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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT
Argued December 12, 2003 Decided February 13, 2004
No. 03-5046
AMGEN INC.,
APPELLANT
v.
DENNIS G. SMITH, IN HIS OFFICIAL CAPACITY AS
ACTING ADMINISTRATOR, CENTERS FOR
MEDICARE & MEDICAID SERVICES, ET AL.,
APPELLEES
Appeal from the United States District Court
for the District of Columbia
(No. 02cv02259)
Jonathan L. Abram argued the cause for appellant. With
him on the briefs were Stuart Langbein, William H. John-
son, C. Boyden Gray, Edward C. DuMont, and Andrew R.
Varcoe. Louis R. Cohen entered an appearance.
Bills of costs must be filed within 14 days after entry of judgment.
The court looks with disfavor upon motions to file bills of costs out
of time.
2
William C. Crenshaw and Anie Elizabeth Wulkan were on
the brief for amicus curiae Biotechnology Industry Organiza-
tion in support of appellant.
Sharon Swingle, Attorney, U.S. Department of Justice,
argued the cause for appellees. With her on the brief were
Peter D. Keisler, Assistant Attorney General, Roscoe C. How-
ard, Jr., U.S. Attorney, Gregory G. Katsas, Deputy Assistant
Attorney General, Mark B. Stern and Michael S. Raab,
Attorneys, Alex M. Azar II, General Counsel, U.S. Depart-
ment of Health & Human Services, Henry R. Goldberg,
Deputy Associate General Counsel, and Lawrence J. Harder,
Supervisory Trial Attorney.
Steven A. Zalesin, Eugene Tillman, and Helen G. Kirsch
were on the brief for appellee Ortho Biotech Products LP.
Before: HENDERSON and ROGERS, Circuit Judges, and
WILLIAMS, Senior Circuit Judge.
Opinion for the Court filed by Circuit Judge ROGERS.
ROGERS, Circuit Judge: The principal issue on appeal is
whether the court has jurisdiction of a complaint filed by
Amgen, Inc., the manufacturer of an anemia treatment, Ara-
nesp, challenging an adjustment to the Medicare Part B rate
at which the federal government pays hospitals for using its
product. The district court dismissed Amgen’s complaint for
lack of prudential standing. Although we hold that Amgen
has prudential standing, we affirm the dismissal of the com-
plaint for lack of jurisdiction.
I.
Title XVIII of the Social Security Act of 1935, 42 U.S.C.
§ 1395 et seq., establishes the Medicare program, which pro-
vides federally funded medical insurance to the elderly and
disabled. Part A of the Medicare program provides insur-
ance coverage for inpatient hospital care, home health care,
and hospice services. Id. § 1395c. Part B of Medicare is a
voluntary program that provides supplemental coverage for
other types of care, including outpatient hospital care. Id.
§§ 1395j, 1395k. The Medicare program is subject to both
3
fiscal limits and restrictions on administrative and judicial
review. We address the former as applied to Amgen in Part
I and the latter in Part III.
A component of the Medicare B program is the Outpatient
Prospective Payment System (‘‘OPPS’’), which pays hospitals
directly to provide outpatient services to beneficiaries. To
control costs, OPPS, rather than reimbursing providers after-
the-fact for their reasonable expenses in any given year, as
was done prior to 1997, pays hospitals prospectively for their
services in each upcoming year, thus requiring payments for
outpatient hospital care to be made based on predetermined
rates. See Balanced Budget Act of 1997, Pub. L. No. 105–33,
111 Stat. 251 (1997). As relevant here, OPPS payments
governed by 42 U.S.C. § 1395l(t) are calculated through a
formula setting payment weights for the provision of certain
services (or certain groups of clinically similar services) based
on the mean or median costs of providing such services in
past years, with adjustments for regional cost variations. Id.
at §§ 1395l(t)(2)(C) & (t)(2)(D). Pursuant to amendments to
the outpatient prospective payment system in the Balanced
Budget Refinement Act of 1999, Pub. L. No. 106–113, 113
Stat. 1501 (1999), the Secretary of the Department of Health
and Human Services (‘‘the Secretary’’) then additionally modi-
fies those resulting payment amounts. Hospitals facing actu-
al costs significantly above their prospective payment
amounts receive outlier adjustments. 42 U.S.C.
§§ 1395l(t)(2)(E) & (t)(5). Hospitals also receive supplemen-
tal payments, called ‘‘pass-through’’ payments, to help cover
the cost of providing certain treatments, including new drugs,
biologicals and medical devices. Id. § 1395l(t)(6) (hereafter,
‘‘§ (t)(6)’’). Under § (t)(6), when a drug, biological, or medi-
cal device becomes eligible for pass-through status, hospitals
providing it to beneficiaries receive supplemental payments
equal to 95% of the wholesale cost of the treatment minus
whatever amount the hospital would otherwise receive
through the prospective payment system, §§ (t)(6)(D)(i) &
1395(u)(o), for a period of two to three years.
§ 1395l(t)(6)(C). At the end of that period, the treatment is
factored into the normal prospective payment system. More
4
generally, the Secretary also has authority, in light of his or
her ‘‘significant expertise’’ and ‘‘judgment grounded in policy
concerns’’ over Medicare’s ‘‘complex and highly technical reg-
ulatory program,’’ see Tenet Health Systems HealthCorp. v.
Thompson, 254 F.3d 238, 248 (D.C. Cir. 2001) (quoting Thom-
as Jefferson Univ. v. Shalala, 512 U.S. at 512 (1994) (internal
quotation omitted)), to make ‘‘other adjustments as deter-
mined to be necessary to ensure equitable payments.’’ 42
U.S.C. § 1395l(t)(2)(E) (hereafter, ‘‘§ (t)(2)(E)’’). No supple-
mental funding is available for these three types of adjust-
ments: when the Secretary makes any of the three — outlier
adjustments, pass-through adjustments, or other equitable
adjustments — any additional projected expenses must be
offset by a reduction in all prospective payment rates.
§ (t)(2)(E). Supplemental pass-through payments are addi-
tionally subject to a cap; they may not exceed a fixed
percentage of OPPS payments, and must be reduced pro rata
in the event they exceed that limit. § (t)(6)(E).
Amgen is the manufacturer of darbepoetin alpha, also
known as Aranesp, a relatively recent biological product used
to treat anemia in chemotherapy and kidney disease patients.
67 Fed. Reg. 66718, 66758 (Nov. 1, 2002). A similar product,
epoetin alpha, was developed in the late 1980s, and is present-
ly marketed both as Amgen’s own predecessor product, Epo-
gen, and the product of its competitor (and intervenor here)
Ortho Biotech Products, Procrit. Id. Providers are present-
ly compensated for providing epoetin alpha to beneficiaries
through the regular prospective payment system. While the
parties disagree about the significance of molecular differ-
ences between darbepoetin alpha and epoetin alpha, Aranesp
differs clinically in that it has a longer half-life, such that
many patients require less frequent dosages and therefore
fewer hospital visits. Id.
Amgen applied on November 30, 2001, to the Centers for
Medicare and Medicaid Services (‘‘CMS’’) (known prior to
July 1, 2001 as the Health Care Financing Administration),
which, as relevant here, administers the Medicare Part B
program, for transitional pass-through new-drug status so
that hospitals would receive supplemental payments for pro-
5
viding Aranesp to Medicare Part B beneficiaries. See
§ (t)(6)(A)(iv). According to the complaint, in September
2001 and July 2002, respectively, the Federal Drug Adminis-
tration approved Aranesp for marketing as a treatment for
kidney disease-related anemia and for chemotherapy-related
anemia. CMS sent Amgen an approval letter on February 5,
2002, and on March 1, 2002, CMS included Aranesp in the
reimbursement rates for 2002, to be effective April 1, 2002.
67 Fed. Reg. 9556, 9562 (March 1, 2002). CMS’s proposed
2003 OPPS rates, published on August 9, 2002, also included
pass-through payments for Aranesp. 67 Fed. Reg. 52092,
52119 (Aug. 9, 2002). The proposed rule stated, however,
that the pass-through provisions had ‘‘been exceptionally
difficult to implement’’ and that CMS was ‘‘actively seeking
comment on all aspects of these [proposed] rates,’’ explaining
that it was ‘‘open to making changes, perhaps significant’’ to
the proposed rates based on comments received. Id. at
52093. Ortho Biotech, the manufacturer of Procrit, submitted
comments questioning the pass-through payments for Ara-
nesp in light of its purported similarity to Procrit. 67 Fed.
Reg. 66718, 66757 (Nov. 1, 2002). Amgen responded that the
two biologicals were not substitutes, and that reimbursement
amounts for Aranesp should not be determined in reference
to Procrit.
On November 1, 2002, the Secretary published the final
rule setting 2003 OPPS rates. 67 Fed. Reg. 66718 (Nov. 1,
2002). Claiming to act pursuant to the authority in § (t)(2)(E)
to make ‘‘adjustments TTT to ensure equitable payments,’’
CMS adjusted payments for Aranesp to the level hospitals
would receive under the prospective payment system, effec-
tively eliminating the supplemental pass-through payment for
the biological. Id. at 66758. The decision to reduce pay-
ments was predicated on the availability of the clinically
similar yet cheaper Procrit, and noted that it was not ‘‘an
equitable or efficient use of Medicare funds to pay for these
two functionally equivalent products at greatly different
rates.’’ Id. Because no historical cost data were available to
calculate Aranesp’s reimbursement level under the prospec-
tive payment system pursuant to § (t)(2)(C), CMS calculated
6
a reimbursement amount using what it determined to be the
equivalent dosage ratio between Procrit and Aranesp. Id. at
66758–59. As an alternative ground for the decision, the final
rule stated that Aranesp is not ‘‘new’’ for pass-through pur-
poses under § (t)(6)(A)(iv) because it is ‘‘functionally equiva-
lent’’ to Procrit and Epogen. Id. at 66759.
Amgen sued the Administrator of CMS and the Secretary
on the ground that the rule reducing its pass-through pay-
ments violated the plain language of the Medicare Act. Am-
gen argued that under § (t)(6) the Secretary is required to
make pass-through payments for new treatments and can
only reduce those payments when necessary to keep total
pass-through payments under the statutory cap, and then
only on a pro rata basis for all pass-through products. Alleg-
ing violations of its procedural rights as well, Amgen argued
that the rule was arbitrary and capricious, and that procedur-
al irregularities violated Amgen’s rights under the Adminis-
trative Procedure Act and the Due Process Clause of the
Fourteenth Amendment to the Constitution. The district
court allowed Ortho Biotech to intervene on the question of
whether Amgen had standing to bring the suit. Relying in
large part on the Fourth Circuit’s decision in TAP Pharma-
ceuticals v. U.S. Dept. of Health, 163 F.3d 199 (4th Cir. 1998),
the district court ruled that Amgen, as a drug manufacturer
not itself regulated by or within the zone of interests of the
relevant portion of the Medicare Act, lacked prudential stand-
ing, and dismissed the complaint. Amgen v. Scully, 234 F.
Supp. 2d 9 (D.D.C. 2002).
II.
Amgen appeals the dismissal of its complaint on the ground
that the district court’s ruling that it lacks prudential stand-
ing to challenge OPPS payment amounts for its product
conflicts with this court’s precedent as well as that of the
Supreme Court. The court reviews de novo the dismissal of a
complaint, accepting as true the allegations of the complaint.
See American Federation of Gov’t Employees AFL–CIO v.
Rumsfeld, 321 F.3d 139, 142 (D.C. Cir. 2003).
7
Section 10(a) of the Administrative Procedure Act, 5 U.S.C.
§ 702 (2004) (‘‘APA’’) provides that ‘‘[a] person suffering legal
wrong because of agency action, or adversely affected or
aggrieved by agency action within the meaning of a relevant
statute, is entitled to judicial review thereof.’’ The Supreme
Court has held that to qualify as ‘‘ ‘adversely affected or
aggrieved TTT within the meaning’ of a statute, a plaintiff
must establish that the injury he complains of TTT falls within
the ‘zone of interests’ sought to be protected by the statutory
provision whose violation forms the legal basis for his com-
plaint.’’ Lujan v. Nat’l Wildlife Found., 497 U.S. 871, 883
(1990) (quoting Clarke v. Securities Industry Assn., 479 U.S.
388, 396–97 (1987)). A party’s claimed injury from adminis-
trative action, therefore, will be considered ‘‘within the mean-
ing’’ of the relevant statute for purposes of 5 U.S.C. § 702
only if the party can meet the so-called ‘‘zone of interests’’
test. Qualified plaintiffs include not only those who are
themselves the ‘‘subject of the contested regulatory action,’’
Clarke, 479 U.S. at 399, but also those whose interests are not
‘‘so marginally related to or inconsistent with the purposes
implicit in the statute that it cannot reasonably be assumed
that Congress intended to permit the suit.’’ Id. Amgen
contends that it is the subject of the Secretary’s action and
that its interests are consistent with the statutory scheme.
We hold that Amgen’s interests are congruent with interests
underlying the Medicare Act and do not reach the question
whether it is a regulated party.
The Supreme Court has explained that ‘‘[t]he [zone of
interests] test is not meant to be especially demanding.’’
Clarke, 479 U.S. at 399. Thus, ‘‘there need be no indication
of congressional purpose to benefit the would-be plaintiff.’’
Id. at 399–400. Not only need a party not be a beneficiary of
a statute, a putative party’s ‘‘objectives in [the] action’’ need
not be ‘‘eleemosynary in nature;’’ whether they are is ‘‘beside
the point.’’ Nat’l Cred. Union Admin. v. First National
Bank, 522 U.S. 479, 498 (1998). Congruence of interests,
rather than identity of interests, is the benchmark; the zone
of interests test serves to exclude only those ‘‘parties whose
interests are not consistent with the purposes of the statute
8
in question,’’ Ethyl Corp. v. EPA, 306 F.3d 1144, 1148 (D.C.
Cir. 2002), because lawsuits by such plaintiffs ‘‘[c]arr[y] a
considerable potential for judicial intervention that would
distort the regulatory process.’’ Hazardous Waste Treat-
ment Council, Inc. v. EPA, 861 F.2d 277, 282–86 (D.C. Cir.
1988).
Parties motivated by purely commercial interests routinely
satisfy the zone of interests test under this court’s prece-
dents. As the court observed in Mova Pharmaceutical Corp.
v. Shalala, 140 F.3d 1060, 1075 (D.C. Cir. 1998), the salient
consideration under the APA is whether the challenger’s
interests are such that they ‘‘in practice can be expected to
police the interests that the statute protects.’’ See also
Animal Legal Defense Fund v. Glickman, 154 F.3d 426, 444–
45 (D.C. Cir. 1998) (en banc); cert. denied sub nom., Nat’l
Ass’n for Biomedical Research v. Animal Legal Defense
Fund, Inc., 526 U.S. 1064 (1999). Manufacturers’ challenges
to agency actions, then, fall within the zone of interests of a
statute when their interests appear congruent with those of
the statute. For instance, in Ethyl Corp., 306 F.2d at 1148, a
manufacturer of fuel additives had prudential standing, under
the Clean Air Act, to challenge regulations applied to automo-
bile manufacturers because, as the developer of products that
will ‘‘reduce harmful air pollutants,’’ the company’s interests
‘‘appear congruent with those of the statute.’’ Id. Similarly,
in Motor & Equipment Mfrs. Ass’n v. Nichols, 142 F.3d 449,
458 (D.C. Cir. 1998), the court held that the manufacturers of
replacement automobile parts could challenge, under the
Clean Air Act, the agency’s order permitting California to
prohibit tampering with pollution monitors, reasoning that the
manufacturers’ commercial interest in selling replacement
parts was ‘‘congruent’’ with those of mechanics and ultimately
of the statute. And in Nat’l Cottonseed Products Ass’n v.
Brock, 825 F.2d 482, 492 (D.C. Cir. 1987), the manufacturers
of respirators had prudential standing to challenge the effec-
tiveness of OSHA regulations in filtering cotton dust ‘‘on the
basis of the vendor-vendee relationship alone.’’ Id. (quoting
FAIC Securities v. Federal Deposit Insurance Corporation,
768 F.2d 352, 359 (D.C. Cir. 1985)).
9
Amgen’s commercial interest in a full statutory reimburse-
ment rate for Aranesp is neither incidental nor antagonistic to
the purposes of § (t)(6), the ‘‘statutory provision whose viola-
tion forms the basis for the complaint,’’ Bennett v. Spear, 520
U.S. 154, 199 (1997). Congress adopted § (t)(6) as an amend-
ment to the Medicare Act in 1999 because the proposed
outpatient prospective payments did ‘‘not adequately address
issues pertaining to the treatment of drugs, biologicals and
new technology,’’ and to prevent ‘‘restricted beneficiary ac-
cess to drugs, biologicals and new technology.’’ H.R. REP.
106–436(I) at 53 (1999). Amgen’s commercial interest in
selling Aranesp is congruent with the interests of beneficia-
ries in obtaining access to the technology because Congress’
reason for providing supplemental pass-through payments
was that hospitals inadequately reimbursed for new drugs or
biologicals are less likely to provide them and more likely to
steer beneficiaries towards older, less expensive treatments.
The required offset to other reimbursements caused by sup-
plemental payments for Aranesp under § (t)(2)(E)’s budget-
neutrality requirement does not create a disqualifying conflict
between Amgen and beneficiaries. There would be such an
offset as a result of any successful challenge brought by any
eligible plaintiff seeking access to a new treatment. More-
over, just as beneficiaries desiring access to Aranesp and
hospitals desiring reimbursement for providing it would have
prudential standing to challenge pass-through payment
amounts, Amgen as a vendor does as well, cf. Nat’l Cotton-
seed Products Ass’n, 825 F.2d at 492. This is true irrespec-
tive of whether hospitals or beneficiaries could file lawsuits;
whether Amgen’s claim is ultimately precluded is a separate
question from whether it has prudential standing to file a
lawsuit. Unlike Hazardous Waste Treatment Council, 861
F.2d 277, where the court held that an association of pollution
equipment providers lacked standing to challenge the agen-
cy’s adoption of allegedly too weak regulations and that the
statute did not manifest ‘‘congressional intent to improve the
competitive position’’ of suppliers of more expensive pollution
control devices, id. at 284, here the purpose of the pass-
10
through provision is precisely to attract supply of higher-
priced items, making Amgen a suitable challenger.
The district court concluded that Amgen’s ‘‘competitive
interest in financial gain’’ was ‘‘not closely aligned with the
federal health care insurance act.’’ Amgen, 234 F. Supp.
2d at 21. In reaching this conclusion the court focused on
the broad purpose of the Medicare Act ‘‘to provide more
adequate and feasible health insurance protection for the el-
derly,’’ id. at 18, and neglected the more specific interest
protected by § (t)(6) itself, namely, preventing ‘‘restricted
beneficiary access to drugs, biologicals and new technolo-
gy.’’ H.R. REP. 106–436(I) at 53. Under the precedents
discussed, the fact that Amgen’s motives were commercial
is not disqualifying, and in distinguishing this circuit’s prec-
edent, the district court did not give adequate weight to
Amgen’s financial alignment with Congress’ purpose in
§ (t)(6) of increasing beneficiary access to new medical
technology. The district court’s reliance on TAP Pharma-
ceuticals v. U.S. Dept. of Health, 163 F.3d 199 (4th Cir.
1998), was also misplaced, for in holding that drug manufac-
turers lack prudential standing to challenge the Medicare B
rates at which providers are reimbursed for their drugs,
the Fourth Circuit limited the standing of commercial enti-
ties to regulated firms, their competitors, and other firms
whose interests put them in the ‘‘same position,’’ id. at 208,
a test that this court has rejected. See Tax Analysis &
Advocates v. Blumenthal, 566 F.2d 139, 142 (D.C. Cir.
1977), cert. denied, 434 U.S. 1086 (1978). Adopting a more
flexible approach that focuses instead on whether a party
‘‘in practice can be expected to police the interests that the
statute protects,’’ Mova Pharmaceutical Corp., 140 F.3d at
1075, is more faithful to the Supreme Court’s teachings, in
Clarke, 479 U.S. at 399, that parties are denied a right to
judicial review only when their interests are ‘‘marginally
related to or inconsistent with’’ the statute at issue, and in
Nat’l Credit Union Admin., 522 U.S. at 499, rejecting as
‘‘beside the point’’ whether a putative plaintiff’s objectives
are the same as those intended by Congress. The ‘‘com-
mercial competitor[s]’’ of regulated parties, TAP Pharma-
11
ceuticals, 163 F.3d at 208, and those in the ‘‘same position,’’
id., may be examples of parties whose interests sufficiently
align with some statutory schemes to confer prudential
standing, but the court sees no reason to consider them the
only parties so situated.
Accordingly, we hold that Amgen’s interests are sufficiently
aligned with the purpose of § (t)(6) in ensuring the access of
Medicare beneficiaries to new technology, and, consequently,
it has prudential standing to sue the Secretary and the
Administrator.
III.
That Amgen has prudential standing does not resolve this
appeal, however. Another threshold issue is whether the
court has jurisdiction to entertain Amgen’s complaint. The
Administrator and Secretary contend that adjustments to
OPPS rates are not subject to judicial review. This court
may affirm the dismissal of a complaint on different grounds
than those relied upon by the district court. See Bennett v.
Spear, 520 U.S. 154, 166 (1997). The court’s jurisdiction is a
pure question of law, and as the merits do not hinge on any
fact-finding or discretionary balancing of competing interests,
a remand to the district court is unnecessary. Compare
McGraw–Hill Cos., Inc. v. Proctor & Gamble Co., 515 U.S.
1309, 1311 (1995); EEOC v. Nat’l Children’s Ctr., Inc., 98
F.3d 1406, 1411 (D.C. Cir. 1996).
Under § (t)(2)(E), the Medicare Act authorizes the Secre-
tary to make adjustments to the payments hospitals receive
under the outpatient prospective payment system:
(E) The Secretary shall establish, in a budget neutral
manner, outlier adjustments under paragraph (5) and
transitional pass-through payments under paragraph (6)
and other adjustments as determined to be necessary to
ensure equitable payments, such as adjustments for cer-
tain classes of hospitals.
42 U.S.C. § 1395l(t)(2)(E). Regarding judicial review of the
Secretary’s adjustments, the Medicare Act provides, in perti-
nent part:
12
There shall be no administrative or judicial review under
section 1395ff, 1395oo, of this title, or otherwise, of —
(A) The development of the [prospective payment]
classification system under paragraph (2), including
the establishment of groups and relative payment
weights for covered OPD [outpatient department] ser-
vices, of wage adjustment factors, other adjustments,
and methods described in paragraph (2)(F) [regarding
measures to control ‘‘unnecessary increases in the
volume of covered OPD services’’];
Id. § 1395l(t)(12)(A) (hereafter ‘‘§ (t)(12)(A)’’). In order to
determine whether the court has jurisdiction to consider
Amgen’s complaint, the court must determine first, whether
the ‘‘other adjustments’’ of which § (t)(12)(A) precludes re-
view include the ‘‘other adjustments as determined to be
necessary to ensure equitable payments’’ authorized by
§ (t)(2)(E), and second, whether the Secretary may use the
equitable adjustment authority under § (t)(2)(E) to alter a
payment amount to which a hospital would have been other-
wise been entitled pursuant to the pass-through provision in
§ (t)(6). Because we hold that § (t)(12)(A) precludes review
of the equitable adjustments made pursuant to § (t)(2)(E),
and that the Secretary, through CMS, acted within the au-
thority under § (t)(2)(E) in adjusting the pass-through pay-
ment amount for Aranesp, our review of DHHS’s decision is
at an end.
There is a ‘‘strong presumption that Congress intends
judicial review of administrative action,’’ Bowen v. Michigan
Academy of Family Physicians, 476 U.S. 667, 670 (1986), and
it can only be overcome by a ‘‘clear and convincing evidence’’
that Congress intended to preclude the suit. Abbott Labora-
tories v. Gardner, 387 U.S. 136, 141 (1967) (quoting Rusk v.
Cort, 369 U.S. 367, 380 (1962)). The presumption is particu-
larly strong that Congress intends judicial review of agency
action taken in excess of delegated authority. See Leedom v.
Kyne, 358 U.S. 184, 190 (1958); Aid Ass’n for Lutherans v.
U.S. Postal Service, 321 F.3d 1166, 1173 (D.C. Cir. 2003).
Such review is favored, the court stated in Dart v. United
13
States, 848 F.2d 217, 221 (D.C. Cir. 1988), ‘‘if the wording of a
preclusion clause is less than absolute.’’
The court therefore turns to the statute’s ‘‘language, struc-
ture and purpose, its legislative history, and whether the
claims can be afforded meaningful review.’’ Thunder Basin
Coal Co. v. Reich, 510 U.S. 200, 206 (1994). That Congress
intended to preclude judicial review of the Secretary’s adjust-
ments to prospective payment amounts is ‘‘clear and convinc-
ing’’ from the plain text of § (t)(12) alone. The text of
§ (t)(12)(E) stipulates that ‘‘there shall be no administrative
or judicial review’’ of ‘‘other adjustments.’’ The legislative
history reflects this stipulation. See H.R. REP. 105–149 at
724. That Congress would use such language of prohibition
is unsurprising, for piecemeal review of individual payment
determinations could frustrate the efficient operation of the
complex prospective payment system. Cf. Block v. Commu-
nity Nutrition Inst., 467 U.S. 340, 348 (1984). Payments to
hospitals are made on a prospective basis, and given the
length of time that review of individual payment determina-
tions could take, review could result in the retroactive order-
ing of payment adjustments after hospitals have already
received their payments for the year. Moreover, both the
pass-through and equitable adjustments to payment rates are
subject to a budget-neutrality requirement under § (t)(2)(E),
such that judicially mandated changes in one payment rate
would affect the aggregate impact of the Secretary’s decisions
by requiring offsets elsewhere, and thereby interfere with the
Secretary’s ability to ensure budget neutrality in each fiscal
year. Other circuits have noted the havoc that piecemeal
review of OPPS payments could bring about, see Skagit
County Pub. Hosp. Dist. No. 2 v. Shalala, 80 F.3d 379, 386
(9th Cir. 1996); American Soc’y of Cataract & Refractive
Surgery v. Thompson, 279 F.3d 447, 454 (7th Cir. 2002), and
this court has noted similar concerns with respect to the
prospective payment system the Medicare A program utilizes
to reimburse hospitals for the costs of providing inpatient
care. See Methodist Hosp. of Sacramento v. Shalala, 38 F.3d
1225, 1232–33 (D.C. Cir. 1994); County of Los Angeles v.
14
Shalala, 192 F.3d 1005, 1019 (D.C. Cir. 1999), cert. denied,
520 U.S. 1204 (2000).
In light of the presumption that Congress rarely intends to
foreclose review of action exceeding agency authority, howev-
er, see Leedom, 358 U.S. at 190; Aid Ass’n, 321 F.3d at 1173;
Dart, 848 F.2d at 221, we construe § (t)(12)(E) to prevent
review only of those ‘‘other adjustments’’ that the Medicare
Act authorizes the Secretary to make; in other words, the
preclusion on review of ‘‘other adjustments’’ extends no fur-
ther than the Secretary’s statutory authority to make them.
First, the reference to ‘‘other adjustments’’ in § (t)(12)(A)
appears alongside other components of outpatient prospective
payments that are contemplated by the Act, such as the
establishment of ‘‘relative payment weights’’ and ‘‘wage ad-
justment factors.’’ The canon of statutory construction, nos-
citur a sociis, i.e., a word is known by the company it keeps,
cf. Washington State Dept. of Social and Health Services v.
Guardianship Estate of Keffeler, 537 U.S. 371, 384–85 (2003),
which is ‘‘often wisely applied where a word is capable of
many meanings in order to avoid giving unintended breadth
to the Acts of Congress,’’ Jarecki v. G.D. Searle & Co., 367
U.S. 303, 307 (1961), suggests that the reference to ‘‘other
adjustments’’ in § (t)(12)(A) should similarly be confined to
those ‘‘other adjustments’’ otherwise provided for in the Act,
and at least creates sufficient ambiguity to trigger the pre-
sumption that judicial review of allegedly ultra vires agency
action is favored. Second, the text in § (t)(12)(A) — ‘‘other
adjustments’’ — matches the language of ‘‘other adjustments
as determined to be necessary to ensure equitable payments’’
in § (t)(2)(E), implying that Congress intended to reference
adjustments made pursuant to that subsection. Third, the
interference with the administration of the Medicare B pro-
gram that would result from judicial review pertaining to the
overall scope of the Secretary’s statutory adjustment authori-
ty, as opposed to case-by-case review of the reasonableness or
procedural propriety of the Secretary’s individual applica-
tions, would be sufficiently offset by the likely gains from
reducing the risk of systematic misinterpretation in the ad-
ministration of the Medicare B program. In the similar
15
context of prospective payments to hospitals providing inpa-
tient services under the Medicare A program, which also
operates under budget-neutrality constraints, review of the
validity of certain system-wide determinations by the Secre-
tary has been held to be available notwithstanding an express
preclusion on review of individual determinations, see Univer-
sal Health Services of McAllen, Inc. v. Sullivan, 770 F. Supp.
704, 711–12 (D.D.C. 1991), aff’d, 978 F.2d 745 (table) (D.C.
Cir. 1992).
Proceeding, then, on the basis that § (t)(12)(A) precludes
judicial review of any adjustment made by the Secretary
pursuant to the equitable adjustment authority under
§ (t)(2)(E), but not of those for which such authority is
lacking, the court turns to the question of whether § (t)(2)(E)
authorizes the type of adjustment the Secretary, acting
through CMS, made here. This requires consideration of the
merits of Amgen’s claim that the Secretary’s decision to
eliminate pass-through payments for Aranesp violated
§ (t)(6), which dictates the manner in which such payments
are to be calculated. If a no-review provision shields particu-
lar types of administrative action, a court may not inquire
whether a challenged agency decision is arbitrary, capricious,
or procedurally defective, but it must determine whether the
challenged agency action is of the sort shielded from review.
Otherwise, agencies could characterize reviewable or unautho-
rized action as falling within the scope of no-review provisions
whose application to such action Congress did not intend. In
such cases, the determination of whether the court has juris-
diction is intertwined with the question of whether the agency
has authority for the challenged action, and the court must
address the merits to the extent necessary to determine
whether the challenged agency action falls within the scope of
the preclusion on judicial review.
Most apposite is Comsat Corp. v. FCC, 114 F.3d 223 (D.C.
Cir. 1997). The Communications Act of 1934 provides the
Federal Communications Commission with authority to make
certain amendments to fees, and includes in the same para-
graph a provision stipulating that ‘‘amendments pursuant to
this paragraph shall not be subject to judicial review.’’ 47
16
U.S.C. § 159(b)(3) (2004). The court held that it had jurisdic-
tion to review whether the Commission’s fee changes fell
within the scope of the Commission’s authority under the
paragraph, and that the Commission’s position that it was
acting pursuant to authority shielded from review did not end
the matter: ‘‘the statute merges consideration of the legality
of the Commission’s action with consideration of this court’s
jurisdiction in cases in which the challenge to the Commis-
sion’s action raises the question of the Commission’s authority
to enact a particular amendment. Where, as here, we find
that the Commission has acted outside the scope of its
statutory mandate, we also find that we have jurisdiction to
review the Commission’s action.’’ 118 F.3d at 226–27. Simi-
larly, in E.I. du Pont de Nemours & Co v. Train, 430 U.S.
112, 124–25 (1977), involving a challenge to regulations pro-
mulgated by the Environmental Protection Agency pursuant
to the Federal Water Pollution Control Act, the Supreme
Court faced a statutory scheme whereby review was available
in the Court of Appeals for agency action taken pursuant to a
particular section of the Act, but the parties were in disagree-
ment regarding whether that section authorized the agency to
issue regulations. The Supreme Court held that ‘‘the issue of
jurisdiction is intertwined with the issue of EPA’s power to
issue the regulations’’ and proceeded to address the merits.
Id. at 125.
The court therefore must determine whether § (t)(2)(E)
authorizes the Secretary to alter a pass-through payment
otherwise required by § (t)(6). If it does, review is preclud-
ed. If it does not, because the court construes § (t)(12)(A) as
only shielding from review ‘‘other adjustments’’ contemplated
by the Medicare Act, the preclusion of review would not apply
to shield the Secretary’s unauthorized action. The effect of
the interplay of these statutory provisions is also to render
irrelevant Amgen’s contentions that the Secretary’s elimina-
tion of the pass-through payment for Aranesp was arbitrary,
capricious, and procedurally deficient. If the Secretary is
authorized to alter pass-through payments, judicial review is
precluded and it does not matter how the Secretary made the
decision. If the Secretary is not so authorized, even a
17
procedurally proper and reasonably explained decision would
be contrary to law because it would be ultra vires.
On the merits, Amgen’s statutory claim is defeated by the
text of § (t)(2)(E). The plain meaning of the Secretary’s
equitable adjustment authority permits the type of adjust-
ment that the Secretary, acting through CMS, made here.
Under § (t)(2)(E), the Secretary may make ‘‘other adjust-
ments’’ to hospital payments beyond those already allowed
under by the statute, ‘‘as determined to be necessary to
ensure equitable payments.’’ It is difficult to see how a
decision by the Secretary to adjust pass-through payments
for a specific treatment downward, based on the Secretary’s
conclusion that the treatment is too costly relative to its
benefits, would not lie at the heart of such authority. The
text of § (t)(2)(E), by authorizing the Secretary to adjust
payments where ‘‘necessary to ensure equitable payments,’’
manifests Congress’s recognition that the payment system
might otherwise sometimes produce inequitable results. The
House and Conference Reports to the Balanced Budget Act
of 1997, Pub. L. No. 105–33, 111 Stat. 251 (1997), state that
that Act ‘‘giv[es] the Secretary discretion in determining the
adjustment factors that will be applied to OPD prospective
rates.’’ H.R. REP. 105–149 at 1323 (1997), H.R. CONF. REP.
No. 105–217 at 785 (1997). That discretion is what was
exercised here.
Amgen presents several arguments for why the Secretary’s
decision to alter Aranesp pass-through payments is not the
sort of ‘‘adjustment’’ authorized under § (t)(2)(E), but none
are persuasive. It relies primarily on a textual argument
relating to the words ‘‘shall’’ and ‘‘other.’’ Amgen maintains
that § (t)(6), which sets forth the means for calculating pass-
through payments, provides in § (t)(6)(A) that the Secretary
‘‘shall’’ make pass-through payments, as does § (t)(2)(E), and
describes the manner of their calculation. Focusing on the
specificity of § (t)(6)’s instructions — that pass-through pay-
ments shall equal 95% of the wholesale cost of the drug or
biological minus the payment amount under the prospective
payment system, §§ (t)(6)(D) & 1395(u)(o); that the payments
shall continue for no fewer than two years and no more than
18
three, § (t)(6)(C); and that all pass-through payments shall
be reduced pro rata in the event that total pass-through
payments exceed a fixed percentage of total payments for
that year, § (t)(6)(E) — Amgen contends that the Secretary
acted unlawfully in using the equitable adjustment authority
to override the ‘‘clear statutory mandate’’ to make pass-
through payments in the prescribed manner. Amgen points
to the pro rata reductions required by § (t)(6)(E) and shield-
ed from review by § 1395l(t)(12)(E), and contends that be-
cause pro rata reductions to avoid budgetary overruns are the
only reductions to pass-through payments addressed in
§ (t)(6), the Secretary’s authority to reduce pass-through
payments is correspondingly limited. Amgen also contends
that the legislative history of § (t)(2)(E) supports its reading
of the word ‘‘shall.’’ Prior to 1999, § (t)(2)(E) provided that
‘‘the Secretary shall establish other adjustments, in a budget
neutral manner, as determined to be necessary to ensure
equitable payments, such as outlier adjustments or adjust-
ments for certain classes of hospitals.’’ This language was
changed in the Balanced Budget Refinement Act of 1999,
Pub. L. No. 106–113, 113 Stat. 1501 (1999), so that § (t)(2)(E)
now provides that ‘‘the Secretary shall establish TTT outlier
payments TTT pass-through payments TTT and other adjust-
ments as determined to be necessary to ensure equitable
payments.’’ Amgen contends that the new language, by
changing outlier payments from an example of an equitable
adjustment the Secretary may consider into an adjustment
the Secretary ‘‘shall establish,’’ reduced the Secretary’s dis-
cretion, both for outlier payments and pass-through pay-
ments. The Secretary’s discretionary authority, Amgen
maintains, is therefore limited to ‘‘other’’ adjustments —
adjustments to rates ‘‘other’’ than those already adjusted by
the outlier and pass-through payment provisions.
This line of reasoning reads too much into the ‘‘shall’’ in
§§ (t)(2)(E) and (t)(6)(A). In the Balanced Budget Refine-
ment Act, Congress made outlier and pass-through payments
mandatory, but they are mandatory only in the same sense
that regional adjustments in § (t)(2)(D) and the use of past
cost data in § (t)(2)(C) are mandatory: they are part of
19
default OPPS rate calculations subject to later adjustment.
Congress’ amendments to § (t)(2)(E) do not mean that Con-
gress also eliminated the Secretary’s discretion to make
further equitable adjustments to payment rates already ad-
justed through the outlier or pass-through provisions. Simi-
lar uses of the statutory term ‘‘shall’’ elsewhere for the
Medicare B program suggest the opposite. Almost every
provision in § 1395l(t)(2) governing OPPS payments requires
that the Secretary ‘‘shall’’ compute payment amounts in a
certain manner: the Secretary ‘‘shall’’ develop a classification
system for covered services, § (t)(2)(A); ‘‘shall’’ use median
or mean cost data to establish payment weights for those
services, § (t)(2)(C); ‘‘shall’’ determine wage adjustment fac-
tors, § (t)(2)(D). Other than the Secretary’s authority to
group clinically similar services together for payment pur-
poses pursuant to § (t)(2)(B), OPPS payments are calculated
almost entirely based on steps the Secretary ‘‘shall’’ take. If
use of the word ‘‘shall’’ makes those payments final, there
would be nothing left for the Secretary to adjust pursuant to
§ (t)(2)(E), for ‘‘other’’ adjustments would violate a ‘‘shall’’
provision. Congress’ use of the term ‘‘shall’’ to describe
OPPS calculations throughout § (t)(2) thus contemplates the
qualification that initial payment amounts are subject to later
adjustment, subject to the Secretary’s ‘‘discretion.’’ H.R.
REP. 105–149 at 1323, H.R. CONF. REP. No. 105–217 at 785.
The Balanced Budget Refinement Act used the same termi-
nology in adding pass-through and outlier payments to the
initial calculation of OPPS payments, and there is nothing in
the Act to suggest that Congress intended to bar adjustments
by the Secretary.
Congress’ recent amendment to § 1395l(t)(6) in § 622 of
the Medicare Prescription Drug, Improvement, and Modern-
ization Act of 2003, Pub. L. No. 108–173, highlights the
Secretary’s flexibility under § (t)(2)(E). As amended,
§ (t)(6)(F) bars the Secretary, after the date of enactment
(December 8, 2003), from calculating pass-through payments
for drugs or biologicals in future rates using a ‘‘functional
equivalence’’ standard, although determinations of ‘‘functional
equivalence’’ made prior to the date of enactment may still be
20
used in future rates so long as they are made only to
determine eligibility for pass-through adjustments and not to
calculate other OPPS payments. Id. at § 622; 42 U.S.C.
§ 1395l(t)(6)(F)(ii). The amendment only applies ‘‘on or after
December 8, 2003’’, id., so it does not apply retroactively of
its own force to the 2003 OPPS rates at issue here. The new
limitation on the future application of a ‘‘functional equiva-
lence’’ standard to pass-through payments, however, by per-
mitting the continuation of some such calculations made ‘‘pri-
or to December 8, 2003,’’ § (t)(6)(F)(ii)(I), contemplates the
Secretary’s authority to apply such a standard in the first
instance. Yet if Amgen’s interpretation of §§ (t)(2)(E) and
(t)(6)(A) were correct, and the ‘‘clear statutory mandate’’ by
which § (t)(6) sets pass-through payments cannot be altered,
there would be no opportunity to apply a ‘‘functional equiva-
lence’’ standard to pass-through payments to begin with:
payment amounts would have been finally set under
§ (t)(6)(D), which sets total payments for pass-through drugs
and biologicals at 95% of wholesale costs. Congress did not
enact such an inflexible system.
Nor, as Amgen contends, does a flexible understanding of
the Secretary’s equitable adjustment authority under
§ (t)(2)(E) render superfluous § (t)(12)(E), which prevents
review of only certain decisions related to the calculation of
pass-through payments. Amgen maintains that if the Secre-
tary could make equitable adjustments to pass-through pay-
ments, it would be redundant for the Medicare Act also to
exempt decisions about matters such as the duration of
payments or the application of any pro rata reduction from
judicial review, because the Secretary could make all such
decisions as ‘‘equitable adjustments’’ under § (t)(2)(E) and
shield them from review under § (t)(12)(A). This is not a
redundancy at all; the initial setting of OPPS rates and later
adjustments are different decisions. Amgen does not point to
any concrete way in which the Secretary could use the
equitable adjustment authority to shield a calculation or
decision for which the Medicare Act contemplates review.
Section (t)(12)(E) is not exhaustive; it lists calculations the
21
Secretary would make while setting pass-through payments
in the first instance. The fact that Congress also used
§ (t)(12)(A) to shield any later adjustments to those initial
rates pursuant to § (t)(2)(E) is not a redundancy. Nor, for
that matter, is the breadth of the no-review provisions sur-
prising, given Congress’ reasons for limiting review. See
Skagit County Pub. Hosp. Dist. No. 2 v. Shalala, 80 F.3d 379,
386 (9th Cir. 1996); American Soc’y of Cataract & Refractive
Surgery v. Thompson, 279 F.3d 447, 454 (7th Cir. 2002); cf.
Methodist Hosp. of Sacramento v. Shalala, 38 F.3d 1225,
1232–33 (D.C. Cir. 1994); County of Los Angeles v. Shalala,
192 F.3d 1005, 1019 (D.C. Cir. 1999), cert. denied, 520 U.S.
1204 (2000).
The Secretary’s equitable adjustment authority that en-
ables the adjustment of OPPS payments otherwise set by the
Medicare Act, including pass-through payments, would not, as
Amgen contends, give the Secretary the absurdly broad
power to make drastic adjustments, such as the elimination of
the entire pass-through program, and term it an ‘‘equitable
adjustment,’’ thereby undermining the mandatory nature of
the pass-through payment system while evading judicial re-
view. Limitations on the Secretary’s equitable adjustment
authority inhere in the text of § (t)(2)(E), which only author-
izes ‘‘adjustments,’’ not total elimination or severe restructur-
ing of the statutory scheme. As in MCI Telecommunications
Corp. v. American Tel. & Tel. Co., 512 U.S. 218, 225 (1994),
where the Supreme Court held that the Federal Communica-
tion Commission’s authority to ‘‘modify’’ certain requirements
could not reasonably be read to encompass the power to make
‘‘basic and fundamental changes in the scheme’’ such as
eliminating them entirely, similar limits inhere in the term
‘‘adjustments’’ to those the Supreme Court found in the word
‘‘modify.’’ The statutory requirement that the Secretary
‘‘shall’’ develop certain aspects of the payment system is
qualified by the Secretary’s authority to ‘‘adjust[ ]’’ those
payment amounts, but a more substantial departure from the
default amounts would, at some point, violate the Secretary’s
statutory obligation to make such payments and cease to be
an ‘‘adjustment[ ].’’ Because the Secretary would, in that
22
event, exceed his statutory authority under § (t)(2)(E), the
preclusion on judicial review in § (t)(12)(A) would not apply.
Cf. Leedom v. Kyne, 358 U.S. at 190; United States v. Dart,
848 F.2d at 223. But because the adjustment to which
Amgen objects, involving only the payment amount for a
single drug, does not work ‘‘basic and fundamental changes in
the scheme’’ Congress created in the Medicare Act, MCI
Telecommunications Corp., 512 U.S. at 225, but is rather of
the sort contemplated by the plain text of § (t)(2)(E), the
court has no occasion to engage in line drawing to determine
when ‘‘adjustments’’ cease being ‘‘adjustments.’’
Finally, the court does not reach the question of whether
review of Amgen’s constitutional claim is barred, as it is not
properly before us. Amgen contends in its reply brief that
the court has jurisdiction to review Amgen’s constitutional
claim that the administrative process violated its due process
rights under the Fourteenth Amendment irrespective of
whether § (t)(12)(A) shields the adjustment from review.
The court has ‘‘repeatedly held that an argument first made
in a reply brief ordinarily comes too late for our consider-
ation.’’ Students Against Genocide v. Department of State,
257 F.3d 828, 842 (D.C. Cir. 2001); see also Bd. of Regents of
the Univ. of Washington v. EPA, 86 F.3d 1214, 1221 (D.C.
Cir. 1996). There is no reference in the district court’s
opinion to Amgen’s constitutional claim, and Amgen’s main
brief mentions neither its constitutional claim nor the district
court’s failure to address it. Instead, Amgen’s main brief
seeks reversal only of the district court’s ruling on prudential
standing under the Medicare Act and the APA, notwithstand-
ing the irrelevance of such a requirement to constitutional
claims, see Clarke, 479 U.S. at 400 n.16, and its awareness of
the Secretary’s arguments in the district court that judicial
review of Amgen’s complaint, which included a constitutional
claim, was precluded. The Secretary’s brief on appeal does
not address whether the court has jurisdiction of the constitu-
tional claim made in Amgen’s complaint, as Amgen mentions
that claim for the first time in its reply brief. Under these
circumstances, the court has no occasion to make exception to
23
its usual refusal to address contentions raised for the first
time in a reply brief.
Accordingly, we affirm the dismissal of Amgen’s complaint.
Although we hold that Amgen has prudential standing to
bring its complaint, we also hold that the court lacks jurisdic-
tion under § (t)(12)(A) to consider Amgen’s complaint chal-
lenging the Secretary’s exercise of the equitable adjustment
authority under § (t)(2)(E).