Regeneron Pharmaceuticals v. United States Department of Health and Human…

Background

Regeneron sought declaratory and injunctive relief against the U.S. Department of Health and Human Services, the Secretary of that department, the Centers for Medicare & Medicaid Services, and the Administrator of that agency. The immediate dispute concerned the Most Favored Nation Rule, a seven-year Medicare Part B payment model that would use prices in certain other countries and a fixed add-on payment to calculate payment amounts for covered drugs.

The rule applied to the 50 drugs with the highest aggregate allowed Medicare Part B charges, subject to stated exclusions. Participation was required for providers and suppliers submitting claims for a covered drug. Regeneron alleged, and the defendants did not dispute for purposes of the motion, that EYLEA was covered. Regeneron also submitted evidence that applying the rule would reduce EYLEA revenue and cause substantial financial harm.

CMS released the rule on November 20, 2020, without first using the Administrative Procedure Act’s usual notice-and-comment process. CMS invoked the Act’s good-cause exception, citing high drug prices and the COVID-19 pandemic. The rule was scheduled to take effect on January 1, 2021.

Preliminary-injunction standard

A preliminary injunction is temporary relief intended to prevent irreparable harm and preserve the status quo while a case proceeds. The court considered whether Regeneron showed a likelihood of success on the merits, likely irreparable harm without an injunction, and that the balance of hardships and public interest favored relief.

Irreparable harm

The court found that Regeneron was likely to suffer unrecoverable financial losses because the Administrative Procedure Act waives sovereign immunity for relief other than damages, meaning Regeneron could not recover the alleged financial losses as damages in this action. The court also found likely reputational harm. Regeneron’s evidence indicated that doctors could switch from EYLEA to competing products or that Regeneron might have to lower its price and renegotiate contracts, potentially causing existing and future customers not to return.

Likelihood of success

The court addressed only Regeneron’s claim that the defendants failed to follow notice-and-comment requirements. It did not evaluate or take a position on Regeneron’s other claims.

The defendants argued that the Medicare Act and the statute authorizing the payment-model testing barred judicial review. The court concluded that Regeneron was likely to show that neither statute barred review of its notice-and-comment claim. Among other reasons, the court determined that Regeneron challenged a regulation rather than an initial benefits determination, and that the claim arose under statutory provisions governing the model and rulemaking authority rather than the Medicare subchapter containing the asserted review bar. The court also concluded that the model-testing statute barred review of specified aspects of models but did not bar review of the procedures used to establish them.

The court then considered the Administrative Procedure Act’s notice-and-comment requirements. It held that CMS had not shown good cause to skip those procedures. The court reasoned that CMS had known about high U.S. drug prices for years and had delayed acting, so its own delay could not establish good cause. The court also found that CMS had not adequately connected the rule to improved COVID-19 outcomes or shown that the pandemic’s economic effects justified immediate implementation. The rule’s seven-year duration and phased-in design further weakened the claimed emergency justification.

The court therefore found that Regeneron was more likely than not to prevail on its claim that the MFN Rule was procedurally invalid because CMS did not comply with required notice-and-comment procedures.

Balance of hardships and public interest

The court found that applying the rule would impose significant financial hardship on Regeneron and could lead to reductions in research and development spending. It also found a public interest in requiring notice and comment for a rule with far-reaching effects. Although the defendants identified an interest in reducing prescription-drug costs and responding quickly to the pandemic, the court found that the government’s delay and the mismatch between the rule and the asserted pandemic-related concerns weakened those interests.

Disposition

The court granted Regeneron’s application for a preliminary injunction. Under the order, the defendants and their agents, employees, attorneys, successors, assigns, and persons acting with them were preliminarily enjoined from applying the MFN Rule to Regeneron’s EYLEA (aflibercept) Injection. The court issued the injunction without requiring a bond. The opinion did not permanently resolve the case’s other claims or the ultimate validity of the MFN Rule.