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Case number 20-5346.

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Council on Radionuclides and Radiopharmaceuticals, Inc.

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of Delaware Corporation, Abelant, versus Xavier Becerra, in his official capacity as Secretary of U.S.

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Department of Health and Human Services and United States Department of Health and Human Services.

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Mr. Seagroves for the Abelant, Ms.

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Kaiser for the Abellies.

[00:00:23] Speaker 08:
Good morning, Council.

[00:00:23] Speaker 08:
Mr. Seagroves, please proceed when you're ready.

[00:00:26] Speaker 01:
Good morning, Your Honors.

[00:00:27] Speaker 01:
May it please the Court?

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The fundamental question presented in this APA appeal is whether an object of final agency action that requires the object to self-report information to the federal government must quantify the cost of complying with that reporting obligation in order to establish Article III standing.

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We respectfully submit that the answer to that question is no.

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Now, this court has certainly said that simply because someone is an object of agency action does not automatically create Article III standing for the object.

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This court has made clear that the court must conduct a case and context specific inquiry.

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Here, of course, the context is the Medicaid drug rebate program, which this court most recently evaluated in Ipsum.

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at the heart of that program, the engine that drives it, if you will.

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is the obligation that is statutorily imposed, whereby participating pharmaceutical manufacturers must self-report information for their products that satisfy the threshold statutory definition of covered outpatient drug, which is subsection K2 of the statute.

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The context at issue here also provides that the failure to timely report required information

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can, according to CMS, subject the manufacturer to per day civil monetary penalties of $10,000 per day.

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And it is CMS's view that that penalty provision in the statute, which wasn't specifically addressed in Ibsen, but that that particular statutory provision does not have a knowledge element.

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It is, according to CMS, essentially a strict liability provision.

[00:02:21] Speaker 05:
Can I ask about the declaration and tell me if I mispronounced Mr. Estophanous?

[00:02:27] Speaker 01:
That's correct.

[00:02:29] Speaker 05:
Has, I'm just gonna call the company AAA to save me a lot of words, has AAA, not the other company, AAA here, have they filed reports and have they paid any rebates since this rule was promulgated?

[00:02:49] Speaker 01:
The record answers one of those two questions, Your Honor.

[00:02:52] Speaker 01:
The record, and this was actually introduced into the record by CMS in its reply brief, which is in the district court, which is docket number 22.

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The government there on pages four and 18 of its reply brief and footnotes on those pages.

[00:03:09] Speaker 03:
Is that an RJA?

[00:03:11] Speaker 01:
It is not, Your Honor.

[00:03:13] Speaker 03:
Thank you.

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The government, yeah, I apologize.

[00:03:19] Speaker 01:
The government pointed out there that one of the two products identified in the AAA declaration, namely Lutathera, had been reported following the final rule, had been reported data for that product had been reported to CMS.

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So CMS put that into the record.

[00:03:39] Speaker 03:
But it's your position as a legal matter, presumably, I'm sorry for my sarcasm, that in order to establish standing, it is immaterial whether any of the members have actually filed reports or paid rebates.

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And so it's not surprising that that information is not in the JA.

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I think that's correct because I think this court has been careful to say that on numerous occasions that one does not have to demonstrate a past injury in order to establish Article III standing in fact.

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And Judge Miller, just to make sure I answered your question as it relates to the payment of rebates, the record is silent on that issue.

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And I personally, I do not know the answer to that question.

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Doesn't that- Go ahead.

[00:04:27] Speaker 07:
No, please, please.

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Doesn't there have to be,

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some indication that the rule causes some injury.

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Let's just use AAA because they're the only entity that can establish the ending now.

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The rule had to do something that caused a change to their detriment.

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It had to impose or have to impose a legal consequence where there would be a legal consequence that flows or is caused by the final rule.

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Here, the final rules reporting instruction, which is at JA61, CMS evaluated the threshold question of whether radiopharmaceuticals as a class satisfy subsection K2's definition of covered outpatient drugs.

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And CMS answered that question in the affirmative and then said,

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in language that is quoted in our brief multiple times, said that radiopharmaceuticals are to be reported in the same manner as other covered outpatient drugs.

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Right.

[00:05:29] Speaker 08:
So suppose then that has to have a consequence.

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And I take it the inference is that it results in reporting obligations that otherwise wouldn't exist.

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Yes, Your Honor.

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And that's... Go ahead.

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And where does the declaration just doesn't say that?

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And I guess one question I have is,

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it at least seems conceivable to me that entities who manufacture radiopharmaceuticals were engaging in the reporting obligations anyway.

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I mean, at least I don't know that that's not true.

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And if that's the case, then wouldn't we be benefited by some indication that there is an entity that wasn't reporting, but as a consequence of the rule, it will have to report or it is inclined to report or

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or something's gonna happen as a result of the rule vis-a-vis reporting.

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It may not be much to do because maybe that's just the nature of things, but I don't see that predicate part about how this entity is going to change its behavior as a consequence of the rule from something that it was doing beforehand to something new that will come about after the fact.

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The record, Your Honor, is silent as to whether prior to

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the final rule, whether any radiopharmaceutical manufacturer was reporting information, the record does reflect, however, that following the final rule, AAA did report information.

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I think it's also important to point out that- And if AAA, then if AAA was reporting before, also, then what's the injury?

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From the rule.

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The injury there would be,

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If I might want to analogize it to committing an act that's not a crime.

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I mean, it seems to me that if they were doing it before as a they're overly conservative and they're concerned about CMS's position that failure to timely report.

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can result in civil monetary penalties and suspension from the program entirely.

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It seems to me that the fact that they were doing it before and now CMS has said definitively put them on notice that you have a statutory obligation to report.

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The fact that they did it as a conservative matter prior to the final rule doesn't mean that

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the final rule hasn't changed the legal consequences of them failing to report.

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It's always, as is often the case with standing, it's hard to disentangle the merits and the standing.

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But as I take it, CMS's position is that under the statute, as under the rule, if a state

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game bundles the administration of a prescription drug with a hospital service and bundles the charging for it that that's within the limitation of the definition of a covered outpatient drug.

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Whereas if the state, and this is going to vary from state to state, if the state bundles the service but separates out the charge, that it does

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that you do have to file and participate in a rebate program.

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And that that seems to, so to the extent that that's, that there's some new unclarity that the rule, I mean, I understand that the industry wanted more and didn't get it in terms of a categorical thing, like you guys are not subject to this, but I'm having trouble seeing what your theory is of how the rule created

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a kind of a trap for the unwary and that you have members who can show that their conduct and or, you know, concretely described risk shifted.

[00:09:23] Speaker 01:
Certainly, your honor.

[00:09:24] Speaker 01:
So the discussion in the final rule that immediately follows the discussion of radiopharmaceuticals goes into some detail as it relates to how does the statutory limiting definition subsection K3, how does that affect essentially a participating manufacturer's obligation at the threshold to report information?

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And essentially, CMS takes the position that

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whether or not the state of California, for example, pays for your thing separately or not, that only affects rebate liability.

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That does not affect the threshold obligation to report information.

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Because if we keep in mind, the chain of events here in the statutory scheme is that the manufacturer self-report information to CMS.

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CMS then provides that information to the states.

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And on page 62 of the Joint Appendix, the final rule,

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makes clear that CMS relies upon the states to then use the information that has been self-reported by manufacturers to determine whether a rebate is owed, because the states are responsible for invoicing the manufacturers for the rebate.

[00:10:32] Speaker 05:
Can I go back to this?

[00:10:35] Speaker 05:
You mentioned the government's acknowledgment that, at least as to Lutifera, AAA has been filing reports since the rule was adopted.

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Do we know where those same reports were filed before the rule was adopted?

[00:10:53] Speaker 01:
We do not.

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And I'm the government in the district court provided a link to a CMS website that had the data.

[00:11:01] Speaker 01:
When one pulls up that link currently, one sees that.

[00:11:05] Speaker 01:
Well, I should say this.

[00:11:06] Speaker 01:
Luda Farah was not approved by the FDA until after the final rule.

[00:11:10] Speaker 01:
Oh, I apologize.

[00:11:12] Speaker 01:
Light bulb.

[00:11:12] Speaker 01:
I apologize.

[00:11:14] Speaker 08:
And it doesn't help that much anyway, because then we don't know the ex ante

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We don't know that anything changed as a consequence of the rule.

[00:11:21] Speaker 08:
Just because reports are filed after doesn't mean they weren't filed before.

[00:11:24] Speaker 08:
I think, unless I'm missing something.

[00:11:30] Speaker 01:
So the report to which, or the database that CMS linked to in the district court demonstrates that Luta Thera, the first reports filed by Luta Thera were not filed in 2018, which is two years after the final rule issue here.

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And that makes sense because Lutathera was not approved by the FDA until 2018.

[00:11:51] Speaker 05:
But AAA has other drugs.

[00:11:54] Speaker 05:
I don't know how far back this database goes, but does it show or can you tell us whether Lutathera filed anything before as to a radionuclide?

[00:12:04] Speaker 01:
They did not.

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For example, the other product that is specifically identified in the declaration, the database, CMS's database reflects that no reports were filed for that.

[00:12:14] Speaker 08:
For that one, it doesn't reflect that any reports were filed after either, or does it?

[00:12:22] Speaker 01:
Correct.

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It lacks any information in it for any such reporting, which would indicate that no such thing.

[00:12:27] Speaker 08:
I guess the bottom line question for me, I think for

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colleagues as well.

[00:12:33] Speaker 08:
Is there anything in the record that shows that there was some radiopharmaceutical as to which reports were not filed before the rule, but are filed after the rule?

[00:12:46] Speaker 01:
No, there's nothing to that point in the record.

[00:12:50] Speaker 04:
We go back to… Anything on this website?

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like the initial notice thing?

[00:12:58] Speaker 01:
Yeah.

[00:12:58] Speaker 01:
The website itself does not, the database, CMS database does not indicate whether a particular product is a radiopharmaceutical or not.

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It lists NDC codes and the like.

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So I don't think that one can look at that database and

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reach an assessment of whether conduct necessarily changed pre and post rule.

[00:13:23] Speaker 05:
But your association members should be able to answer this in about five minutes, right?

[00:13:29] Speaker 01:
I would say so, Your Honor.

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I'd also say that, again, if we keep in mind that this is a statutory scheme where CMS takes the position that essentially there's strict liability for failure to report.

[00:13:40] Speaker 05:
You have to marry that with their explicit representation in the rule that, look, we realize that this reporting stuff is confusing.

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or more complicated maybe for radionuclides.

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And I don't know if I'm saying that right either, but we're here to work with you.

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That makes it a little bit harder to find a risk of prosecution.

[00:14:02] Speaker 05:
Are you aware of any radionuclide manufacturers that haven't been fined?

[00:14:09] Speaker 05:
Have any of your members been fined since it was adopted for not properly reporting?

[00:14:14] Speaker 01:
No, for example, in an incident after oral argument, the government submitted a letter that listed past instances in which the failure to report CMP provision had been implemented.

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And my understanding is that none of those examples involved radio pharmaceuticals.

[00:14:33] Speaker 03:
So, Mr. Segrove, I'm a little confused about your characterization of the scheme as imposing strict liability.

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I had thought that that the

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Your member's declaration said that manufacturers must make good faith reasonable assumptions, and if they're doing that, why do you think that CMS is going to interpret

[00:15:02] Speaker 03:
it's assumptions, it's a bungled good faith effort as amounting to a knowing false reporter.

[00:15:08] Speaker 03:
I guess my two questions just to be clearer.

[00:15:11] Speaker 03:
Where in the statute are you looking to find district liability?

[00:15:18] Speaker 03:
Is that the late filing provision or

[00:15:21] Speaker 01:
And if I could clarify at the beginning, that CMS's position that there's no knowledge element, and this is subsection B3C Romanet 1.

[00:15:31] Speaker 01:
And that's, yeah, the addendum to the blue brief at page six, right hand column.

[00:15:46] Speaker 03:
Send them to the blue.

[00:15:48] Speaker 03:
Oh, it would help to have the right, the brief from the right case.

[00:15:58] Speaker 01:
The heading is failure to provide timely information.

[00:16:01] Speaker 03:
So timely, that's so there's maybe a strict liability for, for lateness, but your argument is not that the new rule makes it imminent that AAA will be late with its filings.

[00:16:15] Speaker 01:
No, but we rely upon both of the penalty provisions, both that provision and the false information provision.

[00:16:22] Speaker 01:
So when we say the declaration says that one has to make reasonable good faith assumptions, but first of all, that's a factually unrefuted statement in the record.

[00:16:33] Speaker 01:
But I think that

[00:16:36] Speaker 01:
When we were talking about that aspect of the declaration, we're talking about the round peg square whole problem with the Medicaid drug rebate program being set up and administered in such a way that, for example, to report the current reporting structure as such, and the reporting structure was such at the time, that the dosage data of millicuries, for example, which is an important term in the radiopharmaceutical context, was not an option.

[00:17:06] Speaker 03:
I'm just dialing back to your assertion that there's strict liability.

[00:17:10] Speaker 03:
I just don't see it.

[00:17:12] Speaker 03:
I think in the very column that you pointed to, which is what I had read, any manufacturer with agreement under this section that knowingly provides false information.

[00:17:19] Speaker 03:
And then there's an obligation to timely provide information.

[00:17:23] Speaker 03:
If you do your best, provide some information, turns out it's not what CMS wants.

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You're not going to be liable.

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You could timely file something and CMS says, we stand ready to help.

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And then the knowingly is only when the information is false, they've tried to guide your members and your members have nonetheless obtusely given the wrong information.

[00:17:50] Speaker 03:
And that's not what they're claiming is their problem, is it?

[00:17:55] Speaker 01:
Well, again, if we look at the CMP provision for failure to report, it has no knowledge element CMS.

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represented this court in Ibsen that there is no knowledge element.

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If factually you violate that, you're at risk for CMPs.

[00:18:15] Speaker 01:
To put in context CMS's statement in the final rule that CMS remains willing to work with radiopharmaceutical manufacturers, the administrative record in this case reflects dating back to at least as early as 2010, which is actually prior to the proposed rule.

[00:18:33] Speaker 01:
The council was working with CMS and trying to deal with this issue and get the clarity that it needed.

[00:18:39] Speaker 01:
So that's at least a six-year process.

[00:18:41] Speaker 01:
So for the agency to say, in the final rule, we will continue to work with you, I think one has to look at the record and see, well, what has been the course of dealing thus far?

[00:18:52] Speaker 01:
And we're talking about a six-year process that hasn't.

[00:18:54] Speaker 05:
Is there a course of such dealing prior to the promulgation of the proposed rule?

[00:18:59] Speaker 05:
were re-nuclear manufacturers already, many of them assuming under the statutory language that they had to file these reports already doing so.

[00:19:09] Speaker 05:
So this confusion even pre-existed in the proposed rule.

[00:19:12] Speaker 01:
That's not in the record, your honor.

[00:19:14] Speaker 08:
But it's not not in the record either.

[00:19:16] Speaker 08:
I mean, we don't know that that wasn't the case.

[00:19:18] Speaker 08:
True.

[00:19:22] Speaker 08:
Or we don't have any reason to think that AAA thought that.

[00:19:26] Speaker 08:
the state of the world beforehand was in one direction or the other as it with respect to the particular point, the judgment that raises.

[00:19:32] Speaker 01:
That's correct.

[00:19:33] Speaker 01:
Cause again, look, we're talking about a six year long process of engagement between the council.

[00:19:38] Speaker 01:
and the agency.

[00:19:40] Speaker 05:
I'm just sorry.

[00:19:40] Speaker 05:
This is my mistake.

[00:19:42] Speaker 05:
Is that six years the time period between the proposed rule and the final rule?

[00:19:47] Speaker 01:
No, Your Honor.

[00:19:48] Speaker 01:
So the record, the proposed rule is 2012.

[00:19:50] Speaker 01:
The final rule is 2016, so four years.

[00:19:54] Speaker 01:
The engagement between the council and CMS, and this is reflected in the administrative record.

[00:20:00] Speaker 01:
And this is in the JA, just to be clear.

[00:20:03] Speaker 01:
And then for example, if one goes back to,

[00:20:07] Speaker 01:
If I could, if you indulge me, I realize I'm over my time.

[00:20:11] Speaker 01:
But there's a letter from CMS to council for the council.

[00:20:17] Speaker 01:
That's a poorly way to put it.

[00:20:19] Speaker 01:
But there's a letter in the record where, again, this is prior to even the proposed rule.

[00:20:28] Speaker 01:
Um, if you indulge me or if I, if I, if I, maybe I'll bring it up in a rebuttal.

[00:20:33] Speaker 01:
That's fine.

[00:20:35] Speaker 05:
So there's a little bit to the rest of your recollection.

[00:20:37] Speaker 05:
There's a letter even prior to the proposed rule that talked about this topic.

[00:20:41] Speaker 01:
Yes, Your Honor, and it's JA 121, and it says, quote, consequently, we, and this is CMS, believe that radiopharmaceutical manufacturers need to submit the necessary baseline data and pricing information to CMS.

[00:20:56] Speaker 01:
That was even prior to the proposed rule.

[00:20:58] Speaker 01:
Yes, Your Honor.

[00:21:02] Speaker 08:
All right.

[00:21:02] Speaker 08:
If my colleagues don't have additional questions for you at this time, we'll hear from the government.

[00:21:08] Speaker 08:
Thank you, Mr. Segros, Ms.

[00:21:10] Speaker 08:
Kaiser.

[00:21:13] Speaker 02:
Good morning, Your Honors, and Matt, please support Bridget Kaiser for Secretary of the Senate and the United States Department of Health and Human Services.

[00:21:22] Speaker 08:
I'm sorry, I'm getting a little bit of an echo from your audio.

[00:21:25] Speaker 02:
Is this a little better?

[00:21:28] Speaker 08:
It's a little better when you're leaning closely, yes.

[00:21:31] Speaker 02:
Okay, I apologize, Your Honors.

[00:21:34] Speaker 02:
So as we've discussed, the council's associational standing depends entirely on AAAs, and the district court twice looked at that declaration and found it wanting and establishing standing.

[00:21:52] Speaker 05:
Is that exactly right?

[00:21:55] Speaker 05:
The BRAG declaration says,

[00:21:58] Speaker 05:
I've never been in this Medicaid program, never needed to before.

[00:22:01] Speaker 05:
And if I have to come into it, it's gonna take a ton of paperwork from me that costs money, right?

[00:22:08] Speaker 05:
It makes the economic analysis and complaint there about what it'll take if it has to come into the Medicaid program.

[00:22:15] Speaker 05:
Isn't that relevant to show that this rule causes a manufacturer of these pharmaceuticals that's a member of this association

[00:22:25] Speaker 05:
to have to make this economic choice between taking on this economic burden or not being reimbursed under Medicaid?

[00:22:33] Speaker 02:
Well, the break declaration, which the council doesn't rely on here, didn't actually say, as I recall, that that manufacturer wanted to

[00:22:47] Speaker 02:
participate in the program or didn't want to participate in the program.

[00:22:51] Speaker 02:
I think that's what Judge Walton concluded about it.

[00:22:54] Speaker 05:
But it certainly makes clear that these reporting requirements impose an economic cost, right?

[00:22:59] Speaker 05:
We have that fact in the record.

[00:23:02] Speaker 05:
It's pretty self-evident that these reporting requirements impose an economic cost.

[00:23:07] Speaker 05:
The government doesn't dispute that these reporting requirements impose an economic slash resource cost on

[00:23:14] Speaker 05:
for just spinning companies, does it?

[00:23:16] Speaker 05:
On manufacturers generally, what I would say- Anybody who has to do, I don't mean generally, just is there any way anyone can comply with these reporting requirements without expending costs, resources?

[00:23:36] Speaker 05:
I don't I wouldn't say that, but what I'd say is that you wouldn't say what is there was a question that I was asking you is there any way to comply, yes or no, with these reporting obligations that is cost free and resource free.

[00:23:55] Speaker 02:
No, I don't think you can cost free comply with reporting requirements, but I would point out that the declaration submitted by AAA doesn't appear to complain about the cost of complying with reporting requirements.

[00:24:15] Speaker 02:
that what this declaration focuses on instead.

[00:24:19] Speaker 05:
The jurisdiction is, we have an obligation to satisfy ourselves with jurisdiction.

[00:24:24] Speaker 05:
I think that runs both ways.

[00:24:25] Speaker 05:
If it's crystal clear on the record, if you have just admitted that this new rule imposes a regulatory obligation and that regulatory obligation imposes, causes an injury, costs resources, just does.

[00:24:40] Speaker 05:
Clear as day.

[00:24:42] Speaker 05:
Why doesn't that mean they're standing?

[00:24:43] Speaker 05:
We have jurisdiction.

[00:24:44] Speaker 05:
We have a duty to exercise what jurisdiction we have.

[00:24:48] Speaker 02:
Well, I think the plaintiff has the burden of establishing that it's injured by this rule.

[00:24:54] Speaker 02:
And as has been observed, we don't know whether the rule caused it to report or not.

[00:25:02] Speaker 05:
We do know that the rule, that it has been reporting under this rule.

[00:25:10] Speaker 05:
It's been reporting under the rule which parrots the statute.

[00:25:12] Speaker 05:
Now, let's be fair.

[00:25:17] Speaker 05:
Your rule itself said you're clarifying this.

[00:25:21] Speaker 05:
Yes.

[00:25:21] Speaker 05:
OK, then.

[00:25:22] Speaker 05:
So under the rule, they're complying with these reporting obligations, and it was really hard.

[00:25:30] Speaker 02:
It was really hard for him, for this company.

[00:25:35] Speaker 02:
If I could take one step back for a moment.

[00:25:37] Speaker 02:
What the rule says.

[00:25:40] Speaker 02:
is not that every radiopharmaceutical is a covered outpatient drug.

[00:25:44] Speaker 02:
It says that some of them are when the limiting condition doesn't apply, the limiting provision.

[00:25:49] Speaker 02:
And as has been discussed, under the limiting provision, if a state pays on a bundled basis for radiopharmaceuticals, then they won't be covered outpatient drugs.

[00:26:01] Speaker 02:
The council itself has said that virtually all the time its drugs do fall and are paid for on a bundled basis.

[00:26:09] Speaker 05:
But they don't know at an upfront basis, right?

[00:26:11] Speaker 05:
The reporting obligation takes in long before some state seeks a rebate.

[00:26:17] Speaker 05:
And I take it these companies, they don't have any control over how somewhere down the line their drug is billed or not by third parties.

[00:26:27] Speaker 05:
So the reporting obligation

[00:26:30] Speaker 05:
exists i should think across the board they've got to do it if they want to get paid under medicaid or they want to get paid even if even if it happens its its drug is used in a medicaid uh to treat a medicaid recipient right they they can't know up front at the time the reports are due whether how how there's how their drug is going to be billed can they well i suppose they

[00:26:58] Speaker 02:
could do some investigation to find out if any state is billing separately for their drugs, as I understand.

[00:27:03] Speaker 05:
That wouldn't, even if they hadn't in the past, that wouldn't stop them from doing it going forward.

[00:27:07] Speaker 05:
They can't, this is something they can't, they can neither control nor know at the time of the reporting obligation, right?

[00:27:16] Speaker 05:
Particularly the way these drugs are used, right?

[00:27:20] Speaker 02:
I agree, it is a situation.

[00:27:23] Speaker 05:
Okay, so then the limiting provision

[00:27:26] Speaker 05:
does not alleviate folks of a reporting obligation.

[00:27:33] Speaker 03:
Or does it?

[00:27:34] Speaker 03:
I mean, that's a question for you as the administering agency.

[00:27:37] Speaker 03:
If today not a single state separately bills for radiopharmaceuticals administered as part of a bundled service,

[00:27:49] Speaker 03:
Does the industry still have to file because it's a possibility that a state might decide to break that out later?

[00:27:58] Speaker 03:
What's the government's position on that?

[00:28:02] Speaker 02:
There's no reporting obligation unless you choose to enter the program.

[00:28:09] Speaker 03:
Once you're in the program, like AAA says, why isn't it enough that they said, we're in the program?

[00:28:18] Speaker 03:
a Medicaid drug rebate program agreement with CMS.

[00:28:23] Speaker 03:
Why isn't that enough to make clear that whatever beef it has, meritorious or not, with the rule is one that it has standing to raise?

[00:28:35] Speaker 03:
What more would you want as a standing matter than, hey, I'm in the program?

[00:28:41] Speaker 02:
Well, the two injuries that I identified coming from the final rule

[00:28:47] Speaker 02:
were rebate liability, which is not mentioned in the declaration.

[00:28:53] Speaker 02:
Rebate liability would only flow if the limiting provision didn't apply to either of these drugs.

[00:29:00] Speaker 02:
And the other one being enforcement actions, which has already been discussed are unlikely in a situation where we've invited manufacturers to come discuss with us any reasonable assumptions they might want to make.

[00:29:16] Speaker 05:
Can we at some point

[00:29:21] Speaker 05:
just use undisputed sort of common sense under the regulation that says, you radionuclide manufacturers, I'm looking at you and I'm pointing at you.

[00:29:34] Speaker 05:
You are now covered.

[00:29:36] Speaker 05:
If you had any questions before, we have exercised our authority and we are making crystal clear, you are now regulated.

[00:29:43] Speaker 05:
If you want to be part of this payment program, you're in it.

[00:29:49] Speaker 05:
And as you just said, the statute requires you, now that we've pointed to you and said you're covered, file reports.

[00:30:02] Speaker 05:
I'll say constantly, it's on a quarterly basis, but that's just an ongoing duty to file reports that are at least complicated in this area.

[00:30:10] Speaker 05:
And as you have admitted, will require resources.

[00:30:16] Speaker 05:
And to pay rebates.

[00:30:18] Speaker 02:
only if rebates are due.

[00:30:21] Speaker 05:
Are you aware, is Judge Pillard's predicate accurate?

[00:30:26] Speaker 05:
Is there no state in this country that bills separately for radionuclide medicines?

[00:30:33] Speaker 05:
Pharmaceuticals?

[00:30:34] Speaker 02:
No, it varies by drug.

[00:30:36] Speaker 05:
Okay, it varies.

[00:30:37] Speaker 05:
So exactly.

[00:30:38] Speaker 05:
So they can't know going in.

[00:30:40] Speaker 05:
So they all have to report and some percentage of them are going to have to pay rebates and they may not know

[00:30:46] Speaker 05:
coming in, whether they're going to have to or not.

[00:30:48] Speaker 05:
Can you tell us that AAA has never had to pay everything?

[00:30:51] Speaker 02:
Do we know that?

[00:30:53] Speaker 02:
I don't know, but it was AAA's burden to identify whether it did, I think.

[00:30:59] Speaker 02:
I don't think that the district court had an obligation to guess at that or to guess.

[00:31:03] Speaker 02:
But there's no guessing required for reporting obligations.

[00:31:09] Speaker 05:
And there's no guessing for whether those reporting obligations impose a cost

[00:31:15] Speaker 05:
resource cost on AAA.

[00:31:18] Speaker 05:
There's no guessiness to that.

[00:31:19] Speaker 05:
I mean, we've said before, sort of, economics 101, we don't need to be led by the nose to everything.

[00:31:26] Speaker 05:
Right.

[00:31:29] Speaker 02:
I would say this.

[00:31:32] Speaker 02:
As I mentioned, the declaration

[00:31:36] Speaker 02:
appears directed entirely at wanting more guidance.

[00:31:40] Speaker 05:
Okay, so they put that one sentence in that you as a government have already admitted is universally true.

[00:31:46] Speaker 05:
Reports required by AAA and reports are going to take your resources.

[00:31:53] Speaker 05:
They're going to have to expend resources to do it.

[00:31:55] Speaker 05:
If they add that sentence that is self evidently true, then there is standing

[00:32:05] Speaker 02:
if what they want is not to report.

[00:32:08] Speaker 05:
If they say that as a result of this rule that pointed to us by name and said, you're now covered, I have to file reports.

[00:32:21] Speaker 05:
And that takes resources.

[00:32:23] Speaker 05:
As a result of that rule, they would have standing, yes?

[00:32:28] Speaker 02:
That would show an injury, but I don't know that it would show standing.

[00:32:44] Speaker 02:
I mean, I think they would have to say that they report because of the final rule rather than because of the statute, the rule.

[00:32:53] Speaker 08:
If it's a particular entity, let's take away from the association just for now.

[00:32:58] Speaker 08:
I know that this is an association.

[00:33:00] Speaker 08:
But if it's a particular entity and they file a declaration that says, beforehand, we weren't filing reports because we thought our radiopharmaceuticals didn't constitute CODs.

[00:33:11] Speaker 08:
But now you've told us that they do, and so we're going to have to file reports afterwards.

[00:33:15] Speaker 08:
We're injured.

[00:33:16] Speaker 08:
That just seems like a straightforward case of injury.

[00:33:18] Speaker 08:
There's no doubt that the injury requirement is satisfied.

[00:33:21] Speaker 08:
In that situation, I take it.

[00:33:25] Speaker 02:
Yes.

[00:33:26] Speaker 02:
Well, as alluded to earlier, the council was aware that CMS took this position even before the final rule.

[00:33:35] Speaker 08:
Well, but if their allegation is we weren't doing it before, now that you've put it in the comment, we feel like we have no choice.

[00:33:46] Speaker 08:
Therefore, we're engaging reporting that we weren't engaging before.

[00:33:49] Speaker 08:
It's it's hard to see how that doesn't satisfy the injury requirement.

[00:33:55] Speaker 02:
Certainly, if the declaration said all of that.

[00:33:58] Speaker 08:
Right.

[00:33:59] Speaker 08:
And so and and it's absolutely clear that

[00:34:03] Speaker 08:
there are reporting obligations that must be met by manufacturers of radiopharmaceuticals.

[00:34:11] Speaker 08:
Now, of course, I know that there's the subsequent question about whether they get out because of the limiting principle, but just put that to the side because we're only talking about reporting obligations at the front end.

[00:34:22] Speaker 08:
It's absolutely clear and there's no dispute and it's hard to see how there could possibly be disputed that as a consequence of being part of the program and having a

[00:34:32] Speaker 08:
a drug that qualifies as a COD, reporting obligations are owed.

[00:34:39] Speaker 08:
So then it seems to me the only question is, were they reporting beforehand anyway?

[00:34:46] Speaker 08:
And as to a particular entity, maybe there's a question whether they were reporting beforehand anyway.

[00:34:51] Speaker 08:
I think one of the questions is, if we're dealing with an association that covers the entire industry, is it not fair to just assume that at least some people are now

[00:35:01] Speaker 08:
facing reporting obligations that they otherwise wouldn't have faced.

[00:35:04] Speaker 08:
And that's just so obvious from everything we know about this regime that the injury requirement is satisfied.

[00:35:10] Speaker 02:
Well, a couple of things I would say.

[00:35:12] Speaker 02:
First, given the nature of this declaration, it's not at all obvious that they don't want to participate in the program, which after all comes with the benefit of mandatory Medicaid coverage of your covered outpatient drugs.

[00:35:26] Speaker 02:
It's not, without knowing what the precise injury of the identified association member is, we can't know whether the relief sought redresses that injury or whether the final rule caused it.

[00:35:39] Speaker 02:
Secondly, I would say this court has recognized that it's in Swanson Group that the question is not whether they could have standing to bring the claims at issue, but whether the evidence the plaintiffs presented in support of standing is sufficient.

[00:35:54] Speaker 02:
And in American Chemistry Council, this course said our standard has never been that it's likely that at least one member has standing.

[00:36:03] Speaker 02:
I think they have an obligation to come forward with one association member who has an injury that's clearly caused by the final rule and redressable by the relief that council.

[00:36:15] Speaker 02:
Well, I'm going to follow up on this.

[00:36:18] Speaker 05:
what the rule changed universe, because I'm very confused.

[00:36:24] Speaker 05:
You all were telling before the rule, they were supposed to report.

[00:36:29] Speaker 05:
Were these, were radio nuclides getting reimbursed or getting paid somehow?

[00:36:37] Speaker 05:
under the Medicaid program, even before this rule?

[00:36:39] Speaker 05:
I don't know what all the different mechanisms were.

[00:36:42] Speaker 05:
Okay.

[00:36:43] Speaker 05:
And even if they were reporting something then, maybe they were reporting in the way that they tell us in the brief, they package information.

[00:36:50] Speaker 05:
They don't, the reporting, what they want to say is sort of, you know, it's a, it's a rather Procrustian effort to try to take the information that we have

[00:36:59] Speaker 05:
about our pharmaceuticals and fit it into the way you want covered outpatient drug reporting under the scheme and under the final rule.

[00:37:12] Speaker 05:
So even if they were reporting something before and getting and participating in Medicaid or receiving Medicaid reimbursements before by reporting information in the form in which they have it before,

[00:37:28] Speaker 05:
If the consequence of this rule is that you now have to report just like other covered outpatient drugs.

[00:37:38] Speaker 05:
And so you're going to have to apply costs and resources to report in a way you haven't reported before.

[00:37:46] Speaker 05:
And that CMS acknowledges is a difficult fit for your particular type of drug.

[00:37:54] Speaker 05:
then that type of additional reporting burden would be an injury, correct?

[00:38:05] Speaker 02:
I think that could be articulated, yes, as an injury.

[00:38:09] Speaker 02:
That could be an injury.

[00:38:10] Speaker 02:
I've articulated.

[00:38:11] Speaker 02:
Yes.

[00:38:11] Speaker 05:
I've articulated that would be an injury.

[00:38:13] Speaker 02:
Yes.

[00:38:13] Speaker 05:
Is that the reality here?

[00:38:15] Speaker 05:
Because no one tells me what's going on beforehand.

[00:38:17] Speaker 05:
I'm very confused as to it seems like they were getting paid somehow.

[00:38:22] Speaker 05:
And it seems like Medicaid was already dealing with them for some way.

[00:38:28] Speaker 05:
And most of this is like this new obligation doesn't fit.

[00:38:34] Speaker 05:
what we do and even who we are, that's one of their merits arguments.

[00:38:37] Speaker 05:
Is that the Delta we're talking about?

[00:38:40] Speaker 05:
Is that now to keep getting paid by, it's not that they wanna participate in Medicaid as you said previously, they were already getting paid and they're not gonna lose that money unless they spend extra time and resources to figure out how to report in a way that they've never reported before and that doesn't fit in their view.

[00:39:05] Speaker 05:
the nature of their product.

[00:39:06] Speaker 05:
Is that what's going on here?

[00:39:08] Speaker 02:
Well, most of the time before, as I understand it, radiopharmaceuticals have been and continue to be bundled.

[00:39:19] Speaker 02:
Most providers bill states on a bundled basis.

[00:39:24] Speaker 02:
And so it hasn't been, they've, and when that happens.

[00:39:30] Speaker 04:
Was it universal when that,

[00:39:35] Speaker 05:
I'm sorry.

[00:39:36] Speaker 05:
You say most we're doing on a bundled basis, but was it universal where states universally paying them only on a bundled basis and something on the state and has changed.

[00:39:45] Speaker 02:
I'm, I'm not aware of any earlier.

[00:39:50] Speaker 02:
I'm not aware of all the history of whether any state has ever billed separately.

[00:39:56] Speaker 02:
I only know that it's most of the time they've been bundled.

[00:40:01] Speaker 02:
I think there may be renewed interest by states in approaching CMS about how they can bill separately because of the option for rebates.

[00:40:13] Speaker 02:
But most of the time, radiopharmaceuticals are billed on a bundled basis.

[00:40:21] Speaker 05:
I guess if it just seems, it's clear from the nature of the statutory scheme that you can't do it without expending resources, extra resources under this rule, because you all don't dispute that this is a more complicated, it's not as easy to figure out how to fill out the reports for them as it is for,

[00:40:47] Speaker 05:
you know, maybe a pill manufacturer, then why isn't it just evident from the scheme that Mr. Staphanous, who's struggling here, he and his company are struggling here to figure out how to do this, are expending resources in the process.

[00:41:12] Speaker 05:
He had to take his time to do the declaration for goodness sake.

[00:41:15] Speaker 05:
I know that can't be at the standing, but they're struggling here.

[00:41:20] Speaker 05:
That would be too easy.

[00:41:21] Speaker 05:
But they're struggling.

[00:41:24] Speaker 05:
They're struggling with it here.

[00:41:25] Speaker 05:
And struggling means resources.

[00:41:28] Speaker 05:
We're going to have to meet with CMS.

[00:41:31] Speaker 02:
Right.

[00:41:32] Speaker 05:
I'm not sure of the... I'm wondering what the end game is here.

[00:41:35] Speaker 05:
Really?

[00:41:36] Speaker 05:
If we all know there's an injury, they just need to add a line.

[00:41:41] Speaker 05:
He's told us we don't know how to do it.

[00:41:43] Speaker 05:
You're saying come meet with us.

[00:41:45] Speaker 05:
That requires resources, right?

[00:41:49] Speaker 05:
But it's not something- That requires resources, right?

[00:41:51] Speaker 02:
Yes, yes.

[00:41:52] Speaker 02:
Yes, Your Honor, it does.

[00:41:53] Speaker 05:
They'll dispute their good faith representation that we can't figure out how to do this because it's round peg square whole as far as we're concerned, right?

[00:42:00] Speaker 05:
That's right.

[00:42:02] Speaker 05:
Okay, that's resources.

[00:42:03] Speaker 05:
We all know there's resources being expended.

[00:42:05] Speaker 05:
Why are we gonna go back and make them start all over again?

[00:42:08] Speaker 05:
This just seems like code fleeting.

[00:42:11] Speaker 05:
Formalism for the state of formalism.

[00:42:13] Speaker 05:
If we all know, we have to be sure our standing exists to be clear.

[00:42:17] Speaker 05:
We all know it does.

[00:42:21] Speaker 02:
I think what we've been focused on just now was injury.

[00:42:27] Speaker 02:
I don't think it will be possible to answer the redressability and causation questions without knowing exactly what injury the identified member.

[00:42:37] Speaker 05:
Injuries, we have to fill out these reports the way the rule requires them.

[00:42:45] Speaker 05:
If it'll be redressed, if they win, they may not to be clear, but we have to assume on the merits at this stage, they're gonna win and they're gonna obtain a ruling that they are not covered outpatient drugs subject to this reporting requirement.

[00:42:58] Speaker 05:
That seems like pretty clear causation of redress to me.

[00:43:02] Speaker 02:
Except that their declaration doesn't complain about the cost of reporting.

[00:43:06] Speaker 02:
It complains about a lack of guidance.

[00:43:09] Speaker 02:
Which requires them to do what?

[00:43:11] Speaker 05:
Under your argument.

[00:43:13] Speaker 02:
Come work with us.

[00:43:15] Speaker 05:
or make reasonable assumptions.

[00:43:18] Speaker 05:
And that either one takes resources.

[00:43:23] Speaker 05:
Does it not?

[00:43:24] Speaker 05:
Make reasonable assumptions where?

[00:43:25] Speaker 05:
In your reports to us.

[00:43:27] Speaker 05:
And you stipulated that there you said, we're not doing fact stipulations here, but you said that requires resources 100% of the time.

[00:43:35] Speaker 05:
And working with you requires resources 100% of the time.

[00:43:38] Speaker 05:
But it's like one of those cases where we said this is just

[00:43:42] Speaker 05:
obvious basic knowledge on the statutory scheme that if you're in it and you don't think you should be in it, you have the injury because the scheme requires bus.

[00:43:56] Speaker 02:
manufacturer doesn't say that it doesn't want to be in it.

[00:44:01] Speaker 02:
It doesn't say that it's had to pay rebates in it.

[00:44:05] Speaker 02:
It says only that it would like more guidance.

[00:44:09] Speaker 05:
This manufacturer is a litigation that says we are, we should not be in this.

[00:44:15] Speaker 05:
Well, that's what the council says.

[00:44:16] Speaker 05:
No, no, no, they are, this association is litigating on their behalf.

[00:44:21] Speaker 05:
I think we can make that leave.

[00:44:24] Speaker 05:
that they share the view of the litigation that they are supporting through their declaration.

[00:44:29] Speaker 05:
That is, they don't think they should look up.

[00:44:32] Speaker 05:
Really, people have to in their declaration.

[00:44:34] Speaker 05:
We're gonna kick them out on standing grounds.

[00:44:37] Speaker 05:
We can't see how we have a jurisdiction because we're not sure that this declaration by a client member of the association agrees with the litigation.

[00:44:47] Speaker 05:
That's what our theory is now.

[00:44:50] Speaker 02:
I think they should at least articulate that they have had to pay a rebate or that either one of their drugs has been swept into the definition of covered outpatient drugs when it ought not to have been.

[00:45:03] Speaker 03:
So here's a question.

[00:45:05] Speaker 03:
Is the fact that a company is entered into the Medicaid drug rebate program and has an agreement with CMS

[00:45:18] Speaker 03:
for these drugs, doesn't that imply that there's a state that separately charges for these?

[00:45:26] Speaker 03:
Because that's an essential triggering condition for both reporting and rebates, right?

[00:45:30] Speaker 02:
No, a manufacturer could enter into a drug rebate program on a prophylactic basis if it wanted to.

[00:45:41] Speaker 02:
It could report information and never rebates.

[00:45:46] Speaker 03:
So on a proactive basis, it's just thinking if any state decides to do this, we want to be ready to recoup.

[00:45:54] Speaker 03:
We want to be able to get to participate.

[00:45:59] Speaker 03:
And we recognize that we'll have to pay rebates then.

[00:46:01] Speaker 03:
But it's not now up and running in that way.

[00:46:04] Speaker 03:
And so that's what you're looking for is the company to say, not only do they have an agreement, but that

[00:46:14] Speaker 03:
there is some circumstance in which the in which they're obligated to pay rebates and nobody knows that nobody's in this record that hasn't been made clear and it's your view that that's the plaintiff burden.

[00:46:32] Speaker 02:
Yes.

[00:46:34] Speaker 02:
As I understood, opposing counsel said he's not sure whether this manufacturer does have rebates.

[00:46:41] Speaker 02:
In the briefs, they said they flow automatically, but that's just not the case.

[00:46:45] Speaker 03:
So, well, they only flow automatically if there's a... I thought you had said you didn't know whether any states separately charge.

[00:46:51] Speaker 03:
And isn't that a precondition for rebates?

[00:46:56] Speaker 03:
bundled service, but separate billing line for the radio.

[00:47:01] Speaker 03:
And if there's no separate billing line, then there's no rebate obligation on the COD manufacturer.

[00:47:11] Speaker 05:
I thought you said some states were separately billing.

[00:47:15] Speaker 02:
I don't know whether any state is separately billing for either of these drugs.

[00:47:20] Speaker 02:
There are some radiopharmaceuticals that do pay rebates, yes.

[00:47:26] Speaker 03:
And when you say filing on it or entering into agreement on a prophylactic basis, I heard Mr. Segrove to say, you know, there's this, and it was a focus of some of Judge Milad's questions, but I didn't have a clear takeaway.

[00:47:37] Speaker 03:
If I haven't entered into agreement and it turns out later that my radionuclide

[00:47:48] Speaker 03:
the situation changes on the ground and the state starts billing it as a separate line item.

[00:47:54] Speaker 03:
I'm not exposed to liability all of a sudden, am I?

[00:47:56] Speaker 02:
No, if you're not participating, the consequence there will be that there won't be federal financial participation paid to the state.

[00:48:07] Speaker 03:
So unless and until I

[00:48:10] Speaker 03:
OK, the state won't be paid for it.

[00:48:12] Speaker 03:
So the state presumably would have an interest in telling me, the manufacturer, hey, we're going to separate this out as a line item.

[00:48:19] Speaker 03:
It'll be good for us, might be good for you.

[00:48:20] Speaker 03:
Yeah, you'll have to pay rebates.

[00:48:21] Speaker 03:
But that's coming, what you file, get an agreement, and we're going to go from here.

[00:48:29] Speaker 02:
That's right.

[00:48:29] Speaker 02:
There's no penalties if you don't participate in the program.

[00:48:33] Speaker 02:
The incentive will be if the situation changes on the ground, and then the state doesn't want to buy your drug.

[00:48:42] Speaker 05:
I just don't know how these things work, because it sounds like some of their things go to these specialized pharmacies.

[00:48:52] Speaker 05:
And then those pharmacies, I guess, provide it to the hospitals or the doctors' offices.

[00:48:58] Speaker 05:
And if you can't answer, maybe Mr. Segros can.

[00:49:02] Speaker 05:
Do they get paid up front?

[00:49:05] Speaker 05:
Do the manufacturers get paid up front?

[00:49:09] Speaker 05:
If someone's ordered this thing, we sent it up to the pharmacy.

[00:49:12] Speaker 05:
We're getting paid now.

[00:49:15] Speaker 05:
To whom it ends up going into, we have no idea.

[00:49:19] Speaker 02:
I'm going to defer to opposing Castle and how his plans get paid.

[00:49:22] Speaker 02:
I'm sorry.

[00:49:23] Speaker 08:
It seems like the kind of thing that might have been helpful to have laid out in the declaration to answer some of these ambiguities.

[00:49:30] Speaker 08:
But let me ask my colleagues if they have additional questions for you, Ms.

[00:49:37] Speaker 08:
Kaiser, and make sure that we don't.

[00:49:40] Speaker 08:
Thank you.

[00:49:41] Speaker 08:
Okay.

[00:49:41] Speaker 08:
Thank you.

[00:49:42] Speaker 08:
Miss Kaiser Mr seagulls will hear from you for rebuttal why don't we will give you two minutes and we'll see where it goes.

[00:49:49] Speaker 01:
Thank you, your honor.

[00:49:49] Speaker 01:
So to answer the letter to provide the court with a record citation where it can go into this question of how the mechanics work.

[00:49:56] Speaker 01:
In fact, it is true that and this is reflected in the background paper at J. A.

[00:50:01] Speaker 01:
1 13 that radio pharmaceutical manufacturer sells its product to a radio pharmacy and gets paid by that customer.

[00:50:12] Speaker 01:
It does not bill the state Medicaid program directly.

[00:50:15] Speaker 01:
Instead, typically that's whatever service provider provides the end service using the radiopharmaceutical.

[00:50:23] Speaker 01:
I think one of the things that we've seen here this morning is, and why we're, I think, wrestling quite a bit with causation.

[00:50:30] Speaker 05:
So am I participating in Medicaid at all?

[00:50:33] Speaker 01:
It is a condition, yeah.

[00:50:35] Speaker 05:
Because you're getting paid by the pharmacy.

[00:50:37] Speaker 05:
I don't know that the pharmacy knows whether the ultimate recipient is going to be a Medicaid recipient or Medicare or private insurance.

[00:50:44] Speaker 01:
It's a condition for, if you want to have any of your products covered by Medicaid and not just radiopharmaceuticals, but any, you have to participate in this program.

[00:50:54] Speaker 01:
And I would say that, you know, we talk quite a bit.

[00:50:56] Speaker 05:
I thought AAA here only did radiopharmaceuticals.

[00:51:02] Speaker 01:
doesn't say that that's only identifies to radio pharmaceuticals that that have manufactured doesn't speak to its portfolio beyond that you know the government says we manufacture and distribute pharmaceutical products, it doesn't mean exclusively okay.

[00:51:19] Speaker 03:
Correct.

[00:51:20] Speaker 03:
That also makes, doesn't that enhance the ambiguity of the declaration?

[00:51:24] Speaker 03:
Because one question I had in reading it at the outset was they say we have entered into a Medicaid drug rebate program agreement and I asked for these drugs?

[00:51:35] Speaker 03:
So the fact that it may be registered and have an agreement with Medicaid actually doesn't tell us anything about whether that relates to the issue in this case, does it?

[00:51:47] Speaker 01:
Well, I think it does because it shows that it's subject to the reporting obligation, the potential rebate liability and the potential penalties for failing to comply with CMS's reporting instructions.

[00:51:59] Speaker 07:
know, the government of its drugs.

[00:52:00] Speaker 07:
Is that what you mean?

[00:52:01] Speaker 07:
Because once it registers, it's registered for all of its drugs.

[00:52:04] Speaker 01:
Correct.

[00:52:06] Speaker 01:
The rebate agreement is not drug is not product specific.

[00:52:09] Speaker 01:
It's essentially everything.

[00:52:11] Speaker 01:
I think it's important to point out that the government didn't raise causation in the district court.

[00:52:15] Speaker 01:
Now, certainly the government can raise it for the first time on appeal.

[00:52:18] Speaker 01:
But when we look at this factual record and we try to

[00:52:22] Speaker 01:
understand what Mr Segros and his colleagues were thinking in the district court with this record.

[00:52:27] Speaker 01:
The government didn't raise standing for the first time until we sought summary judgment.

[00:52:33] Speaker 01:
And in doing so, the government's chief complaint was that we hadn't identified a single member.

[00:52:38] Speaker 01:
We rectified that problem.

[00:52:40] Speaker 01:
The government never made a causation argument or addressability argument.

[00:52:44] Speaker 01:
They raised that for the first time on appeal.

[00:52:47] Speaker 01:
I think that while the government's free to raise that argument on appeal, the degree of lenity that one should answer that question with the record that was created below, one has to recognize what were the arguments made below and therefore what evidence was put into the record as a result.

[00:53:03] Speaker 01:
It's one last thing to Judge Millett's point about

[00:53:06] Speaker 01:
I think referring to the curium declaration, I would just point this court to its decision and fund for animals, which is cited in our reply brief where there the court did not have a affidavit from the putative intervener at issue in that case who was found not to have standing.

[00:53:22] Speaker 01:
And this court nonetheless looked to the allegations made in another putative intervener's declaration.

[00:53:29] Speaker 01:
And in fact, the arguments made in the opponent's pleadings in that case.

[00:53:34] Speaker 01:
For those reasons, it's been a very long argument.

[00:53:38] Speaker 04:
Can I ask one quick question?

[00:53:40] Speaker 08:
Go ahead.

[00:53:40] Speaker 08:
I have one question, please, Judge Mallette.

[00:53:42] Speaker 05:
I'm just trying to understand something.

[00:53:44] Speaker 05:
So there's a Medicaid state utilization data table for 2021 that shows states have paid for NetSpot and Ludifera.

[00:53:58] Speaker 05:
Would that indicate that they were built separately then?

[00:54:02] Speaker 05:
I don't know how they would pay for them directly.

[00:54:03] Speaker 07:
Yes.

[00:54:04] Speaker 05:
So there's no question then that at least some states are billing separately for your AAAs drugs, and that's a matter of public record.

[00:54:14] Speaker 01:
Correct.

[00:54:15] Speaker 05:
Okay.

[00:54:16] Speaker 01:
Sorry.

[00:54:17] Speaker 08:
And I just have one clarification question.

[00:54:19] Speaker 08:
We spent a lot of time this morning talking about the potential burden in terms of reporting obligation that's imposed on manufacturers who become part of the program and then are told that your drugs are actually, they qualify as CODs.

[00:54:34] Speaker 08:
Just want to make sure that that's right, that that is an injury that you in fact feel is happening and is undergirding your action.

[00:54:46] Speaker 01:
Yes.

[00:54:48] Speaker 01:
I think it's one of the reasons why, quite frankly, the council has been engaged in negotiations with CMS for now, if you conclude this litigation for over a decade.

[00:55:00] Speaker 01:
The notion that the AAA declaration doesn't expressly say that we don't wanna report this information, I think as Judge Miller points out, I mean, it's filing that declaration in the context of litigation brought by its trade association that's saying, CMS made a statutory error and that this stuff doesn't even satisfy the threshold definition of a covered outpatient drug.

[00:55:19] Speaker 08:
Right.

[00:55:20] Speaker 08:
But I think the question is, and therefore X and the therefore could be any number of things, because there's more than one type of injury that's been bandied about in this case.

[00:55:30] Speaker 08:
And, but one of the easiest ones to get one's mind around is maybe the most straightforward one that comes about, which is that this imposes, if not, and I'm not necessarily suggesting that it's reporting in the, and in the exact X anti-regime, there wasn't any reporting at all.

[00:55:47] Speaker 08:
But it's that there is a different kind of reporting obligation, which I'll just call a new reporting obligation that was evidence before.

[00:55:54] Speaker 01:
There is a reporting obligation that is a direct product of final agency action.

[00:56:00] Speaker 03:
And there wasn't present before under the statute.

[00:56:03] Speaker 01:
Correct.

[00:56:04] Speaker 01:
I think that while the 2000 letter I mentioned from CMS, which predates the proposed rule,

[00:56:13] Speaker 01:
whether that under Ibsen, for example, whether that could be characterized as final agency action, I think is subject to some question, but there's no question after notice and comment and the government's never made a final agency action argument in this case that the final rule definitively resolves that issue.

[00:56:29] Speaker 04:
CMS acknowledged that there had been any confusion about this.

[00:56:35] Speaker 01:
It was creating clarity.

[00:56:37] Speaker 01:
Correct.

[00:56:38] Speaker 01:
The final rule, and this is J61, specifically notes that it received a comment.

[00:56:44] Speaker 01:
And the government's brief in this court acknowledges that the comment letter was from the council.

[00:56:47] Speaker 01:
And in fact, the preamble discussion of this issue paraphrases a large paragraph from the council's comment letter.

[00:56:55] Speaker 01:
So I think the cause and effect, if I may, there is pretty clear.

[00:56:59] Speaker 05:
And the reporting, the new reporting obligation imposes, compliance requires an expenditure of resources that would not have been required beyond what was required before to engage in whatever reporting was done before.

[00:57:18] Speaker 01:
Well, it imposed the reporting obligation is the same, but the consequences for violating it, I think are markedly different given the statutory penalty scheme.

[00:57:26] Speaker 01:
I mean, it's also- Wait, wait, wait, wait.

[00:57:28] Speaker 08:
So you're saying- Go ahead, I'm sorry.

[00:57:30] Speaker 05:
Okay, I think we're asking the same thing.

[00:57:33] Speaker 05:
So did you just say that whatever reporting they were doing prior to this rule is no different from the reporting they are doing after the rule, it's just that

[00:57:47] Speaker 05:
Now we're sweating bullets about trying to fit our information into this particular format, because if we, before if we got it wrong, oh well, but now if we get it wrong, we're doing the same thing, but now if we get it wrong, we feel like we're at risk of penalties.

[00:58:01] Speaker 01:
That's exactly right.

[00:58:02] Speaker 01:
The framework, if you will, the template for submitting this information didn't markedly change for these purposes because of the final rule.

[00:58:10] Speaker 01:
It's the same room.

[00:58:10] Speaker 01:
It's like, think about it.

[00:58:11] Speaker 01:
It's like the same form.

[00:58:12] Speaker 01:
The form didn't change.

[00:58:14] Speaker 01:
Forms wrapped in that word.

[00:58:16] Speaker 01:
They're worried about consequences.

[00:58:17] Speaker 01:
Correct, correct.

[00:58:18] Speaker 08:
Then I think I was confused about that.

[00:58:21] Speaker 08:
So there is no new reporting obligation.

[00:58:24] Speaker 08:
It's just that the consequence for not doing the reporting obligation that stayed constant throughout has changed.

[00:58:31] Speaker 01:
Well, I would say that there is a new reporting obligation because CMS has said definitively you have an obligation to report, whereas they hadn't said that definitively prior to the final rule.

[00:58:44] Speaker 08:
But I thought you just said that actually the same reports that were being filed before are being filed now.

[00:58:54] Speaker 08:
It's just that the consequence has changed.

[00:58:57] Speaker 01:
Well, the record, so I should clarify, the record is silent as to the change in the, what if any change in the forms there were.

[00:59:05] Speaker 01:
The only thing in the record- You just told us it's the same form.

[00:59:11] Speaker 01:
Yeah, I mean, the information, and this is discussed in J62 when it's talking about and elsewhere in the final rule, talking about the mechanics of reporting this information, whether something was a covered outpatient drug or not, for example, the category that one used wasn't, I think greatly changed as a result of the 2016 final rule that's at issue here.

[00:59:32] Speaker 01:
The consequences of not filing certainly did change.

[00:59:38] Speaker 08:
I see, so the, what was considered a covered outpatient drug didn't really change as a consequence of the rule.

[00:59:45] Speaker 01:
Well, CMS, I think would probably take that position in light of the 2011 letter.

[00:59:51] Speaker 08:
I don't think- And you all were operating under the assumption too.

[00:59:57] Speaker 01:
No, I think that we still viewed it as an open disagreement with the agency on this issue, which is why we sought clarification during the notice and comment process.

[01:00:10] Speaker 08:
All right, unless my colleagues have further questions for you, Mr. Segros.

[01:00:15] Speaker 08:
Thank you to you.

[01:00:16] Speaker 08:
Thank you, Ms.

[01:00:16] Speaker 08:
Kaiser.

[01:00:17] Speaker 08:
We'll take this case under submission.