Court Opinion

ID: 9900470
Source: CourtListenerOpinion
Date Created: 2023-11-18 22:13:32.120656+00
Date Added: 2024-06-11T09:21:05.763737
License: Public Domain

480                   April 26, 2023               No. 212

         IN THE COURT OF APPEALS OF THE
                 STATE OF OREGON

           SAREPTA THERAPEUTICS, INC.,
                     Petitioner,
                          v.
           OREGON HEALTH AUTHORITY,
                    Respondent.
               Oregon Health Authority
                      A171320

  Argued and submitted March 12, 2021.
   Paul W. Conable argued the cause for petitioner. Also on
the briefs were Stephanie Grant and Tonkon Torp LLP; and
Jeffrey Handwerker, Paige Sharpe, Allison Gardner, and
Arnold & Porter Kaye Scholer LLP, Washington, D.C.
   Patricia G. Rincon, Assistant Attorney General, argued
the cause for respondent. Also on the brief were Ellen F.
Rosenblum, Attorney General, and Benjamin Gutman,
Solicitor General.
  Before Ortega, Presiding Judge, and Shorr, Judge, and
Powers, Judge.
  ORTEGA, P. J.
   Motion to dismiss as moot denied. OAR 410-121-0040(3)
(Jan 1, 2018) held valid.
Cite as 325 Or App 480 (2023)                                              481

           ORTEGA, P. J.
         Petitioner challenges, under ORS 183.400, the
Oregon Health Authority’s (OHA’s) adoption of OAR 410-
121-0040(3) (Jan 1, 2018), as it applies to the prescription
drug Exondys 51 (Exondys).1 Petitioner is the manufacturer
of Exondys, which is used in the treatment of Duchenne
muscular dystrophy for patients with specific gene muta-
tions. Under OAR 410-121-0040(3), OHA incorporates by
reference its Oregon Medicaid Pharmaceutical Services
Prior Authorization Criteria (PA Criteria). The PA Criteria
includes prior authorization criteria that a patient must
meet for Exondys to be covered under the Oregon Health
Plan. Petitioner asserts that OHA exceeded its authority in
adopting the PA Criteria, as it applies to Exondys, because
it violates drug-coverage requirements under Title XIX of
the federal Social Security Act (the Medicaid Act). OHA
asserts that this rule challenge is moot because OAR 410-
121-0040(3) has been amended, that petitioner’s argument
is not reviewable as a rule challenge under ORS 183.400,
and that, on the merits, OHA was authorized to adopt the
PA Criteria. We deny OHA’s motion to dismiss and hold OAR
410-121-0040(3) valid.
      OHA’S MOTION TO DISMISS FOR MOOTNESS
         Before discussing the merits of petitioner’s rule
challenge, we first address OHA’s renewed motion to dismiss
the petition as moot. The Appellate Commissioner denied
by order OHA’s motion to dismiss, concluding that it was
appropriate for us to exercise our discretion to review the
case under ORS 14.175, because “[t]he challenged policy or
practice, or similar acts, are likely to evade judicial review
in the future.” OHA renews its motion to dismiss in its
answering brief. As explained below, we deny the renewed
motion.

    1
      The rule challenged by petitioner has since been amended by permanent
and temporary rule many times. For purposes of this opinion, unless otherwise
noted, when we cite OAR 410-121-0040(3), we are referring only to the version of
the rule that incorporated the Oregon Medicaid Pharmaceutical Services Prior
Authorization Criteria (PA Criteria) published on January 1, 2018; likewise,
unless otherwise noted, when we refer to the PA Criteria, we are referring to the
January 1, 2018, version.
482       Sarepta Therapeutics v. Oregon Health Authority

         We recognize that the version of the rule challenged
by petitioner has expired and been amended. Petitioner
stated in its petition that it was challenging “the Prior
Authorization Criteria as first published on September 1,
2017, and as republished or amended.” Petitioner attached
to its petition, as the copy of the rule being challenged, the
PA Criteria for Exondys dated August 21, 2017, and the PA
Criteria for Exondys dated January 1, 2018. The history of
OAR 410-121-0040 provides that the temporary amendment
that went into effect on January 1, 2018, which incorpo-
rated the January 1, 2018, PA Criteria, was replaced by a
temporary rule that went into effect on February 8, 2018,
which was in turn replaced by a temporary rule that went
into effect on May 2, 2018, which was in turn replaced by a
permanent rule amendment that went into effect June 29,
2018, and so on. In fact, OAR 410-121-0040 has been
amended by temporary and permanent rule amendments
39 times between January 1, 2018 and April 1, 2023. The
rule is permanently amended every six months to update
the reference to the latest version of the PA Criteria, and
each permanent amendment is promptly amended by one
or more temporary amendments for additional PA Criteria
updates before the next permanent amendment is made.
         Here, petitioner specifically challenges the PA
Criteria as it applies to Exondys because, petitioner alleges,
it requires that a patient must meet two criteria that are
in addition to the FDA approved use for Exondys. In the
January 1, 2018, PA Criteria, those two criteria provided
that the patient must have been (1) “on a stable dose of corti-
costeroid for at least 6 months,” and (2) evaluated for baseline
function “using a validated tool such as the 6-minute walk
test or North Star Ambulatory Assessment.” PA Criteria,
75-76 (Jan 1, 2018). Those criteria remained unchanged
until July 1, 2020, when OHA added to the first criterion “or
have documented contraindication to steroids.” PA Criteria,
116 (July 1, 2020). With that amendment, the criteria for
Exondys have remained unchanged up to the current ver-
sion, which is dated April 1, 2023. PA Criteria, 128-29
(Apr 1, 2023).
         Based on the foregoing, we agree with OHA
that petitioner’s challenge is moot. The specific rule that
Cite as 325 Or App 480 (2023)                                   483

petitioner challenges has been replaced and the specific cri-
teria challenged by petitioner in the PA Criteria have been
amended. See Joint Council of Teamsters #37 v. BOLI, 168
Or App 398, 412, 11 P3d 247, rev den, 331 Or 429 (2000)
(holding that “the validity of an expired or superseded rule
is not ‘kept alive’ for mootness purposes by the fact that the
superseded rule may have some continuing effect on the
application or validity of a current rule”). Petitioner argues,
however, that we should exercise our discretion and address
its rule challenge under the exception to mootness provided
in ORS 14.175. See Couey v. Atkins, 357 Or 460, 522, 355 P3d
866 (2015) (ORS 14.175 “leaves it to the court to determine
whether it is appropriate to adjudicate an otherwise moot
case under the circumstances of each case.”). We conclude
that it is appropriate to exercise our discretion in this case
and review petitioner’s challenge based on that exception.
         ORS 14.175 provides:
       “In any action in which a party alleges that an act, policy
   or practice of a public body, as defined in ORS 174.109, or of
   any officer, employee or agent of a public body, as defined in
   ORS 174.109, is unconstitutional or is otherwise contrary
   to law, the party may continue to prosecute the action and
   the court may issue a judgment on the validity of the chal-
   lenged act, policy or practice even though the specific act,
   policy or practice giving rise to the action no longer has a
   practical effect on the party if the court determines that:
      “(1)   The party had standing to commence the action;
       “(2) The act challenged by the party is capable of rep-
   etition, or the policy or practice challenged by the party
   continues in effect; and
      “(3) The challenged policy or practice, or similar acts,
   are likely to evade judicial review in the future.”
         First, it is undisputed that Sarepta has standing
to bring this challenge. Second, we agree with Sarepta and
the Appellate Commissioner that the challenged policy “con-
tinues in effect.” Here, Sarepta challenges OHA’s authority
to include the two prior authorization criteria at all. It is
immaterial to the merits of Sarepta’s challenge that OHA
added “or have documented contraindication to steroids” to
the first criteria. Although the rule has been amended 39
484       Sarepta Therapeutics v. Oregon Health Authority

times since January 1, 2018, the policy requiring a patient
to meet the two prior authorization criteria for Exondys
remains intact. Third, we conclude that a challenge to
OHA’s authority to include those criteria in the PA Criteria
for Exondys is likely to evade review due to the length of the
judicial process. The rule is permanently amended every six
months, and regularly amended on a temporary basis even
more often. See Couey, 357 Or at 482 (“ORS 14.175 applies
to types or categories of cases in which it is ‘likely’ that such
challenges will avoid judicial review.”).
          We are not persuaded by OHA’s assertion that the
challenge will not likely evade review because a petitioner
can simply file an amended petition for review with each
additional rule amendment. Because of the frequency of per-
manent amendments, as well as the uncertainty of when
a superseding temporary amendment may issue, requiring
a petitioner to proceed in such a manner would be unduly
burdensome. We also are not persuaded by OHA’s argument
that the challenge is not likely to evade review because an
individual patient who is denied coverage for Exondys could
challenge the OHA’s authority for the rule in a contested
case proceeding. A patient challenging a denial has a sig-
nificantly different interest than petitioner, as the manu-
facturer of the drug, has in this case. Requiring petitioner
to forgo its facial challenge in the hope that a patient might
raise similar issues on a denial of coverage for Exondys is not
required for the “likely to evade review” criteria. See Eastern
Oregon Mining Association v. DEQ, 360 Or 10, 17, 376 P3d
288 (2016) (“[T]he focus of ORS 14.175(3) is whether the gen-
eral type or category of challenge at issue is likely to evade
being fully litigated—including by appellate courts—in the
future, not whether a specific case might avoid becoming
moot through expedited consideration or some other mecha-
nism[.]”); State v. Preston-Mittasch, 319 Or App 507, 509-10,
510 P3d 931, rev den, 370 Or 212 (2022) (“Although not every
single instance involving this challenged act would neces-
sarily evade review, our standard is that a challenged act be
‘likely’ to evade review[.]”).
        Finally, we conclude that we should exercise
our discretion to consider petitioner’s rule challenge. In
Cite as 325 Or App 480 (2023)                              485

determining whether to exercise our discretion, we consider,
among other things, “the adversarial nature of the parties’
interests, the effect of the decision on both the parties and
others not before the court, judicial economy, and the extent
of the public importance of the issues presented.” Eastern
Oregon Mining Assoc. v. DEQ, 285 Or App 821, 830, 398
P3d 449 (2017), aff’d, 365 Or 313, 445 P3d 251 (2019), cert
den, ___ US ___, 141 S Ct 111, 207 L Ed 2d 1052 (2020).
Here, the parties’ interests remain adverse, the issue raised
in this case—the authority of OHA to include any criterion
in the PA Criteria beyond just the FDA indicated use—has
broader relevance than just this case or even just this cov-
ered prescription drug and has great importance to many
people to whom the PA Criteria apply. In sum, we deny
OHA’s renewed motion to dismiss.
           PETITIONER’S RULE CHALLENGE
         Turning to the merits of petitioner’s challenge,
which challenges only the January 1, 2018, version of
the rule, we first describe our scope of review under ORS
183.400. We may declare a rule invalid only if we deter-
mine that the rule “[v]iolates constitutional provisions,”
“[e]xceeds the statutory authority of the agency,” or “[w]as
adopted without compliance with applicable rulemaking
procedures.” ORS 183.400(4). Petitioner contends only that
OHA exceeded its statutory authority, and, specifically, peti-
tioner contends that OHA exceeded its authority because
the rule conflicts with federal law, and not because OHA’s
action fell outside of the scope of authority delegated to it by
the Oregon Legislative Assembly. In that circumstance, the
question we must answer is “whether the substance of the
action, though within the scope of the agency’s or official’s
general authority, departed from a legal standard expressed
or implied in the particular statute being administered, or
contravened some other applicable statute.” Nay v. Dept. of
Human Services, 360 Or 668, 680-81, 385 P3d 1001 (2016)
(quoting Planned Parenthood Assn. v. Dept. of Human Res.,
297 Or 562, 565, 687 P2d 785 (1984)). In conducting that
review, we are limited to considering solely “the face of the
rule and the laws pertinent to it.” AFSCME Local 2623 v.
Dept. of Corrections, 315 Or 74, 79, 843 P2d 409 (1992).
486       Sarepta Therapeutics v. Oregon Health Authority

         With that limited scope of review in mind, we set
out the federal and state statutory background for OHA’s
rule, which involves Oregon Medicaid coverage for prescrip-
tion drugs. “Medicaid ‘is a cooperative endeavor in which
the Federal Government provides financial assistance to
participating States to aid them in furnishing health care to
needy persons.’ ” Nay, 360 Or at 670 (quoting Harris v. McRae,
448 US 297, 308, 100 S Ct 2671, 65 L Ed 2d 784 (1980)).
“The [federal Medicaid] Act gives the States substantial
discretion to choose the proper mix of amount, scope, and
duration limitations on coverage, as long as care and ser-
vices are provided in ‘the best interests of the recipients.’ ”
Alexander v. Choate, 469 US 287, 303, 105 S Ct 712, 83 L Ed
2d 661 (1985) (quoting 42 USC § 1396a(a)(19)). Congress
requires participating states to provide assistance in a
number of general categories of medical services for most
people who receive services under the state’s plan, 42 USC
§ 1396a(a)(10)(A), and states may also elect to provide listed
optional services, one of which is prescription drug coverage,
42 USC § 1396d(a)(12).
           Once a state elects to provide Medicaid services,
the state must act in compliance with the Medicaid Act and
applicable federal regulations. See, e.g., Alexander, 469 US at
289 n 1. The state plan must “include reasonable standards
* * * for determining eligibility for and the extent of medical
assistance under the plan which * * * are consistent with the
objectives of [the Medicaid Act].” 42 USC § 1396a(a)(17). A
state plan must also “provide such methods and procedures
relating to the utilization of, and the payment for, care and
services available under the plan * * * as may be necessary to
safeguard against unnecessary utilization of such care and
services and to assure that payments are consistent with effi-
ciency, economy, and quality of care[.]” 42 USC § 1396a(a)(30).
Under 42 CFR section 440.230, a state plan “must spec-
ify the amount, duration, and scope of each service that it
provides” and “[e]ach service must be sufficient in amount,
duration, and scope to reasonably achieve its purpose.” 42
CFR § 440.230(a), (b). In addition, that regulation provides
that “[t]he agency may place appropriate limits on a service
based on such criteria as medical necessity or on utilization
control procedures.” 42 CFR § 440.230(d).
Cite as 325 Or App 480 (2023)                              487

         Petitioner’s challenge in this case specifically falls
under the federal Medicaid Drug Rebate Program (MDRP)
in the Medicaid Act. “In response to increasing Medicaid
expenditures for prescription drugs, Congress enacted a
cost-saving measure in 1990 that requires drug compa-
nies to pay rebates to States on their Medicaid purchases.”
Pharm. Research & Mfrs. of America v. Walsh, 538 US 644,
649, 1243 S Ct 1855, 155 L Ed 2d 889 (2003) (Walsh) (foot-
note omitted). The Supreme Court in Walsh explained that
the MDRP, has two basic parts. “First, it imposed a gen-
eral requirement that, in order to qualify for Medicaid pay-
ments, drug companies must enter into agreements either
with the Secretary [of Health and Human Services] or, if
authorized by the Secretary, with individual States, to pro-
vide rebates on their Medicaid sales of outpatient prescrip-
tion drugs.” Id. at 652. “Second, once a drug manufacturer
enters into a rebate agreement, the law requires the State
to provide coverage for that drug under its plan unless the
State complies with one of the exclusion or restriction provi-
sions in the Medicaid Act.” Id. (citing 42 USC § 1396r-8(d));
see also 42 USC § 1396a(a)(54) (“A State plan for medical
assistance must * * * in the case of a State plan that provides
medical assistance for covered outpatient drugs (as defined
in section 1396r-8(k) of this title), comply with the applicable
requirements of section 1396r-8 of this title[.]”).
        The permissible restrictions for a state providing
drug coverage are set out in 42 USC section 1396r-8(d)(1):
      “(d) Limitations on coverage of drugs
      “(1)   Permissible restrictions
      “(A) A State may subject to prior authorization any
   covered outpatient drug. Any such prior authorization pro-
   gram shall comply with the requirements of paragraph (5).
      “(B) A State may exclude or otherwise restrict cover-
   age of a covered outpatient drug if—
      “(i) the prescribed use is not for a medically accepted
   indication (as defined in subsection (k)(6));
      “(ii) the drug is contained in the list referred to in
   paragraph (2);
488       Sarepta Therapeutics v. Oregon Health Authority

       “(iii) the drug is subject to such restrictions pursu-
   ant to an agreement between a manufacturer and a State
   authorized by the Secretary under subsection (a)(1) or in
   effect pursuant to subsection (a)(4); or
       “(iv) the State has excluded coverage of the drug from
   its formulary established in accordance with paragraph
   (4).”
In turn, 42 USC section 1396r-8(d)(5), governing a state
prior authorization program, provides:
       “A State plan under this subchapter may require, as a
   condition of coverage or payment for a covered outpatient
   drug for which Federal financial participation is available
   in accordance with this section, with respect to drugs dis-
   pensed on or after July 1, 1991, the approval of the drug
   before its dispensing for any medically accepted indication
   (as defined in subsection (k)(6)) only if the system providing
   for such approval-
      “(A) provides response by telephone or other telecom-
   munication device within 24 hours of a request for prior
   authorization; and
       “(B) except with respect to the drugs on the list referred
   to in paragraph (2), provides for the dispensing of at least
   72-hour supply of a covered outpatient prescription drug in
   an emergency situation (as defined by the Secretary).”
          Turning to Oregon law, the “[Oregon Health Plan
(OHP)] is Oregon’s Medicaid program, which provides
health care assistance to qualifying residents.” Hasner v.
Western Oregon Advanced Health, 289 Or App 207, 208, 410
P3d 373 (2017); see also OAR 410-120-000(171) (defining
“Oregon Health Plan”). OHA is the state agency responsi-
ble for administering and developing policies for the provi-
sion of publicly funded medical care, including under OHP,
ORS 413.032(1), and has authority to “adopt rules necessary
for the administration of the laws that the Oregon Health
Authority is charged with administering,” ORS 413.042.
OHA is also authorized to establish prior authorization for
prescription drugs. ORS 414.325(5)(a)(B) (“Notwithstanding
subsections (1) to (4) of this section and except as provided in
paragraph (b) of this subsection, the authority is authorized
to: * * * Require prior authorization of payment for drugs
the authority has determined should be limited to those
Cite as 325 Or App 480 (2023)                                               489

conditions generally recognized as appropriate by the medi-
cal profession.”); see also ORS 414.361(3) (providing that the
Pharmacy and Therapeutics Committee shall recommend
to OHA “all utilization controls, prior authorization require-
ments or other conditions for the coverage of a drug”).
         OHA has promulgated rules according to that
authority, including OAR 410-121-0040. Under OAR 410-
121-0040(1), prescribing practitioners are required to obtain
prior authorization (PA) for the drugs covered by the rule,
using the process in OAR 410-121-0060.2 The drugs covered
by the rule are described in subsection (3):
       “The Authority may require PA for individual drugs and
    categories of drugs to ensure that the drugs prescribed are
    indicated for conditions funded by OHP and consistent with
    the Prioritized List of Health Services and its correspond-
    ing treatment guidelines (see OAR 410-141-0480). The
    drugs and categories of drugs that the Authority requires
    PA for this purpose are found in the Oregon Medicaid
    Fee-for-Service Prior Authorization Approval Criteria (PA
    Criteria guide) dated January 1, 2018, adopted and incor-
    porated by reference and found at: http://www.oregon.gov/
    OHA/healthplan/pages/pharmacy-policy.aspx.”
OAR 410-121-0040(3).
         The PA Criteria provides in its general information
section that OHA “may require PA for individual drugs and
categories of drugs to ensure that the drugs prescribed are
indicated for conditions funded by OHP and consistent with
the Prioritized List of Health Services and its correspond-
ing treatment guidelines.” PA Criteria, 8. The PA Criteria
includes a section covering drugs used to treat Duchenne
muscular dystrophy (DMD), including Exondys (which has
     2
       “Prior Authorization (PA)” is defined as “payment authorization for speci-
fied medical services or items given by Authority staff or its contracted agencies
before providing the service. A physician referral is not a PA.” OAR 410-120-
0000(203). “Prior Authorization Program (PA)” is defined as
     “a system of determining, through a series of therapeutic and clinical proto-
     cols, which drugs require authorization before dispensing:
         “(A) OAR 410-121-0040 lists the drugs or categories of drugs requiring
     PA;
         “(B) The practitioner or practitioner’s licensed medical personnel listed
     in OAR 410-121-0060 may request a PA.”
OAR 410-121-0000(3)(hh).
490          Sarepta Therapeutics v. Oregon Health Authority

the generic name “eteplirsen”). The identified goals of the
PA for eteplirsen are to “[e]ncourage use of corticosteroids
which have demonstrated long-term efficacy” and “[r]estrict
use of eteplirsen * * * to patients with Duchenne Muscular
Dystrophy.” Id. at 75.
          To obtain approval for Exondys, the criteria set out a
series of questions. The first question asks, “Does the patient
have a diagnosis of Duchenne Muscular Dystrophy with one
of the following genetic mutations amenable to exon 51 skip-
ping: * * *?” If “Yes,” the genetic testing is to be documented
and the next question is asked; if “No,” the PA provides
“Pass to RPh.[3] Deny; medical appropriateness.” The second
question asks, “Has the patient been on a stable dose of cor-
ticosteroid for at least 6 months?” If “Yes,” the next question
is asked; if “No,” the PA provides “Pass to RPh. Deny; medi-
cal appropriateness.” The final question asks, “Has baseline
functional assessment been evaluated using a validated tool
such as the 6-minute walk test or North Star Ambulatory
Assessment?” If “Yes,” the PA provides, “Document baseline
functional assessment and approve for up to 6 months”; if
“No,” the PA provides, “Pass to RPh. Deny; medical appro-
priateness.” 4 Id. at 75-76. If the request is for a renewal of
Exondys, rather than a new prescription, the question asked
is, “Has the patient’s baseline functional status been main-
tained at or above baseline level or not declined more than
expected given the natural disease progression?” If “Yes,”
the PA provides “Approve for up to 6 months. Document
functional status.”; if “No,” the PA provides “Pass to RPh.
Deny; medical appropriateness.”
        Here, petitioner challenges only the second and third
questions for a new prescription of Exondys, arguing that
OHA did not have authority to include those requirements in
its PA Criteria. Petitioner’s argument is that, under 42 USC
section 1396r-8(d), OHA cannot deny coverage for Exondys
when prescribed for its “medically accepted indication,” i.e.,

    3
      We understand “RPh” to be an acronym for “registered pharmacist.”
    4
      As discussed above, the approval criteria for Exondys remains the same
under the January 1, 2023, PA Criteria, except that the first criterion now
includes an exception for “documented contraindication to steroids.” PA Criteria,
130 (Jan 1, 2023).
Cite as 325 Or App 480 (2023)                                                491

its FDA-approved use.5 Petitioner acknowledges that 42 USC
section 1396r-8(d)(5) allows states to establish prior authori-
zation programs, but asserts that prior authorization under
that section allows only a time-limited administration pro-
cess to ensure that the prescription is for its FDA-approved
use and not otherwise excluded from coverage based on the
permissible restrictions set out in 42 USC section 1396r-
8(d)(1)(B). Petitioner concludes that, because the PA Criteria
includes two prerequisites for coverage that are not part of
the FDA-approved use for Exondys, OHA exceeded its statu-
tory authority and the PA Criteria for Exondys is invalid.6
         On the merits, OHA argues that the PA Criteria
complies with 42 USC section 1396r-8(d)(5), because the
plain text of that section places only two limitations on a
state’s prior authorization program—a response within 24
hours and allowing the dispensing of at least a 72-hour
emergency supply of the drug—both of which requirements
are met in OAR 410-121-0060. OHA further asserts that the
general provisions of the Medicaid Act and its implementing
regulations confer broad discretion on the states to use prior
authorization criteria that are based on medical necessity
and utilization control considerations, which are not cir-
cumscribed by 42 USC section 1396r-8(d). OHA argues that
those general Medicaid provisions apply equally to covered
prescription drugs because the MDRP operates in the con-
text of the existing Medicaid framework. OHA also asserts
that the prior authorization criteria for Exondys are, on the
face of the rule, reasonable limitations based on medical
necessity and utilization control.
         Petitioner’s argument requires us to construe fed-
eral law. In doing so, “we follow the methodology prescribed
    5
      “Medically accepted indication” is defined in 42 USC section 1396r-8(k)(6)
as “any use for a covered outpatient drug which is approved under the Federal
Food, Drug, and Cosmetic Act [21 USC section 301 et seq.] or the use of which is
supported by one or more citations included or approved for inclusion in any of the
compendia described in subsection (g)(1)(B)(i).” (Brackets in original.)
    6
      We note that petitioner has also relied on certain other materials for its
argument, such as a June 27, 2018 “notice” issued by the federal Department of
Health & Human Services, Center for Medicare and Medicaid Services (CMS),
and the FDA-approved label for Exondys. Our scope of review on a direct rule
challenge under ORS 183.400 does not permit us to consider that evidence, as we
are restricted to the face of the rule and other relevant law, and, thus, we do not
consider it.
492          Sarepta Therapeutics v. Oregon Health Authority

by the federal courts.” Corp. of Presiding Bishop v. City of
West Linn, 338 Or 453, 463, 111 P3d 1123 (2005). “Federal
courts generally determine the meaning of a statute by
examining its text and structure and, if necessary, its leg-
islative history.” Id. (citing Dep’t of Rev. of Oregon v. ACF
Indus., Inc., 510 US 332, 339-46, 114 S Ct 843, 127 L Ed
2d 165 (1994)). Using that methodology, we begin “with the
‘cardinal canon’ of statutory construction: Congress ‘says in
a statute what it means and means in a statute what it says
there.’ ” Planned Parenthood v. Betlach, 727 F3d 960, 968
(9th Cir 2013) (quoting Conn. Nat’l Bank v. Germain, 503
US 249, 253-54, 112 S Ct 1146, 117 L Ed 2d 391 (1992)). In
examining the text, we “ ‘giv[e] the words used their ordi-
nary meaning, unless Congress has directed us to do other-
wise.’ ” Id. at 968 (quoting Moskal v. United States, 498 US
103, 108, 111 S Ct 461, 112 L Ed 2d 449 (1990) (bracket in
Betlach)).
        Under 42 USC section 1396r-8(d)(1), the Medicaid
Act sets out the “permissible restrictions” on coverage of
drugs under MDRP:
      “(d) Limitations on coverage of drugs
      “(1)    Permissible restrictions
      “(A) A State may subject to prior authorization any
   covered outpatient drug. Any such prior authorization pro-
   gram shall comply with the requirements of paragraph (5).
      “(B) A State may exclude or otherwise restrict cover-
   age of a covered outpatient drug if—
      “(i) the prescribed use is not for a medically accepted
   indication (as defined in subsection (k)(6));
      “(ii) the drug is contained in the list referred to in
   paragraph (2);
       “(iii) the drug is subject to such restrictions pursu-
   ant to an agreement between a manufacturer and a State
   authorized by the Secretary under subsection (a)(1) or in
   effect pursuant to subsection (a)(4); or
       “(iv) the State has excluded coverage of the drug from
   its formulary established in accordance with paragraph
   (4).”
Cite as 325 Or App 480 (2023)                                    493

The permissible restriction of subjecting “any covered outpa-
tient drug” (emphasis added) to a prior authorization program
means just that: it may be applied to any or all covered outpa-
tient drugs. See, e.g., Betlach, 727 F3d at 969 (in a federal stat-
ute “any means all” unless Congress limited the breadth of the
word in the statute). That broad permissible restriction is set out
in its own subparagraph—42 USC section 1396r-8(d)(1)(A)—
which is separate from the subparagraph that sets out the
bases on which a state can “exclude or otherwise restrict
coverage” of a drug—42 USC section 1396r-8(d)(1)(B). The
text of the statute does not link those two types of permis-
sible restrictions—that is, the statute does not suggest
that a prior authorization denial may only be based on one
of the permissible restrictions set out in 42 USC section
1396r-8(d)(1)(B). If Congress had meant to so narrowly limit
the scope of a prior authorization program it could have easily
done so in this statutory section, but it did not, and we will
not add words to the statute to include that limitation.
         However, applying the words chosen by Congress,
we also conclude that a state can only exclude or restrict
coverage of a covered drug, on a drug-wide basis—that is,
regardless of the circumstances of the individual patient—
based on the restrictions in 42 USC section 1396r-8(d)(1)(B).
That reading is informed by the wording and structure of the
statute, which provides that “[a] State may exclude or other-
wise restrict coverage of a covered outpatient drug if” and
then lists permissible restrictions that address drug cover-
age on a drug-wide basis: excluding or restricting coverage
for a particular use because it is not a “medically accepted
indication,” excluding or restricting coverage because it
appears on the statutory list, restricting coverage based on
manufacturer agreement, or excluding coverage through a
formulary. Further, the statutory list provides that “[t]he
following drugs or classes of drugs, or their medical uses,
may be excluded from coverage or otherwise restricted,”
and then primarily describes drugs when used for particu-
lar purposes, suggesting that “otherwise restricted” means
restrictions related to particular uses.7 That is, the statute

   7
       The subsection setting out the statutory list provides:
         “(2) List of drugs subject to restriction
494          Sarepta Therapeutics v. Oregon Health Authority

describes exclusions from coverage entirely or restriction
of uses for an otherwise covered drug that applies to all
patients; in general, there is no allowance for the drug to
be used by anyone if it is excluded from coverage or if the
particular use is restricted.8 But, as stated above, we do not
read that list to be the exclusive types of controls that a state
could use with respect to covered outpatient drugs. That
the prior authorization program may include controls other
than exclusions from coverage and restrictions of use under
42 USC section 1396r-8(d)(1)(B) is further informed by 42
USC section 1396r-8(d)(1)(A), by only requiring that such a
program “shall comply with the requirements of paragraph
(5).”
       The text of 42 USC section 1396r-8(d)(5) provides
that a state can “require, as a condition of coverage or

         “The following drugs or classes of drugs, or their medical uses, may be
     excluded from coverage or otherwise restricted:
         “(A) Agents when used for anorexia, weight loss, or weight gain.
         “(B) Agents when used to promote fertility.
         “(C) Agents when used for cosmetic purposes or hair growth.
         “(D) Agents when used for the symptomatic relief of cough and colds.
         “(E) Prescription vitamins and mineral products, except prenatal vita-
     mins and fluoride preparations.
         “(F) Nonprescription drugs, except, in the case of pregnant women
     when recommended in accordance with the Guideline referred to in sec-
     tion 1396d(bb)(2)(A) of this title, agents approved by the Food and Drug
     Administration under the over-the-counter monograph process for purposes
     of promoting, and when used to promote, tobacco cessation.
         “(G) Covered outpatient drugs which the manufacturer seeks to require
     as a condition of sale that associated tests or monitoring services be pur-
     chased exclusively from the manufacturer or its designee.
         “(H) Agents when used for the treatment of sexual or erectile dysfunc-
     tion, unless such agents are used to treat a condition, other than sexual or
     erectile dysfunction, for which the agents have been approved by the Food
     and Drug Administration.”
     8
       See also Merriam-Webster Unabridged Dictionary, http://unabridged.merriam-
webster.com/unabridged/exclude (accessed Apr 20, 2023) (“exclude” as a transi-
tive verb means “to shut out : restrain or hinder the entrance of”; “to bar from
participation, enjoyment, consideration, or inclusion * * * <that request must
be excluded from further consideration>”; “to prevent or refuse to tolerate the
occurrence, use, or existence of”); id., http://unabridged.merriam-webster.com/
unabridged/restrict (accessed Apr 20, 2023) (“restrict” as a transitive verb means
“to set bounds or limits to : hold within bounds : such as * * * to check, bound, or
decrease the range, scope, or incidence of : set what is to be included or embraced
by : bar or carefully govern addition or increment to”).
Cite as 325 Or App 480 (2023)                              495

payment for a covered outpatient drug * * * the approval of
the drug before its dispensing for any medically accepted
indication.” (Emphasis added.) That text does not indi-
cate that a state may never deny coverage for an individ-
ual patient if the drug is being dispensed for any medically
accepted indication. Rather, it provides that the state can
require its approval of the drug “as a condition of coverage”
for a medically accepted indication. See Merriam-Webster
Unabridged Dictionary, http://unabridged.merriam-webster.
com/unabridged/condition (accessed Apr 20, 2023) (“[C]ondi-
tion” is “something established or agreed upon as a requisite
to doing or taking effect of something else.”). To provide that
an approval is required for something necessarily implies
that a denial is a potential outcome. The only statutory lim-
itations placed on a state’s prior authorization program are
that the state must provide a 24-hour response and allow
coverage for at least a 72-hour supply of a drug for emer-
gency situations. See Pharm. Research & Mfrs. of America
v. Concannon, 249 F3d 66, 75 (1st Cir 2001), aff’d on other
grounds sub nom, Pharm. Research & Mfrs. of America v.
Walsh, 538 US 644, 123 S Ct 1855, 155 L Ed 2d 889 (2003)
(observing that “[t]he statute sets forth only two limitations
on a state’s use of prior authorization”); see also Pharm.
Research & Mfrs. of America v. Meadows, 304 F3d 1197, 1207
(11th Cir 2002), cert den, 538 US 1056 (2003) (“[T]he text of
the Medicaid statute contains only two specific limitations
on prior authorization: a response within 24 hours and the
availability of an emergency 72 hour supply of the drug.”).
Those specific limitations do not circumscribe what controls
a state might use in its prior authorization program under
the authority granted to states in 42 USC section 1396r-
8(d)(1)(A). See, e.g., Betlach, 727 F3d at 969 (“We must give
effect, if possible, to every word of a statute.” (Internal quo-
tation marks and ellipsis omitted.)).
         Considering the broader context of the Medicaid
Act, we also do not find support for petitioner’s argument
that no controls may be included in a prior authorization
program other than the drug-wide exclusions or restric-
tions allowed by 42 USC section 1396r-8(d)(1)(B). See, e.g.,
Betlach, 727 F3d at 971 (stating that “a section of a stat-
ute should not be read in isolation from the context of the
496       Sarepta Therapeutics v. Oregon Health Authority

whole Act” (internal quotation marks omitted)). As set out
above, with regard to a state’s Medicaid plan, the state must
“include reasonable standards * * * for determining eligibil-
ity for and the extent of medical assistance under the plan
which * * * are consistent with the objectives of this [act].”
42 USC § 1396a(a)(17). A state plan must also “provide such
methods and procedures relating to the utilization of, and
the payment for, care and services available under the plan
* * * as may be necessary to safeguard against unnecessary
utilization of such care and services and to assure that pay-
ments are consistent with efficiency, economy, and quality
of care[.]” 42 USC § 1396a(a)(30). The U. S. Supreme Court
has stated that the Medicaid Act “confers broad discretion
on the States to adopt standards for determining the extent
of medical assistance, requiring only that such standards be
‘reasonable’ and ‘consistent with the objectives’ of the Act.”
Beal v. Doe, 432 US 438, 444, 97 S Ct 2366, 53 L Ed 2d 464
(1977); see also Walsh, 538 US at 665 (“[T]he Medicaid Act
gives the States substantial discretion to choose the proper
mix of amount, scope, and duration limitations on coverage,
as long as care and services are provided in the best inter-
est of the recipients.” (Internal quotation marks and citation
omitted.)). The Court has also explained that prior autho-
rization may be used to serve Medicaid-related purposes,
which includes to reduce Medicaid costs. Walsh, 538 US at
664 (plurality); see also id. at 684 (O’Connor, J., dissenting)
(stating that prior authorization may serve a Medicaid pur-
pose such as “safeguarding against unnecessary utilization
and assuring that payments are consistent with efficiency,
economy and quality of care. A State accordingly may impose
prior authorization to reduce Medicaid costs.” (Internal quo-
tation marks and citation omitted.)).
         Further, 42 CFR section 440, subpart B, sets out
regulations that apply to “all services.” 42 CFR § 440.200(b)
(“The requirements and limits of this subpart apply for all
services defined in subpart A of this part.”). Coverage of
prescription drugs is such a “service.” 42 CFR § 440.120(a)
(in subpart A, defining “prescribed drugs”); see also 42 CFR
§ 440.1 (providing that subpart A implements, among others,
section 1905(a) of the Medicare Act, which is 42 USC sec-
tion 1396d(a), which sets out “[s]ervices included in the term
Cite as 325 Or App 480 (2023)                                 497

‘medical assistance’); see also 42 USC § 1396d(a)(12) (pro-
viding that “[t]he term ‘medical assistance’ means payment
of part or all of the cost of the following care and services
or the care and services themselves, or both * * * for indi-
viduals [meeting the eligibility requirement]— * * * (12) pre-
scribed drugs”). In those regulations, a state plan “must
specify the amount, duration, and scope of each service that
it provides” and “[e]ach service must be sufficient in amount,
duration, and scope to reasonably achieve its purpose.” 42
CFR § 440.230(a), (b). In addition, that rule provides that
“[t]he agency may place appropriate limits on a service based
on such criteria as medical necessity or on utilization control
procedures.” 42 CFR § 440.230(d). Under those sections, a
state can adopt reasonable standards for a service sufficient
to achieve the purpose of the Medicaid Act and can include
appropriate limits on a service based on medical necessity
or utilization control. Those regulations specifically apply
to coverage of prescribed drugs, and no exceptions are set
out for drugs in the rebate program, contrary to petitioner’s
assertion at oral argument.
        Finally, we consider the legislative history the par-
ties have provided. Petitioner cites to a House Report from
the Committee on the Budget that accompanied House
Resolution (HR) 5835, which included the amendment to
the Medicaid Act enacting the MDRP. See Omnibus Budget
Reconciliation Act of 1990, Pub Law 101-508, title IV, 104
Stat 1388 (1990). That report provides, in part, with respect
to the MDRP:
       “States that elect to offer prescription drug coverage
   under their Medicaid programs would be required to cover
   all of the drugs of any manufacturer entering into and
   complying with such an agreement with the Secretary.
   This requirement would take effect April 1, 1991. As under
   current law, States would have the option of imposing prior
   authorization requirements with respect to covered prescrip-
   tion drugs in order to safeguard against unnecessary utiliza-
   tion and assure that payments are consistent with efficiency,
   economy, and quality of care. However, the Committee
   does not intend that States establish or implement prior
   authorization controls that have the effect of preventing
   competent physicians from prescribing in accordance with
   their medical judgment. This would defeat the intent of the
498        Sarepta Therapeutics v. Oregon Health Authority

   Committee bill in prohibiting States from excluding cov-
   erage of prescription drugs of manufacturers with agree-
   ments—i.e., assuring access by Medicaid beneficiaries to
   prescription drugs where medically necessary.
      “* * * * *
       “The Committee emphasizes that the bill is framed to
   achieve significant Medicaid savings with the minimum
   possible amount of disruption of current program arrange-
   ments. The bill would not require therapeutic substitution
   or in any other way alter in any way the current relation-
   ships between Medicaid beneficiaries and their physicians
   or their pharmacists. It would not alter the relationship
   between physicians and pharmacists. Nor would it alter the
   current payment arrangements between State Medicaid
   programs and pharmacists. Finally, the bill would not
   affect any authority States have under current law to impose
   prior authorization controls on prescription drugs.”
HR Rep No 101-881, 101st Cong, 2d Sess, reprinted in 1990
USCCAN 2017, 2110, 1990 WL 200617 (emphases added).
         Contrary to petitioner’s argument, that report
confirms that the MDRP did not change the law on prior
authorization; it stated that states may impose prior autho-
rization requirements to “safeguard against unnecessary
utilization” and assure that “payments are consistent with
* * * quality of care,” which is consistent with the broader
Medicaid Act and implementing federal regulations dis-
cussed above. The U. S. Supreme Court has explained that,
prior to the enactment of the MDRP, states “employed ‘prior
authorization programs’ that required approval by a state
agency to qualify a doctor’s prescription for reimburse-
ment. These programs were not specifically governed by
any federal law or regulations, but rather were made part
of the State Medicaid plans and approved by the Secretary
because they aided in controlling Medicaid costs.” Walsh,
538 US at 651-52 (citations omitted). The Court then noted
that “Congress effectively ratified the Secretary’s practice
of approving state plans containing prior authorization
requirements when it created [the MDRP].” Id.
        As the report notes, prior authorization is not
intended to allow controls that have “the effect of preventing
competent physicians from prescribing in accordance with
Cite as 325 Or App 480 (2023)                                               499

their medical judgment” (emphasis added), because “[t]his
would defeat the intent of the Committee bill in prohibit-
ing States from excluding coverage of prescription drugs of
manufacturers with agreements—i.e., assuring access by
Medicaid beneficiaries to prescription drugs where medi-
cally necessary.” That intent is embodied in 42 USC section
1396r-8(d)(1)(B), as discussed above, but does not indicate
that no other controls can be used in a state’s prior authori-
zation program. See Paleski v. State Dept. of Health Services,
144 Cal App 4th 713, 735, 51 Cal Rptr 3d 28 (2006) (after
reviewing the House Report, stating that “according to
Medicaid’s legislative history, state programs like Medi-Cal
must strike a careful balance between the deference due a
treating physician’s decision to prescribe a particular drug
and the implementation of utilization controls, including
prior authorization criteria, which ensure that prescriptions
are appropriate and medically necessary”).
         We also are not persuaded by the case law cited by
petitioner to support its argument that the Medicaid Act pre-
vents OHA from adopting any prior authorization controls
other than the exclusions and restrictions listed in 42 USC
section 1396r-8(d)(1)(B). Petitioner cites to three federal dis-
trict court cases from Florida, Georgia, and Louisiana, that
it asserts supports its construction. In those cases, however,
the courts were called on to determine if the state could
exclude coverage of a drug using a prior authorization pro-
gram and determined that a state could not. Our reading
of the Medicaid statute is not contrary to the ultimate hold-
ings in those cases.9
    9
      Having reviewed the federal district court opinions, we conclude that they
either are not contrary to our analysis of the Medicaid Act and regulations or
are unpersuasive, because the court did not engage in statutory construction.
See Edmonds v. Levine, 417 F Supp 2d 1323 (SD Fla 2006) (addressing a state
policy to exclude certain medically accepted indications for a drug through its
prior authorization program, and concluding that it could not exclude coverage
except as provided in 42 USC section 1396r-8(d)(1)(B)); see also K-V Pharm. Co. v.
Cook, 2014 WL 11833266, at *3 (ND Ga Apr 7, 2014), abrogated on other grounds
by Armstrong v. Exceptional Child Center, Inc., 575 US 320, 135 S Ct 1378, 191 L
Ed 2d 471 (2015) (in addressing the state’s prior authorization program, which
prefers a compounded drug, which is not a covered outpatient drug, over the drug
Makena, a covered outpatient drug, the court concluded that “[c]onditioning
reimbursement for a drug upon the unavailability or inability to use the non-
FDA approved compound is not coverage” and, relying on Edmonds, stating that
“the Medicaid Act does not authorize a state to use a prior authorization program
500          Sarepta Therapeutics v. Oregon Health Authority

         Turning back to OHA’s prior authorization program,
as discussed above, we agree with petitioner to the extent
that, when what is at issue is the exclusion or restriction of
coverage for a drug, on a drug-wide basis, 42 USC section
1396r-8(d)(1)(B) provides the only bases for that exclusion or
restriction. We disagree with petitioner, however, that that
is what OHA has done in the January 1, 2018, PA Criteria
for Exondys.
         OHA covers Exondys for use in treatment of DMD
with genetic mutations amenable to exon 51 skipping. That
criterion is a drug-wide restriction on the use of Exondys
and would be subject to the limitations in 42 USC section
1396r-8(d)(1)(B). Petitioner does not argue that that cov-
erage is more restrictive than the FDA-approved use and,
thus, it would comply with that statutory section.
         The remaining criteria, for a new prescription, are
that a patient must have been on a stable dose of corticoste-
roids for six months and have taken a baseline functional
assessment using a validated tool.10 We conclude that neither
criterion, on the face of the rule, is an exclusion or restriction
of coverage within the meaning of 42 USC section 1396r-
8(d)(1)(B). Taking the second criterion first—the baseline
functional assessment—it does not in any way exclude or
restrict coverage for Exondys as a new prescription. That
criterion does not require a patient to be ambulatory, as
asserted by petitioner; it only requires the patient to take a
to deny coverage for a covered drug”); In re Vioxx Products Liability Litigation,
MDL No 1657, 2010 WL 2649513, at *10, *13-14 (ED La June 29, 2010) (address-
ing a state claim “that had it known that Vioxx presented cardiovascular risks
it would not have approved reimbursement under the State’s Medicaid program,”
and concluding that the state could not have denied coverage for Vioxx while it
was on the market because Louisiana law did not provide a mechanism under
which the state could deny coverage of Vioxx during that time).
     Petitioner also cites to an Arkansas appellate court decision. We also find that
decision unpersuasive, because the court did not engage in statutory construction
of the Medicaid Act. Arkansas Dept. of Human Services v. Sarepta Therapeutics,
Inc., 2021 Ark App 330, 2021 WL 4186665 (Ark App 2021) (addressing a claim
where the state denied coverage of Exondys for a patient based on an agency
rule that “[a]ll services must be medically necessary,” the court stated without
engaging in statutory construction that “[p]rior authorization is a time-limited,
administrative process for ensuring that a doctor has prescribed the covered out-
patient drug for a medically accepted indication”).
     10
        As explained above, since July 2020, the PA Criteria have included in this
criterion “or have documented contraindication to steroids.”
Cite as 325 Or App 480 (2023)                                                501

baseline functional assessment. On the face of the rule, that
assessment is used solely for comparison purposes to eval-
uate whether continued coverage of Exondys is medically
appropriate under the renewal criterion—a criterion that
petitioner does not challenge. At most, that criterion could
minimally delay coverage until an assessment is completed,
but it does not exclude or restrict coverage of Exondys.
          Returning to the first criterion—six months on a
stable dose of corticosteroids—we also conclude that it does
not on its face exclude or restrict coverage of Exondys on a
drug-wide basis. That criterion, in a particular case, could
delay coverage for up to six months if the individual patient
had not started such treatment before seeking coverage of
Exondys, but it is not an exclusion or restriction under 42
USC section 1396r-8(d)(1)(B), as we understand that sec-
tion. It is a patient-specific criterion and does not, on its
face, exclude or restrict coverage of Exondys for its indicated
use—treatment of patients diagnosed with Duchenne mus-
cular dystrophy amenable to exon 51 skipping. And, in this
facial rule challenge, we are not permitted to use hypotheti-
cal individual facts as a basis on which to invalidate a rule.11
See, e.g., AFSCME Local 2632, 315 Or at 79 (“Numerous
individual fact situations can arise under any rule, but
judicial review of the rule as applied to each of those situa-
tions is reserved to other forums.”). We are not persuaded by
petitioner’s argument that the criteria used by OHA are an
impermissible exclusion or restriction of coverage under 42
USC section 1396r-8(d)(1)(B).
         We also note that petitioner does not assert that the
PA Criteria for Exondys do not otherwise conform to other
parts of the Medicaid Act or to the regulations that allow
for “appropriate limits” based on medical necessity or uti-
lization control. The stated goals, on the face of the rule,
appear to be generally consistent with those requirements,
although we do not decide that issue as it is not currently

    11
       To the extent this PA Criteria could, in a particular case, result in a com-
plete denial of coverage for Exondys, such a possibility is beyond the scope of a
facial rule challenge, and we therefore decline to address it. And, in all events,
we would decline to address it here under our discretion to address moot cases
because the current PA Criteria allows an exception for a “documented contra-
indication to steroids.”
502       Sarepta Therapeutics v. Oregon Health Authority

before us. Moreover, our scope of review does not permit us
to look beyond the face of the rule to address what appears
to be largely a fact-based issue.
         Our limited scope of review does not permit us to
do more here. The Oregon Supreme Court has cautioned
that our scope of review on a facial rule challenge must
remain limited and cannot extend to any documents beyond
the text of the rule and applicable statutory provisions.
Wolf v. Oregon Lottery Commission, 344 Or 345, 355, 182
P3d 180 (2008) (“The record on review * * * consists of two
things only: the wording of the rule itself (read in context)
and the statutory provisions authorizing the rule.”); see also
Walter v. Oregon Board of Education, 301 Or App 516, 532,
457 P3d 288 (2019) (“[I]n this rule challenge, there is no evi-
dentiary record.” (Emphasis in original.)). Given our narrow
scope of review, we cannot examine the documents cited by
petitioner, including the FDA approval for Exondys, or con-
sider potential fact scenarios under which the PA Criteria
might exclude or restrict coverage for a medically indicated
use. Nor can we look behind the face of the rule to consider
whether the criteria, in fact, are appropriately based on
medical necessity and utilization controls. We do not suggest
by our holding in this facial rule challenge that petitioner,
or others, could not in the future seek relief under another
procedure that permits consideration of such information.
         Motion to dismiss as moot denied. OAR 410-121-
0040(3) (Jan 1, 2018) held valid.