## Facts

- Judith M. Layzer, a Medicare Part D beneficiary with a rare ovarian cancer, was prescribed Cetrotide (cetrorelix acetate) by multiple oncologists for an off-label use supported by peer-reviewed literature and physician judgment.
- Ray J. Fisher, a Medicare Part D beneficiary with a rare muscular dystrophy with cardiac involvement, was prescribed Increlex (mecasermin) off-label to slow degeneration and restore function.
- The Secretary of Health and Human Services implemented guidance directing Part D plans to cover drugs only when (1) used for an FDA-labeled indication or (2) the off-label use was listed in specified drug compendia (the “compendia requirement”).
- Neither Cetrotide for Layzer’s cancer nor Increlex for Fisher’s condition was on the drugs’ FDA labeling or listed for those indications in the designated compendia.
- Both plaintiffs were denied Part D coverage at the plan level for failure to meet the labeling/compendia criteria and pursued administrative appeals through ALJ hearings and then the Medicare Appeals Council (MAC).
- The ALJs found medical necessity (including a finding that Cetrotide’s medical necessity for Layzer was firmly established), but the MAC denied coverage, treating medical necessity as insufficient without compendia or labeling support.
- Layzer died during the litigation and her estate representative was substituted as plaintiff.

## Issues

1. Whether the Secretary had statutory authority under Medicare Part D to make compendia listing or on-label status an exclusive condition for covering off-label drug uses.
2. Whether the coverage denials, which treated compendia silence as dispositive despite substantial medical evidence, were arbitrary and capricious under the Administrative Procedure Act.
3. Whether the Secretary’s approach was inconsistent with Medicare Part D’s purpose of providing meaningful prescription drug coverage to beneficiaries.

## Decision

- The court denied the Secretary’s Rule 12(c) motion for judgment on the pleadings and granted plaintiffs’ cross-motion.
- The court held the Secretary’s interpretation and application of Part D coverage that made compendia/on-label status exclusive gatekeepers was impermissible and unreasonable.
- The court held the denials were arbitrary and capricious because the agency failed to meaningfully consider record evidence of medical necessity and effectiveness and treated compendia silence as controlling.
- The court set aside the final agency decisions denying coverage and remanded for further proceedings consistent with the court’s interpretation.

## Legal Principles

- Agency interpretations filling statutory gaps must remain within the bounds of reasonableness and must be consistent with the statute’s text, structure, and purpose.
- Informal agency guidance may inform coverage administration, but it cannot lawfully convert a nonexclusive evidentiary reference (e.g., compendia) into an exclusive bar to coverage absent clear statutory direction.
- Under APA review, an agency acts unlawfully when it fails to consider relevant evidence in the administrative record or offers an explanation that does not account for contrary medical evidence.
- Silence in recognized drug compendia is not, by itself, evidence that an off-label use is ineffective; the agency must evaluate reliable evidence such as physician assessments and peer-reviewed literature when presented in the record.

## Conclusion

The court held that Medicare Part D coverage determinations for off-label uses cannot be denied solely because the use is neither on-label nor listed in designated compendia when substantial medical evidence supports the therapy, and it set aside the denials as arbitrary and capricious and remanded for reconsideration.


Layzer v. Leavitt, 770 F. Supp. 2d 579 (S.D.N.Y. 2011)