Cares Cmty. Health v. U.S. Dep't of Health & Human Servs.

346 F. Supp. 3d 121
Court of Appeals for the D.C. Circuit·Decided September 28, 2018·No. Civil Action No. 17-2774 (JEB)·Published·Cited by 2 cases

Opinion

JAMES E. BOASBERG, United States District Judge

Plaintiff Cares Community Health provides a variety of services to people in the Sacramento, California, area regardless of their ability to pay. Cares also operates a pharmacy there that offers prescription drugs under Medicare Part D, and a federal program enables Cares to procure those drugs from manufacturers at a discount. Cares, however, does not necessarily retain the benefit of that discount; rather, at least one insurance company has altered its contract with Cares to reimburse it at a discounted rate. As a result, Cares has now sued the U.S. Department of Health and Human Services and certain officials, contending that the Government has ignored a statutory duty to regulate those contracts in order to require companies to pay Cares the market rate for discounted drugs. Defendants now move to dismiss under Federal Rules of Civil Procedure 12(b)(1), 12(b)(6), and 12(b)(7). Finding that Cares has standing but has failed to state a claim, the Court will grant the Motion.

I. Background

The Court will provide some brief background on the Medicare Part D program and Federally Qualified Health Centers (FQHCs) - of which Cares is an example - before delving into the facts of this particular dispute.

A. Statutory Framework

Medicare Part D subsidizes prescription drugs for Medicare beneficiaries. See 42 U.S.C. § 1395w-101(a)(1). To administer Part D, the Centers for Medicare and Medicaid Services (CMS) contracts with private entities known as Part D plan "Sponsors." Id. § 1395w-115. The Government contracts only with those Sponsors, and not directly with pharmacies, to deliver Part D benefits. Id. § 1395w-27(a). Sponsors then enter into contracts with pharmacies to reimburse them for providing prescription drugs to Part D beneficiaries. Id. § 1395w-104(b).

FQHCs receive grants from the Government to provide health-care services to communities that HHS has designated "medically underserved." See 42 U.S.C. §§ 254b, 1396d(l)(2)(B) ; 42 U.S.C. § 1395x(aa)(4)(A)(i). FQHCs can bill CMS for providing Medicare or Medicaid services. Id. §§ 1395k(a)(2)(D)(ii), 1396a(bb)(2). In addition, they may purchase prescription drugs from manufacturers at discounted prices pursuant to the Section 340B program. See 42 U.S.C. § 256b(a)(4)(A).

At issue in this case is a statutory provision governing payment for FQHC services. To summarize, it provides that FQHCs must be paid "not less than" non-FQHC entities for Medicare services. See 42 U.S.C. § 1395w-27(e)(3)(A). CMS has *125implemented this FQHC payment requirement by promulgating regulations providing that "[t]he contract between the [Sponsor] organization and CMS must specify that ... [t]he [Sponsor] organization must pay a[n] [FQHC] a similar amount to what it pays other providers for similar services." 42 C.F.R. § 422.527(a). The dispute centers on whether this provision also applies to Part D prescription drugs.

B. Factual History

Cares is an FQHC located in Sacramento, California, providing "services to all persons within [its] designated medically underserved area ... regardless of whether those persons can pay for the services they receive." ECF No. 13 (Am. Compl.), ¶¶ 7-8. In 2009, it entered into a Pharmacy Provider Agreement with Part D plan Sponsor Humana Health Plan, Inc. Id., ¶ 34. The Agreement governed Humana's payment to Cares for any "Retail Pharmacy Services" provided to Humana's enrollees and covered all plans Humana offered, including Part D. Id. When, in December 2014, Humana proposed amending the contract to reduce the Part D payment rates for "340B pharmacy services," Cares objected. Id., ¶¶ 37-38. The parties went to arbitration, but the arbitrator concluded that "the ultimate 'legal question [of whether Humana was required to pay Cares under the pay 'not less than' standard] require[d] the reconciliation of conflicting policies' - in other words, an interpretation of federal law had to be made, which was something the Arbitrator found was not arbitratable." Id., ¶ 39.

Cares then filed this suit against HHS, its Secretary, and the CMS Administrator, claiming that they had "unlawfully withheld" agency action in violation of the APA, see 5 U.S.C. § 706(1), because they failed to "carry out [their] mandatory duty to include the [FQHC payment] requirement in contracts" with Part D plan Sponsors. See ECF No. 1 (Complaint), ¶ 58. After Defendants moved to dismiss that Complaint, contending that the § 706(1) claim was deficient because the FQHC payment requirement does not apply to Part D contracts, see ECF No. 9 (Def. First MTD) at 16-18, Cares filed the Amended Complaint. Although the Amended Complaint contains only one count, it appears to assert two distinct but related claims under the APA - one for unlawfully withheld agency action under § 706(1) and, alternatively, one for arbitrary and capricious agency action under § 706(2)(A). See Am. Compl., ¶¶ 44-50.

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Cares Cmty. Health v. U.S. Dep't of Health & Human Servs., 346 F. Supp. 3d 121 (D.C. Cir. 2018).

346 F. Supp. 3d 121 (Cares Cmty. Health v. U.S. Dep't of Health & Human Servs.) — published by Counsel Stack Legal Research, free access to 12M+ legal documents.

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