Coalition for Common Sense in Government Procurement v. United States
404 U.S. App. D.C. 13
D.C. Cir.2013Background
- Congress enacted 10 U.S.C. § 1074g(f) in NDAA 2008 to subject TRICARE retail prescriptions to 38 U.S.C. § 8126 pricing standards.
- Department of Defense previously used a voluntary rebate program and issued Dear Manufacturer letters to affect price differentials between retail price and federal ceiling price.
- Final rule in 2009 required manufacturers to refund the price differential for all prescriptions filled at TRICARE retail pharmacies, irrespective of written agreements.
- Coalition challenged Secretary's authority to impose price caps without consent and the retroactive liability for rebates; district court remanded on separation of liability issues.
- Secretary issued a supplemental rule in 2010 explaining why price caps should apply to manufacturers and that retroactivity was dictated by § 703's effective date.
- On appeal, court applies Chevron and upholds the rule as a reasonable interpretation, and holds § 703 imposes rebate liability on manufacturers beginning January 28, 2008.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Does § 703 authorize price caps without consent? | Coalition: § 703 requires § 8126 contracts with manufacturers. | Secretary: § 703 grants discretion to extend § 8126 standards; no explicit requirement for contracts. | Yes; statute permits involuntary caps without written agreements. |
| Does § 703 impose retroactive rebate liability on manufacturers? | Coalition: liability applies retroactively to drugs already in distribution. | Secretary: liability follows from § 703's effective date; Congress intended an enforceable rebate. | Yes; liability is retroactive to January 28, 2008. |
| Is the Secretary's interpretation of § 703 reasonable under Chevron? | Coalition: interpretation not compelled; other actors could bear costs. | Secretary's interpretation reasonably implements Congress’s objective to unify pricing, considering market realities. | Yes; regulation is a permissible construction. |
Key Cases Cited
- Chevron U.S.A., Inc. v. NRDC, 467 U.S. 837 (1984) (two-step Chevron analysis for agency interpretations)
- INS v. St. Cyr, 533 U.S. 289 (1998) (statutory retroactivity requires clear congressional intent)
- Bowen v. Georgetown Univ. Hosp., 488 U.S. 204 (1988) (retroactivity generally not allowed absent express congressional grant)
- Coalition for Common Sense in Government Procurement v. Secretary of Veterans Affairs, 464 F.3d 1306 (Fed. Cir. 2006) (Dear Manufacturer letter invalidated as substantive regulation without notice-and-comment)
- Village of Barrington v. Surface Transportation Board, 636 F.3d 650 (D.C. Cir. 2011) (Chevron step-one heavy burden; discretionary interpretations allowed)
- National Mining Association v. Department of Labor, 292 F.3d 849 (D.C. Cir. 2002) (statutory retroactivity considerations in agency actions)
- Coalition for Common Sense in Government Procurement v. United States, 821 F. Supp. 2d 275 (D.D.C. 2011) (district court held § 703 ambiguous but upheld 2010 rule as reasonable)