25-5054 | Omnilex

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United States Court of Appeals
FOR THE DISTRICT OF COLUMBIA CIRCUIT

Argued December 18, 2025 Decided August 18, 2026

No. 25-5054

S
ERVIER PHARMACEUTICALS LLC,
APPELLANT

R
OBERT F. KENNEDY, JR., IN HIS OFFICIAL CAPACITY AS
SECRETARY OF HEALTH AND HUMAN SERVICES AND MEHMET
OZ, IN HIS OFFICIAL CAPACITY AS ADMINISTRATOR FOR THE
CENTERS FOR MEDICARE AND MEDICAID SERVICES,
A
PPELLEES

Appeal from the United States District Court
for the District of Columbia
(No. 1:24-cv-02664)

William Perdue argued the cause for appellant. With him
on the briefs were Kolya Glick and Clare Saunders.

Sean R. Janda, Attorney, U.S. Department of Justice,
argued the cause for appellees. With him on the brief were
Brett A. Shumate, Assistant Attorney General, Michael S.
Raab, Attorney, and James F. Segroves, Attorney, U.S.
Department of Health and Human Services.

Before: MILLETT, KATSAS, and CHILDS, Circuit Judges.

Opinion for the Court filed by Circuit Judge M
ILLETT.

M
ILLETT, Circuit Judge: To combat high drug prices,
Congress enacted the Medicare Manufacturer Discount
Program in 2022. The Program requires drug manufacturers to
discount the price of certain drugs covered by Medicare Part D
starting in 2025. But Congress allowed two types of drug
manufacturers to phase in their discount obligations over
several additional years: “specified manufacturers” and
“specified small manufacturers[.]” 42 U.S.C. § 1395w-
114c(g)(4)(B)–(C). At a high level, a specified manufacturer
is a manufacturer whose “total expenditures”—that is, sales—
under Part D are below a particular threshold. A specified
manufacturer qualifies as a “specified small manufacturer” if
80% or more of its sales under Part D came from a single drug.
In both instances, qualification depends on data drawn from
one year: 2021.

In April 2021, Servier Pharmaceuticals LLC acquired a
drug called Tibsovo from Agios Pharmaceuticals, along with
the stock of the drug that Agios had already manufactured.
This pre-existing stock was dispensed to Part D patients
through the end of the year. Servier later switched over to
selling new tablets that it manufactured, but those new tablets
were not dispensed to a Part D patient until February 2022.
Servier did not sell any other drug to a Part D patient in the
United States in 2021.

When Servier requested to phase in its discount
obligations in the Medicare Manufacturer Discount Program,
the Centers for Medicare & Medicaid Services (“CMS”)
designated it a specified manufacturer. The agency
acknowledged that Servier had manufactured some Tibsovo in

2021, but found that none of those tablets were sold under Part
D that year. As a result, Servier’s “total expenditures” for 2021
were $0, making it a specified manufacturer. But since,
necessarily, no single drug made up 80% or more of those non-
existent sales, CMS determined that Servier was not a specified
small manufacturer.

Servier sued the Secretary of Health and Human Services
and the Administrator for CMS, contending that the law
required CMS to credit it with the 2021 sales of the Tibsovo
tablets that Agios made.

The district court granted summary judgment for the
government, and we affirm. For each manufacturer, the “total
expenditures” for a specified small manufacturer drug are
calculated based on the units of that drug that the manufacturer
actually “produced, prepared, propagated, compounded,
converted, or processed[.]” 42 U.S.C. § 1395w-
114c(g)(4)(C)(ii)(I)–(II). Servier has not shown that it
undertook any of those activities with respect to any Part D
sales of Tibsovo tablets in 2021, and so CMS correctly found
that Servier does not qualify as a specified small manufacturer.

Medicare is a federal program administered by the Centers
for Medicare & Medicaid Services, which is part of the
Department of Health and Human Services. See 42 U.S.C.
§§ 1395–1395mmm. Medicare provides health insurance
coverage for people aged 65 or older, people with certain
disabilities, and people with end-stage renal disease. See id.
§§ 1395c, 1395j, 1395w-21(a), 1395w-101(a).

Medicare has four parts. Parts A through C allow people
to enroll in health insurance programs provided by the
government or by private insurance companies. Part D, at issue
here, is an opt-in program offering prescription drug coverage
to Medicare enrollees. See Cares Community Health v. HHS,
944 F.3d 950, 954 (D.C. Cir. 2019); Action All. of Senior
Citizens v. Sebelius, 607 F.3d 860, 861 (D.C. Cir. 2010).

When Medicare Part D was first enacted in 2003, drug
costs were shared between the patient, the government, and
each patient’s private insurer. See 42 U.S.C. § 1395w-102(b)
(2003). The government provided subsidies to low-income
patients, see id. § 1395w-114(a), but the remaining coverage
gap still posed a financial challenge to many patients.

Congress began to address that gap in 2010. As part of the
Affordable Care Act, Congress required insurance companies
to increase their coverage. See generally Patient Protection and
Affordable Care Act, Pub. L. No. 111-148, 124 Stat. 119
(2010). Congress also required drug manufacturers to sign
agreements with CMS under which the manufacturers would
discount certain drugs as part of the newly formed Coverage
Gap Discount Program. Id. at 461–468.

Unsatisfied with the results, Congress set out once again
to address high drug prices in the Inflation Reduction Act of
2022. See Pub. L. No. 117-169, 136 Stat. 1818, 1833–1905;
S. R
EP. No. 116-120, at 1 (2019) (considering bill “to lower
prescription drug prices in the Medicare * * * program[]”).
Congress did so in part by replacing the Coverage Gap
Discount Program with the Manufacturer Discount Program
(“Program”). See 136 Stat. at 1880–1892. This Program
requires drug manufacturers to provide discounts for drugs
once patients reach an out-of-pocket threshold. See id.; S.
REP.
No. 116-120, at 15.

The Program took effect in 2025, but Congress allowed
two categories of manufacturers—“specified manufacturers”
and “specified small manufacturers”—to phase in their
discount obligations over time by providing only a 1% discount
in 2025, and ramping up to the full 10% or 20% discount in
stages over the next several years. 42 U.S.C. § 1395w-
114c(b)(1)(A), (g)(4)(B)–(C).

Central to this appeal is the boundary between those two
categories. In broad strokes, a specified manufacturer is a drug
manufacturer that had low total sales under Part D in 2021,
whereas a specified small manufacturer is a specified
manufacturer that was also highly specialized in 2021, meaning
that its Part D sales predominantly came from one drug. In
other words, Congress provided a ramp-up period for (i) small
manufacturers and (ii) small and highly specialized
manufacturers that allows them both to ease into the discount
obligation gradually.
1

To be a specified manufacturer, an entity must satisfy three
criteria: (1) It must have had an existing agreement with CMS
under the old Coverage Gap Discount Program in 2021; (2) its
Part D sales in 2021 must be less than 1% of the industry-wide
total; and (3) its Part B sales in 2021 also must be less than 1%
of the industry-wide total. 42 U.S.C. § 1395w-
114c(g)(4)(B)(ii)(I).

1
While the statute speaks in terms of a manufacturer’s
“expenditures” for a drug, see 42 U.S.C. § 1395w-114c(g)(4)(C)(ii),
that term refers to the Part D plan’s costs of providing the drug to a
patient, id. §§ 1395w-114c(g)(4)(D), 1395w-115(b)(3). So, from
Servier’s perspective, the term loosely refers to its sales to Part D
patients. We frequently use the simpler term “sales” in this opinion.

Then, to be a specified small manufacturer, a specified
manufacturer also must (1) manufacture a covered Part D drug
in 2021, (2) for which the total sales under Part D for any one
of its specified small manufacturer drugs are (3) “equal to or
more than 80 percent of the total [sales] under [Part D] for all
specified small manufacturer drugs of the manufacturer[.]” 42
U.S.C. § 1395w-114c(g)(4)(C)(ii)(I). Put more simply, 80% or
more of a specified manufacturer’s Part D sales of “specified
small manufacturer drugs” in 2021 must come from one of
those drugs.

That last term, “specified small manufacturer drug[,]” has
its own statutory definition:

with respect to a specified small manufacturer, for
2021, an applicable drug that is produced, prepared,
propagated, compounded, converted, or processed by
the manufacturer.

42 U.S.C. § 1395w-114c(g)(4)(C)(ii)(II)(aa) (emphasis added).
The term “applicable drug[,]” for present purposes, simply
means a drug covered under Part D. Id. § 1395w-114c(g)(2).

Because specified-manufacturer status and specified-
small-manufacturer status are assessed entirely by reference to
a manufacturer’s drug sales in the year 2021—the year before
the law was passed—no manufacturer could take any action to
affect its status under the new Program.

The two statuses come with different benefits. In very
broad strokes, specified manufacturers may phase in their
discount obligations only for the units dispensed to low-income
Part D patients, see 42 U.S.C. § 1395w-114c(g)(4)(B)(i),
whereas specified small manufacturers get to phase in their

discount obligations across all applicable Plan D patients,
regardless of income, see id. § 1395w-114c(g)(4)(C)(i).

The Inflation Reduction Act of 2022 authorized the
Secretary of Health and Human Services to implement its
provisions (including the Program) “by program instruction or
other forms of program guidance.” 136 Stat. at 1892.
Accordingly, CMS issued Program guidance in the form of two
documents in November 2023: Medicare Part D Manufacturer
Discount Program Final Guidance (Nov. 17, 2023) (“Final
Guidance”), J.A. 28–84; and Medicare Part D Manufacturer
Discount Program: Methodology for Identifying Specified
Manufacturers and Specified Small Manufacturers (Nov. 17,
2023) (“Methodology Memorandum”), J.A. 85–93.

The Final Guidance generally restates the statutory
provisions and definitions. But it also elaborates on their
meaning in a few instances. For one, the Final Guidance says
that the term “manufacturer” includes “entities otherwise
engaged in repackaging or changing the container, wrapper, or
labeling of any applicable drug in furtherance of the
distribution of [that] drug from the original place of
manufacture” to the final entity that sells or delivers the drug
to the patient. J.A. 83.

For another, the Final Guidance explains that CMS will
use several sources of information to determine which
manufacturers are eligible for phase-ins. J.A. 55. Those data
sources include “Part D [prescription dispensing] data[] and
ownership information submitted by manufacturers.” J.A. 55.
The Final Guidance also refers the reader to the Methodology

Memorandum for a description of the methodology, data
sources, and calculations that CMS will use to identify
specified manufacturers and specified small manufacturers.
J.A. 55–56.

Lastly, the Final Guidance delineates a review process for
entities deemed ineligible for phase-ins. Dissatisfied entities
can request a “recalculation” of the decision by sending an
email to CMS that “clearly identif[ies] the * * * labeler code(s)
relevant to the request, describe[s] the issue(s) forming the
basis of the request for recalculation, and include[s] or
describe[s] any relevant supporting information.” J.A. 57.
CMS’s recalculation decision is “final and binding[.]” J.A. 57.

The Methodology Memorandum outlines the three steps
that CMS will take to determine if a “specified manufacturer”
is also a “specified small manufacturer.” First, CMS selects a
specified small manufacturer drug of that entity, grouping
together multiple strengths and dosages of the drug to the
extent they exist. J.A. 91. Second, CMS calculates the entity’s
Part D sales for that drug in 2021. J.A. 91–92. Third, CMS
divides the entity’s Part D sales for that drug by its Part D sales
across all of its specified small manufacturer drugs in 2021.
J.A. 92. CMS then repeats this process for each specified small
manufacturer drug of that entity. If the sales of any drug are
“equal to or greater than 80 percent” of that manufacturer’s
total sales, then the entity qualifies as a specified small
manufacturer. J.A. 92.

The Methodology Memorandum also explains that “CMS
will attribute Part D [sales] for a drug * * * to a specified
manufacturer” by relying on each drug’s National Drug
Code(s). J.A. 91.

A National Drug Code is “a numeric code” that identifies
the “labeler, product, and package size and type” of each drug
product. 21 C.F.R. § 207.33(a). As relevant here, the first four
to six digits of each code make up the “labeler code.” Id.
§ 207.33(b)(1)(i). That code is a unique identifier that the Food
and Drug Administration (“FDA”) assigns to “[e]ach person
who engages in manufacturing, repacking, relabeling, or
private label distribution of a drug[.]” Id. § 207.33(c)(1); see
also id. § 207.33(d).

Servier Pharmaceuticals LLC entered the market in 2018.
J.A. 111. At the start of 2021, Servier marketed only two drugs
in the United States, Asparlas and Oncaspar. J.A. 111–112.
Neither drug had any Part D sales in 2021. J.A. 114.

In April 2021, Servier acquired Agios Pharmaceuticals’
oncology division. J.A. 112. As part of this transaction,
Servier obtained ownership of the New Drug Application
(“NDA”) for a cancer-treating drug called Tibsovo, the legal
rights and responsibilities for Tibsovo, and the existing stock
of Tibsovo tablets previously made by Agios and that bore
Agios’s labeler code. J.A. 112; J.A. 122.

Servier soon began making Tibsovo tablets with its own
labeler code on them. In the meantime, Servier continued to
sell its supply of Agios tablets to, as relevant here, Part D
patients. J.A. 112. While Servier released some tablets bearing
its own labeler code in late 2021, none of them were sold to
Part D patients until 2022, after the end of the statutory
reference period. J.A. 112; see J.A. 128–129.

Servier applied for special designation under the
Manufacturer Discount Program. Because Servier’s other two
drugs resulted in no Part D expenditures in 2021, the success
of its application turned on whether Tibsovo’s expenditures
would be attributed to Servier rather than to Agios. If so, 100%
of its Part D expenditures in 2021 would come from one drug,
qualifying Servier as a specified small manufacturer. If not,
Servier would still qualify as a specified manufacturer by dint
of its low total expenditures, but would have to begin paying
discounts right away on the drugs dispensed to non-low-
income patients.

In April 2024, CMS informed Servier that it qualified as a
“specified manufacturer,” but not as a specified small
manufacturer. J.A. 108.

Servier filed a recalculation request with CMS, arguing
that Tibsovo qualifies as “a specified small manufacturer drug
of Servier” because “Servier owned Tibsovo, including [its]
New Drug Application[,]” and “acquired responsibility for
manufacturing Tibsovo” in April 2021. J.A. 111 (formatting
modified). Servier acknowledged that Tibsovo bore Agios’s
labeler code and remained on Agios’s Coverage Gap Discount
agreement throughout 2021. J.A. 112. But that was irrelevant,
according to Servier, because it had “accepted responsibility
for coverage gap discounts for Tibsovo and fully reimbursed
Agios for such discounts post-acquisition.” J.A. 114
(formatting modified).

CMS denied the recalculation request. It explained that its
data showed that all Tibsovo tablets dispensed in 2021 bore
Agios’s labeler code, which remained on Agios’s Coverage

Gap Discount Program agreement. J.A. 119. In contrast, the
“Part D expenditures for Servier’s labeler code * * * were
$0.00 in 2021.” J.A. 119. CMS added that Servier “first
marketed [Tibsovo] under its FDA-assigned labeler code after
2021” and, accordingly, “in 2021, Tibsovo was not attributable
to Servier, as determined by the labeler code.” J.A. 119
(formatting modified).

Servier sued Robert F. Kennedy, Jr., in his official capacity
as Secretary of Health and Human Services, and Mehmet Oz,
in his official capacity as Administrator for CMS, in September
2024, seeking a declaratory judgment that Servier qualifies as
a specified small manufacturer. After the parties cross-moved
for summary judgment, the district court granted the
governmental defendants’ motion and denied Servier’s. See
Servier Pharms. LLC v. Becerra, No. 24-cv-2664, 2025 WL
27352, at *1 (D.D.C. Jan. 3, 2025).

The district court held that CMS’s denial of specified-
small-manufacturer status was lawful because Servier failed to
satisfy two independent statutory requirements. Servier, 2025
WL 27352, at *10–17. First, the court read 42 U.S.C. § 1395w-
114c to attribute a drug’s expenditures only to the entity or
entities that manufactured, or created, the units of the drug that
were sold under Part D in 2021. Id. at *11–14. On that basis,
the district court agreed with CMS that Tibsovo was Agios’s
“specified small manufacturer drug”—not Servier’s—because
all the Tibsovo sold under Part D in 2021 “came from the
existing stock of the drug that Agios had manufactured and that
Servier acquired[.]” Id. at *10. Second, the district court
concluded that Servier failed to satisfy the requirement for
Tibsovo to be listed on Servier’s 2021 Coverage Gap Discount
Program agreement rather than Agios’s. Id. at *11–12, *15.

The district court then rejected Servier’s arbitrary and
capricious challenges. The court explained that CMS did not
err by using labeler codes to identify a drug’s manufacturer.
Servier, 2025 WL 27352, at *17–18. It reasoned that Servier’s
objection to CMS’s use of this data was really a gripe with
CMS’s statutory interpretation—a question of law that rose and
fell with Servier’s contrary-to-law arguments. Id. The court
then held that CMS had adequately explained its decision, and
that a remand would be pointless in any event because there
would be nothing left for CMS to do since the court had
decided what the statute meant. Id. at *18–19.

Servier timely appealed.

The district court had jurisdiction under 28 U.S.C. § 1331.
We have jurisdiction under 28 U.S.C. § 1291.

Under the Administrative Procedure Act (“APA”), we will
set aside agency action that is “arbitrary, capricious, an abuse
of discretion, or otherwise not in accordance with law[.]”
5 U.S.C. § 706(2)(A). When the district court reviews agency
action under the APA, this court reviews the district court’s
decision de novo. Cigar Ass’n of America v. FDA, 964 F.3d
56, 61 (D.C. Cir. 2020). We likewise evaluate an agency’s
interpretation of a statute without deference to the district court
or the agency. Loper Bright Enters. v. Raimondo, 144 S. Ct.
2244, 2262, 2266 (2024).

On appeal, Servier contends that CMS erroneously denied
it specified-small-manufacturer status based on a
misinterpretation of 42 U.S.C. § 1395w-114c’s provision for
attributing Medicare drug sales. Servier also argues that

CMS’s decision was arbitrary and capricious because the
agency relied on a flawed data source, failed to adequately
explain its reasoning, and treated similarly situated parties
differently.

We agree with the district court that CMS properly
determined that Servier was not a specified small
manufacturer. That is because Servier did not actually
“produce[], prepare[], propagate[], compound[], convert[], or
process[]” any units of Tibsovo sold under Part D in 2021. 42
U.S.C. § 1395w-114c(g)(4)(C)(ii)(II). Given that ruling, we
need not decide whether Servier satisfied the other statutory
requirements to be a specified small manufacturer.

Finally, we reject Servier’s arbitrary and capricious
challenges, some of which simply repackage its failed contrary
to law challenges, and the rest of which are misplaced.

III

Because all agree that Servier’s drugs Asparlas and
Oncaspar did not result in any Part D sales in 2021, specified-
small-manufacturer status turns entirely on whether the statute
counts any amount of Tibsovo sold under Part D in 2021 as part
of Servier’s “total expenditures”—that is, its sales. See Resp.
Br. 11; J.A. 114 (Servier Recalculation Request).

Servier asserts that the statute required CMS to credit it
with Tibsovo’s Part D sales in 2021 for two reasons.

First, Servier argues that the statutory calculation of “total
expenditures” must be made by reference to ownership and
manufacture of a drug product (e.g., Tibsovo) as a whole, and
not with reference to the individual tablets actually sold into
Part D and who manufactured them. That would mean that, by

owning and manufacturing any amount of Tibsovo in 2021,
Servier could claim Tibsovo as one of its “specified small
manufacturer drugs” and count Tibsovo’s 2021 sales as part of
its “total expenditures” regardless of whether a single one of
those tablets was actually dispensed under Part D in 2021.

Second, and alternatively, Servier contends that, even if
total expenditures is measured on a Part-D tablet-by-tablet
basis, Servier was a “manufacturer” of those Part D tablets
because it owned the NDA for Tibsovo, performed quality-
control checks, and updated the label for its purchased stock of
Tibsovo tablets.

Neither of those arguments holds up given the plain
statutory text, the facts found by CMS, and Servier’s forfeiture
of its arguments pertaining to its quality-control and label-
updating actions.

CMS properly determined that Servier was not a specified
small manufacturer by examining whether it manufactured any
tablets sold to Part D patients in 2021, rather than by assessing
Tibsovo sales as a whole. Servier’s argument to the contrary
has three key steps: (1) Servier created some Tibsovo tablets
in 2021; (2) which makes Servier a “manufacturer” of Tibsovo
as a product, and Tibsovo a “specified small manufacturer
drug” of Servier’s; and (3) the “total expenditures” for Tibsovo
as a product—regardless of who manufactured which tablet—
exceeded 80% of the total sales for all of Servier’s qualifying
Part D products combined. Servier Opening Br. 25, 27–28, 33.
In Servier’s view, it is irrelevant that none of the tablets it
manufactured actually generated any 2021 Part D sales.

Servier’s mixing and matching of select pieces of statutory
text favors what helps it and ignores what does not. We reject
that bespoke reading, for four reasons.

First, Servier’s product-wide reading is incompatible with
the full statutory text that defines a specified small
manufacturer as “a manufacturer of an applicable drug for
which, in 2021”:

the total expenditures under part D for any one of the
specified small manufacturer drugs of the
manufacturer * * * are equal to or more than 80
percent of the total expenditures under [Part D] for all
specified small manufacturer drugs of the
manufacturer[.]

42 U.S.C. § 1395w-114c(g)(4)(C)(ii)(I).

“[S]pecified small manufacturer drug[,]” in turn, is defined
as a Part D drug “that is produced, prepared, propagated,
compounded, converted, or processed by the manufacturer” in
2021. 42 U.S.C. § 1395w-114c(g)(4)(C)(ii)(II)(aa).

Putting those two definitions together, Congress said
directly that the “total expenditures”—that is, sales—used to
qualify an entity as a specified small manufacturer are (1) the
2021 Part D expenditures for (2) the drug stock that was
“produced, prepared, propagated, compounded, converted or
processed” by that business. This court must give effect to all
of Congress’s words, including its prepositions identifying
who must do what with respect to the drug sold to Part D
patients in 2021. Cf. Telecommunications Research & Action
Ctr. v. FCC, 801 F.2d 501, 517–518 (D.C. Cir. 1986) (finding
decisive Congress’s use of the preposition “under” instead of

“by”). While Servier wants to look only at the drug itself, it
forgets that Congress was creating a manufacturer-specific
exception. Unsurprisingly, then, Congress directed CMS to
focus on the manufacturer of the drug—that is, the producer,
preparer, propagator, compounder, converter, or processor of
those tablets dispensed to Part D patients.

Given that text, Servier’s legal title to the Tibsovo drug
product is beside the point. What matters is that the Tibsovo
tablets that made their way into Medicare Part D sales in 2021
were not produced, prepared, propagated, compounded,
converted or processed by Servier.

Second, the statutory structure confirms that reading.
When Congress created the Manufacturer Discount Program in
2022, Section 1395w-114c already contained the catch-all term
“applicable drug[.]” 42 U.S.C. § 1305w-114c(g)(2). The
statute repeatedly uses that term as a default to refer to the
drugs involved in the Program. See, e.g., id. § 1305w-114c(b)
(“An agreement under this section shall require the
manufacturer to provide * * * discounted prices for applicable
drugs of the manufacturer” dispensed on or after January 1,
2025.).

Notably, when Congress prescribed how to calculate the
“total expenditures” for a given manufacturer, it departed from
that established terminology. 42 U.S.C. § 1395w-
114c(g)(4)(C)(ii)(I)(bb). Congress introduced a new and more
specific term—“specified small manufacturer drug”—and
defined it as “an applicable drug that is produced, prepared,
propagated, compounded, converted, or processed by the
manufacturer.” Id. § 1395w-114c(g)(4)(C)(ii)(II)(aa)
(emphasis added). Congress then directed CMS to calculate
the total expenditures under Part D in 2021 for each of the
“specified small manufacturer drugs” of each manufacturer, id.

§ 1395w-114c(g)(4)(C)(ii)(I)(bb), not each of the “applicable
drugs” of that manufacturer. In other words, the total
expenditures must come from the drug or portion of a drug that
the business actually “produced, prepared, propagated,
compounded, converted, or processed.”

If Congress, like Servier, deemed who manufactured the
relevant Part D tablets irrelevant, Congress would have stuck
with the preexisting term “applicable drugs”—or omitted any
reference to manufacturing and manufacturers altogether.
Servier’s approach, in other words, asks us to read Congress’s
calibrated definition of a “specified small manufacturer drug”
out of the statute. This court, however, must assume Congress
meant the words it said—all of them. See Pulsifer v. United
States, 144 S. Ct. 718, 731–732 (2024) (“When a statutory
construction thus renders an entire subparagraph meaningless,
* * * the canon against surplusage applies with special force.”)
(formatting modified).

Third, and relatedly, the whole reason Congress adopted a
manufacturer-focused definition of the relevant drug
expenditures is that the Manufacturer Discount Program is—as
the name says—all about manufacturers. See 42 U.S.C.
§ 1395w-114c(a) (“The Secretary shall establish a
manufacturer discount program” under which “the Secretary
shall enter into agreements * * * with manufacturers[.]”)
(emphases added); id. § 1395w-114c (repeatedly referring to “a
manufacturer”; “the manufacturer”; and “such manufacturer”).
As the government notes, “[t]he statute uses the word
manufacturer over a dozen times[.]” Resp. Br. 27 (formatting
modified). Congress’s repetition of this term reflects its focus
on manufacturing as an essential characteristic of entities that
are covered by the Program and that may further qualify for
phase-in eligibility. Congress chose not to extend its program
and phase-in exceptions to those like Servier who merely own

another manufacturer’s product or who manufacture only
tablets that never entered into the Part D program in 2021.

Fourth, this straightforward reading comports with the
broader statutory scheme. See Mullin v. Doe, 146 S. Ct. 2121,
2136 (2026) (“We evaluate the provision at issue with a view
to its place in the overall statutory scheme, not just in a single
subsection.”) (formatting modified); Dubin v. United States,
143 S. Ct. 1557, 1566 (2023) (“A statute’s meaning does not
always turn solely on the broadest imaginable definitions of its
component words. Instead, linguistic and statutory context also
matter.”) (formatting modified) (internal citation omitted).

In redesigning Medicare Part D in 2022, Congress sought
to “lower prescription drug prices” by requiring manufacturers
to discount certain drugs. S.
REP. NO. 116-120, at 1. At the
same time, Congress recognized that enforcing the immediate
payment of discounts could unduly burden small and
specialized drug manufacturers within the Part D program, and
so allowed those manufacturers—and only those
manufacturers—to phase in their discount obligations. See 42
U.S.C. § 1395w-114c(g)(4)(C) (titled “Phase-in for specified
small manufacturers”); 136 Stat. at 1885. Reading “specified
small manufacturer drug” to focus on the identity of the actual
manufacturer of the Part D tablets effectuates Congress’s
purpose of identifying those who created the drugs that were
actually used in the Part D program in 2021. Congress, after
all, defined “total expenditures” based on sales of a drug within
Part D, and not broadly to all patients.

Servier’s proposal, by contrast, is contextually
implausible. Here, Tibsovo resulted in $89 million of Part D
expenditures in 2021, $66 million of which came after Servier
acquired Tibsovo in April 2021. Yet Servier suggests that
CMS should attribute the full $89 million in sales to Servier.

See Servier Opening Br. 28, 35; Servier Reply Br. 7, 9.
Crediting Servier with even those expenditures that predate its
acquisition of Tibsovo and that come from Tibsovo tablets with
which Servier had no manufacturing involvement whatsoever
makes no sense in a statute that is focused on differentiating
manufacturers by size and level of diversification.

At other times in its briefing, Servier says CMS should
have attributed only “$66 million out of the $89 million” to
Servier. Servier Reply Br. 2. But Servier had nothing to do
with the actual manufacturing of the tablets tied to that $66
million. Servier’s inconsistency underscores that neither of its
approaches maps onto the statutory text or design.

Servier’s remaining arguments do not move the needle.

First, Servier argues that, if Congress had wanted a tablet-
by-tablet analysis, Congress could have instructed CMS to
calculate “the total expenditures under part D for units of any
one of the specified small manufacturer drugs of the
manufacturer[.]” Servier Opening Br. 30.

That Congress may have had alternative ways of
articulating its manufacturer-specific focus does not change the
clarity of the words Congress did employ, as confirmed by
statutory context. After all, Congress could have implemented
Servier’s proposed reading by directing CMS to calculate “total
expenditures” for each drug “as a whole,” or each drug
“marketed by a pharmaceutical company.” But doing so would
have required abandoning entirely the definition’s focus on the
small and non-diversified manufacturers Congress was
helping. At the end of the day, this court’s job is to interpret
the text Congress wrote using settled tools of statutory

construction. Having done so, a game of competing “what ifs”
will not change the answer.

Second, Servier points out that the statute treats the
different forms (such as the different dosages) of a drug as one,
and contends that “total expenditures” must also refer to all
expenditures for Tibsovo as one drug. See Servier Opening Br.
27; 42 U.S.C. § 1395w-114c(g)(2)(A)(i).

But aggregating drug forms is very different than
aggregating manufacturers and owners. The former fits with
Congress’s goal of identifying small manufacturers and those
with non-diverse portfolios. The statutory inquiry, after all, is
manufacturer-specific, not drug-specific. See 42 U.S.C.
§ 1395w-114c(g)(2)(A), (g)(4)(B)(ii)(I), (g)(4)(C)(ii)(I)
(beginning the inquiry by asking whether an entity is “a
manufacturer of an applicable drug”); id. § 1395w-
114c(g)(4)(C)(ii) (referring to that entity as “the manufacturer”
or “such manufacturer”).

Third, Servier directs this court to a provision that forbids
one manufacturer from retaining its specified-small-
manufacturer status “if [it] is acquired after 2021 by another
manufacturer that is not a specified small manufacturer,” 42
U.S.C. § 1395w-114c(g)(4)(C)(ii)(III). See Servier Opening
Br. 46. Servier argues that the absence of an identical provision
for acquisitions occurring in 2021 implies that there is no
restriction on transfers of status within that year.

That hardly gets Servier where it wants to go. Servier,
after all, does not argue that the portion of Agios it acquired
qualified for and should have retained small-specified-
manufacturer status. Nor does Servier develop any argument
that Agios’s specified-small-manufacturer status (if any)

would have transferred automatically to Servier upon
acquisition. Certainly nothing in the text suggests that.

That does not mean that acquisitions that occurred in 2021
are always irrelevant. Under the statutory text, their import will
depend on what actions the acquiring entity took in 2021 with
regard to the actual manufacture of the acquired drug and its
Part D sales.

Fourth, Servier points out that adopting its reading would
not create perverse incentives for manufacturers that do not
qualify as small to try to game the system by acquiring other
drugs or entities because qualification for the exception is
timebound to events in 2021. See Servier Opening Br. 34–35.
That may be. But this court’s job is to hew to Congress’s text,
not to freelance one-off exceptions under a no-harm, no-foul
theory of statutory construction.

Taking a different tack, Servier argues that it was, as a
matter of law, the manufacturer of the Tibsovo tablets sold
under Part D in 2021 because it (i) owned Tibsovo’s NDA,
(ii) performed quality control of Tibsovo tablets created by
Agios, and (iii) updated Tibsovo’s labeling. Servier Opening
Br. 36–48. Servier offers to submit evidence on remand of
these activities, along with evidence that it, in fact, created at
least one Tibsovo tablet sold under Part D in 2021. Id. at 16–
17, 41, 53 n.3; Servier Reply Br. 31–32 & n.1. A number of
these arguments are forfeited, and those that are not run
headlong into contrary statutory text.

Servier argues that its mere ownership of Tibsovo’s NDA
means that it “propagated” the drug because “no other
manufacturer * * * could introduce Tibsovo into interstate
commerce without Servier’s permission.” Servier Opening Br.
36–37, 41. Servier emphasizes that, as the NDA holder, it
assumed all “rights and responsibilities” for Tibsovo. Id. at 36–
41.

While the government contends that this argument was not
preserved below, the record shows otherwise. See, e.g., J.A.
111 (Servier arguing to CMS that it had “misunderst[ood]”
Servier’s “ownership of Tibsovo” and that Servier “acquired
responsibility” for manufacturing Tibsovo in April 2021);
Servier Mot. for Summ. J. at 13, ECF No. 8-1 (arguing that
“Servier owned Tibsovo beginning on April 1, 2021”); Mot.
Hr’g Tr. 11:9–12:23, ECF No. 21 (arguing that “all that has to
be * * * determined is who owns the economic interest [when]
expenditures occurred, who was the holder of the NDA?”).
The district court, in fact, ruled on the issue and rejected
Servier’s arguments based on the ordinary meaning of
“propagate” and the noscitur a sociis canon of statutory
construction. Servier, 2025 WL 27352, at *17.

Having won the forfeiture battle, Servier nonetheless loses
the interpretive war.

First, the ordinary meaning of “propagate” has to do with
an increase in number or amount. See, e.g., Propagate,
W
EBSTER’S THIRD NEW INTERNATIONAL DICTIONARY 1817
(3d ed. 2002) (“to cause to continue or increase by natural
reproduction”; “to cause to spread out and affect a greater

number or greater area”; “to reproduce or accomplish incidence
of elsewhere”); Propagate, OXFORD ENGLISH DICTIONARY (3d
ed. revised 2007) (“to cause * * * to reproduce or multiply”;
“to produce (a new individual) by natural processes from a
parent stock, seed, etc.”).

Servier’s focus on the legal rights it possesses or the legal
obstacles it removed bears no resemblance to propagate’s
ordinary meaning. Nothing about Servier’s mere ownership of
Tibsovo’s NDA caused the stock of previously manufactured
Tibsovo tablets that it purchased to “increase” in number.

Second, Section 1395w-114c specifies how a
manufacturer can propagate a drug: “either directly or
indirectly by extraction from substances of natural origin, or
independently by means of chemical synthesis, or [both].” 42
U.S.C. § 1395w-114c(g)(5). That language refers to the
physical creation of the drug, not to paper title or legal
oversight.

Third, the “neighboring words” confirm that Congress
meant what it said. Learning Res., Inc. v. Trump, 146 S. Ct.
628, 643 (2026); see Dubin, 143 S. Ct. at 1570 (A term “should
be read in a similar manner to its companions.”). Here, the
words accompanying “propagate” all encompass means of
physically creating or reproducing the drug itself. “Produce”
means “to cause to have existence or to happen”; “to give
being, form, or shape to” or to “make” or “manufacture[.]”
M
ERRIAM-WEBSTER’S COLLEGIATE DICTIONARY 991 (11th ed.
2020). “Prepare” means “to put together” or to “compound[.]”
Id. at 980. “Compound” means “to put together (parts) so as to
form a whole[,]” to “combine[,]” or “to form by combining
parts[.]” Id. at 255. “Convert” means “to alter the physical or
chemical nature or properties of esp[ecially] in
manufacturing[.]” Id. at 273. Finally, “process” means “to

subject to a special process or treatment (as in the course of
manufacture * * *)[.]” Id.

All of those meanings give effect to Congress’s textual
focus on who physically created and manufactured the pills
provided to Part D patients. None of them share Servier’s focus
on post-manufacture ownership or legal authority. Cf. United
States v. Fields, 53 F.4th 1027, 1049 (6th Cir. 2022) (“When
used in connection with a word like * * * ‘drug,’ the words in
[21 U.S.C. § 802(15)]”—“production, preparation,
propagation, compounding, or processing”—“connote * * *
the creation of a final product from component ingredients[.]”);
id. at 1049 n.14 (collecting definitions).

Fourth, when Congress wants to cast a wider net, it knows
how to do so. The Drug Price Negotiation Program was
enacted on the same day and in the same Public Law as the
Manufacturer Discount Program. See 136 Stat. at 1833–1854.
In the Drug Price Program, Congress defined “manufacturer”
by incorporating a statutory definition that is identical to the
Manufacturer Discount Program’s definition except that
Congress added entities engaged “in the packaging,
repackaging, labeling, relabeling, or distribution of
prescription drug products” to the former definition. 42 U.S.C.
§ 1320f(c)(1) (referencing 42 U.S.C. § 1395w-3a(c)(6)(A),
which references 42 U.S.C. § 1396r-8(k)(5)). That definition
is no doubt more to Servier’s liking. But it is not the definition
Congress chose for the Manufacturer Discount Program at
issue here.
2

2
For that same reason, Servier’s reliance on the broader
definition of manufacturer in CMS’s guidance under the Drug Price
Negotiation Program is beside the point. See Servier Opening Br.
43; see also Loper Bright, 144 S. Ct. at 2273. Similarly irrelevant is
a Medicaid Drug Rebate Program regulation interpreting the Drug

Servier’s counterarguments do not change the outcome.

First, Servier contends that the statute’s exclusion of
“wholesale distributor[s]” and “retail pharmac[ies]” from the
definition of “manufacturer,” 42 U.S.C. § 1395w-114c(g)(5),
means that Congress understood the term “manufacturer” to be
broad enough to incorporate those entities, Servier Opening Br.
41–42. Not at all. Congress’s choice to be extra clear as to
some entities does not change the ordinary meaning of the
underlying definition, especially when context and structure so
resoundingly confirm Congress’s meaning, as they do here.
See Atlantic Richfield Co. v. Christian, 140 S. Ct. 1335, 1350
n.5 (2020) (Congress may “employ[] a belt and suspenders
approach” to carry out its aims.).

Second, Servier points to a regulation promulgated by
CMS as part of the Medicaid Drug Rebate Program as reading
“manufacturer” to include the NDA owner. Servier Opening
Br. 43–44. That regulation is of no help to Servier. For one, it
interprets a materially different statutory definition of
manufacturer. See 42 U.S.C. § 1396r-8(k)(5). For another, it
provides only that, for “authorized generic products, the term
‘manufacturer’ will also include the original holder of the
NDA.” 42 C.F.R. § 447.502 (emphases added). Tibsovo is not
a generic.

Price Program’s broader definition of manufacturer. See Servier
Opening Br. 43–44 (citing 42 U.S.C. § 1396r-8(k)(5); 42 C.F.R.
§ 447.502).

Next, Servier offers to provide evidence that it “performed
manufacturing activities” for some of the Tibsovo stock that
was dispensed in the Part D program in 2021. Servier Opening
Br. 53 n.3; Servier Reply Br. 31–32 & n.1.

Servier does not explain what it means by “manufacturing
activities.” If Servier is referring to its possession of legal
rights or wielding of legal responsibilities for Tibsovo, that
evidence would be irrelevant.

To the extent Servier is arguing instead that it in fact
created tablets dispensed under Part D in 2021, Servier told
CMS the opposite. J.A. 112 (“Servier continued to sell
TIBSOVO labeled with the Agios labeler code * * * from April
1, 2021 to February 13, 2022, after which Servier sold
TIBSOVO under its own labeler code.”) (emphasis added); see
id. (“TIBSOVO was still being sold by Servier * * * with
Agios’ labeler code from April 1, 2021, through the end of
2021[.] * * * Servier first released finished product to [the]
Servier supply chain with the Servier labeler code beginning in
October 2021, and such product was first sold in the U.S. on
February 14, 2022.”).

Servier also told the district court the opposite. See J.A.
128 (Q: “But [Servier] didn’t sell any of the drug that itself
manufactured in 2021; correct?” A: “No. * * * [W]hen
Servier acquired ownership of the drug, it also acquired
existing inventory of TIBSOVO that it sold into the
marketplace over the remaining nine months of 2021.”); see
also Servier Mot. for Summ. J. at 15 (stating that “the Tibsovo
it sold in 2021 displayed the legacy codes from” Agios, and
that Servier “sold that acquired inventory” in 2021). Servier’s
representations led the district court to find as undisputed fact

that Servier-manufactured Tibsovo was “first sold in the United
States on February 14, 2022.” Servier, 2025 WL 27352, at *7
n.9; see also id. at *10, *12, *13 (similar).

It is too late for Servier to change its factual story now. Cf.
District of Columbia v. Air Fla., Inc., 750 F.2d 1077, 1084
(D.C. Cir. 1984) (“[I]ssues and legal theories not asserted at the
District Court level ordinarily will not be heard on appeal.”).

Servier’s effort to get around forfeiture by pointing to
CMS’s binding guidance for a “recalculation request”—a
request for reconsideration of CMS’s denial of specified-small-
manufacturer status—fails. The guidance is explicit that
manufacturers may request a recalculation by “describ[ing] the
issue(s) forming the basis of the request for recalculation, and
includ[ing] or describ[ing] any relevant supporting
information.” J.A. 57 (emphasis added).

Servier then argues that issue exhaustion is non-
jurisdictional in this case, and so it was not required to exhaust
this factual assertion in the informal agency proceeding. See
Servier Reply Br. 13–20. Maybe. But the argument is still
forfeited for failure to raise the issue—in fact, for having
argued the opposite—in district court.

Servier has forfeited its remaining arguments that it
manufactured the tablets of Tibsovo dispensed under Part D in
2021 by performing quality control of, and updating the label
for, those tablets.

First, Servier cursorily asserts in one sentence that it
“prepared” and “processed” Tibsovo by engaging in “quality
control” of Tibsovo tablets created by Agios before they were

bottled and distributed. Servier Opening Br. 40–41. But
whenever Servier brought up quality control before the agency
or the district court, it was in support of a different argument—
that Servier had manufactured Tibsovo because it bore
“ownership responsibilities” for the quality control and safety
of the drug. Mot. Hr’g Tr. 60:7–11; see also, e.g., J.A. 112
(arguing in recalculation request that Servier “took over the
manufacture and quality control” of Tibsovo after the
acquisition); Mot. Hr’g Tr. 59:19–60:11 (same); Servier Opp.
to CMS Cross-Mot. for Summ. J. at 9, ECF No. 15 (same). Its
effort to repackage that argument here is forfeited.

Second, the same forfeiture problem dooms Servier’s other
factual argument that it “prepared” and “processed” Tibsovo
because it obtained FDA approval for a new indication (a new
use) of Tibsovo and updated its label accordingly. Servier
Opening Br. 16–17. Servier points out that the Final Guidance
treats entities that relabel or repackage products as
manufacturers. See J.A. 83 (defining “manufacturer” to
include “entities otherwise engaged in repackaging or changing
the container, wrapper, or labeling of any applicable
drug * * *”).

But Servier never informed the agency or the district court
that it had updated Tibsovo’s label, nor argued that there was
any legal significance to this fact. See J.A. 111–115; (Servier
Recalculation Request); J.A. 122–123 (email to CMS). See
generally Servier Mot. for Summ. J.; Servier Opp. to CMS
Cross-Mot. for Summ. J. The district court relied on that
omission: “Servier did not relabel or repackage Agios’s stock
of Tibsovo[.]” Servier, 2025 WL 27352, at *16.

* * * * *

In sum, CMS properly determined that Servier was not a
specified small manufacturer under the Manufacturer Discount
Drug Program because Servier has not shown that it “produced,
prepared, propagated, compounded, converted, or processed”
any units of Tibsovo dispensed to a Part D patient in 2021. 42
U.S.C. § 1395w-114c(g)(4)(C)(ii)(I)–(II).

We turn next to Servier’s arguments that CMS’s use of
labeler codes to identify the “manufacturer” of a drug was
arbitrary and capricious. Servier is incorrect.

This court’s scope of review under the arbitrary and
capricious standard is “narrow[,]” and we cannot “substitute
[our] judgment for that of the agency.” Motor Vehicle Mfrs.
Ass’n of the U.S. v. State Farm Mut. Auto. Ins. Co., 463 U.S.
29, 43 (1983). We set aside agency action only if “the agency
has relied on factors which Congress has not intended it to
consider, entirely failed to consider an important aspect of the
problem, offered an explanation for its decision that runs
counter to the evidence before the agency, or is so implausible
that it could not be ascribed to a difference in view or the
product of agency expertise.” Id. The agency “must examine
the relevant data and articulate a satisfactory explanation for its
action[.]” Id.

Servier accuses CMS of both relying on flawed data and
failing to explain the decision to use only labeler codes as a
proxy for the “manufacturer” of a drug. Servier Opening Br.
48–54. Servier points out that (1) the statute does not mention
the term “labeler code,” (2) the Guidance said that CMS would
consider “‘ownership information submitted by

manufacturers[,]’” and (3) CMS has determined in other
related programs that a “manufacturer” includes an NDA
holder. Id. at 48–51 (quoting J.A. 55).

By way of reminder, a drug’s labeler code is a unique
identifier that the FDA assigns to “[e]ach person who engages
in manufacturing, repacking, relabeling, or private label
distribution of a drug[.]” 21 C.F.R. § 207.33(c)(1).

Turning to the merits, Servier makes no argument as to
why labeler-code data is ill-suited to the task of identifying the
manufacturer. Quite the opposite. Servier agrees that “labeler
codes may accurately reflect the statutory ‘manufacturer’ of the
drug in question in most cases[.]” Servier Opening Br. 50; see
also id. at 30 (acknowledging that the use of labeler codes
would be accurate in any case without a mid-year change in
ownership). As it must since that is a key purpose of the labeler
code. See 21 C.F.R. § 207.33(c)(1) (“Each person who
engages in manufacturing[] * * * of a drug * * * must apply for
[a National Drug Code] labeler code[.]”).

Servier’s real beef is with CMS’s explanation of its
decision to stick with labeler-code data despite the change in
ownership from Agios to Servier. That objection fails because
ownership is not relevant to the specified-small-manufacturer
status that Servier seeks. See Sections III.A, III.B.1, supra. See
generally 5 U.S.C. § 706 (In reviewing agency action under the
arbitrary and capricious standard, we take “due account * * *
of the rule of prejudicial error.”). Because this court has
decided what the statute means as a matter of law, there is no
more explanation for the agency to give. See Loper Bright, 144
S. Ct. at 2273; cf. Centro de Trabajadores Unidos v. Bessent,
167 F.4th 1218, 1237 (D.C. Cir. 2026) (“Once the court
determines the meaning of [a statute], there is no reason to seek
an agency’s explanation as to why it may have changed its view

on the meaning of the statute. The court’s judgment is the final
word.”).

Servier insists that its arbitrary-and-capricious challenge is
not a “purely legal challenge.” Servier Opening Br. 51. But
Servier fails to identify any factual issue that the agency had in
front of it and left unresolved. See Servier Opening Br. 51–53,
53 n.3 (referencing only forfeited factual issues).

Lastly, Servier accuses CMS of acting arbitrarily and
capriciously by failing to consider “that labeler codes do not
indicate the physical makers of drugs, which often are
produced by contract manufacturing organizations and
distributed by private label distributors.” Servier Opening Br.
54–55 (emphasis omitted). Servier also argues that CMS
treated it differently from a similarly situated party, Agios,
because the two companies stand in the same relation to
Tibsovo: Both engaged contract manufacturing organizations
to produce tablets of Tibsovo in 2021, yet only Agios can count
Tibsovo sales towards its total expenditures for specified-
small-manufacturer purposes. Servier Opening Br. at 56–57.

As to the former argument, it was entirely reasonable for
CMS to attribute Tibsovo tablets created at Agios’s direction
to Agios because that direction is an intrinsic part of the
manufacturing process. After all, it is “common practice in the
drug industry to contract out the performance of certain
manufacturing operations” to contractors. See 21 C.F.R.
§ 201.1(d). Attribution of those contractors’ actions to their
principal comports with ordinary conceptions of agency law.
See Saba v. Compagnie Nationale Air France, 78 F.3d 664, 670
n.6 (D.C. Cir. 1996) (“[T]he acts of an agent * * * can be
attributed to its principal[.]”); McKesson Corp. v. Islamic

Republic of Iran, 52 F.3d 346, 351 (D.C. Cir. 1995) (Whether
“Iran exercised sufficient control over Pak Dairy to create a
relationship of principal to agent” determines whether Pak
Dairy’s actions “were attributable to Iran.”) (formatting
modified); R
ESTATEMENT (THIRD) OF AGENCY LAW, ch. 2
intro. note (Oct. 2024 update) (describing the “bases on which
the common law of agency attributes the legal consequences of
one person’s action to another person”).

As to the latter argument, CMS did not treat like entities
differently. The agency consistently attributed Tibsovo tablets
created at Agios’s direction to Agios, and Tibsovo tablets
created at Servier’s direction to Servier. Servier’s problem
arises not from any asymmetrical treatment, but rather from the
timing of its manufacture and sale of Tibsovo into the Part D
program. Agios-manufactured Tibsovo was dispensed under
Part D in 2021—the timeframe that counts—while Servier-
manufactured Tibsovo was not.

For the foregoing reasons, we affirm the district court’s
grant of summary judgment for Robert F. Kennedy, Jr., as
Secretary of Health and Human Services, and Mehmet Oz, as
Administrator for CMS.

So ordered.

Servier Pharmaceuticals LLC v. ROBERT F. KENNEDY, JR. et al.

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