United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued September 9, 2019 Decided December 3, 2019

No. 18-5299

IPSEN BIOPHARMACEUTICALS, INC.,

APPELLANT

v.

ALEX MICHAEL AZAR, II, IN HIS OFFICIAL CAPACITY AS 

SECRETARY OF THE UNITED STATES DEPARTMENT OF HEALTH 

AND HUMAN SERVICES, ET AL.,

APPELLEES

Appeal from the United States District Court

for the District of Columbia

(No. 1:16-cv-02372)

Jeffrey S. Bucholtz argued the cause for appellant. With 

him on the briefs were John D. Shakow and Nikesh Jindal.

Ruthanne M. Deutsch, Hyland Hunt, R. Craig Kitchen, 

Daryl L. Joseffer, and Michael B. Schon were on the brief for

amicus curiae the Chamber of Commerce of the United States 

of America in support of plaintiff-appellant.

Matthew J. Glover, Attorney, U.S. Department of Justice, 

argued the cause for appellees. With him on the brief was Abby 

C. Wright, Attorney. Alisa B. Klein, Attorney, and R. Craig 

Lawrence, Assistant U.S. Attorney, entered appearances.
2

Before: HENDERSON, MILLETT and WILKINS, Circuit 

Judges.

Opinion for the Court filed by Circuit Judge HENDERSON.

KAREN LECRAFT HENDERSON, Circuit Judge: 

This appeal arises out of Ipsen Biopharmaceuticals, Inc.’s

challenge to the designation by Centers for Medicare and 

Medicaid Services (CMS)—a part of the United States 

Department of Health and Human Services—of the pricing 

information Ipsen must report to CMS for a drug that it 

manufactures. The sole issue on appeal is whether a series of 

letters CMS sent Ipsen constitutes final agency action under the 

Administrative Procedure Act (APA), 5 U.S.C. § 704. As 

explained infra, we believe Ipsen has plausibly argued that 

receipt of the letters significantly increased its risk of a 

statutory civil penalty being levied for “knowingly provid[ing] 

false information.” 42 U.S.C. § 1396r-8(b)(3)(C)(ii). This 

increased risk is a “legal consequence” sufficient to make the 

agency action final under the second prong of the test 

enunciated by the United States Supreme Court in Bennett v. 

Spear, 520 U.S. 154, 177–78 (1997). Accordingly, we reverse

the judgment of the district court and remand the case for 

further proceedings.

I. BACKGROUND

Ipsen’s appeal implicates the details of the self-reporting 

scheme contained in the Medicaid drug-rebate program. 

Medicaid is a co-operative federal and state program, the 

federal side of which is administered by CMS. See 42 U.S.C. § 

1396 et seq. In order to participate in the Medicaid program, a

drug manufacturer is obligated to enter into an agreement with 

CMS to provide rebates to states that elect to pay for outpatient 

prescription drugs. The rebate a manufacturer must provide is 
3

calculated in two parts. Both parts use the average price (the 

AMP) that the manufacturer charges a wholesaler for the drug. 

The base rebate is the greater of 1.) the difference between the 

drug’s AMP and the lowest price offered during the most recent 

past quarter and 2.) 23.1 % of the AMP. The additional rebate, 

paid on top of the base rebate, is calculated by subtracting the 

inflation-adjusted AMP for each dosage form and strength of 

the drug when it was first sold to wholesalers (described by 

Ipsen as the “base date AMP”) from the AMP for the same 

dosage and strength during the quarter in which the rebate is 

calculated. The manufacturer calculates the total per-unit 

rebate and reports it to the participating states, which then use 

the information to prepare invoices sent to and paid by the 

manufacturer. The statute provides for civil penalties for 

manufacturers that “knowingly provide[] false information” 

related to the rebate calculation, including a civil penalty of up 

to $100,000 for each item of false information. See 42 U.S.C. 

§ 1396r–8(b)(3)(B)–(C). Judicial review of a rebate calculation 

is limited to review of enforcement proceedings brought by 

CMS. See 42 U.S.C. § 1320a–7a(e); see generally 42 U.S.C. § 

1396r–8.

Ipsen first introduced Somatuline Depot Injection in 2007 

and, accordingly, calculated a base date AMP for the drug at 

that time. In 2014 Ipsen sought and obtained a new FDA 

approval for Somatuline ED, an outpatient prescription drug, it 

asserts, that is entitled to calculation of its own base date 

AMP. 1Ipsen by letter notified CMS to this effect. Before 

receiving a response, Ipsen reported the new base date AMP to 

CMS. CMS responded to Ipsen’s letter several months later, 

indicating that Ipsen was not entitled to calculate a new base 

1 The record does not allow us to determine the precise impact of 

Ipsen’s preferred calculation. Presumably, Ipsen’s base date AMP is 

higher, resulting in a lower additional rebate owed to the states.
4

date AMP. The letter further instructed Ipsen that “the baseline 

data for [Somatuline ED] must be changed to reflect the 

original baseline data of Somatuline Depot.” Ipsen sent a 

second letter, iterating its position and requesting a meeting. 

The letter prompted a response by CMS’s Director of the 

Division of Pharmacy repeating CMS’s view that a new base 

date AMP was not warranted because Somatuline ED had 

received FDA approval under a supplemental new drug 

application number based on the new drug application number 

of Somatuline Depot. The Director’s letter expressly stated that 

it was not “a final agency action or even an initial determination 

on a reimbursement claim.” 

Ipsen responded to the second letter by filing suit. CMS 

moved for summary judgment, arguing that it had taken no 

final agency action to trigger judicial review under the APA. 

See 5 U.S.C. § 704 (“Agency action made reviewable by statute 

and final agency action for which there is no other adequate 

remedy in a court are subject to judicial review.”). The district 

court agreed and granted summary judgment to CMS. Ipsen 

timely appeals pursuant to 28 U.S.C. § 1291. 

II. ANALYSIS

We review the district court’s grant of summary judgment 

de novo. See Grunewald v. Jarvis, 776 F.3d 893, 898 (D.C. Cir. 

2015). The APA permits judicial review of “final agency 

action” only. See 5 U.S.C. § 704. “Agency actions are final if 

two independent conditions are met: (1) the action marks the 

consummation of the agency’s decisionmaking process . . . and 

(2) it is an action by which rights or obligations have been 

determined, or from which legal consequences will flow.” 

Soundboard Ass’n v. FTC, 888 F.3d 1261, 1267 (D.C. Cir. 

2018) (internal alterations and quotation marks omitted) 
5

(quoting Bennett v. Spear, 520 U.S. 154, 177–78 (1997)).2 The 

parties agree that only the second condition is in dispute. 

The Supreme Court has indicated that determining

whether “legal consequences will flow” from an agency action 

is a “pragmatic” inquiry. U.S. Army Corps of Eng’rs v. Hawkes

Co., 136 S. Ct. 1807, 1815 (2016) (citing Abbott Labs. v. 

Gardner, 387 U.S. 136, 149 (1967)). We recently clarified that 

“[i]n characterizing the inquiry as pragmatic, we do not take 

the Court to be encouraging some sort of common-sense 

approach” but rather “[w]e take it as counseling lower courts 

to make Bennett prong-two determinations based on the 

concrete consequences an agency action has or does not have 

as a result of the specific statutes and regulations that govern 

it.” Cal. Comtys. Against Toxics v. EPA, 934 F.3d 627, 637 

(D.C. Cir. 2019).

In Sackett v. EPA, the Supreme Court delineated one way 

an agency action could interact with a statutory scheme to 

cause a legal consequence. 566 U.S. 120 (2012). There, the 

Court considered whether an EPA administrative compliance 

order issued to landowners was a “final agency action.” The 

compliance order recited the EPA’s decision that the 

landowners’ property contained wetlands and that the 

landowners had violated the Clean Water Act, 33 U.S.C. 

§ 1311, by discharging fill material into those wetlands. It 

commanded the landowners to “immediately . . . undertake 

activities to restore the Site.” Sackett, 566 U.S. at 125. The 

order was not self-executing—the EPA had to initiate a 

separate enforcement action in order to penalize the 

2 Although Ipsen argues that the Bennett conditions are properly 

viewed as disjunctive, not conjunctive, it acknowledges that our

Circuit precedent settles this issue. See Soundboard, 888 F.3d at 

1267 (Bennett conditions are conjunctive).
6

landowners for violating the statute. Nonetheless, the Court 

held that “legal consequences . . . flow[ed]” from the order 

because, inter alia, issuance of the order meant that the 

landowners faced higher penalties in a future enforcement 

proceeding than they would have had the EPA not issued the 

order. Id. at 126.

We recently applied Sackett in Rhea Lana, Inc. v. DOL, a 

case in which the Department of Labor twice notified a 

company that one of its practices violated the Fair Labor 

Standards Act. 824 F.3d 1023 (D.C. Cir. 2016). The second 

letter noted that the statute provided for a civil penalty for any 

“repeated or willful violations of” the statute and warned that 

“[i]f at any time in the future [the company] is found to have 

violated [the relevant provisions], it will be subject to such 

penalties.” Id. at 1026. We held that the warning met Sackett’s 

articulation of “legal consequences” resulting therefrom. Id. at 

1032.

Ipsen analogizes the consequences of the CMS letters it 

received to the consequences of the agency communications in 

Sackett and Rhea Lana. It emphasizes that the Medicaid statute

provides for penalties against manufacturers that “knowingly 

provide[] false information.” See 42 U.S.C. § 1396r8(b)(3)(C)(ii). Ipsen argues that “legal consequences . . . 

flow[ed]” from the letters because they increased the 

probability that in the future it could be found to have

“knowingly” supplied false information.

We agree. Within the framework of the “specific” 

statutory and regulatory scheme involved here, California 

Communities, 934 F.3d at 637, and in view of the character of 

the agency action at issue, that increased risk of prosecution 

and penalties constitutes a “legal consequence” under Bennett

for four reasons.
7

First, the letter refutes any colorable argument Ipsen might 

have in an enforcement action that it was acting without 

knowledge of CMS’s position. Under the relevant statute, 

“knowingly” means that “a person, with respect to an act, has 

actual knowledge of the act, acts in deliberate ignorance of the 

act, or acts in reckless disregard of the act, and no proof of 

specific intent to defraud is required.” 42 C.F.R. § 1003.110. 

Here, CMS takes the position that the CMS letter would be 

“relevant evidence” in a future determination regarding

whether Ipsen would be subject to enhanced penalties for a 

“knowing” or “willful” violation of the Social Security Act. See 

Tr. of Oral Arg. at 41–47, Ipsen Biopharmaceuticals v. Azar,

No. 18-5299 (D.C. Cir. Sept. 9, 2019).

3 CMS also conceded 

that it has brought an enforcement action against another drug 

manufacturer under 42 U.S.C. § 1396r-8(b)(3)(C)(ii) for 

“knowingly provid[ing] false information” when that company 

allegedly “misrepresented the Average Sales Price of at least 

one of its products to CMS.” Govt 9/13/2019 Ltr at 1-2. 

Perhaps CMS believed its position would not constitute

“legal consequences” under Bennett because of our dictum in 

Soundboard, indicating that an FTC staff attorney letter, even 

if “could be [used as] evidence of willfulness,” would not 

satisfy Bennett’s second prong. See 888 F.3d at 1273. But this 

case differs from Soundboard in one critical respect. In 

3 CMS draws our attention to the fact that in district court Ipsen 

argued that it could not be found to have “knowingly provid[ed] false 

information,” notwithstanding receipt of the letters because “its 

position reflects . . . a reasonable, good-faith interpretation on a novel 

issue.” This statement, CMS suggests, undermines Ipsen’s argument 

that the letters produced legal consequences because it concedes that 

the letters did not automatically subject Ipsen to civil penalties.

Although Ipsen conceded that the letters would not automatically 

result in penalties, it nonetheless maintains that the letters “increased 

its risk of facing penalties.” 
8

Soundboard, the FTC staff attorney letter did not meet 

Bennett’s first prong because it was not the consummation of 

the agency’s decision-making. Id. at 1269-71. As a result, the 

Soundboard letter was not an authoritative statement of the 

agency’s views. The Supreme Court has indicated that such 

informal advice is insufficient, as a matter of law, to establish 

a “knowing” or “willful” violation of a statute or regulation 

pursuant to a theory that the regulated party should have been 

“warned away from the view that it took.” See Safeco Ins. Co. 

of America v. Burr, 551 U.S. 47, 69-70 & n.19 (2007). 

Following Safeco, we have held, in the False Claims Act 

context, that “knowledge” of falsity was not established where 

the government could point to “informal guidance” only, not

“the necessary ‘authoritative guidance,’” as evidence “to warn 

a regulated defendant away from an otherwise reasonable 

interpretation it adopted.” U.S. ex rel. Purcell v. MWI Corp., 

807 F.3d 281, 289 (D.C. Cir. 2015) (quoting Safeco, 551 U.S. 

at 70 & n.19). At the same time, we noted that even if a 

regulated party adopts a “reasonable” interpretation of an 

“ambiguous” statute, it can nonetheless be deemed liable for

knowingly making a false statement if it “had been warned 

away from that interpretation” by authoritative agency 

guidance. Purcell, 807 F.3d at 288.

When further pressed about the permissible use of the 

letter at oral argument, CMS asserted that using the letter as 

“relevant evidence” against Ipsen did not result in a legal 

consequence because, unlike in Rhea Lana, there is no 

“regulation on the books,” see 824 F.3d at 18 n.3, that 

announces that any future action contrary to the agency’s 

position will be deemed willful by the agency. Tr. of Oral Arg.

at 54–58. But that is a distinction without a difference. In Rhea 

Lana, we held that, if the regulation was “capable of a reading 

rendering the letter a stand-alone trigger for willfulness 

penalties,” it “render[ed] Rhea Lana a candidate for civil 
9

penalties.” Therefore the agency’s letter was final agency 

action because it “establish[ed] legal consequences.” 824 F.3d 

at 21. The outcome in Rhea Lana turned on the legal 

consequence of the letter in that case and CMS cannot avoid 

the legal consequence of the letter in this case by arguing that 

here the legal consequence does not count because it results 

from the application of settled caselaw rather than from a 

published regulation. The CMS letter could be potentially 

dispositive proof in an enforcement action, consistent with 

Safeco and US ex rel Purcell, because “knowingly” means

“that a person, with respect to an act, has actual knowledge of 

the act, acts in deliberate ignorance of the act, or acts in reckless 

disregard of the act, and no proof of specific intent to defraud 

is required,” and that is of legal consequence under Bennett. 

See 42 C.F.R. § 1003.110.

The consequences Ipsen claims to face in the future are not 

as certain as those in Rhea Lana or Sackett. We in Rhea Lana 

and the Supreme Court in Sackett accepted that the agency 

action alone was enough to subject the regulated parties to 

additional penalties in the event of an enforcement action. By 

contrast, Ipsen claims that the letters increase its risk of 

incurring penalties in a future enforcement proceeding—

granted, a less certain consequence. Nonetheless, Ipsen does 

claim that its receipt of the letters will be a factor, if not the 

factor, in assessing penalties against it in a future enforcement 

proceeding. CMS conceded as much before us. See Tr. of Oral 

Arg. at 42 (“Well, again, the letter here would be evidence, or 

could be used as evidence in that adjudication . . . .”). 

Second, the self-reporting nature of the regulatory scheme 

gave the letter’s command immediate and direct legal 

force. The regulatory scheme requires Ipsen to self-report 

pricing information to CMS each quarter as a condition of its 

participation in the Medicaid Rebate program. See 42 C.F.R. 
10

§ 447.510; see also 42 U.S.C. § 1396r-8(b)(3). As soon as the 

letter issued, each and every one of the repeat submissions 

exposed Ipsen to potential civil penalties for each quarter. See 

42 U.S.C. § 1396r-8(b)(3)(C) (a manufacturer “is subject to a 

civil penalty in an amount not to exceed $100,000 for each item 

of false information”). No further or intervening agency action 

is needed for the penalty risk and amount to start 

accumulating—the trigger is the issuance of the letter.

Third, as CMS itself acknowledges, there is no further 

agency action for Ipsen to invoke or to exhaust to plead its 

cause. Appeal is unavailable and there is no avenue for Ipsen 

to affirmatively seek relief. As CMS concedes, the agency’s 

decisionmaking process is at the end. CMS has made its final 

decision and has told Ipsen that its rebate computations “must 

be changed,” as the prior rebate amount is the only one that 

Ipsen (in CMS’s view) can lawfully implement. The only 

potential next step is an agency enforcement action. See Tr. of 

Oral Arg. at 36–37 (Counsel for CMS: “[S]ometimes in selfreporting regimes it may be difficult for a regulated entity, like 

Ipsen, to get a final agency action short of CMS telling them 

please change this.”). 

As a result, the only thing standing between Ipsen and

CMS’s prosecution of it for financial penalties, and a possible 

expulsion from participation in the Medicaid Rebate program, 

see 42 U.S.C. § 1396r-8(b)(3)(C), (4)(B)(i), is the agency’s 

exercise of prosecutorial discretion.4 The regulatory scheme 

thus leaves Ipsen in a quandary: Either accept CMS’s 

interpretation to avert civil penalties and the risk of exclusion 

4 See Tr. of Oral Arg. at 41 (Q: “[I]s there anything standing between 

[Ipsen] * * * and an enforcement action, other than prosecutorial 

discretion?” CMS Counsel: “No[.]”).
11

from the Medicaid Rebate program or proceed in defiance of 

that risk, with penalties growing each quarter.

Fourth, agencies often communicate their interpretations of 

governing statutory and regulatory obligations or prohibitions 

to interested parties in letters and they do so without taking 

final agency action. In this case, however, the nature of the 

agency’s letter went beyond simply announcing its 

interpretation of relevant statutory and regulatory 

language. The letter expressly applied CMS’s interpretation of 

the governing law to the specific facts of Ipsen’s case. See J.A. 

45 (stating that the new factors Ipsen highlighted “do not meet 

the criteria for the establishment of new base date AMPs”).

5

In 

that respect, the agency action at issue here closely resembles 

an individual adjudication, which is a well-recognized form of 

final agency action. See Southwest Airlines Co. v. United States 

Dep’t of Transp., 832 F.3d 270, 276 (D.C. Cir. 2016).

For the foregoing reasons, the judgment of the district 

court is reversed and the case is remanded for further 

proceedings consistent with this opinion. 

So ordered.

5 See also Tr. of Oral Arg. at 52 (CMS counsel stating that the letter 

“laid out our view of the law” and how it applied “to the facts 

provided”).