Astra USA, Inc. v. Santa Clara Cnty.

• Decision Date: 29 March 2011
• Docket Number: No. 09–1273.,09–1273.
• Citation: 131 S.Ct. 1342,563 U.S. 110,179 L.Ed.2d 457
• Parties: ASTRA USA, INC., et al., Petitioners, v. SANTA CLARA COUNTY, CALIFORNIA
• Court: U.S. Supreme Court

563 U.S. 110

131 S.Ct. 1342

179 L.Ed.2d 457

ASTRA USA, INC., et al., Petitioners,

v.SANTA CLARA COUNTY, CALIFORNIA

No. 09–1273.

Supreme Court of the United States

Argued Jan. 19, 2011.

Decided March 29, 2011.

Lisa S. Blatt, Washington, DC, for petitioners.

Ginger D. Anders, for United States, as amicus curiae, by special leave of the Court, supporting the petitioners.

David C. Frederick, Washington, DC, for the respondent.

Miguel Marquez, County Counsel, Greta S. Hansen, Juniper L. Downs, James R. Williams, Office of the County Counsel, County of Santa Clara, San Jose, California, Sanford Svetcov, Jeffrey W. Lawrence, Susan K. Alexander, Aelish M. Baig, Robbins Geller Rudman & Dowd LLP, San Francisco, California, David C. Frederick, Counsel of Record, Scott H. Angstreich, Scott K. Attaway, Kellogg, Huber, Hansen, Todd, Evans & Figel, P.L.L.C., Washington, D.C., for respondent.

Lisa S. Blatt, Counsel of Record, Jeffrey L. Handwerker, Anthony J. Franze, Kristin M. Hicks, Arnold & Porter LLP, Washington, DC, for Petitioners Astra USA, Inc., AstraZeneca Pharmaceuticals LP and Zeneca Inc.

James P. Muehlberger, Robert J. McCully, Ina D. Chang, Shook, Hardy & Bacon LLP, Kansas City, MO, for Petitioners Aventis Pharmaceuticals Inc. and ZLB Behring LLC. Paul J. Riehle, Matthew A. Fischer, Sedgwick, Detert, Moran & Arnold LLP, San Francisco, CA, Lyndon M. Tretter, Jessica P. Feingold, Hogan Lovells US LLP, New York, NY, for Petitioner Bristol-Myers Squibb Company.

Richard D. Raskin, Scott D. Stein, Sidley Austin LLP, Chicago, IL, for Petitioner Bayer Corporation.

Kirke M. Hasson, Colin T. Kemp, Pillsbury Winthrop Shaw Pittman LLP, San Francisco, CA, for Petitioner Merck & Co., Inc. f/d/b/a/ Schering-Plough Corporation. Frederick G. Herold, Dechert LLP, Mountain View, CA, for Petitioner SmithKline Beecham Corporation d/b/a GlaxoSmithKline.

Brian W. Shaffer, Erica Smith-Klocek, Jennifer Jordan, Morgan, Lewis & Bockius LLP, Philadelphia, PA, R. Ted Cruz, Allyson N. Ho, Morgan, Lewis & Bockius LLP, Houston, TX, for Petitioner Pfizer Inc.

Peter N. Larson, David L. Wallach, Jones Day, San Francisco, CA, for Petitioners Tap Pharmaceutical Products Inc. n/k/a Takeda Pharmaceuticals North America, Inc.

Fletcher C. Alford, Ryan B. Polk, Gordon & Rees LLP, San Francisco, CA, S. Craig Holden, Kelly J. Davidson, Ober Kaler, Grimes & Shriver, Baltimore, MD, for Petitioners Wyeth, Inc. and Wyeth Pharmaceuticals, Inc.

Justice GINSBURG, Delivered the opinion of the Court.

Section 340B of the Public Health Services Act, 42 U.S.C.A. § 256b (Oct.2010 Supp.), imposes ceilings on prices drug manufacturers may charge for medications sold to specified health care facilities. Those facilities, here called "340B" or "covered" entities, include public hospitals and community health centers, many of them providers of safety-net services to the poor. The § 340B ceiling-price program (340B Program) is superintended by the Health Resources and Services Administration (HRSA), a unit of the Department of Health and Human Services (HHS). Drug manufacturers opt into the 340B Program by signing a form Pharmaceutical Pricing Agreement (PPA) used nationwide. PPAs are not transactional, bargained-for contracts. They are uniform agreements that recite the responsibilities § 340B imposes, respectively, on drug manufacturers and the Secretary of HHS. Manufacturers' eligibility to participate in State Medicaid programs is conditioned on their entry into PPAs for covered drugs purchased by 340B entities.

It is conceded that Congress authorized no private right of action under § 340B for covered entities who claim they have been charged prices exceeding the statutory ceiling. This case presents the question whether 340B entities, though accorded no right to sue for overcharges under the statute itself, may nonetheless sue allegedly overcharging manufacturers as third-party beneficiaries of the PPAs to which the manufacturers subscribed. We hold that suits by 340B entities to enforce ceiling-price contracts running between drug manufacturers and the Secretary of HHS are incompatible with the statutory regime.

Congress placed the Secretary (acting through her designate, HRSA) in control of § 340B's drug-price prescriptions. That control could not be maintained were potentially thousands of covered entities permitted to bring suits alleging errors in manufacturers' price calculations. If 340B entities may not sue under the statute, it would make scant sense to allow them to sue on a form contract implementing the statute, setting out terms identical to those contained in the statute. Though labeled differently, suits to enforce § 340B and suits to enforce PPAs are in substance one and the same. Their treatment, therefore, must be the same, "[n]o matter the clothing in which [340B entities] dress their claims." Tenet v. Doe, 544 U.S. 1, 8, 125 S.Ct. 1230, 161 L.Ed.2d 82 (2005).

I

A

The 340B Program is tied to the earlier-enacted, much larger Medicaid Drug Rebate Program. Adopted by Congress in 1990, the Medicaid Rebate Program covers a significant portion of drug purchases in the United States. See GAO, J. Dicken, Prescription Drugs: Oversight of Drug Pricing in Federal Programs 1 (GAO–07–481T, 2007) (testimony before the Committee on Oversight and Government Reform, House of Representatives).¹ To gain payment under Medicaid for covered drugs, a manufacturer must enter a standardized agreement with HHS; in the agreement, the manufacturer undertakes to provide rebates to States on their Medicaid drug purchases. 104 Stat. 1388–143, as amended, 124 Stat. 3290, 42 U.S.C.A. § 1396r–8(a). The amount of the rebates depends on the manufacturer's "average" and "best" prices, as defined by legislation and regulation. § 1396r–8(c), (k).

Calculation of a manufacturer's "average" and "best" prices, undertaken by the pharmaceutical company, is a complex enterprise requiring recourse to detailed information about the company's sales and pricing. § 1396r–8(k) ; 42 CFR § 447.500 – 520 (2010). To enable HHS to calculate the rebate rate for each drug, manufacturers submit the relevant data to HHS on a quarterly basis. § 1396r–8(b)(3). With exceptions set out in the legislation, HHS is prohibited from disclosing the submitted information "in a form which discloses the identity of a specific manufacturer ... [or] prices charged for drugs by such manufacturer." § 1396r–8(b)(3)(D).

Under § 340B, added in 1992, 106 Stat. 4967, as amended, 124 Stat. 823, manufacturers participating in Medicaid must offer discounted drugs to covered entities, dominantly, local facilities that provide medical care for the poor. See § 256b(a) ; § 1396r–8(a)(1). The 340B Program, like the Medicaid Drug Rebate Program, employs a form contract as an opt-in mechanism. The 340B Program also draws on the larger scheme's pricing methodology. In their 340B Program contracts with HHS, called Pharmaceutical Pricing Agreements (PPAs), see supra, at 1345, manufacturers agree to charge covered entities no more than predetermined ceiling prices, derived from the "average" and "best" prices and rebates calculated under the Medicaid Drug Rebate Program. § 256b(a)(1) ; see App. to Pet. for Cert. 165a–171a (PPA § I–II).²

If a manufacturer overcharges a covered entity, HRSA may require the manufacturer to reimburse the covered entity; HRSA may also terminate the manufacturer's PPA, § 1396r–8(b)(4)(B)(i), (v) ; App. to Pet. for Cert. 174a (PPA § IV(c)), which terminates as well the manufacturer's eligibility for Medicaid coverage of its drugs, § 1396r–8(a)(1), (5). Currently, HRSA handles overcharge complaints through informal procedures. Manufacturer Audit Guidelines and Dispute Resolution Process, 61 Fed.Reg. 65412 (1996). The 2010 Patient Protection and Affordable Care Act (PPACA), Pub.L. 111–148, 124 Stat. 119, provides for more rigorous enforcement. The PPACA directs the Secretary to develop formal procedures for resolving overcharge claims. Id ., at 826, 42 U.S.C.A. § 256b(d)(3)(A). Under those procedures, which are not yet in place, HRSA will reach an "administrative resolution" that is subject to judicial review under the Administrative Procedure Act (APA), 5 U.S.C. § 701 et seq . See 124 Stat. 827, 42 U.S.C.A. § 256b(d)(3)(C). In addition to authorizing compensation awards to overcharged entities, the PPACA provides for the imposition of monetary penalties payable to the Government. Id ., at 824–825, 42 U.S.C.A. § 256b(d)(1)(B)(ii), (vi).

B

Respondent Santa Clara County (County), operator of several 340B entities, commenced suit against Astra and eight other pharmaceutical companies, alleging that the companies were overcharging 340B health care facilities in violation of the PPAs to which the companies subscribed. The County styled its suit a class action on behalf of both 340B entities in California and the counties that fund those entities. Asserting that the 340B entities and the counties that fund them are the intended beneficiaries of the PPAs, the County sought compensatory damages for the pharmaceutical companies' breach of contract.

The District Court dismissed the complaint, concluding that the PPAs conferred no enforceable rights on 340B entities. Reversing the District Court's judgment, the Ninth Circuit held that covered entities, although they have no right to sue under the statute, could maintain the action as third-party beneficiaries of the PPAs. 588 F.3d 1237, 1241 (2009).

We granted certiorari, 561 U.S. ––––, 131 S.Ct. 61, 177 L.Ed.2d 1151 (2010),³ and now reverse the Ninth Circuit's judgment.

II

As the County conceded below and before this Court, see 588 F.3d, at 1249 ; Tr. of Oral Arg. 45, covered entities have no right of action under § 340B itself. "[R]ecognition of any private right of action for violating a federal statute," currently governing decisions instruct, "must ultimately rest on congressional intent to provide a private remedy." Virginia Bankshares, Inc. v. Sandberg, 501 U.S. 1083, 1102, 111 S.Ct. 2749, 115...