Goetter v. Kennedy

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF COLUMBIA ATHENA GOETTER, et al., Plaintiffs, v. Civil Action No. 25-3100 (CKK) ROBERT F. KENNEDY, JR., in his official capacity as Secretary of Health and Human Services, Defendant. MEMORANDUM OPINION (August 5, 2026) This case is about the amount that Medicare must pay to reimburse suppliers of Relizorb (styled “RELiZORB”), a therapeutic device that helps patients with cystic fibrosis and other serious pancreatic conditions digest and absorb essential fats. This case is one of several related matters arising from a long-running reimbursement dispute between Relizorb’s manufacturer and the Center for Medicare and Medicaid Services. In this case, Relizorb’s manufacturer and three individual Medicare beneficiaries challenge three decisions of the Medicare Appeals Council in which the Council denied requests for greater reimbursement payments for the device. The Secretary of Health and Human Services opposes the Plaintiffs’ challenges and argues that the record supports the Council’s decisions. The parties have filed motions for summary judgment, which are ripe for decision. Upon consideration of the parties’ submissions,1 the relevant legal 1 The Court’s consideration has focused on the following documents, including the attachments and exhibits thereto: • The Defendant’s Supplemental Memorandum in Support of its Motion for Summary Judgment (“Def.’s Mem.”), Dkt. No. 12, which incorporates by reference the Defendant’s Memorandum in Support of its Motion for Summary Judgment in the related case of Henry v. Kennedy (“Henry II”), Case No. 21-cv-0747, available at Dkt. No. 17-1 in Case No. 21-cv-0747; • The Plaintiffs’ Supplemental Memorandum in Support of their Motion for Summary Judgment (“Pls.’ Mem.”), Dkt. No. 14, which incorporates by reference the Memorandum in Support of the Plaintiffs’ Motion 1 authority, and the entire record, the Court concludes that the Council’s decisions were consistent with the relevant legal standards, were supported by substantial evidence, and were not arbitrary and capricious. Accordingly, the Court shall GRANT the Defendant’s [12] Motion for Summary Judgment and DENY the Plaintiffs’ [13] Motion for Summary Judgment. I. BACKGROUND A. Factual Background Relizorb is a therapeutic device that helps patients with cystic fibrosis and other serious pancreatic conditions digest and absorb essential fats. See Compl. ¶¶ 40–43; J.A. vol. 1 at 51. Relizorb is available by prescription in boxes of single-use units called cartridges. See Compl. ¶ 42; J.A. vol. 1 at 51, 179–80. Each cartridge contains digestive enzymes and connects to a supply of enteral nutrition—that is, nutrition delivered by tube feeding directly into the gastrointestinal tract—to help the patient absorb necessary nutrients. See Compl. ¶ 42; J.A. vol. 1 at 51. The three individual Plaintiffs in this action are Medicare beneficiaries with complex illnesses who have received Relizorb to help address nutritional deficits. Compl. ¶¶ 8–10. Relizorb’s developer and sole manufacturer, Alcresta Therapeutics, Inc., is also a Plaintiff. Id. ¶¶ 11, 40. The FDA cleared Relizorb for prescription use by adults in November 2015. Compl. ¶ 44. To understand the multifaceted reimbursement litigation that ensued, it is necessary first to understand the sprawling statutory and regulatory framework that governs Medicare payments for products like Relizorb. The Court describes that framework in the next section. for Summary Judgment and the Plaintiffs’ Reply in Henry II, available at Dkt. Nos. 13-1 and 13-2 in Case No. 25-cv-3100 (this case) and Dkt. Nos. 9 and 18 in Case No. 21-cv-0747; and • The Joint Appendix (“J.A.”), Dkt. No. 16 (cited by volume: “J.A. vol. 1” appears at Dkt. No. 16-1, “J.A. vol. 2” appears at Dkt. No. 16-2, and “J.A. vol. 3” appears at Dkt. No. 16-3). In an exercise of its discretion, the Court concludes that oral argument is not necessary to the resolution of the issues pending before the Court. See LCvR 7(f). 2  B. Statutory and Regulatory Framework 1. The Medicare Program The Medicare program provides health insurance coverage for Americans who are elderly or living with certain disabilities. See 42 U.S.C. § 1395 et seq. The Center for Medicare and Medicaid Service (“CMS”) within the Department of Health and Human Services (“HHS”) administers Medicare on behalf of the Secretary of Health and Human Services. See id. § 1395kk; 42 C.F.R. § 400.200. Congress has provided that many aspects of the Medicare program, including several that are at issue in this case, must be administered through contracts with private firms called Medicare Administrative Contractors (“MACs”). See 42 U.S.C. § 1395u(a). Health coverage under the Medicare program is divided into four parts: A, B, C, and D. See 42 U.S.C. §§ 1395c–1395w-154. Only Part B is at issue in this case. See id. §§ 1395j–1395w- 6. Part B provides coverage for a variety of outpatient medical treatments, including many kinds of supplies and medical devices used outside the context of hospital care. See id. § 1395k. 2. Medicare Coverage and Reimbursement for Enteral Nutrition Products As part of Medicare Part B’s coverage for outpatient treatments, the program provides payment for a variety of products that are “reasonable and necessary for the diagnosis or treatment of illness or injury.”2 This framework covers products like Relizorb that beneficiaries use in 2 See 42 U.S.C. §§ 1395k(a)(2)(B) (providing that Part B covers “medical and other health services”), 1395k(a)(2)(I) (providing that Part B covers “prosthetic devices”), 1395y(a)(1)(A) (excluding payment for items and services that are not “reasonable and necessary”). 3 connection with parenteral and enteral nutrition.3 Medicare Part B reimburses suppliers for 80 percent of the allowed payment amount for these products.4 When a Medicare beneficiary receives a covered product like Relizorb, the supplier of the product generally submits a claim to one of CMS’s regional contractors, which decides whether the product is covered and, if so, how much to pay the supplier.5 To make this decision, which CMS calls the “initial determination,” the contractor applies the Medicare statute and applicable regulations and guidance published by CMS.6 The supplier has the burden of providing “such information as may be necessary in order to determine the amounts due” as payment.7 To help standardize decisions about coverage and reimbursement, CMS assigns unique codes to medical products and supplies through a system called the Healthcare Common Procedure 3 See 42 C.F.R. § 414.102(a) (providing for the payment of claims “[f]or [parenteral and enteral nutrition] items and services furnished on or after January 1, 2002”); Medicare Benefit Policy Manual, CMS Pub. No. 100-02, ch. 15, § 120.A (rev. Oct. 1, 2003) (providing that “[a]ccessories and/or supplies which are used directly with an enteral or parenteral device may . . . be covered under the prosthetic device benefit,” subject to other guidelines); Medicare Claims Processing Manual, CMS Pub. No. 100-04, ch. 20, § 10 (rev. Dec. 20, 2019, June 11, 2021, and May 12, 2022) (providing that “[p]arenteral and enteral nutrition, and related accessories and supplies, are covered under the Medicare program as a prosthetic device”). 4 See 42 C.F.R. § 414.102(a) (providing that payment is made “on the basis of 80 percent of the lesser of” the “actual charge for the item or service” and the “fee schedule amount” set for the item or service). 5 See 42 U.S.C. §§ 1395u(a) (providing that Part B is administered through contracts), 1395kk-1(a)(4)(A)–(B) (providing that the functions of contractors include determining payment amounts and making payments); 42 C.F.R. §§ 405.924(b) (providing that the contractor “makes initial determinations regarding claims for benefits under Medicare . . . Part B,” which includes deciding whether “the items and/or services furnished are covered” and resolving “[a]ny other issues having a present or potential effect on the amount of benefits to be paid under . . . Part B of Medicare”), 421.210(b)–(c) (providing that regional contractors process claims for durable medical equipment, prosthetics, orthotics, and supplies); Medicare Claims Processing Manual, ch. 20, § 10 (rev. Dec. 20, 2019, June 11, 2021, and May 12, 2022) (providing that “[p]arenteral and enteral nutrition, and related accessories and supplies” covered under Part B are “billed to the [durable medical equipment] [Medicare Administrative Contractor]”). 6 See 42 C.F.R. §§ 405.904(a)(2) (providing that a contractor “makes an initial determination when a claim for Medicare benefits under Part A or Part B is submitted”), 405.924(b) (similar); see also id. §§ 405.1060(a)(4) (providing that a national coverage determination “is binding” on contractors), 405.1063 (providing that “[a]ll laws and regulations pertaining to the Medicare and Medicaid programs . . . are binding on” the administrative adjudicators to whom contractors’ decisions may be appealed). 7 42 U.S.C. § 1395l(e); 42 C.F.R. § 424.5(a)(6) (“The provider, supplier, or beneficiary, as appropriate, must furnish to the intermediary or carrier sufficient information to determine whether payment is due and the amount of payment.”). 4 Coding System (“HCPCS”).8 Obtaining an HCPCS code for a new product is important to health care providers and suppliers because it allows them to seek separate reimbursement for the product, rather than having reimbursement bundled with codes for existing products or services. See Compl. ¶ 22. CMS sometimes decides on a national basis that a particular item (identified by its HCPCS code) is reasonable and necessary for the treatment of a particular illness or injury. Such a policy, called a “national coverage determination,” (“NCD”), applies to all Medicare beneficiaries. See 42 U.S.C. §§ 1395ff(f)(1)(B), 1395y(l)(6)(A); 42 C.F.R. § 405.1060(a). In the absence of a national coverage determination, a Medicare contractor can also exercise its discretion to adopt a “local coverage determination” (“LCD”), which applies to all Medicare beneficiaries within the contractor’s jurisdiction. 42 U.S.C. §§ 1395ff(f)(2)(B), 1395y(l)(6)(B). The Medicare statute requires the Secretary to follow certain procedures when adopting NCDs, including providing notice and an opportunity for public comment and publishing of “a clear statement of the basis for the determination.” 42 U.S.C. §§ 1395y(a), 1395y(l)(1)-(4). The statute also imposes procedural requirements on contractors adopting LCDs, including a requirement to publish a “summary of evidence” that the contractor considered and “[a]n explanation of the rationale” for its determination at least 45 days before the determination takes effect. 42 U.S.C. § 1395y(l)(5). The Secretary issued an NCD for enteral and parenteral nutritional therapy in 1984. Medicare National Coverage Determination Manual, CMS Pub. No. 100-03, ch. 1, pt. 3, § 180.2 (July 11, 1984). This NCD provided that the Medicare Part B prosthetic device benefit would 8 See 42 U.S.C. § 1320d-2 (directing the Secretary to “adopt standards for transactions, and data elements for such transactions, to enable health information to be exchanged electronically” for “financial and administrative transactions”); 42 C.F.R. § 414.40(a) (providing that “CMS establishes uniform national definitions of services, codes to represent services, and payment modifiers to the codes”), 45 C.F.R. § 162.1002(b)(3), (c)(1) (adopting HCPCS as the code set for use with durable medical equipment, orthotic and prosthetic devices, and medical supplies). 5 cover enteral nutrition therapy for a patient who “cannot maintain weight and strength commensurate with his or her general condition” because of “chronic illness or trauma” causing an impairment “of long and indefinite duration.” Id. This coverage determination provided that when the coverage requirements for enteral nutrition were satisfied, Medicare would also cover “related supplies” and “equipment” used in conjunction with enteral feeding. Id. (citing Medicare Benefit Policy Manual, CMS Pub. No. 100-02, ch. 15, § 120). In February 2021, the four regional contractors that process claims for durable medical equipment, prosthetics, orthotics, and medical supplies jointly proposed new LCDs for enteral nutrition products, effectively superseding the 1984 NCD. See Proposed Local Coverage Determination: Enteral Nutrition (DL38955), CMS (Feb. 25, 2021), https://perma.cc/86MS-B434. The new joint LCDs were more specific than the prior NCD, providing that “[i]n-line digestive enzyme cartridges” like Relizorb are “reasonable and necessary” for Medicare beneficiaries who meet the coverage criteria for enteral nutrition and “have a diagnosis of Exocrine Pancreatic Insufficiency.” Id. These LCDs provided for coverage of up to two such cartridges per day for qualifying beneficiaries. Id. Following the adoption of these LCDs, the Secretary rescinded the NCD for enteral nutrition therapy, effective January 1, 2022, determining that “no [NCD] is appropriate at this time.” Medicare National Coverage Determinations Manual, CMS Pub. No. 100-03, ch. 1, pt. 3, § 180.1 (rev. May 20, 2022). Accordingly, since January 2022, contractors’ LCDs have been controlling for enteral nutrition therapy. See id. (noting that “[i]n the absence of an NCD, coverage determinations will be made by the Medicare Administrative Contractors”). CMS uses a fee schedule to decide payment amounts for parenteral and enteral nutrition products covered under an NCD or an LCD. See 42 C.F.R. § 414.102(a); see also Balanced Budget 6 Act of 1997, Pub. L. 105-33, 111 Stat. 251, 390, § 4315(s) (1997) (codified at 42 U.S.C. § 1395u(s)) (authorizing adoption of fee schedules for these products). Specifically, Medicare will pay 80 percent of the allowed payment amount, which is “the lesser of” the “actual charge” for the product and the “fee schedule amount” set for that product. Id. CMS sets the fee schedule based on the “reasonable charges” for each product in a fixed base year, 1995, adjusted periodically to account for inflation and other factors. Id. §§ 414.102(c), 414.104(b). However, if the fee schedule does not include a particular product (for example, if the product is new and was not available in the base year), CMS must use a different approach. See id. § 414.112. For covered products that do not appear in the fee schedule, CMS requires contractors to use a specific “gap-filling” methodology to decide the proper payment amount. This gap-filling methodology appears in the Medicare Claims Processing Manual, CMS Pub. No. 100-04, ch. 23, § 60.3, and in a regulation that the Secretary later adopted through notice-and-comment rulemaking, 42 C.F.R. § 414.112. The parties in this case dispute exactly what Medicare’s gap-filling methodology requires. The relevant regulation provides that when a new HCPCS code describes an item or service without a “fee schedule pricing history” under a prior code, the fee schedule amount for the new code is to be established in one of two ways. 42 C.F.R. § 414.112(a). First, if “items with existing fee schedule amounts are determined to be comparable to the new items,” the amount may be established “using existing fee schedule amounts for [those] comparable items.” Id. § 414.112(b). Second, if there are no comparable items, “fee schedule amounts may be established using supplier price lists, including catalogs and other retail price lists (such as internet retail prices) that provide information on commercial pricing for the item.” Id. § 414.112(c)(1). 7  At the times relevant to this case, the Medicare Claims Processing Manual described essentially the same process, requiring the use of existing fee schedules for comparable items, or the use of “other sources of pricing data” if no comparable items were available.9 An earlier version of the Manual that is relevant to a related case was somewhat more prescriptive, calling for the use of “supplier price lists with prices in effect during the fee schedule data base year” if no comparable items were available.10 The relevant regulation and the relevant versions of the Manual provide that “verifiable information from supplier invoices and non-Medicare payer data” may be used in the gap-filling calculation.11 The regulation and the versions of the Manual that are directly relevant to this case also cite “payments made by Medicare Advantage” as a permissible source of pricing information.12 Each source further provides that “[i]f the only available price information is from a period other than the [fee schedule] base period,” the contractor may use pricing information from a different year, adjusted by a deflation factor.13 3. The Medicare Appeals Process After a Medicare contractor makes an initial determination about the amount of payment that is due for a given item or service provided to a Medicare beneficiary, the supplier or beneficiary may pursue up to four levels of administrative appeals. 42 U.S.C. § 1395ff(a)(3)(A), 9 See Medicare Claims Processing Manual, CMS Pub. No. 100-04, ch. 23, § 60.3 (rev. Dec. 4, 2020; Dec. 2, 2021; and Dec. 2, 2022). 10 See Medicare Claims Processing Manual, CMS Pub. No. 100-04, ch. 23, § 60.3 (rev. Sept. 14, 2018). 11 See 42 C.F.R. § 414.122(c)(1); Medicare Claims Processing Manual, CMS Pub. No. 100-04, ch. 23, § 60.3 (rev. Sept. 14, 2018, Dec. 4, 2020; Dec. 2, 2021; and Dec. 2, 2022). 12 See 42 C.F.R. § 414.122(c)(1); Medicare Claims Processing Manual, CMS Pub. No. 100-04, ch. 23, § 60.3 (rev. Dec. 4, 2020; Dec. 2, 2021; and Dec. 2, 2022). 13 See 42 C.F.R. § 414.122(c)(1) (“fee schedule” in original); Medicare Claims Processing Manual, CMS Pub. No. 100-04, ch. 23, § 60.3 (rev. Sept. 14, 2018, Dec. 4, 2020; Dec. 2, 2021; and Dec. 2, 2022). 8 (c)(3)(B), (d)(1)(A), (d)(2)(A); see generally 42 C.F.R. §§ 405.904(a)(2) (describing claim appeals process), 405.906(a)(1)–(2) (providing that both beneficiaries and suppliers are parties to initial determinations), 405.906(b)(1) (providing that the parties to an initial determination may be parties to an appeal). The first level of appeal is a request for a “redetermination” by the Medicare Administrative Contractor (“MAC”) that made the initial determination. 42 U.S.C. § 1395ff(a)(3)(A); 42 C.F.R. §§ 405.904(a)(2), 405.906(b), 405.940–.958. The second level of appeal is a request for “reconsideration,” which is directed to a different Medicare contractor called the “qualified independent contractor” (“QIC”). 42 U.S.C. § 1395ff(c); 42 C.F.R. §§ 405.904(a)(2), 405.934, 405.960–.978. The third level of appeal is a review by an administrative law judge (“ALJ”). 42 C.F.R. §§ 405.936, 405.1000–.1058. The ALJ reviews the initial determination based on a de novo review of the administrative record, which may include evidence developed at a hearing. Id. § 405.1000(d). The fourth and final level of administrative appeal is a review by the Medicare Appeals Council. 42 C.F.R. §§ 405.938, 405.1100–.1140. The Council reviews the ALJ’s decision de novo, but it confines its review to the evidence contained in the administrative record that was before the ALJ. 42 C.F.R. §§ 405.1100(c), 405.1122(a)(1). The Council “may adopt, modify, or reverse” the ALJ’s decision. 42 C.F.R. §§ 405.1128(b). A decision by the Council at the culmination of this four-level process is a final agency determination and is subject to judicial review. See 42 U.S.C. §§ 405(g), 1395ff(b)(1)(A); 42 C.F.R. § 405.1136. A party may also seek judicial review without exhausting every step of the 9 administrative appeals process if the administrative reviewers do not issue decisions within certain statutory time limits. See 42 U.S.C. §§ 1395ff(d)(3)(A)–(B); 42 C.F.R. §§ 405.1016(f), 405.1132. Judicial review proceeds according to the standards of the Administrative Procedure Act (“APA”) and is based on the same administrative record that was before the Council and the ALJ. See 42 U.S.C. § 405(g); id. § 1395ff(b)(1)(A) (providing that judicial review is “as is provided in” § 405(g)). Upon review of the record, the court may enter “a judgment affirming, modifying, or reversing the decision” under review, “with or without remanding the cause for a rehearing.” See 42 U.S.C. §§ 405(g), 1395ff(b)(1)(A). C. Alcresta’s HCPCS Application and Early Reimbursement Litigation With this framework in mind, the Court turns to the history of the reimbursement dispute at the heart of this case. Plaintiff Alcresta, which developed and manufactures Relizorb, requested an HCPCS billing code for the device in December 2015, soon after the FDA cleared the device for use in November 2015. See Compl. ¶ 44. In its application for an HCPCS code, Alcresta answered a variety of questions about its new product. See Ex. 5 to Pls.’ Reply, Henry v. Becerra, No. 21- cv-0747-CKK, Dkt. No. 18-2 (D.D.C. June 11, 2021) (“HCPCS Application Ex.”).14 The information that Alcresta provided in its initial HCPCS application is centrally important to this case. In response to a question asking for the “Manufacturer’s Suggested Retail Price (MSRP) or list price of the item,” Alcresta wrote, “The wholesale acquisition cost [WAC] is 14 The parties did not include this application in the Joint Appendix, but it is part of the Administrative Record because it was before the agency at the time that it made its decision. See J.A. vol. 1 at 193 (stating that the copy of Alcresta’s HCPCS code application previously filed as an exhibit in Case No. 21-cv-0747 was attached as an exhibit to Mr. Mayo’s reconsideration request in this case); J.A. vol. 2 at 81 (same, as to Ms. Goetter); J.A. vol. 3 at 90 (same, as to Ms. Muhammad-Solomon); 42 C.F.R. §§ 405.1122(a)(1) (providing that the Council’s review is based on “the record of the proceedings before the ALJ”), 405.1000(d) (providing that the ALJ’s decision is “based on the administrative record”); see also Env’t Def. Fund, Inc. v. Costle, 657 F.2d 275, 284 (D.C. Cir. 1981) (explaining that “judicial review of agency action is normally confined to the full administrative record before the agency at the time the decision was made”); S. Airways Express, LLC v. United States Dep't of Transportation, 159 F.4th 50, 58 (D.C. Cir. 2025) (same). 10 $49/single use Relizorb™ cartridge.” HCPCS Application Ex. at 11. Elsewhere in the same application, in response to a question soliciting “3 months of marketing experience” reflecting the “total number of units sold in the U.S. and the total dollar amount in sales,” Alcresta answered, “Number of units sold as of 12/08/15 : 600 cartridges,” and “Total Sales as of 12/08/15: $29,400.00,” implying a sales price of $49 per cartridge. Id. at 10–11. In the spring of 2016, CMS, acting through its HCPCS Workgroup, denied Alcresta’s initial request for a unique billing code for Relizorb. Compl. ¶ 44. The HCPCS Workgroup concluded that existing billing codes for enteral feeding supply kits adequately covered Relizorb. Id. Alcresta requested reconsideration of this decision, which CMS denied. Id. Alcresta submitted another application for a unique HCPCS code for Relizorb in 2017, which CMS denied for the same reason. Compl. ¶ 45. Alcresta again requested reconsideration, which CMS denied. Id. In early 2018, Alcresta submitted a third application for an HCPCS billing code and— joined by a Medicare beneficiary receiving Relizorb—filed a civil action in this District seeking a preliminary injunction, arguing that CMS was unlawfully denying separate reimbursement for Relizorb by including it in bundled codes for enteral nutrition supply kits. Compl. ¶¶ 47–48; see Alcresta Therapeutics, Inc. v. Azar (“Alcresta I”), No. 18-cv-0243, 2018 WL 11670883 (D.D.C. June 15, 2018) (TJK). While Alcresta’s application for a preliminary injunction was pending, CMS removed Relizorb from the list of products included in the bundled kit codes in April 2018, and it issued a new temporary code for Relizorb that became effective in July 2018. Compl. ¶¶ 48–49; see Alcresta Therapeutics, Inc. v. Azar (“Alcresta III”), 755 F. App’x 1, 3 (D.C. Cir. 2018). However, this code was encumbered by two “indicators”—one meaning “not payable” and the other meaning 11 “not separately priced by Part B”—that had the practical effect of ensuring that claims using the new code would not result in separate reimbursement. Compl. ¶ 49; see Alcresta I, 2018 WL 11670883, at *5; Alcresta III, 755 F. App’x at 3. In June 2018, Judge Timothy J. Kelly denied Alcresta’s motion for a preliminary injunction, concluding that neither it nor the Medicare beneficiary suing alongside it had shown a sufficient likelihood of irreparable harm to warrant preliminary relief. Alcresta I, 2018 WL 11670883, at *7, *12. Alcresta then applied to Judge Kelly for an injunction pending appeal, which he denied for the same reason. Alcresta Therapeutics, Inc. v. Azar (“Alcresta II”), 318 F. Supp. 3d 321, 328 (D.D.C. 2018) (TJK). On appeal to the D.C. Circuit, Alcresta renewed its application for an injunction pending appeal, which the D.C. Circuit granted in part, ordering the Secretary “to issue a temporary billing code for Relizorb that is not encumbered with the Medicare-coverage indicator, pending further order of the court.” Order, Alcresta Therapeutics, Inc. v. Azar, No. 18-5192 (D.C. Cir. July 13, 2018) (per curiam). In response to this interim order, CMS replaced the “not payable” indicator for Relizorb’s temporary code with another indicator that also had the practical effect of preventing separate Medicare reimbursement. Compl. ¶ 51. Alcresta then moved to enforce the court’s order on the grounds that the assigned code remained essentially unusable, but the D.C. Circuit denied Alcresta’s motion on the grounds that—according to CMS’s representations—the code would “permit[] claims processing and result[] in an appealable, initial determination.” Order, Alcresta Therapeutics, Inc. v. Azar, No. 18-5192 (D.C. Cir. July 27, 2018) (per curiam). Soon afterward, in November 2018, CMS announced a new code for Relizorb that placed it in the same series as other enteral and parenteral nutrition supplies. Compl. ¶ 53; Alcresta III, 12 755 F. App’x at 3. However, this code initially remained encumbered by the same codes that prevented reimbursement of claims submitted using the temporary code. See Compl. ¶ 53. In December 2018, the D.C. Circuit granted Alcresta’s application for a preliminary injunction and ordered CMS to provide “a separate, usable code for Relizorb unencumbered by Medicare coverage or pricing indicators that bundle it with [a code for enteral nutrition supply kits].” Alcresta III, 755 F. App’x at 6. Following this decision, CMS modified the indicators for Relizorb’s code to reflect that it was approved for Medicare payment at “contractor discretion” in connection with enteral nutrition, and CMS issued a permanent code effective January 1, 2019. Compl. ¶ 54 (citing 2019 Corrections to the Alpha-Numeric HCPCS File, CMS, https://perma.cc/N38R-WC5C). Because Relizorb was a new product without an established price on CMS’s national fee schedule for enteral nutrition therapy, CMS sent a letter to its contractors directing them to process claims for Relizorb “in accordance with the gap-filling methodology in section 60.3 of Chapter 23 of the Medicare Claims Processing Manual.” Compl. ¶ 55 (quoting Technical Direction Letter TDL-190132 (Dec. 20, 2018)); see J.A. vol. 3 at 40 (same); see also J.A. vol. 1 at 33 (similar); J.A. vol. 2 at 34 (similar). This case is about whether CMS’s contractors correctly implemented the gap-filling methodology described in this letter. It is undisputed that the contractors ultimately calculated the gap-filled payment amount based on the figure of $49 per cartridge that Alcresta had listed in its initial HCPCS application, in response to a question calling for the “Manufacturer’s Suggested Retail Price (MSRP) or list price of the item.” See HCPCS Application Ex. at 11. Although this question expressly called for the MSRP, Alcresta indicated in its response that the $49-per- cartridge figure reflected the “wholesale acquisition cost” of Relizorb. See id. The parties dispute 13 whether it was reasonable for CMS and its contractors to rely on this figure to set the gap-filled payment amount for Relizorb. D. Prior Litigation Regarding the Contractors’ Gap-Filling Calculation Before the claims in the present case became ripe for judicial review, Alcresta and a Medicare beneficiary named James Henry sought judicial review of two earlier reimbursement decisions, invoking exceptions to the administrative exhaustion rules that typically require a party to obtain a decision from Medicare Appeals Council before filing a civil action. See Compl., Henry v. Azar (“Henry I”), No. 20-cv-1144 (D.D.C. filed May 1, 2020); Compl., Henry v. Azar (“Henry II”), No. 21-cv-0747 (D.D.C. filed Mar. 22, 2021). In both cases, Alcresta and Mr. Henry alleged that CMS had misapplied the gap-filling methodology by improperly relying on the $49- per-cartridge figure in its gap-filling calculation. See Compl., Henry I; Compl., Henry II. This Court dismissed the first case for lack of subject-matter jurisdiction. See Henry I, No. 20-cv-1144, Dkt. Nos. 22–23 (D.D.C. Feb. 8, 2021). The second case remains pending and is held in abeyance pending a decision in the present case, which presents substantially similar legal claims on a more fully developed record. See Joint Status Report, No. 21-cv-0747, Dkt. No. 34 (D.D.C. June 8, 2026). E. Procedural History of the Claims Before the Court The individual Plaintiffs in this case, Athena Goetter, Nya Muhammad-Solomon, and Shandale Mayo, are Medicare and Medicaid beneficiaries who received supplies of Relizorb to help address nutritional deficiencies related to their complex medical conditions. Compl. ¶¶ 8–10, 37–39. This case relates to one specific date of service for each beneficiary. See J.A. vol. 1 at 74 (July 4, 2021, as to Mr. Mayo); J.A. vol. 2 at 93 (January 5, 2022, as to Ms. Goetter); J.A. vol. 3. at 103 (December 30, 2022, as to Ms. Muhammad-Solomon). It is undisputed that treatment with Relizorb was medically necessary for each Plaintiff on the relevant dates. See J.A. vol. 1 at 31 14 (ALJ decision stating that medical necessity “is not at issue” as to Mr. Mayo); J.A. vol. 2 at 50 (same, as to Ms. Goetter); J.A. vol. 3 at 37 (same, as to Ms. Muhammad-Solomon). On the service dates at issue in this case, each Plaintiff received a supply of Relizorb from a Medicare supplier, and the supplier later received reimbursement from a Medicare contractor. See J.A. vol. 1 at 74; J.A. vol. 2 at 93; J.A. vol. 3 at 103. Specifically, Ms. Goetter received 30 cartridges from Bioscrip Infusion Services, LLC (“Bioscrip Infusion”), which later received payment of $1,066.32 ($35.54 per cartridge) from Medicare contractor Noridian Healthcare Solutions, LLC-JA (Jurisdiction A) (“Noridian”). J.A. vol. 2 at 93; see also Compl. ¶¶ 64–65. Ms. Muhammad-Solomon received 60 cartridges from Option Care Enterprises, Inc. (“Option Care”), which later received $2,089.99 ($34.83 per cartridge) from Noridian. J.A. vol. 3 at 103; see also Compl. ¶¶ 73–74. And Mr. Mayo received 30 cartridges from Bioscrip Pharmacy Services, Inc. (“Bioscrip Pharmacy”), which later received payment of $1,014.48 ($33.82 per cartridge) from Medicare contractor CGS Jurisdiction B (“CGS”). J.A. vol. 1 at 74; see also Compl. ¶¶ 82–83. Each of these payments reflected a 20 percent coinsurance rate, meaning that Medicare paid 80 percent of the allowed charges and either the patient or another insurer was responsible for the remaining 20 percent. See J.A. vol. 1 at 74; J.A. vol. 2 at 93; J.A. vol. 3 at 103. The payments that the Medicare contractors allowed for these claims were about 90 percent less than the amounts that the suppliers submitted as charges. See J.A. vol. 1 at 74; J.A. vol. 2 at 93; J.A. vol. 3 at 103. In Ms. Goetter’s case, Bioscrip Infusion submitted a charge of $11,340.00 ($378.00 per cartridge), but Noridian allowed only $1,332.90 ($44.43 per cartridge). J.A. vol. 2 at 93; see also Compl. ¶ 64. In Ms. Muhammad-Solomon’s case, Option Care submitted a charge of $24,271.20 ($412.02 per cartridge), but Noridian allowed only $2,665.80 ($44.42 per cartridge). J.A. vol. 3 at 103; see also Compl. ¶ 73. And in Mr. Mayo’s case, Bioscrip Pharmacy submitted 15 a charge of $11,340 ($378.00 per cartridge), but CGS allowed only $1,268.10 ($42.27 per cartridge). J.A. vol. 1 at 74; see also Compl. ¶ 82. In each case, the MAC calculated the allowed payment amount using the $49-per-cartridge figure from Alcresta’s HCPCS application, adjusted by the beneficiary’s 20 percent coinsurance amount, local sales taxes, and deflation and update factors intended to account for background price changes. See J.A. vol. 1 at 4; J.A. vol. 2 at 4; J.A. vol. 3 at 4. After receiving these decisions, each beneficiary appointed a personal representative to appeal the decisions on their behalf. J.A. vol. 2 at 231; J.A. vol. 3 at 101; see J.A. vol. 1. at 61 (cover letter stating that appointment is attached). The beneficiaries’ appointed representative then proceeded on their behalf through the four-step administrative appeals process.15 In their administrative appeals, the beneficiaries argued that the proper starting point for the gap-filling calculation should have been the supplier’s actual charges submitted for the dates of service in question, not the dramatically lower $49-per-cartridge figure drawn from Alcresta’s HCPCS application. See J.A. vol. 1 at 205; J.A. vol. 2 at 221; J.A. vol. 3 at 213–14. At the culmination of the administrative appeals process, the Medicare Appeals Council affirmed the initial payment decisions in each case, concluding that no additional Medicare Part B reimbursement should be allowed. J.A. vol. 1 at 11; J.A. vol. 2 at 11; J.A. vol. 3 at 12. The Council provided materially identical explanations for its decisions rejecting each of the three beneficiaries’ requests for additional payment. See J.A. vol. 1 at 3–11; J.A. vol. 2 at 3– 15 See J.A. vol. 1 at 62 (requesting redetermination), 64–66 (unfavorable decision on redetermination), 175 (requesting reconsideration), 13 (stating that the decision on reconsideration was unfavorable), 213–14 (requesting ALJ review), 30–36 (unfavorable ALJ decision), 22 (requesting Council review), 3–11 (unfavorable Council decision); J.A. vol. 2 at 91 (requesting redetermination), 65–66 (unfavorable decision on redetermination), 61 (requesting reconsideration), 4 (stating that the decision on reconsideration was unfavorable), 228–229 (requesting ALJ review), 31–37 (unfavorable ALJ decision), 12 (requesting Council review), 3–11 (unfavorable Council decision); J.A. vol. 3 at 99 (requesting redetermination), 78–80 (unfavorable decision on redetermination), 74 (requesting reconsideration), 4 (stating that the decision on reconsideration was unfavorable), 221–22 (requesting ALJ review), 36–46 (unfavorable ALJ decision), 13 (requesting Council review), 3–12 (unfavorable Council decision). 16 11; J.A. vol. 3 at 3–12. In each decision, the Council concluded that “the record indicates that the MAC used an amount—either an MSRP or the wholesale cost—that was not the appropriate price information for purposes of calculating the gap-filled payment amount for the [Relizorb] cartridges at issue in accordance with the regulations.” J.A. vol. 1 at 8 (citing 42 C.F.R. § 414.112(c)(1)); J.A. vol. 2 at 8 (same); J.A. vol. 3 at 8–9 (same). However, the Council nonetheless declined to order additional payment because it concluded that the beneficiaries had “not provided sufficient evidence” to “show that the retail price for a [Relizorb] cartridge was more than the $49 amount used by the MAC in this case.” J.A. vol. 1 at 8; J.A. vol. 2 at 9; J.A. vol. 3 at 9. The Council explained that the beneficiary, “as the party seeking additional payment for the claim, has the burden to establish that the payment amount was incorrect,” and it concluded that the beneficiaries had “not provided sufficient evidence to meet that burden under the circumstances of this case.” J.A. vol. 1 at 8–9 (citing 42 U.S.C. § 1395l(e) (Section 1833(e) of the Social Security Act) and 42 C.F.R. § 424.5(a)(6)); J.A. vol. 2 at 9 (same); J.A. vol. 3 at 9 (same). In each decision, the Council acknowledged that the beneficiaries had put forward some relevant evidence in support of their requests for additional reimbursement payments, but it concluded that this evidence was not sufficiently “verifiable” to support its use in the gap-filling calculation. J.A. vol. 1 at 9–11; J.A. vol. 2 at 9–11; J.A. vol. 3 at 9–11. Among the evidence that the Council considered and rejected as insufficient were a set of supplier invoices showing payments from suppliers to Alcresta of $46.79 per cartridge in 2016, gradually increasing to $66 per cartridge in 2019, and a set of data showing payments from private payors to suppliers, ranging from less than $44.43 to as much as $448.14 per cartridge. J.A. vol. 1 at 9–10; J.A. vol. 2 at 10; J.A. vol. 3 at 10. The Council noted that the beneficiaries had not explained the source of the 17 claims data and had not relied on or referenced the supplier data in support of their request for the Council’s review. J.A. vol. 1 at 10; J.A. vol. 2 at 10; J.A. vol. 3 at 10–11. The Plaintiffs then filed this action, in which they challenge the Council’s payment determination as unlawful on four grounds. First