Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 1 of 29
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE DISTRICT OF MARYLAND
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`
`
`*
`ASSOCIATION OF COMMUNITY
`CANCER CENTERS, et al. *
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`*
` v.
`*
`
`*
`ALEX M. AZAR II, in his official capacity
`*
`as Secretary of the U.S. Department of
`*
`Health and Human Services, et al.
`*
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`*****
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`MEMORANDUM
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`
`
`
`
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`Civil Action No. CCB-20-3531
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`On November 27, 2020, the United States Department of Health and Human Services
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`(“HHS”) promulgated an interim final rule to require reimbursements made for certain drugs
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`covered by Medicare Part B to be based on the lowest price in a group of “most favored nations”
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`rather than the average U.S. sales price. The new reimbursement scheme commences on January
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`1, 2021, leaving providers little over a month to prepare for a new pricing model, attempt to
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`renegotiate contracts, and work with patients to transition them to alternative therapies—if any
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`exist—to manage their long-term care and avoid potentially catastrophic consequences to their
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`health. This rule was promulgated without the usual notice and comment procedures, which the
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`government argues was for good cause. In this action, the plaintiffs seek a temporary restraining
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`order and preliminary injunction to bar implementation of the rule. The matter has, for the
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`purpose of a temporary restraining order, been fully briefed, and oral argument was heard on
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`December 18, 2020. For the reasons stated herein, the motion for a temporary restraining order
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`will be granted.
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`BACKGROUND
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`Since at least 2018, President Donald Trump has sought by various means to lower drug
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`prices. See 85 Fed. Reg. 76181 (Nov. 27, 2020). To achieve that goal, the Centers for Medicare
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`1
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 2 of 29
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`and Medicaid Services (“CMS”), a division of HHS, published in October of 2018 an advance
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`notice of proposed rulemaking, which it later abandoned as the President sought to address the
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`problem of high drug prices through legislation. (See ECF 24-1, Pl.’s Br., at 16). After that
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`effort ultimately failed, on July 24, 2020, President Trump signed a series of “transformative”
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`executive orders designed to “massively lower” the cost of prescription drugs. (See id. at 16–
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`17).1 Pursuant to those executive orders, on November 27, 2020, CMS published in the Federal
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`Register its Most Favored Nation Rule—the subject of this litigation—to implement “a new
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`Medicare payment model” which would “test whether more closely aligning payment for
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`Medicare Part B drugs and biologicals . . . with international prices and removing incentives to
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`use higher-cost drugs can control unsustainable growth in Medicare Part B spending without
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`adversely affecting quality of care for beneficiaries.” 85 Fed. Reg. 76180. This new
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`reimbursement model was promulgated pursuant to 42 U.S.C. § 1315a, which allows the agency
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`to test payment and service delivery “models” to reduce program expenditures while at the same
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`time “preserving or enhancing the quality of care[.]” 42 U.S.C. § 1315a(a)(1). If a model is
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`successful, the agency may follow statutorily prescribed procedures to expand the scope of the
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`model for testing on a larger, possibly even nationwide, basis. See id. § 1315a(c). The “model”
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`proposed by CMS in this case features immediate “mandatory, nationwide participation,” 85
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`Fed. Reg. 76188, and covers the fifty drugs and biologicals that account for the highest Medicare
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`Part B reimbursement spending, id. at 76189, with additional drugs to be phased in over the
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`model’s seven-year duration, id. at 76192. CMS projects this model will impact nearly $5 billion
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`1 The transcript of the President’s remarks upon signing the executive orders is available at
`http://www.whitehouse.gov/briefings-statements/remarks-president-trump-signing-executive-orders-lowering-drug-
`prices (last visited Dec. 18, 2020).
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`2
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 3 of 29
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`in Medicare Part B spending in its first year alone—and nearly $70 billion over the model’s
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`duration. See id. at 76238.
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`The rule took effect upon publication and, although CMS will accept comments for sixty
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`days, until January 26, 2021, 85 Fed. Reg. 76180, the new model, which is expected to reduce
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`Medicare Part B expenditures significantly, is slated to begin on January 1, 2021. Id. at 76181.
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`CMS did not provide the usual notice and comment period prior to promulgation of the rule.
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`Instead, it found there was good cause to waive both the notice and comment period and the
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`delay in effective date required under the Administrative Procedure Act (the “APA”) and the
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`Social Security Act because “delaying implementation of this [rule] is contrary to the public
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`interest[.]” Id. at 76250. CMS relies on the rising cost of drug prices and the economic
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`consequences of the COVID-19 pandemic to justify dispensing with the required procedures. In
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`its finding of good cause, CMS stated that “[h]igh drug prices in the U.S. have serious economic
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`and health consequences for beneficiaries in need of treatment” insofar as “[i]ncreasing
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`premiums, out-of-pocket costs . . . and increases in drug prices” have caused Part B beneficiaries
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`to “divert scarce resources to pharmaceutical treatments and away from other needs[.]” Id. at
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`76249. “The COVID-19 pandemic,” CMS asserts, “has rapidly exacerbated these problems.”
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`Id. Even before COVID-19 struck, the cost of Part B drugs increased by over nine percent
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`between 2009 and 2017. Id. But since the pandemic struck, the United States has seen “historic
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`levels of unemployment” that have “strain[ed] budgets[.]” Id. CMS notes that we have seen
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`some “positive economic and employment trends since the initial peak in April,” but states that a
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`surge “may lead to additional hardship and requires immediate action.” Id. Thus, “because of
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`the particularly acute need for affordable Medicare Part B drugs now, in the midst of the
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`COVID-19 pandemic[,]” CMS found there was good cause to forgo notice and comment. Id.
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`3
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 4 of 29
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`The plaintiffs2 in this action are organizations which represent members including—
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`among other constituencies—provider groups, doctors, patients, and pharmaceutical companies.
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`(ECF 1, Compl. ¶¶ 15–18). The National Infusion Center Association (“NICA”), for example,
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`represents community-based infusion providers which provide important healthcare services.
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`NICA fears the rule at issue in this litigation will, because of the small margins on which many
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`of its community-based centers operate, “immediately imperil” their ability “to care for patients”
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`as the rule may force them to “shutter their doors entirely.” (Id. ¶¶ 17, 73). This entails great
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`risks for patients who rely on drugs covered under Medicare Part B to treat, for example,
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`multiple sclerosis and cancer. (Id. ¶ 73; see also ECF 24-17, Ex. N, Decl. of Dr. Joshua David
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`Katz; ECF 24-16, Ex. M, Decl. of Michael Seldin). CMS acknowledges that its rule could
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`disrupt care, potentially forcing beneficiaries “to travel to seek care from an excluded provider”
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`or perhaps even “postpon[e] or forgo treatment” altogether. 85 Fed. Reg. 76244. Within the first
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`year of the test, CMS projects a nine percent increase in the rate at which patients at non-safety-
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`net providers may have no access to covered medications. Id. at 76237.
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`The plaintiffs filed a complaint initiating this action on December 4, 2020, just a week
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`after the rule took effect and just two weeks after it was announced. (ECF 1). On December 10,
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`2020, they moved for a temporary restraining order and preliminary injunction pending
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`resolution on the merits. (ECF 24). The new reimbursement scheme at the heart of the
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`challenged rule is scheduled to take effect on January 1, 2021, only twenty-two days after the
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`request for injunctive relief was filed. Accordingly, the court issued an accelerated briefing
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`schedule. (ECF 31). The matter is now fully briefed, the court has accepted an amicus brief
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`2 The plaintiffs include the Association of Community Cancer Centers, the Global Colon Cancer Association, the
`National Infusion Center Association, and the Pharmaceutical Research and Manufacturers of America. (ECF 1,
`Compl. ¶¶ 15–18).
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`4
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 5 of 29
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`filed by the American Society of Clinical Oncology (ECF 39), and oral argument was heard on
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`December 18, 2020 (ECF 40).
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`DISCUSSION
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`In this case, the plaintiffs seek to enjoin enforcement of CMS’s Most Favored Nation
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`Rule on the grounds that it (1) violates the APA for failure to provide a notice and comment
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`period; (2) exceeds the authority provided to CMS by the Social Security Act; and (3) violates
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`the Constitution’s bicameralism and presentment and separation of powers requirements. In
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`response, CMS raises a jurisdictional challenge as well as a challenge to the merits of each
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`alleged violation. The court will first address the issue of jurisdiction and then turn to the merits.
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`I.
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`Jurisdiction
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`Courts have an “independent obligation to determine whether subject matter jurisdiction
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`exists,” Arbaugh v. Y&H Corp., 546 U.S. 500, 514 (2006), and if at any time the court
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`determines that it lacks subject matter jurisdiction, the court must dismiss the action, Fed. R. Civ.
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`P. 12(h)(3). To invoke federal subject matter jurisdiction under 28 U.S.C. § 1331, a plaintiff
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`need only plead a colorable claim arising under the Constitution or laws of the United States.
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`Holloway v. Pagan River Dockside Seafood, Inc., 669 F.3d 448, 453 (4th Cir. 2012). The
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`plaintiffs claim this court has jurisdiction under 28 U.S.C. § 1331 (federal question), as well as
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`under 28 U.S.C. § 1346 (United States as defendant) and 5 U.S.C. §§ 701–06 (the Administrative
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`Procedure Act).3 (ECF 1, Compl. ¶ 11). And they have pled a colorable claim that, at a
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`minimum, the promulgation of the Most Favored Nation rule without notice and comment
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`procedures was a violation of the APA.
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`3 The APA does not provide an independent basis for subject matter jurisdiction. See Sigmon Coal Co., Inc. v.
`Apfel, 226 F.3d 291, 301 (4th Cir. 2000).
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`5
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 6 of 29
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`Still, the government asserts that section 405(g) of the Social Security Act, which is
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`incorporated into the Medicare statute, bars judicial review of claims arising under the Social
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`Security Act (and the Medicare statute) unless a claimant first has obtained a final decision from
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`the Secretary. (See ECF 33, Def.’s Br., at 17). Because the plaintiffs did not first present a claim
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`to the agency and exhaust their administrative remedies, the government argues, they may not
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`raise their challenge in this court.
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`“We begin, as always, with the text of the statute.” Permanent Mission of India to the
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`United Nations v. City of New York, 551 U.S. 193, 197 (2007). The Social Security Act, in a
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`section titled “Evidence, procedure, and certification for payments,” provides in relevant part:
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`The findings and decisions of the [Secretary] after a hearing shall be binding upon
`all individuals who were parties to such hearing. No findings of fact or decision
`of the [Secretary] shall be reviewed by any person, tribunal, or governmental
`agency except as herein provided. No action against the United States, the
`[Secretary], or any officer or employee thereof shall be brought under section
`1331 or 1346 of title 28 to recover on any claim arising under this subchapter.
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`42 U.S.C. § 405(h). Thus, any claim “arising under this subchapter”—that is, brought under
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`subchapter II (“Federal Old-Age, Survivors, and Disability Insurance Benefits”)—is barred
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`unless a claimant first raises the claim with the Secretary pursuant to section 405(g).
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`Section 1395ii of the Medicare Act makes section 405(h) applicable to the Medicare Act
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`to the same extent as it applies to the Social Security Act. 42 U.S.C. § 1395ii. Specifically, it
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`provides that certain subsections of “section 405 of this title[] shall also apply with respect to this
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`subchapter to the same extent as [it is] applicable with respect to subchapter II . . . .” 42 U.S.C.
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`§ 1395ii (emphasis added). Thus, in most cases, a claim that is not first channeled through the
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`agency may not be reviewed by a district court. Significantly, though, section 1395ii—like
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`section 405(h)—only bars actions arising under the subchapter in which it appears.
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`6
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 7 of 29
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`As the government admits, the plaintiffs’ claims arise under 42 U.S.C. § 1315a, which is
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`in subchapter XI (“General Provisions, Peer Review, and Administrative Simplification”),
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`whereas section 1395ii is in subchapter XVIII (“Health Insurance for Aged and Disabled”). (See
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`ECF 33 at 16, 18). The plaintiffs do not make any specific or individual claims for
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`reimbursement under subchapter XVIII. Accordingly, the plain text of the relevant statutes
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`demonstrates that the plaintiffs are not subject to the jurisdictional bar in section 405(h). Having
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`pled a colorable claim raising a federal question based on the APA and its application to a
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`separate subchapter of title 42, the plaintiffs properly have invoked this court’s subject matter
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`jurisdiction.4
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`II.
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`Standing
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`Courts likewise have an “independent obligation to assure that standing exists[.]” See
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`Summers v. Earth Island Inst., 555 U.S. 488, 499 (2009). An irreducible constitutional
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`minimum, standing requires that plaintiffs have suffered (1) an injury in fact, (2) caused by the
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`defendant, and (3) which likely could be redressed by a favorable decision of the court. Id. at
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`493; see also Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992). “When standing is
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`challenged on the pleadings, we accept as true all material allegations of the complaint and
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`4 The government asserts three other arguments regarding a jurisdictional bar, all of which are unavailing. The first
`is that 42 U.S.C. § 1395ff(b) bars the court’s jurisdiction over this action, but that provision applies to appeals of
`initial determinations of benefits under part A and part B of subchapter XVIII, which are not at issue in this matter.
`(See ECF 33 at 18). The second is based loosely on the command of Weinberger v. Salfi, 422 U.S. 749, 761–62
`(1975), that a claim arises under an act when the act provides both “the standing and the substantive basis for the
`present contentions.” Salfi considered a constitutional challenge to a denial of individual benefits under subchapter
`II and noted that even though appellees raised constitutional claims, the substance of those claims was based in the
`Social Security Act. Id. “To contend that such an action does not arise under the Act whose benefits is sought is to
`ignore both the language and the substance of the complaint and judgment.” Id. The court therefore held that
`section 405(h) barred federal question jurisdiction. In this case, though, plaintiffs do not seek to “recover on any
`(Social Security) claim” or to challenge a rule arising under subchapter II. Id. at 762. And finally, the third is that
`42 U.S.C. § 1315a, the statute under which this rule was promulgated, prohibits judicial review of challenges to the
`selection, elements, parameter, scope, and duration of a model. 42 U.S.C. § 1315a(d)(2). Because the court does
`not reach the plaintiffs’ statutory challenge to the model, the court need not reach this argument at this stage of the
`proceedings.
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`7
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 8 of 29
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`construe the complaint in favor of the complaining party.” S. Walk at Broadlands Homeowner’s
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`Ass’n v. Open Band at Broadlands, LLC, 713 F.3d 175, 181–82 (4th Cir. 2013) (internal
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`quotation marks and citation omitted).
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`Because the plaintiffs in this action are organizations and because their pleadings indicate
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`they intend to rely, at least in part, on injuries to their members rather than to themselves, the
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`court looks not just to the injuries alleged to the organization but also to injuries to its members
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`who could have brought suit in their own right. See Summers, 555 U.S. at 494; see also Simon v.
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`E. Ky. Welfare Rights Org., 426 U.S. 26, 40 (1976). For an organization to have representational
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`standing, a court must be satisfied that (1) the organization’s members would have standing to
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`sue in their own right; (2) the interests the organization seeks to protect are germane to the
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`organization’s purpose; and (3) neither the claim nor the relief sought requires the participation
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`of individual members in the lawsuit. S. Walk, 713 F.3d at 184; see also Casa de Maryland, Inc.
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`v. Wolf, No. 8:20-cv-02118-PX, --- F. Supp. 3d. ----, 2020 WL 5500165, at *11 (D. Md. Sept. 11,
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`2020) (appeal filed). While violation of a procedural right “in vacuo” is insufficient by itself to
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`confer Article III standing, a procedural injury that is tethered to some “concrete interest”
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`adversely affected by the procedural deprivation is sufficient. See Summers, 555 U.S. at 496.
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`The court is satisfied that NICA has representational standing.5 The rule at issue in this
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`litigation, by reducing reimbursements for Medicare Part B drugs and upending the status quo in
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`the industry, will “immediately imperil” the ability of NICA’s community-based infusion
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`providers “to care for patients, risking both disease flares that often become medical emergencies
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`with lifelong repercussion and exponentially higher medical costs caused by disease
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`5 Due to the compressed schedule in which the court must rule on this motion, it is unable to evaluate whether each
`plaintiff and its constitutent members have standing. But so long as one plaintiff has standing, the court may reach
`the merits.
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`8
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 9 of 29
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`undermanagement.” (ECF 1, Compl. ¶¶ 17, 73). In the Declaration of Dr. Joshua David Katz,
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`the plaintiffs document a striking example of the rule’s likely harms to NICA members—at least
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`one infusion treatment covered by the MFN rule, Ocrevus, is “the only FDA approved therapy”
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`for primary progressive multiple sclerosis. “By rendering it economically impossible to continue
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`infusing Ocrevus,” Dr. Katz warns, “the MFN Rule forces providers to cease treating these
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`patients without the ability to provide any other options.” (ECF 24-17, Ex. N, Decl. of Dr.
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`Joshua David Katz, ¶ 10). An infusion center that must discontinue care for economic reasons is
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`essentially forced into malpractice, as a disruption in treatment for multiple sclerosis “can cause
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`immediate rebound disease activity” and “even more intense symptoms than those previously
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`experienced.” (Id. ¶¶ 6, 11). The plaintiffs’ complaint further alleges that community-based
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`infusion centers are so reliant on drug reimbursements to break even that the rule likely “will
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`force community-based infusion providers to shutter their doors entirely.” (ECF 1 ¶ .).
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`Construing the facts most favorably to the plaintiffs, this concrete injury, traceable to the rule at
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`issue and caused by CMS, may be remedied by an injunction. See Lujan, 504 U.S. at 560–61.
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`Additionally, CMS’s decision to forgo notice and comment rulemaking implicates these severe
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`economic impacts. As counsel indicated at oral argument, the plaintiffs would have used a
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`notice and comment period to protect their economic interests by, at the very least, advocating
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`for a delay in implementation of the model to provide them with time to renegotiate contracts
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`and to transition patients to alternative therapies. (See ECF 40 at 20). Thus, even were NICA’s
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`only injury procedural, the deprivation of notice and comment in this case is not a deprivation
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`“in vacuo” but rather is one that affects “a concrete interest” sufficient to confer Article III
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`standing. Summers, 555 U.S. at 496.
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`9
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 10 of 29
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`The second and third requirements for representational standing are also met in this case.
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`The interests which NICA seeks to protect in this action are certainly germane to its purpose, as
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`NICA “devote[s] significant time and resources to representing” providers of Medicare Part B
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`drugs and their patients. Casa de Maryland, 2020 WL 5500165, at *12. Nor do the plaintiffs’
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`legal challenges require participation of individual members in the lawsuit, as the “ultimate
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`remedy” sought is “setting aside the rule[], not money damages” that would require individual
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`members to join the litigation as parties. Id.6 Accordingly, on the basis of its procedural injury
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`as well as the severe economic harm which imminently threatens its members, NICA has
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`standing to pursue, at a minimum, its claim under the APA.7
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`III. Temporary Restraining Order
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`A party seeking a temporary restraining order or a preliminary injunction must show that:
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`(1) it is likely to succeed on the merits; (2) it is likely to suffer irreparable harm absent relief; (3)
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`the balance of equities tips in its favor; and (4) an injunction is in the public interest. See Winter
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`v. Nat. Res. Def. Council, 555 U.S. 7, 20 (2008); Roe v. Dep’t of Def., 947 F.3d 207, 219 (4th
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`Cir. 2020); see also Maages Auditorium v. Prince George’s Cty., Md., 4 F. Supp. 3d 752, 760 n.1
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`6 For the purposes of this motion, the court is only evaluating NICA’s standing, but it appears likely that this
`analysis applies to other plaintiffs as well
`7 CMS’s arguments that third-party standing is “generally forbidden” and that the court may not consider harms to
`NICA’s constitutent members misses the point. (ECF 33 at 36–37). The plaintiffs here do not seek to assert claims
`on behalf of unconnected third parties, but rather seek to assert claims as to which their members have a significant
`interest. The cases cited by the government deal only with the general presumption against third party standing and
`not with the more nuanced questions of organizational and representational standing which are applicable to this
`action. Compare Bailey v. Atl. Auto. Grp., 992 F. Supp. 2d 560, 566 (D. Md. 2014) (concerning plaintiffs’ standing
`to raise claims of third parties against defendants with whom they had no dealings in the context of a putative class
`action) with Casa de Maryland, --- F. Supp. 3d. ----, No. 8:20-cv-02118-PX, 2020 WL 5500165, at *17 (D. Md.
`Sept. 11, 2020) (appeal filed) (concerning an organizational plaintiff’s ability to demonstrate irreparable harm by
`way of its individual members where the organizational plaintiff had representational standing).
`10
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 11 of 29
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`(D. Md. 2014) (standard for TRO is the same as for a preliminary injunction), aff’d, 681 Fed.
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`App’x 256 (4th Cir. 2017).8
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`A.
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`Likelihood of Success on the Merits
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`The court concludes that the plaintiffs have demonstrated a likelihood of success on the
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`merits of their claim under the APA.9 The APA provides that, prior to promulgation of a final
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`rule, an agency must publish a general notice of proposed rulemaking in the Federal Register and
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`must allow “interested persons an opportunity to participate in the rule making through
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`submission of written data, views, or arguments.” 5 U.S.C. § 553(b), (c). This notice-and-
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`comment process includes three steps. First, the agency “issues a general notice of proposed
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`rulemaking, ordinarily by publication in the Federal Register.” Casa de Maryland, 2020 WL
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`5500165, at * 23 (quoting Perez v. Mortg. Bankers Ass’n, 575 U.S. 92, 96 (2015)) (internal
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`quotation marks and alterations omitted). Second, the agency allows for a comment period
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`wherein interested persons make the submissions described in section 553(c). See id. Third, “to
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`afford the public meaningful participation, the agency must consider and respond to significant
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`comments received during the period for public comment.” Id. This three-step process is
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`designed to allow for robust participation and influence by the public prior to the promulgation
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`of the rule, “when the agency is more likely to give real consideration to alternative ideas.”
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`United States v. Dean, 604 F.3d 1275, 1280–81 (11th Cir. 2010). The importance of these notice
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`and comment procedures “cannot be overstated” as agencies “benefit[] from the experience and
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`input of comments by the public,” which ensure informed decisionmaking. N.C. Growers’
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`8 Though the standard for evaluating a temporary restraining order is the same as for a preliminary injunction, the
`accelerated briefing schedule and time constraints of a motion for temporary restraining order dictate that the court’s
`analysis cannot be as thorough as it would be when evaluating a motion for preliminary injunction.
`9 The court does not today reach the plaintiffs’ arguments concerning the statutory authority of CMS or the
`constitutionality of the rule.
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`11
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 12 of 29
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`Ass’n, Inc. v. United Farm Workers, 702 F.3d 755, 763 (4th Cir. 2012); see also Nat. Res. Def.
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`Council v. Nat’l Highway Traffic Safety Admin., 894 F.3d 95, 115 (2d Cir. 2018). Accordingly,
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`the APA authorizes courts to set aside agency actions that are “without observance of procedure
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`required by law.” 5 U.S.C. § 706(2); see also Chrysler Corp. v. Brown, 441 U.S. 281, 313 (1979)
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`(courts reviewing agency action must ensure agencies comply with procedural requirements of
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`the APA). While review of an agency’s final decision may be narrow, “we must be strict in
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`reviewing an agency’s compliance with procedural rules.” N.C. Growers’ Ass’n, 702 F.3d at 764
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`(quoting Chocolate Mfrs. Ass’n of U.S. v. Block, 755 F.2d 1098, 1103 (4th Cir. 1985)).
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`
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`Despite the importance of notice and comment procedures, the APA includes a narrow
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`exception that allows agencies to dispense with such procedures for good cause.10 The exception
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`applies only “when the agency for good cause finds (and incorporates the finding and a brief
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`statement of reasons therefor in the rules issued) that notice and public procedure thereon are
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`impracticable, unnecessary, or contrary to the public interest.” 5 U.S.C. § 553(b)(3)(B). The
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`requirement that the agency explain its basis for bypassing the typical notice and comment
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`process “is not a procedural formality but serves the crucial purpose of ensuring that the
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`exceptions do not ‘swallow the rule.’” N.C. Growers’ Ass’n, 702 F.3d at 766. Still, the good
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`cause exception exists as “an important safety valve” to be employed “where delay would do real
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`harm.” Dean, 604 F.3d at 1279.
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`To invoke the good cause exception, the burden is on the agency to establish that notice
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`and comment may be dispensed with. Nat. Res. Def. Council, 894 F.3d at 113–14. This
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`10 An agency is also required to publish a substantive rule at least thirty days before its effective date, unless it finds
`good cause to do otherwise and explains that rationale in the rule. 5 U.S.C. § 553(d)(3). Though CMS’s rule was
`not published thirty days in advance of its effective date, it adopts the same reasoning explaining why good cause
`existed to forgo that requirement. 85 Fed. Reg. 76250. The plaintiffs here seem to primarily take issue with the lack
`of notice and comment, and the court will likewise focus its attention on that issue.
`12
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 13 of 29
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`exception is to be narrowly construed and “only reluctantly countenanced.” Id. (internal
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`quotation marks and citation omitted); see also Mack Trucks Inc. v. EPA, 682 F.3d 87, 93 (D.C.
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`Cir. 2012). The good cause inquiry is “meticulous and demanding[,]” Sorenson Commc’ns, Inc.
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`v. FCC, 755 F.3d 702, 706 (D.C. Cir. 2014) (quoting N.J. Dep’t of Envt’l Protection v. EPA, 626
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`F.2d 1038, 1046 (D.C. Cir. 1980)), and the exception is generally limited to “emergency
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`situations” or to situations “where delay could result in serious harm[,]” Jifry v. FAA, 370 F.3d
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`1174, 1179 (D.C. Cir. 2004) (internal citation omitted). Courts review an agency’s finding of
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`good cause de novo. See Sorenson Commc’ns, 755 F.3d at 706 & n.3 (concluding that review of
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`an agency’s legal conclusions concerning good cause is de novo because agencies have “no
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`interpretive authority over the APA” but noting that the courts defer to an agency’s factual
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`findings and expert judgments therefrom unless arbitrary and capricious). Courts consider an
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`explanation for good cause that the agency has “advanced at the time of the rule making” and
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`post-hoc explanations are viewed with “skepticism.” N.C. Growers’ Ass’n, 702 F.3d at 767.
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`Nor may a court “supply a reasoned basis” for agency action “that the agency itself has not
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`given.” Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29,
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`43 (1983).
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`In this case, the plaintiffs attack CMS’s invocation of good cause on two grounds. First,
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`they argue that CMS has forfeited its ability to claim good cause due to its own delay in
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`promulgating a rule it first contemplated many months if not years ago. (See ECF 24-1 at 22).
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`And second, they argue that CMS has failed to adequately justify its invocation of the good
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`cause exception. (See id. at 23–25). Because CMS has expressly invoked only the public
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`interest prong of the good cause exception, the court will proceed to analyze CMS’s rationale
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`Case 1:20-cv-03531-CCB Document 43 Filed 12/23/20 Page 14 of 29
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`under that provision.11 See 85 Fed. Reg. 76250 (noting that delaying implementation of the rule
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`would be contrary to the public interest).
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`The public interest prong may be invoked where notice and comment are “contrary to the
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`public interest,” which requires finding that “the interest of the public would be defeated by any
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`requirement of advance notice.” N.C. Growers’ Ass’n, 702 F.3d at 767 (quoting Util. Solid
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`Waste Activities Grp. v. EPA, 236 F.3d 749, 755 (D.C. Cir. 2001)); see also Mack Trucks, 682
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`F.3d at 94–95. When an agency argues that its action is in the public interest, courts will only
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`agree “in the rare circumstance when ordinary procedures—generally presumed to serve the
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`public interest—would in fact harm that interest.” Mack Trucks, 682 F.3d. at 95. That is, “[t]he
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`question is not whether dispensing with notice and comment would be contrary to the public
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`interest, but whether providing notice and comment would be contrary to the public interest.” Id.
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`This exception is “appropriately invoked when the timing and disclosure requirements of the
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`usual procedures would defeat the purpose of the proposal,” which may occur where the
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`announcement of a proposed rule would precipitate activity by affected parties that would harm
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`the public welfare. Id. For example, if “announcement of a proposed rule would enable the sort
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`of financial manipulation the rule sought to prevent[]” then notice and comment could be
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`dispensed with to prevent a rule from being evaded. Id. (internal quotation marks omitted).
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`A review of the caselaw reveals that courts have indeed been reluctant to uphold
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`invocation of the good cause exception, doing so primarily in circumstances where it was
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`11 Though there is no “rigid requirement that an agency must explicitly invoke the good cause exception, the
`contemporaneous record must manifest plainly the agency’s reliance on the exception in its decision to depart from
`the required notice and comment procedures.” N.C. Growers’ Ass’n, 702 F.3d at 768. The contemporaneous record
`here contains neither an explicit nor an implicit reference to the “impracticability” prong, which requires showing
`that “the due and required execution of the agency functions would be unavoidably prevented by its undertaking
`public rule-making proceedings.” Id. at 766 (quoting Nat’l Nutritional Foods Ass’n v. Kennedy, 572 F.2d 377, 384–
`85 (2d Cir. 1978)). Nor does the record make reference to the “unnecessary” prong, which applies when a rule is “a
`rou