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Judge Dismisses ACLA's PAMA Lawsuit

NEW YORK (360Dx) – Citing a "lack of subject matter jurisdiction," a US District Court judge has dismissed the American Clinical Laboratory Association's lawsuit over the implementation of new Medicare pricing for lab tests under the Protecting Access to Medicare Act.

The lawsuit, filed last year, legally challenged the implementation of a market-based Medicare pricing framework for laboratory tests, arguing that the Centers for Medicare & Medicaid Services based market rates on flawed data that excluded 99 percent of the laboratory industry from reporting.

In response, HHS argued that the court did not have jurisdiction over the matter because the PAMA Clinical Laboratory Fee Schedule final rule is not subject to judicial review, and even if it were, ACLA has not exhausted its legal remedies.

In an opinion issued Friday afternoon, US District Court Judge Amy Berman Jackson agreed with the government's argument about jurisdiction.

"While the Court acknowledged that plaintiff's arguments on the merits raise important questions, it agrees with defendant that it cannot resolve this dispute, and it will dismiss this matter for lack of subject matter jurisdiction," Berman Jackson wrote in her opinion.

The opinion was made in response to a cross-motions before the court for summary judgements, or rulings to be made without trial. Based on her opinion, Berman Jackson dismissed the lawsuit and denied ACLA's summary judgement motion. The defendant's summary judgement motion was also denied as moot, due to the dismissal of the case.

ACLA expressed disappointment in the ruling and stated that the association and its members were continuing to review further legal options.

"While the District Court's opinion acknowledged that ACLA's 'arguments on the merits raise important questions,' the District Court refused to consider those arguments, because it erroneously concluded that Congress had stripped it of its jurisdiction to do so," ACLA President Julie Khani said in a statement. "The Court's decision that it is powerless to require HHS to comply with the statutory requirements sets a harmful precedent that allows agencies to circumvent Congress' express directions at the expense of patient care."

Khani also said that the ruling increases the need for Congressional leaders to step in and "reform and modernize" the clinical lab fee schedule.

Khani's sentiments were echoed by ACLA members.

"The court's refusal to reach the merits of these important questions makes it critical for Congress to act quickly to force CMS to comply with the law as written," Laboratory Corporation of America Chairman and CEO David King said in a statement.

King expressed deep disappointment in the verdict and stated that LabCorp is continuing to evaluate all options alongside ACLA and industry colleagues.

A Quest Diagnostics spokesman said the company was fully aligned with ACLA's statement.

The College of American Pathologists also expressed disappointment with the lawsuit outcome. 

"With the court's decision to dismiss this lawsuit, the CAP will continue its call on Congress to amend the Protecting Access to Medicare Act to protect patient access to laboratory services," CAP President R. Bruce Williams said in a statement. 

Industry analyst Ross Muken, a senior managing director and partner with investment bank Evercore ISI, suggested that while the outcome was not what the lab industry wanted, it was "largely anticipated" by the market, with an approximately 100 basis point headwind already baked into stock estimates.

He also predicts the ruling could have a silver lining for large lab companies, suggesting that hospitals considering selling their lab operations may be swayed to do so by the decision.

"We expect an uptick in M&A activity to aid volumes/shares in the near to long term," he stated in a note published today.

A CMS spokesperson said the agency is reviewing the ruling and has no comment at this time.