Pharmaceutical Research & Manufacturers of America v. United States Department of Health & Human Services, 138 F. Supp. 3d 31

Background

PhRMA challenged HHS’s Interpretive Rule that restates a previously vacated Final Rule excluding “a drug designated ... for a rare disease or condition” from 340B discounts for newly added covered entities (ACA subsections M–O).
The Court had earlier vacated HHS’s Final Rule for lack of statutory rulemaking authority; HHS then issued an Interpretive Rule (non‑legislative) identical in substance announcing how it will apply §340B(e).
HHS sent letters and guidance indicating manufacturers not following the Interpretive Rule were “out of compliance” and could face refunds, penalties, or termination of pricing agreements; no administrative dispute resolution process mandated by the ACA has been implemented.
PhRMA sought judicial review under the APA arguing the Interpretive Rule is final agency action and that HHS’s interpretation conflicts with the plain text of §340B(e). HHS argued the rule is non‑final (interpretive only) and, alternatively, entitled to Skidmore deference.
The Court found the Interpretive Rule was final agency action (pre‑enforcement effects, definitive position, purely legal question, significant practical burdens) and that HHS’s interpretation contradicted the plain meaning of §340B(e).
Result: the Court denied defendants’ summary judgment, granted PhRMA’s summary judgment, and vacated the Interpretive Rule as not in accordance with law under the APA.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the Interpretive Rule is final agency action	Interpretive Rule + enforcement letters are definitive, pose immediate burdens, and are reviewable pre‑enforcement	Interpretive rule is non‑legislative guidance and not subject to pre‑enforcement review until an enforcement action	Final: rule is reviewable — Bennett factors and CSI Aviation test satisfied (definitive position, pure legal question, significant practical burden)
Whether HHS’s interpretation of §340B(e) is lawful	§340B(e) plain text excludes any drug that is designated as an orphan drug (all uses), not only uses that match the orphan designation	§340B(e) should be read to exclude orphan drugs only when used for the rare indication for which they were designated (use‑limited)	Held for PhRMA: plain language and consistent statutory usage show Congress intended to exclude drugs designated as orphan drugs regardless of particular use; HHS interpretation conflicts with statute
Appropriate deference to agency interpretation	No Chevron deference because HHS lacks authority to issue binding rules here; at most Skidmore persuasiveness which cannot overcome plain text	Agency urged deference (Skidmore or Chevron if finality implies rulemaking authority)	Chevron not applicable; plain meaning controls — no deference given to interpretation that contradicts statute
Remedy under the APA	Vacatur of the Interpretive Rule as contrary to law	Argued nonfinality or deference might avoid vacatur	Court vacated the Interpretive Rule as arbitrary, capricious, and not in accordance with law (5 U.S.C. §706(2)(A))

Key Cases Cited

Bennett v. Spear, 520 U.S. 154 (Sup. Ct.) (two‑part finality test: consummation and legal consequences)
Sackett v. EPA, 566 U.S. 120 (Sup. Ct.) (pre‑enforcement agency actions with legal consequences are reviewable)
Chevron U.S.A., Inc. v. Natural Res. Def. Council, Inc., 467 U.S. 837 (Sup. Ct.) (two‑step framework for judicial review of agency statutory interpretation)
Skidmore v. Swift & Co., 323 U.S. 134 (Sup. Ct.) (weight of agency interpretation depends on persuasiveness)
CSI Aviation Servs., Inc. v. U.S. Dep’t of Transp., 637 F.3d 408 (D.C. Cir.) (pre‑enforcement letter constituted final agency action where agency took definitive position, issue was purely legal, and practical burdens were significant)
Ciba‑Geigy Corp. v. EPA, 801 F.2d 430 (D.C. Cir.) (ripeness/finality framework for pre‑enforcement review)