718 F.3d 436
5th Cir.2013Background
- Southwest filed July 11, 2011 in district court challenging CMS on Medicare Part D’s Preferred Pharmacy Rule (PPR).
- 42 U.S.C. § 405(h) requires exhaustion of administrative remedies before federal court review of Medicare claims.
- Illinois Council v. Sebelius created a narrow exception to § 405(h) where no judicial review would be available absent agency channeling.
- CMS argued the district court lacked jurisdiction absent § 405(h) review through DHHS; Southwest argued Illinois Council applies.
- Court analyzes whether PPR claims are “coverage determinations” (reviewable) or “grievances” (not reviewable).
- Key questions include whether enrollees or proxies can pursue review and whether amount-in-controversy requirements can be satisfied.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Illinois Council exception applies | Southwest: exception applies if no review available otherwise. | CMS: exception does not apply; channeling through agency remains. | Illinois Council exception not triggered; review foregone. |
| Whether CMS interpretation as coverage determinations can be reviewed | Southwest: PPR challenges are grievances, not reviewable. | CMS interpretation treats PPR challenges as coverage determinations and reviewable. | CMS interpretation entitled to deference; review available via administrative channel. |
| Whether enrollees or proxies can initiate review for providers | Southwest: enrollees cannot be represented by providers; Illinois Council applies. | Enrollees may appoint representatives; proxies (enrollees’ interests) can pursue review. | Representations allowed; proxies sufficient; Illinois Council not satisfied. |
| Whether aggregation can satisfy the amount-in-controversy requirement | Southwest: impossible to aggregate enough enrollees to meet $1,300 per regulations. | Aggregation possible; several enrollees or high-cost drugs can reach threshold. | Illinois Council not satisfied; aggregation thresholds not shown to preclude review. |
| Whether the district court properly dismissed for lack of subject matter jurisdiction | Southwest contends there is a pathway to review under Illinois Council. | Dismissing is proper if Illinois Council exception not proven. | Affirmed district court's dismissal; no complete preclusion shown. |
Key Cases Cited
- Illinois Council v. Sebelius, 529 U.S. 1 (S. Ct. 2000) (narrow exception to channeling where no review would be possible)
- Physician Hospitals of Am. v. Sebelius, 691 F.3d 649 (5th Cir. 2012) (channeling requirement and narrow Illinois Council exception discussed)
- Council for Urological Interests v. Sebelius, 668 F.3d 704 (D.C. Cir. 2011) (illustrates when third-party incentives undermine review under § 405(h))
- National Athletic Trainers’ Ass’n v. U.S. Dept. of Health & Human Servs., 455 F.3d 500 (5th Cir. 2006) (third-party proxies with incentives can constitute reviewable representation)
- Tex. Clinical Labs, Inc. v. Sebelius, 612 F.3d 771 (5th Cir. 2010) (agency interpretation of regulation reviewed for consistency and deference)