Pharm. Coal. for Patient Access v. United States

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PHARMACEUTICAL COALITION FOR PATIENT ACCESS, Plaintiff, v. UNITED STATES OF AMERICA, DEPARTMENT OF HEALTH AND HUMAN SERVICES, U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES, OFFICE OF THE INSPECTOR GENERAL, CHRISTI A. GRIMM,^[1] in her official capacity as Inspector General of the United States Department of Health and Human Services, and XAVIER BECERRA, in his official capacity as United States Secretary of the Department of Health and Human Services, Defendants.

Civil Action No. 3:22-cv-714 (RCY)

United States District Court, E.D. Virginia, Richmond Division

January 17, 2024

MEMORANDUM OPINION

Roderick C. Young United States District Judge

This is a lawsuit challenging an action by a federal agency. Plaintiff Pharmaceutical Coalition for Patient Access (“PCPA”) commenced this litigation to appeal a negative advisory opinion issued by the U.S. Department of Health and Human Services, Office of the Inspector General (“HHS OIG” or “the Agency”) which dooms a Medicare Part D patient assistance program that PCPA wished to implement.

This case is currently before the Court on the parties' cross-motions for summary judgment.^[2] The matters have been fully briefed, and the Court dispenses with oral argument because the materials before it adequately present the facts and legal contentions, and argument would not aid the decisional process. E.D. Va. Loc. Civ. R. 7(J). For the reasons stated below, the Court finds that PCPA cannot show that the Agency erred, let alone that the Agency acted arbitrarily capriciously, or not in accordance with law. The Court thus affirms the opinion below and will grant Defendants' motion in full and deny PCPA's cross-motion.

I. STANDARD OF REVIEW

Under the Administrative Procedure Act (“APA”), a reviewing court must “hold unlawful and set aside” agency actions-including advisory opinions-if they are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” 5 U.S.C. § 706(2)(A). The same goes for agency actions “contrary to constitutional right[s.]” Id. § 706(2)(B).

“In an APA suit challenging agency action, review is limited to the administrative record and ‘resolution . . . does not require fact finding on behalf of [the] court.'” Hyatt v. U.S. Pat. & Trademark Off., 146 F.Supp.3d 771, 780 (E.D. Va. 2015) (alterations in original) (quoting Nw. Motorcycle Ass'n v. U.S. Dep't of Agric., 18 F.3d 1468, 1472 (9th Cir. 1994)); see 5 U.S.C. § 706; Camp v. Pitts, 411 U.S. 138, 142 (1973) (“focal point” for judicial review is “the administrative record already in existence, not some new record made initially in the reviewing court”). “Accordingly, the ordinary summary judgment standard under [Federal Rule of Civil Procedure 56(c)] does not apply” because “the presence or absence of a genuine dispute of material fact is not in issue, as the facts are all set forth in the administrative record.” Hyatt, 146 F.Supp.3d at 780. Therefore, “when a party seeks review of agency action under the APA, the district judge sits as an appellate tribunal,” and “[t]he ‘entire case' on review is a question of law.” Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077, 1083 (D.C. Cir. 2001).

II. BACKGROUND

A. Factual Background

The following factual narrative, drawn from the administrative record before HHS OIG, represents the undisputed facts for the purpose of resolving the cross-motions for summary judgment:

1. Oncology Care and Medicare Part D

There is no question that many patients with cancer suffer significant financial burdens associated with their care. Administrative Record (“AR”) 4-8, ECF No. 42 (PCPA Advisory Op. Request); accord AR 86 (OIG Advisory Op. No.^[3] 22-19). For example, PCPA certified that some innovative oncology medicines can run a patient up to (and beyond) $10,000 for a monthly supply at retail. AR 5 (PCPA Advisory Op. Request); accord AR 94 (Advisory Op. No. 22-19) (“‘[F]rom 2008 to 2021, launch prices for new drugs increased exponentially by 20% per year ....[I]n 2020-2021, 47% of new drugs were initially priced above $150000 per year' and . . . ‘[t]he highest prices were among . . . oncology drugs[.]'” (quoting Benjamin N. Rome et al., Trends in Prescription Drug Launch Prices, 2008-2021, JAMA NETWORK (June 7, 2022), https://jamanetwork.com/ journals/jama/fullarticle/2792986 [https://perma.cc/RK73-QEJF])). This is where Medicare comes into play.

Medicare has four parts, the relevant part here being Medicare Part D. Medicare Part D covers outpatient prescription drugs (including cancer drugs), but beneficiaries remain responsible for certain specified deductibles and co-pays.^[4] Part D beneficiaries are responsible for 100% of an initial deductible, which in 2022 was $480. After satisfying that deductible, beneficiaries enter various coverage phases, where they are responsible for a 25% co-insurance payment until they reach the “catastrophic coverage” threshold. Upon reaching the “catastrophic” threshold, which in 2022 was $7,050 (including the prior deductible and coinsurance payments), beneficiaries continue to pay 5% of the cost for brand-name medications. There is no upper limit on the 5% contribution. Given these figures, it is little surprise that both PCPA and the Agency acknowledge that “some patients, including some Federal health care program beneficiaries, are unable or unwilling to access medically necessary oncology drugs due to the[se] significant out-of-pocket costs incurred under the current Medicare Part D cost-sharing structure.” AR 94 (Advisory Op. No. 22-19)); see, e.g., AR 4-8 (PCPA Advisory Op. Request).

From the government's perspective, as explained by HHS OIG, this cost-sharing structure has a purpose: the structure “expos[es] beneficiaries to the economic effects of drug prices set by manufacturers,” thereby acting as a “market safeguard” to protect against overinflated drug prices. AR 102-03 (Advisory Op. No. 22-19) (citing Cong. Budget Off., A Detailed Description of CBO's Cost Estimate for the Medicare Prescription Drug Benefit 15 (July 2004), https://www.cbo.gov/sites/default/files/108th-congress-2003-2004/reports/07-21-medicare.pdf [https://perma.cc/YGH9-JQUH]). By retaining some beneficiary sensitivity to branded drug prices, drug manufacturers would have to keep beneficiaries' financial limitations in mind and thus, in theory, could not excessively raise their prices. See id.

To illustrate the payment structure outlined above using PCPA's $10,000-per-month cancer drug hypothetical,^[5] under Medicare Part D, the patient would owe approximately $2,800 in deductibles and co-insurance payments for that medication for the first month. See AR 5-6 (PCPA Advisory Op. Request); accord AR 89 (Advisory Op. 22-19). Every following month, the patient would be in the “catastrophic” phase of the benefit design and owe a 5% co-insurance payment for the remainder of the year for that prescription, equaling $500 per month. See AR 6 (PCPA Advisory Op. Request). In such a case, the total annual cost for the patient for this single prescription would exceed $8,000.^[6] See id. PCPA pointed to one study indicating that 41% percent of cancer patients abandoned medication if their out-of-pocket costs were between just $500.01 and $2,000. See id. at 6 n.11 (citing Jalpa A. Doshi et al., Association of Patient Out-of Pocket Costs with Prescription Abandonment and Delay in Fills of Novel Oral Anticancer Agents, 36 J. OF CLINICAL ONCOLOGY 476 (2018)).

2. PCPA's Proposed Coalition-Model Patient Assistance Program

To address these concerns, PCPA proposed a coalition-model patient assistance program to serve financially needy Medicare Part D patients diagnosed with cancer. Id. at 1. Through the program, PCPA would provide subsidies as co-pay assistance to Part D enrollees so long as the enrollee had: (1) a cancer diagnosis; (2) a household income between 150% and 350% of the federal poverty line; (3) already been prescribed a Part D oncology drug produced by a participating manufacturer; and (4) their Part D plan initially approve the coverage of the Part D drug. Id. at 11-12, 15; AR 46 (PCPA Add'l Info. Resps.). Enrollees qualified for PCPA's program would pay $35 per month for branded drugs (or $10 per month for generic products) plus either 25% or 10% of the otherwise applicable co-insurance obligation (that percentage dependent on the particular enrollee's financial need); PCPA would cover the rest of the enrollee's cost. See AR 12 (PCPA Advisory Op. Request). So, if the $10,000-per-month oncology drug described previously were branded and produced by a participating manufacturer, under PCPA's program (and depending on the enrollee's financial need), PCPA would cover approximately somewhere between $6,380 and $7,280 of the enrollee's annual co-pay for that drug. The government, through Medicare, would foot the rest of the over-$111,000 bill for the year.

On the manufacturer side, participation in PCPA's arrangement would be open to any manufacturer of branded or generic oncology products reimbursed by Medicare Part D. Id. at 15. Each participating manufacturer would pay PCPA for the costs associated with the cost-sharing subsidies PCPA pays for that participating manufacturer's own products. Id. at 14. In essence, the participating manufacturers would subsidize the Part D enrollees' cost-sharing amounts for their own products, with PCPA as the middleman. But again, the manufacturers would do so only for their own drugs, not for the drugs of any other participating manufacturer. Id.

In addition to the co-pay subsidies, PCPA would also operate programs to support “Addition Medical Needs” of cancer patients, which would include financial assistance with health insurance premiums for qualifying patients and other initiatives to address health...