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Ipsen Biopharmaceuticals, Inc. v. Hargan

United States District Court, District of Columbia

September 24, 2018

IPSEN BIOPHARMACEUTICALS, INC., Plaintiff,
v.
ERIC D. HARGAN, Acting Secretary of Health and Human Services, et al., [1] Defendants.

          MEMORANDUM OPINION

          DABNEY L. FRIEDRICH, UNITED STATES DISTRICT JUDGE

         Ipsen Biopharmaceuticals, Inc. (Ipsen) brings this suit under the Administrative Procedure Act to challenge the Centers for Medicare & Medicaid Services' (CMS) interpretation of the Social Security Act-as expressed in a letter sent to Ipsen-as arbitrary, capricious, and contrary to law. Before the Court are the parties' cross-motions for summary judgment. Because the letter at issue does not qualify as final agency action, the Court will grant CMS's motion for summary judgment, deny Ipsen's motion for summary judgment, and dismiss the complaint.

         I. BACKGROUND

         Ipsen markets various drug products in the United States. A.R. 1. In 2007, the Food & Drug Administration (FDA) approved Ipsen's new drug application (NDA) for a product called Somatuline Depot Injection that is used to treat acromegaly.[2] Id. at 1, 35-39. In 2014, after Ipsen had submitted additional user studies and proposed changes in supplemental new drug applications (sNDAs), FDA approved two supplemental applications: one that "propose[d] changes to the drug substance and drug product manufacturing processes, and to the drug product container closure system" and another that "provide[d] for a new indication" to use the drug to treat a rare type of cancer. See Id. at 40, 76. Ipsen calls the products approved through the sNDA process Somatuline ED. Id. at 1.

         The parties dispute whether Somatuline ED is a new drug for purposes of the Medicaid Drug Rebate Program (MDRP). The Social Security Act requires drug manufacturers to participate in the MDRP as a condition of Medicaid payment for covered outpatient drugs. See 42 U.S.C. § 1396r-8. As part of that program, manufacturers provide rebates to the states for sales of prescription drugs covered by Medicaid. Id. § l396r-8(a)(1). The amount of those rebates is calculated using a statutorily set formula, id. § 1396r-8(c), and that formula uses a drug's "base date average manufacturer price" (AMP)-that is, a number reflecting the average manufacturer's price for the first full quarter after a drug enters the market-as part of the calculation. If Somatuline ED is a new drug, Ipsen can calculate and report a new base date AMP for it. If not, Ipsen must continue to use the AMP for the "old" version of Somatuline Depot Injection. See Def.'s Opp'n & Cross-Mot. at 1-6, Dkt. 16-1 (describing the process).

         On January 7, 2015, Ipsen sent a letter to CMS-the federal agency tasked with administering the Medicaid program-expressing its view that "the Somatuline ED products should be considered 'new products' entitled to baseline AMPs separate and distinct from those of the correlating Somatuline Injection products." A.R. 1. The letter explained in detail why Ipsen believed Somatuline ED was entitled to its own AMP and informed CMS that "Ipsen intend[ed] to proceed with this approach absent CMS instruction to the contrary." Id. at 4. On July 2, 2015, CMS replied to Ipsen via email. CMS's email stated that CMS "appreciate[d]" the nature of the changes Ipsen made and "the time, effort and financial support" involved, but concluded that Ipsen's changes "d[id] not meet the criteria for the establishment of new base date AMPs for the three strengths of Somatuline ED." Id. at 6. CMS provided a brief analysis and concluded that "the baseline data for these three NDCs [for Somatuline ED] must be changed to reflect the original baseline data of Somatuline Depot." Id. On July 30, Ipsen emailed CMS and stated that it would seek review of the decision and "would continue to use its newly established base date AMP pending further review by HHS." Id. at 11.

         On September 21, Ipsen (through counsel) sent another letter to CMS, this time requesting that CMS's Office of General Counsel review the initial determination, requesting a meeting to discuss the issue, and again arguing that its Somatuline ED products were entitled to new base date AMPs. Id. at 9-21. Ipsen's letter concluded that CMS "should reconsider its decision reflected in the July 2, 2015 email and should approve Ipsen's request to establish new base date AMPs for its Somatuline ED product." Id. at 21. On August 3, the Director of the Division of Pharmacy sent a two-page letter reiterating CMS's position and stating that CMS "maintain[ed]" that the factors Ipsen relied upon "d[id] not warrant establishment of new base date AMPs for the three strengths of Somatuline ED." Id. at 34. The letter stated that it was not "a final agency action or even an initial determination on a reimbursement claim." Id.

         Ipsen filed a complaint on December 5, 2016, and now "request[s] that the Court declare that Somatuline ED is a new and different drug product from its predecessor for purposes of the MDRP and set aside CMS's contrary determination." Pl's Mot. at 12, Dkt. 13. The parties have since filed cross-motions for summary judgment. Dkts. 13, 16.

         II. LEGAL STANDARDS

         A court grants summary judgment if the moving party "shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a); see also Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247-48 (1986). When a plaintiff seeks review of an agency decision under the Administrative Procedure Act (APA), summary judgment "serves as the mechanism for deciding, as a matter of law, whether the agency action is supported by the administrative record and otherwise consistent with the APA standard of review." Sierra Club v. Mainella, 459 F.Supp.2d 76, 90 (D.D.C. 2006). "[T]he entire case ... is a question of law" and the district court "sits as an appellate tribunal." Am. Biosci., Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001) (internal quotation marks and footnote omitted).

         The Administrative Procedure Act provides that "final agency action for which there is no other adequate remedy in a court [is] subject to judicial review." 5 U.S.C. § 704. To be "final" under this provision, the action must satisfy two conditions: "First, the action must mark the consummation of the agency's decisionmaking process-it must not be of a merely tentative or interlocutory nature. And second, the action must be one by which rights or obligations have been determined, or from which legal consequences will flow." U.S. Army Corps of Eng'rs v. Hawkes Co., 136 S.Ct. 1807, 1813 (2016) (quoting Bennett v. Spear, 520 U.S. 154, 177-78 (1997)). Here, both parties "agree that CMS's interpretation . . . was the consummation of its decisionmaking process," as "CMS is not still considering how to respond to Ipsen's letters." Defi's Reply at 2-3, Dkt. 20. The issue is thus whether CMS's August 3, 2016 letter is an action by which rights or obligations have been determined, or from which legal consequences will flow.[3]

         III. ANALYSIS

         "The law in this area is hardly crisp." Rhea Lana, Inc. v. Dep't of Labor, 824 F.3d 1023, 1027 (D.C. Cir. 2016). That is at least in part because of the "'pragmatic' and 'flexible' nature of the inquiry as a whole." Id. (quoting Nat'l Ass 'n of Home Builders v. U.S. Army Corps of Eng'rs, 417 F.3d 1272, 1279 (D.C. Cir. 2005)). As a result, there is language in Supreme Court and D.C. Circuit opinions that seemingly pulls in both directions. The Supreme Court, for example, recently characterized its 1956 decision in Frozen Food in terms that would seem to cut in favor of finding reviewability here:

Although the order "had no authority except to give notice of how the [Interstate Commerce] Commission interpreted" the relevant statute, and "would have effect only if and when a particular action was brought against a particular carrier," we held that the order was nonetheless immediately reviewable. The order, we explained, "warns every carrier, who does not have authority from the Commission to transport those ...

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