Servier Pharmaceuticals LLC. v. Becerra, Civil Action No. 2024-2664

Background

Servier Pharmaceuticals LLC challenged the Centers for Medicare and Medicaid Services (CMS) determination that it is not a “specified small manufacturer” under the Manufacturer Discount Program (MDP) of the Inflation Reduction Act (IRA) of 2022, affecting eligibility for phased-in rebate obligations under Medicare Part D.
The IRA provides manufacturers meeting the small manufacturer definition with a seven-year phase-in of required drug discounts, but Servier was only granted “specified manufacturer” (not “specified small manufacturer”) status by CMS.
The dispute turned on 2021 data: Servier acquired the drug Tibsovo from Agios Pharmaceuticals in April 2021, but Tibsovo distributed in 2021 was manufactured pre-acquisition by Agios, under Agios’s labeler code and its Coverage Gap Discount Program agreement with CMS.
Servier reimbursed Agios for discounts on Tibsovo sales post-acquisition but did not release Tibsovo manufactured under its own labeler code until 2022.
CMS used National Drug Code labeler codes in Prescription Drug Event data to attribute 2021 Part D expenditures, assigning all Tibsovo expenditures for 2021 to Agios; consequently, Servier’s attributable expenditures were $0.
Servier’s administrative recalculation request was denied by CMS; Servier then sought summary judgment under the APA, and CMS cross-moved, with the District Court resolving the matter.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Servier is a "specified small manufacturer" under the IRA for the MDP phase-in program	Servier argued that ownership of Tibsovo and responsibility for discounts post-acquisition meets the statutory definition for 2021, as “manufacturer” should reflect NDA ownership and economic interest during relevant time periods.	CMS argued that only products actually produced by Servier, covered by its own Coverage Gap Discount Program agreement (and labeler code), count for 2021, and all 2021 expenditures involved Agios-manufactured product under Agios agreements.	Court agreed with CMS: only expenditures for drugs produced by Servier, covered by its own agreement, count; Servier does not qualify.
Whether CMS's reliance on labeler code data was arbitrary or capricious under APA	Servier argued relying solely on labeler codes ignored real-world ownership and responsibilities, especially post-acquisition, and that CMS had more accurate information.	CMS argued labeler codes are the proper statutory proxy for manufacturer, accurately reflecting production and agreement coverage per statute and guidance.	Court found CMS’s reliance on labeler codes logical, consistent with statute, and not arbitrary/capricious.
Whether CMS adequately explained its decision to deny Servier’s request	Servier argued CMS did not sufficiently detail why its evidence of ownership and reimbursement duties were not considered under the statute.	CMS pointed to detailed methodology and explicit explanation in its guidance and communication, tying attribution directly to labeler code per statute.	Court found CMS’s explanation sufficient and its reasoning clear given statutory reading.
Whether the statutory definition of “manufacturer” can include Servier’s status post-acquisition for 2021 expenditures	Servier argued that broad dictionary or regulatory definitions of "manufacturer" could capture post-acquisition product ownership and obligations.	CMS argued statutory and regulatory context requires actual production or processing by the manufacturer seeking eligibility, not merely economic or NDA ownership.	Court found “manufacturer” in this context means the entity producing the dispensed drugs; Servier was not Tibsovo’s manufacturer for 2021.

Key Cases Cited

Loper Bright Enterprises v. Raimondo, 144 S. Ct. 2244 (2024) (holding that courts must exercise independent judgment over statutory interpretations, marking end of Chevron deference in this context)
Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984) (describes prior two-step statutory interpretation standard for agency decisions)
Motor Vehicle Manufacturers Ass’n of U.S., Inc. v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29 (1983) (explains arbitrary and capricious review under APA)
Barnhart v. Sigmon Coal Co., Inc., 534 U.S. 438 (2002) (emphasizes starting statutory interpretation with statutory text)
Allentown Mack Sales & Serv., Inc. v. NLRB, 522 U.S. 359 (1998) (process for agency decision must be logical and rational)