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3rd Circuit: Humana Can Sue GSK For Reimbursement For Avandia-Related Expenses

PHILADELPHIA - (Mealey's) Medicare Advantage provider Humana Medical Plan Inc. is allowed under Medicare law to seek reimbursement from GlaxoSmithKline PLC (GSK) for the costs of treating insurance customers who were injured by GSK's Avandia diabetes drug, a unanimous Third Circuit U.S. Court of Appeals panel said June 28 (In Re:  Avandia Marketing, Sales Practices and Products Liability Litigation, No. 11-2664, 3rd Cir.; 2012 U.S. App. LEXIS 13230). 

(Opinion available. Document #28-120712-005Z.) 

In 2010, Humana Medical Plan and related entity Humana Insurance Co. (Humana) filed a class action complaint against GSK in the U.S. District Court for the Eastern District of Pennsylvania, alleging that the drug maker was obligated under the Medicare Secondary Payer (MSP) Act to reimburse Humana for the cost of treating insurance policy holders who were injured by Avandia.  Humana operates a Medicare Advantage plan, which is a private insurance policy that provides coverage to Medicare-eligible persons who choose not to participate directly in the federal Medicare program. 

Medicare Advantage organizations (MAOs) pay medical costs for plan participants and each year are paid a fixed annual amount by Medicare. 

Avandia is a prescription drug prescribed to lower blood glucose levels in type 2 diabetics.  Plaintiffs allege that the drug substantially increases the risk of heart attack and stroke.  Federal lawsuits are centralized in an Eastern District multidistrict litigation. 

Medicare Got Settlement Set-Aside 

GSK has begun settling with plaintiffs and, at the time Humana filed its suit, had paid $460 million.  In the MDL, a portion of each settlement is set aside to reimburse the federal Medicare Trust Fund for Avandia injury treatment expenses paid by the federal government.  

GSK has not included Medicare Advantage plans in its settlement agreements, although the plans may have paid for treatment of Avandia injuries.  Humana argued in its suit that under the Medicare Secondary Payer Act, MAOs have a private right of action to collect double damages and to compel GSK to identify settling claimants to Medicare Advantage providers that cover those claimants. 

In 2011, Judge Cynthia M. Rufe granted GSK's motion to dismiss Humana's suit, finding that Medicare law does not provide MOAs with a private cause of action to seek reimbursement. 

Private Right Of Action Exists 

In a unanimous opinion, the Third Circuit panel said that the Medicare Secondary Payer Act does provide Humana with a private cause of action against GSK.  "Even if we were to find, as Appellees suggest, that this provision is ambiguous, we would nonetheless be required to defer to regulations issued by the Centers for Medicare and Medicaid Services ('CMS')," the panel wrote. 

"The language of the MSP private cause of action is broad and unrestricted and therefore allows any private plaintiff with standing to bring an action," the panel wrote.  "Since private health plans delivered Medicare services prior to the 1980 passage of the MSP Act, Congress was certainly aware that private health plans might be interested private parties when it drafted the cause of action, and it did not exclude them from that provision's ambit." 

"That decision is logically consistent because affording MAOs access to the private cause of action for double damages comports with the broader policy goals of the [Medicare Advantage] program," the panel continued.  "Further, even if we were to find the statutory text to be ambiguous on the issue, Chevron [Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc, 467 U.S. 837, 842-43 (1984) [enhanced version available to subscribers]] deference to CMS regulations, which grant MAOs parity with traditional Medicare, would require us to find in favor of Humana here." 

The panel reversed the District Court and remanded for further proceedings. 

Panel, Counsel 

Circuit Judge Joseph A. Greenaway wrote the opinion.  The other panel members were Chief Circuit Judge Theodore A. McKee and Circuit Judge D. Michael Fisher. 

Humana is represented by Richard W. Cohen, Peter D. St. Phillip Jr. and Gerald Lawrence of Lowey, Dannenberg, Cohen & Hart in White Plains, N.Y.  GSK is represented by Thomas E. Zemaitis, George A. Lehner and Kenneth H. Zucker of Pepper Hamilton in Philadelphia. 

Amicus curiae America's Health Insurance Plans is represented by Arthur N. Lerner of Crowell & Moring in Washington, D.C.

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