Nabriva Therapeutics US, Inc., DAB CR6562 (2024)

DECISION

Petitioner, Nabriva Therapeutics US, Inc., is a pharmaceutical manufacturer that participates in the Medicare Part D Coverage Gap Discount Program (CGDP).  Because Petitioner failed to timely pay its April 2023 invoice covering the first quarter of 2023, totaling $278,763.37, the Centers for Medicare & Medicaid Services (CMS) was required to impose the civil monetary penalty (CMP) prescribed in 42 U.S.C. § 1395w-114a(e)(2).  The CMP of $69,690.84, which is 25 percent of the $278,763.37 that Petitioner did not timely pay, is mandated by law.  Therefore, I uphold the imposition of a $69,690.84 CMP.  See 42 U.S.C. § 1395w-114a(e)(2)(A); see also 42 C.F.R. § 423.2340(c).

I. Background and Procedural History

Petitioner, as a Part D drug manufacturer, agreed to participate in the CGDP.  CMS Exs. 1, 2; see 42 C.F.R. § 423.2310(a)(1) (requiring that for coverage to be available under Medicare Part D for applicable drugs of a manufacturer, the manufacturer must

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participate in the CGDP, have a CGDP agreement in effect, and have a contract with CMS’s Third Party Administrator (TPA) that administers the program).1

On April 28, 2023, the TPA2 sent Petitioner an email informing it that its April 2023 invoice covering the first quarter of 2023 was available in the online CGDP portal.  CMS Ex. 4.  The TPA sent a follow-up email message on June 1, 2023, in which it reminded Petitioner that it should pay its first quarter invoice by June 8, 2023.  CMS Ex. 5 at 4-6.  The TPA sent additional reminder email messages on June 8 and 14, 2023, and receipt of the additional reminders is confirmed by “read receipts.”  CMS Ex. 6.

On July 3, 2023, Petitioner provided written notice of its voluntary termination from the CGDP.  CMS Ex. 7 at 1-2.  CMS, in a July 6, 2023 email message, informed Petitioner that its termination would be effective January 1, 2025.  CMS Ex. 7 at 3 (citing 42 C.F.R. § 423.2345(b)(2)).

On September 1, 2023, CMS notified Petitioner of the determination to impose a $348,454.21 CMP, based on its outstanding April 2023 invoice balance of $278,763.37 and a late payment penalty of $69,690.84 (amounting to 25 percent of the $278,763.37 invoice).  DAB E-File Docket Entry No. 1a at 1.  Petitioner paid its first quarter invoice of $278,763.37 on September 29, 2023.  CMS Ex. 9.  Therefore, the outstanding CMP at issue is $69,690.84.  See CMS Brief (Br.) at 14; see P. Br. (disputing only the “late payment penalties”).

Petitioner filed the instant request for hearing on October 10, 2023.3  The Civil Remedies Division issued my standing pre-hearing order (Pre-Hearing Order) on October 18, 2023.  CMS filed a combined motion for summary judgment and pre-hearing brief, along with 10 proposed exhibits (CMS Exs. 1-10).  Petitioner filed a response, which I construe to be

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its brief.  In the absence of any objections to the proposed exhibits, I admit CMS Exs. 1‑10.  The admitted exhibits, along with DAB E-File Docket Entry No. 1a (September 1, 2023 notice of determination to impose a CMP), constitute the full evidentiary record that is the basis for this decision.4  See Civil Remedies Division Procedures § 14(a) (“Documents that are intended to prove facts as alleged by a party must be offered as exhibits.”); Pre-Hearing Order § 8 (“If an argument relies upon a particular exhibit, the party must provide a pinpoint citation to the exhibit and page number in its brief,” and “[e]vidence submitted should be relevant and support a party’s arguments and it will be unnecessary to consider evidence that is neither cited by a party in its brief or by any witnesses.”).

Because the parties have not submitted the written direct testimony of any witnesses, a hearing is unnecessary for purposes of cross-examination.  Pre-Hearing Order §§ 11-13 (directing the parties to submit the written direct testimony of proposed witnesses, and explaining that an in-person hearing will be held only if a party submits a request to cross-examine a witness for whom written direct testimony has been submitted).  See Jeffrey K. McIlroy, MD, Inc., DAB No. 3143 at 19 (2024) (citing George Yaplee Med. Ctr., DAB No. 3003 at 5 (2020)) (“Where no witness testimony is proffered, or all witness testimony is submitted in writing and no cross-examination is sought, there is no need to convene an in-person hearing.”).

I consider the record in this case to be closed, and the matter is ready for a decision on the merits.5

II. Issue

Whether CMS was required to impose a $69,690.84 CMP based on Petitioner’s failure to timely pay its April 2023 CGDP invoice covering the first quarter of 2023.

III. Jurisdiction

I have jurisdiction to hear and decide this case.  42 C.F.R § 423.1006(a); see also 42 U.S.C. §§ 1320a-7a(c)(2); 1395w-114a(e)(2)(B).

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IV. Findings of Fact, Conclusions of Law, and Analysis6

1. Petitioner is a drug manufacturer that had entered into CGDP and TPA agreements and participated in the CGDP.
2. In entering into these agreements, Petitioner agreed to comply with the requirement that it pay quarterly invoices within 38 calendar days of receipt.
3. The TPA notified Petitioner of the invoice covering the first quarter of 2023 on April 28, 2023.
4. On June 1, 8, and 14, 2023, the TPA reminded Petitioner of its April 2023 invoice.
5. Petitioner did not pay the invoice until September 29, 2023.
6. Pursuant to 42 U.S.C. § 1395w-114a(e)(2)(A)(ii), “[t]he Secretary shall impose a civil monetary penalty on a manufacturer that fails to provide applicable beneficiaries discounts for applicable drugs of the manufacturer in accordance with such agreement and for each such failure in an amount the Secretary determines is commensurate with the sum of . . . 25 percent of such amount.”
7. After Petitioner did not timely pay its April 28, 2023 invoice, CMS issued a September 1, 2023 notice of its intent to impose a CMP of $348,454.21, which included the $278,763.37 invoiced amount and a 25 percent penalty of $69,690.84.
8. Because Petitioner paid the April 2023 invoice on September 29, 2023, the remaining and outstanding civil monetary penalty addressed in the September 1, 2023 notice is $69,690.84.
9. Pursuant to 42 U.S.C. § 1395w-114a(e)(2)(A)(ii), CMS was required to impose a CMP of 25 percent of the unpaid CGDP invoice, amounting to $69,690.84.
10. There is no statutory or regulatory basis to reduce the CMP.

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11. To the extent CMS argues that its April 12, 2012 rulemaking creates a CMP exception based on “technical or other reasons beyond the control of the manufacturer,” Petitioner has offered no evidence that its failure to timely pay its invoice was due to technical or other reasons beyond its control.

Congress enacted enforcement mechanisms for the CGDP that included the imposition of a CMP against a drug manufacturer that did not timely reimburse a Part D sponsor for applicable drug discounts.  42 U.S.C. § 1395w-114a(e).  Congress directed the Secretary to impose a CMP against a drug manufacturer that failed to provide the applicable discount in accordance with CGDP agreement.  42 U.S.C. § 1395w-114(e)(2)(A).

Petitioner, a drug manufacturer, entered into a CGDP data agreement with CMS’s TPA in December 2017, at which time it agreed, in part, to pay each Part D sponsor within 38 days of receipt of an invoice from the TPA.  CMS Ex. 1 at 2; see 42 C.F.R. § 423.2315(b)(3); see also 42 U.S.C. § 1395w-114a(c)(A)(iv) (authorizing the Secretary to establish procedures, to include the number of calendar days allowed for reimbursement).  Petitioner also entered into a CGDP agreement with CMS that same month, in which it agreed that if it did not pay the applicable discounts within 38 days of receipt of the applicable invoice, “[t]he amount for each such failure” is the invoice amount “plus an additional 25 percent of the amount the Manufacturer would have paid with respect to such discounts under the agreement.”  CMS Ex. 2 at 4; see 42 U.S.C. § 1395w-114a(e)(2)(A) (stating that the Secretary “shall” impose a CMP in the sum of “the amount the manufacturer would have paid with respect to such discounts under the agreement” and “25 percent of such amount.”).

On April 28, 2023, the TPA invoiced Petitioner for the first quarter of 2023.  CMS Ex. 4.  The TPA reminded Petitioner of this invoice several more times on June 1, 8, and 14, 2023.  CMS Exs. 5 at 4 (stating, “The Medicare Part D [CGDP] Q1 2023 invoice payments are due by Thursday, June 8, 2023.”); 6 (“read receipt” for June 8, 2023 email message with a subject line stating that the payment deadline was “TODAY,” and “read receipt” for June 14, 2023 email message with “CGDP Medicare Q1 2023 Invoice Payment Overdue” in its subject line).

In an apparent response to these notices, Petitioner requested voluntary termination of its  CGDP agreement in correspondence dated June 28, 2023.  CMS Ex. 7 at 2.  In response, CMS informed Petitioner that its termination would be effective January 1, 2025, pursuant to 42 C.F.R. § 423.2345(b)(2), which states that “termination is effective . . . as of the day after the end of the succeeding calendar year if the termination occurs on or after January 30 of a calendar year.”  CMS Ex. 7 at 3.

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CMS issued a notice of determination to impose a CMP on September 1, 2023.  DAB E-File Docket Entry No. 1a.  The notice explained that CMS is imposing a CMP of $348,454.21 based on the overdue invoice amount of $278,763.37 and the “25% late penalty” of $69,690.84.  DAB E-File Docket Entry No. 1a at 1; see 42 § U.S.C. § 1395w-114a(e)(2)(A) and 42 C.F.R. § 423.2340(c) (both addressing the determination of CMPs).  Because Petitioner paid the outstanding $278,763.37 balance on September 29, 2023 (CMS Ex. 9), the remaining CMP at issue is the 25 percent late penalty of $69,690.84.  See P. Br. (stating, “Nabriva has paid all outstanding Sponsor Payments not including assessed late payment penalties,” and requesting “abatement of the late payment penalties”).

Petitioner states that it is closed, has entered into liquidation and dissolution, and “is in the process of selling its remaining assets in order to complete a managed wind down.”  P. Br.  Petitioner added that if it “is unsuccessful in raising funds to satisfy its other creditor obligations it will explore alternatives such as an Assignment for the Benefit or Creditors or Bankruptcy.”  P. Br.  Petitioner requested the relief of “an abatement of the late payment penalties imposed for missing the required deadlines to make the Sponsor Payments.”  P. Br.  Although not addressed in its brief, Petitioner had previously reported, in its request for hearing, that because it had “significantly reduced the number of persons employed within the Company’s finance and accounting functions,” it had not timely paid the April 2023 invoice because the staff reductions rendered it “unable to promptly transfer payables execution to complete payment obligations the company had incurred.”  Request for Hearing.

The controlling statute, 42 U.S.C. § 1395w-114a(e)(2)(A), mandates the imposition of a 25 percent penalty when a drug manufacturer “fails to provide applicable beneficiaries discounts for applicable drugs of the manufacturer in accordance with” the Discount Program Agreement.  Inasmuch as Petitioner had entered into a CGDP agreement (CMS Ex. 2) and had agreed to pay, within 38 days of receipt, the TPA invoice that would reimburse the Part D sponsors (CMS Ex. 1), Petitioner was obligated to pay the April 2023 invoice covering the first quarter of 2023 by June 8, 2023.  CMS Exs. 4-6; see 42 C.F.R. § 423.2315(b)(3).  Despite several reminders, Petitioner did not pay the invoice until more than three weeks after CMS notified it of the determination to impose a CMP on September 1, 2023.  CMS Ex. 9; see CMS Exs. 5-6; DAB E-File Docket Entry No. 1a.  Because Petitioner did not timely pay its invoice, and thereby did not provide applicable beneficiaries with applicable discounts for applicable drugs of the manufacturer, CMS is required to impose a CMP.  42 U.S.C. § 1395w-114a(e)(2)(A).  CMS correctly calculated the CMP as $69,690.84, which is 25 percent of the $278,763.37 invoice amount that was overdue by nearly three months at the time of issuance of the notice.  DAB E-File Docket Entry No. 1a.  Therefore, CMS has a legitimate basis to impose the CMP.

Congress did not contemplate any exceptions to the imposition of the late payment CMP, and the Secretary’s regulations likewise lack any mechanism to reduce a CMP to below

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the amount mandated by Congress.  42 U.S.C. § 1395w-114a(e)(2)(A); 42 C.F.R. § 423.2340(c).  To the extent the Secretary, in rulemaking cited by CMS, referenced “technical or other reasons beyond the control of the manufacturer, such as a natural disaster,” as a reason why a drug manufacturer would not be subject to a CMP based on a failure to provide applicable beneficiaries applicable discounts for applicable drugs of the manufacturer, Petitioner has not claimed a technical or other reason beyond its control that prevented it from making a timely payment of the April 2023 invoice covering the first quarter of 2023.  CMS Br. at 14-15 (citing 77 Fed. Reg. 22072, 22,090 (Apr. 12, 2012)).  Petitioner’s claimed reduction in staffing of its “finance and accounting functions” was a business decision and not a “technical” issue or a matter “beyond its control.”  See Request for Hearing.  Petitioner points to no authority by which I may grant it relief from the applicable statutory and regulatory requirements, and I have no authority to declare statutes or regulations invalid or ultra vires.  1866ICPayday.com, L.L.C., DAB No. 2289 at 14 (2009) (“An ALJ is bound by applicable laws and regulations and may not invalidate either a law or regulation on any ground . . . .”).

V. Conclusion

For the foregoing reasons, I uphold the $69,690.84 CMP, which is an amount that is prescribed by law.  42 U.S.C. § 1395w-114a(e)(2)(A).