Astra USA, Inc. v. Santa Clara Cnty., Cal
In Astra USA, Inc. v. Santa Clara Cnty., Cal., U.S. 131 S.Ct. 1342, 1347, 179 L.Ed.2d 457 (2011), a program created by a federal statute imposed limits on prices that drug manufacturers could charge healthcare facilities for medications. 131 S.Ct. at 1345.
Drug manufacturers wishing to participate in state Medicaid systems had to enroll in this federal program. Id.
To enroll, the drug manufacturers signed "form" contracts with the Department of Health and Human Services ("HHS") that "simply incorporated statutory obligations." Id. at 1348.
One statutory provision in the federal program provided for compensation to healthcare facilities overcharged by the drug manufacturers. Id. at 1347.
Some healthcare facilities, believing they were overcharged for drugs, sued drug manufacturers under this federal statutory scheme. Id.
Specifically, the healthcare facilities alleged that the overcharging constituted a breach of the manufacturers' enrollment contracts and that the facilities, as third-party beneficiaries of those contracts, could recover damages. Id. at 1347
Despite acknowledging that the enrollment contracts specifically named the healthcare facilities as recipients of the drugs and that the very purpose of these agreements was to ensure that these facilities were not overcharged, the Supreme Court declined to accord the plaintiffs intended third-party beneficiary status. Id. at 1347-48.
Instead, the Court held that suits filed by the statutorily-protected healthcare facilities to enforce the enrollment contracts were "incompatible with the statutory regime." Id. at 1345.
In reaching this conclusion, the Court emphasized that Congress placed the Secretary of HHS in control of the drug pricing scheme, not the healthcare facilities. Id. "HHS's control could not be maintained were potentially thousands of healthcare facilities permitted to bring suits alleging errors in manufacturers' price calculations." Id.
"If the healthcare facilities may not sue under the statute, it would make scant sense to allow them to sue on a form contract implementing the statute, setting out terms identical to those contained in the statute." Id.
Indeed, the Court reasoned that "the absence of a private right to enforce ... would be rendered meaningless if the healthcare facilities could overcome that obstacle by suing... instead." Id. at 1348.
Under Astra, the fact that a private entity stands to benefit financially from a statutory scheme does not necessarily make it an intended third-party beneficiary of contracts operating within that scheme where no statutory private right of action exists.