United States District Court, District of Columbia
D. BATES UNITED STATES DISTRICT JUDGE
a collection of hospitals, hospital associations, and
healthcare providers, have brought this action against the
Department of Health and Human Services (“HHS”)
and Secretary of HHS Alex M. Azar II, in his official
capacity, arguing that HHS's decision to continue to
delay implementation of a final rule (the “Rule”)
it issued on January 5, 2017, is arbitrary and capricious and
constitutes “unreasonably delayed” agency action
under the Administrative Procedure Act (“APA”), 5
U.S.C. § 500 et seq. Compl. [ECF No. 1]
¶¶ 21-22, 57-62 (quoting 5 U.S.C. §§
706(1)-(2)). Concurrent with the filing of their complaint,
plaintiffs moved for summary judgment. The government now
moves to stay the case pending the outcome of an anticipated
rule that would advance the effective date of the Rule, or,
in the alternative, to stay briefing of summary judgment
until after the Court has decided the government's
yet-to-be-filed motion to dismiss. For the reasons described
below, the government's motion will be denied.
Rule at issue is part of the 340B Program, which was
established by the Veterans Health Care Act of 1992, Pub. L.
No. 102-585, § 602, 106 Stat. 4943, 4967-71 (1992), and
codified in section 340B of the Public Health Service Act, 42
U.S.C. § 256b (1992). The 340B Program lowered drug
costs for certain federally-funded health providers serving
low-income communities, setting maximum prices for covered
outpatient drugs. See 42 U.S.C. § 256b. In
2010, Congress instructed the Secretary of HHS to improve
compliance by drug manufacturers with the 340B Program by,
among other things, (1) developing and publishing standards
and methodology for the calculation of ceiling prices for
covered drugs; (2) establishing refund procedures for
instances of manufacturer overcharges; (3) providing covered
health care providers with access to the applicable ceiling
prices via the HHS website; and (4) imposing sanctions on
noncompliant manufacturers. See Patient Protection
and Affordable Care Act, Pub. L. 111-148, § 7102, 124
Stat. 119, 823-27 (2010).
to Congress' mandate, HHS promulgated a 340B final rule
on January 5, 2017. 340B Drug Pricing Program Ceiling Price
and Manufacturer Civil Monetary Penalties Regulation, 82 Fed.
Reg. 1210 (Jan. 5, 2017). The Rule “set forth the
calculation of the 340B ceiling price and application of
civil monetary penalties” to “provide increased
clarity in the marketplace for all 340B Program stakeholders
as to the calculation of the 340B ceiling price.”
Id. at 1210-11.
twenty-two months have passed since HHS issued the final
Rule. During this period, the government has pushed back
implementation of the Rule five times, most recently delaying
the effective date to July 1, 2019. Compl. ¶¶
51-56. Plaintiffs allege that these delays have caused
significant harm to the approximately 2, 487 covered 340B
entities, including by causing them to be overcharged for
drugs. Compl. ¶¶ 9, 25-27.
government now moves the Court to stay this case pending the
outcome of HHS's planned rulemaking. See Mem. in
Supp. of Defs.' Mot. for a Stay (“Gov't's
Mot.”) [ECF No. 15] at 1. On October 31, 2018, HHS
filed a notice of proposed rulemaking that would change the
effective date of the Rule from July 1, 2019 to January 1,
2019. See Notice Regarding Pub. of Notice of
Proposed Rulemaking [ECF No. 18]. The proposed rule was
published in the Federal Register on November 2, 2018, and
gives stakeholders 21 days to submit comments. 340B Drug
Pricing Program Ceiling Price and Manufacturer Civil Monetary
Penalties Regulation, 83 Fed. Reg. 55, 135, 55, 135 (Nov. 2,
2018). According to HHS, January 1 is the earliest the Rule
could take effect because the 340B program runs on a
quarterly system, and the next quarter starts January 1.
Gov't's Mot. at 4. HHS argues that moving the
effective date to January 1, 2019 “would effectively
provide plaintiffs with all the relief they have sought in
their Complaint . . . and thereby moot the case, ” or
at least narrow the relevant issues. Id.
respond that there is no guarantee that HHS will issue a
final rule advancing the effective date of the Rule, or that
it will become effective on January 1, 2019, given the length
of the comment period and the requirement that the final rule
be published 30 days before it becomes effective.
See Pls.' Mem. in Opp'n to Gov't's
Mot. (“Pls.' Opp'n”) [ECF No. 16] at 4-5.
Because the 340B program is organized on a quarterly basis,
if the effective date falls after January 1, 2019, the Rule
would not be implemented in practice until April 1, 2019.
Id. at 5.
Court declines to stay the case pending the outcome of the
government's proposed rule. As the government notes,
“it is not certain” the proposed rulemaking
moving the effective date will moot the case. Reply in Supp.
of Gov't's Mot. (“Gov't's Reply) [ECF
No. 17] at 2 (emphasis omitted). Nor is it certain that the
proposed rulemaking moving the effective date to January 1
will become final by that date. Although the government has
curtailed the typical comment period from 30 days to 21 days,
see 340B Drug Pricing Program Ceiling Price and
Manufacturer Civil Monetary Penalties Regulation, 83 Fed.
Reg. at 55, 135, it is not clear that any rule moving the
effective date would become final sufficiently in advance of
January 1, 2019. See 5 U.S.C. § 533(d)
(requiring publication of final rule to be made 30 days
before its effective date unless certain exceptions apply).
And HHS cannot guarantee that the proposed rule advancing the
effective date will become final at all, as HHS is required
to consider any comments made before it issues a final rule.
See Am. Civil Liberties Union v. FCC, 823 F.2d 1554,
1581 (D.C. Cir. 1987) (“Notice and comment rulemaking
procedures obligate the [agency] to respond to all
significant comments, for ‘the opportunity to comment
is meaningless unless the agency responds to significant
points raised by the public.'” (citation omitted)).
government also requests, in the alternative, that the Court
defer full briefing of plaintiffs'
“premature” summary judgment motion and instead
consider the defenses the government intends to assert
pursuant to Federal Rule of Civil Procedure 12.
Gov't's Mot. at 5. The government notes that the
Federal Rules of Civil Procedure afford it 60 days to respond
to a complaint, including by filing a motion to dismiss.
Gov't's Reply at 5. Its response may raise threshold,
non-merits issues, the government contends, such as whether
plaintiffs have standing to assert their claims. See
id. The government also argues that jurisdictional
discovery may be required to determine whether the case may
proceed, and consideration of plaintiffs' summary
judgment motion would therefore be improper. Id. at
argue that a stay pending any decision regarding the
government's anticipated motion to dismiss would be
inappropriate because there is a “need for an expedited
decision.” Pls.' Opp'n at 6. And there is no
need to delay summary judgment briefing, plaintiffs contend,
because judicial review will be based solely on the
administrative record. See id.
Court agrees with plaintiffs that postponing summary judgment
briefing pending the resolution of the government's
anticipated motion to dismiss would not serve the orderly
disposition of this case. Federal Rule of Civil Procedure
56(b) provides that “a party may file a motion for
summary judgment at any time until 30 days after the
close of all discovery.” Fed.R.Civ.P. 56(b) (emphasis
added). Although “in many cases the motion
will be premature until the nonmovant has had time to file a
responsive pleading, ” Fed.R.Civ.P. 56 advisory
committee's notes (2010 amendment), in APA cases early
summary judgment motions are often appropriate, as
“[t]he entire case on review is a question of law, and
only a question of law, ” Marshall Cty. Health Care
Auth. v. Shalala, 988 F.2d 1221, 1226 (D.C. Cir. 1993).
The line that divides the motion-to-dismiss stage of
proceedings from summary judgment is therefore less clear.
Even when a motion to dismiss is filed in an APA case, a
court “may convert the motion into a motion for summary
judgment under Rule 12(d).” Bates v. Donley,
935 F.Supp.2d 14, 17 (D.D.C. 2013).
Court finds that it is in the interest of the sound
administration of judicial-and the parties'-resources to
proceed with one combined briefing schedule for
plaintiffs' summary judgment motion and any motion to
dismiss or cross-motion for summary judgment the government
may file. See Grimes v. District of
Columbia, 794 F.3d 83, 90 (D.C. Cir. 2015)
(“Typically, a district court enjoys broad discretion
in managing its docket and determining the order in which a
case should proceed”); Fed.R.Civ.P. 56 advisory
committee's notes to 2010 amendment (noting courts
“can regulate [the timing of summary judgment motions]
to fit the needs of the case”). It is therefore hereby
that  the government's motion to stay the case or, in
the alternative, to stay briefing of plaintiffs' summary
judgment motion is DENIED; it is further
that the parties shall file by not later than November 8,
2018 a joint proposed briefing scheduling in ...