United States Court of Appeals, District of Columbia Circuit
September 9, 2019
from the United States District Court for the District of
Columbia (No. 1:16-cv-02372)
Jeffrey S. Bucholtz argued the cause for appellant. With him
on the briefs were John D. Shakow and Nikesh Jindal.
Ruthanne M. Deutsch, Hyland Hunt, R. Craig Kitchen, Daryl L.
Joseffer, and Michael B. Schon were on the brief for amicus
curiae the Chamber of Commerce of the United States of
America in support of plaintiff-appellant.
Matthew J. Glover, Attorney, U.S. Department of Justice,
argued the cause for appellees. With him on the brief was
Abby C. Wright, Attorney. Alisa B. Klein, Attorney, and R.
Craig Lawrence, Assistant U.S. Attorney, entered appearances.
Before: Henderson, Millett and Wilkins, Circuit Judges.
LeCRAFT HENDERSON, CIRCUIT JUDGE.
appeal arises out of Ipsen Biopharmaceuticals, Inc.'s
challenge to the designation by Centers for Medicare and
Medicaid Services (CMS)-a part of the United States
Department of Health and Human Services-of the pricing
information Ipsen must report to CMS for a drug that it
manufactures. The sole issue on appeal is whether a series of
letters CMS sent Ipsen constitutes final agency action under
the Administrative Procedure Act (APA), 5 U.S.C. § 704.
As explained infra, we believe Ipsen has plausibly
argued that receipt of the letters significantly increased
its risk of a statutory civil penalty being levied for
"knowingly provid[ing] false information." 42
U.S.C. § 1396r-8(b)(3)(C)(ii). This increased risk is a
"legal consequence" sufficient to make the agency
action final under the second prong of the test enunciated by
the United States Supreme Court in Bennett v. Spear,
520 U.S. 154, 177-78 (1997). Accordingly, we reverse the
judgment of the district court and remand the case for
appeal implicates the details of the self-reporting scheme
contained in the Medicaid drug-rebate program. Medicaid is a
co-operative federal and state program, the federal side of
which is administered by CMS. See 42 U.S.C. §
1396 et seq. In order to participate in the Medicaid
program, a drug manufacturer is obligated to enter into an
agreement with CMS to provide rebates to states that elect to
pay for outpatient prescription drugs. The rebate a
manufacturer must provide is calculated in two parts. Both
parts use the average price (the AMP) that the manufacturer
charges a wholesaler for the drug. The base rebate is the
greater of 1.) the difference between the drug's AMP and
the lowest price offered during the most recent past quarter
and 2.) 23.1 % of the AMP. The additional rebate, paid on top
of the base rebate, is calculated by subtracting the
inflation-adjusted AMP for each dosage form and strength of
the drug when it was first sold to wholesalers (described by
Ipsen as the "base date AMP") from the AMP for the
same dosage and strength during the quarter in which the
rebate is calculated. The manufacturer calculates the total
per-unit rebate and reports it to the participating states,
which then use the information to prepare invoices sent to
and paid by the manufacturer. The statute provides for civil
penalties for manufacturers that "knowingly provide
false information" related to the rebate calculation,
including a civil penalty of up to $100, 000 for each item of
false information. See 42 U.S.C. §
1396r-8(b)(3)(B)-(C). Judicial review of a rebate calculation
is limited to review of enforcement proceedings brought by
CMS. See 42 U.S.C. § 1320a-7a(e); see
generally 42 U.S.C. § 1396r-8.
first introduced Somatuline Depot Injection in 2007 and,
accordingly, calculated a base date AMP for the drug at that
time. In 2014 Ipsen sought and obtained a new FDA approval
for Somatuline ED, an outpatient prescription drug, it
asserts, that is entitled to calculation of its own base date
Ipsen by letter notified CMS to this effect. Before receiving
a response, Ipsen reported the new base date AMP to CMS. CMS
responded to Ipsen's letter several months later,
indicating that Ipsen was not entitled to calculate a new
base date AMP. The letter further instructed Ipsen that
"the baseline data for [Somatuline ED] must be changed
to reflect the original baseline data of Somatuline
Depot." Ipsen sent a second letter, iterating its
position and requesting a meeting. The letter prompted a
response by CMS's Director of the Division of Pharmacy
repeating CMS's view that a new base date AMP was not
warranted because Somatuline ED had received FDA approval
under a supplemental new drug application number based on the
new drug application number of Somatuline Depot. The
Director's letter expressly stated that it was not
"a final agency action or even an initial determination
on a reimbursement claim."
responded to the second letter by filing suit. CMS moved for
summary judgment, arguing that it had taken no final agency
action to trigger judicial review under the APA. See
5 U.S.C. § 704 ("Agency action made reviewable by
statute and final agency action for which there is no other
adequate remedy in a court are subject to judicial
review."). The district court agreed and granted summary
judgment to CMS. Ipsen timely appeals pursuant to 28 U.S.C.
review the district court's grant of summary judgment de
novo. See Grunewald v. Jarvis, 776 F.3d 893, 898
(D.C. Cir. 2015). The APA permits judicial review of
"final agency action" only. See 5 U.S.C.
§ 704. "Agency actions are final if two independent
conditions are met: (1) the action marks the consummation of
the agency's decisionmaking process . . . and (2) it is
an action by which rights or obligations have been
determined, or from which legal consequences will flow."
Soundboard Ass'n v. FTC, 888 F.3d 1261, 1267
(D.C. Cir. 2018) (internal alterations and quotation ...