Case 7:20-cv-10488-KMK Document 45 Filed 12/30/20 Page 1 of 30
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`UNITED STATES DISTRICT COURT
`SOUTHERN DISTRICT OF NEW YORK
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`No. 20-CV-10488 (KMK)
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`OPINION & ORDER
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`REGENERON PHARMACEUTICALS, INC.,
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`UNITED STATES DEPARTMENT OF HEALTH
`AND HUMAN SERVICES, et al.,
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`v.
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`Plaintiff,
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`Defendants.
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`Appearances
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`George W. Hicks, Jr., Esq.
`Paul D. Clement, Esq.
`Daniel Ryan Cellucci, Esq.
`Robert Allen, Esq.
`Kirkland & Ellis LLP
`Washington, DC
`New York, NY
`Counsel for Plaintiff
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`Lisa Newman, Esq.
`Department of Justice
`Washington, DC
`Counsel for Defendants
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`Meredythe Medford Ryan, Esq.
`Ropes & Gray LLP
`New York, NY
`Counsel for Amicus Curiae American Society of Clinical Oncology
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`KENNETH M. KARAS, United States District Judge:
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`Regeneron Pharmaceuticals, Inc. (“Regeneron” or “Plaintiff”) brings this Action seeking
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`declaratory and injunctive relief against the United States Department of Health and Human
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`Services (“HHS”), Alex M. Azar II, in his official capacity as Secretary of HHS (“Azar” or the
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`“Secretary”), the Centers for Medicare & Medicaid Services (“CMS”), and Seema Verma, in her
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`Case 7:20-cv-10488-KMK Document 45 Filed 12/30/20 Page 2 of 30
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`official capacity as Administrator of CMS (“Verma” or the “Administrator”; collectively
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`“Defendants”). Before the Court is an Order to Show Cause regarding Plaintiff’s application for
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`a preliminary injunction enjoining application of the Most Favored Nation Rule, 85 Fed. Reg.
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`76,180 (“MFN Rule”), to its drug EYLEA (aflibercept) Injection (“EYLEA”). (Order to Show
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`Cause for Preliminary Injunction, Temporary Restraining Order, and Expedited Briefing
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`Schedule (“OSC”) (Dkt. No. 20).) For the reasons that follow, Plaintiff’s application for a
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`preliminary injunction is granted.
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`I. Background
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`On November 20, 2020, CMS released the Most Favored Nation (“MFN”) Rule. Most
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`Favored Nation Model, 85 Fed. Reg. 76,180 (Nov. 20, 2020) (to be codified at 42 C.F.R. pt.
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`513). “The MFN Model aims to take a global approach to calculating Medicare Part B drug
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`payment amounts, by testing a new payment methodology that [1] takes into account the
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`discounts that other countries enjoy [(the “MFN Price” component)]], and [2] pays providers and
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`suppliers with a fixed add-on amount that does not reward the use of higher cost drugs [(the
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`“alternative add-on payment” component)].” Id. at 76, 181. The MFN Rule was promulgated
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`based on Section 1115A of the Social Security Act (“Section 1115A”), which allows CMS,
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`through the Center for Medicare & Medicaid Innovation (“CMI”) to “test payment and service
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`delivery models.” Id. at 76, 250; 42 U.S.C. § 1315a. This “test” will be in effect for seven years,
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`with the MFN Price component phased in over the first three. 42 C.F.R. § 513.210(b)(8).
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`Targeting some of Medicare Part B’s top drug expenditures, the MFN Rule will apply to the top
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`50 drugs by aggregate allowed Medicare Part B charges (the “MFN Drugs”). Id. at § 513.130(a).
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`Subject to certain exclusions, id. at § 513.130(b), participation is required for all providers and
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`suppliers that submit a claim for an MFN Drug, id. at § 513.100(b). CMS did not follow notice
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`Case 7:20-cv-10488-KMK Document 45 Filed 12/30/20 Page 3 of 30
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`and comment procedures prior to promulgating the MFN Rule. See 5 U.S.C. § 553(b) & (c).
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`Instead, it found that there was good cause to dispense with the notice and comment requirement
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`of the Administrative Procedures Act (“APA”), supposedly due to the risks of high drug prices
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`and the COVID-19 pandemic. 85 Fed. Reg. 76,248–76,249.
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`In announcing the MFN Rule, the President stated that it will “transform the way the U.S.
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`government pays for drugs.” Remarks by President Trump on Delivering Lower Prescription
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`Drug Prices for All Americans (Nov. 20, 2020), https://www.whitehouse.gov/briefings-
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`statements/remarks-president-trump-delivering-lower-prescription-drug-prices-americans/
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`(“MFN Announcement”). The President said that prior drug price reductions were “peanuts
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`compared to what we’ve done with [most] favored nations,” and that the MFN rule is “probably
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`the biggest story that we’ve ever had relative to drug prices.” Id. He further said “[n]obody has
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`ever done this” and “there’ll never be anything like this.” Id. He indicated that “we’re talking
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`about savings of 50, 60, 70 percent, 80 percent.” Id. Indeed, CMS estimates that the MFN Rule
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`will save more than $85 billion for Medicare Part B, and $28.5 billion for beneficiaries. 85 Fed.
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`Reg. 76,181.
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`In the same comments, the President indicated that the MFN Rule had been under
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`consideration for at least two years. He stated that the MFN Rule “is something that has been
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`talked about for many years, but nobody had the courage to do it.” MFN Announcement. He
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`also said that it “took a long time before we were able to do this because, statutorily, we had to
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`go through a process.” Id. He said the gap between U.S. and foreign prices has existed “for
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`years,” and “[w]e’ve been working on [the MFN Rule] for two years.” Id. The Secretary echoed
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`these comments, stating that he and the President “came up with the idea for Most Favored
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`Nations status” at “the very first meeting we had in the Oval Office” after he became Secretary
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`in January 2018. Id. While the Secretary noted a recent application for approval of a vaccine,
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`neither he nor the President discussed the role of the MFN Rule in responding to the COVID-19
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`pandemic. Id.
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`The regulatory record reflects this two-year history. On October 30, 2018, CMS issued
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`an advance notice of proposed rulemaking (the “ANPRM”). Medicare Program; International
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`Pricing Index Model for Medicare Part B Drugs, 83 Fed. Reg. 54,546 (Oct. 30, 2018). The
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`ANPRM noted that U.S. drug acquisition costs exceed those of other developed countries, and
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`that this leads to “unnecessary, potentially avoidable costs for Part B drugs.” Id. at 54,550. It
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`proposed an International Pricing Index model, which was to be tested in “selected geographic
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`areas” pursuant to 42 U.S.C. § 1315a. Id. at 54,547. The ANPRM did not comply with the
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`notice and comment requirements of 5 U.S.C. § 553(b) & (c). Instead, CMS promised that it
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`“would implement [the model] through notice and comment rulemaking,” id. at 54,550, and that
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`“interested parties will also be provided an opportunity to comment on such information through
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`subsequent proposed and final rulemaking documents,” id. at 54,561.
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`On July 27, 2020, 21 months later, the President announced four executive orders focused
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`on drug prices. See Congress Didn’t Act on Prescription Drug Prices. So President Trump Did.
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`(July 27, 2020), https://www.whitehouse.gov/articles/congress-didnt-act-on-prescription-drug-
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`prices-so-president-trump-did/ (“Order Announcement”). The text of this Executive Order was
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`released nearly two months later, on September 13, 2020. Exec. Order No. 13,948, Executive
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`Order on Lowering Drug Prices by Putting America First (Sep. 13, 2020),
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`https://www.whitehouse.gov/presidential-actions/executive-order-lowering-drug-prices-putting-
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`america-first-2/ (“MFN Order”); see also Exec. Order No. 13,947, Lowering Drug Prices by
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`Putting America First (July 24, 2020), https://www.govinfo.gov/content/pkg/DCPD-
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`202000674/html/DCPD-202000674.htm (noting the Sep. 13, 2020 release date for this Executive
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`Order, which resembles and was superseded by the MFN Order). The MFN Order directed the
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`Secretary to “immediately take appropriate steps to implement his rulemaking plan to test a
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`payment model pursuant to which Medicare would pay, for certain high-cost prescription drugs
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`and biological products covered by Medicare Part B, no more than the most-favored-nation
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`price.” Id. It defined the “most-favored-nation price” as “the lowest price . . . for a
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`pharmaceutical product that the drug manufacturer sells in a member country of the Organisation
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`for Economic Co-operation and Development (OECD) that has a comparable per-capita gross
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`domestic product.” Id.
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`Plaintiff alleges, and Defendants do not refute, that EYLEA is among the 50 drugs
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`covered by the MFN Rule, (Compl. ¶ 62 (Dkt. No. 1); Decl. of Richard O’Neal in Supp of
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`Proposed OSC (“O’Neal Decl.”) ¶ 16 (Dkt. Nos. 13)), and that the MFN Rule will reduce
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`revenue from EYLEA and cause Plaintiff substantial financial harm, (O’Neal Decl. ¶¶ 21–33).
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`Plaintiff filed its Complaint on December 11, 2020. (Compl.). Since the MFN Rule will
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`take effect on January 1, 2021, 42 C.F.R. § 513.1(c), Plaintiff immediately petitioned for
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`emergency relief, including a preliminary injunction, (Proposed OSC (Dkt. No. 11); Decl. of
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`Robert Allen in Supp. of OSC (“Allen Decl.”) (Dkt. No. 12); O’Neal Decl.; Mem. of Law in
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`Supp. of OSC (“Pl.’s Mem.”) (Dkt. Nos. 14)).1
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`Also on December 11, 2020, the Court entered an Order to Show Cause, which
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`established an expedited briefing schedule in light of the January 1 implementation date.
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`1 Plaintiff also submitted a motion to seal portions of its memorandum and the O’Neal
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`Declaration. (Not. of Pl.’s Mot. for Leave to File Under Seal (Dkt. No. 8); Decl. of Daniel
`Cellucci in Supp. of Pl.’s Mot for Leave to File Under Seal (Dkt. No. 9).)
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`Case 7:20-cv-10488-KMK Document 45 Filed 12/30/20 Page 6 of 30
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`(OSC.)2 Defendants submitted their opposition on December 16, 2020. (Defs.’ Opp. to Pl.’s
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`Mot. for TRO and Prelim. Injunctive Relief (“Defs.’ Mem.”) (Dkt. No. 33).) Plaintiff submitted
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`its reply on December 18, 2020. (Reply in Supp. of OSC (Dkt. No. 40); see also Dkt. No. 39
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`(unredacted version).) On the same date, Amicus Curiae American Society of Clinical Oncology
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`(“Amicus”) filed its brief. (Dkt. No. 37.) The Court held oral argument on December 22, 2020.
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`(See Dkt. (minute entry for Dec. 22, 2020).) The following day, a court in the District of
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`Maryland issued a temporary restraining order, which prevented the Government from
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`implementing the MFN Rule for 14 days. (See Order (Dkt. No. 44, Ass’n of Cmty. Cancer Ctrs.
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`v. Azar, 20-CV-3531 Dkt. (D. Md.)).) On December 28, 2020, a court in the Northern District of
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`California issued an order (the “California Order”) vacating the MFN Rule nationwide “pending
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`completion of the notice and comment process.” (See Order Granting Mot. for Prelim. Inj. (Dkt.
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`No. 50, Cal. Life Scis. Ass’n v. Cntr. for Medicare and Medicaid Servs., 20-CV-8603 Dkt. (N.D.
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`Cal.)).)
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`II. Discussion
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`“A preliminary injunction is an extraordinary remedy never awarded as of right.” Winter
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`v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008); see also Mazurek v. Armstrong, 520
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`U.S. 968, 972 (1997) (“[A] preliminary injunction is an extraordinary and drastic remedy, one
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`that should not be granted unless the movant, by a clear showing, carries the burden of
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`persuasion.” (emphasis and quotation marks omitted)). “Preliminary injunctive relief is designed
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`to preserve the status quo and prevent irreparable harm until the court has an opportunity to rule
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`on the lawsuit’s merits.” Williams v. Rosenblatt Sec., Inc., 136 F. Supp. 3d 593, 616 n.11
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`2 The Court also granted Plaintiff’s motion to seal portions of its submission, (Dkt. No.
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`23), and Plaintiff filed under seal unredacted copies of its memorandum and the O’Neal
`Declaration, (see Dkt. Nos. 26, 27).
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`(S.D.N.Y. 2015) (quotation marks omitted). “A party seeking a preliminary injunction must
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`demonstrate: (1) a likelihood of success on the merits or sufficiently serious questions going to
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`the merits to make them a fair ground for litigation and a balance of hardships tipping decidedly
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`in the plaintiff's favor; (2) a likelihood of irreparable injury in the absence of an injunction; (3)
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`that the balance of hardships tips in the plaintiff's favor; and (4) that the public interest would not
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`be disserved by the issuance of an injunction.” Benihana, Inc. v. Benihana of Tokyo, 784 F.3d
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`887, 895 (2d Cir. 2015) (alteration and quotation marks omitted). A preliminary injunction may
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`be “warranted on the strength of the[] first two factors alone.” New York v. U.S. Dep’t of
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`Homeland Sec., 969 F.3d 42, 86 (2d Cir. 2020). The third and fourth factors “merge when the
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`Government is the opposing party.” Nken v. Holder, 556 U.S. 418, 435 (2009).
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`The Court finds that a preliminary injunction is appropriate. Plaintiff has demonstrated
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`irreparable financial and reputational harm, a probability of success on its notice and comment
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`claim, and that the balance of hardships and public interest favor an injunction.3
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`A. Irreparable Harm
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`A showing of irreparable harm is “the single most important prerequisite for the issuance
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`of a preliminary injunction.” Faiveley Transp. Malmo AB v. Wabtec Corp., 559 F.3d 110, 118
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`(2d Cir. 2009). The “standard requires plaintiffs seeking preliminary relief to demonstrate that
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`irreparable injury is likely in the absence of an injunction.” Winter, 555 U.S. at 22. Since it is
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`“an extraordinary remedy,” preliminary injunctive relief should not be issued “based only on a
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`possibility of irreparable harm.” Id. Further, irreparable harm “is neither remote nor speculative,
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`but actual and imminent.” Faiveley Transp, 559 F.3d at 118.
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`3 Based on the emergency nature of Plaintiff’s application, the Court will discuss only
`Plaintiff’s claim regarding the notice and comment procedures required by the APA.
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`Case 7:20-cv-10488-KMK Document 45 Filed 12/30/20 Page 8 of 30
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`Plaintiff claims three types of irreparable harm, but the Court considers only two: (1)
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`unrecoverable monetary harm; and (2) reputational harm. (Pl.’s Mem. 20–24.) The Court finds
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`Plaintiff has shown irreparable harm.
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`1. Monetary Harm
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`“Monetary loss alone will generally not amount to irreparable harm . . . unless the movant
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`provides evidence of damage that cannot be rectified by financial compensation.” Borey v. Nat’l
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`Union Fire Ins. Co., 934 F.2d 30, 34 (2d Cir. 1991). However, where a plaintiff cannot recover
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`damages due to sovereign immunity, monetary loss may amount to irreparable harm. See United
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`States v. New York, 708 F.2d 92, 93 (2d Cir. 1983) (affirming the district court’s finding that
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`“[the plaintiff’s] injury was irreparable even though [its] losses were only pecuniary because a
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`suit in federal court against [the defendant,] New York[,] to recover the damages sustained by
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`the plaintiff would be barred by the Eleventh Amendment”). Here, because the APA waives
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`sovereign immunity only for “relief other than damages,” 5 U.S.C. § 702, Plaintiff cannot
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`recover its alleged financial losses.
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`Defendants cite some cases suggesting that the magnitude of the monetary harm affects
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`whether it is irreparable. One such case held that an “alleged loss of $10 million per year . . . is
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`not of sufficient magnitude in light of [the plaintiff’s] annual revenues of $100 million.”
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`ConverDyn v. Moniz, 68 F. Supp. 3d 34, 48 (D.D.C. 2014). The Ninth Circuit requires a
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`showing that the plaintiff “will lose considerable revenue.” California Pharmacists Ass’n v.
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`Maxwell-Jolly, 596 F.3d 1098, 1113–14 (9th Cir. 2010), vacated and remanded sub nom.
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`Douglas v. Indep. Living Ctr. of S. California, Inc., 565 U.S. 606 (2012). Further, the Court
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`considers only “the harm arising during the interim between the request for an injunction and
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`final disposition of the case on the merits.” Jayaraj v. Scappini, 66 F.3d 36, 40 (2d Cir. 1995).
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`Plaintiff’s uncontested declaration suggests that it will lose substantial revenue in 2021,
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`based on the MFN Rule’s methodology. (O’Neal Decl. ¶ 32.) Given the complexity of this case,
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`it is unlikely that there will be final judgment before the end of next year, so Plaintiff’s reliance
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`on lost revenue for “the entirety of 2021” is appropriate. (See Defs.’ Mem. 25.) While Plaintiff
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`is a large corporation, the magnitude of its forecast revenue losses is unquestionably
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`“considerable.” Indeed, at least three circuits have held that unrecoverable damages may be
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`irreparable harm, without reference to the amount of the loss. See Odebrecht Const., Inc. v.
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`Sec’y, Fla. Dep’t of Transp., 715 F.3d 1268, 1289 (11th Cir. 2013) (“In the context of
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`preliminary injunctions, numerous courts have held that the inability to recover monetary
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`damages because of sovereign immunity renders the harm suffered irreparable.”); Chamber of
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`Commerce v. Edmondson, 594 F.3d 742, 770–71 (10th Cir. 2010) (“Imposition of monetary
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`damages that cannot later be recovered for reasons such as sovereign immunity constitutes
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`irreparable injury.”); Iowa Utilities Bd. v. FCC, 109 F.3d 418, 426 (8th Cir. 1996) (“The threat of
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`unrecoverable economic loss . . . does qualify as irreparable harm.”). Further, these financial
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`losses result from both the MFN Price and alternative add-on payment components of the MFN
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`Rule. (Oral Arg. 51–52.) Thus, the Court finds that Plaintiff will likely suffer irreparable
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`financial loss absent a preliminary injunction.
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`2. Reputational Harm
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`A court can find irreparable harm based on “loss of reputation, good will, and business
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`opportunities.” Register.com, Inc. v. Verio, Inc., 356 F.3d 393, 404 (2d Cir. 2004). This is
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`because these damages “are difficult to establish and measure.” Id.; see also Ticor Title Ins. Co.
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`v. Cohen, 173 F.3d 63, 68–69 (2d Cir. 1999) (explaining that “it would be very difficult to
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`calculate monetary damages that would successfully redress the loss of a relationship with a
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`client that would produce an indeterminate amount of business in years to come,” and that this
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`supports a finding of irreparable harm). Courts have determined that a loss of existing business
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`and a decline in the opportunity for new business may qualify as irreparable harm. See, e.g.,
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`John E. Andrus Mem’l, Inc. v. Daines, 600 F. Supp. 2d 563, 571–72 (S.D.N.Y. 2009) (finding
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`irreparable harm due to harm to reputation where “physicians would cease” giving new business
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`to the plaintiff and existing customers “would begin seeking alternative” arrangements); Johnson
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`Controls, Inc. v. A.P.T. Critical Sys., Inc., 323 F. Supp. 2d 525, 532 (S.D.N.Y. 2004) (finding
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`irreparable harm where complained of conduct would allow competitors to “lur[e] away the
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`business of a number of [the plaintiff’s] long-term . . . clients,” and noting that “there is little
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`guarantee that, should [the plaintiff] ultimately prevail in this action, these clients would
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`return”); see also Nalco Co. v. EPA, 786 F. Supp. 2d 177, 188 (D.D.C. 2011) (finding irreparable
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`harm where “customer would be unlikely to incur voluntarily such cost and disruption a second
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`time to return to [the plaintiff’s] product,” as this would cause “the loss of long-standing clients
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`that may be unwilling, or unable, to do business with [the plaintiff]” (alteration and quotation
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`marks omitted)).
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`Plaintiff’s uncontested declaration states that it will lose existing business and new
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`customers to competitors as a result of the MFN Rule, and that these customers are unlikely to
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`return. (O’Neal Decl. ¶¶ 21–28.) Plaintiff will lose this business in part because the EYLEA
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`reimbursement rate will fall below doctors’ acquisition costs, and doctors will use alternatives.
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`(Id. at ¶¶ 23–27.) Even if Regeneron lowers the price of EYLEA, it will suffer reputational harm
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`because it will need to renegotiate contracts, while its competitors will not. (Id. at ¶ 29.) The
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`burden to renegotiate contracts is due to both the MFN Price and alternative add-on payment
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`components of the MFN Rule. (Oral Arg. 19–20, 51.) This loss of business could be difficult to
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`measure in the same way as lost business in Register.com and Ticor was difficult to measure—
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`particularly the loss of new customers. Defendants argue that “conclusory averments” of harmed
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`reputation do not suffice. (Defs.’ Mem. 26.) In the case Defendants cite, the plaintiff merely
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`recited the standard for a preliminary injunction in a declaration, which was, unsurprisingly,
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`insufficient to establish irreparable harm. Rush v. Hillside Buffalo, 314 F. Supp. 3d 477, 485
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`(W.D.N.Y. 2018) (finding overly conclusory a declaration stating “immediate and irreparable
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`injury, loss, or damage will result to [the plaintiff] and that monetary damages at a later time will
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`not adequately compensate him for injuries and damages he has sustained and is sustaining”
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`(alterations omitted)). Here, the O’Neal Declaration cogently explains why the MFN Rule will
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`cause reputational harm. (See O’Neal Decl. ¶¶ 21–28.) And the Court agrees that Mr. O’Neal is
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`qualified to offer this assessment, based on his position and experience. (Pl.’s Reply 14–15;
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`O’Neal Decl. ¶¶ 2–5.) Thus, the Court finds that Plaintiff will likely suffer irreparable
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`reputational harm absent a preliminary injunction.4
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`4 Defendants seek a stay of Plaintiff’s application, arguing that the California Order
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`undermines its claimed irreparable harm. (Dkt. No. 42.) The Court disagrees. Defendants may
`appeal the California Order. (See id. at 2 (“The Solicitor General has not determined whether to
`appeal or seek a stay pending appeal of the California Order.”).) Indeed, appeal seems likely, as
`Defendants argued both here and in the Northern District of California that universal or
`nationwide injunctions are inappropriately broad, (see Defs.’ Mem. 28–29; see also Defs.’ Opp.
`to Pls.’ Mot. for Prelim. Inj. at 20 (Dkt. No. 47, Cal. Life Scis. Ass’n, 20-CV-8603 Dkt. (N.D.
`Cal.))), and the Justice Department has taken the same position in other matters and in its internal
`litigation guidelines, (see Dkt. No. 44 at 2 (providing examples)). As a result, “the [Ninth]
`Circuit could alter the injunction at any moment,” causing Plaintiff to “sustain irreparable harm
`immediately, before the Court could decide the merits of its claims.” California v. Health &
`Human Servs., 390 F. Supp. 3d 1061, 1066 (N.D. Cal. 2019). Further, “because this Court is
`governed by the law of a different circuit, the Court cannot conclude that a stay or decision on
`the merits from the Ninth Circuit . . . would resolve this case.” Nw. Immigrant Rights Project v.
`U.S. Citizenship & Immigration Servs., No. 19-CV-3283, 2020 WL 5995206, at *31 (D.D.C.
`Oct. 8, 2020). By contrast, where courts have stayed proceedings, it has been pending decisions
`that would establish controlling authority. See Pars Equality Cntr. v. Trump, No. 17-CV-255
`(D.D.C. Mar. 2, 2018) (issuing a stay pending the Supreme Court’s review of a parallel
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`B. Probability of Success
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`“To establish a likelihood of success on the merits, a plaintiff need not show that success
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`is an absolute certainty. [It] need only make a showing that the probability of . . . prevailing is
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`better than fifty percent.” Broker Genius, Inc. v. Volpone, 313 F. Supp. 3d 484, 497 (S.D.N.Y.
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`2018) (quotation marks omitted) (citing Eng v. Smith, 849 F.2d 80, 82 (2d Cir. 1988)), appeal
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`dismissed as moot sub nom. Broker Genius Inc. v. Gainor, 756 F. App’x 81 (2d Cir. 2019). The
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`Court finds that Plaintiff has established a likelihood of success on its claim that Defendants
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`failed to comply with the APA’s notice and comment requirements. In the interest of releasing
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`this Opinion & Order expeditiously, the Court does not evaluate and takes no position on
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`Plaintiff’s probability of success on its other claims. See Forest City Daly Hous., Inc. v. Town of
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`N. Hempstead, 175 F.3d 144, 151 (2d Cir. 1999) (“[P]laintiff[] need[s] to show a likelihood of
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`success with respect to only one of [its claims].”).
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`1. Preclusion
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`Defendants argue that Plaintiff’s claims are barred from judicial review, both under the
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`Medicare Act generally, (Defs.’ Mem. 7–9), and under Section 1115A, the statute authorizing
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`CMS to test models, (id. at 9–13). The Court finds that Plaintiffs are likely to show that no
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`statute bars its review of Plaintiff’s notice and comment claim.
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`There is a “strong presumption that Congress intends judicial review of administrative
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`action.” Smith v. Berryhill, 139 S. Ct. 1765, 1776–77 (2019). “This presumption, however, may
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`preliminary injunction that the Supreme Court stayed); Hawai'i v. Trump, 233 F. Supp. 3d 850
`(D. Haw. 2017) (issuing a stay pending Ninth Circuit review of a parallel preliminary
`injunction). Finally, Defendants’ proposed approach would leave “the resolution of important
`questions . . . to a single district court and to a single circuit, losing the benefit of the ‘airing of
`competing views’ on difficult issues of national importance.” Nw. Immigrant Rights Project,
`2020 WL 5995206, at *31 (quoting Dep’t of Homeland Sec. v. New York, 140 S. Ct. 599, 600
`(2020) (Gorsuch, J., concurring)).
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`be overcome by clear and convincing indications, drawn from specific language, specific
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`legislative history, and inferences of intent drawn from the statutory scheme as a whole, that
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`Congress intended to bar review.” Cuozzo Speed Techs. v. Lee, 136 S. Ct. 2131, 2140 (2016)
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`(quotation marks omitted).
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`a. Medicare Act
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`Defendants argue that judicial review of the MFN Rule is barred under the Medicare Act
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`pursuant to 42 U.S.C. §§ 405(g), 405(h), and 1395ff. (Defs.’ Mem. 7–9.)
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`The statutory framework referenced by Defendants consists of two components. The first
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`establishes a procedure for obtaining judicial review of benefits decisions (the “Review
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`Provisions”). 42 U.S.C. §§ 405(g), 1395ff. Section 405(g) of the Social Security Act provides
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`that an individual “after any final decision” of the Secretary “made after a hearing to which he
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`was a party . . . may obtain” judicial review. 42 U.S.C. § 405(g). This provision of the Social
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`Security Act is incorporated into the Medicare Act by 42 U.S.C. § 1395ff(b)(1)(A), which states
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`that “any individual dissatisfied with any initial determination under subsection (a)(1) shall be
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`entitled to . . . judicial review of the Secretary’s final decision after such hearing as is provided in
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`section 405(g) of this title.” This provision refers to subsection (a)(1), which provides authority
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`for the Secretary to “promulgate regulations and make initial determinations with respect to
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`benefits under part A or part B.” Id. at (a)(1).
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`The second component (the “Preclusion Provision”) bars judicial review when claimants
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`do not comply with the Review Provisions. 42 U.S.C. § 405(h). Section 405(h) of the Social
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`Security Act bars “action[s] against the United States . . . brought under section 1331 or 1346 of
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`Case 7:20-cv-10488-KMK Document 45 Filed 12/30/20 Page 14 of 30
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`Title 28 to recover on any claim arising under this subchapter.”5 42 U.S.C. § 405(h). The statute
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`also states that “[n]o findings of fact or decision of the Commissioner of Social Security shall be
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`reviewed by any person, tribunal, or governmental agency except as herein provided.” Id. This
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`Social Security Act provision is incorporated into the Medicare Act by 42 U.S.C. § 1395ii, which
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`states that § 405(h) “shall . . . apply with respect to this subchapter.” The referenced subchapter
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`is Subchapter XVIII, which is the Medicare Act. See Turecamo v. Comm’r, 554 F.2d 564, 566
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`n.1 (2d Cir. 1977) (describing “Subchapter XVIII of the Social Security Act” as “[t]he Medicare
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`statutory framework”).
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`
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`Plaintiff argues that both the Review Provisions and the Preclusion Provision are
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`inapplicable. (Pl.’s Reply 2.) The Court agrees.
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`
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`The Review Provisions are inapplicable for two reasons. First, the MFN Rule does not
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`cite 42 U.S.C. § 1395ff as a source of authority. See 85 Fed. Reg. 76,250. As a result, Plaintiff’s
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`claims do not arise “under subsection (a)(1)” of § 1395ff, and Plaintiff is not bound by
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`procedural requirements specific to such claims. See 42 U.S.C. § 1395ff(b)(1)(A). Neither of
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`the sources of rulemaking authority cited in the MFN Rule similarly incorporates § 405(g). See
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`42 U.S.C. §§ 1302, 1395hh; see also 85 Fed. Reg. 76,250 (listing sources of authority for MFN
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`Rule). Second, even if Plaintiff were subject to this requirement, it applies only to “any initial
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`determination under subsection (a)(1).” Id. Subsection (a)(1) authorizes the Secretary to
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`“promulgate regulations and make initial determinations with respect to benefits under part A or
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`part B.” Id. at (a)(1). Plaintiff challenges a regulation, not an initial determination, so this
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`5 This sentence “reaches beyond ordinary administrative law principles of ripeness and
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`exhaustion of administrative remedies . . . by preventing the application of exceptions to those
`doctrines.” Shalala v. Ill. Council on Long Term Care, Inc., 529 U.S. 1, 2 (2000). Thus,
`Plaintiff’s briefing on the general exhaustion requirement, (see Pl.’s Reply 3), is not applicable to
`this sentence of the Preclusion Provision.
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`Case 7:20-cv-10488-KMK Document 45 Filed 12/30/20 Page 15 of 30
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`provision does not apply. (See Pl.’s Reply 2.) Indeed, a separate, also inapplicable provision
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`limits judicial review of regulations. Id. at (e)(1) (“A regulation or instruction that relates to a
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`method for determining the amount of payment under part B and that was initially issued before
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`January 1, 1981, shall not be subject to judicial review.”).
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`
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`The Preclusion Provision is also inapplicable. The Court considers its two relevant
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`sentences in turn. As discussed, the second sentence of § 405(h) bars review by “any . . .
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`tribunal” of any “findings of fact or decision” of the Secretary, “except as herein provided.” Id.
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`The Supreme Court has held that an “attack on [a] regulation . . . is not subject to such a
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`requirement because there is no hearing,” and the first sentence of § 405(h) contextually defines
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`“‘decision’ . . . as those determinations made by ‘the Secretary after a hearing.’” Bowen v.
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`Michigan Acad. of Family Physicians, 476 U.S. 667, 679 n.8 (1986); see also 42 U.S.C. § 405(h)
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`(“The findings and decision of the Commissioner of Social Security after a hearing shall be
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`binding . . . .”). Because the MFN Rule was not promulgated “after a hearing,” see generally 85
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`Fed. Reg. 76,180, the second sentence does not apply.
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`The third sentence of § 405(h)—which is the focus of the briefing—does not bar review
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`because it applies to Subchapter XVIII, and Plaintiff’s claim arises under Subchapter XI. As
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`discussed, the last sentence of § 405(h) bars federal courts’ jurisdiction only for “any claim
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`arising under this subchapter.” 42 U.S.C. § 405(h). And § 1395ii applies this provision only
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`“with respect to this subchapter.” 42 U.S.C. § 1395ii. Section 1395ii also is located in
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`Subchapter XVIII. By contrast, Section 1115A and the Secretary’s source of rulemaking
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`authority under Section 1115A are both located in Subchapter XI. See 42 U.S.C. §§ 1302,
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`1315a. Neither section incorporates § 405(h), id., but other provisions of Subchapter XI do, see,
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`e.g., 42 U.S.C. § 1320a-7(f)(3), suggesting that Congress did not intend § 405(h) to apply to
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`§§ 1302 or 1315a.
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`
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`At oral argument, Defendants asserted that the Supreme Court has construed the “claim
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`arising under” language broadly. (Oral Arg. 25, 32 (citing Heckler v. Ringer, 466 U.S. 602, 615
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`(1984) and Sensory Neurostimulation, Inc. v. Azar, 977 F.3d 969, 979 (9th Cir. 2020)).) But the
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`Supreme Court has not rewritten the statute, and neither will this Court. Indeed, Ringer states
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`that a