Organogenesis Inc. v. Sebelius

CourtDistrict Court, District of Columbia
DecidedMay 6, 2014
DocketCivil Action No. 2013-2033
StatusPublished

This text of Organogenesis Inc. v. Sebelius (Organogenesis Inc. v. Sebelius) is published on Counsel Stack Legal Research, covering District Court, District of Columbia primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Organogenesis Inc. v. Sebelius, (D.D.C. 2014).

Opinion

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA

ORGANOGENESIS INC., : : Plaintiff, : Civil Action No.: 13-cv-2033 (RC) : v. : Re Document No.: 3, 12 : KATHLEEN SEBELIUS, : : Defendant. :

MEMORANDUM OPINION

GRANTING DEFENDANT’S MOTION TO DISMISS AND DENYING PLAINTIFF’S MOTION FOR A PRELIMINARY INJUNCTION AS MOOT

I. INTRODUCTION

Plaintiff, Organogenesis, has filed suit against Defendant Kathleen Sebelius, in her

official capacity as Secretary of Health and Human Services (“HHS”), challenging under the

Administrative Procedures Act (“APA”) the Centers for Medicare & Medicaid Services’s

(“CMS”) 2014 final rule packaging the drug Apligraf into payment for the service in which it is

applied. Presently before the Court is Plaintiff’s motion for preliminary injunction and

Defendant’s motion to dismiss. Upon consideration of the pleadings and the relevant legal

authorities, the Court finds that it lacks jurisdiction to resolve the merits of the Plaintiff’s claims.

Accordingly, the Court grants Defendant’s motion to dismiss and denies Plaintiff’s motion for a

preliminary injunction as moot. The Court shall not address Plaintiff’s motion for a preliminary

injunction in its Memorandum Opinion, but only the Defendant’s motion to dismiss. II. FACTUAL BACKGROUND

Title XVIII of the Social Security Act of 1935, 42 U.S.C. §1395 et seq., establishes the

Medicare program, which provides federally funded medical insurance to the elderly and

disabled. Part A of the Medicare program provides insurance coverage for inpatient hospital

care, home health care, and hospice services. Id. §1395c. Part B of Medicare is a voluntary

program that provides supplemental coverage for other types of care, including outpatient

hospital care. Id. §§ 1395j, 1395k. Under this program, physicians, hospitals, and other health

care providers may obtain payment from Medicare when they provide covered services to

persons enrolled in Medicare Part B. The Medicare program is subject to both fiscal limits and

restrictions on administrative and judicial review.

A component of the Medicare Part B program is the Outpatient Prospective Payment

System (“OPPS”), which pays hospitals directly to provide outpatient services to beneficiaries.

Under OPPS, hospitals are paid prospectively for their services in each upcoming year, thus

requiring payments for outpatient hospital care to be made based on predetermined rates. See

Balanced Budget Act of 1997, Pub. L. No. 105-33, 111 Stat. 251 (1997). Under OPPS, payment

is based on the Ambulatory Payment Classification (“APC”) to which an item or service is

assigned. Pursuant to 42 U.S.C. §1395l(t), payments are calculated through a formula, setting

payment weights for the provision of certain services, or groups of clinically similar services, as

determined by the agency. Id. at §§1395l(t)(2)(C). These APC calculations are based on the

mean or median cost of providing such services in past years, with adjustments for regional cost

variations. Id. at §§1395l(t)(2)(C) – (D). Hospitals facing actual costs significantly above their

prospective payment amounts receive outlier adjustments from the Secretary of the Department

of Health and Human Services. Id. §1395l(t)(2)(E). Hospitals can also receive supplemental

2 payments, called “pass-through” payments, to help cover the cost of providing certain

treatments, including new drugs, biologicals, and medical devices. Id. §1395l(t)(6).

The Balanced Budget Refinement Act of 1999 required CMS to annually update payment

weights, relative payment rates, wage adjustments, outlier payments, and APC groups. It also

required CMS to establish payments in a “budget-neutral” manner — that is, CMS must maintain

a balanced budget and cannot provide payments exceeding a set budget. Id. §1395l(t)(2)(E).

Thus, whenever the Secretary makes any type of payment adjustment, the additional projected

expenses must be offset by a reduction in all prospective payment rates. Id.

Apart from reimbursement authority for general outpatient services, CMS must

separately pay for a category of drugs and biologicals known as “specified covered outpatient

drugs” (“SCODs”). The Medicare Prescription Drug, Improvement, and Modernization Act of

2003 (“MMA”) Pub. L. No. 108-173, §621(a), 117 Stat. 2066, 2307 (2003). Congress has

specified the methodology for determining the payment rates of SCODs in a separate provision.

See 42 U.S.C. §1395l(t)(14). This provision defines a SCOD as follows:

In this paragraph, the term “specified covered outpatient drug” means, subject to clause (ii), a covered outpatient drug (as defined in section 1396r-8(k)(2) of this title) for which a separate ambulatory classification group (APC) has been established and that is--

(I) a radiopharmaceutical; or

(II) a drug or biological for which payment was made under paragraph (6) (relating to pass-through payments) on or before December 31, 2002.

Covered outpatient drug is defined in 42 U.S.C. §1396r-8(k)(2) as follows:

Subject to the exceptions in paragraph (3), the term “covered outpatient drug” means –

(A) of those drugs which are treated as prescribed drugs for purposes of section 1396d(a)(12) of this title, a drug which may be dispensed only upon prescription (except as provided in paragraph (5)), and—

3 (i) which is approved for safety and effectiveness as a prescription drug under section 505 or 507 of the Federal Food, Drug, and Cosmetic Act [21 U.S.C.A. § 355 or 357] or which is approved under section 505(j) of such Act [21 U.S.C.A. § 355(j) ];

(ii) (I) which was commercially used or sold in the United States before October 10, 1962, or which is identical, similar, or related (within the meaning of section 310.6(b)(1) of title 21 of the Code of Federal Regulations) to such a drug; and (II) which has not been the subject of a final determination by the Secretary that it is a “new drug” (within the meaning of section 201(p) of the Federal Food, Drug, and Cosmetic Act [21 U.S.C.A. § 321(p)]) or an action brought by the Secretary under section 301, 302(a), or 304(a) of such Act [21 U.S.C.A. § 331, 332(a), or 334(a) ] to enforce section 502(f) or 505(a) of such Act [21 U.S.C.A. § 352(f) or 355(a) ]; or

(iii) (I) which is described in section 107(c)(3) of the Drug Amendments of 1962 and for which the Secretary has determined there is a compelling justification for its medical need, or is identical, similar, or related (within the meaning of section 310.6(b)(1) of title 21 of the Code of Federal Regulations) to such a drug, and (II) for which the Secretary has not issued a notice of an opportunity for a hearing under section 505(e) of the Federal Food, Drug, and Cosmetic Act [21 U.S.C.A. § 355(e) ] on a proposed order of the Secretary to withdraw approval of an application for such drug under such section because the Secretary has determined that the drug is less than effective for some or all conditions of use prescribed, recommended, or suggested in its labeling; and

(B) a biological product, other than a vaccine which—

(i) may only be dispensed upon prescription,

(ii) is licensed under section 262 of this title, and

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Organogenesis Inc. v. Sebelius, Counsel Stack Legal Research, https://law.counselstack.com/opinion/organogenesis-inc-v-sebelius-dcd-2014.