In re Avandia Mktg., Sales Practices & Prods. Liab. Litig.

• Decision Date: 28 June 2012
• Docket Number: No. 11–2664.,11–2664.
• Court: U.S. Court of Appeals — Third Circuit
• Parties: In re AVANDIA MARKETING, SALES PRACTICES AND PRODUCTS LIABILITY LITIGATION GlaxoSmithKline, LLC & GlaxoSmithKline, PLC. Humana Medical Plan, Inc. and Humana Insurance Company, individually and on behalf of all others similarly situated, Appellants.

685 F.3d 353

In re AVANDIA MARKETING, SALES PRACTICES AND PRODUCTS LIABILITY LITIGATION GlaxoSmithKline, LLC & GlaxoSmithKline, PLC. Humana Medical Plan, Inc. and Humana Insurance Company, individually and on behalf of all others similarly situated, Appellants.

No. 11–2664.

United States Court of Appeals, Third Circuit.

Argued Jan. 24, 2012.

Opinion Filed: June 28, 2012.

Richard W. Cohen, Esq. (argued), Peter D. St. Phillip, Jr., Esq., Gerald Lawrence, Esq., Uriel Rabinovitz, Esq., Lowey, Dannenberg, Cohen & Hart, White Plains, NY, for Appellants.

Thomas E. Zemaitis, Esq. (argued), George A. Lehner, Esq., Kenneth H. Zucker, Esq., Pepper Hamilton, Philadelphia, PA, for Appellees.

Arthur N. Lerner, Esq., Crowell & Moring, Washington, DC, for Amicus–Appellants.

Before: McKEE, Chief Judge, FISHER, and GREENAWAY, JR., Circuit Judges.

OPINION

GREENAWAY, JR., Circuit Judge.

Plaintiff Humana Medical Plan, Inc. and Humana Insurance Company (collectively, “Humana”) brought suit against GlaxoSmithKline, L.L.C. and GlaxoSmithKline plc (collectively, “Glaxo”) alleging that Glaxo was obligated to reimburse Humana for expenses Humana had incurred treating its insureds' injuries resulting from Glaxo's drug, Avandia. Humana runs a Medicare Advantage plan. Its complaint asserts that, pursuant to the Medicare Act, Glaxo is in this instance a “primary payer” obligated to reimburse Humana as a “secondary payer.” The District Court dismissed the action, agreeing with Glaxo that the Medicare Act did not provide Medicare Advantage organizations (“MAOs”) with a private cause of action to seek such reimbursement. Humana filed a timely appeal.

The Medicare Secondary Payer Act, in 42 U.S.C. § 1395y(b)(3)(A), provides Humana with a private cause of action against Glaxo. Even if we were to find, as Appellees suggest, that this provision is ambiguous, we would nonetheless be required to defer to regulations issued by the Centers for Medicare and Medicaid Services (“CMS”). The regulations make clear that the provision extends the private cause of action to MAOs. Accordingly, we will reverse the judgment of the District Court and remand for further proceedings.

I. BACKGROUND

Glaxo manufactures and distributes Avandia, a Type 2 diabetes drug that has been linked to substantially increased risk of heart attack and stroke. Thousands of Avandia patients have alleged various injuries resulting from their use of the drug and Glaxo has begun entering into agreements to settle these claims.¹ As part of the settlement process, where the claimant is insured by Medicare, Glaxo sets aside reserves to reimburse the Medicare Trust Fund for payments it made to cover the costs of treatment for the claimants' Avandia-related injuries.

While most Medicare-eligible individuals receive Medicare benefits directly from the government, individuals can elect instead to receive their benefits through private insurance companies that contract with the government to provide “Medicare Advantage” (“MA”) plans. 42 U.S.C. § 1395w–21(a)(1). Glaxo has not, to date, included reimbursement of MA plans in the settlement agreements that it has reached with Avandia claimants enrolled in MA plans, although MAOs have paid the costs of treatment of Avandia-related injuries for these claimants.² Humana's MA plan provides benefits to approximately one million people, and Humana filed this lawsuit to seek reimbursement from Glaxo for the costs of treating its enrollees' Avandia-related injuries.

On November 17, 2010, Humana filed its class action complaint in the Eastern District of Pennsylvania.³ Humana sought, on behalf of itself and a class of similarly-situated MAOs: (1) damages under the Medicare Secondary Payer Act (“MSP Act”), which provides a private cause of action, 42 U.S.C. § 1395y(b)(3)(A), allowing double damages for failure to reimburse a secondary payer; and (2) equitable relief in the form of an order compelling Glaxo to identify settling Avandia claimants to the MAOs that cover them.

On December 23, 2010, Glaxo filed a motion to dismiss. The District Court heard oral argument on the motion and, on June 13, 2011, granted it. In dismissing the action, the District Court noted that Part C of the Medicare Act (the “Medicare Advantage” or “MA” statute) contains its own secondary payer provision, 42 U.S.C. § 1395w–22(a)(4). In re Avandia Mktg., Sales Practices, and Prods. Liability Litig., 2011 WL 2413488, at *3 (E.D.Pa. June 13, 2011). The District Court observed that this provision references the MSP Act without fully adopting or incorporating it and that its language is permissive, whereas the language of the MSP Act is mandatory. Id. Given the existence of the MA statute's provision, specifically relevant to MAOs, the District Court held that the private cause of action within the MSP Act did not apply to MAOs, nor did the secondary payer provision in the MA statute create a private right of action for MAOs. Id. at *4. Next, the District Court analyzed whether an implied private right of action for Humana existed according to the four-part test laid out by the Supreme Court in Cort v. Ash, 422 U.S. 66, 95 S.Ct. 2080, 45 L.Ed.2d 26 (1975). In re Avandia, 2011 WL 2413488, at *4. Although the District Court found that Humana met the first prong of the test, as it was a member of the class the statute was enacted to benefit, it found that Humana failed on the other three prongs: there was no clear legislative intent to create a remedy for Humana, it was not consistent with the legislative scheme to imply a remedy, and the cause of action was one traditionally litigated under state law. Id. The District Court therefore found that no implied private right of action existed.

Additionally, the District Court found that the statute's silence on the existence of a private right of action for MAOs “does not create ambiguity, but rather indicates [Congress's] intent not to create a private right of action for MAOs.” Id. at *5. With no ambiguity in the plain text of the statute, the District Court held that the judicial deference to duly-enacted regulations required by Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837, 842–43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984), did not come into play. Accordingly, the Court did not defer to the CMS regulation that granted MAOs parity with Medicare vis-à-vis recovery from primary payers, see42 C.F.R. § 422.108(f). In re Avandia, 2011 WL 2413488, at *5.

Finally, Humana sought an order from the District Court ordering Glaxo to disclose information about settlements that Humana's enrollees entered into with Glaxo. The District Court declined to grant Humana the equitable relief it sought. It found that Humana, and not Glaxo, had access to information about which Avandia claimants were enrolled in Humana's MA plan and that Humana could use this information to remind claimants of their obligation to disclose any settlement they might reach with Glaxo.^4,5Id. Humana filed a timely Notice of Appeal. Humana asks this Court to determine whether the District Court erred in holding that the private cause of action in the MSP Act, 42 U.S.C. § 1395y(b)(3)(A), did not provide Humana with a cause of action here. America's Health Insurance Plans, representing the health insurance industry, filed an amicus brief in support of Humana.

II. JURISDICTION AND STANDARD OF REVIEW

The District Court had subject matter jurisdiction, pursuant to 28 U.S.C. § 1331, because interpretation of the federal Medicare Act presents a federal question. This Court has appellate jurisdiction, pursuant to 28 U.S.C. § 1291. We review de novo the decision of a district court granting a motion to dismiss, pursuant to Rule 12(b)(6). McTernan v. City of York, 577 F.3d 521, 526 (3d Cir.2009). In ruling upon a motion to dismiss, “all well-pleaded allegations of the complaint must be taken as true and interpreted in the light most favorable to the plaintiffs, and all inferences must be drawn in favor of them.” Id. (quoting Schrob v. Catterson, 948 F.2d 1402, 1408 (3d Cir.1991)).

III. ANALYSIS

Humana asks this Court to determine whether the private cause of action for double damages created by the Medicare Secondary Payer Act, 42 U.S.C. § 1395y(b)(3)(A), provides it and other MAOs with the right to bring suit. ⁶ We find that the plain text of the provision sweeps broadly enough to include MAOs and that, even if we determined the statute to be ambiguous on this point, deference to CMS regulations ⁷ would require us to find that MAOs have the same right to recover as the Medicare Trust Fund does. We will therefore reverse the decision of the District Court.

A. The Medicare Statute

Subchapter XVIII of Chapter 7 of Title 42 of the United States Code is entitled “Health Insurance for Aged and Disabled,” and is more commonly known as the Medicare Statute. 42 U.S.C. §§ 1395 to 1395kkk–1. The Medicare Statute divides benefits into four parts. Part A, “Hospital Insurance Benefits for Aged and Disabled,” and Part B, “Supplementary Medical Benefits for Aged and Disabled,” create, describe, and regulate traditional fee-for-service, government-administered Medicare. §§ 1395c to 1395i–5; §§ 1395–j to 1395w–5. Part C, inserted with the passage of the Balanced Budget Act of 1997, Pub. L. 105–33, creates the program now known as Medicare Advantage, which allows for the creation of MA plans and is described in detail below. § 1395w–21 to –29. Finally, Part D provides for prescription drug coverage for Medicare enrollees. § 1395w–101 to –154.

Part C allows Medicare enrollees to obtain their Medicare benefits through private insurers (MAOs) instead of receiving direct benefits from the government under Parts A and B. § 1395w–21(a). CMS pays an MAO a fixed amount for each enrollee, per capita (a “capitation”). The MAO then administers Medicare benefits for those enrollees and assumes the risk associated with insuring them. MAOs like Humana are thus responsible for paying...