UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
) COMMUNITY ONCOLOGY ) ALLIANCE, INC. ) ) Plaintiff, ) ) v. ) Civil Action No. 18-cv-1256 (TSC) ) OFFICE OF MANAGEMENT AND ) BUDGET, et al. ) ) Defendants. ) )
MEMORANDUM OPINION
Currently pending before the court is Defendants’ Motion to Dismiss, ECF No. 26. In
light of the pleadings submitted, as well as the record herein, and for the reasons set forth below,
the court will GRANT Defendants’ Motion to Dismiss.
I. Background
Congress enacted Medicare “to establish a federally funded health insurance program for
the elderly and disabled.” Texas All. for Home Care Servs. v. Sebelius, 681 F.3d 402, 405 (D.C.
Cir. 2012) (citation omitted); see also 42 U.S.C. § 1395 et seq. Part B of Medicare “governs
reimbursement or payment for certain physician services and supplies considered medically
necessary to treat a disease or condition.” Compl. ¶ 12. Medicare pays physicians when they
provide covered services—including the administration of some drugs and biologic products—to
enrollees in Part B. See 42 U.S.C. §§ 1395w-4, 1395u(o), 1395w-4(j)(3), 1395x(s)(2)(A). The
Department of Health and Human Services (“HHS”) through the Centers for Medicare and
Medicaid Services (“CMS”) administers the Medicare program. 42 U.S.C. §§ 1395kk-1395kk-
1(a).
Page 1 of 6 The Medicare Modernization Act (“MMA”), Pub. L. No. 108-173, 117 Stat. 2066 (2003),
requires that payments made to providers for most drugs under Medicare Part B be calculated
based on average sale price (“ASP”) data reported by manufacturers. Generally, Part B drugs—
including oncological drugs, Compl. ¶ 16—are reimbursed at 106 percent of the ASP. Id. §
1395w-3a(b)(1)-(4). The MMA also contains a section precluding administrative and judicial
review. See 42 U.S.C. § 1395w-3a(g)(1).
The Balanced Budget and Emergency Deficit Control Act of 1985 was designed to
“eliminate the federal budget deficit by 1991.” National Ass'n of Counties v. Baker, 842 F.2d
369, 372 (D.C. Cir. 1988). That act was amended by the Budget Control Act of 2011, which
provides sequestration provisions, triggered by various statutory conditions, which are designed
to reduce budgetary resources. See 2 U.S.C. §§ 901-903. Pursuant to the Budget Control Act,
the Office of Management and Budget (“OMB”) prepares the proposed sequestration for the
President’s order and subsequent application through Executive Branch agencies. 2 U.S.C. §
901a (5)-(6). However, the statute limits reductions in spending on some Medicare programs to
two percent. Id. § 901a(6)(A). This two-percent limit applies to “individual payments for
services furnished” as part of Medicare Part B. Id. §§ 901a(6)(A), 906(d)(1)(A).
In 2013, after Congress failed to pass a budget, the statutory conditions were triggered,
and OMB issued a report on sequestration calculations to be ordered. Compl. ¶ 27. This report
required a two-percent reduction in Medicare payments. Id. ¶ 28. HHS applied the sequestration
cut to Part B drugs, thereby “reduc[ing] the pertinent Part B drug statutory reimbursement
formula from ASP plus 6% to ASP plus 4.3%.” Id. ¶ 31. The sequestration order has been
extended numerous times and is scheduled to continue into 2027. Id. ¶ 19.
Page 2 of 6 Plaintiff Community Oncology Alliance, Inc.—a non-profit corporation representing
“more than 5,000 healthcare providers who are independent, community-based oncologists,”
Compl. ¶¶ 1, 9—sued Defendants—the Office of Management and Budget; Mick Mulvaney, in
his representative capacity; the U.S. Department of Health and Human Services; and Alex M.
Azar II, in his representative capacity—alleging, inter alia, that the sequestration of funds for
Medicare Part B drugs was unauthorized by Congress, because 42 U.S.C. § 906(d)(1)(A)
“expressly permits a reduction only in payment ‘for services.’” Compl. ¶ 24 (emphasis omitted).
Plaintiff contends that because “[t]here is no express mention of Part B drug reimbursement in
this section . . . [t]his [omission] exhibits Congress’ intent not to interfere with the statutory
reimbursement formula of ASP plus 6% for Part B drugs.” Id. (citation omitted). Plaintiff
argues that therefore the “sequestration order as applied to Medicare Part B drugs, which is
tantamount to an executive legislation drafting, represents a separation-of-powers violation by
the Executive Branch, providing for Defendants’ intrusion into Congress’ legislative sphere.” Id.
¶ 56.
Defendants have moved to dismiss for lack of subject matter jurisdiction on four grounds:
1) the Medicare Modernization Act expressly precludes judicial review of Plaintiff’s claims
concerning determinations of reimbursements paid by Medicare for Part B drugs; 2) review of
such claims is permitted only in accordance with exclusive judicial-review provisions of the
Medicare statute, that confer jurisdiction only to review final decisions by HHS about individual
claims for reimbursement presented by or on behalf of healthcare service providers, and Plaintiff
has not alleged compliance with the requirements for presentment and administrative review; 3)
Plaintiff’s claims do not fall within the jurisdictional scope of the Balanced Budget Act’s judicial
review provisions; and 4) Plaintiff has not established associational standing to seek declaratory
Page 3 of 6 and injunctive relief. Because Defendants prevail on the first ground, the court need not reach
the merits of the others.
II. Legal Standard for Rule 12(b)(1)
A motion pursuant to Federal Rule of Civil Procedure 12(b)(1) “presents a threshold
challenge to the court’s jurisdiction.” Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987).
The plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence.
Lujan v. Defs. of Wildlife, 504 U.S. 55, 56 (1992). The court “assume[s] the truth of all material
factual allegations in the complaint and construe[s] the complaint liberally, granting plaintiff the
benefit of all inferences that can be derived from the facts alleged, and upon such facts
determine[s] jurisdictional questions.” Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C.
Cir. 2011) (quotations marks and citations omitted).
III. Analysis
While courts must “presume the Congress intends that agency action be judicially
reviewable, . . . that presumption, like all presumptions used in interpreting statutes, may be
overcome by specific language . . .
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA
) COMMUNITY ONCOLOGY ) ALLIANCE, INC. ) ) Plaintiff, ) ) v. ) Civil Action No. 18-cv-1256 (TSC) ) OFFICE OF MANAGEMENT AND ) BUDGET, et al. ) ) Defendants. ) )
MEMORANDUM OPINION
Currently pending before the court is Defendants’ Motion to Dismiss, ECF No. 26. In
light of the pleadings submitted, as well as the record herein, and for the reasons set forth below,
the court will GRANT Defendants’ Motion to Dismiss.
I. Background
Congress enacted Medicare “to establish a federally funded health insurance program for
the elderly and disabled.” Texas All. for Home Care Servs. v. Sebelius, 681 F.3d 402, 405 (D.C.
Cir. 2012) (citation omitted); see also 42 U.S.C. § 1395 et seq. Part B of Medicare “governs
reimbursement or payment for certain physician services and supplies considered medically
necessary to treat a disease or condition.” Compl. ¶ 12. Medicare pays physicians when they
provide covered services—including the administration of some drugs and biologic products—to
enrollees in Part B. See 42 U.S.C. §§ 1395w-4, 1395u(o), 1395w-4(j)(3), 1395x(s)(2)(A). The
Department of Health and Human Services (“HHS”) through the Centers for Medicare and
Medicaid Services (“CMS”) administers the Medicare program. 42 U.S.C. §§ 1395kk-1395kk-
1(a).
Page 1 of 6 The Medicare Modernization Act (“MMA”), Pub. L. No. 108-173, 117 Stat. 2066 (2003),
requires that payments made to providers for most drugs under Medicare Part B be calculated
based on average sale price (“ASP”) data reported by manufacturers. Generally, Part B drugs—
including oncological drugs, Compl. ¶ 16—are reimbursed at 106 percent of the ASP. Id. §
1395w-3a(b)(1)-(4). The MMA also contains a section precluding administrative and judicial
review. See 42 U.S.C. § 1395w-3a(g)(1).
The Balanced Budget and Emergency Deficit Control Act of 1985 was designed to
“eliminate the federal budget deficit by 1991.” National Ass'n of Counties v. Baker, 842 F.2d
369, 372 (D.C. Cir. 1988). That act was amended by the Budget Control Act of 2011, which
provides sequestration provisions, triggered by various statutory conditions, which are designed
to reduce budgetary resources. See 2 U.S.C. §§ 901-903. Pursuant to the Budget Control Act,
the Office of Management and Budget (“OMB”) prepares the proposed sequestration for the
President’s order and subsequent application through Executive Branch agencies. 2 U.S.C. §
901a (5)-(6). However, the statute limits reductions in spending on some Medicare programs to
two percent. Id. § 901a(6)(A). This two-percent limit applies to “individual payments for
services furnished” as part of Medicare Part B. Id. §§ 901a(6)(A), 906(d)(1)(A).
In 2013, after Congress failed to pass a budget, the statutory conditions were triggered,
and OMB issued a report on sequestration calculations to be ordered. Compl. ¶ 27. This report
required a two-percent reduction in Medicare payments. Id. ¶ 28. HHS applied the sequestration
cut to Part B drugs, thereby “reduc[ing] the pertinent Part B drug statutory reimbursement
formula from ASP plus 6% to ASP plus 4.3%.” Id. ¶ 31. The sequestration order has been
extended numerous times and is scheduled to continue into 2027. Id. ¶ 19.
Page 2 of 6 Plaintiff Community Oncology Alliance, Inc.—a non-profit corporation representing
“more than 5,000 healthcare providers who are independent, community-based oncologists,”
Compl. ¶¶ 1, 9—sued Defendants—the Office of Management and Budget; Mick Mulvaney, in
his representative capacity; the U.S. Department of Health and Human Services; and Alex M.
Azar II, in his representative capacity—alleging, inter alia, that the sequestration of funds for
Medicare Part B drugs was unauthorized by Congress, because 42 U.S.C. § 906(d)(1)(A)
“expressly permits a reduction only in payment ‘for services.’” Compl. ¶ 24 (emphasis omitted).
Plaintiff contends that because “[t]here is no express mention of Part B drug reimbursement in
this section . . . [t]his [omission] exhibits Congress’ intent not to interfere with the statutory
reimbursement formula of ASP plus 6% for Part B drugs.” Id. (citation omitted). Plaintiff
argues that therefore the “sequestration order as applied to Medicare Part B drugs, which is
tantamount to an executive legislation drafting, represents a separation-of-powers violation by
the Executive Branch, providing for Defendants’ intrusion into Congress’ legislative sphere.” Id.
¶ 56.
Defendants have moved to dismiss for lack of subject matter jurisdiction on four grounds:
1) the Medicare Modernization Act expressly precludes judicial review of Plaintiff’s claims
concerning determinations of reimbursements paid by Medicare for Part B drugs; 2) review of
such claims is permitted only in accordance with exclusive judicial-review provisions of the
Medicare statute, that confer jurisdiction only to review final decisions by HHS about individual
claims for reimbursement presented by or on behalf of healthcare service providers, and Plaintiff
has not alleged compliance with the requirements for presentment and administrative review; 3)
Plaintiff’s claims do not fall within the jurisdictional scope of the Balanced Budget Act’s judicial
review provisions; and 4) Plaintiff has not established associational standing to seek declaratory
Page 3 of 6 and injunctive relief. Because Defendants prevail on the first ground, the court need not reach
the merits of the others.
II. Legal Standard for Rule 12(b)(1)
A motion pursuant to Federal Rule of Civil Procedure 12(b)(1) “presents a threshold
challenge to the court’s jurisdiction.” Haase v. Sessions, 835 F.2d 902, 906 (D.C. Cir. 1987).
The plaintiff bears the burden of establishing jurisdiction by a preponderance of the evidence.
Lujan v. Defs. of Wildlife, 504 U.S. 55, 56 (1992). The court “assume[s] the truth of all material
factual allegations in the complaint and construe[s] the complaint liberally, granting plaintiff the
benefit of all inferences that can be derived from the facts alleged, and upon such facts
determine[s] jurisdictional questions.” Am. Nat’l Ins. Co. v. FDIC, 642 F.3d 1137, 1139 (D.C.
Cir. 2011) (quotations marks and citations omitted).
III. Analysis
While courts must “presume the Congress intends that agency action be judicially
reviewable, . . . that presumption, like all presumptions used in interpreting statutes, may be
overcome by specific language . . . that is a reliable indicator of congressional intent.” Knapp
Med. Ctr. v. Hargan, 875 F.3d 1125, 1128 (D.C. Cir. 2017) (quotations marks and citations
omitted); see also id. (“[T]he strong presumption that Congress intends judicial review of
administrative action . . . is therefore rebuttable by a clear statement of congressional intent to
preclude review.”) (quotation marks and citations omitted) (alteration in original).
Section 1395w-3a of the MMA provides the method for determining Medicare Part B
drug reimbursements. See 42 U.S.C. § 1395w-3a. That section states that “[t]here shall be no
administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or
otherwise, of . . . determinations of payment amounts under this section.” 42 U.S.C. § 1395w-
Page 4 of 6 3a(g)(1). The D.C. Circuit has found that this type of language precludes judicial review. See,
e.g., Knapp Med. Ctr., 875 F.3d at 1127, 1132 (finding that the language “[t]here shall be no
administrative or judicial review under section 1395ff of this title, section 1395oo of this title, or
otherwise” precludes judicial review); Mercy Hosp., Inc. v. Azar, 891 F.3d 1062, 1066 (D.C. Cir.
2018) (same); Fla. Health Scis. Ctr., Inc. v. Sec'y of Health & Human Servs., 830 F.3d 515, 518
n.1, 518-19 (D.C. Cir. 2016) (same); Tex. All. For Home Car Servs. v. Sebelius, 681 F.3d 402,
409 (D.C. Cir. 2012) (same).
While Plaintiff attempts to portray its challenge as one arising under the sequestration
provisions of the Budge Control Act, see Compl. ¶¶ 51-56, this labeling does not allow Plaintiff
to evade the Medicare statute’s provision precluding judicial review. When “interpreting a
provision that precludes judicial review, [courts] must determine whether the challenged agency
action is of the sort shielded from review.” Knapp Med. Ctr., 875 F.3d at 1128; Mercy Hosp.,
Inc., 891 F.3d at 1067 (“Designing a pleading so that it circumvents a statutory bar to review will
not override Congress's decision to deny jurisdiction.”). To determine whether a challenged
action is covered by a statute that precludes judicial review, the D.C. Circuit instructs courts to
use a “functional analysis” that avoids “frustrating the Congress’s desire to place certain
administrative actions beyond review.” Knapp Med. Ctr., 875 F.3d at 1131. “The dispositive
issue is whether the challenged [action is] inextricably intertwined with an action that all agree is
shielded from review, regardless of where that action lies in the agency’s decision tree.” Fla.
Health Scis. Ctr., Inc., 830 F.3d at 521 (emphasis in original). Plaintiff’s claims effectively
challenge the payments made for Medicare Part B drugs. See Compl. ¶ 10 (“COA brings this
suit to stop the impermissible reduction in reimbursement for Part B drugs and the consequent
destructive effects that threaten cancer patients from being able to obtain affordable cancer care
Page 5 of 6 in their own communities.”). Therefore, § 1395w-3a(g)(1) applies because HHS’s reduced
payments due to sequestration cuts are “inextricably intertwined” with HHS’s determination of
payment amounts under the section.
Plaintiff contends that it “is not challenging determinations of payment amounts made
under Section 1395w-3a,” but instead “is challenging the reduction of the ASP plus 6% payment
formula made in connection with the separate Balanced Budget Act.” Pl.’s Opp’n. to Defs.’
Mot. to Dismiss at 19-20, ECF No. 28. This argument is unconvincing, because Plaintiff is, in
fact, challenging the government’s interpretation of HHS’s responsibilities to provide
reimbursements under the Medicare Act. See Compl. ¶ 34 (“[U]sing the BCA’s sequestration
tool to reduce spending for Part B drugs constitutes a de facto amendment to the MMA’s
statutory formula and thereby violates the Constitution’s Presentment Clause (Article I, Section
7).”).
IV. Conclusion
Because Plaintiff cannot circumvent the statutory bar to judicial review of HHS’s
payment determinations for prescription drugs under Medicare Part B, the court GRANTS
Defendants’ Motion to Dismiss, ECF No. 26.
A corresponding Order will issue separately.
Date: March 31, 2019
Tanya S. Chutkan TANYA S. CHUTKAN United States District Judge
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