[00:00:00] Speaker 00: Case number 23-5020, Row 1, Inc. [00:00:04] Speaker 00: doing business as regenerative labs at balance versus Xavier Becerra, secretary of health and human services, solely in his official capacity at L. Mr. Gallagher for the imbalance, Ms. [00:00:15] Speaker 00: Lopez for the police. [00:00:22] Speaker 05: Good morning, Mr. Gallagher. [00:00:24] Speaker 05: You may proceed when you're ready. [00:00:26] Speaker 01: Thank you. [00:00:27] Speaker 01: May it please the court, Patrick Allagher from Duane Morris on behalf of Appellant of the Labs. [00:00:31] Speaker 01: I deserve two minutes for rebuttal. [00:00:33] Speaker 01: This case is about the government's failure or refusal to engage in notice and comment in adopting a substantive legal policy statute. [00:00:42] Speaker 01: All regenerative wants in this case is the opportunity to have that notice and comment process before enactment of a policy or regulation. [00:00:53] Speaker 01: Starting from the language of the statute, section 4058, Congress did not adopt a statute barring any action under the Medicare statute. [00:01:02] Speaker 05: I am mystified, Mr. Gallagher, by the request for rulemaking. [00:01:07] Speaker 05: And maybe you could help me understand just very practically what rule your client is seeking because [00:01:18] Speaker 05: I understand that it's the company's position that initially the February policy should have been done by rulemaking, and it wasn't. [00:01:28] Speaker 05: But that claim, I mean, that policy, at least according to CMS, has been rescinded in their letters saying that. [00:01:40] Speaker 05: So surely you don't, your client doesn't want to rule [00:01:45] Speaker 05: saying what the initial February letters said. [00:01:49] Speaker 05: And since there was no such rule, they want a rule saying what the March rescission letter said. [00:01:57] Speaker 05: I'm just really having trouble following what rulemaking needs to be convened on the record that we now have. [00:02:04] Speaker 01: Understood. [00:02:06] Speaker 01: I think the ask is if [00:02:09] Speaker 01: CMS wants to adopt a rule, like was adopted in the two February TDLs, at that point, notice and comment would be required. [00:02:19] Speaker 05: But that's not happening. [00:02:21] Speaker 05: I mean, that's not so effectively. [00:02:24] Speaker 05: And this is what I was wondering. [00:02:25] Speaker 05: It sounds like what your client wants is to petition for a rulemaking, saying something else, saying categorically, [00:02:34] Speaker 05: This product is a, what is it, a 361, not a 351. [00:02:41] Speaker 05: But that's up to the client to ask you to do a petition for rulemaking. [00:02:47] Speaker 05: That doesn't seem like relief in this case. [00:02:49] Speaker 01: So I think, and this is from paragraphs 106 through 123 of the verified amended complaint, amended verified complaint, the policy has not been. [00:03:02] Speaker 01: And I understand that there's a technical direction letter, the two technical direction letters, initially from February for the improper adoption, reflecting the improper adoption for substance legal policy under the Medicare statute. [00:03:15] Speaker 01: And I understand that there's a March letter rescinding those TDLs, but from regenerative perspective, and it paragraphs 106 through 123, it's very clearly alleged that the substantive policy has not actually been rescinded. [00:03:29] Speaker 05: Nothing has changed. [00:03:30] Speaker 05: So that's your request for declaratory relief. [00:03:33] Speaker 01: That's what we're asking to vacate the policy. [00:03:36] Speaker 01: Not just have this March, this third March, 2022 TDL reporting service in the two prior TDLs, but to actually vacate the policy, which is still happening. [00:03:52] Speaker 05: The products, so- I understand your theory about the de facto policy or the stealth policy. [00:04:01] Speaker 05: I guess I'm not satisfied, but I will be satisfied with the extent of your answer on what a rule would look like. [00:04:09] Speaker 05: I can't really envision a rule that says, hey, that policy that we announced in some TDLs back when, we really mean it, that that's no longer the policy. [00:04:20] Speaker 05: I've never seen a rule like that. [00:04:22] Speaker 01: Understood. [00:04:22] Speaker 01: We're not asking for that. [00:04:25] Speaker 05: What are you asking for? [00:04:25] Speaker 05: What would be the content of the rule? [00:04:29] Speaker 01: We're not asking that there has to be a rule. [00:04:32] Speaker 01: We're just saying if they want to adopt a rule. [00:04:35] Speaker 05: That's advisory opinion in some general worlds. [00:04:39] Speaker 05: You have to wait until they've promulgated something by the next letter and say, again, as we said last time with actually good effect, you can't do it that way. [00:04:52] Speaker 01: I think that's the problem is that they [00:04:54] Speaker 01: without going through notice and comment, have adopted this substantive legal policy, which is completely against Azar Villalena and the requirement for notice and comment under the Medicare statute and the APA. [00:05:09] Speaker 01: The policy reflected in those two initials TDLs is still in place. [00:05:15] Speaker 05: And so we're not- If we were convinced there was a sort of under the waterline policy, [00:05:26] Speaker 05: I can't really imagine this court saying, hey, promulgate that policy by rule. [00:05:32] Speaker 05: I think we would have to say you can't conduct an under the water line policy. [00:05:37] Speaker 05: So let's set aside the rule question for now and your argument that there's no requirement to present the claim to the agency, including to wait for a proxy, you know, someone who wants reimbursement [00:05:54] Speaker 05: to present to the agency. [00:05:56] Speaker 05: That's the grovement of the rest of your complaint. [00:06:01] Speaker 01: That is a second part of the argument. [00:06:04] Speaker 01: So under the Illinois Council exception, where a claim would be, an action would be completely precluded from judicial review, [00:06:17] Speaker 01: And that includes that there's no adequate proxy. [00:06:21] Speaker 01: There's two reasons there's no adequate proxy here. [00:06:23] Speaker 01: First, just the fact that nobody knew about these TDLs until Regenerative filed this lawsuit. [00:06:30] Speaker 01: So providers who are in a specific geographic location are looking at their own MAC for their specific region. [00:06:38] Speaker 01: These statements start coming out on the internet that look like informal guidance. [00:06:44] Speaker 01: It does not look to any of them like something that is an edict from CMS, a direction from CMS nationwide. [00:06:54] Speaker 01: Regenerative through interactions with contributors, interactions with providers, and some interactions with Macs. [00:07:03] Speaker 01: and looking at what the MACs were putting on the internet, suspected that there was more to the story. [00:07:09] Speaker 01: And so filed the initial complaint in the middle of March of 2022. [00:07:13] Speaker 01: And it was only after that complaint was filed that the TDLs came. [00:07:22] Speaker 01: Second point is providers and beneficiaries do not have the same ability and willingness to pursue this claim [00:07:31] Speaker 01: related purely to process that if the government wants to promulgate a policy, they need to go through notice. [00:07:41] Speaker 01: And in fact, in the manner in which these statements have come out from the max, calling into question the safety and effectiveness, improperly calling into question the safety and effectiveness of regenerative products, and going so far as to suggest they're perhaps illegally marketed, [00:07:59] Speaker 01: providers have zero incentive to push back against CMS, they go to other treatment and other therapy. [00:08:07] Speaker 05: But as I understand the CMS, what you allege to be the CMS de facto unstated policy contrary to their retraction letter is something that applies categorically to this whole class of products. [00:08:25] Speaker 01: It applies categorically across this whole class of [00:08:28] Speaker 05: So when you say someone would substitute, they would substitute a product that is not [00:08:33] Speaker 05: one of these. [00:08:35] Speaker 01: Correct. [00:08:35] Speaker 01: So by way of example, this policy impacts amniotic and placental tissue-based products, HCTPs, providers can look to cortisone shots, anti-inflammatories, and surgery. [00:08:51] Speaker 01: Surgery is an alternative that providers look to. [00:08:54] Speaker 01: Surgery costs 10 times more than this. [00:08:57] Speaker 01: Orthopedic surgeons have no problem doing surgery if Medicare is telling them [00:09:03] Speaker 01: you can't use these products. [00:09:04] Speaker 02: Isn't there a case pending right now where there is another party pursuing the claim that you'd like to pursue? [00:09:12] Speaker 02: You're saying that part of your argument to deal with the no review at all test is that there isn't anyone else who has an incentive and yet there is a case now [00:09:25] Speaker 02: someone on your side of the claim saying exactly what you said, no one would have the incentive to pursue. [00:09:32] Speaker 02: So I mean, that's evidence against your position, isn't it? [00:09:36] Speaker 02: I don't believe so. [00:09:37] Speaker 02: I'm confused about the discussion so far. [00:09:39] Speaker 02: I didn't think this was about notice and comment so much as [00:09:43] Speaker 02: we should be able to get past this block on the agency's enforcement type action. [00:09:51] Speaker 02: In other words, the agency taking an action that adversely affects us. [00:09:56] Speaker 02: So in the traditional sense, we have standing, because we're the ones who are really hurt. [00:10:00] Speaker 02: The problem with you is, under the statute and the case law, we've said if it's under the Medicare Act, unless you can show you have no way at all, you can't raise the claim, right? [00:10:13] Speaker 01: No, so if I can address your first question, I think you're referring to the stem labs case where they do have a provider and they are pursuing a different claim. [00:10:23] Speaker 01: You're saying they're not raising all of what you'd like to raise. [00:10:27] Speaker 01: They're not raising the specific cause of action that we are raising and the reputational harm that Regenerative has had. [00:10:36] Speaker 02: You've got a statutory bar against your being, excuse me, being able to challenge the way you'd like to be able to challenge. [00:10:44] Speaker 01: I don't believe there is, because the language of Section 405H is limited to a cause of action to recover on any claim. [00:10:53] Speaker 01: And under Illinois Council, just as prior, was very, very careful that page 14 of the opinion go through the types of actions to recover on any claim. [00:11:05] Speaker 01: It included claims for money, claims for other benefits, claims for program eligibility, claims to contest a sanction or remedy. [00:11:12] Speaker 01: That's what was at issue. [00:11:14] Speaker 01: in that specific case. [00:11:15] Speaker 02: 405H doesn't apply if it would mean no review at all. [00:11:19] Speaker 02: That's what you're fighting. [00:11:22] Speaker 01: That's the Illinois Council exception. [00:11:25] Speaker 02: Yeah, go ahead. [00:11:26] Speaker 01: But I think additionally, Illinois Council does not go so far and can't because it's not what the statute says, is to say any cause of action under the Medicare statute is barred. [00:11:39] Speaker 01: It has to be [00:11:40] Speaker 01: and a cause of action to recover on any claim. [00:11:45] Speaker 01: And Justice Breyer's list, and he's very careful, and he had four colleagues who thought that, in that case, they were going too far in applying this bar. [00:11:55] Speaker 01: It's limited to causes of action where it's talking about what you're getting at is the payment of money. [00:12:03] Speaker 01: And what we're asking for is just the opportunity for notice and comment [00:12:09] Speaker 01: the government chooses to implement. [00:12:12] Speaker 05: You're arguing not that the contractors are misapplying the reasonable and necessary standard. [00:12:18] Speaker 05: You're arguing that, in fact, they're just automatically denying all the claims. [00:12:22] Speaker 01: That is correct. [00:12:23] Speaker 01: And that's paragraph, again, paragraph 106 to 123 of the amended, verified. [00:12:29] Speaker 05: And the most plausible factual allegations for that are what? [00:12:37] Speaker 01: So there are specific examples that have been pled where MAC representatives said that it is automatic. [00:12:51] Speaker 05: And that was very soon after the rescission letter. [00:12:55] Speaker 05: In the period of time since then, is it your position that zero reasonable and necessary determinations have been made? [00:13:06] Speaker 01: Since the time of the amended complaint, nothing has changed. [00:13:12] Speaker 01: It is still automatic. [00:13:15] Speaker 05: So there's been no case in which Regenitiv's products have been deemed by CMS to be reimbursable. [00:13:24] Speaker 01: And that is the problem. [00:13:26] Speaker 05: And they issue the requester some documentation for that effect, not reasonable and necessary. [00:13:35] Speaker 05: when they make that determination, when somebody submits and they make a determination. [00:13:38] Speaker 05: Sorry, we're not going to cover that. [00:13:40] Speaker 05: Because you make an allegation and you refer to it in your brief that one can't even tee up a proxy claim because nobody's giving the requisite paperwork. [00:13:52] Speaker 05: I wasn't sure what paperwork you were referring to. [00:13:54] Speaker 05: I'm sure that's my unfamiliarity, not the inadequacies of your advocacy. [00:13:59] Speaker 01: So I think at this point after [00:14:03] Speaker 01: At this point, after the policy has been put into place and is in place, providers are not submitting claims. [00:14:12] Speaker 01: Not what? [00:14:13] Speaker 05: Submitting claims. [00:14:13] Speaker 01: They're not submitting claims for reimbursement. [00:14:16] Speaker 05: But nobody anywhere is even trying to use this product. [00:14:21] Speaker 02: There is capital, there are cash-pay people. [00:14:23] Speaker 02: You have the one claim that I mentioned, you agree it's inaction. [00:14:27] Speaker 02: I mean, that's part, that's the inconsistency with your argument. [00:14:29] Speaker 02: There is someone pursuing a claim. [00:14:32] Speaker 02: that is consistent with your theory, at least in part. [00:14:36] Speaker 01: So in the STEM Labs case, STEM Labs has sued and they have a provider who is a co-plaintiff with them. [00:14:42] Speaker 01: And I understand in that case, and I don't represent STEM Labs, I am not sure what they're going for, but I understand in that case, the provider go through the administrative appeals. [00:14:57] Speaker 01: What we're asking for is something different. [00:14:59] Speaker 01: and the providers do not have the incentive to pursue this claim, which is purely about process, notice, and comment, or future claims, they're not going to use it. [00:15:13] Speaker 01: Medicare has told them to do something else. [00:15:15] Speaker 01: And there's other treatments, such as cortisone shots, anti-inflammatories, and surgery that they will use instead. [00:15:21] Speaker 01: And for past claims, all they're asking for is, [00:15:25] Speaker 01: Please forgive me and pay me because I did not know and could not. [00:15:30] Speaker 01: The reason they didn't know and couldn't know is because the policy wasn't announced in advance, just substantively everything changed. [00:15:39] Speaker 04: You just said you're clear. [00:15:41] Speaker 04: I have a question about the proxy issue. [00:15:44] Speaker 04: In the case of QVHHS, didn't they reject the argument that some risk providers might switch products doesn't mean that there are no proxies? [00:15:56] Speaker 01: Well, in RICU, RICU was about telehealth services where they were being provided by doctors internationally overseas. [00:16:09] Speaker 01: In that case, it went through the entirety of notice and comment. [00:16:14] Speaker 01: After Congress authorized the expansion of telehealth services under Medicaid, the agency published an interim final rule, had a comment period, considered those comments, offered reasons responses, published a final rule, and then implemented the final rule. [00:16:31] Speaker 01: With respect to the proxy issue, [00:16:34] Speaker 01: So that makes it entirely different from this, because we only know about the policy and the TDLs because of the lawsuit. [00:16:42] Speaker 01: That's how we got the first two TDLs by filing the complaint. [00:16:47] Speaker 01: And additionally, with respect to the proxy issue, Enrique admitted that hospitals wanted the services to be covered. [00:16:57] Speaker 01: And we're reaching out to see if the services could be covered. [00:17:00] Speaker 01: In this case, because of the manner in which the MACs publicly have put out there, improperly and incorrectly, that these products are not safe and effective and may be illegally marketed, no provider wants to touch that. [00:17:18] Speaker 01: It's like a scarlet letter that's been hung around. [00:17:21] Speaker 04: And then just a couple more questions. [00:17:22] Speaker 04: What about granted what the products, orthopedics, excuse me, would they be an adequate proxy? [00:17:29] Speaker 01: No. [00:17:30] Speaker 04: And why not? [00:17:33] Speaker 01: They don't have the incentive. [00:17:35] Speaker 01: And again, in sim labs, I don't know whether they have used regenerative products at all. [00:17:42] Speaker 01: But they don't have the incentive to ask for this specific relief for if you want to go through and implement this policy or a policy like it, just publish it first. [00:17:56] Speaker 01: and let regenerative defend its products. [00:18:00] Speaker 04: Why don't providers have an incentive to raise a notice in Comic Plane? [00:18:10] Speaker 01: They don't have the same ability and willingness to pursue it because this is existential. [00:18:17] Speaker 04: Well, I guess what I'm getting at is, are you telling me that that ability for a proxy has to be right now in this moment in time as we are [00:18:26] Speaker 04: uh, deciding this case or, and all we have to do is look at their ability that there's someone out there or that there has to be a case filed right at this moment to determine whether or not you have a proxy. [00:18:38] Speaker 01: I'm not saying that there has to be a case filed right at this moment, but they, you have to look at from a practical perspective. [00:18:44] Speaker 01: That's counsel for your logical interest from a practical perspective. [00:18:48] Speaker 01: Look at, do they have the same incentive, the same ability and willingness to pursue this and [00:18:54] Speaker 04: a provider claim that you have. [00:18:57] Speaker 04: In other words, you're looking for someone who could essentially stand in your shoes. [00:19:00] Speaker 04: It has to be on all four. [00:19:05] Speaker 01: They can't stand in our, they can't stand in our shoes, but from a practical perspective, why would a provider who their goal is to treat their patients, to serve their patients and as they can to get Medicare reimbursement. [00:19:20] Speaker 01: When the MACs have put out at the direction of CMS, the statements that these products, these types of products may not be safe and effective and may be illegally marketed. [00:19:31] Speaker 01: Why would any provider try to defend that instead of going to alternative therapy? [00:19:37] Speaker 02: Well, in Griner, the providers are arguing for notice and comment and they are seeking declaratory injunctive relief, which is what you're arguing for. [00:19:47] Speaker 01: It's a different, [00:19:49] Speaker 01: It's a different incentive. [00:19:51] Speaker 02: It's different because it's not you. [00:19:53] Speaker 02: But I mean, that doesn't seem to me to be enough of an answer. [00:19:57] Speaker 02: Yeah, it's different. [00:19:58] Speaker 02: It's them, not you. [00:19:59] Speaker 02: But they're asking for the same thing you're asking for, which is counter to your argument that there isn't anyone out there who will ask. [00:20:08] Speaker 02: Notice and comment is the best example. [00:20:10] Speaker 02: They're asking for notice and comment about the matter that you're concerned about. [00:20:17] Speaker 01: So it's the same ability and willingness to pursue it and providers do not have that ability. [00:20:25] Speaker 01: As a general proposition. [00:20:27] Speaker 01: As a general proposition in this case. [00:20:29] Speaker 02: I'm sorry. [00:20:31] Speaker 02: I am interrupting you. [00:20:32] Speaker 02: I apologize. [00:20:33] Speaker 02: Did you ever file a request for notice and comment rulemaking with the agency? [00:20:39] Speaker 01: We did not, and there was no reason to, because before this policy was implemented sometime around the end of 2021 or early 2022, under the Medicare statute, the claims were being processed under the normal procedure on a claim-by-claim basis under the test whether the care provided was reasonable and necessary. [00:21:01] Speaker 01: And there was no, at that point, there was no need. [00:21:04] Speaker 02: But there's been time since then, once you figured out what was going on. [00:21:09] Speaker 02: I'm really, as a procedural matter, it's a little perplexing. [00:21:12] Speaker 02: In a normal agency situation, if you think an agency's acting pursuant to a rule that is either impermissible or was not properly promulgated, you would ask for notice and comment rulemaking, set up the case that way. [00:21:27] Speaker 02: Is there some reason you couldn't have done that here? [00:21:31] Speaker 02: You didn't, you say. [00:21:32] Speaker 02: We didn't. [00:21:33] Speaker 02: And is there some reason you couldn't or can't? [00:21:36] Speaker 02: In other words, your argument is you've adopted a policy. [00:21:40] Speaker 02: You clearly have it in play. [00:21:42] Speaker 02: And we want notice and comment if you're going to follow this policy. [00:21:46] Speaker 02: And we clearly have standing because you're affecting our product. [00:21:50] Speaker 02: Now, you have never made that claim. [00:21:52] Speaker 02: And you walked right into a potential bar under the Medicare Act, under the statute that we've been talking about. [00:21:59] Speaker 02: Why didn't you ask for notice and comment rulemaking? [00:22:02] Speaker 01: I think the important point of what you said is, if they pass the rule, regenerative would be more than happy to go back to before the policy was implemented, where each claim. [00:22:17] Speaker 02: But your premise is they do have the policy. [00:22:20] Speaker 02: That's the reason you would [00:22:22] Speaker 02: assert when you were asking for notice and comment and then the agency has an obligation to respond. [00:22:27] Speaker 02: Now they may say we're not giving it to you because we don't have a policy or whatever and then you would have review on that. [00:22:35] Speaker 02: That's in the normal [00:22:36] Speaker 02: you would be able to get review and say they're a denial. [00:22:39] Speaker 02: It's a tough standard to review. [00:22:40] Speaker 02: Their denial of our petition for notice and comment rulemaking is bogus because they do have a policy date. [00:22:47] Speaker 02: And they are enforcing the policy adversely to us. [00:22:50] Speaker 02: And we can't otherwise get in through the Medicare Act because of the way the statute's written. [00:22:56] Speaker 02: Now, you don't want to make that argument, but you can certainly advance it and say it appears we may not be able to get in through the Medicare Act. [00:23:03] Speaker 02: We have to challenge it this way, and this isn't fair. [00:23:07] Speaker 02: I don't understand why that course of action isn't being pursued, if your claim's correct. [00:23:16] Speaker 01: Because we don't necessarily want a policy implemented the way it was before it was fine, when it was on a case-by-case basis. [00:23:25] Speaker 02: I understand, but the argument would be then whatever it is you're doing, there should be a policy that you shouldn't be doing that, or a rule that you can't do that. [00:23:35] Speaker 02: In other words, you haven't put it in play in a way that seemed obvious to me, and that's what I'm curious about. [00:23:41] Speaker 05: So on the question of whether there are any determinations that have been a result of agency presentation and decision about whether the treatment is reasonable and necessary, there's the whole category before [00:24:00] Speaker 05: uh, before the February letters went out, that then they said, you know, deny that. [00:24:07] Speaker 05: And then they changed their mind. [00:24:09] Speaker 05: Like there were things in the pipeline. [00:24:12] Speaker 05: And even if someone is a private payer, and I don't, you may know the answer to this. [00:24:17] Speaker 05: I don't, I know if you're under insurance that you submit even for things that you're not going to get coverage for because you deductibles and stuff like that. [00:24:26] Speaker 05: And I, [00:24:27] Speaker 05: So people have incentives, even who can afford it, to try. [00:24:31] Speaker 01: But the incentive is to try and get the claim paid. [00:24:37] Speaker 01: The incentive is not to challenge the notice and comment and say, if you want to adopt this policy, CMS, you need to take it through notice and comment. [00:24:47] Speaker 01: And that's where the provider. [00:24:48] Speaker 05: Even if you're a practitioner who had been using this before, had some skill in it, it was part of their business, [00:24:55] Speaker 05: You're saying they just, nobody cares about it enough, they just walk away. [00:25:00] Speaker 01: Their incentive is to try and get, so for the instances where they use it, because there certainly were instances where before they knew that this policy was being implemented, it was being used, and then those claims were denied. [00:25:13] Speaker 05: Nobody's been in touch with them to say, actually now it's back to the way it was? [00:25:19] Speaker 01: Well, it's not actually the way it is. [00:25:21] Speaker 01: And they know that. [00:25:22] Speaker 05: They've said formally that it is, and that's something you want them to hold true to. [00:25:27] Speaker 05: So do they not know that at least facially CMS has said we're actually doing case by case reasonable and necessary? [00:25:39] Speaker 01: So I believe they know that, but they know that the policy is still to automatically deny. [00:25:46] Speaker 01: And in part, that's group paragraphs 106 to 123 of the complaint. [00:25:51] Speaker 01: Providers tend to be cautious about these types of things. [00:25:56] Speaker 01: Many were cautious initially. [00:25:58] Speaker 01: But then before they jump back in, they reach out to the max to see how will this be handled. [00:26:03] Speaker 01: And what they've been told is it will be automatically denied. [00:26:05] Speaker 02: I mean, your incentive argument [00:26:08] Speaker 02: is it's not strong. [00:26:11] Speaker 02: I don't know. [00:26:12] Speaker 02: You understand the concept. [00:26:13] Speaker 02: It's a compelling type of an argument, because you're the one who's directly taking the hit. [00:26:18] Speaker 02: And you may or may not have other folks in the market who will pursue the claim. [00:26:24] Speaker 02: I understand, apparently. [00:26:26] Speaker 02: And I can see why a lot would not if they're alternative products. [00:26:31] Speaker 02: If there's somewhere else they can go, why are they going to fight over a reimbursement for your product when the agency's not going to pay it? [00:26:37] Speaker 02: That's what you're saying, right? [00:26:39] Speaker 02: Yes. [00:26:39] Speaker 00: Yeah. [00:26:39] Speaker 02: I mean, that's a compelling argument to me. [00:26:42] Speaker 02: It's like, why am I going to waste time? [00:26:43] Speaker 02: If there's another medicine B? [00:26:46] Speaker 02: Instead of A, I'm not going to fight for reimbursement on A. I can go to B. And that's what you're saying. [00:26:52] Speaker 02: We're the ones being damned. [00:26:53] Speaker 02: And the agency says it's changed, but it really hasn't. [00:26:56] Speaker 02: But I still come back to, I don't understand why you haven't attacked the failure of rulemaking in the direct way in which [00:27:06] Speaker 02: It is often done because that's what you're claiming. [00:27:09] Speaker 02: There is a policy that has become de facto a rule that's impermissible in the normal course, and we want to challenge it. [00:27:16] Speaker 02: But there's a way to do that. [00:27:17] Speaker 02: You haven't done it. [00:27:19] Speaker 02: And you walked right into the Medicare Act's bars, which are very difficult. [00:27:24] Speaker 02: You're straining to make arguments, whether you can find proxies and all the arguments we've been talking about today. [00:27:30] Speaker 02: And there's another course of action you haven't taken. [00:27:35] Speaker 01: And all I can say is, again, I think regenerative does not necessarily want to rule. [00:27:42] Speaker 01: It's only if the agency wants to implement the rule. [00:27:45] Speaker 01: And I think this case falls clearly under this court's holding in National Association of Home Health Services, which clearly said, in interpreting the statutory language, [00:27:58] Speaker 01: recover on any claim under the Medicare statute that doesn't apply to causes of action that are to rectify early procedural irregularity. [00:28:08] Speaker 05: That decision predates Peckler and is of a vintage that one questions that every jot and tittle of what it might be taken. [00:28:22] Speaker 05: to support is actually supported. [00:28:24] Speaker 01: I understand the timing of it, but though that line of cases, Heckler and then ultimately Illinois council are all addressing causes of action that ultimately are about payment of money. [00:28:38] Speaker 05: Right. [00:28:38] Speaker 05: All right. [00:28:39] Speaker 05: All right. [00:28:47] Speaker 03: It'll just take me a moment. [00:28:49] Speaker 03: So myself. [00:28:56] Speaker 04: Before you proceed, just on that last thought, in Illinois Council, wasn't there notice and comment raised? [00:29:03] Speaker 04: I'm directing this to you. [00:29:06] Speaker 03: Yes, sorry. [00:29:06] Speaker 03: I just wanted to have made, and Carolyn Lopez on behalf of the government. [00:29:11] Speaker 03: Yes, Your Honor, that was at issue in Illinois Council. [00:29:14] Speaker 03: And actually, more specifically, I think one of the best sites for this is in the Ringer case at pages 614 to 6... In the old case, I didn't hear you. [00:29:21] Speaker 03: Oh, Heckler versus Ringer. [00:29:23] Speaker 03: At pages 614 through 615, Ringer Court expressly says one of the claims that is being brought could be conceived of as procedural and that the secretary should have issued the instructions via notice and comment rulemaking. [00:29:40] Speaker 03: And in Ringer, the Supreme Court squarely held that that was the sort of the procedural substantive labels don't matter. [00:29:48] Speaker 03: Those all are subject to Medicare channeling. [00:29:50] Speaker 03: And that really does tie back here. [00:29:52] Speaker 03: When you look at the complaint, so the ringer language is this inextricably intertwined language, which of course this court is well familiar with, the Medicare channeling and the preclusion of review provisions. [00:30:06] Speaker 03: When something is inextricably intertwined with the agency action that requires, in this case, channeling, [00:30:13] Speaker 03: you can't forego channeling. [00:30:15] Speaker 03: And here the complaint really makes quite clear that it is inextricably intertwined from start to finish. [00:30:21] Speaker 03: So the injury is that now many providers aren't being allegedly now that many providers are no longer being burst for regeneratives. [00:30:31] Speaker 03: products. [00:30:31] Speaker 03: That's JA 132 paragraph 135. [00:30:35] Speaker 03: And then the so-called procedural challenge also is quite clear at bottom about reimbursement. [00:30:42] Speaker 03: So there, JA 134 paragraph 141, the description of the challenge is that the problem is that there was, quote, a blanket denial of coverage for regenerative products without proper rulemaking. [00:30:54] Speaker 03: So quite clearly, inextricably intertwined again. [00:30:56] Speaker 03: And then as we've been discussing today, [00:30:59] Speaker 03: Of course, the relief that they asked for is a request to vacate the policy, which separately, as we've been discussing today, is mooch because the policy is no longer extant as per the third letter. [00:31:09] Speaker 03: And to seek a declaration, and this is at JA135, that regenerative products, quote, should be reimbursed. [00:31:22] Speaker 03: And so quite clearly, this is all part and parcel with the reimbursement question. [00:31:27] Speaker 05: Ms. [00:31:28] Speaker 05: Lopez, does the government have any role or any burden [00:31:34] Speaker 05: show by affidavit or otherwise that adequate proxies do exist once regenerative has alleged that circumstances that they believe and that let's just take for purposes of the question that support the notion that there are no [00:31:54] Speaker 05: Nobody has the incentives aligned with theirs to pursue a claim. [00:31:59] Speaker 03: So I want to be very careful here to caveat what I'm saying, which is to say that it is true under counsel for urological interests that in the rare and in what this court described as unique circumstances in which there have been sufficiently specific allegations, [00:32:19] Speaker 03: that the beneficiaries and providers interest are sort of diametrically opposed to that of the council's members. [00:32:27] Speaker 03: So there, and this is at page 713 of that opinion, they are that was satisfied because they said, there were specific allegations that said, in fact, the hospitals that would otherwise bring the claims were affirmatively benefited from the regulation. [00:32:41] Speaker 03: So they got to buy these materials from the council's members at buyer sale rates. [00:32:47] Speaker 03: And they got the hospitals regained control of this procurement process, which otherwise the council's members had had charge of. [00:32:56] Speaker 03: And then the court coupled that with the fact out there in the world that there had been no claims brought by hospitals. [00:33:02] Speaker 03: in three years. [00:33:03] Speaker 03: And they are, and it's only in that, again, what this court calls unique circumstances that the court found that in that circumstance, the council had met its sort of initial burden, even at the allegation stage. [00:33:16] Speaker 05: So I'm aware of how the circumstances in that case were very strong in favor of no proxies. [00:33:24] Speaker 05: And it may just be that this is the result of the bar in the statute. [00:33:30] Speaker 05: But the product inventor or purveyor of a product that has been, let's say, has been viewed as very beneficial. [00:33:42] Speaker 05: And then by erroneously, the government describes it as hazardous. [00:33:50] Speaker 05: And then a few days later, oh, I'm sorry. [00:33:55] Speaker 05: No claim if and also assume people are very sensitive to risk and [00:34:04] Speaker 05: They just shunned the product. [00:34:06] Speaker 05: And nobody's, there's no proxies because nobody's interested. [00:34:10] Speaker 05: It's died on the vine. [00:34:12] Speaker 03: Your honor, even at the motion to dismiss stage, it's regenerative burden to provide specific allegations in its complaints that that is true. [00:34:22] Speaker 03: And they simply haven't done that. [00:34:23] Speaker 05: So if I could just sort of think they have, that's exactly how they characterize the situation. [00:34:29] Speaker 05: And so the shortcomings that you would point to in particular are, [00:34:33] Speaker 03: are the following. [00:34:35] Speaker 03: So first, although they sort of posit generally that because their products haven't, that because of the original denial letters, which again were rescinded. [00:34:45] Speaker 03: So we are not in a world in which those statements are still out there as CMS's statement. [00:34:49] Speaker 03: So they sort of allege reputational injury there, but that's already been taken back. [00:34:54] Speaker 05: Just a question of practicality. [00:34:59] Speaker 05: How does the rescission, is that posted somewhere online or how do people learn of that? [00:35:04] Speaker 05: How do potential medical providers who had previously been using [00:35:08] Speaker 03: this these therapies and then stopped how are they told oh never mind yes your honor so i want to be a little bit careful here because i'm not exactly sure how the public posting worked um originally these letters actually were just between um cms and the medicare contractors so they actually weren't public at all and it's the medicare contractors public statements that are out there these technical direction letters actually only were released to the public as part of [00:35:37] Speaker 03: litigation. [00:35:39] Speaker 03: And so it's sort of a little bit funny to then. [00:35:43] Speaker 03: And presumably the retraction was also part of that public record and part of that litigation record. [00:35:50] Speaker 03: And again, that third letter instructs the Medicare contractors who had posted notice to folks that they were going to stop reimbursing for these types of products. [00:36:00] Speaker 03: They told, they instructed the Medicare contractors to remove any of the policy, their policy language, and also to rescind any educational materials that might have sort of been along those lines. [00:36:13] Speaker 03: And then, so just to return to your honor, a question about sort of why the government thinks that regenerative's complaint doesn't meet that really high threshold met in council for urological interests, which is sort of the trigger for when the government [00:36:25] Speaker 03: may in those unique circumstances need to submit a declaration. [00:36:29] Speaker 03: So it's entirely within Regenerative's own knowledge whether or not providers have in fact stopped purchasing their products. [00:36:36] Speaker 03: And you'll notice that nowhere in the complaint do they say that. [00:36:39] Speaker 03: In fact, at most they say many providers will stop. [00:36:41] Speaker 03: Not all providers will stop. [00:36:43] Speaker 03: And the Medicare channeling, the exception for the no review is [00:36:49] Speaker 03: quite narrow. [00:36:50] Speaker 03: It's not that you might lose some providers who might be interested in using your product. [00:36:54] Speaker 03: It's that it's become highly unlikely that this is going to get channeled. [00:36:57] Speaker 05: And do you know, do you know whether I mean, I know it's not in the record, but [00:37:03] Speaker 05: How are we supposed to, what assumptions should we have about whether zero claims have been submitted to be reviewed? [00:37:13] Speaker 03: So yes, Your Honor, two responses to that. [00:37:15] Speaker 03: The first is, yes, it is out of the record. [00:37:18] Speaker 03: But since Your Honor has asked, I know that there are currently pending administrative claims involving regenerative. [00:37:25] Speaker 03: And then more broadly, as this court's case in RICU makes clear, it's not CMS's burden at this stage to show that there's currently and actively [00:37:35] Speaker 03: pending administrative claims. [00:37:37] Speaker 03: So in RICU, as is made quite clear in the oral argument audio, there were currently no pending administrative claims. [00:37:46] Speaker 03: And that wasn't sort of a bar to the general notion, which is the default rule that usually one thinks that providers and beneficiaries who have been using a product will be generally aligned with the providers and suppliers who make that product continuing to seek reimbursement. [00:38:02] Speaker 03: Again, unless the asserted change is something that [00:38:05] Speaker 03: that makes their interests diametrically opposed in the way that it was for counsel. [00:38:10] Speaker 02: Let me see if I can, I'm really, this case is looser than it should be in my mind. [00:38:16] Speaker 02: Take this situation, I'm trying to make it as stream as I can to see what your position is. [00:38:22] Speaker 02: Secretary announces, Company X has this medical product. [00:38:26] Speaker 02: I am sending a notice to all Medicare providers, contractors, [00:38:32] Speaker 02: You are not to do anything to facilitate reimbursement. [00:38:37] Speaker 02: for this product at all. [00:38:39] Speaker 02: I want to make that clear that's policy and you should adopt it and then all of those who might pick it up in the market somehow let the Medicare providers know we understand we will not in any way even seek to use this product. [00:38:56] Speaker 02: Now is the offended party, is the offended party barred because there's no channeling? [00:39:03] Speaker 02: So as the offended party of an action to say this is a policy that really should have been adopted by rulemaking and there's a failure here and I'm pursuing I'm pursuing a request. [00:39:14] Speaker 02: I can press justice Supreme Court said [00:39:18] Speaker 02: It's rulemaking and you can't do it this way. [00:39:21] Speaker 02: Yes or no? [00:39:22] Speaker 03: Your honor, I want to make sure that I understand the parameters. [00:39:24] Speaker 02: Make it as extreme as it can. [00:39:26] Speaker 03: Okay, so the parameters of the hypothetical that I'm taking just so that I'm crystal clear are that there is an announcement from the secretary that says do not reimburse these products anymore in any way. [00:39:37] Speaker 03: That's announced to everybody publicly. [00:39:38] Speaker 02: I don't want it in the market. [00:39:40] Speaker 02: I want to make it as stream as possible. [00:39:42] Speaker 02: I don't like this product. [00:39:43] Speaker 02: I don't want it in the market. [00:39:44] Speaker 02: No reimbursement in any of my products. [00:39:49] Speaker 02: Yes, right. [00:39:49] Speaker 02: Contractors who do it will no longer be contracted. [00:39:53] Speaker 03: And in your hypothetical, right. [00:39:56] Speaker 03: But the key question is whether there are still, even in that hypothetical, whether there are still providers and beneficiaries. [00:40:02] Speaker 02: No, and I gave you that part of the hypothetical. [00:40:04] Speaker 02: I saw potential providers confirm with the contractors, we understand it'll not happen. [00:40:10] Speaker 02: It's done. [00:40:11] Speaker 03: So in that sort of extreme hypothetical, [00:40:15] Speaker 03: Assuming some time has passed so as well, then we may be in that this very narrow counsel for your logical interest case in which the court said. [00:40:24] Speaker 03: At that point, CMS might have to come forward to say, actually, we've talked to some providers who do still plan to do that. [00:40:29] Speaker 03: But that's absolutely not what we have. [00:40:31] Speaker 02: Again, I want to make sure I'm understanding how you're setting this up. [00:40:35] Speaker 02: So your counsel, forget you're representing the government today, your counsel for the offended party, and you say, OK, the way we have to attack this is what? [00:40:44] Speaker 02: What would your advice be? [00:40:46] Speaker 02: We petition for rulemaking. [00:40:48] Speaker 02: What would your advice be? [00:40:49] Speaker 03: Uh, well, your honor, I'm afraid I can't take off my government hat, but I'm being deadly serious. [00:40:55] Speaker 02: I need to understand the parameters. [00:40:57] Speaker 02: I need to understand the limits of your, your honor. [00:41:00] Speaker 03: So they could do what STEM labs has done, uh, which is to coordinate with the fighters and, uh, providers and beneficiaries who are filing claims and doing exactly what you're supposed to do in Medicare channeling, which is to present these issue and concrete claims. [00:41:15] Speaker 03: So when Brian, as we've been discussing earlier, [00:41:17] Speaker 03: There's the exact challenge that the plaintiffs in that case say that there's a shadow policy and that it hasn't been issued by rulemaking and then it needs to be issued by rulemaking. [00:41:29] Speaker 03: So we know from the context of this particular case [00:41:32] Speaker 03: that it's possible to do those things. [00:41:34] Speaker 05: So regenerative kind of violence. [00:41:37] Speaker 05: They're in a tough position because what they're saying is, you've done a thing by rulemaking, not by rulemaking, that should have been done by rulemaking. [00:41:46] Speaker 05: We have zero interest in a rule. [00:41:48] Speaker 05: So we can't say, if you're going to do that, you have to do it by rulemaking. [00:41:52] Speaker 05: That's not in our interest. [00:41:53] Speaker 05: What we want you to do is speak a rule saying, [00:41:58] Speaker 05: We did a 180 and then another 180. [00:42:03] Speaker 05: Therefore, public, please understand that you should treat the status of these therapies the way they were treated before the, what are they called? [00:42:14] Speaker 05: The technical direction letters. [00:42:16] Speaker 03: The TDLs, before the TDLs. [00:42:19] Speaker 03: But Your Honor, the third technical direction letter already does that. [00:42:22] Speaker 03: This is a case that's classically a moot. [00:42:25] Speaker 05: Right. [00:42:26] Speaker 05: What I hear them saying that is, you know, we're all like this. [00:42:30] Speaker 05: Somebody tells you, you know, oh, don't go to that doctor. [00:42:34] Speaker 05: That doctor's an axe murderer. [00:42:36] Speaker 05: And you think, what are these chances? [00:42:37] Speaker 05: But you also think, I'm going to pick a different doctor. [00:42:40] Speaker 05: You know, there's just a way in which once the [00:42:47] Speaker 05: The doubt is sewn. [00:42:50] Speaker 05: It is hard to unsew. [00:42:52] Speaker 05: And they can't sue the government for defamation or interference with, you know, torsionist interference with business relations or anything. [00:43:03] Speaker 05: So. [00:43:05] Speaker 03: But Your Honor, the answer to that isn't to file an advisory opinion that says maybe you shouldn't have issued those [00:43:11] Speaker 03: direction letters without notice and comment in the first place. [00:43:13] Speaker 03: I didn't hear you. [00:43:16] Speaker 03: I'm sorry. [00:43:17] Speaker 03: The answer to that is not to file an advisory opinion saying you shouldn't have issued those first two technical direction letters without notice and comment. [00:43:24] Speaker 03: The agency has already provided all the relief that might be available and that's just sort of the limits of article [00:43:34] Speaker 03: free jurisdiction. [00:43:35] Speaker 03: And again, if regenerative thinks that there's still some sort of secret policy that's actually being applied on a case by case basis or squarely within Medicare channeling. [00:43:46] Speaker 03: And again, we know, although not necessary, we know from the Griner, the currently pending Griner litigation, that there are folks making these exact same types of arguments. [00:44:00] Speaker 03: If there are no further questions, we'd ask that the court affirm. [00:44:02] Speaker 03: Thank you, Ms. [00:44:03] Speaker 05: Lopez. [00:44:06] Speaker 05: Mr. Gallagher, you have a minute for rebuttal. [00:44:11] Speaker 01: Thank you. [00:44:11] Speaker 01: I will be quick. [00:44:13] Speaker 01: On the proxy issue, the allegations at paragraphs 123 to 126 of the complaint go through what we've been discussing about there being not the same incentives. [00:44:25] Speaker 01: We are entitled to inferences from those, and they are the only facts that are in the record. [00:44:30] Speaker 01: Additionally, on the point of the proxies that regenerative manufacturers should somehow coordinate with a provider, that type of coordination would violate anti-kickback statutes, any number of other statutes that prevent manufacturers from giving health care providers or beneficiaries those types of monetary things. [00:44:54] Speaker 01: So we can't coordinate with them and suggest pay their legal fees [00:44:58] Speaker 05: Just to be clear, I don't think the proxy analysis assumes that anybody would be paying the proxies. [00:45:06] Speaker 05: It's a question of whether it would be in their aligned interest to pursue on their own. [00:45:12] Speaker 01: Understood. [00:45:13] Speaker 01: I think the provider doesn't have the same incentive, ability, or willingness to pay legal fees to go through the process for this specific relief. [00:45:21] Speaker 05: Understood. [00:45:23] Speaker 01: Thank you. [00:45:24] Speaker 05: Thank you. [00:45:30] Speaker 05: The case is submitted. [00:45:31] Speaker 05: Thank you very much.