Fresenius Kabi USA, LLC v. United States of America

District Court, District of Columbia·Decided March 30, 2026·No. Civil Action No. 2025-0375·Published

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

FRESENIUS KABI USA, LLC, Plaintiff,

v. Civil Action No. 25-375 (TJK)

UNITED STATES OF AMERICA, et al., Defendants.

MEMORANDUM OPINION

Fresenius Kabi USA, LLC is a manufacturer of injectable drug products that participates in the Medicaid Drug Rebate Program administered by the Centers for Medicare and Medicaid Services, or CMS. Through that program, it pays rebates to states based on a drug’s classification and, in exchange, that drug is eligible for Medicaid coverage. In general, manufacturers pay higher rebates for “innovator” drugs than for “noninnovator”—or generic—drugs. In 2021, Fresenius Kabi petitioned CMS to reclassify several of its drugs as noninnovators, so it would pay lower rebates. In September 2024, CMS denied the request, but informed Fresenius Kabi that it could respond within a month to supplement or clarify its position, but if it did not, the decision would be final. Fresenius Kabi timely responded, then followed up by suing CMS, the Department of Health and Human Services, and relevant officials, alleging that the decision was arbitrary, capri- cious, and contrary to law under the Administrative Procedure Act. Defendants move to dismiss under Federal Rule of Civil Procedure 12(b)(6), asserting that CMS’s decision was not final agency action, so Fresenius Kabi lacks a cause of action. The Court agrees, so it will grant the motion and dismiss the case.

I. Background A. Statutory and Regulatory Framework “Medicaid is a cooperative federal-state program that provides federal funding for state medical services to the poor.” Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 433 (2004). Congress created the Medicaid Drug Rebate Program “to offset Medicaid costs incurred by the federal gov- ernment and the states for outpatient drugs provided to Medicaid recipients.” Council on Radio- nuclides & Radiopharmaceuticals, Inc. v. Azar, 18-cv-633 (RBW), 2019 WL 5960142, at *2 (D.D.C. Nov. 13, 2019). For a drug to be eligible for Medicaid reimbursement, the manufacturer must enter into a rebate agreement with the Department of Health and Human Services to pay rebates to states. 42 U.S.C. §§ 1396r-8(a)(1), (c)(1)(A), (c)(3)(A). The rebate rate for a drug depends on its classification as either: (1) “single source” (2) “innovator multiple source” or (3) “noninnovator multiple source”—a generic drug. See id. §§ 1396r-8(c)(1), (3); id. § 1396r- 8(k)(7)(A). Rebate rates for noninnovator drugs are lower than those for single source and inno- vator drugs. See id. § 1396r-8(c). In 2016, CMS established a “narrow exception” process through which, under certain circumstances, drug manufacturers could apply to have an innovator drug treated as a noninnovator for purposes of calculating rebate liability. See ECF No. 1 ¶ 69; see also 42 C.F.R. § 447.502. The process was intended “to ensure that drugs that are or were required to be marketed under an original new drug application for technical reasons would not be erroneously classified as innovators.” ECF No. 1 ¶ 69 (citation omitted).

B. Procedural Background Fresenius Kabi is a global health care company and drug manufacturer. ECF No. 1 ¶ 9.

One of the drugs it manufactures is heparin, a common anticoagulant. Id. ¶¶ 1–2, 75. Fresenius Kabi’s heparin products come in many forms, including vials, prefilled syringes, and—relevant

here—pre-mixed intravenous bags. Id. ¶ 2. In June 2021, Fresenius Kabi requested a narrow exception for several heparin products—including four types of premixed heparin bags and one type of prefilled heparin syringe. Id. ¶ 96. Between February and March 2024, CMS granted narrow exceptions for some of these products, including heparin vials and prefilled syringes. Id. ¶¶ 100–101.

On September 30, 2024, though, CMS sent Fresenius Kabi a letter denying the company’s request for a narrow exception for four of its heparin bag products. See generally ECF No. 1-8. The letter informed Fresenius Kabi that CMS had “decline[d] to . . . grant a narrow exception and den[ied] [its] request to report the drugs . . . as noninnovator multiple source . . . drugs.” Id. at 2. CMS further advised Fresenius Kabi that “[i]f [it] ha[d] any questions or concerns” about the letter, it should “respond within 30 days . . . with any supplements to or clarifications of [its] positions in [its] request” and to “include detailed supporting documentation if available.” Id. at 5. Moreover, the letter provided that “[i]f [CMS] does not receive any written response by 30 days, then the decision in this letter is final.” Id.

On October 29, 2024, Fresenius Kabi responded with its own letter, challenging CMS’s decision as both outside its legal authority and in violation of “CMS guidance and precedent.” ECF No. 19-5 at 3. The letter also advised that, unless the agency rescinded the decision by De- cember 2, 2024, Fresenius Kabi intended “to amend its complaint in . . . pending litigation . . . to establish that all of the heparin products marketed by Fresenius Kabi are . . . noninnovator drugs . . . entitled to narrow exceptions.” Id. (emphasis in original).1 Fresenius Kabi included with its

1 In March 2024, Fresenius Kabi filed a separate lawsuit seeking to clarify the effective date of narrow exceptions granted for drugs not at issue here. See Fresenius Kabi USA, LLC v. United States, 24-cv-676 (TJK) (D.D.C. Oct. 11, 2024) (“Fresenius Kabi I”).

letter a 30-page white paper “setting forth more fully [its] intended legal challenge.” See id. at 5.2 CMS has not yet responded. See ECF No. 25 at 11.

Rather than amend its pending complaint, however, Fresenius Kabi filed this lawsuit on February 7, 2025, against the United States, the Department of Health and Human Services, the Centers for Medicare and Medicaid Services, and officials in charge of these agencies. It alleges that CMS’s decision declining to classify the four heparin bag products as noninnovators was ar- bitrary, capricious, and contrary to law under the Administrative Procedure Act (“APA”). See ECF No. 1 at 31–37. Defendants move to dismiss, arguing that CMS’s decision was not final agency action reviewable under the APA, so Fresenius Kabi lacks a cause of action. ECF No. 19.3 II. Legal Standard To survive a motion under Rule 12(b)(6), a plaintiff must have pleaded “enough facts to state a claim to relief that is plausible on its face and to nudge [its] claims across the line from conceivable to plausible.” Abbas v. Foreign Pol’y Grp., 783 F.3d 1328, 1338 (D.C. Cir. 2015) (internal quotations omitted). To meet this standard, a plaintiff must plead “factual content that allows the court to draw the reasonable inference that the defendant[s] [are] liable for the

2 The Court may consider Fresenius Kabi’s response letter and white paper, attached as an exhibit to Defendants’ motion to dismiss, see ECF No. 19-5, as documents “referred to in the complaint,” Langeman v. Garland, 88 F.4th 289, 292 (D.C. Cir. 2023) (internal quotations omitted ); see also ECF No. 1 ¶ 21 (“Fresenius Kabi subsequently asked CMS on October 29, 2024 to rescind its decision in the hope of avoiding litigation.”).

3 Defendants also move for relief from Local Rule 7(n). ECF No. 20. That rule generally requires an agency to “file a certified list of the contents of the administrative record with the Court within 30 days following service of the answer to the complaint or simultaneously with the filing of a dispositive motion, whichever occurs first.” LCvR 7(n)(1). Because the Court concludes, based on the pleadings and documents incorporated by reference, that the decision is not final agency action, consideration of the entire administrative record is unnecessary. See Connecticut v. Dep’t of Interior, 344 F. Supp. 3d 279, 294 (D.D.C. 2018). Thus, the Court will grant Defendants ’ motion to waive compliance with Local Rule 7(n).

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