Am. Hosp. Ass'n v. Azar
385 F. Supp. 3d 1
D.C. Cir.2019Background
- Medicare Part B's OPPS sets prospective reimbursement rates for separately payable outpatient drugs (SCODs); default method is ASP plus 6% under 42 U.S.C. § 1395w-3a.
- The 340B Program lets certain hospitals buy drugs at discounted acquisition prices; HHS sought to reduce the Medicare reimbursement for 340B-purchased drugs to narrow the spread.
- For CY 2018 HHS set 340B drug payments to ASP minus 22.5%, citing lack of hospital acquisition-cost survey data and MedPAC estimates; plaintiffs challenged that rule in court.
- The Court held the 2018 adjustment unlawful because the Secretary exceeded his statutory authority under § 1395l(t)(14)(A)(iii)(II), which permits only "adjustments" to ASP-based rates, not wholesale substitution of an acquisition-cost methodology.
- HHS adopted the same ASP minus 22.5% approach for 2019; plaintiffs filed a supplemental complaint and moved for injunctive relief and other remedies for both years.
- The Court again found the 2019 rate unlawful but declined to vacate the 2018 and 2019 OPPS rules; instead it remanded both rules to HHS without vacatur and retained jurisdiction to monitor progress.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether plaintiffs satisfied presentment and exhaustion under 42 U.S.C. § 405(g) to obtain judicial review | Henry Ford presented claims for 2019 reimbursements; exhaustion is futile because issue is a pure legal question and administrative bodies cannot grant the relief requested | Defendants did not contest presentment and argued exhaustion rules apply | Court waived exhaustion as futile and exercised jurisdiction under § 405(g) because the challenge raises pure legal questions and administrative review cannot cure the legal error |
| Whether the Secretary exceeded statutory authority by setting 340B rates at ASP minus 22.5% under § 1395l(t)(14)(A)(iii)(II) | The Secretary’s use of an acquisition-cost–based methodology and a ~30% reduction exceeds the limited "adjustment" authority and is ultra vires | Secretary contends the action is an "adjustment" under subsection II and is within discretion; also asserted preclusion of review arguments | Court held the adjustment was ultra vires: the Secretary fundamentally altered the statutory ASP-based scheme rather than making a permissible adjustment |
| Whether the agency action is committed to agency discretion or precluded from review | Plaintiffs: statute limits adjustments and thus provides a judicially manageable standard | Defendants: decisions on OPPS adjustments are committed to agency discretion and/or review is precluded by § 1395l(t)(12) | Court found Amgen and related precedent supply a meaningful standard; preclusion/discretion defenses fail because the action was not a permissible "adjustment" |
| Appropriate remedy: vacatur, injunction, or remand | Plaintiffs sought injunctions and retrospective payments (ASP plus 6%), including vacatur of the changes | Defendants asked for remand without vacatur, leaving remedy to HHS | Court remanded both rules to HHS without vacatur, denying full injunctive relief but granting relief in part; court retained jurisdiction and ordered status reports |
Key Cases Cited
- Amgen, Inc. v. Smith, 357 F.3d 103 (D.C. Cir. 2004) (limits on Secretary's authority to make "adjustments" to OPPS rates)
- North Air Cargo v. USPS, 674 F.3d 852 (D.C. Cir. 2012) (district court generally remands unlawful agency action to the agency)
- Bennett v. Donovan, 703 F.3d 582 (D.C. Cir. 2013) (agency should decide on remand how best to provide relief)
- Allied-Signal, Inc. v. U.S. Nuclear Regulatory Comm'n, 988 F.2d 146 (D.C. Cir. 1993) (standard for vacatur: weigh seriousness of deficiencies against disruptive consequences)
- Cape Cod Hosp. v. Sebelius, 630 F.3d 203 (D.C. Cir. 2011) (budget neutrality constraints and remedial adjustments in Medicare context)
- Shands Jacksonville Med. Ctr. v. Burwell, 139 F. Supp. 3d 240 (D.D.C. 2015) (remand without vacatur appropriate where vacatur would create disruptive retroactivity and budget-neutrality issues)
- H. Lee Moffitt Cancer Ctr. & Research Inst. Hosp., Inc. v. Azar, 324 F. Supp. 3d 1 (D.D.C. 2018) (remanding to HHS to adopt appropriate adjustment rather than ordering specific relief)
- Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (U.S. 1988) (presumption against retroactive rulemaking)