In a recent 2-1 decision, the Fourth Circuit joined every other circuit to have considered the issue in applying
At issue before the Fourth Circuit was the Medicaid Drug Rebate Program's ("MDRP's") requirement that manufacturers report their "best price" for Medicaid covered drugs for purposes of rebate calculations. "Best price" is defined by statute as the "the lowest price available from the manufacturer during the rebate period to any wholesaler, retailer, provider, health maintenance organization, nonprofit entity, or governmental entity . . . inclusive of cash discounts, free goods that are contingent on any purchase requirement, volume discounts, and rebates." Given the complexity of Medicaid's price reporting requirements, CMS has repeatedly emphasized that manufactures should "make reasonable assumptions" in calculating "best price."
Based on these laws, regulations, and guidance, the relator claimed that the defendant, a pharmaceutical company, had submitted legally false claims to Medicaid because it had not appropriately accounted for discounts offered to separate customers along the distribution chain in its "best price" reporting. More specifically, the relator alleged that the defendant should have aggregated the discounts offered to those customers and reported the aggregated discount price as its "best price" instead of the single lowest discount price. The defendant countered that it reasonably interpreted "best price" to mean the lowest price at which a manufacturer sells a drug to any single entity and therefore it was justified in reporting the single lowest discount price.
The Fourth Circuit held the defendant's interpretation of "best price" was reasonable because the statute (1) uses the term "price" instead of "prices"; (2) lists the entities to be considered in the singular rather than the plural; and (3) states that the price to be reported is the "available" price, which suggests an actual offered price, not a hypothetical aggregated discount price. The court also held that the defendant was not warned away from its interpretation because "CMS knew . . . that manufacturers were not aggregating discounts given to different entities along supply chains . . . [yet] failed to clarify and thereby maintained strategic ambiguity."
The majority's broad attacks on the complexity of the MDRP combined with CMS's persistent refusal to provide appropriate clarity on the MDRP's requirements may offer broader defenses to
The dissent made many of the same arguments as the dissent in a recent Seventh Circuit decision applying
The Fourth Circuit's decision can be found here.
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