Health Law Daily Wrap Up, MEDICAID—Tex. App.: Court affirms dismissal of claims against pharmacy, (Jun 9, 2026)

By Donielle Tigay Stutland, J.D.

The burden is placed on a provider to know the Medicaid regulations, not on the State to keep providers specially informed of changes to those regulations.

The Texas Fifteenth Court of Appeal affirmed a trial court’s decision to dismiss a suit brought by a pharmacy provider against Texas Health and Human Services Commission’s administration of the Texas Medicaid program. On appeal, the court affirmed the trial court’s finding that the pharmacy’s due process claim, and declaratory judgment claim are barred by sovereign immunity. The court also concluded that that the trial court did not abuse its discretion by staying discovery and it affirmed the dismissal with prejudice (Nariocan Enterprises LLC v. Texas Health and Human Services Commission, No. 15-24-00117-CV (Tex. App. Jun. 4, 2026)).

Background.Nariocan Enterprises LLC d/b/a Cantu’s Pharmacy (Nariocan) operates a pharmacy in Texas and is enrolled as a Texas Medicaid Pharmacy Provider subject to the administration of the Texas Medicaid Program by the Commission. The Texas Health and Human Services Commission (the Commission) Office of Inspector General opened an investigation into certain claims paid by Medicaid to Nariocan. According to Nariocan, the Commission alleged that it had issued a directive in the Texas Medicaid Provider Procedures Manual (Provider Manual) instructing pharmacies that Medicaid was no longer authorizing refills, effective January 17, 2022, for COVID-19 at-home test kits.

Nariocan filed a lawsuit asserting a claim under the Uniform Declaratory Judgments Act (UDJA), seeking declarations that the Commission was required to (1) issue notice to Nariocan of changes to the Provider Manual, and (2) establish actual notice to Nariocan of the changes prior to any enforcement or sanction. The Commission responded that the UDJA claim was barred by sovereign immunity, the claim was not ripe, and Nariocan had failed to exhaust administrative remedies.The trial court granted the plea and dismissed all claims with prejudice. Nariocan appealed.

Due Process.The court affirmed that the pharmacy’s claim is barred by sovereign immunity. Nariocan alleged that the Commission deprived it of “due process under Article I, Section 19 of the Constitution of the State of Texas by infringing on its right to notice of the applicable regulations . . . .” Nariocan also alleged that the Commission’s actions were arbitrary, capricious, unreasonable, unlawful, and unconstitutional. On appeal, Nariocan asserted that its due process claim is not barred by immunity because Nariocan seeks only declaratory and injunctive relief to prevent an ongoing violation of law and not monetary damages.

The court found that the pharmacy did not identify “any rule or regulation for which HHS failed to provide publication notice.” It was noted that under Section 371.1065 of the Texas administrative code, the burden is placed on a provider to know the Medicaid regulations, not on the State to keep providers specially informed of changes to those regulations. Because Nariocan has no constitutionally protected right to special notice of Medicaid regulations changes, it failed to state a cognizable due process claim.

Declaratory JudgmenT. The court also found the pharmacy’s declaratory judgment claim was barred by sovereign immunity. According to Nariocan, the Commission claimed it had issued a directive to Nariocan that Medicaid was no longer authorizing refills for COVID-19 home test kits. Nariocan claims the delivery of the notices had not been provided. In its plea to the jurisdiction and on appeal, the Commission alleged that Nariocan had not identified a “rule” that is amenable to challenge under Section 2001.038. The court agreed that for this claim, the pharmacy sought only a declaration regarding notice obligations for changes to the Provider Manual, not the validity or applicability of any rule, stressing, “[T]here is no general right to sue a state agency for a declaration of rights.”

The court confirmed that the trial court did not err in granting the Commission’s plea to the jurisdiction. Additionally, because the court found that the trial court properly granted the Commission’s plea to the jurisdiction based on sovereign immunity, it determined that it need not address the Commission’s alternative grounds raised in its plea that Nariocan’s claims were not ripe or that it was required to exhaust administrative remedies.

Abuse of discretion. Finally the court concluded that that the trial court did not abuse its discretion by staying discovery, because the plea to the jurisdiction challenged only the sufficiency of the pleadings. The court indicated that the Commission did not challenge the existence of jurisdictional facts in its plea to the jurisdiction but rather challenged the sufficiency of Nariocan’s pleadings to demonstrate jurisdiction. As such, no discovery was necessary for the trial court to rule on the Commission’s plea to the jurisdiction.

Dismissal with prejudice. The court also found that dismissal with prejudice was proper. The court rejected Nariocan’s argument that when a trial court dismisses a claim for lack of ripeness or failure to exhaust administrative remedies, it must dismiss without prejudice to refiling. First the court pointed out that it affirmed the trial court’s dismissal of Nariocan’s claims on sovereign immunity grounds. Here, Nariocan had a reasonable opportunity to amend its pleadings. The court indicated that because Nariocan’s pleadings did not allege facts constituting a waiver of immunity, dismissal with prejudice was proper.

The case is No. 15-24-00117-CV.

Judge: Farris, April.

Attorneys: Ricardo Pumarejo, Jr. (Pumarejo Law Firm) for Nariocan Enterprises LLC d/b/a Cantu’s Pharmacy. Sherlyn Harper (Sherlyn Harper, Attorney at Law) for Texas Health and Human Services Commission.

Companies: Nariocan Enterprises LLC d/b/a Cantu’s Pharmacy; Texas Health and Human Services Commission

Cases: CaseDecisions CMSNews Covid19 GCNNews MedicaidNews TexasNews