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Genesis Health Care Inc. v. Azar

United States District Court, D. South Carolina

December 19, 2019

Genesis Health Care, Inc., Plaintiff,
v.
Alex M. Azar, II, as Secretary of the United States Department of Health and Human Services; George Sigounas, as Administrator) of the Health Resources and Services Administration; and Krista Pedley, as Captain in the United States Public Health Service and Director of the Office of Pharmacy Affairs in the Health Resources and Services Administration, Defendants.

          ORDER

          R. Bryan Harwell, Chief United States District Judge

         This matter is before the Court for consideration of Defendants Alex M. Azar, II, George Sigounas, and Krista Pedley's (“Defendants”) motion to dismiss for lack of subject matter jurisdiction, ECF No. 41, and motion to stay discovery, ECF No. 46. For the reasons discussed below, the Court will grant Defendants' motion to dismiss, thereby rendering Defendants' motion to stay discovery moot, and dismiss this case without prejudice for lack of subject matter jurisdiction.

         Factual and Procedural History

         Plaintiff is a nonprofit Federally Qualified Health Center (“FQHC”) that provides comprehensive primary and preventative healthcare to patients regardless of their health insurance status and ability to pay. Amended Verified Petition for Judicial Review (“Amended Petition”) ¶ 1. As a FQHC, Plaintiff is eligible to participate in the 340B Program, which is a drug pricing program managed by the Health Resources and Services Administration (HRSA), an agency within Department of Health and Human Services (“HHS”). Id. ¶ ¶ 9-10. The 340B Program allows the HHS Secretary to enter into agreements with manufacturers of covered outpatient drugs in order to obtain discounts for covered entities, such as Plaintiff, that purchase these drugs for their patients. Id. ¶ 10. Plaintiff and other covered entities purchase covered outpatient drugs from manufacturers through wholesalers, and dispense these drugs at wholly-owned and contract pharmacies to individuals who qualify as a covered entity's patients under the 340B Program. Id. ¶ 11.

         HHS may audit covered entities to evaluate compliance with the statutory requirements of the 340B Program. Id. ¶ 13. The Health Resources and Services Administration (“HRSA” or “the agency”) is an agency within HHS and is responsible for administering the 340B Program. Id. ¶2. Within the HRSA, the Office of Pharmacy Affairs (“OPA”) is responsible for conducting audits of covered entities like Plaintiff. Id. ¶ 14. In June 2017, OPA conducted a one-and-a-half day on-site audit (the Audit) of Plaintiff. Id. On February 14, 2018, OPA issued its Final Report containing its Audit findings. Id. ¶ 15. OPA found Plaintiff had “fail[ed] to comply with the statutory eligibility requirement of compliance with auditable records” and therefore, the agency made a preliminary determination that Plaintiff was no longer eligible to participate in the 340B Program and that Plaintiff was liable to manufacturers of covered outpatient drugs for purchases made while it was ineligible for 340B Program participation. Id.

         On March 13, 2018, Tony R. Megna, Plaintiff's CEO, responded to the agency's Final Audit Report and objected to the Audit's findings. Id. ¶ 18. On June 26, 2018, the agency replied to Plaintiff's response and concluded Plaintiff's objections were without merit and Plaintiff was ineligible for participation in the 340B Program. Id. ¶ 19. Two days later, on June 28, 2018, Plaintiff filed a verified petition for judicial review and emergency motion to stay before this Court, in which Plaintiff asked this Court to, inter alia, impose a temporary stay halting the agency's determination that Plaintiff was ineligible to participate in the 340B Program and declare Plaintiff eligible under the 340B Program. See ECF No. 1.

         On August 23, 2018, this Court entered an Order noting Plaintiff had withdrawn its emergency motion to stay because Plaintiff had been provisionally readmitted to the 340B Program. ECF No. 10. The Court stayed this case at the request of both parties from August 24, 2018 to May 29, 2019 to allow the parties to attempt to resolve this matter without judicial intervention. While this case was stayed, on September 24, 2018, the agency vacated its decision to remove Plaintiff from the 340B Program and promptly reinstated Plaintiff into the 340B Program. Amended Complaint ¶ 22.

         Despite HRSA vacating its decision and reinstating Plaintiff into the 340B Program, Plaintiff file a motion to amend its petition, emergency motion to stay, and petition for declaratory relief. See ECF No. 33. The Court denied Plaintiff's motion for a preliminary injunction and emergency motion to stay, but granted Plaintiff's motion to amend its petition. ECF No. 44. In the Amended Petition, Plaintiff sought an order from this Court: (1) directing “HRSA to retract any notification it may have provided to manufacturers that Plaintiff is ineligible under the 340B Program”[1], (2) “set[ting] aside HRSA's determinations pursuant to 5 U.S.C. § 706(2)(A)”, and (3) declarative relief “concerning the plain wording of 42 U.S.C. § 256b(a)(5)(B).” ECF No. 33 at 25. After the Amended Petition was filed, on June 6, 2019, OPA voided the audit findings in their entirety, and informed Plaintiff that it “ha[d] no further obligations or responsibilities in regard to the audit, including any actions to submit a [Corrective Action Plan] or perform the actions outlined in the [Corrective Action Plan] previously submitted to OPA. ECF No. 41, Exhibit A.

         Shortly after Plaintiff filed the amended petition, Defendants filed a motion to dismiss for lack of subject matter jurisdiction, ECF No. 41, and a motion to stay discovery, ECF No. 46, pending this Court's ruling on Defendants' motion to dismiss. Plaintiff has responded to both motions. See ECF Nos. 43, 47. Accordingly, both motions are ripe for decision before this Court.

         Standard of Review

         A Rule 12(b)(1) motion to dismiss for lack of subject matter jurisdiction raises the fundamental question of whether a court has jurisdiction to adjudicate the matter before it. Fed.R.Civ.P. 12(b)(1). “Federal courts are courts of limited subject matter jurisdiction, and as such there is no presumption that the court has jurisdiction.” Pinkley, Inc. v. City of Frederick, Md., 191 F.3d 394, 399 (4th Cir. 1999). In deciding a motion under Rule 12(b)(1), the burden is on the plaintiff to show subject matter jurisdiction exists, and the Court is to “regard the pleadings' as mere evidence on the issue, and may consider evidence outside the pleadings without converting the proceeding to one for summary judgment.” Richmond, Fredericksburg & Potomac R.R. Co. v. United States, 945 F.2d 765, 768 (4th cir. 1991) (citing Adams v. Bain, 697 F.2d 1213, 1219 (4th Cir. 1982)). “The moving party should prevail only if the material jurisdictional facts are not in dispute and the moving party is entitled to prevail as a matter of law.” Id.

         Discussion

         Defendants move to dismiss this case in its entirety under Fed.R.Civ.P. 12(b)(1) for lack of subject matter jurisdiction and mootness. ECF No. 41 at 2. Specifically, Defendants contend (1) this case was rendered moot by the agency's decision to void the audit in its entirety and there is no final agency action under the APA for Plaintiff to challenge; (2) there is no case or controversy as required by Article III and Plaintiff is now seeking an impermissible advisory opinion; and (3) the Declaratory Judgment Act, 28 U.S.C. § 2201, does not provide an independent basis for this Court to exercise jurisdiction in this case.[2]

         Defendants first allege this case should be dismissed pursuant to Fed.R.Civ.P. 12(b)(1) because there is no final agency action for Plaintiff to challenge under the APA and therefore, this case is moot. 5 U.S.C. § 702 of the APA provides that “[a] person suffering legal wrong because of agency action, or adversely affected or aggrieved by agency action within the meaning of the relevant statute, is entitled to judicial review thereof.” Other than agency action made specifically reviewable by statute, § 704 limits the APA's non-statutory right of judicial review to final agency action. 5 U.S.C. § 704 ...


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