

of drugs

They

have

purchasing role they are

as a

not in the

purchasing
an

chain The

payment

by the
a

UMP

reimbursement

benefit under

insurance contract with its

enrollees

is not

drug purchase Wellpartner

6

fails to prove the first issue under RCW 82 the resale 272 04 or UMP and

of drugs
7

by Wellpartner to the

its subcontractors

ODS and

MedImpact

Wellpartner
are

also fails to prove the second issue The UMP and its subcontractors health
care

not

hospitals clinics

providers

or

other

providers

ofhealth

care

services under the statute

Wellpartner
10

admits the UMP and its subcontractors Under

are

not hospitals
care

clinics

or

health care
11

providers

chapter

44 48 RCW the term health

services

includes

medical dental chiropractic hospital optometric podiatric pharmaceutical

mental

12

ambulance custodial

health

and other

therapeutic

services The statute

means

RCW

13

10 010 44 48 clearly contemplates

services

that health care services

therapeutic
or

14

provided directly
13

to

patients by medical personnel

not health insurance

coverage services
15

The UMP is not

16

health

care

services

entity

it is

an

insurer

Wellpartner
are

argues

that the UMP and its

subcontracting administrators

ODS and

MedImpact
reasons

other

17

providers
added

of health

care

services The argument fails for similar

or

because this like

18

language

is meant to include entities

or

persons that

are

treatment

providers

hospitals clinics
19

health

care

providers

but that may have

different title The

statutory
20

language
entities

of RCW 82is not meant to include insurance 272 04 like the

companies

or

insurance

UMP

or

subcontractors that administer the insurance contract

Insurance entities do not

21

including
care

the payments of insurance benefits

provide

health

22

treatment

they just pay for medical

treatment and attempt to limit costs

23

24

13

Other references to health

care

services in the RCWs

25

6 020 88A 18RCW M

18 060 57A RCW

3 080 RCW 68 7

contemplate direct medical services to patients See RCW 460 70 3 100 and RCW 43 42 220 20 18RCW 48

FINAL DECISION

Page 29

Docket No 10 228

The drug
1

formularies
as

tiered

drug payments

limits
as

on

prescription

amounts

or

drug brand types

2

handled

by MedImpact

and others

part ofthe
are

UMP

contracts

are

insurance cost containment

3

examples

These restrictions

not

medical treatment

by

medical

providers

ofthe UMP enrollee

Whether the health insurance contract restrictions

possibly benefit
drug
or

the enrollee

medically in
not medical

some

circumstances is very

subjective

The

reimbursement process is

treatment

by

the insurance administrator

ODS

MedImpact
that

on

behalf of

the UMP
7

Wellpartner

did not

provide expert

medical

testimony

drug

reimbursement

review in any of its forms is medical treatment

some

given to

the UMP enrollee The fact that

ofthe

employees

or

committees that create these contract restrictions include

licensed treatment professionals does riot make them medical

providers

for the enrollee

or

patient
10

related to the

prescriptions

that

were

issued

by

their doctors
are

The Board finds that these cost containment actions

11

not

qualifying medical
services under

treatment

by

health

care

providers

or

other

providers

ofhealth

care

12

RCW 82 It is difficult to 272 04 insurance administrative actions ODS

imagine

that the

legislature

would have considered the

13

as

transforming or qualifying
as a

UMP MedImpact
or

or

14

all

insurance entities ofhealth

to
care

or

administrators

health

care

providers

other is

providers
15

services under RCW 82 No 272 04

legislative history

presented
16

support Wellpartner argument s

17

FINDINGS OF FACT

18

1
19

The Board has jurisdiction The Board s

over

the

subject matter

ofthis

proceeding
above
are

2
20

analysis

and

undisputed statement description

are

of facts set forth

incorporated

by

s reference The Board

ofthe

parties

contentions and arguments and of in these

21

the 3 4

testimony

of witnesses
an

not

incorporated by reference
located in

findings

22

Wellpartner is
The
UMP is

Oregon corporation

Portland Oregon
offered
to

one

ofseveral health insurance

plans

Washington

state

employees by a

23

via the PEBB The state

24

employee pays

for the health insurance coverage in part

an

payroll deduction
25

the balance ofthe cost of the insurance is

employee

benefit

paid by

the

s employee

state agency to the

PEBB

which

provides health insurance coverage

FINAL DECISION

Page

29

Docket No 10 228

including
will

prescription drug benefit

the

The

employee patient

selects which PEBB plan

one

provide

s employee insurance coverage plans

for state

The UMP is just

ofthe several

available health insurance

3

employees
or

The term enrollee means the decision

same as

patient

insurance

plan enrollee

in this

6
5

Drug prescriptions
health

are

filled after the

can

patient

seeks medical

care

from

doctor

or

other

professional

who

issue

prescription

The patient decides where to have the

prescription
7

filled under the UMP program chose

Patients filled few

typically

Wellpartner when

there is lead time for the

prescription

to be

by mail

order

Many prescriptions
and

need to be filled and taken mail order is

some

immediately within a
workable

hours however

filling

the

prescription via

not

8
10

The UMP

plan provides

a cost

incentive to its enrollees for

of the

drugs

available

via mail order with

11

Wellpartner pharmacies like drugs

are

Many UMP

enrollees choose to have their prescriptions filled at local

or

12

Safeway Costco
needed

Walgreens

that

are

physically near

the

patient

because the

13

immediately soon

after the

prescription
use

is written

by the doctor
reasons

An unknown

number of UMP enrollees chose to

14
use

local

pharmacies

for other

and decline to

s Wellpartner

order mail pharmacy the UMP

same

15

10
16

Wellpartner is located in Oregon

s contract

does not

specify where the

mail

order vendor must be located The

were

tax issues would be

presented

if Wellpartner

17

located in
an

Washington

or

another state
a

11 When
18

enrollee ofthe UMP

places
for

drug prescription

order with

Wellpartner
in

the

enrollee is not
19

placing a wish

drugs the phrase used by Wellpartner

order for

closing
a

argument
20

the enrollee is

placing

an

prescription drugs

that the enrollee has

legal right to receive pursuant

the UMP
or

to the contract

covering prescription drugs

The fact that receive

21

its subcontractors have the

duty

under the UMP benefits

plan to only

22

reimbursement for

specific formulary drugs

does not alter the fact that the enrollee is the

23

only purchaser of the drugs

12 The UMP enrollee retains the

right to totally self for prescription pay

or

without any

24

reimbursement via the UMP when

25

if the UMP

or

its administrators

ODS

or

FINAL DECISION

Page 30

Docket No 10 228

MedImpact

decline insurance coverage and reimbursement s enrollee doctor

a

to

the enrollee for the

drug

prescribed by the
2

13 The UMP is
3

performing

reimbursement function

governed by
and

the enrollee insurance s

contract with the UMP when it pays

ODS MedImpact

Wellpartner
is
not

s 14 A UMP enrollee
an

placement of a prescription

order with
a

Wellpartner

different than
as

s enrollee
or

placement

of a prescription order with

local

pharmacy

such

Safeway

Costco
6

similar

pharmacy
are

The UMP is the insurance program in both situations retail sales

to

15
7

Drug

sales

by Wellpartner

enrollees of the UMP and the

Washington

Prescription Drug Program

16

UMP ODS

and

MedImpact
care

are

not

hospitals clinics

health

care

providers

or

other

providers

of health

services under RCW 82 272 04 Inc

17 Northwest
10

Pharmacy Services
or

NWPS
care

is not

hospitals clinics

health

care

providers
11

other

providers

of health

services under RCW 82 272 04

18

UMP ODS MedImpact

and NWPS

are

not the

purchasers

of prescription

drugs

from

12

Wellpartner
19

13

Wellpartner does
UMP

not sell

or

resell

prescription drugs

to

ODS MedImpact NWPS

or

the

14

20
15

ODS MedImpact NWPS They

are

and the UMP

are

involved in the health insurance business

not

consumers or

purchasers

of prescription from

drugs

The enrollees of UMP

or

are

16

the

only purchasers of prescription drugs

Wellpartner

other

pharmacies

whether

17

order mail or local 21 The enrollees in the insurance

18

plan administered through NWPS

are

purchasers

of

prescription drugs
19

from

Wellpartner

22 When
20

MedImpact

administers and
on

applies a formulary tiered levels drugs by the UMP

a

of drugs payments it is

or

other contract restrictions insurance administration ofthe UMP program 23 The

reimbursement for

engaged

in

21

activity

It is not providing

health

care

service to the enrollees

22

23

drug formularies
as

tiered

drug payments
and others
are

limits
as

on

prescription amounts
UMP contracts

and brand insurance ofthe

types
24

handled

by MedImpact
examples they

part ofthe

are

cost containment
25

not

medical treatment by medical

providers

UMP enrollees

FINAL DECISION

Page

31

Docket No 10 228

24 The UMP does not make

1

gift as argued by Wellpartner

ofprescription

drugs

to its

enrollees The UMP pays reimbursements for

2

drugs to Wellpartner

via ODS and

MedImpact and its

3

other

subcontractors

to fulfill the UMP contractual s

obligations

to

its insurers who

25 26

are

the enrollees in the UMP manufacturer of drugs wholesaler of drugs to

Wellpartner

is not is not

Wellpartner
the UMP

ODS MedImpact

NW

Pharmacy Services

or

27
7

Wellpartner

does not sell health

or

resell

prescription drugs
or

as a

manufacturer of health

or

wholesaler to

hospitals clinics
the evidence

care

providers
case

other

providers

care

services under

presented

in this

28 Exhibit R3 is

s Wellpartner Washington Wellpartner

checks
are

master business

application
box

4 On page R3 of the

application
10

box 3c

only

the Retail

the boxes for

Wholesale

Manufacturing
11

and Service State

not checked for the

question

Indicate the business

a

activities in admission UMP 29

or

Washington

check

all that

apply

This document is

significant
to the

12

by Wellpartner

it indicates that

Wellpartner is not a wholesaler of drugs

13

its subcontractors
a

14

Wellpartner has dispensed

warehouse in

Portland Oregon

where prescription

drugs

are

stored and

15

30 Neither party knows whether the sales under the

16

Snoqualmie
Department

Tribe 340B

plan

are

included in the

s Department

assessments The

based its assessment upon

were

17

figures provided by Wellpartner Wellpartner testified

accounted for

that 340B program sales

18

separately
an

from sales to the UMP enrollees The parties agree that amended
tax return

Wellpartner
19

may file

for the years at issue if it later discovers that

the 340B program sales of approximately

20

s 000 s 23 Wellpartner counsel representation

in

closing argument were inadvertently

right
to

included in the UMP enrollee sales

Wellpartner
to

21

would then have the

appeal

any determination

by

the

Department

as

the

22

treatment of revenues from the 340B program ofthe 31

Snoqualmie

Tribe with

Wellpartner
it
was

Wellpartner arguing

offered testimony

on

Snoqualmie

Tribe 340B

23

plan solely because

that the contract with the Tribe 34013

was

similar to the UMP contract and Tribe 340B

24

therefore relevant to the UMP issues The

Snoqualmie

plan is factually

25

FINAL DECISION

Page

32

228 Docket No 10

different in
1

significant

ways from the UMP

situation

and the Board

disregards the

testimony
2

about the 340B sells

plan

when

deciding the

UMP issues The

32
3

Wellpartner

drugs

to

enrollees in the ofthe cost set

are

Washington Prescription Drug Program

This program is
a

enrollees pay 100

percent

by MedImpact

discount State

program the discount prices

negotiated by

the program via its

Washington
and its
or

administering

agency

The Washington the

Prescription Drug Program

administering

state agency do not

6

purchase

drugs

from

Wellpartner

nor

from ODS

MedImpact
from

Only the
7

enrollees ofthe

Washington Prescription Drug Program purchase drugs

Wellpartner
33 The Performance Audit of the Exhibit Al
term

Prescription Drug Purchasing

Consortium Audit

Report
use

is

report to the legislature The Audit Report and related exhibits

a

the

purchase

in

generic sense
the

or

catch all

sense

The Audit

Report

is not
or

10

attempting to describe
11

legal

or

statutory

relationship

of Wellpartner

ODS

MedImpact
the

to the

UMP

or

other state

agencies

to address who is the

legal purchaser of
Report
state

12

prescription drugs

for tax purposes under RCW 82 The Audit 272 04

is

13

looking

at the cost effectiveness of drugs

purchases

that

are

administered funds
are

by

agencies

14

where public

funds beneficiary funds

or and state

employee

used for
as

prescription drug payments

15

Some state
or

agencies buy drugs directly

UMP
an

such

the DOC

Most state
16

agencies

like the PEBB for

the

insurance program ofthe

or

PEBB only

provide reimbursement
34 Little information
was

drugs purchased by their enrollees

about how the DOC

beneficiaries for its

17

presented

directly purchases drugs

treatment

18

prisoners inmates
physician assistants

The Board notes that the DOC

nurses

employs
as

personnel doctors

pharmacists etc

both

employees

and

independent

19

contractors to treat
20

prisoners

35

Wellpartner also referenced drug purchasing programs of Washington State Department

ofLabor and

21

Industries

and

Department

of Health No

testimony

or

documents
are a

are

in

22

evidence about the details ofthese programs The Board accepts that there of Washington State

number

23

agencies

and programs involved in

drug purchasing

these programs

differ in
24

unknown ways from the UMP

25

FINAL DECISION

Page

33

Docket No 10 228

36 Under the UMP rebates from

1

drug

manufacturers

are

administratively paid to

the UMP

and handled in
2

a manner

to benefit the

enrollees ofthe UMP The UMP accounting s

not the

practice
3

is consistent with the

enrollees

UMP being

the

purchasers

ofthe

drugs

37 The contracts between the UMP and refer to UMP

ODS MedImpact Wellpartner

and others do not

are

ODS

or

MedImpact

as a

buyer or purchaser
UMP to

of drugs The contracts

all

part of the insurance

contracts entered
are

by the

provide benefits
ofthe

to its enrollees

patients
6

s UMP enrollees either

the
a

patients

and

recipients

prescription drugs order mail non

dispensed
7

by Wellpartner

order mail pharmacy

or

other local

pharmacies
38

s Wellpartner employees
any money UMP
or

are

not

credible when

they

use

the term

purchase

to refer to

they

receive related to State

s Wellpartner dispensing

of drugs to enrollees of the

the

Washington

Prescription Benefit Plan

relate the payment of money from
are

10

39
11

s Wellpartner employees when testifying incorrectly

any
source as

the

purchase

of drugs

by that entity

such statements

serving self in

12

the context ofthis case

statute at issue

they are not factually or legally

correct in the context ofthe tax

13

40 Witnesses ofthe
14

Department

are

credible when

they describe

the UMP

as

being a health

insurance program for state

15

employees

and assert that the UMP and its of prescription

subcontractors

ODS and
16

MedImpact
are

are

not

purchasers

drugs

for enrollees The

enrollees
41

the

purchasers

of prescription

drugs
its Executive Vice

17

Wellpartner
cash

via the

testimony of Mr Judge

President
a

admits that all do

18

sales

where the enrollee pays 100 percent ofthe

price

for

prescription drug

not
19

qualify for

treatment at the lower B tax rate ofRCW 82 O 272 04

a

42 In the tax context of RCW 82 272 04

20

health

care

insurer

such

as

the UMP

or an

insurance company is not the of prescription purchaser

in

drugs

when it reimburses

or

pays

21

part or wholly for the

drugs

from

pharmacy for

the benefit of its insured

at retail
or

22

43 When RCW 82references 272 04

care

persons selling
of health
care

to

hospitals clinics

health of

23

providers

or

other

providers

services

the term other

nurses

providers

health care services

24

means

licensed

providers

such as

doctors

chiropractors language
not include

pharmacist
25

and other medical treatment persons licensed

by the

State This
term

refers to persons who

provide health care treatment

and

care

The

does

FINAL DECISION

Page 34

Docket No 10 228

insurance
1

companies

or

entities that

provide

insurance coverage to their enrollees

are

beneficiaries
2

via contracts with various entities who

health

care

providers

The term

health
3

care

providers

should be interpreted consistent with the terms The term health

care

hospitals clinics
insurance

health

care

providers
or

providers
as

is

not a reference to

companies

health

care

benefit programs such

care

the UMP

provided by

the State of

Washington

The term health

providers

is not a reference to subcontractors of The context of the statutory reference is

UMP who do not

6

provide

health

care

treatment

to entities that treat

7

patients directly

not that administer health insurance

plans

like the

UMP 44

UMP ODS
272 04 82

and

MedImpact

are

not health

care

treatment

providers

as

referenced in RCW

45
10

Wellpartner Wellpartner
272 04 82

fails to meet its burden of proof fails to show that it

46
11

qualifies

for lower B tax treatment under RCW O

12

13

Any
such

Conclusion of Law that should be deemed

Finding

of Fact is

hereby adopted

as

14

From these
15

findings

the Board

comes

to these

16

CONCLUSIONS OF LAW

17

1
18

The Board has jurisdiction The payment of money for PEBB is not the

over

this

130 03 appeal RCW 82

an

2
19

prescription drugs by

insurance entity such

as

the UMP

or

purchase
or

of drugs when it is done as part oftheir insurance

relationship by
a

20

with their enrollees

beneficiaries under RCW 82 The payment ofmoney 272 04

21

health insurance provider such as the UMP is

or

legally

reimbursement

not a

drug

sale

22

purchase

of prescription and

drugs
are

under RCW 82 272 04

not

3
23

UMP ODS

MedImpact
not sell
or

purchasers

of prescription
to

drugs

from

Wellpartner

Wellpartner does
24

resell

prescription drugs

UMP ODS

and

MedImpact
for the lower

4
25

Wellpartner

does not meet the

requirements

of RCW 82to 272 04

qualify

O B tax rate

provided in

the statute

FINAL DECISION

Page

35

Docket No 10 228

5
1

In the tax context of RCW 82 272 04 company is not the

health

insurer

such as the UMP it reimburses

or an

insurance

purchaser
from
a

of prescription

drugs when

or

pays in

part

or

wholly
6

for the

drugs
and

pharmacy
are

for the benefit of its insured

an

The UMP

ODS

MedImpact

not

other

providers

of health

care

services

under RCW 82 272 04

7

Under

44 chapter 48 RCW the

term health

care

services includes

medical dental
mental

chiropractic hospital optometric podiatric pharmaceutical ambulance custodial

6

health
7

and other

therapeutic

services The statute services

means

RCW 48 clearly 10 010 44

services

contemplates patients
8

that health

care

therapeutic

provided directly

to

not health insurance

or

coverage

When RCW 82references 272 04

care

persons selling
ofhealth
care

at retail

or

to

hospitals clinics
other

health of

providers
care

or

other

providers

services the term

as

providers

10

health
11

services means licensed

providers

such

doctors

nurses State

chiropractors
in other

pharmacist

and other medical treatment persons licensed

by the

words

12

persons who

provide plans

health

care

treatment and

care

The term does not include insurance

13

companies

or

that

provide

insurance coverage to their enrollees

are

beneficiaries

and

that contract with various entities who

14

health

care

providers

The term health

care

providers
15

should be interpreted consistent with the terms The term health

care

hospitals clinics

health

care

providers
16

providers

is not

reference to insurance
care

companies
a

or

health care programs

provided by

the State Nor is the term health

providers

17

reference to subcontractors of insurance programs of UMP like ODS and 9 The burden ofproof is
to
as

MedImpact
the Board

18

argued by Wellpartner Wellpartner is not asking for

to its business activities in

apply

a tax

exemption provision apply

an

Washington
or

it is

only

19

asking
20

the Board to

alternative and lower tax

provision

statute

as

contained in

RCW 82 272 04

21

22

From these

conclusions

this Board enters this

23

24

25

FINAL DECISION

Page

36

Docket No 10 228

DECISION
1

The Board sustains the

3

s Department

Determination Nos 09 and 179R 179 and denies

assessing

tax interest and

penalties against Wellpartner

s Wellpartner refund

claim

DATED this
5

day 5

2011

BOARD OF TAX APPEALS

6

STEPHEN L
8

4
SEBRING

AAAO

JOHNSON Vice Chair

10

TERRY
11

tuber

12

Right of Reconsideration
13

of

Final Decision

14

Pursuant

to WAC 456 you may file 955 09

must

petition

for reconsideration ofthis

15

Final Decision You

file the

petition

for reconsideration with the Board of

16

Tax Appeals within 10 business

days

ofthe date of mailing of the

upon which relief is

Final Decision
You

The petition must state the

17 must 18

specific grounds
all other

requested

also

serve a

copy

on

parties

and their representatives ofrecord The

or

Board may

deny the petition modify its decision

a

reopen the

hearing

19

Be advised that

party petitioning

for

judicial

review of this Final Decision is

20

responsible
necessary

for the reasonable costs incurred by this agency in ofthe record for transmittal to the

preparing the
for

copies
are

superior court Charges

21

the
22

transcript

payable separately to

the court reporter

D
24

25

FINAL DECISION

Page 37

Docket No 10 228