Fox Insurance Co. v. Centers for Medicare and Medicaid Services

The Medicare Act established a federally subsidized health insurance program for the elderly and disabled. The Centers for Medicare and Medicaid Services (CMS) (defendant) administered Medicare. Medicare Part D provided prescription drug coverage to those who voluntarily enrolled in the program through plans offered by private insurers. In 2006, CMS awarded Fox Insurance Company, Inc. (Fox) (plaintiff) a contract to operate Medicare prescription drug plans. The contract was renewed several times. In 2010, CMS started receiving complaints that Fox improperly delayed or denied access to critical cancer, seizure, and HIV medications. In February, CMS contacted Fox. Fox replied that it had corrected the system error that caused the problem. After further investigation, CMS temporarily suspended Fox’s ability to market its plan and enroll new beneficiaries. In early March, CMS conducted a three-day audit of Fox. The audit revealed that Fox improperly denied coverage for critical medications, forcing patients to forego or postpone life-saving treatments like chemotherapy. Fox also improperly forced patients to undergo invasive medical procedures before covering certain medications. Fox’s compliance officer admitted that the company had no compliance plans or procedures in place. On March 8, Fox detailed the remedial steps it had allegedly taken to correct various issues. However, Fox did not undertake many of those actions until after the audit started. On March 9, CMS immediately terminated Fox’s contract, finding that any delay would pose an imminent and serious threat to enrollees’ health. Fox unsuccessfully challenged CMS’s decision through administrative channels. Fox then sued CMS in federal district court. The district court granted summary judgment in CMS’s favor on the merits. Fox appealed.