Regeneron Sues HHS Over Drug Pricing Rule, Alleges APA Violations

Regeneron Pharmaceuticals filed new complaint Friday against the Department of Health and Human Services (HHS), Alex Azar II, in his role as Secretary of HHS, the Centers for Medicare and Medicaid Services (CMS), and Seema Verma in her role as the Administrator for CMS. The case, filed in the Southern District of New York, challenges the recent executive order promulgated by President Trump regarding pharmaceutical drug pricing of the top fifty prescription medications covered by Medicare.

The new rules change the price at which the government will reimburse a health provider for medication. Under the new rules, the complaint explained, the government will not pay the average U.S. sale price for a given drug; instead, the government will pay out “at the lowest price paid for that drug by any other country that is a member of the (Organization for Economic Cooperation and Development) with a GDP per capita at least sixty percent of the U.S.”

The executive order from President Trump that prompted the rulemaking from HHS and CMS was issued on July 24. However, the rules were not issued until September 13. The plaintiffs alleged that the rule was issued without the notice and comment period mandated by the Administrative Procedures Act (APA), which requires an opportunity for public comment unless the agency makes a finding that rulemaking without the notice period is in the interest of the public. The complaint said HHS indicated that the period was being bypassed due to an urgent need for the costs to be reduced due to the pandemic, however, the complaint argues that as the rule was issued after the election for punitive reasons.

The complaint also alleges a litany of improper motives for the rulemaking action. First, the complaint argued that it is hypocritical to rely on statutory authority granted in the Affordable Care Act when the administration is actively disputing the constitutionality of that statute in other litigation. Second, they argue that the rulemaking was made in light of a direct animus against the industry as a whole. Third, the complaint offers that the rule impacts the plaintiff’s free speech as regards its pricing systems and its ability to negotiate with parties. The complaint finally argued that the rule is an unconstitutional taking and the result of an overbroad delegation of power from Congress to HHS.

The complaint contains eight violations of the APA. The plaintiffs seek an injunction preventing the rulings from HHS and CMS from taking effect and a decision that the rules were issued in violation of both the APA and the Constitution. The plaintiffs are represented by Kirkland & Ellis, LLP.