Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 1 of 122
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
`
`_____________________________________
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`
`
`
`PHARMACEUTICAL CARE
`
`MANAGEMENT ASSOCIATION,
`
`
`601 Pennsylvania Avenue, N.W., Suite 740
`Washington, D.C. 20004
`
`
`
`
`
`
`Plaintiff,
`
`
`v.
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`
`
`
`UNITED STATES DEPARTMENT OF
`HEALTH AND HUMAN SERVICES,
`
`200 Independence Avenue, S.W.
`Washington, D.C. 20201;
`
`UNITED STATES DEPARTMENT OF
`HEALTH AND HUMAN SERVICES –
`OFFICE OF INSPECTOR GENERAL,
`
`330 Independence Avenue, S.W.
`Washington, D.C. 20201;
`
`UNITED STATES DEPARTMENT OF
`HEALTH AND HUMAN SERVICES –
`OFFICE OF COUNSEL TO THE
`INSPECTOR GENERAL,
`
`330 Independence Avenue, S.W.
`Washington, D.C. 20201;
`
`UNITED STATES DEPARTMENT OF
`JUSTICE,
`
`950 Pennsylvania Avenue, N.W.
`Washington, D.C. 20530;
`
`ALEX M. AZAR, II, in his official capacity
`as Secretary of Health and Human Services,
`
`200 Independence Avenue, S.W.
`Washington, D.C. 20201;
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`
`
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`Case No. _____
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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 2 of 122
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`JEFFREY A. ROSEN, in his official capacity
`as Acting Attorney General of the United
`States,
`
`950 Pennsylvania Avenue, N.W.
`Washington, D.C. 20530;
`
`CHRISTI A. GRIMM, in her official capacity
`as Acting Inspector General of the
`Department of Health and Human Services,
`
`330 Independence Avenue, S.W.
`Washington, D.C. 20201; and
`
`GREGORY E. DEMSKE, in his official
`capacity as Chief Counsel to the Inspector
`General of the Department of Health and
`Human Services,
`
`330 Independence Avenue, S.W.
`Washington, D.C. 20201
`
`
`Defendants.
`_____________________________________
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`COMPLAINT AND PRAYER FOR DECLARATORY AND INJUNCTIVE RELIEF
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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 3 of 122
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`
`
`TABLE OF CONTENTS
`
`Page
`
`B. 
`
`C. 
`
`D. 
`
`E. 
`
`INTRODUCTION ...........................................................................................................................1 
`PARTIES .........................................................................................................................................9 
`JURISDICTION AND VENUE ....................................................................................................13 
`FACTUAL ALLEGATIONS ........................................................................................................13 
`Legal And Factual Background .............................................................................13 
` 
`Retrospective Rebates Play A Critical Role In Controlling
`A. 
`Prescription Drug Prices ............................................................................13 
`Confidentiality Is Essential To The Functioning Of The
`Retrospective Rebate System .....................................................................17 
`Medicare Part D Provides Subsidized Access To Prescription Drug
`Coverage Through A Market-Based Program Modeled On
`Longstanding Rebate Practices ..................................................................19 
`Part D Plan Sponsors Compete For Enrollees Based On Coverage,
`Premiums, And Out-Of-Pocket Costs At The Point Of Sale .....................23 
`Designing Part D Plans, Submitting Bids For Each Contract Year,
`And Coming Into Compliance With New Program Rules Is A
`Complex, Lengthy, And Highly Regulated Process That Begins
`More Than A Year In Advance Of A Contract Year .................................28 
`A Statutory Exception And Regulatory Safe Harbor For
`Manufacturer “Discounts” Protect Price Concessions To Pharmacy
`Benefit Managers From Liability Under The Federal Anti-
`Kickback Statute ........................................................................................35 
`The Rebate Rule .....................................................................................................40 
`HHS Introduces The Rebate Rule By Issuing A Request For
`A. 
`Information And A Notice Of Proposed Rulemaking ...............................40 
`Governmental And Commercial Actuarial Studies Of The Rebate
`Rule Predict Troubling Economic Consequences ......................................46 
`The Proposed Rule Draws Praise From Drug Manufacturers And
`Broad Concerns From PBMs, Plan Sponsors, Pharmacies, And
`Others About Higher Premiums And Federal Spending............................52 
`HHS-OIG Withdraws The Proposed Rule .................................................57 
`President Trump Issues An Executive Order Directing HHS-OIG
`To Promulgate A Rule ...............................................................................61 
`
` 
`
`F. 
`
`B. 
`
`C. 
`
`D. 
`E. 
`
`i
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 4 of 122
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`TABLE OF CONTENTS (continued)
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`Page
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`
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` 
`
`F. 
`
`HHS-OIG Proceeds With The Rebate Rule Over Serious Criticism
`From Multiple Stakeholders And Federal Agencies ..................................64 
`The Rebate Rule Is Contrary To Law And Violates The Administrative
`Procedure Act .........................................................................................................70 
`The Rebate Rule Is Ultra Vires And Contravenes Multiple
`A. 
`Statutory Limitations .................................................................................70 
`The Rebate Rule Exceeds The Department’s Statutory
`1. 
`Authority Under The Anti-Kickback Statute .................................70 
`The Rebate Rule Violates The Medicare Act’s Non-
`Interference Clause ........................................................................74 
`The Rebate Rule Impermissibly Institutes A Price Structure ........76 
`3. 
`The Rebate Rule Is Arbitrary And Capricious ...........................................77 
`The Effective Date Of The Rebate Rule Disrupts The
`1. 
`Bidding Process For Contract Year 2022 And Makes It
`Impossible For CMS To Timely Issue Necessary
`Determinations That PBMs And Plan Sponsors Must
`Account For Before The Bidding Deadline ...................................77 
`The Rebate Rule’s Central Premise—That The Rule Will
`Not Increase Premiums Or Federal Spending—Is Arbitrary
`And Capricious ..............................................................................89 
`The Rebate Rule Will Increase Net Prices Because
`a. 
`Public Disclosure Of Sensitive Price Information
`Will Undermine Pharmacy Benefit Managers’
`Bargaining Power...............................................................90 
`Even If Net Prices Remain Constant, The Rebate
`Rule Will Increase Premiums And Federal
`Spending ............................................................................93 
`The Rebate Rule Reflects Flawed And Unsupported
`Assumptions About The Growth Of List Prices ............................97 
`The Rebate Rule Will Not Achieve Its Intended Purpose
`And Will Only Harm The Vast Majority Of Enrollees ..................99 
`The Rebate Rule Will Undermine Value-Based
`Arrangements ...............................................................................107 
`HHS-OIG Failed To Comply With The Procedural Requirements
`For Amending The Regulatory Safe Harbors ..........................................110 
`The Rebate Rule Was Not Promulgated With The Required
`1. 
`Notice-And-Comment..................................................................110 
`
`2. 
`
`2. 
`
`3. 
`
`4. 
`
`5. 
`
`b. 
`
`B. 
`
`C. 
`
`ii
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 5 of 122
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`TABLE OF CONTENTS (continued)
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`Page
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`
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`2. 
`
`HHS-OIG Failed To Consult With The Attorney General
`Before Proposing The Rebate Rule..............................................111 
`COUNT I (CONTRARY TO LAW) ...........................................................................................112 
`COUNT II (ARBITRARY AND CAPRICIOUS) .......................................................................113 
`COUNT III (DECLARATORY JUDGMENT) ...........................................................................114 
`PRAYER FOR RELIEF ..............................................................................................................115 
`
`iii
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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 6 of 122
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`GLOSSARY
`
`
`Definition
`
`Congressional Budget Office
`
`Centers for Medicare & Medicaid Services
`
`Direct and Indirect Remuneration
`
`U.S. Department of Health and Human Services
`U.S. Department of Health and Human Services – Office of Inspector
`General
`Tit. XVIII, 42 U.S.C. § 1395 et seq.
`
`CMS Office of the Actuary
`
`Office of Information & Regulatory Affairs
`
`Office of Management and Budget
`
`Pharmacy benefit manager
`
`Pharmaceutical Care Management Association
`
`Term
`
`CBO
`
`CMS
`
`DIR
`
`HHS
`
`HHS-OIG
`
`Medicare Act
`
`OACT
`
`OIRA
`
`OMB
`
`PBM
`
`PCMA
`
`Proposed Rule 84 Fed. Reg. 2340 (Feb. 6, 2019)
`
`Rebate Rule
`
`85 Fed. Reg. 76666 (Nov. 30, 2020)
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`
`
`
`
`
`
`iv
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 7 of 122
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`Plaintiff Pharmaceutical Care Management Association (“PCMA”), for its complaint
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`against Defendants the UNITED STATES DEPARTMENT OF HEALTH AND HUMAN
`
`SERVICES (“HHS”); the DEPARTMENT OF HEALTH AND HUMAN SERVICES – OFFICE
`
`OF INSPECTOR GENERAL (“HHS-OIG”); the UNITED STATES DEPARTMENT OF
`
`HEALTH AND HUMAN SERVICES – OFFICE OF COUNSEL TO THE INSPECTOR
`
`GENERAL (“HHS-OCIG”); the DEPARTMENT OF JUSTICE (“DOJ”); ALEX M. AZAR, II,
`
`in his official capacity as Secretary of Health and Human Services (the “Secretary”); JEFFREY
`
`A. ROSEN, in his official capacity as Acting Attorney General of the United States; CHRISTI A.
`
`GRIMM, in her official capacity as Acting Inspector General of the Department of Health and
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`Human Services; and GREGORY E. DEMSKE, in his official capacity as Chief Counsel to the
`
`Inspector General of the Department of Health and Human Services, alleges, by and through its
`
`attorneys, as follows:
`
`INTRODUCTION
`
`1.
`
`This case is about the “Rebate Rule”—a final order issued by the Department of
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`Health and Human Services Office of Inspector General (“HHS-OIG”) in the waning days of the
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`Trump Administration that radically transforms the way prescription drugs are priced and paid
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`for in the Medicare Part D program. See Removal of Safe Harbor Protection for Rebates
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`Involving Prescription Pharmaceuticals, 85 Fed. Reg. 76666 (Nov. 30, 2020) (the “Rebate
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`Rule”). The Rebate Rule is the product of an erratic and highly irregular administrative process.
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`When HHS-OIG proposed the Rule in 2019, the proposal provoked a tsunami of concern about
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`increased premiums for enrollees and skyrocketing federal spending. HHS’s own actuaries
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`estimated the cost of the proposed rule to be as high as $196 billion over ten years—making it
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`one of the most expensive regulations in history—and predicted that seniors’ prescription drug
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`premiums would go up by as much as 25%. HHS-OIG then withdrew the proposal, and the
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`1
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 8 of 122
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`matter seemed to be over. In July 2020, however, the proposal was abruptly revived by
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`President Trump’s Executive Order directing Secretary Azar to finalize the Rule—so long as
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`Secretary Azar could confirm that it would not adversely affect premiums or federal spending.
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`Less than four months later, HHS-OIG adopted the Rebate Rule, with an accompanying
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`certification by Secretary Azar making the exact findings demanded by the President based on
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`nothing more than “experience.” The Rule reflects a total lack of coordination between HHS-
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`OIG and HHS’s own Centers for Medicare & Medicaid Services (“CMS”), which administers
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`Medicare Part D and issues critical implementing rules and guidance for program participants.
`
`Not surprisingly, given this tumultuous and rushed procedural history, the Rebate Rule suffers
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`from numerous fatal legal flaws and is already producing chaos and confusion in the planning
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`process for the 2022 contract year in which the Rule is scheduled to take effect.
`
`2.
`
`This action under the Administrative Procedure Act, 5 U.S.C. §§ 551-706
`
`(“APA”), and the Declaratory Judgment Act, 28 U.S.C. § 2201, accordingly challenges and
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`seeks declaratory relief from the Rebate Rule because it exceeds HHS-OIG’s statutory authority,
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`violates the APA’s notice-and-comment-rulemaking requirement, and departs from settled
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`principles of agency rulemaking. The Rule is unlawful, arbitrary, and irrational, and will
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`undermine critical aspects of the Medicare Part D prescription drug program, upend preparations
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`for the 2022 contract year, and increase prescription drug premiums, federal spending, and
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`aggregate spending on prescriptions—ultimately harming the American seniors and disabled
`
`citizens the Rule purports to help.
`
`3.
`
`Medicare Part D is a federal prescription drug benefit program that uses market-
`
`based mechanisms to offer affordable drug coverage to millions of seniors and disabled
`
`Americans through privately operated, federally subsidized drug plans. Since Congress enacted
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`2
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 9 of 122
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`the program in 2003 and the program became operational in 2006, sponsors of Part D plans have
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`emulated the commercial insurance market—just as Congress intended—in negotiating with
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`drug manufacturers and pharmacies to control the cost of prescription drugs and compete for
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`enrollees. As commercial insurers have done for decades, Part D plan sponsors typically employ
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`pharmacy benefit managers (“PBMs”) to administer their drug plans and negotiate rebates from
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`manufacturers’ nominal “list” prices. By offering rebates that lower the net cost of a drug,
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`manufacturers can potentially increase their market share because lower net costs incentivize
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`PBMs and plan sponsors to offer or adopt formularies—tiered lists of covered drugs—that
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`include or prefer the drug under plan utilization management rules. Since the mid-1990s and
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`through the earliest days of Part D, PBMs and manufacturers in both the commercial and Part D
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`contexts have converged around a business model in which manufacturers pay retrospective
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`rebates to PBMs after the product is dispensed to the enrollee, and PBMs pass rebates on to plan
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`sponsors—including 99.6% of rebates in the Medicare Part D context. Plan sponsors under Part
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`D are then required to report the full amount of the rebates (including any portion that may be
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`retained by the PBM pursuant to the contract between the PBM and plan sponsor) to CMS as
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`drug price reductions, and pass the savings on to the government and plan enrollees in the form
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`of reduced subsidies and premiums. This widely adopted and longstanding model has proved
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`critical to the tremendous success of the Medicare Part D program.
`
`4.
`
`The Rebate Rule breaks with this established business model and seeks to
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`radically transform the way that prescription drugs offered by manufacturers are typically priced
`
`and paid for, at a significant cost to the federal government and the large majority of Part D
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`sponsors and enrollees. The Rule pursues this result by threatening manufacturers, PBMs, and
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`plan sponsors with significant criminal and civil liability under the federal anti-kickback statute,
`
`3
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 10 of 122
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`42 U.S.C. § 1320a-7b, simply for engaging in the same rebate practices that they have followed
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`since the start of the Medicare Part D program, consistent with the commercial insurance market
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`that Congress intended for Part D plans to emulate.
`
`5.
`
`The anti-kickback statute makes it a felony for any person to “knowingly and
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`willfully” pay or receive “remuneration” in exchange for, among other things, recommending
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`items or services reimbursed by federal healthcare programs. 42 U.S.C. § 1320a-7b(b)(1)-(2).
`
`An important statutory exception clarifies, however, that remuneration does not include any
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`“discount or other reduction in price” that is “properly disclosed and appropriately reflected” in
`
`the costs for which reimbursement could be claimed under a federal healthcare program. Id.
`
`§ 1320a-7b(b)(3)(A). For decades, a more specific regulatory safe harbor has also protected any
`
`“rebate” for which “the terms” are “disclosed in writing to the buyer at the time of the initial
`
`sale” and the buyer, if requested by the Secretary, discloses certain information provided by the
`
`seller. 42 C.F.R. § 1001.952(h)(1)(iii). PBMs, plans, and manufacturers have relied on this
`
`regulatory safe harbor since the start of Medicare Part D to conduct their retrospective rebate
`
`practices.
`
`6.
`
`The Rebate Rule uses the threat of liability under the anti-kickback statute to
`
`bring an end to retrospective manufacturer rebates for plans and PBMs. The Rule modifies the
`
`regulatory safe harbor for discounts so that it no longer applies to rebates paid by manufacturers
`
`to plan sponsors or PBMs under Medicare Part D. Instead, the Rule seeks to channel
`
`manufacturer price concessions into a new regulatory safe harbor that applies only when the
`
`discount is applied at the point of sale (e.g., when the enrollee is filling the prescription at the
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`pharmacy counter), passed through to the enrollee, and paid to the pharmacy through a
`
`4
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 11 of 122
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`
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`chargeback; in other words, the manufacturer effectively pays the pharmacy directly or
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`indirectly.
`
`7.
`
`The Rebate Rule is purportedly aimed at reducing the enrollee’s out-of-pocket
`
`contribution toward the price of the particular prescription drug through cost-sharing payments
`
`such as deductible, copayment, and coinsurance. But multiple government and commercial
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`actuarial analyses of the Rule—including analyses performed by HHS’s own actuaries and the
`
`nonpartisan Congressional Budget Office (“CBO”)—confirm that in practice it will serve mainly
`
`to reinforce the ability of the pharmaceutical industry to raise prices, and thus will ultimately
`
`have the counterproductive effect of increasing the cost of prescription drugs. PBMs’ ability to
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`maximize price concessions from manufacturers depends on keeping negotiations confidential so
`
`that no one manufacturer knows what price any other manufacturer has agreed to accept. That is
`
`why HHS treats price information as confidential and therefore protected under the federal Trade
`
`Secrets Act. Mandating that discounts apply at the point of sale will undercut those protections
`
`and make it easy for manufacturers to discern each other’s prices and discounts. As both CBO
`
`and the Federal Trade Commission (“FTC”) have recognized, disclosure of this sensitive
`
`information will allow manufacturers to tacitly collude in their negotiations and avoid the
`
`deepest discounts, driving up the net price paid for prescription drugs after all discounts and
`
`rebates, resulting in more profits for manufacturers.
`
`8.
`
`Even if net prices remained constant, moreover, government and commercial
`
`actuaries have uniformly recognized that lowering enrollees’ cost share at the point of sale will
`
`increase their premiums unless plan sponsors reduce coverage. Increased premiums, in turn, will
`
`increase federal spending on subsidies, which are tied by law to the costs incurred by plan
`
`sponsors. Lower cost sharing by enrollees will also drive up utilization of less cost-effective
`
`5
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 12 of 122
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`drugs as enrollees become less sensitive to their true costs, further increasing the cost of
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`providing coverage and therefore premiums and federal spending. And implementing the Rule
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`will require massively overhauling the current system through which price concessions are
`
`delivered, resulting in implementation costs that will further drive up premiums and federal
`
`subsidies.
`
`9.
`
`These obvious and colossal costs of the Rebate Rule doomed HHS-OIG’s first
`
`attempt to promulgate it through notice-and-comment rulemaking in 2019. While drug
`
`manufacturers welcomed the Proposed Rule as a way to limit PBMs’ bargaining power, PBMs,
`
`Part D sponsors, and independent and academic commentators widely condemned it. And after
`
`the close of the comment period, other agencies and administration officials joined in the
`
`condemnation. HHS-OIG submitted the Rule to the Office of Management and Budget
`
`(“OMB”), where the Rule met widespread opposition from within the administration and was
`
`accordingly withdrawn. More than a year later, however, President Trump resuscitated the Rule
`
`by Executive Order, directing HHS-OIG to complete the rulemaking, but only if the Secretary
`
`reached the conclusion—unsupportable in light of the evidence on costs according to HHS’s own
`
`actuarial analysis—that the Rule would not increase premiums or federal spending. Predictably,
`
`the Secretary drew that very conclusion. He did so without evidentiary support based on little
`
`more than his personal speculation that PBMs are sophisticated negotiators, and that plan
`
`sponsors would never settle for increased premiums irrespective of the underlying market
`
`dynamics. HHS-OIG then rushed the Rule out the door, shortly before the end of the Trump
`
`Administration, improperly dispensing with the new comment period required by the APA for
`
`the new rulemaking.
`
`6
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 13 of 122
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`10.
`
`The result of this herky-jerky, last-minute rulemaking process is an unlawful rule
`
`that rests on flawed and widely rejected economic assumptions. HHS lacks authority to subject
`
`retrospective manufacturer rebates under Medicare Part D to liability under the anti-kickback
`
`statute because—irrespective of the regulatory safe harbor for discounts—the original statutory
`
`exception for discounts continues to protect retrospective rebates. At the time Medicare Part D
`
`was enacted, moreover, the regulatory safe harbor already reflected HHS-OIG’s understanding
`
`that properly disclosed manufacturer rebates were not remuneration within the meaning of the
`
`federal anti-kickback statute. As reflected in multiple provisions of the Medicare Act, therefore,
`
`Congress clearly understood that retrospective manufacturer rebates paid to PBMs—the
`
`dominant form of price concessions in the private market at the time, as today—were not illegal
`
`kickbacks but publicly beneficial financial arrangements. Indeed, the entire point of Medicare
`
`Part D was to create a federally subsidized program that would simulate commercial market
`
`practices. HHS-OIG’s repeal of the regulatory safe harbor for discounts thus undermines the
`
`fundamental premises of the Medicare Act, is contrary to law, and is arbitrary and capricious. In
`
`the alternative, should this Court uphold the Rebate Rule, PCMA seeks a declaratory judgment
`
`that its members’ rebate practices are protected by the statutory exception, which HHS-OIG
`
`cannot and did not seek to repeal.
`
`11.
`
`The Rebate Rule is arbitrary and capricious in numerous other respects. On the
`
`merits, the Rebate Rule rests on a central premise—that the changes imposed will not increase
`
`premiums or federal spending—that is recognized as irrational by the consensus of independent
`
`analyses, as well as the government’s own studies, which show that the rule will increase both
`
`premiums and federal spending. For that reason, the Rule will not achieve its intended purpose
`
`of lowering costs for seniors, but will instead only harm the vast majority of Medicare Part D
`
`7
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 14 of 122
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`enrollees. The Rule will also critically undermine HHS’s publicly stated goal of promoting
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`value-based arrangements to reward healthcare providers with incentive payments based on the
`
`quality of care provided, because many of those arrangements will now be subject to criminal
`
`prosecution due to their falling outside of the new, narrowed safe harbors. Moreover, HHS-OIG
`
`violated the APA’s procedural requirements to provide notice and an opportunity for comment
`
`on the Rebate Rule, which was abruptly issued in November 2020 without any new notice or
`
`comment period—well over a year after the Proposed Rule was publicly listed as withdrawn in
`
`July 2019.
`
`12.
`
`To make matters worse, the January 1, 2022 effective date of the Rebate Rule’s
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`key provision puts PBMs and the Part D sponsors they support in an impossible practical
`
`situation. The work that goes into estimating net drug prices, premiums, and the information
`
`necessary for potential enrollees to choose the right plan for them is a long, complex, and highly
`
`regulated endeavor. Part D sponsors must submit their bids for 2022 by early June of this year.
`
`Those bid submissions, in turn, require months of preparation and negotiation, and depend in
`
`significant part on regulations and guidance governing bid requirements issued by CMS well in
`
`advance of the bid deadline. Numerous commenters explained why market participants would
`
`need substantial lead time to restructure their affairs in light of the Rebate Rule and to allow
`
`CMS to weigh in on how the Rebate Rule would affect bid and other Part D regulatory
`
`requirements. HHS-OIG, however, did not view these timing concerns as its problem. It simply
`
`declared, 37 separate times, that the comments pointing out these practical problems were
`
`“outside the scope” of the Rebate Rule. Because of the timing of the adoption of the Rebate
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`Rule, CMS lacked any meaningful opportunity to issue guidance accounting for the Rebate
`
`Rule’s impact on Part D for contract year 2022. As a result, manufacturers will be unwilling to
`
`8
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`

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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 15 of 122
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`lock in binding rebate offers to PBMs and plan sponsors, threatening plan sponsors’ ability to
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`effectively design their plans and complete the bidding process. To adopt an effective date for
`
`the Rebate Rule that is completely out of alignment with the CMS schedule for implementing
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`Part D program bid requirements is the definition of arbitrary and capricious action.
`
`13.
`
`For all of these reasons, even if this Court were to conclude that HHS-OIG had
`
`statutory authority to regulate in this manner, the Rebate Rule must be vacated as arbitrary and
`
`capricious and contrary to the APA. At the very least, the Rule’s January 1, 2022 effective date
`
`must be vacated to ensure adequate time to implement the Rule during a subsequent bid cycle.
`
`In addition, the Court should issue a declaration that retrospective rebates paid to Part D plan
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`sponsors and PBMs are protected by the statutory exception for discounts.
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`PARTIES
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`14.
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`Plaintiff PCMA is a non-profit § 501(c)(6) corporation duly organized under the
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`laws of the State of Delaware, with its principal place of business in Washington, D.C. PCMA is
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`the national trade association representing America’s PBMs, which administer prescription drug
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`plans for more than 270 million Americans with health coverage through Fortune 500
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`companies, health insurers, labor unions, Medicare, Medicaid, the Federal Employees Health
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`Benefits Program, and the health insurance marketplaces. Many PBMs also own and operate
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`home delivery and specialty pharmacies.
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`15.
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`PBMs are the only entities in the supply chain whose mission is to lower drug
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`costs for plan sponsors. Plan sponsors engage PBMs to maximize the value of prescription drug
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`benefits by negotiating price concessions from drug manufacturers and pharmacies, in addition
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`to providing numerous other services. PBMs also lower costs in other ways, such as by
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`encouraging the use of generics, offering specialty pharmacy services, and helping patients with
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`adherence to the prescribed plan of care. Two 2020 studies estimated that PBMs helped
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`Case 1:21-cv-00095-JDB Document 1 Filed 01/12/21 Page 16 of 122
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`beneficiaries and payers save on average $962 per beneficiary per year in prescription drug costs,
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`equaling more than $1 trillion over the ensuing decade. Visante, Inc., The Return on Investment
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`(ROI) on PBM Services (Feb. 2020), https://www.pcmanet.org/wp-content/uploads/2020/02/
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`ROI-on-PBM-Services-FINAL_.pdf; Visante Inc., Pharmacy Benefit Managers (PBMs):
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`Generating Savings for Plan Sponsors and Consumers (Feb. 2020), https://www.pcmanet.org/
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`wp-content/uploads/2020/02/Pharmacy-Benefit-Managers-Generating-Savings-for-Plan-
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`Sponsors-and-Consumers-2020-1.pdf. PBMs would not serve 270 million beneficiaries through
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`all types of health plans if they did not bring down costs.
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`16.
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`PCMA’s members include the following PBMs: Abarca Health, CerpassRx, CVS
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`Health, Envolve Pharmacy Solutions, Express Scripts, Humana Pharmacy Solutions, IngenioRx,
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`Integrated Prescription Management, Magellan Rx Management, Maxor Plus, MedImpact
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`Healthcare Systems, OptumRx, PerformRx, Prime Therapeutics, Serve You Rx, and
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`WellDyneRx (collectively, the “members”). PCMA’s members each administer prescription
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`drug benefits on behalf of health plans and their enrollees, including enrollees who reside or
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`purchase pharmaceuticals in Washington, D.C.
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`17.
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`Each of PCMA’s members has Article III standing because they rely on the
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`regulatory safe harbor eliminated by the Rebate Rule in negotiating price concessions in the
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`Medicare Part D context. As explained herein, by eliminating this safe harbor, the Rule will
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`force PCMA’s members to modify their current price concession practices; renegotiate
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`agreements with manufacturers, pharmacies, plans, and other parties; and restructure business
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`models that have existed for decades, to avoid exposing themselves to potential civil and
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`criminal liability under the anti-kickback statute. Even to continue to implement price
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`concessions under the new point-of-sale safe harbor adopted by the Rebate Rule, PCMA’s
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`members will be forced to publicly reveal valuable trade secret information regarding the terms
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`of their contracts, drastically undercutting their bargaining power in negotiating those
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`agreements, and thus reducing their ability to secure valuable price concession that lower the
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`cost of prescription drugs for Medicare Part D drug plan sponsors, enrollees, and the federal
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`government. In any event, the system configurations and other implementing action required to
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`come within this safe harbor are practically impossible under the current effective date of the
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`Rule. Those injuries are directly and immediately traceable to the challenged rule and would be
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`remedied by a judgment vacating the Rule or its effective date or declaring that the current price
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`concession practices of PCMA’s members are otherwise protected from liability under the
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`federal anti-kickback statute.
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`18.
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`PCMA has associational standing to bring this lawsuit on behalf of its members
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`because at least one of its members has Article III standing, the interests that PCMA seeks to
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`protect are germane to its organizational purpose of promoting PBMs and the proven tools they
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`utilize to lower prescription drug prices, and neither the claims asserted nor the relief requested
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`in this lawsuit requires the participation of individual PCMA members.
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`19.
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`Defendant HHS is an executive department of the United States federal
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`government that is headquartered in Washington, D.C. HHS is responsible for administering
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`federal health and social services program including Medicare, and for civil enforcement of the
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`federal anti-kickback statute.
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`20.
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`Defendant HHS-OIG is an administrative agency within HHS that is
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`headquartered in Washington, D.C. HHS is responsible for combating waste, fraud, and abuse
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`within HHS programs, including through civil enforcement of the federal anti-kickback statute
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`and referring violations of that statute to the Attorney General for criminal enforcement. HHS-
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`OIG promulgated the Rebate Rule challenged in this lawsuit.
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`21.
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`Defendant HHS-OCIG is an administrative agency within HHS-OIG that is
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`headquartered in Washington, D.C. HHS-OCIG is responsible for providing