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        IN THE UNITED STATES COURT OF APPEALS
                 FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                 Fifth Circuit

                                                                  FILED
                                                                 May 1, 2013

                                 No. 12-40097                    Lyle W. Cayce
                                                                      Clerk

SOUTHWEST PHARMACY SOLUTIONS, INCORPORATED, doing business
as American Pharmacies,

                                           Plaintiff-Appellant
v.

CENTERS FOR MEDICARE AND MEDICAID SERVICES; DONALD M.
BERWICK, solely in his official capacity as Administrator of The Centers for
Medicare and Medicaid Services; KATHLEEN SEBELIUS, Secretary of the
United States Department of Health and Human Services, solely in her
official capacity; UNITED STATES DEPARTMENT OF HEALTH AND
HUMAN SERVICES,

                                           Defendants-Appellees



                 Appeal from the United States District Court
                      for the Southern District of Texas




Before WIENER, CLEMENT, and PRADO, Circuit Judges.
EDITH BROWN CLEMENT, Circuit Judge:
      The sole issue on appeal is whether the district court properly dismissed
Southwest Pharmacy Solutions’s claim for lack of subject matter jurisdiction.
While 42 U.S.C. § 405(h) clearly requires a plaintiff to exhaust administrative
remedies before filing a claim in federal court, the Supreme Court has provided
a narrow exception to this rule in Shalala v. Illinois Council on Long Term Care,
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                                 No. 12-40097

Inc., 

, 17–20 (2000). Southwest argues that its claim falls within this
exception and therefore was dismissed erroneously.           However, caselaw
interpreting the application of § 405(h) to Medicare claims emphasizes that the
Illinois Council exception is extremely narrow and appropriately applied only in
cases where judicial review would be entirely unavailable through the prescribed
administrative procedures. As Southwest has not carried its heavy burden of
showing that the Illinois Council exception applies, we AFFIRM the district
court’s order dismissing the suit.


                       FACTS AND PROCEEDINGS
      1. Medicare Part D
      In 2003, Congress enacted the Medicare Prescription Drug, Improvement,
and Modernization Act of 2003 (“Medicare Part D”). Pub. L. 108–173, codified
at 42 U.S.C. §§ 1395w-101, et seq. Appellee Centers for Medicare and Medicaid
Services (“CMS”) is the agency within the Department of Health and Human
Services (“DHHS”) that is charged with the administration of the Medicare
Program. Among other things, Medicare Part D added a new prescription drug
benefit to the Medicare Program. Individuals eligible for Medicare but not
enrolled in a separate Medicare Advantage Plan can obtain prescription drug
benefits through a Prescription Drug Plan (“PDP”).
      Medicare Part D requires PDPs to permit enrollees to fill prescriptions at
“any willing pharmacy,” which includes “any pharmacy that meets the terms and
conditions under the plan.” 

However, under the
regulations promulgated pursuant to the statute, the Preferred Pharmacy Rule
(“PPR”) allows PDPs to charge enrollees different copayment amounts based on
the pharmacy where they choose to have their prescriptions filled. 42 C.F.R. §
423.120(a)(9) (“A Part D sponsor . . . may reduce copayments or coinsurance for
covered Part D drugs obtained through a preferred pharmacy relative to the

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copayments or coinsurance applicable for such drugs when obtained through a
non-preferred pharmacy.”).
       Although the PPR has been in effect since 2006, the first PDP to establish
a preferred pharmacy network was the Humana Walmart-Preferred Rx Plan
(“Walmart Plan”) in 2011. The Walmart Plan designates Walmart-owned
pharmacies as “preferred” and greatly reduces the copayments and coinsurance
required at these pharmacies as compared to the copayments and coinsurance
required at other, non-preferred pharmacies.
       2. The Present Lawsuit
       Southwest Pharmacy Solutions, Inc. (“Southwest”) is a coalition of
independent pharmacies operating in Texas, Arkansas, Louisiana, New Mexico,
Oklahoma, Missouri, Mississippi, and Tennessee. Southwest filed this suit in
district court on July 11, 2011 against CMS. Southwest alleged that the PPR
allows a PDP to create a scheme that excludes independent pharmacies from
participating in preferred pharmacy networks in direct contravention of the “any
willing pharmacy” requirement. 42 U.S.C. § 1395w-104(b)(1)(A).1 CMS moved
to dismiss Southwest’s claim for lack of subject matter jurisdiction.
       In its motion to dismiss, CMS argued that the district court was precluded
from exercising jurisdiction over claims arising under the Medicare statute
unless such claims were first channeled through the administrative review
process. 

Section 405(h) provides that “[n]o action against the
United States . . . or any officer or employee thereof shall be brought under
section 1331 or 1346 of Title 28 to recover on any claim arising under this
subchapter.”2 

“[t]his means that §1331 (federal question)
jurisdiction is categorically unavailable for claims arising under the Medicare

       1
           At the time this suit was filed, the Walmart Plan remained the only PDP in operation.
       2
        Section 405(h) of the Social Security Act has been adopted and incorporated into the
Medicare Act. 42 U.S.C. § 1395ii; see Ill. 

.

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Act.” GOS Operator, LLC v. Sebelius, 

, 1222 (S.D. Ala.
2012). Instead, any claims arising under the Medicare Act must be brought
before DHHS prior to seeking judicial review of those claims under § 405(g).
      In response to this argument, Southwest maintained that the district court
had jurisdiction under Illinois Council, which provides a narrow exception to
§ 405(h) where “the Medicare Act offers no avenue for review of a particular
category of statutory or constitutional claims.” Council for Urological Interests
v. Sebelius, 

, 708 (D.C. Cir. 2011). The district court disagreed and
granted CMS’s motion to dismiss after finding that the Illinois Council exception
to § 405(h) did not apply. Southwest timely appeals.


                          STANDARD OF REVIEW
      This Court reviews de novo a district court’s dismissal for lack of subject
matter jurisdiction. Nat’l Athletic Trainers’ Ass’n v. U.S. Dept. of Health &
Human Servs., 

, 502 (5th Cir. 2006).


                                  ANALYSIS
      Title 42 U.S.C. § 405(h), which is incorporated into the Medicare Act by
42 U.S.C. § 1395ii, “severely restricts the authority of federal courts [to hear
claims arising under the Medicare Act] by requiring [that] ‘virtually all legal
attacks’ under the Act be brought through the agency.” Physician Hosps. of Am.
v. Sebelius, 

, 653 (5th Cir. 2012) (quoting Ill. 

). Although the Supreme Court in Illinois Council acknowledged
that this channeling requirement comes “at a price, namely, occasional
individual delay-related hardship,” it nonetheless determined that:
         In the context of a massive, complex health and safety
         program such as Medicare, embodied in hundreds of pages of
         statutes and thousands of pages of often interrelated


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         regulations, any of which may become the subject of a legal
         challenge in any of several different courts, paying this price
         may seem 

. The “net effect of § 405(h) is that it ‘demands the channeling of
virtually all legal attacks through the agency,’ thereby assuring the Secretary
[of the DHHS] ‘greater opportunity to apply, interpret or revise policies,
regulations, or statutes without possibly premature interference by different
individual courts.’” GOS 

(quoting Ill. 

).
      In Illinois Council, the Supreme Court created a very narrow exception to
the channeling requirement “where application of § 405(h) would not simply
channel review through the agency, but would mean no review at 

. Under this exception, a party may file a claim under the
Medicare Act in federal court without first bringing it before the DHHS if
further postponement of judicial review would have the effect of foreclosing
judicial review entirely. See 

other words, § 405(h) does not serve
as a jurisdictional bar where the party challenging a regulation shows that
“hardship likely found in many cases turns what appears to be simply a
channeling requirement into complete preclusion of judicial review.” 

fact that a plaintiff would suffer great hardship if forced to proceed
through administrative channels before obtaining judicial review is insufficient
to warrant application of the Illinois Council exception. See Physician 

(noting that the Supreme Court’s language in Illinois Council
“requires that a party go beyond showing its own hardship and indicate that the
difficulty it encounters is sufficiently widespread as to threaten the loss of any
judicial review”).   Instead, a plaintiff must demonstrate “either a legal
impossibility that any claimant would obtain judicial or administrative review,


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                                 No. 12-40097

or hardship from administrative channeling that was ‘sufficiently widespread’
to threaten the loss of any judicial review.”     Vertos Med. Inc. v. Novitas
Solutions, Inc., No. H-12-3224, 

, at *6 (S.D. Tex. Nov. 27,
2012). The second criterion applies only “when there [is] no third party with an
interest and a right to seek administrative review. If [third parties have] an
incentive, and [are] properly aligned to bring an administrative challenge, the
[plaintiff’s] inability or difficulty would not trigger the Illinois Council
exception.” Id. (citing Physicians 

–58).
      Southwest provides three primary reasons why channeling its claims
through the administrative process would effectively result in a total loss of
judicial review: (1) Southwest would be foreclosed from appealing an adverse
administrative decision in federal court since a claim challenging the PPR would
likely be characterized by CMS as a grievance rather than a coverage dispute;
(2) Southwest could not bring a claim challenging the PPR either directly or
through its enrollees as proxies since the enrollees would not have sufficient
financial incentive to vigorously pursue the regulatory challenge; and, (3) even
assuming Southwest could bring a claim through its enrollees, those enrollees
would not be able to satisfy the statutory amount-in-controversy requirement.
      A. Classification of Southwest’s Claim
      Under the Medicare Part D regulations, only claims that CMS has
characterized as “coverage determinations,” as opposed to “grievances,” are
appealable to the federal courts after being channeled through the
administrative review process. See 42 C.F.R. § 423.562(b). Claims that are
characterized as grievances do not receive either administrative or judicial
review. See id.; see also 

A “coverage determination” is defined
as including a “decision on the amount of cost sharing for a drug.”           

A “grievance,” on the other hand, includes “any complaint or
dispute, other than one that involves a coverage determination, expressing

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dissatisfaction with any aspect of the operations, activities, or behavior of a Part
D plan sponsor, regardless of whether remedial action is requested.” 

      According to Southwest, any claim challenging the PPR would be treated
as a grievance rather than a coverage determination by CMS and thus would not
be subject to judicial review. Southwest continues to press this point even
though CMS submitted a declaration written by Anthony Culotta, the Director
of Medicare Enrollment and Appeals Group at CMS, to the district court,
admitting that an enrollee’s complaint regarding the disparity in copayments or
coinsurance between preferred and non-preferred pharmacies would be treated
as a coverage determination (the “Culotta Declaration”). Southwest’s refusal to
accept CMS’s interpretation of a coverage determination stems from its
speculation that CMS has adopted this interpretation solely to advance its
position in the instant litigation and its contention that the interpretation
conflicts with CMS’s past practices.
      Generally, we defer to an agency’s interpretation of its own regulations
absent plain error or inconsistency with those regulations. See Auer v. Robbins,

, 461 (1997). While we have declined to extend deference under
Auer to an agency’s “interpretation [that] is a novel litigating position ‘wholly
unsupported by regulations, ruling, or administrative practice,’” Tex. Clinical
Labs Inc. v. Sebelius, 

, 777 (5th Cir. 2010) (quoting Brown v.
Georgetown Univ. Hosp., 

, 212 (1988)), that is not the case here.
Southwest has not provided any evidence that CMS has previously applied the
Medicare Part D regulations in a manner inconsistent with its proffered
interpretation—in fact, CMS has not even had the opportunity to characterize
a challenge to the PPR as a grievance rather than a coverage determination.
Absent such an inconsistency, we decline to hold that the agency’s interpretation
“is merely a litigating position” rather than a “fair and considered judgment on

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the matter in question.” 

). This is
simply not a case where the agency’s interpretation is so lacking in the
“hallmarks of thorough consideration” that we should decline to grant it Auer
deference. Christopher v. SmithKline Beecham Corp., 

, 2169
(2012).
      Southwest has also failed to convince us that CMS’s interpretation is
merely a “post hoc rationalization advanced by an agency seeking to defend past
agency action against attack.” 

omitted) (quoting 

). As CMS has yet to characterize a claim challenging the PPR
as either a grievance or a coverage determination, there is no past action to
defend. Moreover, unlike previous cases where courts have declined to defer to
an agency’s interpretation when doing so would impose liability, see, e.g., 

invoke the [agency’s] interpretation of ambiguous regulations
to impose potentially massive liability on respondent for conduct that occurred
well before that interpretation was announced.”), or unfair surprise, see, e.g.,
Long Island Care at Home, Ltd. v. Coke, 

, 171 (2007) (“[A]s long as
interpretive changes create no unfair surprise . . . the change in interpretation
alone presents no separate ground for disregarding the Department’s present
interpretation.”), on a party without sufficient warning, CMS’s interpretation in
fact benefits Southwest by promising to allow its challenges to the PPR to
proceed as coverage determinations rather than grievances.             Nor is this
conclusion undermined by the fact that CMS advanced this position in a
document drafted in response to the present litigation, see 

171;
Tex. Clinical 

, or by the fact that CMS is a party to this
case, see generally Tex. Clinical Labs, 

.
      As Southwest has not shown that CMS’s interpretation of its own
regulations is merely a litigating position or a post hoc rationalization, we must
look to see if this interpretation is consistent with the regulatory text. See Chase

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Bank USA, N.A. v. McCoy, 

, 880 (2011) (“Because the
interpretation the [Board of Governors of the Federal Reserve System] presents
in its brief is consistent with the regulatory text, we need look no further in
deciding this case.”). Since an agency’s interpretations “are creatures of its own
regulations,” CMS’s interpretations of the Medicare regulations are “controlling
unless plainly erroneous or inconsistent with the regulations being interpreted.”
Castellanos-Contreras v. Decatur Hotels LLC, 

, 409 (5th Cir. 2010)
(citing Long Island Care at 

). CMS’s interpretation of the
Medicare Part D regulations’ characterization of claims as coverage
determinations or grievances is neither plainly erroneous nor inconsistent with
the text of the regulations.3 Southwest has not given us a compelling reason to
doubt CMS’s explicit commitment to characterize claims challenging the PPR as
coverage determinations that dispute the amount of cost sharing for a particular
enrollee purchasing a particular drug.4




       3
         Several provisions in the regulations and CMS’s Medicare Prescription Drug Benefit
Manual support this interpretation. A coverage determination includes, for example, a
“decision not to provide or pay for a Part D drug (including a decision not to pay because the
drug is not on the plan’s formulary, because the drug is determined not to be medically
necessary [or] because the drug is furnished by an out-of-network pharmacy . . . ) that the
enrollee believes may be covered by the plan.” 42 C.F.R. § 423.566. If uncertainty arises as
to whether the claim should be considered a grievance, the Manual directs the plan sponsor
to “process the complaint as a request for a coverage determination.” CTRS. FOR MEDICARE AND
MEDICAID SERVS., MEDICARE PRESCRIPTION DRUG BENEFIT MANUAL, ch. 18, § 20.2 (2013).
       4
         Although Southwest contends that the interpretation of Medicare Part D regulations
advanced in the Culotta Declaration contradicts CMS’s interpretation set forth in its
Prescription Drug Benefit Manual, supra note 3, none of the examples provided by Southwest
directly cover the hypothetical claims at issue here. Southwest’s examples from the
Prescription Drug Benefit Manual instead address situations where an enrollee contests the
characterization of a particular drug as a “non-preferred” versus a “preferred” drug, or where
an enrollee chooses between copayment and coinsurance, and not the imposition of different
prices for drugs purchased at a “non-preferred” versus a “preferred” pharmacy. Accordingly,
Southwest cannot claim that the Culotta Declaration is materially inconsistent with any
previously promulgated policies on this specific issue.

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      We find it appropriate to extend Auer deference to an agency’s
interpretation of its own regulations “where, as here, the regulation is
ambiguous as to the precise issue in contest,” Wells Fargo Bank of Tex. N.A. v.
James, 

, 494 (5th Cir. 2003) (citing 

), the
agency’s interpretation is consistent with the regulations, and there is no
indication that the interpretation was adopted to further the agency’s litigating
position. See Tex. Clinical 

. If, at some point in the future,
CMS were to refuse to process a challenge to the PPR as a coverage
determination, Southwest could reassert its right to judicial review by filing a
new claim with that new evidence. But on the evidence before us, we hold that
CMS’s interpretation of the Medicare Part D regulations, as set forth in the
Culotta Declaration, is deserving of courts’ deference. The district court did not
err in finding that the administrative process would be available to Southwest
and other similarly situated parties seeking a determination on this issue.
      B. Ability to Bring a Claim Directly or Through a Proxy
      Southwest’s second argument posits that, even if CMS were to
characterize a challenge to the PPR as a coverage determination, Southwest
would still be unable to obtain judicial review since the Medicare Part D
regulations do not allow providers to bring coverage determination claims.
See 42 U.S.C. § 1395w-104(h)(1) (“[O]nly the part D eligible individual shall be
entitled to bring [a coverage determination] appeal.”). The regulations do,
however, allow for an enrollee to appoint a representative to navigate the
appeals process on his behalf. See 42 C.F.R. § 423.566(c). Consequently, in
order to obtain judicial review of a regulatory challenge to the PPR, a provider
must seek to be appointed as the representative of an enrollee.            See 

(noting that enrollees may request judicial review of a
claim if the Medicare Appeals Council affirms an adverse Administrative Law
Judge decision). Southwest argues that, since it cannot challenge the regulation

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directly or as an assignee, its claim falls within the Illinois Council exception.
Although Southwest acknowledges that its enrollees could appoint a member
pharmacy to act as their representative in a challenge to the PPR, it maintains
that this is not sufficient to satisfy the requirement of judicial review because
representatives do not have the same rights as assignees and because the
enrollees would have little incentive to bring these claims in the first place.
      In arguing that the type of representation allowed under the Medicare
Part D regulations is inadequate, Southwest attempts to distinguish precedent
declining to extend the Illinois Council exception where a third party could bring
a claim as an assignee of the aggrieved provider. See, e.g., Am. Chiropractic
Ass’n v. Leavitt, 

, 816–17 (D.C. Cir. 2005) (finding that judicial
review was not completely foreclosed since the aggrieved chiropractors could
bring their challenge as the enrollees’ assignee). According to Southwest,
assigning rights to a provider—thereby allowing the provider to become a party
to the administrative proceeding—is not the same as merely appointing a
provider as a representative.        However, the only meaningful distinction
identified by Southwest between appointment as a representative and
assignment is that an appointment can be revoked by the enrollee whereas an
assignment cannot. Southwest provides no compelling explanation why this
minor difference leads to the conclusion that enrollees would be inadequate
proxies for pharmacies in a challenge to the PPR. And we see no reason why it
would. That a representative’s appointment can be revoked is not relevant to
whether a representative whose appointment has not been revoked can vindicate
its claim in the courts.
      Furthermore, as CMS notes, the Medicare Part D regulations would allow
Southwest’s member pharmacies to pursue these claims on behalf of their
customers    immediately     after    obtaining    authorization     from   them.
See 42 C.F.R. § 423.560 (“Unless otherwise stated [in the rules described in

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subpart M of part 423], the appointed representative has all of the rights and
responsibilities of an enrollee in . . . obtaining a coverage determination, or in
dealing with any of the levels of the [Medicare Part D] appeals process.”). The
enrollees would not have to navigate the process of bringing an administrative
claim or shoulder any of the expenses associated with that process. In this way,
Southwest could shield enrollees from the cost and inconvenience of bringing a
claim challenging the PPR, thereby making it easier to attract potential
litigants.
      Even assuming that the assignment of rights to providers by the enrollees
differs from the appointment of providers as representatives of the enrollees for
the purposes of § 405(h), Southwest has not demonstrated that the enrollees
would be ineffective or unwilling proxies. In spite of Southwest’s efforts to
compare the instant facts to those in Council for Urologicial 

(applying the Illinois Council exception where the provider’s
proposed proxies had no reason initiate the litigation), we find important
distinctions between the two cases. In Council for Urological Interests, the only
parties that could bring a challenge to the regulation at issue “were at best
neutral and at worst stood to gain from the new regulation.” Physician 

(citing Council for Urological 

). “Thus,
the third parties [in Council for Urological Interests] lacked the incentive to
bring a challenge because they were categorically misaligned with the plaintiffs.”

D.C. Circuit ultimately concluded that, “[i]n cases
where the only entities able to invoke Medicare Act review are highly unlikely
to do so, their unwillingness to pursue a Medicare Act claim poses a serious
‘practical roadblock’ to judicial review.”    Council for Urological 

.
      The facts of this case are, however, more akin to those in National Athletic
Trainers, where we held that third-party physicians were sufficient proxies for

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aggrieved athletic trainers since the physicians had adequate financial incentive
to pursue a regulatory challenge on the trainers’ 

. Like
the physicians in National Athletic Trainers, the enrollees stand to gain
financially as they could reduce their future prescription copayments or
coinsurance by challenging the PPR. See 

Southwest and the
enrollees could receive a financial benefit from overturning the PPR—albeit of
different magnitudes—and have similar incentives to initiate a regulatory
challenge.
          Moreover, precedent from this circuit and our sister circuits merely
requires that the proxies have some incentive to bring a regulatory challenge on
behalf of the aggrieved party. See, e.g., Nat’l Ath. 

(discussing economic incentives); Am. Chiropractic 

(discussing non-economic incentives). While the enrollees may not stand to gain
a fortune from challenging the PPR, they also have some non-financial stake in
the outcome of the case, as evidenced by their continued patronage of
independent pharmacies even after the introduction of the Walmart-Humana
Plan discount. There is no indication that “the absence of any relationship
between [Southwest] and the [enrollees]” would prevent an “alignment of
interests” such that the practical effect of § 405(h) would be a complete
preclusion of judicial review.5 See Council for Urological 

         The United States District Court for the Eastern District of North Carolina has
recently reached a similar conclusion, finding that the plaintiffs:
      [F]ailed to show that the interests of non-preferred pharmacies and PDP
      enrollees are so misaligned that judicial review is precluded. PDP enrollees
      have the incentive to patronize a non-preferred pharmacy for all the normal,
      non-economic reasons customers prefer one business to another, such as
      location, product selection, and customer service. . . . Furthermore, a PDP
      enrollee’s non-economic incentive to bring a challenge dovetails with the
      enrollee’s financial incentive. An enrollee patronizing a non-preferred
      pharmacy naturally would be interested in paying the lower preferred
      pharmacy co-payment for a medication and therefore would be inclined to bring
      a challenge.

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713–14. Because Southwest could shoulder the administrative and financial
burdens of bringing an administrative claim and its enrollees stand to gain some
financial or other benefit from overturning the PPR, the Illinois Council
exception does not apply.
       C. Satisfaction of the Amount-in-Controversy Requirement
       Finally, Southwest argues that, assuming its claim is characterized as a
coverage determination and assuming that it found enrollees who would allow
a member pharmacy to represent them, it still would be foreclosed from judicial
review by the amount-in-controversy requirement.                   The Medicare Part D
regulations provide that an enrollee may only obtain judicial review of an
adverse coverage determination if the enrollee has at least $1,300 in controversy.
42 C.F.R. §§ 423.1976(a)–(b), 423.2136(a); 75 Fed. Reg. 58407–01 (Sept. 24, 2010)
(setting the minimum amount in controversy as $1,300 at the time Southwest’s
complaint was filed). The amount in controversy in this case consists of the
difference in copayment or coinsurance for a particular drug at preferred
pharmacies versus non-preferred pharmacies.                  Under the regulations, an
enrollee may aggregate his claims for multiple medications in order to satisfy the
amount in controversy. 42 C.F.R. § 423.1970(c)(1). An enrollee may also
aggregate his appeal with the appeals of other enrollees in order to satisfy the
amount in controversy.6          

       However, the power to


Farmville Drug Discount, Inc. v. Sebelius, No. 4:12–CV–109–D, 

, at *9
(E.D.N.C. Mar. 27, 2013) (citations omitted).
       6
         CMS contends that the amount in controversy could also be satisfied by accounting
for an enrollee’s projected annual costs for a particular prescription drug or set of drugs. We
reject this methodology since, as Southwest notes, the projected value of an enrollee’s
prescriptions can only be used to satisfy the amount in controversy when the basis for the
enrollee’s appeal is the provider’s refusal to provide prescription drug benefits.
See 42 C.F.R. § 423.1970(b). Because a claim challenging the PPR is based on an objection to
the amount of cost sharing for a particular prescription drug, and not the refusal to provide
prescription drug benefits, the enrollees would not be able to use the projected value formula
to satisfy the amount in controversy.

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aggregate claims under this provision is limited by the requirement that all
claims be brought within 60 days of filling the prescriptions, 

423.1970(c)(2), and the requirement that the aggregated claims involve the same
prescription drugs, 

       Southwest argues that these restrictions completely preclude it from
challenging the PPR. In its brief, Southwest makes numerous calculations to
demonstrate that “it is mathematically impossible for any [single] enrollee of the
Walmart Humana-Preferred Rx Plan to reach the $1,300 amount in controversy
utilizing the differences [in copayment or coinsurance] between preferred and
non-preferred pharmacies.”          Southwest further insists that it would be
“impossible, if not virtually impossible, to have a sufficient group of individuals
submitting their administrative appeals virtually simultaneously concerning the
identical prescription drug such that they can collectively achieve the minimum
amount in controversy for judicial review.” According to Southwest, it would be
mathematically and practically impossible to find a sufficient number of
enrollees whose claims could be aggregated to satisfy the amount-in-controversy
requirement.
       The district court disagreed with this argument, citing Southwest’s failure
to refute CMS’s contention that some prescription drugs are so costly that
meeting the amount-in-controversy threshold would not be preclusively difficult
for a group of enrollees. Neither party has provided definitive calculations on
this issue; Southwest refers generally to the testimony of two pharmacists who
maintained that it would be difficult for any single individual to satisfy the
amount-in-controversy requirement, while CMS counters that Southwest need
only identify four enrollees with prescriptions for the same expensive drug who
would be willing to allow Southwest to represent them in court.7                     Both

       7
       CMS’s assertion is based on the following analysis: during the second stage of the
Walmart Plan’s prescription drug coverage (the “Initial Coverage Stage”), a single enrollee

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Southwest’s and CMS’s calculations are based on hypothetical drug costs, and
neither give any concrete estimate of how many enrollees’ claims would need to
be aggregated to reach $1,300 in controversy given a particular drug or set of
drugs.
       At the very least, both parties seem to agree that it would take multiple
enrollees who have been prescribed expensive drugs to satisfy the amount-in-
controversy requirement. Nonetheless, without more, this burden does not
warrant the application of the Illinois Council exception, which requires
complete preclusion of judicial review rather than mere postponement of review
based on hypothetical, unconfirmed difficulties in bringing a claim. See Puerto
Rican Ass’n of Physical Med. & Rehab., Inc. v. United States, 

, 49–50
(1st Cir. 2008) (declining to apply the Illinois Council exception where plaintiffs
had not attempted to bring a test case through the administrative review process
in order to challenge the regulation at issue).             Accordingly, Southwest’s
hypothetical illustration that reaching the amount in controversy would be
mathematically impossible is insufficient to trigger the Illinois Council
exception.
       Moreover, as discussed above, Southwest cannot prevail on its conclusory
assertion that “enrollee[s] [have] no incentive to engage in the collective
coordinated action necessary to aggregate all such claims to meet a minimum
amount in controversy over a single prescription drug in order to obtain judicial
review” such that the aggregation of enrollees’ claims would be a practical
impossibility. To apply the Illinois Council exception to this set of facts would


using a non-preferred pharmacy could pay up to a total of $430.10 more in co-insurance (for
either a single prescription drug or multiple prescription drugs) than an enrollee using a
preferred pharmacy. Since the Initial Coverage Stage is the only stage during which an
enrollee’s amount in controversy can increase, the maximum amount in controversy that any
single enrollee could achieve under the Walmart Plan is $430.10. Thus, it would require a
minimum of four enrollees to reach the $1,300 amount in controversy under the Medicare Part
D regulations.

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                                      No. 12-40097

open the door to a myriad of challenges based on hypothetical impossibilities.
While Southwest may ultimately be unable to successfully recruit multiple
enrollees to challenge the PPR, we should not assume that the hypothetical facts
before us would necessarily culminate in a complete preclusion rather than a
mere postponement of judicial review.8
       Southwest asks us to apply the Illinois Council exception based purely on
speculation that finding a group of enrollees who would be willing to pursue
their claims would be an impossible task. Although no enrollee or group of
enrollees has yet challenged the PPR, this does little to bolster Southwest’s
argument as the first plan promulgated under the PPR went into effect on
January 1, 2011. At the time this case was brought in district court, the
regulations had not even been in effect for a year.9 See Nat’l Athletic 

(holding that, under the circumstances of the case, one year was
not a “sufficient period of time . . . for us to infer from the lack of a challenge
that there will be no challenge”); cf. Council for Urological 

(finding that no third party had an incentive to bring a claim where there
was an absence of any administrative challenge to the regulations at issue in the
three-year period following the promulgation of those regulations). The fact that
a relatively short period of time has passed without challenge to the PPR does
not necessarily indicate that, given the appropriate information and guidance,
the enrollees could not or would not bring those claims in the future. As a result,
Southwest has not convinced us that its enrollees would be unwilling or unable



       8
          Southwest admits that it has not attempted to recruit enrollees who could aggregate
their claims in order to challenge the PPR. Such an attempt, while not always necessary to
successfully invoke the Illinois Council exception, would provide us with some concrete basis
on which to determine that obtaining judicial review would be practically impossible.
       9
        Southwest filed its original complaint in the United States District Court for the
Southern District of Texas on July 11, 2011.

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                                 No. 12-40097

to reach the amount-in-controversy threshold such that it should be granted an
exception to § 405(h)’s channeling requirement.


                               CONCLUSION
      While Southwest may have shown that it faces obstacles in finding
enrollees who would file claims challenging the PPR which would satisfy the
amount-in-controversy requirement, it has not shown that those obstacles are
insurmountable. The question asked by the Supreme Court in Illinois Council
is not whether compliance with § 405(h)’s channeling requirement would be
merely inconvenient or expensive, but instead whether it would result in a
“complete preclusion of judicial review.” Council for Urological 

. Because Southwest has failed to demonstrate that its challenge to
the PPR falls within the very narrow reach of the Illinois Council exception, we
AFFIRM the district court’s dismissal for lack of subject matter jurisdiction.




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