throbber
Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 1 of 22
`
`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
`
`
`
`
`
`
`Case No. 7:20-cv-10488-KMK
`
`
`ECF Case
`
`
`
`
`
`
`
`REGENERON PHARMACEUTICALS,
`INC.,
`
`
`Plaintiff,
`
`
`v.
`
`UNITED STATES DEPARTMENT OF
`HEALTH AND HUMAN SERVICES,
`
`ALEX M. AZAR II, in his official capacity
`as Secretary of the United States Department
`of Health and Human Services,
`
`CENTERS FOR MEDICARE AND
`MEDICAID SERVICES,
`
`SEEMA VERMA, in her official capacity as
`the Administrator of the Centers for
`Medicare and Medicaid Services,
`
`
`Defendants.
`
`
`
`
`
`
`
`
`
`REPLY IN SUPPORT OF ORDER TO SHOW CAUSE FOR A PRELIMINARY
`INJUNCTION, TEMPORARY RESTRAINING ORDER, AND EXPEDITED BRIEFING
`SCHEDULE
`
`
`
`Robert W. Allen, P.C.
`Daniel Cellucci
`KIRKLAND & ELLIS LLP
`601 Lexington Avenue
`New York, New York 10022
`Tel: (212) 446-4800
`Fax: (212) 446-4900
`bob.allen@kirkland.com
`dan.cellucci@kirkland.com
`
`
`Paul D. Clement (admitted pro hac vice)
`George W. Hicks, Jr. (admitted pro hac vice)
`KIRKLAND & ELLIS LLP
`1301 Pennsylvania Ave. NW
`Washington, D.C. 20004
`Tel: (202) 389 5000
`Fax: (202) 389-5200
`paul.clement@kirkland.com
`george.hicks@kirkland.com
`
`Counsel for Plaintiff Regeneron Pharmaceuticals, Inc.
`
`
`Dated: December 18, 2020
`
`
`
`

`

`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 2 of 22
`
`
`
`TABLE OF CONTENTS
`
`INTRODUCTION .......................................................................................................................... 1
`
`ARGUMENT .................................................................................................................................. 1
`
`I.
`
`REGENERON’S CLAIMS ARE NOT BARRED FROM JUDICIAL REVIEW. ............ 1
`
`A.
`
`B.
`
`The Medicare Statute Does Not Preclude Regeneron’s Claims. ............................ 1
`
`Section 1115A(d)(2) Does Not Strip this Court of Jurisdiction. ............................ 4
`
`II.
`
`REGENERON IS EXCEEDINGLY LIKELY TO PREVAIL ON THE MERITS. ........... 6
`
`A.
`
`B.
`
`C.
`
`D.
`
`The MFN Rule Was Promulgated Without Notice and Comment. ........................ 6
`
`The MFN Rule Lacks Statutory Authorization. ...................................................... 8
`
`The MFN Rule is Arbitrary and Capricious. ........................................................ 11
`
`The MFN Rule Is Unconstitutional....................................................................... 12
`
`III.
`
`REGENERON WILL SUFFER IRREPARABLE HARM, AND THE BALANCE
`OF EQUITIES FAVORS RELIEF. .................................................................................. 14
`
`CONCLUSION ............................................................................................................................. 15
`
`
`
`
`
`
`
`

`

`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 3 of 22
`
`TABLE OF AUTHORITIES
`
`
`
`Page(s)
`
`Cases
`
`Aid Ass’n for Lutherans v. USPS,
`321 F.3d 1166 (D.C. Cir. 2003) .................................................................................................. 5
`
`Am. Hosp. Ass’n v. Azar,
`964 F.3d 1230 (D.C. Cir. 2020) .............................................................................................. 4, 5
`
`Amgen, Inc. v. Smith,
`357 F.3d 103 (D.C. Cir. 2004) .................................................................................................... 4
`
`Baxter Healthcare Corp. v. Weeks,
`643 F.Supp.2d 111 (D.D.C. 2009) .............................................................................................. 3
`
`Benihana, Inc. v. Benihana of Tokyo, LLC,
`784 F.3d 887 (2d Cir. 2015) ........................................................................................................ 9
`
`Bond v. United States,
`564 U.S. 211 (2011) .................................................................................................................. 15
`
`California v. HHS,
`281 F.Supp.3d 806 (N.D. Cal. 2017) ........................................................................................ 15
`
`Chamber of Commerce v. DHS,
`2020 WL 7043877 (N.D. Cal. Dec. 1, 2020) .......................................................................... 7, 8
`
`Clinton v. City of New York,
`524 U.S. 417 (1998) .................................................................................................................. 12
`
`COMSAT Corp. v. FCC,
`114 F.3d 223 (D.C. Cir. 1997) .................................................................................................... 4
`
`Council for Urological Interests v. Sebelius,
`668 F.3d 704 (D.C. Cir. 2011) .................................................................................................... 3
`
`Cumberland Cnty. Hosp. Sys., Inc. v. Burwell,
`816 F.3d 48 (4th Cir. 2016) ......................................................................................................... 3
`
`DCH Reg’l Med. Ctr. v. Azar,
`925 F.3d 503 (D.C. Cir. 2019) .................................................................................................... 5
`
`Defs. of Wildlife v. Chertoff,
`527 F.Supp.2d 119 (D.D.C. 2007) ............................................................................................ 12
`
`
`
` ii
`
`
`

`

`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 4 of 22
`
`Dep’t of Commerce v. New York,
`139 S.Ct. 2551 (2019) ..................................................................................................... 8, 12, 13
`
`FDA v. Brown & Williamson Tobacco Corp.,
`529 U.S. 120 (2000) .................................................................................................................... 9
`
`Fox Ins. Co. v. Sebelius,
`381 F. App’x 93 (2d Cir. 2010) ................................................................................................... 3
`
`Fresno Cmty. Hosp. & Med. Ctr. v. Azar,
`370 F.Supp.3d 139 (D.D.C. 2019) .............................................................................................. 6
`
`Furlong v. Shalala,
`238 F.3d 227 (2d Cir. 2001) ........................................................................................................ 3
`
`Heckler v. Ringer,
`466 U.S. 602 (1984) .................................................................................................................... 2
`
`Jordan v. U.S. Dep’t of Justice,
`591 F.2d 753 (D.C. Cir. 1978) .................................................................................................. 10
`
`Mack Trucks, Inc. v. EPA,
`682 F.3d 87 (D.C. Cir. 2012) ...................................................................................................... 7
`
`Motor Vehicle Mfrs. Ass’n of U.S., Inc. v. State Farm Mut. Auto. Ins. Co.,
`463 U.S. 29 (1983) .................................................................................................................... 11
`
`National Athletic Trainers’ Ass’n v. HHS,
`455 F.3d 500 (5th Cir. 2006) ....................................................................................................... 3
`
`North Oaks Med. Ctr., LLC v. Azar,
`2020 WL 1502185 (E.D. La. Mar. 25, 2020) .............................................................................. 6
`
`NRDC v. NHTSA,
`894 F.3d 95 (2d Cir. 2018) .......................................................................................................... 7
`
`Palmieri v. Lynch,
`392 F.3d 73 (2d Cir. 2004) ........................................................................................................ 11
`
`Paroline v. United States,
`572 U.S. 434 (2014) .................................................................................................................... 9
`
`Pavano v. Shalala,
`95 F.3d 147 (2d Cir. 1996) .......................................................................................................... 3
`
`Purdue Univ. v. Scalia,
`2020 WL 7340156 (D.D.C. Dec. 14, 2020) ................................................................................ 7
`
`
`
` iii
`
`
`

`

`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 5 of 22
`
`Ralls Corp. v. CFIUS,
`758 F.3d 296 (D.C. Cir. 2014) .................................................................................................... 5
`
`Republic of Iraq v. Beaty,
`556 U.S. 848 (2009) .................................................................................................................. 12
`
`Saget v. Trump,
`345 F.Supp.3d 287 (E.D.N.Y. 2018) ........................................................................................... 6
`
`Seila Law LLC v. Consumer Fin. Prot. Bureau,
`140 S. Ct. 2183 (2020) .............................................................................................................. 13
`
`Shalala v. Ill. Council on Long Term Care, Inc.,
`529 U.S. 1 (2000) .................................................................................................................... 2, 3
`
`Sharkey v. Quarantillo,
`541 F.3d 75 (2d Cir. 2008) .......................................................................................................... 6
`
`Sw. Airlines Co. v. TSA,
`554 F.3d 1065 (D.C. Cir. 2009) .................................................................................................. 4
`
`Turecamo v. Comm’r,
`554 F.2d 564 (2d Cir. 1977) ........................................................................................................ 2
`
`United States v. Windsor,
`570 U.S. 744 (2013) .................................................................................................................... 8
`
`Util. Air Regul. Grp. v. EPA,
`573 U.S. 302 (2014) .................................................................................................................. 11
`
`Yale New Haven Hosp. v. Azar,
`409 F.Supp.3d 3 (D. Conn. 2019) ............................................................................................... 6
`
`Constitutional Provisions, Statutes, and Rules
`
`U.S. Const. art. II, §3 ...................................................................................................................... 9
`
`42 U.S.C. §405(h) ........................................................................................................................... 2
`
`42 U.S.C. §1315a(b)(2)(A) ........................................................................................................... 10
`
`42 U.S.C. §1315a(d)(2) ............................................................................................................... 4, 6
`
`42 U.S.C. §1395ii............................................................................................................................ 2
`
`42 U.S.C. §1395nn(i)(3) ................................................................................................................. 6
`
`42 U.S.C. §1395w-3a .................................................................................................................... 12
`
`
`
` iv
`
`
`

`

`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 6 of 22
`
`85 Fed. Reg. 59649 (Sept. 13, 2020) ............................................................................................ 13
`
`85 Fed. Reg. 76180 (Nov. 27, 2020)................................................................................... 8, 10, 12
`
`Other Authorities
`
`Remarks by President Trump on Delivering Lower Prescription Drug Prices
`for All Americans (Nov. 20, 2020), https://www.whitehouse.gov/briefings-
`statements/remarks-president-trump-delivering-lower-prescription-drug-prices-americans .... 13
`
`Trump Administration Announces Prescription Drug Payment Model to Put
`American Patients First (Nov. 20, 2020), https://www.hhs.gov/about/news/2020/11/20/
`trump-administration-announces-prescription-drug-payment-model-to-put-american-
`patients-first.html ........................................................................................................................ 9
`
`
`
`
`
`
`
`
`
` v
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`

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`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 7 of 22
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`
`
`INTRODUCTION
`
`In the government’s view, the executive can unilaterally promulgate a “transformative”
`
`regulation that will “completely restructure the prescription drug market,” affecting millions of
`
`Americans and nearly $100 billion in commerce, without the congressional authorization it
`
`specifically sought and without notice and comment on the front end or judicial review on the back
`
`end. That is not our system of government, which disclaims executive fiat in favor of separated
`
`powers and checks and balances. Perhaps not surprisingly, the government’s extraordinary
`
`arguments fail at every turn. The government invokes inapposite restrictions on judicial review
`
`that apply only to different subchapters and different kinds of challenges. On the merits, it
`
`dismisses representations by the Solicitor General and the President, ignores the lengthy delay and
`
`felt need for congressional authorization or at least notice and comment that preceded the MFN
`
`Rule’s promulgation, insists that the Section 1115A mousehole for “testing” “models” authorizes
`
`the elephantine MFN Rule, and brushes aside the rule’s procedural, substantive, and constitutional
`
`flaws. And it contests Regeneron’s irreparable harm only by ignoring circuit law and complaining
`
`that Regeneron
`
` The
`
`simple reality is that the executive cannot accomplish “transformative” changes that inflict obvious
`
`and irreparable harm on the governed without statutory authority, notice and comment, or judicial
`
`review. The government’s opposition confirms that the MFN Rule is a massive overreach and that
`
`Regeneron is entitled to immediate relief.
`
`ARGUMENT
`
`I.
`
`REGENERON’S CLAIMS ARE NOT BARRED FROM JUDICIAL REVIEW.
`
`A.
`
`The Medicare Statute Does Not Preclude Regeneron’s Claims.
`
`The government first contends that 42 U.S.C. §§405, 1395ii preclude this Court’s review.
`
`That argument fails three times over.
`
`
`
`

`

`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 8 of 22
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`First, those provisions apply to different subchapters and are simply inapplicable here. In
`
`relevant part, 42 U.S.C. §405(h) provides that “[n]o action against the United States, the
`
`Commissioner of Social Security, 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,” i.e., subchapter II
`
`of the Social Security Act. In turn, 42 U.S.C. §1395ii provides that §405(h) “shall also apply with
`
`respect to this subchapter,” with “this subchapter” referring to subchapter XVIII. 42 U.S.C.
`
`§1395ii (emphasis added). But Regeneron’s claims do not “aris[e] under” subchapter XVIII (or,
`
`even more obviously, subchapter II). As the government correctly acknowledges, Regeneron
`
`“challenges agency action taken under 42 U.S.C. § 1315a.” Opp.7. Section 1315a, however is
`
`located not in subchapter XVIII but in subchapter XI. The government attempts to elide this
`
`problem by asserting that §1315a is “indisputably part of the Medicare statute,” id., but that is both
`
`wrong and irrelevant. The “Medicare statute” is, in fact, subchapter XVIII, not subchapter XI. See
`
`Turecamo v. Comm’r, 554 F.2d 564, 566 n.1 (2d Cir. 1977) (describing the “Medicare statutory
`
`framework” as “Subchapter XVIII of the Social Security Act”). But there is no need to explore
`
`the metaphysical depths of what constitutes the “Medicare statute” when the text refers to “this
`
`subchapter,” i.e., subchapter XVIII, and §1315a lies in a different subchapter. The government’s
`
`lead jurisdictional argument is thus fatally flawed.1
`
`Second, even if the channeling provisions of §§405(h), 1395ii were applicable here, they
`
`would not apply to Regeneron’s claims, because they channel claims to a reimbursement process
`
`that Regeneron cannot access. Section 405 “provides for judicial review of reimbursement
`
`decisions” and “requires that claimants first exhaust their administrative remedies.” Council for
`
`
`1 The cases the government invokes, like Heckler v. Ringer, 466 U.S. 602 (1984), and Shalala v. Ill. Council on Long
`Term Care, Inc., 529 U.S. 1 (2000), suffer from the same wrong-subchapter problem. The government briefly cites
`42 U.S.C. §1395ff, but that section applies only to appeals from an “initial determination with respect to benefits,”
`which does not remotely describe this case.
`
`
`
` 2
`
`
`

`

`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 9 of 22
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`Urological Interests v. Sebelius, 668 F.3d 704, 705 (D.C. Cir. 2011). But Regeneron cannot seek
`
`reimbursement and has no administrative remedies to exhaust. It is a pharmaceutical
`
`manufacturer, and the statute “permit[s] non-providers to seek immediate review in federal court.”
`
`Id. at 711.2 Indeed, the government’s own authority provides that where a party (like Regeneron)
`
`cannot avail itself of Medicare’s administrative review mechanisms and brings a “challenge[] to
`
`agency policy,” the claims “fall outside the scope of section 405(h).” Furlong v. Shalala, 238 F.3d
`
`227, 230, 234 (2d Cir. 2001); see also, e.g., Baxter Healthcare Corp. v. Weeks, 643 F.Supp.2d 111,
`
`115-16 (D.D.C. 2009) (permitting pharmaceutical manufacturer’s challenge notwithstanding
`
`§405(h), where manufacturer “could not access HHS’ administrative review process”).3
`
`Third, even if Regeneron had administrative remedies to exhaust, the requirement to
`
`exhaust them would not be absolute. Exhaustion is excused when the plaintiff can show “(1) that
`
`the claim is collateral to a demand for benefits; (2) that exhaustion would be futile; and (3) that
`
`plaintiffs would suffer irreparable harm if required to exhaust administrative remedies.” Pavano
`
`v. Shalala, 95 F.3d 147, 150 (2d Cir. 1996). Here, Regeneron’s claim is “collateral to a demand
`
`for benefits”; indeed, Regeneron does not even have a “demand for benefits” but is “challenging
`
`the validity of agency regulations.” Id. Exhaustion would plainly be “futile,” as Defendants are
`
`not going to invalidate their own rule in an administrative process. And Regeneron faces imminent
`
`and irreparable harm, see Mem.20-24; pp.14-15, infra, so it need not endure the “incontrovertibly
`
`grotesque,” “ten-year backlog” of the Medicare reimbursement administrative process,
`
`Cumberland Cnty. Hosp. Sys., Inc. v. Burwell, 816 F.3d 48, 49-50 (4th Cir. 2016).
`
`
`2 The government’s cases, by contrast, involve a “provider,” Fox Ins. Co. v. Sebelius, 381 F. App’x 93, 95 (2d Cir.
`2010), or “claimant” seeking review of a “Medicare determination,” Pavano v. Shalala, 95 F.3d 147, 150 (2d Cir.
`1996); see also Ill. Council, 529 U.S. at 18 (“Medicare patients” and “Medicare providers” must seek agency review).
`3 National Athletic Trainers’ Ass’n v. HHS, 455 F.3d 500 (5th Cir. 2006), is not to the contrary. That out-of-circuit
`precedent simply viewed “physicians that employ athletic trainers” as an “adequate proxy” for the trainers “in the
`administrative review process.” Id. at 504-05. No comparable relationship exists between physicians and Regeneron.
`
`
`
` 3
`
`
`

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`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 10 of 22
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`B.
`
`Section 1115A(d)(2) Does Not Strip this Court of Jurisdiction.
`
`As a fallback, the government claims that Section 1115A(d)(2) bars this Court’s review.
`
`That provision states, in relevant part, that “[t]here shall be no … judicial review” of “the selection
`
`of models for testing,” “the selection of organizations, sites, or participants to test those models,”
`
`or “the elements, parameters, scope, and duration of such models.” 42 U.S.C. §1315a(d)(2). That
`
`limited provision does not begin to insulate the government from a challenge that it has not
`
`properly invoked Section 1115A at all and has violated the APA and the Constitution to boot.
`
`1. Regeneron is not quibbling about how the government is testing a model or running the
`
`kind of experiment authorized by Section 1115A. Its challenge is far more fundamental—namely,
`
`that Section 1115A, and its authorization to test limited models (and its limitations on challenges
`
`to the details of those tests), is wholly inapplicable to the kind of “transformative” change
`
`envisioned by the MFN Rule. To invoke the judicial review limits of Section 1115A when the
`
`principal thrust of the challenge is that Section 1115A is inapplicable is a non sequitur. Not
`
`surprisingly, courts have consistently permitted challenges like this in the face of judicial review
`
`prohibitions, on the basis that “[i]f a no-review provision shields particular types of administrative
`
`action, a court … must determine whether the challenged agency action is of the sort shielded from
`
`review.” Amgen, Inc. v. Smith, 357 F.3d 103, 113 (D.C. Cir. 2004). Put differently, as the D.C.
`
`Circuit recently explained, “the jurisdiction-stripping provision does not apply if the agency’s
`
`action fails to qualify as the kind of action for which review is barred.” Am. Hosp. Ass’n v. Azar,
`
`964 F.3d 1230, 1238 (D.C. Cir. 2020). In such instances, “if the court finds that the agency has
`
`acted outside the scope of its statutory mandate,” it “ha[s] jurisdiction.” Id. As “a practical
`
`matter,” therefore, the merits and the jurisdiction questions “merge[],” and thus “the court can
`
`simply skip to the merits question in its analysis.” Id.; see also Sw. Airlines Co. v. TSA, 554 F.3d
`
`1065, 1071 (D.C. Cir. 2009); COMSAT Corp. v. FCC, 114 F.3d 223, 226-27 (D.C. Cir. 1997).
`
`
`
` 4
`
`
`

`

`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 11 of 22
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`The government does not even acknowledge this line of cases, and the government’s lead
`
`case recognizes this caselaw and distinguishes it from the decisions on which the government
`
`relies (which involve challenges where the statute and its judicial review restriction concededly
`
`apply). See DCH Reg’l Med. Ctr. v. Azar, 925 F.3d 503, 510 (D.C. Cir. 2019). The more apposite
`
`subsequent authority does the same. See Am. Hosp. Ass’n, 964 F.3d at 1238-39 (distinguishing
`
`cases, including DCH, involving “judicial review of agency action for alleged statutory violations
`
`even when a statute precludes review”). Accordingly, before the government can invoke Section
`
`1115A(d)(2) here, this Court must first determine whether the MFN Rule is a “test” of a “model”
`
`consistent with Congress’ intent and principles of constitutional avoidance.4
`
`2. Even if Section 1115A limited judicial review, it would not preclude review of
`
`Regeneron’s constitutional and procedural claims. Foreclosing judicial review of constitutional
`
`claims requires “the clearest evocation of congressional intent.” Ralls Corp. v. CFIUS, 758 F.3d
`
`296, 308 (D.C. Cir. 2014). There is no such “clear and convincing evidence” here, id. at 311, and
`
`the government does not pretend otherwise. It does not even attempt to grapple with that
`
`requirement, instead blithely suggesting that it is somehow “reasonable” to include constitutional
`
`claims within the scope of the review bar because Congress “broadly precluded all judicial review
`
`related to the selection and scope of models under the statute.” Opp.11. Unsurprisingly, that idea
`
`is unsupported by any citation, and the idea that the executive could discriminate on the basis of
`
`race or religion in its modeling without a judicial reckoning is unfathomable. There is no basis for
`
`a different rule when the government engages in retaliation forbidden by the First Amendment or
`
`evades the strictures of Art. I §7. Those constitutional challenges must be confronted on the merits.
`
`
`4 Even the government’s description of its own line of cases is incomplete. The D.C. Circuit has held that “the case
`law in this circuit is clear that judicial review is available when an agency acts ultra vires.” Aid Ass’n for Lutherans
`v. USPS, 321 F.3d 1166, 1173 (D.C. Cir. 2003). Thus, “[w]hen an executive acts ultra vires, courts are normally
`available to reestablish the limits on his authority,” even if a “statute[] preclude[s] judicial review.” Id.
`
`
`
` 5
`
`
`

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`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 12 of 22
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`3. The same goes for Regeneron’s challenge to forgoing notice-and-comment rulemaking.
`
`See Opp.12-13. Section 1115A(d)(2) bars review of certain substantive matters, such as “the
`
`selection of models,” “sites, or participants to test those models,” and “the elements, parameters,
`
`scope, and duration of such models.” 42 U.S.C. §1315a(d)(2). Nothing in that language even
`
`purports to bar a claim that CMS violated notice-and-comment requirements or to make CMS’
`
`compliance with the APA optional. That silence is compelling given that “statutory limitations on
`
`judicial review of agency action should be interpreted narrowly in light of the APA’s strong
`
`presumption in favor of judicial review.” Sharkey v. Quarantillo, 541 F.3d 75, 84 (2d Cir. 2008).
`
`Rather than square its argument with the statute’s text, the government asserts that in the
`
`“Medicare context,” any “distinction between procedural and substantive challenges is irrelevant.”
`
`Opp.12. But there is no “Medicare” exception to the rules of statutory interpretation or judicial
`
`review. Indeed, courts considering challenges to Medicare policies have concluded that “review
`
`of the promulgation of the Secretary’s rules and policies [is] separate from the substance of any
`
`such rules or policies.” Yale New Haven Hosp. v. Azar, 409 F.Supp.3d 3, 15 (D. Conn. 2019).5
`
`Congress, moreover, knows how to bar review of procedural claims “but did not include such
`
`language in this preclusion statute.” Id. (citing 42 U.S.C. §1395nn(i)(3)). And Congress routinely
`
`carves out procedural claims from preclusion statutes. See, e.g., Saget v. Trump, 345 F.Supp.3d
`
`287, 295 (E.D.N.Y. 2018). Try as it might, the government cannot evade confronting the merits.
`
`II.
`
`REGENERON IS EXCEEDINGLY LIKELY TO PREVAIL ON THE MERITS.
`
`A.
`
`The MFN Rule Was Promulgated Without Notice and Comment.
`
`The government does not dispute that the good-cause exception is “meticulous and
`
`
`5 See also North Oaks Med. Ctr., LLC v. Azar, 2020 WL 1502185, at *9 (E.D. La. Mar. 25, 2020) (“Contrary to the
`Secretary’s position, it is possible to allege a challenge to notice and comment requirements distinct from a precluded
`challenge to the Secretary’s estimates.”); Fresno Cmty. Hosp. & Med. Ctr. v. Azar, 370 F.Supp.3d 139, 157-58 (D.D.C.
`2019) (review bar does not extend to “alleg[ations] that the Secretary violated the APA”).
`
`
`
` 6
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`
`

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`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 13 of 22
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`demanding,” “narrowly construed,” and “reluctantly countenanced.” Mem.8-9. Nor can it deny
`
`that a more modest version of the rule was subject to notice and comment years ago or that the
`
`rule has a long transition period. It nevertheless insists that it has satisfied the “exacting standards”
`
`for good cause. NRDC v. NHTSA, 894 F.3d 95, 114 (2d Cir. 2018). But it makes an especially
`
`curious argument in support of that claim, affirmatively disclaiming any contention that notice and
`
`comment would have been “impracticable”—i.e., that an “emergency situation[]” warranted
`
`immediate implementation of the MFN Rule, id.—and instead resting on the “public interest”
`
`exception. Opp.16. The government’s choice likely reflects that, in the past several weeks alone,
`
`multiple courts have rejected government arguments that COVID-19 makes notice and comment
`
`“impracticable.” See, e.g., Purdue Univ. v. Scalia, 2020 WL 7340156, at *6-10 (D.D.C. Dec. 14,
`
`2020); Chamber of Commerce v. DHS, 2020 WL 7043877, at *1-2 (N.D. Cal. Dec. 1, 2020). But
`
`the government’s Plan B fares no better. The “public interest” condition is met only “in the rare
`
`circumstance when ordinary procedures—generally presumed to serve the public interest—would
`
`in fact harm that interest.” NHTSA, 894 F.3d at 114 (quoting Mack Trucks, Inc. v. EPA, 682 F.3d
`
`87, 95 (D.C. Cir. 2012)). “[F]or the exception to apply, the use of notice and comment must
`
`actually harm the public interest.” Id. The only “recognized permissible use” of the “public
`
`interest” prong “is when the notice would enable manipulation,” such that “surprise to the parties
`
`is necessary.” Id. at 114 n.13. The idea that a rule contemplated for years and phased in over
`
`several more could satisfy that standard is a non-starter.
`
`The government makes no real attempt to satisfy these requirements, and instead invokes
`
`a passing statement in NHTSA, where the court, when discussing the public-interest prong and
`
`finding it inapplicable, noted that “[t]his is not a situation of acute health or safety risk requiring
`
`immediate administrative action.” Id. at 115. That stray reference is not enough to conflate the
`
`
`
` 7
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`
`

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`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 14 of 22
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`“impracticability” and “public-interest” prongs or to transplant “emergency” considerations that
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`NHTSA itself recognized are properly understood as part of the “impracticability” prong into the
`
`“public-interest” prong. And even if it were, those considerations still would not suffice to turn
`
`the pandemic into an excuse for dispensing with orderly and fair administrative proceedings. In
`
`fact, neither Defendants nor the President ever invoked COVID-19 (declared a national emergency
`
`eight months earlier) as a reason for the rule—including the “new surge” that warranted literally
`
`one sentence in the MFN Rule (and not a peep during the lengthy remarks accompanying the rule’s
`
`issuance). See 85 Fed. Reg. 76180, 76249 (Nov. 27, 2020).6 And even that sentence was qualified:
`
`CMS stated that the “new surge” in cases “may lead to additional hardship.” Id. (emphasis added).
`
`And to put the cherry on the pretextual sundae, the rule actually exempts the one class of treatments
`
`actually designed to treat COVID-19. See id. at 76191. This is the exact sort of “mismatch” that
`
`defeats resort to the good-cause exception. Chamber of Commerce, 2020 WL 7043877, at *10.
`
`The MFN Rule Lacks Statutory Authorization.
`
`B.
`1. The United States just told the Supreme Court that the entire Affordable Care Act
`
`(ACA) is invalid and of no effect, including Section 1115A. Thus, unless the government wants
`
`to disclaim the Solicitor General’s argument or concede that it is unlikely to succeed, it cannot
`
`dispute that Regeneron is likely to prevail here. Burying its response in a footnote, see Opp.19
`
`n.6, the government never denies that the Solicitor General’s success would doom the rule; instead,
`
`it observes that “statutes are declared invalid by courts, not positions taken in parties’ legal briefs”
`
`and that “the Executive Branch continues to operate under the [ACA] while challenges to it are
`
`being litigated.” Id. (citing United States v. Windsor, 570 U.S. 744 (2013)). Defendants, however,
`
`are not merely enforcing a statute, as in Windsor; they are using statutory authority to create a
`
`
`6 In fact, the government ignores all of the history preceding the MFN Rule’s promulgation, effectively asking this
`Court to “exhibit a naiveté” it need not indulge. Dep’t of Commerce v. New York, 139 S.Ct. 2551, 2575 (2019).
`
`
`
` 8
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`Case 7:20-cv-10488-KMK Document 40 Filed 12/18/20 Page 15 of 22
`
`brand-new “transformative” regime. Moreover, the executive plainly has a duty to “take Care that
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`the Laws be faithfully executed,” U.S. Const. art. II, §3, and does not need to wait for a judicial
`
`ruling to decline to enforce an unconstitutional or invalid law. At a minimum, given the
`
`government’s view that the entire ACA, including the authority for the MFN Rule, is invalid, the
`
`government cannot dispute that Regeneron has at least raised a “serious question[] going to the
`
`merits” of the MFN Rule. Benihana, Inc. v. Benihana of Tokyo, LLC, 784 F.3d 887, 895 (2d Cir.
`
`2015).7 And when it comes time to balance the equities, the government’s view, as represented to
`
`the Supreme Court, that the statute on which the MFN Rule rests is invalid cannot be ignored.
`
`2. The “transformative” MFN Rule does not set forth a “model” that can be “tested” as
`
`contemplated by

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