Vermont v. Leavitt

• Decision Date: 19 September 2005
• Docket Number: No. 2:04 CV 206.,2:04 CV 206.
• Citation: 405 F.Supp.2d 466
• Parties: State of VERMONT and Vermont Agency of Administration Plaintiffs, v. Michael O. LEAVITT, in his official capacity as Secretary of the United States Department of Health and Human Services and Lester M. Crawford, in his official capacity as Acting Commissioner of the United States Food and Drug Administration Defendants.
• Court: U.S. District Court — District of Vermont

405 F.Supp.2d 466

State of VERMONT and Vermont Agency of Administration Plaintiffs, v. Michael O. LEAVITT, in his official capacity as Secretary of the United States Department of Health and Human Services and Lester M. Crawford, in his official capacity as Acting Commissioner of the United States Food and Drug Administration Defendants.

No. 2:04 CV 206.

United States District Court, D. Vermont.

September 19, 2005.

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Mark J. Di Stefano, Vermont Attorney General's Office, Montpelier, VT, Michael Owen McShane, Vermont Attorney General's Office, Waterbury, VT, for Plaintiffs.

Joseph Robert Perella, Office of The United States Attorney, Burlington, VT, for Defendants.

OPINION AND ORDER

SESSIONS, Chief Judge.

I. Introduction

In Beebe Plains, Vermont, there is a street, appropriately named Canusa Avenue, that runs right along the United States-Canada border. Houses on the northern side of the street are in Canada while houses on the southern side are in Vermont. If a resident of the northern side of Canusa Avenue needs medication to control high cholesterol, he or she can purchase a 90-day supply of 20 milligram Lipitor for $170. On the southern side of the street, Vermont residents will have to dig much deeper if they need to purchase the same drug. The same 90-day supply of Lipitor costs about $330 in the United States.¹

This price differential is far from unique. On average, brand-name drug prices are approximately 70% higher in the United States. Congressional Research Service Report for Congress, Importing Prescription Drugs: Objectives, Options, and Outlook 7-8 (Aug. 4, 2004). It has been estimated that United States consumers would have saved $59.7 billion if, during 2004, they had purchased all brand-name drugs at Canadian prices. Id. at 29. To put that figure in context, it is more than the gross national products of Kuwait, Iceland and Jamaica combined.²

Given the dramatic difference between United States and Canadian drug prices, it is unsurprising that many Americans are interested in buying prescription drugs in Canada. "Nearly five million shipments, comprising about 12 million prescription drug products with a value of approximately $700 million entered the U.S. from Canada alone in 2003." HHS Task Force on Drug Importation, Report on Prescription Drug Importation, ix (Dec.2004) (hereafter "HHS Report"). As residents of a border state, most Vermonters can drive to Canada within two or three hours. Thus, Vermont residents are more likely to buy prescription drugs in Canada than most other Americans.

Vermont regulators have been concerned about high domestic drug prices and the increase in ad-hoc, personal importation of Canadian drugs by Vermont residents. In response to these concerns plaintiff Vermont Agency of Administration ("VAA") submitted a citizen petition to the Food and Drug Administration ("FDA") requesting that the FDA allow the Vermont State Employee Medical Benefit Plan ("VTSEMBP") to "establish a program for the orderly individual importation of prescription medications." Citizen Pet. at 2 (Dec. 4, 2003) (Doc. 1, Ex. A). The FDA denied this petition. Letter from William K. Hubbard to Michael K. Smith of 8/4/05 (Doc. 1, Ex. B) (hereafter "FDA Decision").

Plaintiffs VAA and the State of Vermont (collectively "Vermont") filed this lawsuit on August 19, 2004, challenging the FDA's denial of the citizen petition. Vermont claims that the denial was arbitrary and capricious in violation of the Administrative Procedure Act ("APA"). Vermont also seeks a declaratory judgment that 21 U.S.C. § 384(l)(1) violates Article I, § 1 of the United States Constitution by improperly delegating legislative power to the Executive Branch.

On November 29, 2004, the Defendants filed a Motion to Dismiss (Doc. 5) pursuant to Federal Rule of Civil Procedure 12(b)(6). The Defendants argue that they were required to deny Vermont's citizen petition because it proposed a drug importation scheme that violated federal law. Thus, the issue before the Court is the legality rather than the merit of Vermont's proposal. For the reasons set forth below, the Court grants the Defendants' Motion to Dismiss.

II. Standard of Review

A. Rule 12(b)(6)

When deciding a motion to dismiss pursuant to Federal Rule of Civil Procedure 12(b)(6), a court must "construe the complaint in the light most favorable to the plaintiff, accepting the complaint's allegations as true." Todd v. Exxon Corp., 275 F.3d 191, 197-98 (2d Cir.2001). A district court may grant a motion to dismiss for failure to state a claim only if "`it appears beyond doubt that the plaintiff can prove no set of facts in support of his claim which would entitle him to relief.'" Id. at 198 (quoting Conley v. Gibson, 355 U.S. 41, 45-46, 78 S.Ct. 99, 2 L.Ed.2d 80 (1957)). Therefore, "`[t]he issue is not whether a plaintiff will ultimately prevail but whether the claimant is entitled to offer evidence to support the claims.'" Id. (quoting Scheuer v. Rhodes, 416 U.S. 232, 236, 94 S.Ct. 1683, 40 L.Ed.2d 90 (1974)). In general, when deciding a motion to dismiss, a court will consider the facts alleged in the complaint and any documents attached as exhibits or incorporated by reference. Cosmas v. Hassett, 886 F.2d 8, 13 (2d Cir.1989).

B. Administrative Procedure Act

Under the APA, the Court must set aside any agency action that is "arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law." 5 U.S.C. § 706(2)(A). Under this standard, the Court must "determine whether the agency has considered the pertinent evidence, examined the relevant factors, and articulated a satisfactory explanation for its action including whether there is a `rational connection between the facts found and the choice made.'" J. Andrew Lange, Inc. v. F.A.A., 208 F.3d 389, 391 (2d Cir. 2000) (quoting Burlington Truck Lines, Inc. v. United States, 371 U.S. 156, 168, 83 S.Ct. 239, 9 L.Ed.2d 207 (1962)). The Court's "review of an agency decision is generally confined to the administrative record compiled by that agency when it made the decision." Vt. Pub. Interest Research Group v. United States Fish & Wildlife Serv., 247 F.Supp.2d 495, 514 (D.Vt.2002). "The scope of review under the arbitrary and capricious standard is narrow and a court is not to substitute its judgment for that of the agency." Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29, 43, 103 S.Ct. 2856, 77 L.Ed.2d 443 (1983).

When the agency action is based on an interpretation of its governing statute, the Court must consider whether that interpretation is entitled to deference and, if so, how much. See United States v. Mead Corp., 533 U.S. 218, 121 S.Ct. 2164, 150 L.Ed.2d 292 (2001). If a statute speaks clearly "to the precise question at issue," the Court "must give effect to the unambiguously expressed intent of Congress." Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837, 842-43, 104 S.Ct. 2778, 81 L.Ed.2d 694 (1984).

III. Factual Background

The following facts are taken as true for the purposes of this motion. Vermont filed its citizen petition with the FDA on December 4, 2003. Compl. ¶ 17 (Doc. 1). Vermont explained that it wanted "authority to contract with providers to create a system under which its members have the option of forwarding a prescription to a Canadian firm where the prescription would be reviewed by a physician familiar with the member's medical history and rewritten as a Canadian prescription, which would be forwarded to a licensed Canadian pharmacy to be filled and sent by mail to the member in the United States." Citizen Pet. at 2. Accordingly, Vermont requested the FDA to "issue regulations or otherwise commit to exercise its enforcement discretion to allow the VTSEMBP to establish a program for the orderly individual importation of prescription medications in a manner that promotes the safety and health of its members." Id. at 1-2. In the alternative, the petition requested that the FDA "issue guidance that such a program would be lawful under the statutes and regulations enforced by the Commissioner of Food and Drugs." Id. at 1. Finally, Vermont requested that "the FDA promptly establish regulations to provide for importation of prescription drugs from Canada into the [United States]" as provided by section 1121 of the Medicare Prescription Drug, Improvement, and Modernization Act, Pub.L. No. 108-173, 117 Stat.2066 (2003) ("MMA"). Id.

In its petition, Vermont noted that the FDA is not currently committing resources to controlling importation by individuals of prescription medications from outside the United States for their own use. Id. at 2. Vermont claimed that, because of the close proximity to Canada, "[t]he reality is that many plan members regularly travel to Canada and have the ability to bring back prescription medications under the published FDA enforcement policy." Id. Given that prescription medications are cheaper in Canada, "members are likely to import prescription medications on an ad-hoc, personal level." Id. at 3. Vermont argued that, when this occurs, VTSEMBP does not "have an opportunity to intervene to minimize the risks associated with prescription medications obtained outside the U.S., as identified by the FDA." Id.

Vermont suggested that, by granting the petition, the FDA would enable VTSEMBP to minimize any health risks associated with importing drugs. Id. As part of its program, Vermont would contract with service providers with knowledge regarding which prescription drugs sold in Canada are manufactured in FDA-approved facilities. Id. The petition suggests that "[i]f the plan was able to bring such Canadian prescription purchases back into our plan mechanism, as opposed to after-the-fact reimbursement as occurs with any other out-of-network purchase we may be able to make those purchases subject to other safety and health promotion features of our...