In re Avandia Mktg. (2012) 685 F.3d 353, U.S. Court of Appeals, 3rd Cir
Plaintiff Humana Medical Plan/ Insurance Company brought suit against GlaxoSmithKline, alleging that Glaxo was obligated to reimburse Humana for expenses Humana had incurred treating its insureds’ injuries resulting from a Glaxo drug. Humana is an Medicare Advantage Organization that runs a Medicare Advantage plan. An MA plan assumes full responsibility for paying the medical costs of its plan participants in exchange for a fixed annual per-participant payment from the government. This fixed, or “capitated,” amount is calculated annually, using a formula based on the cost of providing the required benefits that would otherwise be covered by traditional Medicare.
MAO's then administer Medicare benefits for those enrollees and assume the risk associated with insuring them. Humana asserted that, pursuant to the Medicare Act, Glaxo was a “primary payer” obligated to reimburse Humana as a “secondary payer.” The District Court dismissed the action, agreeing with Glaxo that the Medicare Secondary Payer Act (“MSP”) did not provide MAO's with a private cause of action to seek such reimbursement. Humana appealed.
Medicare Part C allows Medicare enrollees to obtain Medicare benefits through private insurers instead of receiving direct benefits from the government. (U.S.C. § 1395w-21(a).) Under the MSP, Medicare cannot pay medical expenses where “payment has been made or can reasonably be expected to be made under a workmen's compensation law or plan of the United States or a State or under an automobile or liability insurance policy or plan (including a self-insured plan) or under no fault insurance.” (U.S.C. § 1395y(b)(2)(A)(ii).) The MSP also gives the Secretary the authority to make “conditional payments” in circumstances where a primary payer is actually responsible for the cost of medical treatment but "has not made or cannot reasonably be expected to make payment with respect to such item or service promptly.” (Id. § 1395y(b)(2)(B)(i).) In such a circumstance, the primary plan must subsequently reimburse the Medicare Trust Fund. (Id. at para (B)(ii).) If the primary plan fails to reimburse the Fund, “the United States may bring an action against any or all entities that are or were required or responsible . . . to make payment . . . under a primary plan.” (Id. at para (B)(iii).) The government may then collect double damages in accordance with paragraph (3)(A).” (Id.) Additionally, a private cause of action, with no particular plaintiff specified, exists pursuant to paragraph (3)(A).
The Court found that the plain text of the MSP establishes “a private cause of action for damages” and places no additional limitations on which private parties may bring suit. (Id. § 1395y(b)(3)(A).) Accordingly, the provision is broad and unambiguous, placing no limitations upon non-governmental actors to bring suit for double damages when a primary plan fails to appropriately reimburse any secondary payer.
The legislative history also supports this interpretation. Congress’ goal in creating the Medicare Advantage program was to harness the power of private sector competition to stimulate experimentation and innovation that would ultimately create a more efficient and less expensive Medicare system. If Medicare could threaten recalcitrant primary payers with double damages and MAO's could not, MAO's would be at a competitive disadvantage, unable to exert the same pressure and thus forced to expend more resources collecting from such payers. Further, when MAO's spend less on providing coverage for their enrollees, as they will if they recover efficiently from primary payers, Medicare does achieve cost savings. The Court found it would give Chevron deference to Centers for Medicare and Medicaid Services ("CMS"). In Chevron v. Natural Resources Defense Council, Inc, (1984) 467 U.S. 837, the Supreme Court found that courts must defer to an agency's regulations “unless they are arbitrary, capricious, or manifestly contrary to the statute.” (Id. at p. 844.) In this case, CMS “has the congressional authority to promulgate rules and regulations interpreting and implementing Medicare-related statutes.” (Torretti v. Main Line Hosps., Inc. (2009, 3d Cir.) 580 F.3d 168, 174.) CMS regulations state that an MAO “will exercise the same rights to recover from a primary plan, entity, or individual that the Secretary exercises under…” Medicare. (42 C.F.R. § 422.108.) The plain language of this regulation suggests that the Medicare Act treats MAO's the same way it treats Medicare for purposes of recovery from any primary payer. Accordingly, the Court was bound to defer to the duly-promulgated regulation of CMS.


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