Council on Radionuclides and Radiopharmaceuticals, Inc. v. Azar

• Court: District Court, District of Columbia
• Decided: November 13, 2019
• Docket: Civil Action No. 2018-0633
• Status: Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ____________________________________ ) COUNCIL ON RADIONUCLIDES AND ) RADIOPHARMACEUTICALS, INC., ) ) Plaintiff, ) ) v. ) Civil Action No. 18-633 (RBW) ) ALEX M. AZAR II, in his official ) Capacity as Secretary of the United States ) Department of Health and Human ) Services, and ) ) UNITED STATES DEPARTMENT OF ) HEALTH AND HUMAN SERVICES, ) ) Defendants. ) ____________________________________)

MEMORANDUM OPINION

The plaintiff, the Council on Radionuclides and Radiopharmaceuticals, Inc. (the

“Council”), brings this civil action pursuant to the Administrative Procedure Act (“APA”), 5

U.S.C. §§ 701–706 (2018), against the defendants, the United States Department of Health and

Human Services (the “Department”) and Alex Azar, in his official capacity as the Secretary of

the Department (the “Secretary”), challenging the defendants’ interpretation of certain provisions

of the Social Security Act, 42 U.S.C. §§ 1396–1396w-5 (2018). See generally Complaint

(“Compl.”). Currently pending before the Court are the Plaintiff’s Motion for Summary

Judgment (“Pl.’s Mot.”) and the Defendants’ Cross-Motion for Summary Judgment and

Opposition to Plaintiff’s Motion for Summary Judgment (“Defs.’ Mot.”). Upon careful consideration of the parties’ submissions, 1 the Court concludes for the following reasons that it

must deny the plaintiff’s motion for summary judgment and grant the defendants’ cross-motion

for summary judgment.

I. BACKGROUND

Established in 1965 under Title XIX of the Social Security Act, the Medicaid program

provides states with funding to provide medical assistance to individuals “whose income and

resources are insufficient to meet the costs of necessary medical services.” 42 U.S.C. § 1396-1.

“In order to participate in the Medicaid program, a [s]tate must have a plan for medical

assistance approved by the Secretary.” Pharm. Research & Mfrs. of Am. v. Walsh, 538 U.S.

644, 650 (2003) (citing 42 U.S.C. § 1396a(b)). A state’s plan must, among other things,

“define[] the categories of individuals eligible for benefits and the specific kinds of medical

services that are covered” by the plan. Id. (citing 42 U.S.C. § 1396a(a)(10), (17)). And, a state

may choose to provide, as part of its plan, payment under the Medicaid program for “covered

outpatient drugs,” see 42 U.S.C. § 1396a(a)(54), which are defined to include drugs that (1)

“may be dispensed only upon prescription,” 42 U.S.C. § 1396r-8(k)(2)(A); (2) are “approved for

safety and effectiveness as a prescription drug,” id. § 1396r-8(k)(2)(A)(i); and (3) are not

“provided as part of, or as incident to and in the same setting as” certain specified services “and

for which payment may be made . . . as part of payment for th[ose] [services] and not as direct

reimbursement for the drug” (the “limiting definition”), id. § 1396r-8(k)(3).

1 In addition to the filings already identified, the Court considered the following submissions in rendering its decision: (1) the Defendants’ Answer (“Defs.’ Answer”); (2) the Memorandum of Points and Authorities in Support of Plaintiff’s Motion for Summary Judgment (“Pl.’s Mem.”); (3) the Memorandum in Support of Defendants’ Cross- Motion for Summary Judgment and in Opposition to Plaintiff’s Motion for Summary Judgment (“Defs.’ Mem.”); (4) the Plaintiff’s Reply in Support of Motion for Summary Judgment and Opposition to Defendants’ Cross-Motion for Summary Judgment (“Pl.’s Opp’n”); and (5) the Defendants’ Reply to Plaintiff’s Opposition to Defendants’ Cross- Motion for Summary Judgment (“Defs.’ Reply”).

2 In 1990, Congress created the Medicaid drug rebate program (the “Medicaid Drug Rebate

Program”) to offset Medicaid costs incurred by the federal government and the states for

outpatient drugs provided to Medicaid recipients. See Walsh, 538 U.S. at 652. Pursuant to the

Medicaid Drug Rebate Program, a drug manufacturer, in order to receive state Medicaid

payments for its covered outpatient drugs, must enter into a rebate agreement with the Secretary.

See Pharm. Research & Mfrs. of Am. v. Thompson, 251 F.3d 219, 221 (D.C. Cir. 2001). The

rebate agreement requires drug manufacturers to pay the state “a portion of the price of [its]

drugs” for which payment is covered by a state under the Medicaid program. Id.; see 42 U.S.C.

§ 1396r-8(a), (b). The Medicaid Drug Rebate Program also requires that drug manufacturers, on

a quarterly basis, submit, inter alia, drug pricing information, see id. § 1396r-8(b)(3)(A), and

noncompliance with these reporting obligations subjects the drug manufacturer to monetary

penalties, see id. § 1396r-8(b)(3)(C).

On February 1, 2016, the Centers for Medicare & Medicaid Services (the “CMS”), the

division of the Department that administers the Medicaid program on behalf of the Secretary,

issued a final rule revising the requirements “pertaining to [the] Medicaid reimbursement for

covered outpatient drugs . . . [and] also revis[ing] other requirements related to [covered

outpatient drugs], including key aspects of [their] Medicaid coverage and payment, and the

[Medicaid] [D]rug [R]ebate [P]rogram” (the “Final Rule”). Joint Appendix (“JA”) at 2. In its

final rule, the CMS noted, in response to comments, that radiopharmaceuticals 2 “meet the

definition of a [covered outpatient drug],” if they are approved by the United States Food and

Drug Administration (the “FDA”) as a “prescription drug,” so long as the limiting provision does

2 According to the Council, “[r]adiopharmaceuticals are used primarily as part of a variety of diagnostic imaging, and in some cases, therapeutic procedures,” Compl. ¶ 30, and “are either themselves radioactive and/or used to produce radioactive ‘patient ready’ doses,” id. ¶ 29.

3 not apply to the drug, id. at 7. CMS further stated that “radiopharmaceuticals[, including those

used in compounding patient-ready doses,] qualify as a [covered outpatient drug] because of the

approval process undergone with [the] FDA . . . [and] [t]herefore, radiopharmaceuticals are to be

reported to the [Medicaid Drug Rebate] [P]rogram in the same manner as other [covered

outpatient drugs] for the purposes of the administration of the [Medicaid Drug Rebate]

[P]rogram.” Id.

On March 19, 2018, the Council filed its complaint in this case, challenging the CMS’s

interpretation of the definition of “covered outpatient drugs” to include radiopharmaceuticals.

See Compl. at 1. Thereafter, the parties filed their cross-motions for summary judgment, which

are the subjects of this Memorandum Opinion.

II. STANDARD OF REVIEW

A moving party is entitled to summary judgment “if the movant shows that there is no

genuine dispute as to any material fact and the movant is entitled to judgment as a matter of

law.” Fed. R. Civ. P. 56(a). When ruling on a Rule 56(a) motion, the Court must view the

evidence in the light most favorable to the non-moving party. See Holcomb v. Powell, 433 F.3d

889, 895 (D.C. Cir. 2006) (citing Reeves v. Sanderson Plumbing Prods., 530 U.S. 133, 150

(2000)). The Court must therefore draw “all justifiable inferences” in the non-moving party’s

favor and accept the non-moving party’s evidence as true. Anderson v. Liberty Lobby Inc., 477

U.S. 242, 255 (1986). At the summary judgment stage, “[b]are allegations are insufficient,”

Sierra Club v. EPA, 292 F.3d 895, 898 (D.C. Cir. 2002). In responding to a motion for summary

judgment, the non-moving party “must do more than simply show that there is some

metaphysical doubt as to the material facts.” Matsushita Elec. Indus. Co. v. Zenith Radio Corp.,

475 U.S. 574, 586 (1986). Accordingly, the non-moving party must not rely on “mere

4 allegations or denials . . . but . . . must set forth specific facts showing that there [are] [ ] genuine

issue[s] for trial.” Anderson, 477 U.S. at 248 (second omission in original) (citation and internal

quotation marks omitted). Thus, “[t]he mere existence of a scintilla of evidence in support of the

[non-moving party’s] position [is] insufficient” to withstand a motion for summary judgment, as

“there must be [some] evidence on which the jury could reasonably find for the [non-movant].”

Id. at 252.

III. ANALYSIS

The Court’s analysis starts and ends “with the question of subject matter jurisdiction.”

Am. Freedom Law Ctr. v. Obama, 106 F. Supp. 3d 104, 108 (D.D.C. 2015) (Walton, J.) (quoting

Aamer v. Obama, 742 F.3d 1023, 1028 (D.C. Cir. 2014)); see also NO Gas Pipeline v. FERC,

756 F.3d 764, 767 (D.C. Cir. 2014) (“It is fundamental to federal jurisprudence that Article III

courts such as ours are courts of limited jurisdiction.”). “Article III of the Constitution limits the

jurisdiction of federal courts to ‘Cases’ and ‘Controversies.’” Susan B. Anthony List v.

Driehaus, 573 U.S. 149, 157 (2014) (citing U.S. Const. art. III, § 2). “In an attempt to give

meaning to Article III’s case-or-controversy requirement, the courts have developed a series of

principles termed ‘justiciability doctrines,’ among which are standing[,] ripeness, mootness, and

the political question doctrine.” Nat’l Treasury Emps. Union v. United States, 101 F.3d 1423,

1427 (D.C. Cir. 1996) (quoting Allen v. Wright, 468 U.S. 737, 750 (1984)). If a plaintiff lacks

Article III standing, a district court

need not delve into [a plaintiff’s] myriad constitutional and statutory claims . . . because a court may not resolve contested questions of law when its jurisdiction is in doubt, as [h]ypothetical jurisdiction produces nothing more than a hypothetical judgment—which comes to the same thing as an advisory opinion, disapproved by [the Supreme] Court from the beginning.

Am. Freedom Law Ctr., 106 F. Supp. 3d at 108 (first, third, and fourth alterations in original)

5 (first quoting Crow Creek Sioux Tribe v. Brownlee, 331 F.3d 912, 915 (D.C. Cir. 2003); then

quoting Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 101 (1998)).

[T]he irreducible constitutional minimum of standing contains three elements. First, the plaintiff must have suffered an “injury in fact”—an invasion of a legally protected interest which is (a) concrete and particularized, and (b) “actual or imminent, not ‘conjectural’ or ‘hypothetical.’” Second, there must be a causal connection between the injury and the conduct complained of—the injury has to be “fairly . . . trace[able] to the challenged action of the defendant, and not . . . th[e] result [of] the independent action of some third party not before the court.” Third, it must be “likely,” as opposed to merely “speculative,” that the injury will be “redressed by a favorable decision.”

Lujan v. Defenders of Wildlife, 504 U.S. 555, 560–61 (1992) (second, third, fourth, and fifth

alterations in original) (citations omitted). “An allegation of future injury may suffice if the

threatened injury is certainly impending, or there is a substantial risk that the harm will occur.”

Susan B. Anthony List, 573 U.S. at 158 (internal quotation marks omitted).

An association seeking to establish standing to sue on behalf of its members must further

show that

(1) at least one of its members would have standing to sue in his own right, (2) the interests the association seeks to protect are germane to its purpose, and (3) neither the claim asserted nor the relief requested requires that an individual member of the association participate in the lawsuit.

Chamber of Commerce v. EPA, 642 F.3d 192, 199 (D.C. Cir. 2011) (quoting Sierra Club, 292

F.3d at 898). And, “it is not enough to aver that unidentified members have been injured,” id.

(citation omitted); instead, an association must provide “individual affidavits” from “members

who have suffered the requisite harm,” Summers v. Earth Island Inst., 555 U.S. 488, 499 (2009);

see also Sierra Club, 292 F.3d at 899 (stating that the plaintiff “must set forth by affidavit or

other evidence specific facts” to show it has standing).

The plaintiff, “[t]he party [that is] invoking federal jurisdiction[,] bears the burden of

establishing standing,” Clapper v. Amnesty Int’l USA, 568 U.S. 398, 411–12 (2013) (internal

6 quotations marks omitted), and “each element must be supported in the same way as any other

matter on which the plaintiff bears the burden of proof, i.e., with the manner and degree of

evidence required at the successive stages of the litigation,” Susan B. Anthony List, 573 U.S. at

158 (internal quotations marks omitted). Therefore, “a plaintiff moving for summary judgment

in [a] district court[] [ ] must support each element of its claim to standing ‘by affidavit or other

evidence.’” Sierra Club, 292 F.3d at 899 (quoting Lujan, 504 U.S. at 561).

The defendants argue that the Council “does not have standing because it has failed to

establish that a single one of its members has suffered, or is likely to suffer, an injury traceable to

[the] [d]efendants,” and that they are therefore entitled to summary judgment. Defs.’ Mem. at 2,

10. 3 The Council argues in response that the Final Rule not only “exposes [its] members to

injuries that flow from the inability to report product and pricing data—the risk of civil penalties

and enforcement, and the risks to product coverage,” Pl.’s Opp’n at 6, but also “imposes, or

would impose, significant costs upon [its] members, both member companies that already

participate in the Medicaid [Drug] Rebate Program [(the ‘participating members’)] and member

companies that do not participate in the Medicaid [Drug] Rebate Program currently [(the

‘nonparticipating members’)],” id. at 5. According to the Council, the Final Rule requires “[the

participating] members [to] incur administrative costs associated with ongoing reporting of

product data and processing rebate claims, as well as liability for the rebate amounts

3 The defendants also argue that the “CMS’s interpretation of the Medicaid Drug Rebate [Program] is reasonable and its explanation of that interpretation is neither arbitrary nor capricious.” Defs.’ Mem. at 2; see also Defs.’ Mem. at 14–27. However, because the Court concludes that the Council lacks standing, the Court is precluded from determining the merits of these arguments. See Steel Co. v. Citizens for a Better Env’t, 523 U.S. 83, 95 (1998) (“The requirement that jurisdiction be established as a threshold matter ‘spring[s] from the nature and limits of the judicial power of the United States’ and is ‘inflexible and without exception.’” (alteration in original) (quoting Mansfield, C. & L.M.R. Co. v. Swan, 111 U.S. 379, 382 (1884)); see also NO Gas Pipeline, 756 F.3d at 767 (“It is fundamental to federal jurisprudence that Article III courts such as ours are courts of limited jurisdiction. Therefore, ‘we must examine our authority to hear a case before we can determine the merits.’” (quoting Wyo. Outdoor Council v. U.S. Forest Serv., 165 F.3d 43, 47 (D.C. Cir. 1999))).

7 themselves,” and “[the] nonparticipating members to participate in a government program that

does not apply to them, at a significant price,” id., including the costs associated with “hiring

additional personnel; installing new information technology systems capable of evaluating,

synthesizing, and collecting product information for reporting purposes; and training personnel

in the requirements of the Medicaid [Drug] Rebate Program,” id. at 6. However, the arguments

advanced by the Council in its opposition to the defendants’ summary judgment motion do not

suffice to establish its standing because they are not supported by evidence, see Deloatch v.

Harris Teeter, Inc., 797 F. Supp. 2d 48, 57 (D.D.C. 2011) (stating that “[t]he ‘mere arguments of

counsel . . . are not evidence’ that may be used to defeat a motion for summary judgment.”

(quoting Barnette v. Ridge, No. Civ.A. 02-1897(RMC), 2004 WL 3257071, at *6 n.6 (D.D.C.

Nov. 15, 2004)), and the Council has failed to submit evidence or identify any evidence already

in the record establishing that at least one of its members has been harmed, or is likely to be

harmed, as a result of the adoption of the Final Rule. 4

The evidence submitted by the Council in support of its position that it has standing are

declarations from two of its members, Curium US LLC (“Curium”), see Pl.’s Opp’n, Exhibit

(“Ex.”) A (Declaration of Dan Brague, CEO, Curium US LLC (“Curium Decl.”)) ¶ 4, and

Advance Accelerator Applications, see id., Ex. B (Declaration of Roger Estafanos of AAA

(“AAA Decl.”)) ¶ 4. However, contrary to the Council’s assertion that these declarations

“illustrat[e] that [its] members will suffer economic injury,” Pl.’s Opp’n at 5, they are

4 The Court notes that it reviewed two letters that were submitted by the parties in the Joint Appendix: one letter to the CMS from Mallinckrodt Pharmaceuticals and another letter to the CMS from GE Healthcare. See JA 29–32, 38–41. However, because neither Mallinckrodt Pharmaceuticals nor GE Healthcare indicated in their letters whether they were members of the Council, the Court did not take these letters into consideration when determining whether the Council had established that one of its members had standing to sue in its own right.

8 insufficient to confer standing upon the Council because neither declaration establishes that

either member has been harmed or will be harmed by the Final Rule.

With respect to the declaration submitted by Dan Brague, the Chief Executive Office of

Curium, this declaration fails to show that Curium will suffer economic injury, as the Council

claims. Brague claims that Curium, if it were to enter into a Medicaid Drug Rebate Program

Agreement, “would have to expend significant resources to implement new programs and install

new systems to administer the [Medicaid Drug Rebate] Program.” Pl.’s Opp’n, Ex. A (Curium

Decl.) ¶ 10. However, Brague concedes that “Curium . . . does not currently participate in the

Medicaid Drug Rebate Program and has not entered into a Medicaid Drug Rebate Program

Agreement,” id., Ex. A (Curium Decl.) ¶ 8, and he does not assert that Curium intends to

participate in the Medicaid Drug Rebate Program in the future, see generally id., Ex. A (Curium

Decl.). And, because participation in the Medicaid Drug Rebate Program is not mandatory for

drug manufacturers, but rather is only required in order to receive state Medicaid payments for

its covered outpatient drugs, see Thompson, 251 F.3d at 221; see also 42 U.S.C. § 1396r-8(a),

(b), Brague’s declaration fails to establish that Curium will even likely be required to comply

with the requirements of the Medicaid Drug Rebate Program, cf. Humane Soc. v. Babbitt, 46

F.3d 93, 97 (D.C. Cir. 1995) (finding that the plaintiff could not establish that it had standing

because its supporting declaration lacked allegations demonstrating that the injury was

imminent). Thus, Curium’s alleged harm asserted in Brague’s declaration is not imminent, but

purely speculative, and therefore, is not sufficient to establish that Curium has standing to sue in

its own right.

The declaration submitted by Roger Estafanos, the Head of Pricing and Market Access at

Advance Accelerator Applications, also fails to establish that Advance Accelerator Applications

9 has standing to sue in its right. Estafanos represents that Advance Accelerator Applications

“currently participates in the Medicaid Drug Rebate Program and has entered into a Medicaid

Drug Rebate Program Agreement,” Pl.’s Opp’n, Ex. B (AAA Decl.) ¶ 8, and that because the

CMS “provides little to no guidance on how radiopharmaceutical manufacturers are to comply

with the[] [Medicaid Drug Rebate Program’s] reporting requirements,” id., Ex. B (AAA Decl.) ¶

10., “manufacturers [must] make good-faith, reasonable assumptions about how to satisfy the

reporting requirements,” id., Ex. B (AAA Decl.) ¶ 15 (claiming that “the general lack of specific

reporting standards relating to radiopharmaceuticals, and [the] CMS’s refusal to clarify how

radiopharmaceutical manufacturers are to comply with these requirements necessitates that

manufacturers make good-faith, reasonable assumptions about how to satisfy the reporting

requirements”). However, this general statement that Advance Accelerator Applications must

make assumptions about how to satisfy its reporting obligations is insufficient to establish that

Advance Accelerator Applications has suffered a concrete harm, without any allegation

establishing either that its assumptions have resulted in its noncompliance with the regulations or

that there is a substantial risk that it will be found noncompliant with the regulations. Cf. State

Nat. Bank v. Lew, 795 F.3d 48, 53 (D.C. Cir. 2015) (finding that the plaintiff had standing to

challenge regulations because it “indeed alleged [in its affidavit] that it must now monitor its

remittances to stay within the safe harbor[] and [that] the monitoring program causes it to incur

costs”). In addition, contrary to the Council’s assertions that “[the participating] members [will]

incur administrative costs associated with ongoing reporting of product data and processing

rebate claims, as well as liability for the rebate amounts themselves,” Pl.’s Opp’n at 5, and that

the Final Rule “exposes [its] members to injuries that flow from the inability to report product

and pricing data—the risk of civil penalties and enforcement, and the risks to product coverage,”

10 id. at 6, Estafanos does not claim that Advance Accelerator Applications has incurred or will

incur any additional costs, see generally id., Ex. B (AAA Decl.). Thus, because Estafanos’s

declaration does not allege sufficient facts to support that Advance Accelerator Applications has

suffered or will suffer an injury as a result of participating in the Medicaid Drug Rebate

Program, the Court finds that Advance Accelerator Applications has failed to establish its

standing to sue in its own right as well.

Therefore, because neither declaration submitted by the Council establishes that at least

one of its members has standing, the Court concludes that the Council has failed to carry its

burden of showing that it has standing to sue as an association on behalf of its members. Thus,

the Court finds that summary judgment in favor of the defendants is required.

IV. CONCLUSION

For the foregoing reasons, the Court concludes that the Council has failed to establish

that one of its members has standing to sue in its own right. Accordingly, the Court will grant

the defendants’ summary judgment motion and deny the plaintiff’s motion for summary

judgment.

SO ORDERED this 13th day of November, 2019. 5

REGGIE B. WALTON United States District Judge

5 The Court will contemporaneously issue an Order consistent with this Memorandum Opinion.