Ass'n of Cmty. Cancer Ctrs. v. Azar

• Decision Date: 23 December 2020
• Docket Number: Civil Action No. CCB-20-3531
• Citation: 509 F.Supp.3d 482
• Parties: ASSOCIATION OF COMMUNITY CANCER CENTERS, et al. v. Alex M. AZAR II, in his official capacity as Secretary of the U.S. Department of Health and Human Services, et al.
• Court: U.S. District Court — District of Maryland

509 F.Supp.3d 482

ASSOCIATION OF COMMUNITY CANCER CENTERS, et al.

v.Alex M. AZAR II, in his official capacity as Secretary of the U.S. Department of Health and Human Services, et al.

Civil Action No. CCB-20-3531

United States District Court, D. Maryland.

Signed December 23, 2020

Michele Walls Sartori, Hogan Lovells, Washington, DC, for Association of Community Cancer Centers.

Andrew Zimmitti, Manatt Phelps and Phillips LLP, Washington, DC, Michael S. Kolber, Pro Hac Vice, Manatt Phelps and Phillips LLP, New York, NY, for Global Colon Cancer Association.

Alethea Anne Swift, Pro Hac Vice, Timothy Cleveland, Pro Hac Vice, Cleveland Terrazas PLLC, Austin, TX, Benjamin Howard Carney, Gordon, Wolf & Carney, Chtd, Towson, MD, for National Infusion Center Association.

Robert Stanton Jones, Allon Kedem, Pro Hac Vice, John P. Elwood, Pro Hac Vice, Arnold & Porter Kaye Scholer LLP, Washington, DC, Diana Sterk, Pro Hac Vice, Arnold and Porter Kaye Scholer LLP, New York, NY, for Pharmaceutical Research and Manufacturers of America.

Rachael Westmoreland, U.S. Department of Justice, Washington, DC, for Alex M. Azar, II, U.S. Department of Health and Human Services, Seema Verma, Center for Medicare and Medicaid Services, Brad Smith, Center for Medicare and Medicaid Innovation.

MEMORANDUM

Catherine C. Blake, United States District Judge On November 27, 2020, the United States Department of Health and Human Services ("HHS") promulgated an interim final rule to require reimbursements made for certain drugs covered by Medicare Part B to be based on the lowest price in a group of "most favored nations" rather than the average U.S. sales price. The new reimbursement scheme commences on January 1, 2021, leaving providers little over a month to prepare for a new pricing model, attempt to renegotiate contracts, and work with patients to transition them to alternative therapies—if any exist—to manage their long-term care and avoid potentially catastrophic consequences to their health. This rule was promulgated without the usual notice and comment procedures, which the government argues was for good cause. In this action, the plaintiffs seek a temporary restraining order and preliminary injunction to bar implementation of the rule. The matter has, for the purpose of a temporary restraining order, been fully briefed, and oral argument was heard on December 18, 2020. For the reasons stated herein, the motion for a temporary restraining order will be granted.

BACKGROUND

Since at least 2018, President Donald Trump has sought by various means to lower drug prices. See 85 Fed. Reg. 76181 (Nov. 27, 2020). To achieve that goal, the Centers for Medicare and Medicaid Services ("CMS"), a division of HHS, published in October of 2018 an advance notice of proposed rulemaking, which it later abandoned as the President sought to address the problem of high drug prices through legislation. (See ECF 24-1, Pl.’s Br., at 16). After that effort ultimately failed, on July 24, 2020, President Trump signed a series of "transformative" executive orders designed to "massively lower" the cost of prescription drugs. (See id. at 16–17).¹ Pursuant to those executive orders, on November 27, 2020, CMS published in the Federal Register its Most Favored Nation Rule—the subject of this litigation—to implement "a new Medicare payment model" which would "test whether more closely aligning payment for Medicare Part B drugs and biologicals ... with international prices and removing incentives to use higher-cost drugs can control unsustainable growth in Medicare Part B spending without adversely affecting quality of care for beneficiaries." 85 Fed. Reg. 76180. This new reimbursement model was promulgated pursuant to 42 U.S.C. § 1315a, which allows the agency to test payment and service delivery "models" to reduce program expenditures while at the same time "preserving or enhancing the quality of care[.]" 42 U.S.C. § 1315a(a)(1). If a model is successful, the agency may follow statutorily prescribed procedures to expand the scope of the model for testing on a larger, possibly even nationwide, basis. See id. § 1315a(c). The "model" proposed by CMS in this case features immediate "mandatory, nationwide participation," 85 Fed. Reg. 76188, and covers the fifty drugs and biologicals that account for the highest Medicare Part B reimbursement spending, id. at 76189, with additional drugs to be phased in over the model's seven-year duration, id. at 76192. CMS projects this model will impact nearly $5 billion in Medicare Part B spending in its first year alone—and nearly $70 billion over the model's duration. See id. at 76238.

The rule took effect upon publication and, although CMS will accept comments for sixty days, until January 26, 2021, 85 Fed. Reg. 76180, the new model, which is expected to reduce Medicare Part B expenditures significantly, is slated to begin on January 1, 2021. Id. at 76181. CMS did not provide the usual notice and comment period prior to promulgation of the rule. Instead, it found there was good cause to waive both the notice and comment period and the delay in effective date required under the Administrative Procedure Act (the "APA") and the Social Security Act because "delaying implementation of this [rule] is contrary to the public interest[.]" Id. at 76250. CMS relies on the rising cost of drug prices and the economic consequences of the COVID-19 pandemic to justify dispensing with the required procedures. In its finding of good cause, CMS stated that "[h]igh drug prices in the U.S. have serious economic and health consequences for beneficiaries in need of treatment" insofar as "[i]ncreasing premiums, out-of-pocket costs ... and increases in drug prices" have caused Part B beneficiaries to "divert scarce resources to pharmaceutical treatments and away from other needs[.]" Id. at 76249. "The COVID-19 pandemic," CMS asserts, "has rapidly exacerbated these problems." Id. Even before COVID-19 struck, the cost of Part B drugs increased by over nine percent between 2009 and 2017. Id. But since the pandemic struck, the United States has seen "historic levels of unemployment" that have "strain[ed] budgets[.]" Id. CMS notes that we have seen some "positive economic and employment trends since the initial peak in April," but states that a surge "may lead to additional hardship and requires immediate action." Id. Thus, "because of the particularly acute need for affordable Medicare Part B drugs now, in the midst of the COVID-19 pandemic[,]" CMS found there was good cause to forgo notice and comment. Id.

The plaintiffs² in this action are organizations which represent members including—among other constituencies—provider groups, doctors, patients, and pharmaceutical companies. (ECF 1, Compl. ¶¶ 15–18). The National Infusion Center Association ("NICA"), for example, represents community-based infusion providers which provide important healthcare services. NICA fears the rule at issue in this litigation will, because of the small margins on which many of its community-based centers operate, "immediately imperil" their ability "to care for patients" as the rule may force them to "shutter their doors entirely." (Id. ¶¶ 17, 73). This entails great risks for patients who rely on drugs covered under Medicare Part B to treat, for example, multiple sclerosis and cancer. (Id. ¶ 73; see also ECF 24-17, Ex. N, Decl. of Dr. Joshua David Katz; ECF 24-16, Ex. M, Decl. of Michael Seldin). CMS acknowledges that its rule could disrupt care, potentially forcing beneficiaries "to travel to seek care from an excluded provider" or perhaps even "postpon[e] or forgo treatment" altogether. 85 Fed. Reg. 76244. Within the first year of the test, CMS projects a nine percent increase in the rate at which patients at non-safety-net providers may have no access to covered medications. Id. at 76237.

The plaintiffs filed a complaint initiating this action on December 4, 2020, just a week after the rule took effect and just two weeks after it was announced. (ECF 1). On December 10, 2020, they moved for a temporary restraining order and preliminary injunction pending resolution on the merits. (ECF 24). The new reimbursement scheme at the heart of the challenged rule is scheduled to take effect on January 1, 2021, only twenty-two days after the request for injunctive relief was filed. Accordingly, the court issued an accelerated briefing schedule. (ECF 31). The matter is now fully briefed, the court has accepted an amicus brief filed by the American Society of Clinical Oncology (ECF 39), and oral argument was heard on December 18, 2020 (ECF 40).

DISCUSSION

In this case, the plaintiffs seek to enjoin enforcement of CMS's Most Favored Nation Rule on the grounds that it (1) violates the APA for failure to provide a notice and comment period; (2) exceeds the authority provided to CMS by the Social Security Act; and (3) violates the Constitution's bicameralism and presentment and separation of powers requirements. In response, CMS raises a jurisdictional challenge as well as a challenge to the merits of each alleged violation. The court will first address the issue of jurisdiction and then turn to the merits.

I. Jurisdiction

Courts have an "independent obligation to determine whether subject matter jurisdiction exists," Arbaugh v. Y&H Corp. , 546 U.S. 500, 514, 126 S.Ct. 1235, 163 L.Ed.2d 1097 (2006), and if at any time the court determines that it lacks subject matter jurisdiction, the court must dismiss the action, Fed. R. Civ. P. 12(h)(3). To invoke federal subject matter jurisdiction under 28 U.S.C. § 1331, a plaintiff need only plead a colorable claim arising under the Constitution or laws of the United States. Holloway v. Pagan River Dockside Seafood, Inc. , 669 F.3d 448, 453 (4th Cir. 2012). The plaintiffs claim this court has jurisdiction under 28 U.S.C. § 1331 (federal question), as well as under 28 U.S.C. § 1346 (United States as defendant) and 5 U.S.C. §§ 701 – 06 (the Administrative Procedure Act).³ (ECF...