The United States of America et al v. Regeneron Pharmaceuticals, Inc. et al

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UNITED STATES DISTRICT COURT
DISTRICT OF MASSACHUSETTS
___________________________________
)
UNITED STATES OF AMERICA, et al., 	)
ex rel. JULIANNE NUNNELLY and 	)
MATTHEW SHANKS, 	)
)
Plaintiffs, 	)
) 	Civil Action
v. 	) 	No. 20-cv-11401-PBS
)
REGENERON PHARMACEUTICALS, INC., 	)
)
Defendant. 	)
______________________________ 	)
MEMORANDUM AND ORDER
March 2, 2026
Saris, J.
INTRODUCTION
This 	litigation 	raises 	complex 	issues 	regarding 	sovereign
immunity. It stems from three separate complaints under the False
Claims Act (“FCA”), 31 U.S.C. § 3729 et seq., and state analogs of
the 	FCA: 	one 	filed 	by 	the 	United 	States; 	one 	filed 	by 	Colorado,
Georgia, Michigan, North Carolina, Texas, and Washington (the “Qui
Tam States”); and one filed by Maine, Nebraska, Ohio, Oregon, and
Wyoming (the “Non-Qui Tam States”).1 Plaintiffs seek to recover a
1 The action was initially brought by Defendant’s former employees
on behalf of the United States and the Qui Tam States, among other
states 	and 	localities. 	The 	United 	States 	and 	the 	Qui 	Tam 	States
subsequently 	intervened. 	The 	employees 	did 	not 	sue 	on 	behalf 	of
the Non-Qui Tam States, which intervened separately under Federal
Rule of Civil Procedure 24.
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portion of the reimbursements they made to physicians for sales of
Eylea, 	a 	prescription 	drug 	manufactured 	by 	Defendant 	Regeneron
Pharmaceuticals, 	Inc. 	(“Regeneron”). 	The 	United 	States 	seeks
recovery 	of 	alleged 	overpayments 	from 	Medicare 	Part 	B, 	while 	the
Qui 	Tam 	States 	and 	Non-Qui 	Tam 	States 	(together, 	the 	“State
Plaintiffs”) 	seek 	recovery 	of 	alleged 	overpayments 	from 	their
Medicaid programs.
The present dispute centers on Regeneron’s attempt to assert
contingent 	counterclaims 	for 	recoupment, 	offset, 	and 	unjust
enrichment 	related 	to 	its 	own 	alleged 	overpayments 	of 	rebates 	to
state Medicaid programs. Regeneron has raised these counterclaims
in 	its 	answer 	to 	the 	Non-Qui 	Tam 	States’ 	complaint 	and 	has 	moved
to 	amend 	its 	answer 	to 	the 	Qui 	Tam 	States’ 	complaint 	to 	do 	the
same. 	Regeneron 	has 	also 	moved 	to 	amend 	its 	answer 	to 	the 	United
States’ 	complaint 	to 	add 	similar 	counterclaims 	based 	on 	the
assertion 	that 	the 	federal 	government 	paid 	a 	lower 	portion 	of
Medicaid 	costs 	to 	states 	due 	to 	Regeneron’s 	alleged 	actions. 	Now
before 	the 	Court 	are 	Regeneron’s 	motion 	to 	amend 	its 	answers 	to
the United States’ and the Qui Tam States’ complaints and the Non-
Qui Tam States’ motion to dismiss Regeneron’s counterclaims.
The 	United 	States 	and 	the 	State 	Plaintiffs 	have 	invoked
sovereign 	immunity 	with 	respect 	to 	the 	counterclaims 	asserted 	by
Regeneron. Regeneron argues that Plaintiffs impliedly waived their
immunity 	by 	bringing 	their 	complaints 	in 	federal 	court. 	After
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hearing, the Court concludes that the State Plaintiffs have waived
their sovereign immunity but the United States has not. The Court
therefore 	DENIES 	the 	Non-Qui 	Tam 	States’ 	motion 	to 	dismiss 	(Dkt.
230) 	and 	ALLOWS 	Regeneron’s 	motion 	for 	leave 	to 	amend 	(Dkt. 	227)
with respect to the Qui Tam States but not the United States.
BACKGROUND
For 	purposes 	of 	the 	instant 	motions, 	the 	Court 	“accepts 	as
true all well-pleaded facts in the counterclaim[s]” asserted (and
proposed to be asserted) by Regeneron. Dubliner, Inc. v. E. Coast
Tavern 	Grp., 	Inc., 	706 	F. 	Supp. 	3d 	181, 	189 	(D. 	Mass. 	2023). 	The
Court 	assumes 	familiarity 	with 	its 	opinion 	denying 	Regeneron’s
motion to dismiss. See United States ex rel. Nunnelly v. Regeneron
Pharms., Inc., 780 F. Supp. 3d 336 (D. Mass. 2025).
I. 	Average Sales Price
The central issue in this litigation is whether Regeneron was
required 	to 	treat 	credit 	card 	processing 	fees 	related 	to 	Eylea
sales 	as 	price 	concessions 	under 	relevant 	regulations. 	See 	42
C.F.R. § 414.804(a)(2) (defining price concessions). Regeneron did
not treat credit card processing fees as price concessions, instead
classifying 	them 	as 	bona 	fide 	service 	fees 	(“BFSFs”). 	See 	id.
§ 414.802 (defining BFSFs); id. § 414.804(a)(2)(ii) (“[B]ona fide
service fees are not considered price concessions.”).
Because it treated credit card processing fees as BFSFs rather
than 	price 	concessions, 	Regeneron 	did 	not 	deduct 	the 	amount 	of
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those fees from the average sales price (“ASP”) of Eylea. See id.
§ 	414.804(a)(2)(i)-(ii) 	(requiring 	manufacturer 	to 	deduct 	price
concessions, 	but 	not 	BFSFs, 	when 	calculating 	the 	ASP). 	Regeneron
then 	reported 	the 	ASP 	to 	the 	Centers 	for 	Medicare 	& 	Medicaid
Services (“CMS”). Medicare Part B reimburses physicians for Eylea
based in part on the ASP, with a higher ASP resulting in a larger
reimbursement. 	Therefore, 	Regeneron’s 	decision 	to 	treat 	credit
card 	processing 	fees 	as 	BFSFs 	rather 	than 	price 	concessions
resulted 	in 	higher 	payments 	from 	the 	United 	States 	(through
Medicare 	Part 	B) 	to 	physicians. 	Similarly, 	because 	the
reimbursements 	paid 	by 	state 	Medicaid 	programs 	to 	physicians 	are
generally 	based 	on 	the 	Medicare 	Part 	B 	reimbursement 	rate, 	the
State Plaintiffs also paid an increased amount due to Regeneron’s
classification of the fees as BFSFs.
Plaintiffs 	argue 	that 	Regeneron 	should 	have 	treated 	the
credit card processing fees as price concessions. They claim that
Regeneron’s 	failure 	to 	do 	so 	violated 	the 	FCA 	and 	state 	analogs
and 	resulted 	in 	higher 	federal 	expenditures 	from 	Medicare 	Part 	B
and state expenditures from Medicaid programs.
II. 	Average Manufacturer Price
Another 	figure 	reported 	by 	Regeneron 	to 	CMS 	is 	the 	average
manufacturer price (“AMP”) of Eylea. The AMP is used to calculate
the amount of rebates owed by Regeneron to state Medicaid programs
under the Medicaid Drug Rebate Program. A higher AMP typically, if
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not 	always, 	results 	in 	a 	higher 	rebate 	amount. 	See 	42 	U.S.C.
§ 1396r-8(c)(1); 42 C.F.R. § 447.509(a).
Regeneron 	alleges 	that, 	as 	with 	the 	ASP, 	the 	AMP 	is 	not
reduced by any amount which Regeneron classifies as a BFSF. See 42
U.S.C. § 1396r-8(k)(1)(B)(II); 42 C.F.R. § 447.504(c)(14), (e)(5).
But, 	according 	to 	Regeneron, 	the 	consequences 	of 	not 	deducting 	a
fee 	from 	the 	AMP 	are 	the 	opposite 	of 	not 	deducting 	that 	fee 	from
the ASP. While a higher ASP results in a higher amount paid by the
government 	(via 	both 	Medicare 	Part 	B 	and 	Medicaid), 	Regeneron
contends that a higher AMP results in a higher amount paid by the
manufacturer (via Medicaid rebates). Therefore, because it treated
credit 	card 	processing 	fees 	as 	BFSFs, 	Regeneron 	allegedly 	paid
higher rebates to state Medicaid programs than it would have if it
had classified the fees as price concessions.
The state and federal governments share the cost of Medicaid:
the 	United 	States 	pays, 	among 	other 	things, 	a 	percentage 	of 	a
state’s 	net 	expenditure 	called 	the 	Federal 	Medical 	Assistance
Percentage 	(“FMAP”). 	See 	42 	U.S.C. 	§§ 	1396b(a)(1), 	1396d(b).
Therefore, when a higher AMP increases rebates paid to states and
thereby 	decreases 	states’ 	net 	Medicaid 	expenditures, 	the 	federal
government ends up paying a lower amount to the states.
In its counterclaims, Regeneron alleges that its treatment of
credit card processing fees as BFSFs resulted in increased rebates
to the State Plaintiffs and decreased outlays by the United States.
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Thus, 	Regeneron 	contends, 	Plaintiffs’ 	potential 	recovery 	against
it should be reduced by those benefits.
LEGAL STANDARD
“District courts apply the same legal standard to motions to
dismiss counterclaims pursuant to Fed. R. Civ. P. 12(b)(6) as they
do when reviewing motions to dismiss a complaint.” Sensitech Inc.
v. LimeStone FZE, 548 F. Supp. 3d 244, 257 (D. Mass. 2021). Under
that standard, a counterclaim must allege “a plausible entitlement
to relief.” Bell Atl. Corp. v. Twombly, 550 U.S. 544, 559 (2007).
A counterclaim “is facially plausible if, after accepting as true
all 	non-conclusory 	factual 	allegations, 	the 	court 	can 	draw 	the
reasonable inference that the counter-defendant is liable for the
misconduct alleged.” Sensitech, 548 F. Supp. 3d at 257.
A 	party 	seeking 	to 	amend 	a 	pleading 	at 	this 	stage 	of 	the
litigation 	requires 	either 	“the 	opposing 	party’s 	written 	consent
or the court’s leave.” Fed. R. Civ. P. 15(a)(2). “The court should
freely give leave when justice so requires.” Id. In the absence of
a specific reason to deny a motion to amend, “such as undue delay,
bad 	faith 	or 	dilatory 	motive 	on 	the 	part 	of 	the 	movant, 	repeated
failure 	to 	cure 	deficiencies 	by 	amendments 	previously 	allowed,
undue 	prejudice 	to 	the 	opposing 	party 	by 	virtue 	of 	allowance 	of
the 	amendment, 	[or] 	futility 	of 	amendment,” 	the 	court’s 	leave
“should, as the rules require, be ‘freely given.’” Amyndas Pharms.,
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S.A. 	v. 	Zealand 	Pharma 	A/S, 	48 	F.4th 	18, 	36 	(1st 	Cir. 	2022)
(quoting Foman v. Davis, 371 U.S. 178, 182 (1962)).
DISCUSSION
I. 	Ripeness
The 	State 	Plaintiffs 	first 	contend 	that 	Regeneron’s
counterclaims are not ripe. The State Plaintiffs do not argue that
the counterclaims are not ripe merely because they are contingent
on the Court’s adjudication of the State Plaintiffs’ claims. See,
e.g., 	Argonaut 	Ins. 	Co. 	v. 	St. 	Francis 	Med. 	Ctr., 	17 	F.4th 	1276,
1282 	(9th 	Cir. 	2021) 	(“[C]onditional 	pleadings 	are 	a 	recognized
part 	of 	federal 	practice 	. 	. 	. 	.”). 	Rather, 	the 	State 	Plaintiffs
contend that the counterclaims are not ripe because Regeneron can,
at any time, submit revised AMP calculations to CMS and request a
refund on overpaid rebates. The State Plaintiffs point out that a
manufacturer 	is 	required 	to 	report 	a 	revised 	AMP 	if 	it 	believes
that 	its 	original 	calculations 	were 	incorrect, 	see 	42 	C.F.R.
§ 447.510(b), and argue that state Medicaid programs have no power
to unilaterally refund rebates until the manufacturer submits that
report.
This argument is a square peg in a round hole. Regeneron does
not 	allege 	that 	it 	submitted 	a 	revised 	AMP 	and 	that 	the 	State
Plaintiffs 	failed 	to 	reimburse 	it. 	Rather, 	Regeneron 	argues 	that
it 	cannot 	submit 	a 	revised 	AMP 	because 	it 	does 	not 	believe 	that
its 	original 	calculation 	was 	incorrect, 	precisely 	for 	the 	reason
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at 	issue 	in 	this 	litigation, 	i.e., 	that 	Regeneron 	continues 	to
believe that a credit card processing fee is a BFSF. Moreover, to
the extent the State Plaintiffs’ argument amounts to one requesting
administrative exhaustion, Regeneron points out that the pertinent
regulations 	contain 	no 	such 	requirement: 	On 	the 	contrary, 	they
expressly contemplate that a manufacturer can report a revised AMP
“to address specific rebate adjustments . . . as required by . . .
[a] 	court 	order.” 	Id. 	§ 	447.510(b)(1)(v). 	The 	Court 	therefore
concludes 	that 	the 	counterclaims 	are 	routine 	contingent
counterclaims 	that 	are 	ripe 	to 	be 	asserted 	by 	Regeneron, 	even
though, 	as 	with 	all 	contingent 	counterclaims, 	they 	cannot 	be
adjudicated 	until 	the 	event 	that 	they 	are 	“condition[ed] 	on”
occurs. Argonaut Ins. Co., 17 F.4th at 1281 n.1.
II. 	Sovereign Immunity
The 	parties 	agree 	that 	the 	United 	States 	and 	the 	State
Plaintiffs enjoy sovereign immunity in federal court. At issue is
whether 	Plaintiffs 	have 	impliedly 	waived 	that 	immunity 	through
their “invocation of the jurisdiction” of this Court. Arecibo Cmty.
Health Care, Inc. v. Puerto Rico, 270 F.3d 17, 27 (1st Cir. 2001).
The 	Court 	concludes, 	as 	explained 	below, 	that 	the 	relevant 	legal
standard 	differs 	with 	respect 	to 	the 	federal 	government 	and 	the
states, 	and 	that 	the 	United 	States 	has 	not 	waived 	its 	sovereign
immunity but the State Plaintiffs have.
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A. 	Sovereign Immunity of the United States
Under 	Federal 	Rule 	of 	Civil 	Procedure 	13, 	a 	party 	typically
is 	required 	to 	assert 	any 	compulsory 	counterclaim, 	i.e., 	a 	claim
that 	“arises 	out 	of 	the 	transaction 	or 	occurrence 	that 	is 	the
subject 	matter 	of 	the 	opposing 	party’s 	claim.” 	Fed. 	R. 	Civ. 	P.
13(a)(1)(A). 	But 	Rule 	13(d) 	expressly 	provides 	that 	this
requirement 	“do[es] 	not 	expand 	the 	right 	to 	assert 	a
counterclaim -- or to claim a credit -- against the United States.”
Fed. 	R. 	Civ. 	P. 	13(d). 	As 	a 	result, 	even 	counterclaims 	that
ordinarily 	are 	considered 	compulsory 	may 	not 	be 	asserted 	against
the 	federal 	government 	if 	they 	are 	barred 	by 	sovereign 	immunity.
See 	6 	Wright 	& 	Miller’s 	Federal 	Practice 	& 	Procedure 	§ 	1427 	(3d
ed. 2025) (“Rule 13(d) reaffirms the general principle of sovereign
immunity by specifically stating that Rule 13 does not expand the
right of a party to sue the United States . . . .”).
Nevertheless, “[d]espite the sovereign-immunity doctrine and
the 	language 	of 	Rule 	13(d), 	when 	the 	United 	States 	institutes 	an
action, 	[a] 	defendant 	may 	assert 	by 	way 	of 	recoupment 	any 	claim
arising out of the same transaction or occurrence as the original
claim in order to reduce or defeat the government’s recovery.” Id.
(emphasis added); see also 3 Moore’s Federal Practice § 13.50[2][c]
(3d 	ed. 	2026) 	(“[W]hen 	the 	United 	States 	brings 	a 	suit, 	it 	. 	. 	.
waive[s] its sovereign immunity as to any recoupment claims of the
defendant.”). 	A 	recoupment 	counterclaim 	is 	one 	which 	“allows 	a
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defendant 	to 	. 	. 	. 	assert[] 	-- 	up 	to 	the 	amount 	of 	the 	claim 	--
the defendant’s own claim against the plaintiff growing out of the
same 	transaction.” 	In 	re 	Sheedy, 	801 	F.3d 	12, 	21 	(1st 	Cir. 	2015)
(quoting 	Bolduc 	v. 	Beal 	Bank, 	SSB, 	167 	F.3d 	667, 	672 	(1st 	Cir.
1999)); see also 3 Moore’s Federal Practice § 13.50[2][c] (noting
that 	a 	recoupment 	counterclaim 	must 	“arise 	from 	the 	same
transaction 	or 	occurrence 	as 	the 	government’s 	claim, 	seek 	relief
of the same kind or nature[,] and seek an amount not in excess of
the opposing claim”).
The 	question 	for 	the 	Court 	thus 	is 	whether 	Regeneron’s
proposed 	counterclaims 	against 	the 	United 	States 	are 	recoupment
claims. 	They 	are 	not. 	Although 	Regeneron 	styles 	some 	of 	them 	as
such, 	the 	proposed 	counterclaims 	in 	fact 	arise 	out 	of 	a 	separate
transaction 	than 	the 	claims 	asserted 	by 	the 	United 	States. 	The
United States seeks partial reimbursement of amounts that it paid
through 	Medicare 	Part 	B 	to 	physicians. 	Regeneron’s 	proposed
counterclaims, on the other hand, seek to reduce the United States’
potential 	recovery 	by 	the 	amount 	that 	the 	federal 	government
allegedly 	underpaid 	to 	states 	due 	to 	the 	application 	of 	the 	FMAP
to 	decreased 	net 	expenditures 	by 	the 	states’ 	Medicaid 	programs.
These transactions plainly are distinct.
Indeed, 	Regeneron’s 	proposed 	counterclaims 	likely 	are 	not
even 	setoff 	claims 	vis-à-vis 	the 	United 	States. 	“A 	setoff 	is 	C’s
deduction 	from 	C’s 	debt 	to 	B 	of 	an 	amount 	based 	on 	B’s 	unrelated
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debt to C.” In re Slater Health Ctr., Inc., 398 F.3d 98, 103 (1st
Cir. 	2005); 	see 	also 	Texas 	v. 	Caremark, 	Inc., 	584 	F.3d 	655, 	659–
60 	(5th 	Cir. 	2009) 	(“Recoupment 	is 	a 	demand 	asserted 	to 	diminish
or 	extinguish 	the 	plaintiff’s 	demand 	that 	arises 	out 	of 	the 	same
transaction forming the basis of the plaintiff’s claim; setoff, on
the 	other 	hand, 	arises 	out 	of 	a 	transaction 	extrinsic 	to 	the
plaintiff’s claim.” (quoting In re Gober, 100 F.3d 1195, 1207 (5th
Cir. 	1996))). 	Regeneron’s 	proposed 	counterclaims 	seek 	to 	reduce
the United States’ recovery by the amount of its underpayments to
states, not to Regeneron. As the United States points out, allowing
Regeneron 	to 	benefit 	from 	that 	alleged 	debt 	of 	the 	federal
government to the states could potentially result in an unwarranted
windfall.
In 	any 	event, 	neither 	setoff 	counterclaims 	nor 	unjust
enrichment 	counterclaims 	are 	permissible 	where 	the 	United 	States
has 	impliedly 	waived 	its 	immunity 	only 	to 	recoupment 	claims. 	See
3 	Moore’s 	Federal 	Practice 	§ 	13.31 	(“Claims 	for 	setoff 	are 	. 	. 	.
permissive counterclaims.”); Caremark, 584 F.3d at 659 (“Sovereign
immunity is not waived as to permissive counter-claims . . . .”).
The Court thus will deny Regeneron’s motion to amend with respect
to the United States because amendment would be futile. See infra
Section III.
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B. 	Sovereign Immunity of the State Plaintiffs
A 	state 	may 	waive 	its 	Eleventh 	Amendment 	immunity 	when 	it
“‘voluntarily invoke[s]’ the jurisdiction of the federal courts.”
Bergemann 	v. 	R.I. 	Dep’t 	of 	Env’t 	Mgmt., 	665 	F.3d 	336, 	340 	(1st
Cir. 2011) (quoting Coll. Sav. Bank v. Fla. Prepaid Postsecondary
Educ. 	Expense 	Bd., 	527 	U.S. 	666, 	675 	(1999)). 	The 	scope 	of 	that
waiver 	is 	broader 	than 	a 	waiver 	by 	the 	United 	States, 	in 	part
because 	“Rule 	13(d)’s 	provision 	regarding 	sovereign 	immunity 	and
counterclaims 	against 	the 	United 	States 	is 	not 	applicable 	to
counterclaims brought against states.” 3 Moore’s Federal Practice
§ 13.50[4].
The 	”trend 	among 	the 	courts,” 	accordingly, 	“is 	to 	interpret
th[e] waiver of immunity” by states to “include[] not only claims
in 	recoupment 	but 	also 	all 	compulsory 	counterclaims.” 	Id.; 	see,
e.g., 	Bd. 	of 	Regents 	of 	the 	Univ. 	Of 	Wis. 	Sys. 	v. 	Phoenix 	Int’l
Software, 	Inc., 	653 	F.3d 	448, 	469-70 	(7th 	Cir. 	2011) 	(agreeing
with the “trend among the circuits” that “when a state waives its
sovereign 	immunity 	by 	litigation 	conduct, 	that 	waiver 	opens 	the
door 	to 	counterclaims 	regarded 	as 	compulsory 	within 	the 	meaning
of [Rule] 	13(a)”); 	Regents 	of 	the 	Univ. 	of 	N.M. 	v. 	Knight, 	321
F.3d 1111, 1124, 1126 (Fed. Cir. 2003) (rejecting argument that a
state “waive[s] its immunity only with respect to counterclaims in
recoupment” 	and 	instead 	holding 	that 	immunity 	is 	waived 	with
respect 	to 	“all 	compulsory 	counterclaims”). 	In 	keeping 	with 	this
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trend, the First Circuit has “held that it would be unfair to allow
a 	state 	to 	bring 	a 	claim 	in 	federal 	court 	while 	simultaneously
invoking 	sovereign 	immunity 	to 	shield 	itself 	from 	counterclaims
arising out of the same transaction or occurrence.” Bergemann, 665
F.3d 	at 	341-42 	(emphasis 	added); 	see 	Arecibo 	Cmty. 	Health 	Care,
270 	F.3d 	at 	28 	(“Where 	a 	state 	avails 	itself 	of 	the 	federal
courts . . ., 	we 	think 	it 	reasonable 	to 	consider 	that 	action 	to
waive the state’s immunity with respect to that claim in toto and,
therefore, 	to 	construe 	that 	waiver 	to 	encompass 	compulsory
counterclaims . . . .”).
The 	question 	for 	the 	Court 	thus 	is 	not 	whether 	Regeneron’s
counterclaims against the State Plaintiffs are recoupment claims,
but 	rather 	whether 	they 	are 	compulsory 	counterclaims 	under 	Rule
13(a). 	That 	is 	a 	less 	stringent 	standard. 	See 	3 	Moore’s 	Federal
Practice 	§ 	13.11 	(“[R]ecoupment 	has 	been 	given 	a 	more 	limited
construction 	than 	the 	modern 	compulsory 	counterclaim 	. 	. 	. 	.
[W]hile 	recoupment 	claims 	may 	be 	by 	definition 	compulsory
counterclaims, 	the 	converse 	is 	not 	true.” 	(citation 	omitted)); 	6
Wright & Miller’s Federal Practice & Procedure § 1410 (noting that
“[c]ourts generally have agreed that” the compulsory counterclaim
standard under Rule 13(a) “should be interpreted liberally”).
A 	compulsory 	counterclaim 	is 	one 	which 	“arises 	out 	of 	the
transaction 	or 	occurrence 	that 	is 	the 	subject 	matter 	of 	the
opposing party’s claim.” Fed. R. Civ. P. 13(a). The First Circuit
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“interpret[s] 	th[is] 	provision 	broadly.” 	Kress 	Stores 	of 	P.R.,
Inc. 	v. 	Wal-Mart 	P.R., 	Inc., 	121 	F.4th 	228, 	245 	(1st 	Cir. 	2024)
(per curiam). “[T]he ‘transaction or occurrence’ standard requires
only a ‘logical relation’ between the claims . . . .” Id. (quoting
Iglesias 	v. 	Mut. 	Life 	Ins. 	Co. 	of 	N.Y., 	156 	F.3d 	237, 	241 	(1st
Cir. 1998)). A “‘logical relation’ between claims exists when ‘the
same 	aggregate 	of 	operative 	facts 	serves 	as 	the 	basis 	of 	both
claims’” 	or 	where 	“the 	aggregate 	core 	of 	facts 	upon 	which 	the
original claim rests activates additional legal rights in a party
defendant 	that 	would 	otherwise 	remain 	dormant.” 	Id. 	at 	245 	& 	n.9
(quoting 	Iglesias, 	156 	F.3d 	at 	241-42). 	This 	liberal 	standard
“allows 	the 	court 	to 	apply 	Rule 	13(a) 	to 	any 	counterclaim 	that
from an economy or efficiency perspective could be profitably tried
with 	the 	main 	claim.” 	6 	Wright 	& 	Miller’s 	Federal 	Practice 	&
Procedure § 1410.
The 	Court 	concludes 	that 	Regeneron’s 	counterclaims 	against
the State Plaintiffs fall within this broad umbrella and that “the
interests of both economy and fairness will be served by requiring
the 	counterclaim[s] 	to 	be 	brought 	in 	the 	same 	suit” 	as 	the 	State
Plaintiffs’ 	claims. 	3 	Moore’s 	Federal 	Practice 	§ 13.10[3]. 	The
counterclaims directly stem from the same legal issue as the State
Plaintiffs’ claims. See id. § 13.10[1][b] (noting that courts look
to 	the 	“similarity 	of 	factual 	and 	legal 	issues” 	in 	assessing
whether 	claims 	“share 	an 	‘aggregate 	of 	operative 	facts’”). 	That
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issue 	is 	whether 	a 	credit 	card 	processing 	fee 	must 	be 	classified
as 	a 	price 	concession 	or 	a 	BFSF. 	And 	if 	the 	State 	Plaintiffs 	are
correct 	that 	it 	must 	be 	treated 	as 	a 	price 	concession, 	then 	that
result would potentially “activate[] additional legal rights” for
Regeneron, 	which 	alleges 	that 	it 	could 	then 	seek 	partial
reimbursement 	of 	the 	rebates 	it 	paid 	to 	the 	State 	Plaintiffs’
Medicaid 	programs. 	Kress 	Stores, 	121 	F.4th 	at 	245 	n.9 	(quoting
Iglesias, 156 F.3d at 242).
The Court further notes that unlike the United States, which
seeks 	recovery 	only 	of 	overpayments 	made 	by 	Medicare 	Part 	B, 	the
State 	Plaintiffs 	seek 	recovery 	for 	their 	Medicaid 	programs. 	A
factual 	overlap 	thus 	exists 	between 	the 	State 	Plaintiffs’ 	claims
and 	Regeneron’s 	counterclaims, 	which 	collectively 	will 	determine
the correct balance of funds owed between Regeneron and the State
Plaintiffs’ Medicaid programs. See United States ex rel. Ramadoss
v. 	Caremark, 	Inc., 	No. 	99-cv-914, 	2010 	WL 	11507448, 	at 	*6 	(W.D.
Tex. 	June 	8, 	2010) 	(finding 	a 	“logical 	relationship” 	between
states’ requested damages for false claims and defendant’s request
for recovery of “any overpayment by [the defendant] to the States
arising 	from 	the 	calculation 	of 	reimbursements 	to 	the 	States’
Medicaid programs”).
Considerations of “fairness” also favor Regeneron. 3 Moore’s
Federal Practice § 13.10[3]. As Regeneron points out, barring its
counterclaims 	would 	result 	in 	a 	situation 	where 	it 	could 	face
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unmitigated 	liability 	no 	matter 	how 	it 	decided 	to 	categorize 	its
credit 	card 	processing 	fees. 	Where, 	as 	here, 	Regeneron 	treats
credit card processing fees as BFSFs, it can be subject to a false
claims action based on states’ alleged overpayments to physicians.
On 	the 	other 	hand, 	if 	Regeneron 	had 	treated 	the 	fees 	as 	price
concessions, 	it 	could 	face 	suit 	from 	states 	alleging 	that
Regeneron’s 	Medicaid 	rebates 	were 	too 	low. 	See 	United 	States 	ex
rel. Streck v. Bristol-Myers Squibb Co., No. 13-cv-07547, 2018 WL
6300578, 	at 	*3 	(E.D. 	Pa. 	Nov. 	29, 	2018) 	(describing 	similar
lawsuit). 	The 	most 	equitable 	way 	to 	resolve 	this 	catch-22 	is 	to
allow Regeneron to assert its contingent counterclaims to attempt
to square the ledger.
The State Plaintiffs object that allowing Regeneron to assert
its counterclaims will result in additional discovery obligations
because 	the 	ASP 	and 	the 	AMP 	are 	calculated 	differently. 	Even 	if
that is true, the Court notes that the First Circuit “does not use
a ‘same evidence’ test for purposes of Rule 13(a)” but rather uses
the 	“logical 	relation” 	test. 	Phoenix 	Int’l 	Software, 	653 	F.3d 	at
470; 	see 	6 	Wright 	& 	Miller’s 	Federal 	Practice 	& 	Procedure 	§ 	1410
(“[A] counterclaim arising from the same events as those underlying
plaintiff’s 	claim 	is 	compulsory, 	even 	though 	the 	evidence 	needed
to 	prove 	the 	opposing 	claims 	may 	be 	substantially 	different.”).
Under 	the 	“logical 	relation” 	test, 	the 	claims 	and 	counterclaims
“focus on a single factual dispute”: the treatment by Regeneron of
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credit card processing fees as BFSFs rather than price concessions.
Phoenix Int’l Software, 653 F.3d at 471.
Finally, the Qui Tam States argue that Regeneron cannot assert
any counterclaims seeking to offset the Texas Health Care Program
Fraud 	Prevention 	Act 	(“THFPA”) 	claim. 	The 	Qui 	Tam 	States 	assert
that 	the 	Texas 	Supreme 	Court 	has 	held 	that 	“remedies 	available
under the THFPA are punitive” and that “penalties under the THFPA
‘cannot 	be 	offset 	against 	the 	state.’” 	Dkt. 	236 	at 	15 	(quoting
Nazari 	v. 	State, 	561 	S.W.3d 	495, 	509 	(Tex. 	2018)). 	But 	Nazari
applied 	state-law 	principles 	in 	determining 	that 	Texas 	had 	not
waived 	its 	immunity 	to 	the 	defendants’ 	counterclaims 	“in 	its 	own
courts.” 	Nazari, 	561 	S.W.3d 	at 	501. 	Where, 	as 	here, 	Texas 	has
submitted to the jurisdiction of a “federal court,” the “question
of whether the state has waived sovereign immunity . . . is one of
federal 	law.” 	Parente 	v. 	Lefebvre, 	122 	F.4th 	457, 	462 	(1st 	Cir.
2024); cf. Lapides v. Bd. of Regents of the Univ. Sys. of Ga., 535
U.S. 613, 619 (2002) (“[A] State’s voluntary appearance in federal
court 	amount[s] 	to 	a 	waiver 	of 	its 	Eleventh 	Amendment 	immunity.”
(emphasis added)). As already discussed, federal precedent allows
Regeneron to assert its counterclaims.
The 	Court 	thus 	concludes 	that 	the 	State 	Plaintiffs 	have
impliedly 	waived 	their 	sovereign 	immunity 	to 	Regeneron’s
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counterclaims.2 	For 	that 	reason, 	the 	Court 	will 	deny 	the 	Non-Qui
Tam States’ motion to dismiss Regeneron’s counterclaims. The Court
will 	also 	allow 	Regeneron’s 	motion 	to 	amend 	with 	respect 	to 	Qui
Tam States, as further explained below.
III. Motion to Amend
Regeneron has moved to amend its answers to the United States’
and 	Qui 	Tam 	States’ 	complaints 	to 	assert 	the 	proposed
counterclaims. 	At 	the 	outset, 	the 	United 	States 	and 	Regeneron
debate 	whether 	this 	motion 	should 	be 	analyzed 	under 	Federal 	Rule
of Civil Procedure 15 or 16. The United States argues that Rule 16
applies because a scheduling order exists in this case and because
the 	scheduling 	order’s 	deadline 	to 	amend 	pleadings 	has 	passed.
Regeneron 	contends 	that 	Rule 	15 	applies 	because 	the 	scheduling
order did not, in fact, contain any such deadline.
The 	Court 	agrees 	with 	Regeneron 	that 	Rule 	15 	applies. 	The
scheduling order in this case does not contain a deadline to amend
pleadings. 	See 	Dkt. 	205 	at 	2 	(proposed 	schedule); 	Dkt. 	216 	at 	1
(adopting 	proposed 	schedule). 	The 	United 	States 	asserts 	that 	the
Court orally foreclosed the possibility of amended pleadings in a
scheduling 	conference. 	But 	during 	that 	conference, 	the 	Court
2 	The 	Court 	agrees 	with 	the 	State 	Plaintiffs, 	however, 	that
Regeneron’s claims related to the AMP are more properly stated as
counterclaims 	rather 	than 	affirmative 	defenses. 	The 	Court 	will
“treat the pleading as though” the issue was “correctly designated”
as a counterclaim. Fed. R. Civ. P. 8(c)(2).
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merely 	asked 	the 	United 	States 	if 	it 	intended 	on 	amending 	its
pleadings, 	and 	when 	the 	United 	States 	responded 	that 	it 	did 	not,
the 	Court 	declined 	to 	create 	a 	deadline 	for 	the 	United 	States 	to
do 	so. 	The 	Court 	never 	stated 	that 	the 	deadline 	for 	Regeneron 	to
move to amend its answers had passed or that the Court would refuse
to entertain any such motion.3
Because 	no 	deadline 	was 	set 	for 	Regeneron 	to 	amend 	its
answers, the Court analyzes Regeneron’s motion to amend under Rule
15, which requires the Court to “freely give leave [to amend] when
justice 	so 	requires.” 	Fed. 	R. 	Civ. 	P. 	15(a)(2). 	This 	standard 	is
a “liberal” one. Amyndas, 48 F.4th at 36. Leave to amend should be
given 	unless 	there 	is 	a 	specific 	ground 	for 	denial, 	such 	as
futility, 	undue 	delay, 	or 	undue 	prejudice 	to 	the 	opposing 	party.
See id.
The 	United 	States 	and 	the 	Qui 	Tam 	States 	contend 	that
amendment 	would 	be 	futile 	due 	to 	sovereign 	immunity. 	As 	already
explained, 	the 	United 	States 	would 	be 	immune 	to 	Regeneron’s
proposed 	counterclaims, 	see 	supra 	Section 	II.A, 	but 	the 	Qui 	Tam
States would not, see supra Section II.B. The Court thus will deny
Regeneron’s 	motion 	to 	amend 	with 	respect 	to 	the 	United 	States 	as
3 	Indeed, 	the 	Court 	initially 	stated 	that 	it 	was 	contemplating
setting an amendment deadline in “July or August[] 2025,” Dkt. 197
at 4, and Regeneron filed its motion to amend in August.
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futile 	but 	cannot 	deny 	the 	motion 	with 	respect 	to 	the 	Qui 	Tam
States on that ground.
Further, 	Regeneron 	did 	not 	demonstrate 	“undue 	delay” 	in
moving to amend. Amyndas, 48 F.4th at 37. Regeneron moved to amend
approximately 	two 	and 	a 	half 	months 	after 	filing 	its 	initial
answers. That delay falls “well short of the timeframes that [First
Circuit] cases have identified as undue and cannot, under all the
circumstances, 	be 	characterized 	as 	substantial.” 	Id. 	at 	38; 	see
id. 	at 	39 	(contrasting 	delays 	of 	one 	to 	two 	months 	with 	cases
involving delays of a year or more). Further, even though Regeneron
discussed 	the 	AMP 	and 	Medicaid 	rebates 	in 	its 	motion 	to 	dismiss
briefing and thus was already aware of those issues, the fact that
the 	allegations 	underlying 	the 	proposed 	counterclaims 	“[a]re 	not
‘new’ . . . taken in a vacuum, cannot serve as a basis for denying
[Regeneron’s] motion to amend” based on undue delay. Id. at 39.
Finally, 	the 	Court 	cannot 	conclude 	that 	“undue 	prejudice”
will 	result 	from 	allowing 	Regeneron 	to 	assert 	its 	contingent
counterclaims against the Qui Tam States. Id. at 36 (quoting Foman,
371 	U.S. 	at 	182). 	Discovery 	is 	scheduled 	to 	continue 	until 	2027
and will already include AMP-related discovery with respect to the
Non-Qui 	Tam 	States, 	against 	whom 	Regeneron’s 	counterclaims 	were
undisputedly timely. Undergoing AMP-related discovery with respect
to 	the 	Qui 	Tam 	States 	will 	not 	present 	an 	undue 	burden 	to 	the
parties.
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The 	Court 	thus 	will 	allow 	Regeneron’s 	motion 	to 	amend 	with
respect to the Qui Tam States.
ORDER
For 	the 	foregoing 	reasons, 	Regeneron’s 	motion 	for 	leave 	to
amend (Dkt. 227) is ALLOWED with respect to its answer to the Qui
Tam States’ complaint but DENIED with respect to its answer to the
United States’ complaint; the Non-Qui Tam States’ motion to dismiss
(Dkt. 230) is DENIED; and the discovery stay previously imposed by
the Court (see Dkt. 273) is LIFTED.
SO ORDERED.
/s/ PATTI B. SARIS________________
Hon. Patti B. Saris
United States District Judge
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