medicaid program and which medicaid expenditures the federal government will reimburse the decision to disapprove louisiana's medicaid save planned here has triggered efforts by the federal government to recoup over twenty six million dollars in federal medicaid funding representing expenditures at the state made that were not in its approved state plan that is why the state is pursuing this appeal even though it no longer seeks to implement the methodology and has not paid under that methodology for over six years the decision by the centers for medicare and medicaid services to disapprove the amendment in the administrators decision upholding that disapproval is not in accordance with the governing statute and regulations and should be reversed at the time that the decision was made the regulations provided that reimbursement for outpatient prescription drugs should not exceed estimated acquisition costs plus  reasonable dispensing the estimated acquisition cost was defined to mean the state medicaid agency's best estimate of the price generally and currently paid by providers for drug and when it adopted that definition c m s made very clear that it was not prescribing a preferred payment method and that states were permitted to exercise maximum flexibility in this double showing how those estimates  s used to publish periodic lee showing all the different methodologies that states used to estimate acquisition costs and to set their prescription drug reimbursements and if you look at that chart you can see that most states were reimbursing at what is known as average wholesale price minus some sort of discount or wholesale acquisition cost plus some sort of markup and even a quick glance at that chart will show that the estimates were far from uniform and varied significantly from state to state and the chart also shows that at that time louisiana had federal approval to pay average will sell price minus thirteen and a half percent for independent fermi's pharmacies an average wholesale price minus fifteen percent m s published a proposed rule that essentially said we need to get away from average wholesale price and wholesale acquisition costs because they're not reliable indicators of what pharmacies are actually paying instead c m s proposed replacing estimated actual acquisition costs with actual acquisition costs and that proposed amending its regulations to require states to provide survey data reflecting pharmacies actual or average acquisition c any time that they submitted a proposed plan amendment those were not part of the rules at the time c m s asked for comments on that proposal which was just a proposal and not a final rule meanwhile independent of what was happening at the national level louisiana medicaid had also come to the conclusion that it wanted to move away from its average wholesale price methodology and to adopt what it called average acquisition costs louisiana implemented that change in the september two thousand and twelve but as we described in the brief there was an almost immediately immediate outcry especially from small independent pharmacies that they were being reimbursed less than their costs and threatening to withdraw from the medicaid program if adjustments were not made now at that point the state medicaid agency had two choices it could have pulled back the amendment implementing average acquisition costs gone back to its average wholesale price methodology for which it had full c m s approval or it could put in a follow on amendment to make a minor adjustment to the average acquisition cost approach if it had done the former that is if it had abandoned average acquisition costs there would have been no amendment to approve no questions from c m s as to why the state was changing its methodology no disallowance and no reason to appeal to this court but instead louisiana tried to take a step that was much more in line with the evolving federal policy by making an adjustment to the average acquisition costs methodology but in doing so it appears to have triggered a much more rigorous standard of review and when that we believe was not permitted under the regulations as they existed at the time and we think the back and forth between c m s in the state medicaid agency with respect to that amendment is very telling the state was comparing its amendment to the average wholesale price methodology that had it it had been using for years until september th just two months earlier from the state's perspective it was submitting an amendment that resulted in a significant drop in pharmacy reimbursement that was much closer to what plans the actual cost of pharmacies with the minor adjustment to cover the costs of additional pharmacies who were not being reimbursed their costs under the average cost methodology c m s however was of valuating the amendment against the average acquisition cost endured that had been in place for only seven weeks and would see a mess had not even viewed or approved at the time the state submitted its adjustments under the statute and regulations in place at the time c m s should not have disapproved the plan amendment in the st instan the statute provides that states must assure that their payments are consistent with the fish and sea and economy and are sufficient to enlist in the providers to ensure access to the medicaid population so the state provided evidence m s that its payments were efficient and economic and that they were substantially less than what the state had been paying previously under its average wholesale price methodology it provided evidence to c m s that it had access concerns that is that such services would not be available to medicaid to the same extent as the rest of the population if adjustments were not made judge graves i can see you talking but i can't hear you ok cost was it turned out that the average cost had a bigger impact on many small independent pharmacies than the state had intended and it they were and so it looked to see what kind of adjustments can we make to the to the survey of thousands that would cover the costs of some of these of the smaller firms and it's admitted evidence to  about how the impact on these four pharmacies how they had not been having their costs reimbursed under average acquisition costs but they would with the one percent adjustment or the ten percent adjustment submitted because almost immediately after s b a sixty six was submit it so the service had done had been done for s b a fifty five dollars and then they were used also to was answer your question on a pay so for the survey that the state for the calculations that the state did as to how many pharmacies would have their cost covered with the adjustments under and sixty six dollars it showed that on average two thirds of pharmacies would have their costs covered and one rd of pharmacies would not have their costs covered here's to us that that falls very comfortably within that's not what the survey that's not what the information showed your honor it just showed how many would be reimbursed their costs and how many would not be reimbursed their costs and one rd of pharmacies were still not being reimbursed  there was it exactly at cost or was it a penny call correct it didn't show that but it did show that one rd would not have their costs reimbursed which is a large percentage when you're talking about insuring access to for the medicaid population and the statute does not say that the regulation at the time was just what what is generally and commonly paid and to set to set your reimbursement so that two thirds of pharmacies would get their costs covered and one dollar rd would not is certainly well within the concept of what is generally paid especially when c m s have repeatedly told states that it was a that they had maximum flexibility in determining how their estimates should be calculated now in this tried to set its reimbursement at the average wholesale price without a discount the federal government said that is not a reasonable estimate because we have evidence that shows that ninety nine percent of pharmacies are are paying less than fifteen percent of average wholesale price for their drugs and this court said in light of that evidence that the uphill the administrators determination that at that time the state's estimate was not reasonable because it said the state did not submit any evidence to the contrary at the hearing before the administrator of this case is exactly the opposite louisiana did submit evidence to the administrator as to what it what the costs were that were incurred by pharmacies how many were having their costs reimburse and how many were not having their costs reimbursed and  m s submitted nothing nothing to show that those were not the prices that were d incurred generally and currently by farms to use in the state and so not a reasonable estimate and there is no indication here that those that the prices the reimbursement methodology set by the state was not reimbursing the prices generally and currently incurred by pharmacies in in purchasing their drugs less or any questions i'll save the remainder of my time for  it please the court carolyn lopez on behalf of the government i want to start out by just talking about the framework of this court's nine hundred and ninety eight decision because there and the one thousand nine hundred and ninety eight decision interpreted in regulations that were substantive identical to the ones at issue here the court didn't say oh it's c m s is a burden to dispute the states what this court clearly held is that the regulations imposed two distinct requirements one as that yes states have clear that state it's the state's obligation to provide supporting documentation for that estimate of c m s asks and that regardless of any sort of presumptions at the beginning that it's always up to the administrator to disagree if that after years of study and public forums louisiana st submitted one rate to each of us and by submitting that rate it represented the fat rate was its best estimate and then just a few weeks later louisiana unilaterally switched to a higher rate and c m s naturally asked can you provide us the supporting documentation for why you no longer think that the that the methodology the rate methodology that you just proposed to us and have never with draw isn't right anymore and after a year and a half of back and forth so h h s did exactly what its c m s did exactly what it's supposed to do which is to give the state an opportunity to explain itself all louisiana produced was this analysis based on four pharmacies out of more than one thousand pharmacies and even today i don't hear louisiana saying that that statistically valid in any way or that it could justify an across the board rate not just for sort of you know smaller pharmacies or pharmacies of a certain type but an across the board rate forever for everybody and then yes it's true that louisiana sort of withheld these two thousand and twelve spreadsheets with that which they had apparently actually which they had when they st submitted the st plan at one thousand two hundred and fifty five dollars plan and they bizarrely waited until reconsideration to submit those and so the administrator recently found both that it was  untimely at that point because they were obligated to present it to c m s in the st instance but also that it just didn't change it didn't change the analysis because it didn't actually support the higher rate and i'm happy to sort of talk through rejected in that case that somehow the administrator wasn't applying the regulations that were in effect at the time again the regulations in effect at that time require that the estimate both be that the states best and closest provide supporting documents patient when asked the only changes in two thousand and sixteen are two which are relevant here so the st is that states instead of being able to sort of wait to see if c m s asked for documentation have to present certain types of documentation at the outset but that's just simply irrelevant here because it's always been true both in two thousand and twelve and actually still today that if c m s has questions about whatever it is  state has submitted it's allowed to ask for documentation for that and the state has to provide that documentation and when the administrator makes an finding that documentation is insufficient to meet the federal standards or to show that it's actually the closest assistant and therefore in accordance with the federal upper limits it's entitled to disapprove the play and so here it was entirely reasonable for a c m s to say listen you've told us that th and fifty five which you've never withdrawn is your best estimate please just explain to us why that's not right and you know analysis based on four pharmacies just doesn't cut it and neither as the administrator explained even assuming argue endo the that you could you know analyze those two thousand and twelve spreadsheets they don't cut it either because louisiana and submitting its original rate had understood that under an average acquisition cost methodology some individual providers are not going to be reimbursed their costs what an average methodology means indeed it as far into this as a briefing on reconsideration to  louisiana said look an average methodology means approximately half of the providers aren't going to be reimbursed for their rate so it's you know it doesn't as the administrator explained that two thousand and twelve spreadsheets don't  interrupt that original assumption that was built into that into the original rate and so it's entirely reasonable to say that you haven't shown us documentation that actually answer a question as to why the higher rate was justified and then i did also want to point out that as the administrator it explains that original rate also included this sort of help desk in which if there was a problem with individual rates for individual drugs and twelve spreadsheet don't actually address overall whether pharmacy was overcompensated under compensated exactly fairly compensated what it does is it looks at a metric of like individual drugs but it never actually the number of pharmacies that were compensated overcompensated under compensated for those individual drugs between the rate under one thousand two hundred and fifty five and the rate here so we actually have no idea whether or not those numbers change at all and  that that's clearly a sufficient record of for the administrator to conclude that reason i just didn't justify its rate hike here  and then just in terms of the the state has talked a little bit about these calls from pharmacists and as the administrator made clear here sort of receiving a number of calls in no way you know show meets the state's burden to show that actually this isn't our best estimated cost in the state has just never sort of linked to those up with any hard data that pharmacist being that that the original rate actually wasn't wasn't the best estimate of costs if i apologize with the zoom it's a little bit hard for me to tell whether there are any additional questions from the bench and there are no further questions we rest on our briefs and ask the quarter from thank you yes i'd like to just take a step back louisiana as the methodology here for which we seek approval for a short period was one of the lowest reimbursements in the country when you looked at what other states were paying based on wholesale average acquisition or average  wholesale price it was slightly higher yes up to ten percent up to ten percent on multiple source drugs which can be a penny or a fraction of a penny it was paying slightly higher than the average lower than what most other states were paying it was a very slight adjustment yet the government says up to ten percent but up to ten percent for multiple source drugs which is usually a penny or fraction of a penny and a one percent adjustment on brand name drugs it was a slight adjustment that covered the cost of slightly more pharmacies it still did not cover the cost of one dollar rd of pharmac for any particular drug on average one rd of pharmacies were not being reimbursed or us it was a that the notion that this was not efficient and economic which is what the statute requires the federal government completely disregards the concerns that the state had regarding access and it focuses on the language of your best estimate or your closest estimate yes that may be part of the standard but it's also an estimate of price is generally paid well generally paid does that mean exactly the midpoint or fifty percent generally paid is not defined by a percentage it's not defined by a survey it's not defined by anything that the federal government ever put out to say what does it mean to be generally paid now there there is case law on other types of medicaid services also subject to the efficient an economic standard where states were told that if you're not reimbursing the cost of seven dollars eighty five percent of providers that your rates are too high here louisiana have a much was reimbursing the costs on average of a much lower percentage than that it falls very comfortably within the the concept of what is rates are much too low and it raised it by one percent or fraction of a penny to say ok now we're reimbursing the costs that are generally paid that was completely appropriate and within the states purview to do certainly within the maximum flexibility that was contemplated under the regulations oh i see you took your microphone off do you have a question are you just ready to get out of  here i would also like very quickly to touch on the argument that that the state submitted the survey information showing the percentage of pharmacies that would not be reimbursed the cost was untimely it was appropriate for that for the state to submit that information on reconsideration it certainly was not purpose fully withheld the wills on reconsideration say that the party has the right to submit any evidence were relevant to the issues the issues that were identified for the hearing on consideration was whether this the state's proposed reimbursement met the statutory and regulatory standard issue was not whether the state had submitted sufficient evidence to support its estimate when the state was told on the disapproval that what it had submitted was insufficient it was it submitted additional information which was entirely appropriate under the rules for reconsideration and it should have been considered by the administrator instead of instead of dismissed we asked the court to reverse the agency's disapproval of the amendment thank you your honors thank you council that will include the arguments today and actually for this the week thank you thank you