throbber
Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 1 of 74 PageID #: 5984
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`UNITED STATES DISTRICT COURT
`FOR THE SOUTHERN DISTRICT OF INDIANA
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`No. 1:21-cv-81-SEB-MJD
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`
`Document Electronically Filed
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`
`PLAINTIFFS’ COMBINED
`MEMORANDUM IN SUPPORT OF
`PLAINTIFFS’ CROSS-MOTION
`FOR SUMMARY JUDGMENT AND
`IN OPPOSITION TO DEFENDANTS’
`MOTION TO DISMISS OR, IN THE
`ALTERNATIVE, FOR SUMMARY
`JUDGMENT [DKT. 88]
`
`
`ELI LILLY AND COMPANY,
`Lilly Corporate Center
`893 Delaware Street
`Indianapolis, IN 46225,
`and
`LILLY USA, LLC,
`1500 South Harding Street
`Indianapolis, IN 46221,
`
`
`
`
`
`
`
`Plaintiffs,
`
`v.
`ALEX M. AZAR II, in his official capacity as
`Secretary of Health & Human Services
`Office of the Secretary
`200 Independence Avenue, S.W.
`Washington, D.C. 20201,
`ROBERT P. CHARROW, in his official
`capacity as General Counsel of
`Health & Human Services
`Office of the General Counsel
`200 Independence Avenue, S.W.
`Washington, D.C. 20201,
`UNITED STATES DEPARTMENT OF
`HEALTH AND HUMAN SERVICES
`200 Independence Avenue, S.W.
`Washington, D.C. 20201,
`THOMAS J. ENGELS, in his official capacity
`as Administrator of the Health Resources and
`Services Administration
`5600 Fishers Lane
`Rockville, MD 20852,
`and
`HEALTH RESOURCES AND SERVICES
`ADMINISTRATION
`5600 Fishers Lane
`Rockville, MD 20852,
`
`
`
`
`
`
`
`
`
`
`
`
`
`Defendants.
`
`
`
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 2 of 74 PageID #: 5985
`
`TABLE OF CONTENTS
`
`TABLE OF AUTHORITIES .......................................................................................................... ii
`
`INTRODUCTION .......................................................................................................................... 1
`
`BACKGROUND ............................................................................................................................ 3
`
`3
`The 340B Program
`A.
`7
`The ADR Rule
`B.
`LEGAL STANDARD ................................................................................................................... 11
`
`ARGUMENT ................................................................................................................................ 11
`
`I.
`
`II.
`
`19
`22
`
`The December 30 Decision Is An Invalid Legislative Rule And Final Agency Action. .. 11
`A.
`The December 30 Decision Is a Legislative Rule Subject to APA Challenge.
`12
`B.
`Even if the December 30 Decision is Not Legislative, It Remains Final
`Agency Action Subject to the APA.
`The Court Should Decide The Merits of the Statutory Question.
`C.
`The December 30 Decision Is Contrary To Law Because The 340B Statute Does Not
`Require Manufacturers To Sell Discounted Product To Contract Pharmacies. ................ 24
`A.
`The 340B Statute Enumerates the Fifteen Types of “Covered Entities” that
`24
`Must Receive 340B Discounts, and Does Not Include Contract Pharmacies.
`27
`The December 30 Decision’s “Agency” Theory Has No Basis in the Statute.
`B.
`33
`Defendants’ Construction Also Raises Grave Constitutional Concerns.
`C.
`The December 30 Decision Is Arbitrary And Capricious. ................................................ 37
`The ADR Rule Is Procedurally And Substantively Defective. ......................................... 41
`A.
`The ADR Rule Needed to Proceed through Notice and Comment.
`41
`B.
`The ADR Rule Violates Article II.
`45
`C.
`The ADR Rule Violates Article III.
`50
`D.
`The ADR Rule Is Arbitrary, Capricious, and Beyond the Agency’s Authority. 57
`CONCLUSION ............................................................................................................................. 60
`
`III.
`IV.
`
`
`
`
`
`
`
`
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 3 of 74 PageID #: 5986
`
`Cases
`
`TABLE OF AUTHORITIES
`
`Am. Hosp. Ass’n v. Azar,
`967 F.3d 818 (D.C. Cir. 2020) .............................................................................................4, 39
`
`Am. Hosp. Ass’n v. HHS,
`2021 WL 616323 (N.D. Cal. Feb. 17, 2021) .......................................................................6, 16
`
`Am. Min. Congress v. Mine Safety & Health Admin.,
`995 F.2d 1106 (D.C. Cir. 1993) .........................................................................................14, 18
`
`Amerijet Int’l, Inc. v. Pistole,
`753 F.3d 1343 (D.C. Cir. 2014) ...............................................................................................39
`
`AMG Capital Mgmt., LLC v. FTC,
`141 S. Ct. 1341 (2021) .............................................................................................................52
`
`Appalachian Power Co. v. EPA,
`208 F.3d 1015 (D.C. Cir. 2000) .........................................................................................12, 20
`
`Ariz. Pub. Serv. Co. v. EPA,
`211 F.3d 1280 (D.C. Cir. 2000) ...............................................................................................45
`
`Ashcroft v. Iqbal,
`556 U.S. 662 (2009) .................................................................................................................11
`
`Astra U.S.A., Inc. v. Santa Clara Cty.,
`563 U.S. 110 (2011) .......................................................................................................5, 25, 56
`
`Atl. City Elec. Co. v. FERC,
`295 F.3d 1 (D.C. Cir. 2002) .....................................................................................................23
`
`Azar v. Allina Health Services,
`139 S. Ct. 1804 (2019) .............................................................................................................23
`
`Baptist Hospital East v. Secretary of Health & Human Services,
`802 F.2d 860 (6th Cir. 1986) ...................................................................................................37
`
`Barnhart v. Peabody Coal Co.,
`537 U.S. 149 (2003) .................................................................................................................26
`
`Barrick Goldstrike Mines Inc. v. Browner,
`215 F.3d 45 (D.C. Cir. 2000) ...................................................................................................22
`
`Bennett v. Spear,
`520 U.S. 154 (1997) .................................................................................................................20
`
`ii
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 4 of 74 PageID #: 5987
`
`Boucher v. U.S. Dep’t of Agric.,
`934 F.3d 530 (7th Cir. 2019) ...................................................................................................39
`
`Burlington Truck Lines, Inc. v. United States,
`371 U.S. 156 (1962) .................................................................................................................40
`
`Byers v. C.I.R.,
`740 F.3d 668 (D.C. Cir. 2014) .................................................................................................40
`
`Cal. Cmties. Against Toxics v. EPA,
`934 F.3d 627 (D.C. Cir. 2019) ...........................................................................................20, 21
`
`Calder v. Bull,
`3 U.S. (3 Dall.) 386 (1798) .....................................................................................................33
`
`Carole Media LLC v. N.J. Transit Corp.,
`550 F.3d 302 (3d Cir. 2008).....................................................................................................33
`
`Catholic Health Initiatives v. Sebelius,
`617 F.3d 490 (D.C. Cir. 2010) .................................................................................................14
`
`CFTC v. Schor,
`478 U.S. 833 (1986) ...........................................................................................................53, 54
`
`Christopher v. SmithKline Beecham Corp.,
`567 U.S. 142 (2012) .................................................................................................................26
`
`Clarian Health W., LLC v. Hargan,
`878 F.3d 346 (D.C. Cir. 2017) .................................................................................................13
`
`Cmty. Nutrition Inst. v. Young,
`818 F.2d 943 (D.C. Cir. 1987) .................................................................................................13
`
`Council Tree Commc’ns, Inc. v. FCC,
`619 F.3d 235 (3d Cir. 2010).....................................................................................................45
`
`CSI Aviation Servs., Inc. v. Dep’t of Transp.,
`637 F.3d 408 (D.C. Cir. 2011) ...........................................................................................18, 22
`
`Dep’t of Transp. v. Ass’n of Am. R.R.,
`575 U.S. 43 (2015) .............................................................................................................48, 50
`
`Dickson v. Sec’y of Def.,
`68 F.3d 1396 (D.C. Cir. 1995) .................................................................................................60
`
`Dirks v. SEC,
`463 U.S. 646 (1983) .................................................................................................................28
`
`iii
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`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 5 of 74 PageID #: 5988
`
`Dolan v. City of Tigard,
`512 U.S. 374 (1994) ...........................................................................................................35, 36
`
`Edmond v. United States,
`520 U.S. 651 (1997) .....................................................................................................48, 49, 50
`
`Elec. Privacy Info. Ctr. v. DHS,
`653 F.3d 1 (D.C. Cir. 2011) .....................................................................................................14
`
`Encino Motorcars, LLC v. Navarro,
`136 S. Ct. 2117 (2016) .............................................................................................................40
`
`FCC v. Fox Television Stations, Inc.,
`556 U.S. 502 (2009) .................................................................................................................40
`
`FDA v. Brown & Williamson Tobacco Corp.,
`529 U.S. 120 (2000) .................................................................................................................37
`
`Fla. Power & Light Co. v. Lorion,
`470 U.S. 729 (1985) .................................................................................................................11
`
`Fleming v. USDA,
`987 F.3d 1093 (D.C. Cir. 2021) .........................................................................................49, 50
`
`Freeman v. Quicken Loans, Inc.,
`566 U.S. 624 (2012) .................................................................................................................31
`
`In re Grand Jury Investigation,
`916 F.3d 1047 (D.C. Cir. 2019) ...............................................................................................50
`
`Granfinanciera, S.A. v. Nordberg,
`492 U.S. 33 (1989) .............................................................................................................55, 56
`
`Haw. Hous. Auth. v. Midkiff,
`467 U.S. 229 (1984) .................................................................................................................34
`
`Hawaii v. Office of Hawaiian Affairs,
`556 U.S. 163 (2009) .................................................................................................................24
`
`Helvering v. Morgan’s, Inc.,
`293 U.S. 121 (1934) .................................................................................................................26
`
`Hoctor v. USDA,
`82 F.3d 165 (7th Cir. 1996) .....................................................................................................14
`
`Home Builders Ass’n of Greater Chicago v. U.S. Army Corps of Eng’rs,
`335 F.3d 607 (7th Cir. 2003) .............................................................................................19, 20
`
`iv
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 6 of 74 PageID #: 5989
`
`Horne v. Dep’t of Agric.,
`576 U.S. 350 (2015) .................................................................................................................33
`
`Ill. Cent. Gulf R. Co. v. ICC,
`702 F.2d 111 (7th Cir. 1983) ...................................................................................................38
`
`INS v. St. Cyr,
`533 U.S. 289 (2001) .................................................................................................................60
`
`Intercollegiate Broadcasting System, Inc. v. Copyright Royalty Board,
`684 F.3d 1332 (D.C. Cir. 2012) .........................................................................................48, 49
`
`Ipsen Biopharm., Inc. v. Azar,
`943 F.3d 953 (D.C. Cir. 2019) ...........................................................................................21, 22
`
`Iselin v. United States,
`270 U.S. 245 (1926) .................................................................................................................27
`
`Kelo v. City of New London,
`545 U.S. 469 (2005) .................................................................................................................34
`
`Kisor v. Wilkie,
`139 S. Ct. 2400 (2019) .............................................................................................................18
`
`Koontz v. St. Johns River Water Mgmt. Dist.,
`570 U.S. 595 (2013) ...........................................................................................................35, 36
`
`Lamie v. United States Tr.,
`540 U.S. 526 (2004) .................................................................................................................26
`
`Lingle v. Chevron U.S.A. Inc.,
`544 U.S. 528 (2005) ...........................................................................................................33, 34
`
`Little Sisters of the Poor Saints Peter & Paul Home v. Pennsylvania,
`140 S. Ct. 2367 (2020) .............................................................................................................57
`
`Loja v. Main St. Acquisition Corp.,
`906 F.3d 680 (7th Cir. 2018) ...................................................................................................31
`
`Metro. Sch. Dist. v. Davila,
`969 F.2d 485 (7th Cir. 1992) .............................................................................................12, 23
`
`Michigan v. EPA,
`268 F.3d 1075 (D.C. Cir. 2001) ...............................................................................................23
`
`Michigan v. EPA,
`576 U.S. 743 (2015) .................................................................................................................40
`
`v
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 7 of 74 PageID #: 5990
`
`Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.,
`463 U.S. 29 (1983) .............................................................................................................37, 53
`
`Murray’s Lessee v. Hoboken Land & Improvement Co.,
`59 U.S. (18 How.) 272 (1856) ...........................................................................................54, 56
`
`Nat’l Ass’n of Mfrs. v. Dep’t of Def.,
`138 S. Ct. 617 (2018) ...............................................................................................................24
`
`Nat’l Fuel Gas Supply Corp. v. FERC,
`468 F.3d 831 (D.C. Cir. 2006) .................................................................................................40
`
`Nat’l Min. Ass’n v. McCarthy,
`758 F.3d 243 (D.C. Cir. 2014) .................................................................................................13
`
`NFIB v. Sebelius,
`567 U.S. 519 (2012) .................................................................................................................36
`
`Nollan v. Cal. Coastal Comm’n,
`483 U.S. 825 (1987) .................................................................................................................36
`
`NRDC v. EPA,
`643 F.3d 311 (D.C. Cir. 2011) ...............................................................................12, 14, 18, 23
`
`NRDC v. Wheeler,
`955 F.3d 68 (D.C. Cir. 2020) ...................................................................................................18
`
`Oil States Energy Servs. v. Greene’s Energy Group,
`138 S. Ct. 1365 (2018) .............................................................................................................53
`
`Owner-Operator Indep. Drivers Ass’n, Inc. v. Dep’t of Transp.,
`840 F.3d 879 (7th Cir. 2016) ...................................................................................................31
`
`Pacemaker Diagnostic Clinic, Inc. v. Instromedix, Inc.,
`725 F.2d 537 (9th Cir. 1984) ..................................................................................................54
`
`Panhandle E. Pipe Line Co. v. FERC,
`890 F.2d 435 (D.C. Cir. 1989) .................................................................................................39
`
`Penn. Coal Co. v. Mahon,
`260 U.S. 393 (1922) .................................................................................................................33
`
`Pennsylvania v. HHS,
`80 F.3d 796 (3rd Cir. 1996) .....................................................................................................49
`
`Perez v. Mortg. Bankers Ass’n,
`575 U.S. 92 (2015) .............................................................................................................18, 19
`
`vi
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 8 of 74 PageID #: 5991
`
`Phila. Gas Works v. FERC,
`989 F.2d 1246 (D.C. Cir. 1993) ...............................................................................................53
`
`PhRMA v. HHS,
`138 F. Supp. 3d 31 (D.D.C. 2015) ................................................................................... passim
`
`PhRMA v. HHS,
`43 F. Supp. 3d 28 (D.D.C. 2014) .........................................................................................6, 32
`
`Public Citizen, Inc. v. Mineta,
`427 F. Supp. 2d 7 (D.D.C. 2006) .............................................................................................44
`
`Rancho de Calistoga v. City of Calistoga,
`800 F.3d 1083 (9th Cir. 2015) .................................................................................................37
`
`Reagan v. Farmers’ Loan & Tr. Co.,
`154 U.S. 362 (1894) .................................................................................................................33
`
`Reckitt Benckiser Inc. v. EPA,
`613 F.3d 1131 (D.C. Cir. 2010) ...............................................................................................21
`
`Ruckelshaus v. Monsanto Co.,
`467 U.S. 986 (1984) .................................................................................................................37
`
`Sackett v. EPA,
`566 U.S. 120 (2012) .................................................................................................................22
`
`SEC v. Chenery Corp.,
`332 U.S. 194 (1947) .................................................................................................................53
`
`Shalala v. Guernsey Memorial Hospital,
`514 U.S. 87 (1995) .............................................................................................................17, 19
`
`Sparre v. U.S. Dep’t of Labor,
`924 F.3d 398 (7th Cir. 2019) ...................................................................................................37
`
`Squires-Cannon v. Forest Preserve Dist. of Cook Cnty.,
`897 F.3d 797 (7th Cir. 2018) ...................................................................................................33
`
`St. Francis Hospital Center v. Heckler,
`714 F.2d 872 (7th Cir. 1983) ...................................................................................................37
`
`Stern v. Marshall,
`564 U.S. 462 (2011) ...............................................................................................50, 55, 56, 57
`
`Stovic v. R.R. Ret. Bd.,
`826 F.3d 500 (D.C. Cir. 2016) ................................................................................................38
`
`vii
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 9 of 74 PageID #: 5992
`
`Taggart v. Lorenzen,
`139 S. Ct. 1795 (2019) .............................................................................................................52
`
`Teva Pharm. USA, Inc. v. FDA,
`441 F.3d 1 (D.C. Cir. 2006) .....................................................................................................58
`
`Thomas v. Union Carbide Agricultural Products Co.,
`473 U.S. 568 (1985) .....................................................................................................54, 55, 56
`
`Tourus Records, Inc. v. DEA,
`259 F.3d 731 (D.C. Cir. 2001) .................................................................................................59
`
`U.S. Army Corps of Eng’rs v. Hawkes Co.,
`136 S. Ct. 1807 (2016) .............................................................................................................20
`
`U.S. Tel. Ass’n v. FCC,
`28 F.3d 1232 (D.C. Cir. 1994) .................................................................................................13
`
`United Dominion Indus. v. United States,
`532 U.S. 822 (2001) .................................................................................................................26
`
`United States v. Davis,
`16 F.3d 212 (7th Cir. 1994) .....................................................................................................26
`
`United States v. Johnston,
`258 F.3d 361 (5th Cir. 2001) ...................................................................................................54
`
`United States v. Orona-Ibarra,
`831 F.3d 867 (7th Cir. 2016) ...................................................................................................33
`
`United States v. Philip Morris USA Inc.,
`566 F.3d 1095 (D.C. Cir. 2009) ...............................................................................................26
`
`Univ. of Tex. Sw. Med. Ctr. v. Nassar,
`570 U.S. 338 (2013) .................................................................................................................28
`
`Vermont Yankee Nuclear Power Corp. v. NRDC,
`435 U.S. 519 (1978) .................................................................................................................43
`
`Voyk v. Brotherhood of Locomotive Eng’rs,
`198 F.3d 599 (6th Cir. 1999) ...................................................................................................27
`
`W. Ill. Home Health Care v. Herman,
`150 F.3d 659 (7th Cir. 1998) ...................................................................................................20
`
`Wabash Valley Power Ass’n, Inc. v. Rural Electrification Admin.,
`988 F.2d 1480 (7th Cir. 1993) .................................................................................................23
`
`viii
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 10 of 74 PageID #: 5993
`
`Weiss v. United States,
`510 U.S. 163 (1994) .................................................................................................................48
`
`Wellness Int’l Network, Ltd. v. Sharif,
`135 S. Ct. 1932 (2015) .......................................................................................................56, 57
`
`Whitman v. Am. Trucking Ass’ns,
`531 U.S. 457 (2001) .................................................................................................................31
`
`Constitutional Provisions
`
`U.S. Const. art. II, § 2, cl. 2 ...........................................................................................................45
`
`Statutes
`
`5 U.S.C. § 553 ....................................................................................................................18, 23, 42
`
`5 U.S.C. § 702 ................................................................................................................................19
`
`5 U.S.C. § 706(2) ................................................................................................................... passim
`
`11 U.S.C. § 548(a)(2) .....................................................................................................................55
`
`15 U.S.C. § 45(l) ............................................................................................................................52
`
`42 U.S.C. § 1396r-8(a)(1), (5) .........................................................................................................5
`
`42 U.S.C. § 1396r-8(b)(4)(B)(v) ......................................................................................................5
`
`42 U.S.C. § 256b .................................................................................................................... passim
`
`Pub. L. No. 111-148, § 7101(a) ...............................................................................................27, 33
`
`Pub. L. No. 111-148, § 7102(a) .......................................................................................................7
`
`Rules
`
`Fed. R. Civ. P. 12 ...........................................................................................................................11
`
`Fed. R. Civ. P. 65 ...........................................................................................................................52
`
`Regulations
`
`42 C.F.R. § 10.20 .....................................................................................................................46, 47
`
`42 C.F.R. § 10.21 ................................................................................................................... passim
`
`42 C.F.R. § 10.22 ...........................................................................................................................10
`
`ix
`
`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 11 of 74 PageID #: 5994
`
`42 C.F.R. § 10.23 .....................................................................................................................10, 52
`
`42 C.F.R. § 10.24 ................................................................................................................... passim
`
`61 Fed. Reg. 43,549 (Aug. 23, 1996).............................................................................6, 15, 16, 17
`
`75 Fed. Reg. 10,272 (Mar. 5, 2010) .....................................................................................6, 15, 17
`
`81 Fed. Reg. 53,381 (Aug. 12, 2016)..................................................................................... passim
`
`82 Fed. Reg. 1,210 (Jan. 5, 2017) ..................................................................................................16
`
`85 Fed. Reg. 2,869 (Jan. 17, 2020) ..................................................................................................6
`
`85 Fed. Reg. 80,632 (Dec. 14, 2020) ..................................................................................... passim
`
`Other Authorities
`
`Connor J. Baer, Drugs for the Indigent: A Proposal to Revise the 340B Drug
`Pricing Program, 57 WM. & MARY L. REV. 637 (2015) ...........................................................3
`
`Frank Gahan, The Law of Damages 1 (1936) ................................................................................51
`
`GAO, 340B Drug Discount Program: Increased Oversight Needed to Ensure
`Nongovernmental Hospitals Meet Eligibility Requirements (Dec. 2019),
`https://bit.ly/34Vj6zK ..............................................................................................................30
`
`GAO, HHS Uses Multiple Mechanisms to Help Ensure Compliance with 340B
`Requirements, https://bit.ly/3hfFVD8 ....................................................................................7, 8
`
`GAO, Manufacturer Discounts in the 340B Program Offer Benefits, But Federal
`Oversight Needs Improvement (Sept. 2011), https://bit.ly/2JvWKgJ ......................................29
`
`H. Energy & Commerce Comm., Review of the 340B Drug Pricing Program
`(Jan. 10, 2018)..........................................................................................................................40
`
`H.R. Rep. No. 102-384 (II) (1992) ............................................................................................3, 40
`
`HHS Releases Advisory Opinion Clarifying that 340B Discounts Apply to
`Contract Pharmacies (Dec. 30, 2020), https://bit.ly/3bp6m7R ...............................................13
`
`HHS-OIG, Contract Pharmacy Arrangements in the 340B Program,
`OEI-05-13-00431 (Feb. 4, 2014), https://bit.ly/3eWKmBQ .......................................28, 32, 40
`
`HHS/HRSA, About the Unified Agenda, https://bit.ly/2OYh3FZ
`(last visited May 8, 2021) ........................................................................................................43
`
`HHS/HRSA, View Rule, RIN: 0906-AA90 (Spring 2017), https://bit.ly/2ZydLLo .......................43
`
`x
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`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 12 of 74 PageID #: 5995
`
`HRSA, 340B Program Integrity, Audits of Covered Entity Results (Apr. 2020),
`https://bit.ly/3fcAALF .............................................................................................................29
`
`N.C. H.B. 106, Sess. Law 2019-135, § 7 (2019), available at
`https://bit.ly/3nWSZk1, Recommendations for a 340B Correctional
`Partnership in North Carolina (May 7, 2019), https://bit.ly/33lvWpP ....................................29
`
`Reince Priebus, Asst. to the President and Chief of Staff,
`Memorandum for the Heads of Executive Departments and Agencies
`(Jan. 20, 2017), https://bit.ly/2KIutnM ....................................................................................43
`
`Restatement (Second) of Agency (1958) ........................................................................................38
`
`Restatement (Third) of Agency (2006) ...........................................................................................38
`
`Sunita Desai & J. Michael McWilliams, Consequences of the 340B Drug Pricing
`Program, 378 N. ENG. J. MED. 539 (Feb. 8, 2018) ..................................................................30
`
`Tom Mirga, HRSA: 340B Dispute Resolution Will Stay on Hold Until We Get
`Broader Regulatory Authority, 340B Report (Mar. 12, 2020) ..................................................9
`
`Tom Mirga, HRSA Says its 340B Contract Pharmacy Guidance Is Not Legally
`Enforceable, 340B Report (July 9, 2020) ..................................................................................7
`
`
`
`
`
`xi
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`

`

`Case 1:21-cv-00081-SEB-MJD Document 89 Filed 05/10/21 Page 13 of 74 PageID #: 5996
`
`INTRODUCTION
`
`The Department of Health and Human Services (“HHS”) has promulgated two equally
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`unlawful rules and has attempted to defend them on equally pretextual grounds.
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`First, in the guise of an “advisory opinion,” HHS has promulgated a legislative rule
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`requiring manufacturers to deliver their products at substantial discounts to an unlimited number
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`of so-called “contract pharmacies.” The agency says manufacturers must do this so long as the
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`contract pharmacies have an undefined (and rather unlikely) “agency” relationship with the actual
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`entities covered by the 340B program—a requirement that appears nowhere in the statutory text.
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`The government claims that none of this is new, i.e., that HHS’s decision merely repeats what the
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`340B statute has always meant and what its guidance documents have always said. That revisionist
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`history ignores HHS’s own repeated statements to the contrary, as well as the basic chronology of
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`the statutory regime. Either way, there can be no doubt that the agency’s “advisory opinion”
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`represents the culmination of the agency’s decision-making process; tellingly, it has already been
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`relied on by parties seeking to compel the government to take action against Plaintiffs Eli Lilly
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`and Company and Lilly USA, LLC (collectively, “Lilly”). Regardless of what the government
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`wants to call it, that is a rule subject to immediate judicial review.
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`This Court should review and invalidate that rule as contrary to law. At the heart of
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`virtually every issue in this case, both procedural and substantive, lies the same question: Does
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`the 340B statute require manufacturers to deliver discounted drugs to contract pharmacies? The
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`answer is th

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