Pharm. Rsch. & Mfrs. of Am. v. Becerra

Pharm. Rsch. & Mfrs. of Am. v. Becerra

Opinion

MEMORANDUM OPINION

Pharmaceutical Research and Manufacturers of America (PhRMA) challenges a final rule promulgated by the Department of Health and Human Services on the grounds that the rule violates the Administrative Procedure Act. See generally Compl. ("Compl."), ECF No. 1. At the motion to dismiss stage, the Court rejected the government's contention that PhRMA lacks Article III standing. See Pharm. Rsch. & Mfrs. of Am. v. Becerra, No. 1:21-CV-1395 (CJN), 2021 U.S. Dist. LEXIS 230186, 2021 WL 5630798 (D.D.C. Dec. 1, 2021). PhRMA has now moved for summary judgment, arguing that the rule exceeds the agency's authority under the relevant statute. See PhRMA's Motion for Summary Judgment ("PhRMA's Mot."), ECF No. 26. The government has cross-moved for summary judgment. [*2]  See HHS's Cross-Motion for Summary Judgment ("HHS's Cross-Mot."), ECF No. 31. For the reasons that follow, the Court grants PhRMA's motion and denies the government's cross-motion.

I. Factual and Procedural Background

A. Prescription Drug Best Prices and Accumulator Adjustment Programs

Medicaid is a "cooperative federal-state program that provides federal funding for state medical services to the poor." Frew ex rel. Frew v. Hawkins, 540 U.S. 431, 433, 124 S. Ct. 899, 157 L. Ed. 2d 855 (2004); see also 42 U.S.C. § 1396 et seq. When a state decides to participate in the Medicaid program it must offer Medicaid plans that meet certain federal statutory and regulatory requirements. See Cookeville Reg'l Med. Ctr. v. Leavitt, 531 F.3d 844, 845, 382 U.S. App. D.C. 115 (D.C. Cir. 2008). Among the regulatory requirements include those promulgated by the Secretary of Health and Human Services, as the Secretary has been tasked with "mak[ing] and publish[ing] such rules and regulations . . . as may be necessary to the efficient administration" of the Medicaid program. 42 U.S.C. § 1302.

A state may offer outpatient prescription drug coverage as part of its Medicaid plan. See 42 U.S.C. § 1396d(a)(12); Pharm. Rsch. & Mfrs. of Am. v. Walsh, 538 U.S. 644, 652, 123 S. Ct. 1855, 155 L. Ed. 2d 889 (2003). To manage the costs of covering prescription drugs, Congress has conditioned receipt of federal funds on a cost-saving measure that requires drug manufacturers to participate in something called the Medicaid Drug Rebate Program. See Walsh, 538 U.S. at 649. That program [*3]  requires drug manufacturers to enter into rebate agreements. See id.

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