Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 1 of 18
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`UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF COLUMBIA
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`Civil Action No. ______________
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` )))))))))))))))))))))))))))))))))))))))))))
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`OCHSNER CLINIC FOUNDATION D/B/A
`OCHSNER MEDICAL CENTER,
`1514 Jefferson Hwy, New Orleans, LA 70121
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`OCHSNER MEDICAL CENTER - KENNER,
`L.L.C., 180 W Esplanade Ave., Kenner, LA
`70065-2467
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`EAST BATON ROUGE MEDICAL CENTER
`LLC D/B/A OCHSNER MEDICAL CENTER
`BATON ROUGE, 17000 Medical Center
`Drive, Baton Rouge, LA 70816
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`OCHSNER MEDICAL CENTER -
`HANCOCK LLC, 149 Drinkwater Rd
`Bay Saint Louis, MS 39520
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`SOUTHERN REGIONAL MEDICAL
`CORPORATION D/B/A LEONARD J.
`CHABERT MEDICAL CENTER, 8166 Main
`St, Houma, LA 70360
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`HOSPITAL SERVICE DISTRICT OF THE
`PARISH OF ST BERNARD D/B/A ST.
`BERNARD PARISH HOSPITAL, 8000 W
`Judge Perez Dr., Chalmette, LA 70043
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`HOSPITAL SERVICE DISTRICT NO 1 OF
`ST. CHARLES PARISH D/B/A ST.
`CHARLES PARISH HOSPITAL, 1057 Paul
`Maillard Rd, Luling, LA 70070
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` Plaintiffs,
`v.
`
`
`XAVIER BECERRA, in his official capacity
`as Secretary, United States Department of
`Health and Human Services,
`200 Independence Ave. S.W.
`Washington, District of Columbia 20201,
`
`Defendant.
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`

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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 2 of 18
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`COMPLAINT
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`Plaintiffs, Ochsner Clinic Foundation d/b/a Ochsner Medical Center; Ochsner Medical
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`Center - Kenner, L.L.C.; East Baton Rouge Medical Center LLC d/b/a Ochsner Medical Center
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`Baton Rouge; Ochsner Medical Center - Hancock LLC; Southern Regional Medical Corporation
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`d/b/a Leonard J. Chabert Medical Center; Hospital Service District of the Parish of St Bernard
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`d/b/a St. Bernard Parish Hospital; and Hospital Service District No 1 of St. Charles Parish d/b/a
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`St. Charles Parish Hospital (collectively “Plaintiffs”) are hospitals that participate in the Medicare
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`program and purchase drugs through the 340B Drug Pricing Program, bring this complaint against
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`Defendant Xavier Becerra, in his official capacity as Secretary of Health and Heath Human
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`Services (“Secretary”), and allege as follows:
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`INTRODUCTION
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`1.
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`Plaintiffs seek judicial review of a final determination of the Secretary regarding
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`the Hospital Outpatient Prospective Payment System (“OPPS”) and Ambulatory Surgical Center
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`Payment Systems and Quality Reporting Programs for Calendar Years (“CYs”) 2018, 2019, 2020,
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`2021, and 2022. See 82 Fed. Reg. 52356, 52493-511, 52622-25 (Nov. 13, 2017) (“CY 2018 Final
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`Rule”); 83 Fed. Reg. 58818, 58079-81 (Nov. 21, 2018) (“CY 2019 Final Rule”) 84 Fed. Reg.
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`61142, 61317-27 (Nov. 12, 2019) (“CY 2020 Final Rule”), 85 Fed. Reg. 85866, 86042-55
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`(Dec. 29, 2020) (“CY 2021 Final Rule”), 86 Fed. Reg. 63458, 63644-49 (Nov. 16, 2021)
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`(“CY 2022 Final Rule”) (collectively, the “Final Rules”). Specifically, Plaintiffs challenge the
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`Secretary’s determination in the Final Rules to reduce Medicare reimbursement for prescription
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`drugs purchased by certain safety net hospitals at prices required by section 340B of the Public
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`Health Service Act (“PHSA”) (the “340B Program”).
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`2
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 3 of 18
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`2.
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`Plaintiffs bring this action under the Social Security Act, 42 U.S.C. § 1395, et seq.
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`(the “Medicare statute”) and the Administrative Procedure Act, 5 U.S.C. §§ 551, et seq. (the
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`“APA”). The Plaintiffs allege that the Secretary acted ultra vires and exceeded his scope of
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`authority under the Medicare statute in contravention of Congressional intent by reducing
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`reimbursement payment for drugs purchased under the 340B Program.
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`3.
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`Congress enacted the 340B Program in 1992, lowering the cost of drugs for certain
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`public and not-for-profit hospitals (like Plaintiffs) and federally funded clinics serving large
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`numbers of low-income patients. By so doing, Congress enabled these hospitals to “stretch scarce
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`Federal resources as far as possible, reaching more eligible patients and providing more
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`comprehensive services.” H.R. Rep. No. 102-384(II), at 12 (1992); see also 82 Fed. Reg. at 52493
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`& n. 18 (quoting House Report and noting that “[t]h statutory intent of the 340B Program is to
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`maximize scarce Federal resources as much as possible, reaching more eligible patients”).
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`4.
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`As this Court explained, “hospitals participating in the 340B Program purchase
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`340B drugs at steeply discounted rates, and when those hospitals prescribe the 340B drugs to
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`Medicare beneficiaries, they are reimbursed by HHS at OPPS rates.” Am. Hosp. Ass’n v. Azar,
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`348 F. Supp. 3d 62, 69 (D.D.C. 2018), reversed by Am. Hosp. Ass’n v. Azar, 967 F.3d 818,
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`D.C.Cir., 2020), cert. granted by Am. Hosp. Ass’n v. Azar, 141 S. Ct. 2883 (July 2, 2021), reversed
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`and remanded by Am. Hosp. Ass’n v. Becerra, 142 S.Ct. 1896 (June 15, 2022).
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`5.
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`The Final Rules eliminate all, or nearly all, of the differential between Medicare
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`OPPS reimbursement rates and the discounted purchase costs mandated for 340B hospitals. The
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`Secretary’s decision to reduce payment rates in all five years is a violation of both the Secretary’s
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`authority under the Medicare statute and the purpose and design of the PHSA provisions
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`establishing the 340B Program. It is also arbitrary and capricious agency action under the APA.
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`3
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 4 of 18
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`6.
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`Starting January 1, 2018 (the effective date of the CY 2018 Final Rule), the
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`Secretary began reimbursing covered outpatient drugs and biologicals acquired through the 340B
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`Program at each drug’s average sales price (“ASP”) minus 22.5 percent. The Secretary extended
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`that payment reduction through CYs 2019 through 2022. The CY 2020 Final Rule also extended
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`the payment reduction to non-excepted off-campus provider-based departments, which policy
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`remains in effect to the present.
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`7.
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`From April, 2019 through February, 2020, Plaintiffs presented claims to the
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`Secretary’s claims processing contractors (the Medicare administrative contractors, or “MACs”)
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`challenging the payment reduction pursuant to the claims dispute process set forth in 42 U.S.C.
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`§ 1395ff. An example of a dispute letter, but without the accompanying data run, is included as
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`Exhibit A. The MACs did not respond to these dispute letters.
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`8.
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`The MACs presumably did not respond to these dispute letters because of their
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`policies that they would not honor the statutory claims appeal processes for claims for
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`reimbursement for 340B drugs. One of the MACs serving the Plaintiffs states that it “cannot accept
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`appeals involving the application of the 340B payment adjustment.” Accordingly the MAC
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`categorically pronounces that it “will dismiss these redetermination requests.” The other MAC
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`similarly states that it is acting “[i]n accordance with Medicare’s national payment policy.” Under
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`this policy “administrative review is not available for applicable drugs acquired under the 340B
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`drug program that are reimbursed under Outpatient Prospective Payment System (OPPS).” As a
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`result, without exception, the MAC asserts that “[a]ppeal requests for reimbursement of drugs
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`purchased through the 340B program will be dismissed.” Screen shots from the MACs’ websites
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`are included as Exhibit B. Given the futility of submission of these disputes, as evidenced by the
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 5 of 18
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`lack of a response to its dispute letters as well as the statements on the MACs’ websites, the
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`Plaintiffs suspended their submission practices.
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`9.
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`This Court has found that, as to CYs 2018 and 2019, the Secretary exceeded his
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`authority when he reduced the 2018 and 2019 Medicare reimbursement rate for drugs covered by
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`the 340B Program. See Am. Hosp. Ass’n, 348 F. Supp. 3d at 79-83. On appeal, however, the
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`Circuit Court for the District of Columbia found that the Secretary’s interpretation is not “directly
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`foreclosed” by the statute, and on that basis upheld the Secretary’s action. Am. Hosp. Ass’n v. Azar,
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`967 F.3d 818, 828 (DC Cir. July 31, 2020), cert. granted by Am. Hosp. Ass’n v. Azar, 141 S. Ct.
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`2883 (July 2, 2021), reversed and remanded by Am. Hosp. Ass’n v. Becerra, 142 S.Ct. 1896 (June
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`15, 2022). The Supreme Court granted certiorari and issued a decision on June 15, 2022. Like the
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`District Court, the Supreme Court gave a close reading to the statute and declared that the
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`reimbursement cuts were “contrary to the statute and unlawful.” Am. Hosp. Ass'n v. Becerra, No.
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`20-1114, slip op. at *8 (U.S. June 15, 2022).1 The Supreme Court has thus reversed the DC Circuit
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`Court opinion and remanded to the lower courts for further action. Id.
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`10.
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`The Supreme Court decision conclusively confirms that the Secretary acted, and
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`continues to act, unlawfully by paying less than ASP plus 6 percent for 340B drugs. The Plaintiffs’
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`dispute letters have thus rightfully demanded that the MACs pay the plaintiffs the full amount
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`owed under the statute. Consistent with the Supreme Court’s decisions and their rights under
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`Medicare claims appeals statute (42 U.S.C. § 1395ff), Plaintiffs bring this action seeking
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`declaratory relief from the Secretary’s 340B Program payment reductions for CYs 2018 through
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`2022. (The 2020, 2021, and 2022 payment reductions are the same as the 2018 and 2019
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`1 The Westlaw version cites to Am. Hosp. Ass'n v. Becerra, 142 S. Ct.1896 (2022). Since this is a
`new case, the version does not have formated page numbers. The citations listed in the Complaint
`are to the Slip Opinion.
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`5
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 6 of 18
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`reductions in all material respects.) Since the payment reductions have been declared unlawful,
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`the Plaintiffs respectfully request that the Court order the Secretary to pay Plaintiffs’ claims for
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`340B drugs for the period spanning CYs 2018 to 2022 at ASP plus 6 percent.
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`PARTIES
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`1.
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`Plaintiff, Ochsner Clinic Foundation d/b/a Ochsner Medical Center, is a hospital
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`located in New Orleans, Louisiana (Medicare Provider No. 190036) that participates in the
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`Medicare program and the 340B Program that is affected by the unlawful reimbursement cut for
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`340B drugs.
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`2.
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`Plaintiff, Ochsner Medical Center - Kenner, L.L.C., is a hospital located in Kenner,
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`Louisiana (Medicare Provider No. 190274) that participates in the Medicare program and the 340B
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`Program that is affected by the unlawful reimbursement cut for 340B drugs.
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`3.
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`Plaintiff, East Baton Rouge Medical Center LLC d/b/a Ochsner Medical Center
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`Baton Rouge, is a hospital located in Baton Rouge, Louisiana (Medicare Provider No. 190202)
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`that participates in the Medicare program and the 340B Program that is affected by the unlawful
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`reimbursement cut for 340B drugs.
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`4.
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`Plaintiff, Ochsner Medical Center - Hancock LLC, is a hospital located in Bay Saint
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`Louis, Mississippi (Medicare Provider No. 250162) that participates in the Medicare program and
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`the 340B Program that is affected by the unlawful reimbursement cut for 340B drugs.
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`5.
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`Plaintiff, Southern Regional Medical Corporation d/b/a Leonard J. Chabert Medical
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`Center, is a hospital located in Houma, Louisiana (Medicare Provider No. 190183) that participates
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`in the Medicare program and the 340B Program that is affected by the unlawful reimbursement
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`cut for 340B drugs.
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 7 of 18
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`6.
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`Plaintiff, Hospital Service District of the Parish of St Bernard d/b/a St. Bernard
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`Parish Hospital, is a hospital located in Chalmette, Louisiana (Medicare Provider No. 190308) that
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`participates in the Medicare program and the 340B Program that is affected by the unlawful
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`reimbursement cut for 340B drugs.
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`7.
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`Plaintiff, Hospital Service District No. 1 of St. Charles Parish d/b/a St. Charles
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`Parish Hospital, is a hospital located in Luling, Louisiana (Medicare Provider No. 190079) that
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`participates in the Medicare program and the 340B Program that is affected by the unlawful
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`reimbursement cut for 340B drugs.
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`8.
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`Defendant Xavier Becerra is the Secretary of the United States Department of
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`Health and Human Services, which administers the Medicare program established under title
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`XVIII of the Social Security Act. Defendant Becerra is sued in his official capacity only. The
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`Centers for Medicare & Medicaid Services (“CMS”) is the federal agency to which the Secretary
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`has delegated administrative authority over the Medicare and Medicaid programs. References to
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`the Secretary herein are meant to refer to him, his subordinate agencies and officials, and to his
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`official predecessors or successors as the context requires.
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`JURISDICTION AND VENUE
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`9.
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`This action arises under the Medicare statute, title XVIII of the Social Security Act,
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`42 U.S.C. § 1395 et seq., including 42 U.S.C. § 1395ff(b)(1)(A), and the APA, 5 U.S.C. § 551.
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`10.
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`This Court has subject-matter jurisdiction pursuant to 42 U.S.C. § 405(g). Due to
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`the Secretary’s Final Rules, Plaintiffs have been paid amounts for covered 340B drugs that are
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`approximately 30 percent lower than the rate prescribed by 42 U.S.C. § 1395l(t)(14)(A)(iii).
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`Consistent with 42 U.S.C. § 1395ff(a)(3)(C), Plaintiffs have presented protested claims to their
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`MACs notifying the MACs that they believe that they have been underpaid. See Exhibit A. The
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 8 of 18
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`MACs, however, have issued statements of general applicability that categorically deny the right
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`to initiate such appeals. Exhibit B. Although the Plaintiffs had for a period filed individual claims
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`protests all the same, the Plaintiffs suspended such activity due to the MACs’ non-responsiveness.
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`Pursuing appeals of the protested claims or initiating appeals for the claims not protested would
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`have been futile. Accordingly, all such further actions may be deemed waived. See Am. Hosp.
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`Ass’n v. Azar, 410 F. Supp. 3d 142, 154 ( D.D.C. 2019) (finding that exhaustion of claims would
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`have been futile because the Secretary did not argue that further administrative review was
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`necessary or that it would give the agency opportunity to self-correct; the Secretary already
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`considered and rejected plaintiffs’ arguments; additional administrative review would not develop
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`the factual record or provide the court with further agency expertise; and no administrative review
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`body could override the agency’s binding regulations).
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`11.
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`The Supreme Court’s decision conclusively decided the merits that are the crux of
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`the Plaintiffs’ filed disputes with the MACs. Those disputes are now ripe for review in Federal
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`court, pursuant to 42 U.S.C § 1395ff(b)(1)(A) (cross-referencing 42 U.S.C. § 405(g)).
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`12.
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`Alternatively, this Court has subject-matter jurisdiction under 28 U.S.C. § 1331
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`because Plaintiffs’ claims arise under the laws of the United States.
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`13.
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`Venue is proper in this district under 28 U.S.C. § 1391 because Defendant resides
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`in the District of Columbia and a substantial part of the events giving rise to this action occurred
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`in this district.
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`14.
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`An actual controversy exists between the parties under 28 U.S.C. § 2201, and this
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`Court has authority to grant the requested declaratory relief under 28 U.S.C. §§ 2201 & 2202,
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`5 U.S.C. § 706, and 42 U.S.C. § 405(g).
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 9 of 18
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`A.
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`Statutory and Regulatory Framework
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`STATEMENT OF FACTS
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`15.
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`Under the 340B Program, certain hospitals serving a disproportionate share of
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`low-income individuals and federally funded clinics (so-called “covered entities”) may purchase
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`outpatient prescription drugs at discounted prices. Drug manufacturer participation in the 340B
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`Program is essentially mandatory: manufacturers must participate as a condition of having their
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`drugs covered by Medicaid. 42 U.S.C. § 1396r-8(a)(5).
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`16.
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`Covered entities are statutorily defined at PHSA § 340B(a)(4) and include
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`qualifying hospitals, Ryan White HIV/AIDS program grantees, black lung clinics, rural referral
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`centers, critical access hospitals, Title X family planning clinics, and other institutions that
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`primarily serve the poor, indigent, or the under- or uninsured. The 340B Program is designed to
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`enable covered entities to purchase 340B drugs for all eligible patients, including patients with
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`Medicare or private insurance, at the reduced cost but still bill Medicare at the OPPS rate
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`prescribed under the Medicare statute.
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`17.
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`According to the Government Accountability Office, access to reduced price
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`medications enables covered entities “to expand the type and volume of care they provide to the
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`most vulnerable patient populations.” U.S. Dep’t of Health & Human Servs., Justification of
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`Estimates for Appropriations Committees at 325 (2017).
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`18.
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`Plaintiffs are “covered entities” under the 340B Program and are paid under the
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`OPPS system.
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`B. Medicare OPPS Reimbursement for Drugs
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`19.
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`Medicare is a federal health insurance program for eligible disabled individuals and
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`senior citizens. 42 U.S.C. §§ 1395 et seq. Plaintiffs provide hospital services to Medicare
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 10 of 18
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`beneficiaries that qualify for reimbursement through Medicare.
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`20.
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`In 1997, Congress directed the Secretary to create a hospital Outpatient Prospective
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`Payment System through which Medicare was to pay for services offered in hospital outpatient
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`departments. See 42 U.S.C. § 1395l(t).
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`21.
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`Starting in 2004, Congress ordered the Secretary to set reimbursement rates for
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`separately payable drugs not otherwise bundled into the payment for an outpatient service. See
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`Medicare Prescription Drug, Improvement, and Modernization Act of 2003, Pub. L. No. 108-173,
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`§ 621, 117 Stat. 2307, codified at 42 U.S.C. § 1395l(t)(14). This payment rate covers all applicable
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`drugs whether purchased through the 340B Program or on the open market by non-340B covered
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`entities.
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`22.
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`By statute, the Secretary is directed to set payment rates for all such drugs using
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`one of two alternative processes:
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`a. The Secretary may set the payment rate at the average hospital acquisition cost
`for the drug for that year (to vary, at the discretion of the Secretary, by “hospital
`group” as defined by “relevant characteristics”), “as determined by the
`Secretary taking into account . . . hospital acquisition cost survey data,”
`42 U.S.C. § 1395l(t)(14)(A)(iii)(I); or
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`b. If “hospital acquisition cost data are not available,” the Secretary may use the
`average sales price for the drug established by 42 U.S.C. § 1395w-3a and “as
`calculated and adjusted by the Secretary as necessary for purposes of this
`paragraph,” 42 U.S.C. § 1395l(t)(14)(A)(iii)(II).
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`23.
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`The Secretary had paid for such drugs pursuant to the second option, and adjusted
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`the rate as required by statute to ASP plus 6 percent. 42 U.S.C. § 1395w-3a(b)(1)(A)-(B).
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`24.
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`There is no separate statutory rate established only for 340B drugs or any alternative
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`method for the Secretary to establish a different payment methodology for 340B drugs. This
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`statutory default rate of ASP plus 6 percent was applied without adjustment until January 1, 2018.
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`25.
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`Notwithstanding this clear statutory framework, on July 13, 2017, the Secretary
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`proposed to lower the Medicare reimbursement rate for drugs purchased under the 340B Program
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`by adopting a third methodology not authorized by the statute. The Secretary changed the payment
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`rate for 340B drugs to ASP minus 22.5 percent. 82 Fed. Reg. 33558, 33634 (July 20, 2017). The
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`Secretary did not have the data necessary to “precisely calculate the price paid by 340B hospitals
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`for [any] particular covered outpatient drug,” and so instead relied on an estimate. Id. According
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`to the Secretary, the new rate would better recognize “the significantly lower acquisition costs of
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`such drugs incurred by a 340B hospital,” and “better represent[] the average acquisition cost for
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`these drugs and biologicals.” Id.
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`26.
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`The Secretary finalized this proposal on November 13, 2017 over the strong
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`objection of many commenters. 82 Fed. Reg. at 52362. This significant change in reimbursement
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`has effectively made participation in the 340B Program punitive, at least as to Medicare
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`beneficiary utilization of 340B drugs, as reimbursement no longer covers the full costs of the drugs,
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`including carrying costs and 340B program compliance costs.
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`27.
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`The Secretary attempts to rely on the language included in the second statutory
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`option—42 U.S.C. § 1395l(t)(14)(A)(iii)(II)—as authority to make the change. See, e.g., 82 Fed.
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`Reg. at 52499 (alleging that that statutory “calculate and adjust” authority gives the Secretary
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`“broad discretion” to “adjust” payments for drugs). However, the Secretary’s policy clearly
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`exceeds this statutory authority because the reduction made is expressly based on the estimated
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`acquisition costs of 340B drugs, i.e. a variation of the cost-based methodology set forth under the
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`first clause of the applicable statutory provision, 42 U.S.C. § 1395l(t)(14)(A)(iii)(I). See, e.g., 82
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`Fed. Reg. at 52501. The Secretary, by his own admission, has never been able to reliably collect
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`the required cost data for each drug as required under 42 U.S.C. § 1395l(t)(14)(A)(iii)(I).
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`11
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 12 of 18
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`See 82 Fed. Reg. at 33634 (acknowledging that the Secretary lacked the data necessary to
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`“precisely calculate the price paid by 340B hospitals for [any] particular covered outpatient
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`drug.”). Therefore, he improperly sought to use aggregate acquisition costs as estimated by the
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`Medicare Payment Advisory Commission (“MedPAC”) as a proxy for that data, even though
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`payment under 42 U.S.C. § 1395l(t)(14)(A)(iii)(II) must be based on average sales price, not
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`acquisition costs. Id.
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`28.
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`The detrimental and impermissible cuts were adopted again in CYs 2019, 2020,
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`2021, and 2022, all based on the same statutory interpretation. Indeed, the Secretary affirmatively
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`elected not to rely on survey data, even after the Secretary conducted a 340B drug pricing survey,
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`albeit an invalid one, in 2020. In the CY 2021 Final Rule, the Secretary discussed the results of
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`the 2020 survey. As noted by the Secretary, only seven percent of survey recipient hospitals
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`actually provided any detailed pricing information. Another 55 percent checked off a box provided
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`by the Secretary on the survey to indicate that they were paying 340B pricing, but declining to
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`provide any detail. Finally 38 percent opted not to respond at all. 85 Fed. Reg. 85866, 86045
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`(Dec. 29, 2020).
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`29.
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`While not conceding that his data was thus wholly flawed, the Secretary
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`nevertheless acknowledged that:
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`[A]s described above, the utilization of the survey data is complex, and we
`wish to continue to evaluate how to balance and weigh the use of the survey
`data, the necessary adjustments to the data, and the weighting and
`incorporation of ceiling prices—all to determine how best to take the
`relevant factors into account for potentially using the survey to set Medicare
`OPPS drug payment policy. We appreciate the feedback from commenters
`and will continue to assess it as we explore whether survey data should be
`considered hospital acquisition cost data for purposes of paying for drugs
`acquired under section 1833(t)(14)(A)(iii)(I) in future years.
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 13 of 18
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`Id. at 86052. Given the potential issues with the survey data, the Secretary thus did not rely on the
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`data for setting 340B drug reimbursement rates in 2021. Nor was that data used to support the
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`continuation of the policy in CY 2022.
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`C.
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`Supreme Court Decision and the Secretary’s Response
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`30.
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`After this Court ruled in favor of the American Hospital Association, and the DC
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`Circuit Court reversed, the Supreme Court reviewed the DC Circuit Court’s decision and reversed
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`again. Am. Hosp. Ass'n, No. 20-1114, slip op. at *8. The Supreme Court found that there are two
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`statutory pathways for setting hospital outpatient department reimbursement: either (a) CMS
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`conducts a valid drug pricing survey meeting the statutory requirements, or (b) hospitals get paid
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`at ASP plus 6 percent. Id. at *6. As the Secretary readily acknowledged that a survey had not
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`been conducted, the Supreme Court found that the Secretary “acted unlawfully by reducing the
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`reimbursement rates for 340B hospitals.” Id. at *7.
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`31.
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`The Supreme Court remanded to the lower courts to implement the decision. Id. at
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`8. Although it did not mandate any specific relief, it was unequivocal that 340B drugs were to be
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`reimbursed at ASP plus 6 percent. Every claim where that rate has not been paid constitutes an
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`underpayment that remains outstanding, notwithstanding the Supreme Court decision.
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`32.
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`The Secretary’s agency, however, has thus far opted not to consider itself bound by
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`the Supreme Court’s instruction. In a proposed rule pertaining to hospital outpatient department
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`reimbursement for CY 2023, CMS has stated:
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`We are still evaluating how to apply the Supreme Court’s recent decision to
`prior calendar years. In that decision, the Court summarized the parties’
`arguments regarding budget neutrality and stated that, “[a]t this stage, we
`need not address potential remedies.” We are interested in public comments
`on the best way to craft any potential remedies affecting cost years 2018-
`2022 given that the Court did not resolve that issue.
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 14 of 18
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`87 Fed. Reg. 44502, 44505 (July 26, 2022). CMS’s reference to “any potential remedies” does
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`not reflect an understanding of the unambiguous instruction it received from the Supreme Court
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`to reconcile prior payments to the statutorily mandated reimbursement rate.
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`D.
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`Judicial Review and Plaintiffs’ Claims
`
`33.
`
`A plaintiff must typically satisfy two requirements before seeking judicial review
`
`under 42 U.S.C. § 405(g): a plaintiff must “present” its claim to the Secretary for a decision, and
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`then must exhaust all available administrative remedies. Mathews v. Eldridge, 424 U.S. 319, 328
`
`(1976). The presentment requirement is not waivable, although the exhaustion may be. See Am.
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`Hosp. Ass’n v. Azar, 895 F.3d 822, 825-26 (D.C. Cir. 2018). Exhaustion may be excused where
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`“an agency has adopted a policy or pursued a practice of general applicability that is contrary to
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`the law[.]” DL v. District of Columbia, 450 F. Supp. 2d 11, 17 (D.D.C. 2006). For example, courts
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`have recognized the futility of exhaustion where plaintiffs “do not challenge an individual …
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`decision by [the agency] . . . but instead challenge the agency’s ‘policy, pattern, and practice’ or
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`‘systemic failure to comply with’ federal law. See id. at 18; see also Tataranowicz v. Sullivan,
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`753 F. Supp. 978, 987 (D.D.C. 1990), rev'd on other grounds, 959 F.2d 268 (D.C. Cir. 1992).
`
`34.
`
`The Plaintiffs have presented claims for payment to the Medicare program for its
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`separately payable drugs affected by the Final Rules. For CYs 2018 through 2022, Medicare has
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`paid drug claims submitted by the Plaintiff hospitals at ASP minus 22.5 percent.
`
`35.
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`Dissatisfied with that payment amount, the Plaintiffs had filed protests with their
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`MACs, including a listing of all of the claims subject to dispute for the period covered by each
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`individual protest. Exhibit A (cover letter without the accompanying claims detail). Nothing more
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`was required under 42 U.S.C. § 1395ff to initiate a protest. 42 U.S.C. § 1395ff(a)(3)(C)(i) (merely
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`requiring that “notice” of the dispute be filed).
`
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 15 of 18
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`36.
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`The MACs, however, did not respond, presumably because of their blanket
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`statements published on their websites that notify hospitals, such as the Plaintiffs, that appeals of
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`340B drug payment disputes will not be accepted. Exhibit B.
`
`37.
`
`Although the MACs’ refusal to initiate proceedings denied the Plaintiffs their right
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`to an administrative adjudication, the Plaintiffs’ disputes continued to develop all the same. The
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`Plaintiffs’ claims have both a legal component and a factual component. The legal component
`
`relates to whether, generally, the Secretary has the right to make the disputed payment cuts. In
`
`that regard, the American Hospital Association, on behalf of safety net hospitals including
`
`Plaintiffs, vindicated their rights to full payment for 340B drugs administered in the hospital
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`outpatient department. The Supreme Court decision removes any question as to whether the
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`Plaintiffs’ position expressed in their dispute letters was correct as a matter of law.
`
`38.
`
`With the legal questions answered, the factual aspects of the Plaintiffs’ disputes are
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`now ripe for review. Specifically, the Plaintiffs request this Court to determine factually the
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`amount of the underpayment now due the Plaintiffs. The Plaintiffs had submitted listings of their
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`underpaid claims, along with their dispute letter preserving their rights to seek payment in court
`
`once the law had been clarified through the initial judicial process. The Plaintiffs continued
`
`submitting these disputes until it became clear that the MACs were taking no action on those
`
`submissions. Additionally, even up to the current moment, the MACs still decline, as stated on
`
`their websites, to process disputes of claims of underpayment for 340B drugs. Thus, it is, and
`
`always has been, futile to either initiate an individual claims appeal proceeding or seek to pursue
`
`any appeals, once initiated. As this categorical denial of these appeals is a matter of general
`
`applicability and is antithetical to applicable, Federal law, waiver of exhaustion is warranted in
`
`this case.
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 16 of 18
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`39.
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`Since the Plaintiffs’ dispute is thus now properly before this Court, this Court has
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`the statutorily granted ability to affirm, modify, or reverse the decision of the Secretary, without
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`remand. 42 U.S.C. § 405(g). The Plaintiffs thus respectfully request that the Court modify the
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`Secretary’s decision to require the Secretary to pay every underpaid claim for a 340B program
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`drug (as identified on each such claim) at the full ASP plus 6 percent rate.
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`CAUSE OF ACTION
`(Administrative Procedure Act)
`The Secretary Has Violated Congress’s Unambiguous Directive that 340B Drugs are to be
`Reimbursed at the Full Rate of ASP Plus 6 Percent
`
`40.
`
`The allegations set forth in paragraphs 1 through 44 are incorporated by reference
`
`as if fully set forth herein.
`
`41.
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`The APA permits judicial review of agency actions, findings, and conclusions that
`
`are “not in accordance with law” or are “in excess of statutory jurisdiction, authority, or
`
`limitations.” 5 U.S.C. §§ 706(2)(A), 706(2)(C).
`
`42.
`
`When “Congress has directly spoken to the precise question at issue,” this Court
`
`must give effect to Congress’s unambiguously stated intent. Chevron U.S.A., Inc. v. Natural Res.
`
`Def. Council, Inc., 467 U.S. 837, 842-43 (1984). It is a “core administrative-law principle that an
`
`agency may not rewrite clear statutory terms to suit its own sense of how the statute should
`
`operate.” Util. Air Regulatory Gp. v. EPA, 573 U.S. 302, 328 (2014).
`
`43.
`
`Congress has unequivocally permitted the Secretary two avenues—and no others—
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`to adjust reimbursement for covered outpatient drugs and biologicals. See 42 U.S.C.
`
`§ 1395l(t)(14)(A)(iii)(I)–(II). On the one hand, the Secretary may set reimbursement based on
`
`hospital acquisition cost survey data. 42 U.S.C. § 1395l(t)(14)(A)(iii)(I). On the other, if such
`
`data are not available, the Secretary must reimbursed at the average sales price. 42 U.S.C.
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`§ 1395l(t)(14)(A)(iii)(II). The Secretary’s Final Rules did not utilize either method, but instead
`
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`Case 1:22-cv-02390 Document 1 Filed 08/12/22 Page 17 of 18
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`relied on an estimate of aggregate acquisition costs as a proxy for appropriate data. As declared
`