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Council on Radionuclides and Radiopharmaceuticals, Inc. v. Azar

United States District Court, District of Columbia

November 13, 2019

COUNCIL ON RADIONUCLIDES AND RADIOPHARMACEUTICALS, INC., Plaintiff,
v.
ALEX M. AZAR II, in his official Capacity as Secretary of the United States Department of Health and Human Services, and UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES, Defendants.

          MEMORANDUM OPINION

          REGGIE B. WALTON UNITED STATES DISTRICT JUDGE

         The plaintiff, the Council on Radionuclides and Radiopharmaceuticals, Inc. (the “Council”), brings this civil action pursuant to the Administrative Procedure Act (“APA”), 5 U.S.C. §§ 701-706 (2018), against the defendants, the United States Department of Health and Human Services (the “Department”) and Alex Azar, in his official capacity as the Secretary of the Department (the “Secretary”), challenging the defendants' interpretation of certain provisions of the Social Security Act, 42 U.S.C. §§ 1396-1396w-5 (2018). See generally Complaint (“Compl.”). Currently pending before the Court are the Plaintiff's Motion for Summary Judgment (“Pl.'s Mot.”) and the Defendants' Cross-Motion for Summary Judgment and Opposition to Plaintiff's Motion for Summary Judgment (“Defs.' Mot.”). Upon careful consideration of the parties' submissions, [1] the Court concludes for the following reasons that it must deny the plaintiff's motion for summary judgment and grant the defendants' cross-motion for summary judgment.

         I. BACKGROUND

         Established in 1965 under Title XIX of the Social Security Act, the Medicaid program provides states with funding to provide medical assistance to individuals “whose income and resources are insufficient to meet the costs of necessary medical services.” 42 U.S.C. § 1396-1. “In order to participate in the Medicaid program, a [s]tate must have a plan for medical assistance approved by the Secretary.” Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S. 644, 650 (2003) (citing 42 U.S.C. § 1396a(b)). A state's plan must, among other things, “define[] the categories of individuals eligible for benefits and the specific kinds of medical services that are covered” by the plan. Id. (citing 42 U.S.C. § 1396a(a)(10), (17)). And, a state may choose to provide, as part of its plan, payment under the Medicaid program for “covered outpatient drugs, ” see 42 U.S.C. § 1396a(a)(54), which are defined to include drugs that (1) “may be dispensed only upon prescription, ” 42 U.S.C. § 1396r-8(k)(2)(A); (2) are “approved for safety and effectiveness as a prescription drug, ” id. § 1396r-8(k)(2)(A)(i); and (3) are not “provided as part of, or as incident to and in the same setting as” certain specified services “and for which payment may be made . . . as part of payment for th[ose] [services] and not as direct reimbursement for the drug” (the “limiting definition”), id. § 1396r-8(k)(3).

         In 1990, Congress created the Medicaid drug rebate program (the “Medicaid Drug Rebate Program”) to offset Medicaid costs incurred by the federal government and the states for outpatient drugs provided to Medicaid recipients. See Walsh, 538 U.S. at 652. Pursuant to the Medicaid Drug Rebate Program, a drug manufacturer, in order to receive state Medicaid payments for its covered outpatient drugs, must enter into a rebate agreement with the Secretary. See Pharm. Research & Mfrs. of Am. v. Thompson, 251 F.3d 219, 221 (D.C. Cir. 2001). The rebate agreement requires drug manufacturers to pay the state “a portion of the price of [its] drugs” for which payment is covered by a state under the Medicaid program. Id.; see 42 U.S.C. § 1396r-8(a), (b). The Medicaid Drug Rebate Program also requires that drug manufacturers, on a quarterly basis, submit, inter alia, drug pricing information, see id. § 1396r-8(b)(3)(A), and noncompliance with these reporting obligations subjects the drug manufacturer to monetary penalties, see id. § 1396r-8(b)(3)(C).

         On February 1, 2016, the Centers for Medicare & Medicaid Services (the “CMS”), the division of the Department that administers the Medicaid program on behalf of the Secretary, issued a final rule revising the requirements “pertaining to [the] Medicaid reimbursement for covered outpatient drugs . . . [and] also revis[ing] other requirements related to [covered outpatient drugs], including key aspects of [their] Medicaid coverage and payment, and the [Medicaid] [D]rug [R]ebate [P]rogram” (the “Final Rule”). Joint Appendix (“JA”) at 2. In its final rule, the CMS noted, in response to comments, that radiopharmaceuticals[2] “meet the definition of a [covered outpatient drug], ” if they are approved by the United States Food and Drug Administration (the “FDA”) as a “prescription drug, ” so long as the limiting provision does not apply to the drug, id. at 7. CMS further stated that “radiopharmaceuticals[, including those used in compounding patient-ready doses, ] qualify as a [covered outpatient drug] because of the approval process undergone with [the] FDA . . . [and] [t]herefore, radiopharmaceuticals are to be reported to the [Medicaid Drug Rebate] [P]rogram in the same manner as other [covered outpatient drugs] for the purposes of the administration of the [Medicaid Drug Rebate] [P]rogram.” Id.

         On March 19, 2018, the Council filed its complaint in this case, challenging the CMS's interpretation of the definition of “covered outpatient drugs” to include radiopharmaceuticals. See Compl. at 1. Thereafter, the parties filed their cross-motions for summary judgment, which are the subjects of this Memorandum Opinion.

         II. STANDARD OF REVIEW

         A moving party is entitled to summary judgment “if the movant 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). When ruling on a Rule 56(a) motion, the Court must view the evidence in the light most favorable to the non-moving party. See Holcomb v. Powell, 433 F.3d 889, 895 (D.C. Cir. 2006) (citing Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150 (2000)). The Court must therefore draw “all justifiable inferences” in the non-moving party's favor and accept the non-moving party's evidence as true. Anderson v. Liberty Lobby Inc., 477 U.S. 242, 255 (1986). At the summary judgment stage, “[b]are allegations are insufficient, ” Sierra Club v. EPA, 292 F.3d 895, 898 (D.C. Cir. 2002). In responding to a motion for summary judgment, the non-moving party “must do more than simply show that there is some metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Accordingly, the non-moving party must not rely on “mere allegations or denials . . . but . . . must set forth specific facts showing that there [are] [ ] genuine issue[s] for trial.” Anderson, 477 U.S. at 248 (second omission in original) (citation and internal quotation marks omitted). Thus, “[t]he mere existence of a scintilla of evidence in support of the [non-moving party's] position [is] insufficient” to withstand a motion for summary judgment, as “there must be [some] evidence on which the jury could reasonably find for the [non-movant].” Id. at 252.

         III. ANALYSIS

         The Court's analysis starts and ends “with the question of subject matter jurisdiction.” Am. Freedom Law Ctr. v. Obama, 106 F.Supp.3d 104, 108 (D.D.C. 2015) (Walton, J.) (quoting Aamer v. Obama, 742 F.3d 1023, 1028 (D.C. Cir. 2014)); see also NO Gas Pipeline v. FERC, 756 F.3d 764, 767 (D.C. Cir. 2014) (“It is fundamental to federal jurisprudence that Article III courts such as ours are courts of limited jurisdiction.”). “Article III of the Constitution limits the jurisdiction of federal courts to ‘Cases' and ‘Controversies.'” Susan B. Anthony List v. Driehaus, 573 U.S. 149, 157 (2014) (citing U.S. Const. art. III, § 2). “In an attempt to give meaning to Article III's case-or-controversy requirement, the courts have developed a series of principles termed ‘justiciability doctrines,' among which are standing[, ] ripeness, mootness, and the political question doctrine.” Nat'l Treasury Emps. Union v. United States, 101 F.3d 1423, 1427 (D.C. Cir. 1996) (quoting Allen v. Wright, 468 U.S. 737, 750 (1984)). If a plaintiff lacks Article III standing, a district court

need not delve into [a plaintiff's] myriad constitutional and statutory claims . . . because a court may not resolve contested questions of law when its jurisdiction is in doubt, as [h]ypothetical jurisdiction produces nothing more than a hypothetical judgment-which comes to the same thing as an advisory opinion, disapproved by [the Supreme] Court from the beginning.

Am. Freedom Law Ctr., 106 F.Supp.3d at 108 (first, third, and fourth alterations in original) (first quoting Crow Creek Sioux Tribe v. Brownlee, 331 F.3d 912, 915 (D.C. Cir. 2003); then quoting Steel Co. v. Citizens for a Better Env't, 523 U.S. 83, 101 (1998)).

[T]he irreducible constitutional minimum of standing contains three elements. First, the plaintiff must have suffered an “injury in fact”-an invasion of a legally protected interest which is (a) concrete and particularized, and (b) “actual or imminent, not ‘conjectural' or ‘hypothetical.'” Second, there must be a causal connection between the injury and the conduct complained of-the injury has to be “fairly . . . trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court.” ...

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