Supreme Court Denies Certiorari in MAO’s Double Damages Case


On April 15, 2013, the United States Supreme Court denied a petition for certiorari brought by GlaxoSmithKline (“Glaxo”) seeking review of a Third Circuit decision in favor of Humana Medical Plan (“Humana”), as a Medicare Advantage Organization (“MAO”). In re: Avandia Mktg., 685 F.3d 353 (3d Cir. 2012),cert. denied sub nom. GlaxoSmithKline v. Humana Medical Plans, Inc., No. 12-690, 569 U.S. ___ (Apr. 15, 2013). The Third Circuit decided in June 2012 that the Humana MAO had a federal cause of action to recover from Glaxo double damages for treatment of injuries suffered by Humana’s enrollees resulting from Glaxo’s drug, Avandia.

In reversing the District Court, the Third Circuit held that the MAO, as a secondary payer, had a private cause of action for double damages under the Medicare Secondary Payer Act (“MSP,” see 42 U.S.C. § 1395y(b)(3)(A)). The court interpreted the MSP to provide to MAOs the same right to recover double damages as the Medicare Trust Fund would have against Glaxo, the primary payer under the statute.

Glaxo’s argument was that the double-damages remedy provided under the MSP was not available to a private MAO. Glaxo contended that Part C of the Medicare Act, which created MAOs and which included its own secondary payer provision for MAOs (the “MASP”), governed MAOs and did not provide for double-damages recovery.

The Third Circuit rejected Glaxo’s argument, finding that, even though the MASP did not provide for such recovery, it did not preclude an MAO from asserting a private cause of action for double damages under the MSP. The court stated that denying an MAO the same rights to recovery provided to Medicare “would undermine the very purpose of the MA program and that Congress did not intend” that result. In re: Avandia, 685 F.3d at 363. The Third Circuit elaborated that MAOs’ recovery from primary payers results in savings that benefit enrollees not covered by traditional Medicare. Further, ensuring that MAOs have the leverage of potential double damages recovery from primary payers advances “the goals of the MA program.” Id. at 365.

The Third Circuit held that the applicable MSP language “unambiguously” provided Humana with a private cause of action. Id. At the same time, the court noted that it may be counterintuitive to describe any provision of the Medicare Act as being clear. The court recognized that the Medicare Act “has been described as among ‘the most completely impenetrable texts within human experience.’” Id. Thus, the court went on to say that, even if the MSP language was unclear -- that is, “silent or ambiguous” -- the court would then, under the Chevron deference rule, be required to give deference to the CMS regulations which, in “plain language,” provided for MAOs to enjoy the same rights to double damages as the Medicare Trust Fund. Id. at 366. Under either analysis, MAOs would have the right to sue for double damages under the MSP. The Supreme Court’s denial of Glaxo’s petition for certiorari reinforces the reasoning and holding of the Third Circuit.

For more information about this case, please contact Edward M. Waller, Jr.


DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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