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The End of Chevron Deference Could Foretell the Beginning of Equal Access to Care Under Medicaid

One cannot move in legal circles without hearing at least some discussion of the SCOTUS’ position on the administrative state. With a now-entrenched conservative majority and at least two or three of those justices expressing doggedly anti-regulation views, many are asking if one of the venerable pillars of the administrative state—the doctrine known as “Chevron deference”—will ultimately be abrogated by the Court.

The name “Chevron deference” is derived from the case Chevron U.S.A. v. Natural Resources Defense Counsel (1984), in which the Court upheld the EPA’s decision to, essentially, deregulate an industry with respect to air pollution standards. In that case the Court held that when a statute delegating regulatory authority to an administrative agency is ambiguous, courts must defer to the agency’s reasonable interpretation of the statute. The practical effect has often been that in the face of an ambiguous statute, the agency, rather than the court, has the last word regarding the meaning of the statute, with some notable exceptions.

Until fairly recently, Chevron has enjoyed a high degree of legal entrenchment. It has also presented difficulties for, among others, specialty pharmacies and other providers seeking fair reimbursement through Medicaid’s Equal Access Provision, often known simply as “Section 30A.”

The introduction of Neil Gorsuch to the Court, however, has renewed many scholars’ interest in the subject of administrative deference, given the fact that he penned a famous concurrence to his own opinion while on the Tenth Circuit arguing passionately against Chevron’s continued vitality, and has since continued to side-swipe the doctrine while on the Court. Ending Chevron would shift power from executive agencies to the Judiciary which could result in more favorable outcomes for providers with respect to reimbursement.

While Chevron deference is implicated in a variety of different challenges to agency action, recently the doctrine has come into play in the context of specialty pharmacy challenges to CMS/HHS’s adoption of National Average Drug Acquisition Cost (NADAC) pricing under Section 30A. The implementation of NADAC pricing has resulted in numerous specialty medications being reimbursed below acquisition cost for prescriptions dispensed to Medicaid patients, yet CMS has failed to consider whether NADAC pricing violates the equal access provision in Section 30A. The applicability of Chevron deference to CMS’s decision is being contested.

Frier Levitt represents providers in challenging a variety of different agency action under the Administrative Procedure Act (APA), including agency action pertaining to reimbursement of federally funded health care programs such as Medicare, Medicaid and Tricare. These legal challenges involve the Court’s review of the underlying administrative record and an analysis of whether the agency acted in an arbitrary and capricious manner such that the agency decision must be set aside. Litigating these claims involves consideration as to what deference, if any, should be given to the agency’s decision-making. When a court concludes that Chevron deference should be applied, it is difficult to succeed in setting aside the agency decision. Frier Levitt attorneys have developed legal arguments and strategies to defeat the application of Chevron deference.

If your pharmacy has questions about bringing a challenge under Section 30A, contact Frier Levitt today.