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Ipsen Biopharmaceuticals, Inc. v. Azar

United States Court of Appeals, District of Columbia Circuit

December 3, 2019

Ipsen Biopharmaceuticals, Inc., Appellant
Alex Michael Azar, II, in his official capacity as Secretary of the United States Department of Health and Human Services, ET AL., Appellees

          Argued September 9, 2019

          Appeal 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.



         This 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 further proceedings.

         I. Background

         Ipsen's 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.

         Ipsen 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 AMP.[1] 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."

         Ipsen 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. § 1291.

         II. Analysis

         We 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 ...

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