944 F.3d 950
D.C. Cir.2019Background
- Federally Qualified Health Centers (FQHCs) serve underserved populations and receive federal financial supports: Medicare Part B "wraparound" payments and Section 340B drug discounts.
- The Medicare Part C "Not Less Than" Provision (42 U.S.C. § 1395w-27(e)(3)(A)) requires CMS contracts with Medicare Advantage plans to include written-agreement terms ensuring payments to FQHCs for services are "not less than" payments to non‑FQHCs for such services. Wraparound payments apply only to non‑pharmacy outpatient services.
- Section 340B (42 U.S.C. § 256b) requires drug manufacturers to sell outpatient drugs to eligible safety‑net providers, including FQHCs, at discounted prices; providers can realize income when insurers reimburse at market (non‑discounted) rates.
- Cares Community Health (an FQHC) had an MA‑PD (Medicare Advantage + Part D) pharmacy agreement with Humana; Humana later set lower reimbursement rates for drugs Cares acquires under 340B, reducing Cares’ revenue.
- Cares sued HHS claiming HHS unlawfully failed to enforce the Not Less Than Provision against Part D prescription drug plans (APA claims for withholding action and arbitrary and capricious conduct). The district court dismissed; the D.C. Circuit affirmed, holding the Medicare statute does not unambiguously require HHS to apply the Not Less Than rule to Part D reimbursements for 340B drugs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the Not Less Than Provision’s phrase "services provided by such [FQHC]" unambiguously includes pharmacy/Part D drugs | Cares: phrase has ordinary meaning that includes pharmacy services, so the Not Less Than rule covers drugs dispensed by FQHCs | HHS: the statute’s defined term "[FQHC] services" (used elsewhere) excludes prescription drugs; textual context ties the Not Less Than rule to non‑pharmacy services | Court: phrase could encompass pharmacy services but is not unambiguously broader than the defined term; this ambiguity alone does not compel Cares’ reading |
| Whether Part D’s cross‑references (Part D Contract & Rewording Provisions) necessarily apply the Not Less Than Provision to Part D reimbursements (despite the Part C "written agreement" cross‑reference) | Cares: Part D provisions import and reword Part C rules to apply the Not Less Than Provision to prescription drug plans, so Part D insurers must include "not less than" terms for FQHC drugs | HHS: Part D did not revise the Part C requirement that the Not Less Than term appear in a "written agreement described in" the Part C Written Agreement Provision; no statutory link to Part D pharmacy agreements | Court: Part D did not unambiguously eliminate or alter the Part C "written agreement" prerequisite; Cares failed to show the Not Less Than Provision necessarily applies to Part D drug reimbursements |
| Whether HHS unlawfully withheld agency action or acted arbitrarily and capriciously by approving Part D plans that reimburse FQHCs less for 340B drugs | Cares: HHS must enforce the Not Less Than Provision against Humana; failure to do so is agency inaction / arbitrary | HHS: statute does not require enforcement in Part D context; agency action permitted; no APA violation | Court: APA claims fail because the statute does not unambiguously require HHS to act as Cares urges; dismissal affirmed |
Key Cases Cited
- Ne. Hosp. Corp. v. Sebelius, 657 F.3d 1 (D.C. Cir. 2011) (explains Medicare Parts and structure)
- Astra USA, Inc. v. Santa Clara Cty., 563 U.S. 110 (2011) (Section 340B is separate statutory program administered outside Medicare)
- Am. Hosp. Ass’n v. Azar, 895 F.3d 822 (D.C. Cir. 2018) (Medicare reimbursements for some 340B‑eligible hospitals were reduced based on 340B discounts)
- Regions Hosp. v. Shalala, 522 U.S. 448 (1998) (statutory interpretation requires an interpretation to be more than merely possible to displace another)
- Vonage Holdings Corp. v. FCC, 489 F.3d 1232 (D.C. Cir. 2007) (different terms in same statute are presumed to have different meanings)
- Gozlon‑Peretz v. United States, 498 U.S. 395 (1991) (Congressional inclusion or omission of language is intentional)
- Marx v. Gen. Revenue Corp., 568 U.S. 371 (2013) (surplusage canon applies only when a competing reading gives effect to all text)
- Sandoz Inc. v. Amgen Inc., 137 S. Ct. 1664 (2017) (policy preferences cannot override plain statutory text)