Full opinion text
OPINION MARSHALL, District Judge. This action challenges the validity of the Maximum Allowable Cost (MAC) regulations of the Department of Health, Education and Welfare (HEW) which establish a mechanism for limiting reimbursement or payment for multiple-source prescription drugs under federally subsidized health care programs (mainly Medicare and Medicaid). The case raises important issues concerning the authority of the defendant, Secretary of HEW, to control spiraling expenditures in federal health programs in the face of claims by the medical profession, selected patients and the drug industry, that the Secretary’s efforts violate a host of legislative enactments, procedural requirements and the Constitution. We have concluded, for the reasons hereinafter stated, that all of the objections are without merit. Accordingly, judgment will enter dismissing the action. Plaintiffs are the American Medical Association (AMA), five licensed physicians who are AMA members and who treat patients who receive Medicare and Medicaid benefits, four recipients of Medicare benefits and two Medicaid recipients. The Pharmaceutical Manufacturers Association (PMA) has intervened as a plaintiff. Defendant is the Secretary of HEW. The Commonwealth of Massachusetts and the State of Connecticut intervened as defendants. The complaint and intervening complaint allege violations of the Social Security Act, the Public Health Service Act, the Administrative Procedure Act and the Fifth Amendment to the Constitution. Jurisdiction is here under 28 U.S.C. § 1331. The case is ready for decision on a series of motions and countermotions which will be described shortly. But first we summarize the history and content of the challenged MAC regulations. I. AN OVERVIEW OF THE MAC REGULATIONS On November 15,1974 the Secretary published proposed regulations to establish a procedure for limiting reimbursement or payment for multiple-source drugs under the Medicare and Medicaid programs (42 U.S.C. § 1395 et seq. and 42 U.S.C. § 1396 et seq., respectively) and certain other federally sponsored health programs. 39 Fed.Reg. 40302. After reviewing more than 2,600 public comments on the proposal, the Secretary published the final MAC regulations on July 31,1975. They became effective on August 26, 1976. 40 Fed.Reg. 32284 (45 C.F.R. § 19.1 et seq.). The regulations undertake to reduce the cost of prescription drugs paid for by the Medicare and Medicaid programs and they provide a comprehensive scheme for the determination, application and review of cost limitations. MAC determinations are made by a Pharmaceutical Reimbursement Board, which consists of five full-time HEW employees representing the principal program areas involved in developing and implementing cost determinations. The Board begins the MAC determination process by identifying “multiple-source drugs” for which significant amounts of federal funds are being expended and for which formulators or labelers charge significantly different prices. A “multiple-source drug” is a “drug marketed or sold by two or more formulators or labelers or a drug marketed or sold by the same formulator or labeler under two or more different proprietary names or both under a proprietary name and without such a name.” 45 C.F.R. § 19.2(d). For example, the antibiotic ampicillin trihydrate is sold under a variety of trademarked brand names, including Amcill and Totacillin. 1975 Physicians’ Desk Reference at 302. After the Board identifies a multiple-source drug, it must seek advice from the Food and Drug Administration (FDA) concerning whether present FDA regulatory control will assure the marketability and bioequivalence of the proposed MAC drug. Unless the FDA advises the Board that the establishment of a MAC should be delayed or withheld, the Board proceeds to determine the “lowest unit price” at which the multiple-source drug is “widely and consistently available” on a national and, when appropriate, a local basis. The Board is required to submit this determination, together with supporting information, to the Pharmaceutical Reimbursement Advisory Committee. The Committee is composed of nine members who are not full-time employees of the federal government and who represent the areas of pharmacy, pharmacology, medicine, pharmaceutical marketing, public health, and consumer affairs. The function of the Committee is to advise the Board on the appropriateness of all proposed MAC determinations, and, upon request, to advise the Board and the Secretary on matters relating to general HEW policies and procedures, involving drug reimbursement. After considering the Committee’s advice and recommendations, the Board decides whether to propose the lowest unit price as the maximum allowable cost (MAC) for the drug. If it decides to do so, the proposed MAC is published in the Federal Register, thereby triggering provisions in the regulations which afford an opportunity for the public to respond by submitting written comments or by requesting an informal public hearing. The Board may, but need not, grant such a hearing. On the basis of the evidence and submissions, accumulated by these procedures, the Board then makes its final MAC determination and publishes notice of its decision. Once a MAC is established, reimbursement benefits for that drug under Medicare and Medicaid may not exceed the lowest of three possible computations: (1) the MAC of the drug plus a reasonable dispensing fee; (2) the acquisition cost of the drug plus a reasonable dispensing fee; or (3) the provider’s usual and customary charge to the public for the drug. Id. § 19.3(a). However, the MAC limit is not applicable to a brand of the drug “which the prescriber has certified in his own handwriting is medically necessary for that patient.” Id. § 19.3(a)(3)(i). Because of this alternative cost limitation scheme, non-multiple-source drugs, which are not covered by MACs, will nonetheless be subject to cost controls (2) or (3) as will specially prescribed “medically necessary” drugs. However, the focus of the plaintiffs’ complaint is on the MAC limitations. The regulations provide for the Board to regularly review the MAC list to assure that continued application of each MAC is justified. Moreover, any individual may make a written request that a MAC determination be revised or withdrawn. If the Board determines that substantial grounds for review exist, it is required to initiate the same procedures as those by which the MAC was initially established. II. THE PROCEDURAL HISTORY OF THE CASE The procedural history of this case is complex. The parties have filed a plethora of motions which have spawned numerous and lengthy briefs and exhibits. The Secretary answered the complaint of the six plaintiff recipients but moved to dismiss the five plaintiff physicians and the American Medical Association for lack of standing. Simultaneously, the AMA sought judgment on the pleadings on two of its claims; (1) that the MAC regulations contravene the reimbursement standards of the Social Security Act; and (2) that the regulations amount to federal supervision and control over the practice of medicine in violation of 42 U.S.C. § 1395. The AMA plaintiffs withheld from their motion several disputed procedural questions for resolution at trial. These questions concern whether the promulgation of the regulations was arbitrary, capricious and an abuse of discretion. The Secretary then moved for partial summary judgment on the same issues on which the AMA had previously sought judgment on the pleadings. Subsequently, plaintiff-intervenor PMA, an association representing 131 member drug manufacturers and distributors, filed its complaint which reiterated many of the AMA’s claims and which also raised new allegations of procedural infirmities in the MAC regulations. PMA then moved for summary judgment raising issues which, unlike the AMA’s statutory issues, are primarily factual and procedural. PMA contends in its motion that the MAC regulations (1) violate the Social Security Act and are arbitrary and capricious because the record provides no basis for the Secretary’s finding that the regulations will not impair the quality of care to Medicare and Medicaid beneficiaries, (2) are unlawful because the record provides no basis for the finding that the costs to be saved by the regulations are unnecessary in the efficient delivery of needed health services, (3) unlawfully allocate to the Food and Drug Administration authority to make determinations as to drug quality and therapeutic equivalence without adequate procedural safeguards, and (4) violate Executive Order No. 11821 which requires inflationary impact statements. Then the intervenor state defendants moved for judgment on the pleadings with respect to the two legal issues previously raised in the AMA motion, i. e., contravention of the reimbursement standards of the Social Security Act and alleged federal supervision and control over the practice of medicine. The Secretary then made his second cross-motion for partial summary judgment, this time on the four issues raised in the PMA motion. A third cross-motion for partial summary judgment by the Secretary is also pending and seeks to dispose of the remaining issues raised in the complaints. In light of (or, perhaps, despite) this tortured history, we have concluded that all of the material disputed issues have been moved upon and abundantly briefed and the case is ready for final decision on the merits. We discuss the issues in the following order: (1) plaintiffs’ standing, (2) statutory validity of the reimbursement standards, (3) supervision and control over the practice of medicine, (4) the basis for the Secretary’s findings (including drug quality and unnecessary costs), (5) the fairness of the MAC procedures, and (6) compliance with Executive Order No. 11821. III. PLAINTIFF PHYSICIANS’ AND AMA’S STANDING Before reaching the merits of the various motions, we must evaluate the standing of the AMA and the plaintiff physicians which is challenged by the Secretary’s motion to dismiss. The Supreme Court has held that the Administrative Procedure Act confers standing upon those who can show that the challenged agency action has caused them “injury in fact” and that the alleged injury is to an interest “arguably within the zone of interests to be protected or regulated” by the statutes that the agency is claimed to have violated. United States v. SCRAP, 412 U.S. 669, 686, 93 S.Ct. 2405, 2415, 37 L.Ed.2d 254 (1973). The Secretary challenges the standing of the American Medical Association and five of its member physicians solely on the ground that the allegations in the complaint are insufficient to demonstrate that these six plaintiffs will suffer any injury, economic or otherwise, as a result of the promulgation of the MAC regulations. The dispute centers on paragraph 14 of the complaint, which alleges that the MAC regulations, by limiting federal reimbursement to the cost of the least expensive multiple-source drug, effectively compel physicians to prescribe these drugs, even though they would otherwise prescribe another drug which they believe to be safer, more reliable, or more effective. This compulsion also stems from the allegation that hospitals and pharmacists will not furnish non-MAC drugs to patients, because to do so would require these providers to subsidize the added unreimbursable cost of non-MAC drugs. The AMA also alleges that the MAC regulations thereby violate 42 U.S.C. § 1395, which prohibits federal supervision or control over the practice of medicine. In his motion the Secretary contends that any alleged interference or injury to a physician’s prescribing practices is illusory, because the MAC limitation on reimbursement is inapplicable whenever the physician certifies in his own handwriting that a particular drug product is medically necessary for his patient. With the physician’s freedom thus preserved and a statutory violation avoided, the Secretary concludes that plaintiff physicians and the AMA will suffer no injury. The Secretary’s argument correctly recognizes that plaintiffs’ alleged injury is directly tied to the existence of a violation of the § 1395 prohibition on federal supervision or control of medical practice. But his arguments mistakenly focus on the existence of a statutory violation (which he denies) rather than plaintiffs’ standing to complain of the alleged violation if it exists. In arguing the merits of plaintiffs’ claim that a statutory violation exists, defendant has exceeded the scope of the inquiry raised by a standing challenge. Standing “focuses on the party seeking to get his complaint before a federal court and not on the issues he wishes to have adjudicated.” Flast v. Cohen, 392 U.S. 83, 99, 88 S.Ct. 1942, 1952, 20 L.Ed.2d 947 (1968). The relevant inquiry is whether plaintiffs have alleged an actual or threatened injury to themselves that is likely to be redressed by a favorable decision. Simon v. Eastern Ky. Welfare Rights Organization, 426 U.S. 2637-39, 96 S.Ct. 1917, 1924, 48 L.Ed.2d 450 (1976). They need not show that that decision will in fact be in their favor. Hence, plaintiffs here need not show on the standing issue that the MAC regulations violate § 1395 in order to show a cognizable alleged injury. To require otherwise would force plaintiffs to establish the validity of their claim for relief as a prerequisite to invoking federal jurisdiction. It would also violate the principle that “standing in no way depends on the merits of plaintiff’s contention that particular conduct is illegal.” Warth v. Seldin, 422 U.S. 490, 500, 95 S.Ct. 2197, 2206, 45 L.Ed.2d 343 (1975). Consequently, the only question before us is whether the complaint shows alleged unlawful conduct by the Secretary which, if established, will cause a sufficient injury to plaintiffs to satisfy standing requirements. That alleged injury consists of “supervision or control over” plaintiffs’ medical practice by effectively requiring them to prescribe only MAC-listed drugs, contrary to 42 U.S.C. § 1395. The MAC regulations will have this effect, say plaintiffs, because federal reimbursement will be limited to the least expensive MAC drugs and because hospitals and pharmacies providing drugs to patients will not furnish more costly drugs for which they cannot receive full reimbursement. Both of these rationales omit any specific allegation that plaintiff physicians or the AMA, will be financially injured by the regulations. This omission probably reflects the fact that physicians are generally not reimbursed for drug costs under Medicaid and Medicare programs, except when the drugs cannot be self-administered, are commonly provided incident to an office visit or hospital outpatient arrangement, and are reflected in the physician’s overall bill. See 42 U.S.C. §§ 1395k, 1395x(s)(2). In cases where hospitals or pharmacies provide the drugs, plaintiffs’ allegations, insofar as they suggest financial injury, are reducible to the claim that physicians will tend to prescribe MAC-listed drugs so that hospitals and pharmacies will receive full reimbursement and so that patients will not have to take up the slack. This general absence of direct financial impact partially attenuates the effect of the regulations on the physician’s medical judgment. The indirectness of this injury, “while not necessarily fatal to standing, ‘may make it substantially more difficult to meet the minimum requirement of Art. Ill: to establish that, in fact, the asserted injury was the consequence of the defendant’s actions, or that prospective relief will remove the harm.’ ” Simon v. Eastern Ky. Welfare Rights Organization, supra, 426 U.S. at 44-45, 96 S.Ct. at 1927, quoting Warth v. Seldin, supra, 422 U.S. at 505, 95 S.Ct. 2197. In order to meet this burden, plaintiffs must show that their injury is or will be fairly traceable to the promulgation of the regulations and does not result from the independent action of some third party not before the court, and that the connection between the agency action and the alleged injury rests upon more than “remote possibilities” or “speculative inferences.” Eastern Ky. Welfare Rights Org., supra, 426 U.S. at 42-43, 96 S.Ct. at 1926-27. We believe that plaintiffs have demonstrated a sufficiently direct and perceptible connection between the disputed drug reimbursement limitations and the exercise of their medical judgment. First, there are some instances under the Medicare and Medicaid statutes in which the reimbursement limitations in the regulations would apply directly to physicians’ bills irrespective of hospital or pharmacy drug policies. In these cases, it is plausible that the regulations pose a substantial likelihood that the doctor will prescribe only those drugs for which he himself may receive full reimbursement, at least where more costly drugs are not medically necessary although indicated for his patient. Second, even where the drugs are provided by hospitals or pharmacies rather than by the physician, it can readily be inferred from the allegations that these third parties will be less willing to provide non-MAC-listed drugs for Medicare and Medicaid patients for the sole purpose of avoiding the financial drain of uncompensated services. Regarding these third parties, we believe the present case is distinguishable from Eastern Ky. Welfare Rights Org., supra. In that case, the Court denied standing to several organizations and indigent individuals who had claimed that certain government officials had “encouraged” the denial of hospital services to indigents by issuance of an Internal Revenue Service ruling which allowed favorable tax treatment to certain nonprofit hospitals which offered emergency room but not other hospital services to indigents. The Court held that it was purely speculative whether the alleged denials of hospital services were attributable to the defendants’ encouragement, or resulted from independent decisions by the third party hospitals not traceable to tax considerations. On the contrary, the alleged interference here is directly traceable to the defendant’s regulations. It is fairly inferable from the complaint that the MAC regulations will not only discourage hospitals from making non-MAC-listed drugs available to Medicare and Medicaid patients, but will make it financially imperative for them to do so. But if the regulations are withdrawn, the impediment to professional judgment will disappear. The injury here is therefore both more direct and perceptible than that at issue in Eastern Ky. Welfare Rights Org. and it is certain that the prospective relief which plaintiffs seek will remove the alleged harm. Finally, this case contains elements of statutorily-conferred standing which were absent from Simon. Even if physicians would generally suffer little direct financial injury from the MAC regulations, they have alleged a different category of intangible injury, for their independent professional judgment is explicitly protected by 42 U.S.C. § 1395. In this connection, the Court has stated in Linda R.S. v. Richard D., 410 U.S. 614, 617 n.3, 93 S.Ct. 1146, 1148, 35 L.Ed.2d 536 (1973), that Congress may enact statutes creating legal rights, the invasion of which creates standing, even though no injury exists without the statute. Thus it appears that statutes like § 1395 can create interests which establish the conditions for cognizable injury. And as the Court observed in Association of Data Processing Service Organizations, Inc., v. Camp, 397 U.S. 150, 154, 90 S.Ct. 827, 830, 25 L.Ed.2d 184 (1970), “[w]here statutes are concerned, the trend is toward enlargement of the class of people who may protest administrative action.” Nevertheless, the presence of an interest expressly conferred by statute does not dilute the requirement of a direct and palpable injury to that interest. Eastern Ky. Welfare Rights Org., supra, 426 U.S. at 41, n.22, 96 S.Ct. at 1926, n.22. In the present case, however, we believe the threatened interference with a physician’s prescription practices — that the regulations “would permit a handful of HEW employees, who need not be physicians, effectively to dictate the precise medication which private physicians must prescribe” (Complaint, ¶ 14) — constitutes a distinctive and recognizable harm to an intangible interest. To require more precise and intricate allegations would be inconsistent with modern pleading requirements. Therefore, we hold that the allegations are sufficient to confer standing upon the plaintiff physicians. With respect to the plaintiff professional association, the Court has made it clear that even in the absence of injury to itself, an association may have standing as the representative of its injured members. Warth v. Seldin, supra, 422 U.S. at 511, 95 S.Ct. 2197; Sierra Club v. Morton, 405 U.S. 727, 739, 92 S.Ct. 1361, 31 L.Ed.2d 636 (1972); Simon v. Eastern Ky. Welfare Rights Organization, supra, 426 U.S. at 39-41, 96 S.Ct. at 1925. Consequently, both the plaintiff physicians and the AMA are entitled to invoke this court’s jurisdiction. The Secretary’s motion to dismiss these plaintiffs for lack of standing is denied. III. THE MERITS A. Reimbursement Standards The first issue raised by AMA’s motion for judgment on the pleadings and the Secretary’s motion for summary judgment is whether the MAC regulations were issued in excess of the Secretary’s authority and whether they violate the reimbursement standards provided under the Social Security Act. General authority for the promulgation of regulations pertaining to the Act is granted to the Secretary under 42 U.S.C. § 1302, which provides that the Secretary shall make and publish such rules and regulations, not inconsistent with [the Social Security Act], as may be necessary to the efficient administration of the functions with which [he] is charged under [the Act]. Section 1302 gives the Secretary “broad rule-making powers,” Thorpe v. Housing Authority of City of Durham, 393 U.S. 268, 277 n.28, 89 S.Ct. 518, 21 L.Ed.2d 474 (1969), and grants him the authority to enact any regulation which is reasonably related to the purposes of the Act and consistent with the enabling legislation. Johnson’s Professional Nursing Home v. Weinberger, 490 F.2d 841, 844 (5th Cir. 1974). The construction of a statute by one charged with its execution should be followed unless there are “compelling indications” that he is wrong. Red Lion Broadcasting Co. v. F.C.C., 395 U.S. 367, 381, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969). Because of the deference generally accorded to the administrator’s interpretation of a statutory scheme, a heavy burden lies on those who challenge the validity of the Secretary’s regulations. Johnson’s Professional Nursing Home, supra; State of Florida v. Mathews, 526 F.2d 319, 323 (5th Cir. 1976). Given these standards of review, the starting point for our statutory analysis is the identification of the different categories of drug services provided under the Medicare and Medicaid programs. Then the different reimbursement standards which apply to each of the various subdivisions of these programs will be analyzed in light of the MAC regulations. It will be apparent that the interplay of these different categories of drug services and different reimbursement standards provides a moderate degree of technical complexity. Medicare, 42 U.S.C. § 1395 et seq., is a nationally uniform federal program of health insurance for the aged and the disabled. It is completely financed and administered by the federal government through the Social Security Administration. Medicare is divided into two parts. Part A, 42 U.S.C. § 1395c-1395i, provides federal insurance for inpatient hospital services, post-hospital extended care services (including nursing home services), and post-hospital home health services. This “basic Medicare” program covers the cost of “drugs and biologicals” ordinarily furnished to patients for use in hospitals or extended care facilities, 42 U.S.C. § 1395d, § 1395x(b)(2), (h)(5), (j)(7), but not those provided to homebound patients, 42 U.S.C. § 1395x(m)(5). Part B of Medicare, 42 U.S.C. § 1395j-1395w, establishes a voluntary supplemental insurance program for aged and disabled individuals. It provides protection against the costs of physicians’ services and a variety of medical services and equipment which are furnished in and out of medical institutions and which are not covered by the basic plan. This “supplementary Medicare” program covers only the cost of drugs and biologicals which (1) cannot be self-administered, (2) are incidental to a physician’s services to patients in his office or to hospital outpatients, (3) are of a kind commonly furnished in physicians’ offices, and (4) are commonly rendered without charge or included in the physician’s bill. 42 U.S.C. § 1395k, § 1395x(s)(2). Thus, only a small percentage of drugs, such as injections, are covered under Part B of Medicare. In sum, both Part A and Part B of Medicare generally limit coverage to those drugs which have a close nexus to supervised institutional care. Medicaid, 42 U.S.C. § 1396 et seq., is a federal-state cooperative program that enables participating states to furnish medical assistance to individuals whose economic resources are insufficient to meet the costs of necessary medical care. States electing to participate in the program must submit a plan for approval by the Secretary. Upon approval, the state becomes entitled to federal matching funds to finance the program. Each state has considerable discretion in designing the contours of its program within the guidelines established by 42 U.S.C. § 1396a. The Medicaid program covers physicians’ services, extended care services, inpatient and outpatient hospital services, and a wide range of other specified medical services for the needy. Under 42 U.S.C. § 1396d(a)(12), state Medicaid plans may include the costs of all “prescribed drugs,” including those furnished in health care institutions and those purchased at pharmacies. Thus, Medicaid potentially provides a more extensive range of coverage for drug costs than Medicare. The reimbursement standard for all payments under basic Medicare (Part A) and for those payments made to hospitals and extended care facilities under supplementary Medicare (Part B) is the lesser of (1) the “reasonable cost” of the services provided, or (2) the “customary charge” for those services. 42 U.S.C. § 1395f(b)(l), § 13951 (a)(2). The reasonable cost portion of this standard provides the upper limit of permissible reimbursement. The definition of reasonable cost is found in 42 U.S.C. § 1395x(v)(l)(A), which was amended in 1972 to provide explicitly for the exclusion of unnecessary costs in accordance with regulations promulgated by the Secretary. Act of Oct. 30, 1972, Pub.L. No.92-603, § 223. The key phrase of this section provides that “the reasonable cost of any services shall be the cost actually incurred, excluding therefrom any part of incurred cost found [by the Secretary] to be unnecessary in the efficient delivery of needed health services.” The meaning of this phrase is analyzed below, but we note here that the parties consider this language to have pivotal significance in this case. The parties also declare that this phrase constitutes the basic statutory reimbursement standard governing almost all drug reimbursements under Medicare and Medicaid, but this simplification is not easily extracted from the language of the other reimbursement standards which are provided under these programs. The reimbursement standard for payments made under supplementary Medicare (Part B) to providers other than hospitals and extended care facilities (e. g., physicians, laboratories, ambulance services and medical suppliers) is based on the “reasonable charge” for the services provided. 42 U.S.C. § 13951 (a)(1), § 1395k(a)(1), § 1395x(s). While “reasonable charge” is not defined in these provisions, Congress in 1972 amended a different section (42 U.S.C. § 1395u(b)(3)) which indicated that reimbursement for “reasonable charges” should be governed by substantially the same considerations of necessity and efficiency as are employed in the “reasonable cost” standard of § 1395x(v)(1)(A). Thus, the fourth sentence of § 1395u(b)(3) provides that post-1972 increases in physicians’ charges can be recognized only to the extent that the Secretary finds, on the basis of area economic indices, that such increases are justified by changes in operating expenses and earning levels of physicians. This ceiling on physician charges indirectly limits reimbursement for certain drug expenditures to a “reasonable cost” level, because it controls payment of the physicians’ bill for his professional services and that bill may in turn include specific charges for drugs administered by the physician as an incident to his professional services. See 42 U.S.C. § 1395x(s)(2). And in the fifth sentence of its 1972 amendments to 42 U.S.C. § 1395u(b)(3), Congress went even further and indicated that these included drug costs are subject to perhaps a more stringent standard than “reasonable costs.” Thus, the fifth sentence provides that, with respect to medical supplies, services and equipment which, “in the judgment of the Secretary,” do not generally vary in quality from one supplier to another, charges “may not exceed the lowest charge levels at which such services, supplies and equipment are widely and consistently available in a locality. . . . ” (emphasis added.) Drugs furnished as an incident to a physician’s services are explicitly included as “services and supplies” in 42 U.S.C. § 1395x(s)(2). Thus the Secretary may use a “lowest available cost” rather than a “reasonable cost” formula in determining the “reasonable charges” for drug services offered by the Medicare providers covered by § 13957 (a)(1) and § 1395k(a)(1). Because this formula appears to be even stronger than that provided by § 1395x(v)(1)(A), it is difficult to reconcile the two provisions. A similar problem exists with the Medicaid reimbursement standards. The basic reimbursement standard for medical care and services under Medicaid is set out in 42 U.S.C. § 1396a(a)(30). This section was added in 1967 and requires the states to establish methods and procedures designed to assure that payments for “any drugs” under Medicaid will not exceed “reasonable charges consistent with efficiency, economy and quality of care.” This language is not defined in the statute nor in its legislative history. It strikes us as a hybrid of the reasonable cost and reasonable charge standards for while the language uses the term “reasonable charges” rather than “reasonable costs,” it incorporates the “efficiency” criterion of the § 1395x(v)(l)(A) definition. Because Medicaid is a federal-state cooperative program and state methods and procedures must be approved by the Secretary to assure conformity with federal law, it is reasonable to infer that Congress vested responsibility in the Secretary to give meaning to the language. The Secretary has promulgated regulations under Medicaid which indicate that standards and principles used regarding payment for Medicare services are generally applicable regarding Medicaid services. Thus the regulations provide that reimbursement for inpatient hospital services is limited to reasonable costs under Medicare and reimbursement for extended care and non-institutional services is limited to reasonable charges under Medicare. 45 C.F.R. § 250.30. Another indication that Medicaid incorporates Medicare standards is provided by the reimbursement standard in § 1396a(a)(13)(D) of Medicaid. That section was added in 1972, five years after the addition of § 1396a(a)(30), and provides that states shall develop their own methods and standards for determining the “reasonable cost” of inpatient hospital care for Medicaid recipients, subject to advance approval by the Secretary and also subject to the condition that reimbursement by the states could in no case exceed the reasonable cost standard provided in § 1395x(v)(l)(A) of Medicare. Despite the overlapping between §§ 1395x(v)(l)(A), 1395u(b)(3), 1396a(a)(30) and 1396a(a)(13)(D), we hesitate to conclude that the last three of these four sections create standards of reimbursement identical to that created by the first. Although the three provisions employ similar standards of reasonableness and efficiency, each has peculiar features which distinguish it from § 1395x(v)(1)(A). The fifth sentence of § 1395u(b)(3) leaves quality determinations to the “judgment” of the Secretary and leaves excessive cost determinations subject to such exceptions as he specifies. In contrast, § 1395x(v)(l)(A) requires determinations of unnecessary and unreasonable costs to be made in accordance with “methods” established by regulations which the Secretary prescribes. With respect to Medicaid, § 1396a(a)(13)(D) incorporates § 1395x(v)(l)(A) (Medicare “reasonable cost”) by reference, but § 1396a(a)(30) does not. Also, the unifying impact of this incorporation is reduced by the fact that § 1396a(a)(13)(D) applies only to the narrow category of drugs provided incident to inpatient hospital services while § 1396a(a)(30) applies to “any drugs.” Furthermore, the legislative history of these Medicaid provisions indicates that Congress intended to encourage and preserve a wide measure of state autonomy and experimentation in the determination of the reasonable costs of Medicaid programs. These considerations are absent from the Medicare program, which is administered solely on the federal level. These differing legislative policies have led to reimbursement standards with different cost methodologies. Under Medicaid, responsibility for developing methods and standards for cost determinations under § 1396a(a)(13)(D) is assigned initially to the states, while under Medicare, § 1395x(v)(l)(A), complete responsibility is assigned to the Secretary. Similarly, § 1396a(a)(30) by its terms does not require formal findings regarding efficiency, economy and quality of care, but § 1395x(v)(l)(A) does. Finally, to add to the confusion and complexity of the program interaction, a third provision of the Medicaid statutes incorporates another Medicare reimbursement standard by reference. Thus § 1396b(i)(l) was enacted in 1972 to prohibit federal reimbursement for state Medicaid payments for “items or services” whose charges exceeded the standards provided in the fourth and fifth sentence of § 1395u(b)(3). As noted earlier, that section utilized a “lowest charge level widely and consistently available” standard. Given this maze of reimbursement standards applicable to different categories of drug costs and charges under two different health care programs with different methodologies and philosophies of ad- ' rhinistration, it is indeed difficult for us to nail down any one reimbursement standard for the purpose of evaluating the consistency of the MAC regulations with the legislative scheme. But we believe that the “reasonable cost” standard of § 1395x(v)(1)(A) is most immediately relevant to the present controversy and most clearly embodies the Congressional formula for preventing reimbursement for excessively priced medical items and services. Several considerations impel us to this conclusion. First, § 1395x(v)(l)(A) applies directly to the great proportion of drugs covered by the Medicare and Medicaid programs. Congress has directed that the reasonable cost formula of that section be applied concurrently to all payments under basic Medicare, to payments made to hospitals and extended care facilities under supplementary Medicare, and by reference in § 1396a(a)(13)(D) to inpatient hospital costs under Medicaid. By contrast the “reasonable charge” limitation sections apply to a narrower category of drugs and attack the cost problem indirectly by limiting charges in bills for professional services. Second, § 1395x(v)(l)(A) is the most specific and fully developed formula for reimbursement. We recognize that all of the sections embody broad terminology of efficiency, economy, necessity and quality of care, and that these terms require administrative interpretation. However, § 1395x(v)(l)(A)' contains the most complete methodology of determining unnecessary costs and is the only one to express that determination in formulistic terms. In the case of competing and overlapping statutes, legislative intent is most reliably expressed in the statute where the attention to detail and to precision are the most manifest. Finally, a reimbursement scheme which disburses different amounts for drug costs to providers who furnish identical services to Medicare and Medicaid patients, or who furnish identical services to the same patients in different circumstances, tends to be illogical, inefficient and uneconomical. The interest in a uniform policy of drug reimbursement is strong. However, we note that under the present Medicaid scheme, some deviations from the § 1395x(v)(l)(A) are allowed on the state level. But those deviations in reimbursement may in no case exceed the reasonable cost level provided in that section. Therefore, we conclude that § 1395x(v)(l)(A) provides the applicable reimbursement standard against which the validity of the MAC regulations must be tested. Plaintiffs raise numerous arguments alleging that the MAC regulations violate § 1395x(v)(l)(A). To repeat, the crucial language of that section provides that: “The reasonable cost of any services shall be the cost actually incurred, excluding therefrom any part of incurred cost found to be unnecessary in the efficient delivery of needed health services, and shall be determined in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs for various types or classes of institutions, agencies, and seivices. . . . ” (emphasis added to reflect terms the plaintiffs deem significant.) In summary, plaintiffs contend that (1) the MAC regulations inflexibly limit reimbursement to a lower level than “cost actually incurred,” (2) the Secretary has not “found,” nor do the regulations provide for findings, that drug costs above maximum allowable costs are “unnecessary in the efficient delivery of needed health services,” (3) such findings, assuming they were made, were not determined in accordance with preestablished “methods” and procedures, and (4) even assuming such findings were made and such methods were followed, Section 1395x(v)(l)(A) was only intended to curb aberrant extravagance and program abuse by specific health providers, not across-the-board limits on the costs of standard medical supplies purchased on the market. Plaintiffs’ first contention, that the MAC regulations violate this section by inflexibly basing reimbursement on the cost of a MAC drug rather than on the “cost actually incurred” by the provider, relies upon a misconstruction of the statute. Reimbursement under this section was never intended to be based solely on a provider’s actual costs. The language of the statute explicitly excludes payments for incurred costs which are unnecessary. Furthermore, in enacting this provision Congress sought to limit costs to “those that would be incurred by a reasonably prudent and cost-conscious management,” not those that are actually incurred by any health care institution regardless of its operating efficiency. S.Rep.No.92-1230, 92d Cong., 2d Sess., 187 (1972). The MAC regulations seek to implement this Congressional directive by disallowing unnecessary and unreasonable incurred costs. Moreover, § 1395x(v)(l)(A) is not a monolithic lower limit for Medicare or Medicaid reimbursement. The alternative “customary charge” standard of reimbursement under § 1395f(b)(l) and § 13951(a)(2) requires below-cost reimbursement for certain services provided at nominal charge. The obvious conclusion is that § 1395x(v)(l)(A) does not require reimbursement of all actual costs. Rather, it limits reimbursement to a level no higher than actual costs and sets broad standards for the subtraction of excessive and unnecessary costs from that figure. We also reject plaintiffs’ argument that the Secretary has not found, and the regulations fail to make or require a finding, that the difference in price between a MAC drug and a drug actually prescribed represents costs which are “unnecessary in the efficient delivery of needed health services.” We note first that the Secretary is empowered to make findings of broad scope and application. The legislative history of the 1972 amendments of § 1395x(v)(1)(A) makes clear that the Secretary was not confined to retrospective determinations of reasonable costs on a case-by-case basis. Separate findings as to necessity do not have to be made each time a provider seeks reimbursement for drug costs. Rather, the amendments authorized the Secretary to prospectively establish the reasonable cost for items and services on a class and presumptive basis. S.Rep.No.92-1230, supra, at 188. In the “basis and purpose” statement published with the final regulations in the Federal Register, the Secretary made findings on exactly this basis: What the Secretary is determining by issuing the MAC regulation is that portions of the costs of certain drugs are unnecessary to the efficient delivery of quality health care. This determination is based upon a recognition of the fact that a number of drugs containing the same active ingredients in the same dosage forms and strengths are available from different formulators and labelers at significantly different prices. In light of this fact, and in the interest of the efficient administration of the duties with which the Secretary is charged, consistent with quality care, the MAC regulation is issued to take advantage of these varying multiple-source prices. 40 Fed.Reg. at 32288. Under the MAC regulation, the Secretary is determining only that portions of the cost of certain drugs are unnecessary to the efficient delivery of needed health services. Cost limits are established representing those estimates of drug costs which are necessary. Necessary costs are recognized as reasonable costs and are fully reimbursable. 40 Fed.Reg. at 32289. These findings are sufficient to satisfy § 1395x(v)(l)(A)’s requirement that an exclusion from actual cost be “found to be unnecessary.” Individual findings on a prescription-by-prescription basis are not required. Plaintiffs also attack these findings on the ground that they were not made pursuant to methods and procedures for cost determinations that are required by § 1395x(v)(1)(A). Plaintiffs rely on the second clause of that section, which provides that the reasonable cost of any services “ . . . shall be determined in accordance with regulations establishing the method or methods to be used, and the items to be included, in determining such costs for various types or classes of . services . . . ” Plaintiffs read this section as requiring the Secretary to make precise, economically justifiable findings that portions of costs in specific drug categories are unnecessary and to establish procedures in advance for making such findings. They characterize the Secretary’s findings, as well as the MAC regulations, as nothing more than “pre-emptory declarations” and “blanket limitations,” because the findings summarily treat all drug costs in excess of all future MAC limitations as unnecessary, and because the regulations direct the Pharmaceutical Reimbursement Board to choose the lowest-priced multiple-source drug which is widely and consistently available without any procedures for determining the necessity of those particular limitations. We agree with the plaintiffs that § 1395x(v)(1)(A) requires the Secretary to devise regulations establishing a method for determining what costs are unnecessary to the efficient delivery of drug-related health services. We believe, however, that the procedures established by the MAC regulations satisfy this requirement. The Pharmaceutical Reimbursement Board does not, as plaintiffs charge, simply ascertain the lowest price at which a drug is sold and then summarily conclude that all costs above that figure are unnecessary. Admittedly, during the MAC process the Board is directed to determine the lowest unit price as a convenient starting point in a process which is heavily dependent upon the competitive pricing of drugs on the open market. But this is only a single step in the detailed process outlined by the MAC regulations. This process begins when the Board identifies a multiple-source drug and sends the name of the drug to the FDA for review of certain of its technical aspects. After referral to the FDA, the Board determines the lowest unit price at which the drug is widely and consistently available. This figure is sent to the Pharmaceutical Reimbursement Advisory Committee which reviews the appropriateness of proposing that or any MAC for the drug. The Board then publishes notice of the proposed MAC and takes public comments before deciding whether to finalize the lowest unit price, or a higher figure, as the MAC limit. It is only after a particular multiple-source drug, which is both widely and consistently available, successfully passes through the MAC procedures that the Secretary concludes that all costs above the figure which is ultimately adopted as the MAC limit are unnecessary. We conclude that the Secretary is not required to supplement this methodology with elaborate and distinct findings regarding each item of unnecessary cost. The MAC regulations were properly promulgated under the “notice and comment” procedure of the Administrative Procedure Act, 5 U.S.C. § 553, which only directs the agency to “incorporate in the rules a concise general statement of their basis and purpose.” The APA does not require a statement of findings of fact. Neither does § 1395x(v)(l)(A). Moreover, extensive findings are essentially incompatible with the quasi-legislative character of the rule-making process. Amoco Oil Co. v. EPA, 163 U.S.App.D.C. 162, 501 F.2d 722, 734-35 (1974). In short, we hold that the MAC regulations themselves constitute the methodology contemplated by § 1395x(v)(1)(A). Plaintiffs’ next contention is that the Secretary cannot properly find that drug costs above MAC levels are unnecessary without contravening the legislative intent behind § 1395x(v)(l)(A). According to their theory, that section was only intended to authorize cost controls on health care institutions which were inefficient and which charged excessive costs relative to comparáble providers operating in similar circumstances, and was not meant to allow across-the-board cost controls on all providers with respect to standard medical supplies purchased on the market. We believe Congress intended its economizing measure to cover more than merely the problem of the spendthrift. The committee reports support the plaintiffs’ theory in that they indicate that the precipitating stimulus for the enactment of § 1395x(v)(1)(A) was a desire to establish limits on differences in provider costs which flowed from marked inefficiency in operation or conditions of excessive service. See S.Rep.No.1230, supra, at 187. But that report went on to specify not only techniques for weeding out inefficient institutions, but also techniques for setting across-the-board limitations on costs. These limitations could cover such items as laundry costs, medical record costs and administration costs (which did not vary with the quality and intensity of medical care), as well as such items as overall costs per patient day (which did vary with those same indicia of medical care). The report also recognized that “special limits could be established on cost elements found subject to abuse.” Id. at 189. Furthermore, § 1395x(v)(1)(A) must be interpreted in light of a six-year Congressional experience with spiraling expenditures under the Medicare program. To combat this problem, Congress in 1972 enacted not only § 1395x(v)(1)(A), but a number of provisions designed to save money by encouraging the efficient provision of health care services. Section 222(a) of those amendments authorized the Secretary to conduct experiments and demonstration projects to determine whether changes in reimbursement methods “would have the effect of increasing the efficiency and economy of health services . . . without adversely affecting the quality of such services.” 42 U.S.C. § 1395b-1(a)(1)(A). Similarly, sections 223, 224 and 233 of the 1972 amendments authorized the Secretary to exercise his judgment to limit Medicare costs and charges. Section 223 is codified as § 1395x(v)(1)(A), and it provides broad criteria for the determination and exclusion of unnecessary costs. When an act expresses such a major policy of government in such general terms, the fact that the committee reports omit a specific reference to a particular method of agency action to carry out that policy is not fatal to the agency’s asserted power. The draftsmen of statutes delegating agency powers do not normally include specific consideration of every evil sought to be corrected, but instead expect the agency to use its expertise to combat new abuses as they arise. American Trucking Associations v. United States, 344 U.S. 298, 309-10, 73 S.Ct. 307, 97 L.Ed. 337 (1953). Therefore we reject the assertion that the Secretary’s findings on unnecessary drug costs represent an attempt to expand his power beyond the scope of the statutory framework. Those findings were clearly directed at eliminating costs which he deemed to be “unnecessary in the efficient delivery of needed health services” within the meaning of § 1395x(v)(l)(A). And given the deference ordinarily accorded to an administrator’s statutory interpretations, the MAC regulations are a lawful means of achieving that objective. Nevertheless, plaintiffs argue, Congress has rejected bills and proposals that would have specifically given the Secretary the authority to establish a MAC-type system of drug reimbursement. However, nearly all of the bills which they cite would impose much stricter federal controls over drug reimbursement than those established by the MAC regulations. The bills generally proposed a formulary system which would limit reimbursement for drug costs and would also restrict types of drugs for which reimbursement could be sought. The MAC regulations only set reimbursement limitations and do not exclude any drug from potential coverage under Medicare or Medicaid. Furthermore, all of the cited bills, with one exception, were referred to Congressional committees. We have been given no citation, and have found none, which indicates that these bills have received any further or final action. The mere introduction of a bill has no probative value for purposes of statutory interpretation. Order of Railway Conductors of America v. Swan, 329 U.S. 520, 529, 67 S.Ct. 405, 91 L.Ed. 471 (1947). The exceptional bill, which proposed a formulary system, was dropped in the conference committee and was replaced by a broad compromise provision which is not inconsistent with the development of a MAC system. In any event, unsuccessful attempts at legislation are not the best of guides to legislative intent. Red Lion Broadcasting Co. v. F.C.C., 395 U.S. 367, 382 n. 11, 89 S.Ct. 1794, 23 L.Ed.2d 371 (1969). Legislators may merely wish to make clear what form a program should take rather than leave its details to an administrator’s discretion. Similarly, the fact that Congress has failed to adopt HEW recommendations for specific limitations on drug reimbursement, does not establish that such a proposal is excluded from a general provision on the subject. Cf. Helvering v. Clifford, 309 U.S. 331, 337, 60 S.Ct. 554, 84 L.Ed. 788 (1940). Instead, Congress may have preferred to retain generalized treatment of the subject under the broad language of § 1395x(v)(1)(A). We conclude that Congress has not specifically rejected a MAC system and that such a system is not manifestly inconsistent with Congressional intent. Plaintiffs also argue that the MAC regulations violate a section of the Social Security Act which is peripherally related to those sections establishing reimbursement standards. The section is 42 U.S.C. § 1395x(t), which defines “drugs” and “biologicals” to: include only such drugs and biologicals ... as are included . [in the drug compendia of specified medical and pharmacological organizations], . . . or as are approved by the pharmacy and drug therapeutics committee (or equivalent committee) of the medical staff of [participating] hospital(s) This section was enacted in 1965 and has never been amended. Plaintiffs first assert that § 1395x(t) mandates full reimbursement and program coverage for all drugs listed or approved in accordance with that section. They argue that the MAC regulations, by providing full reimbursement for MAC drugs and only partial reimbursement for drugs which cost more than MAC limits and which may be so listed or approved, effectively limit drug coverage to a more restricted category of drugs than those specified in § 1395x(t). We reject this strained interpretation of the statute and of the MAC regulations. The statute was intended to limit payment to only those drugs which were approved by responsible and competent medical organizations. It does not require, but instead permits, reimbursement for all drugs which are approved by the mechanisms specified by the statute. The legislative history supports this reading: The intent of the provisions for determining which drugs and biologicals are covered is to permit payment for all drugs and biologicals which medical and medically related organizations have evaluated and selected as being proper for use in the course of good patient care. 1965 U.S.Code Cong. & Ad.News at p. 1969 (emphasis added). The section was intended to protect patients against poor quality drugs, not to require the government to pay the full cost of all brands of a drug when a portion of that cost has been found unnecessary in the efficient delivery of medical care. Furthermore, the MAC regulations do not affect which drugs are eligible for reimbursement; rather, they affect only the amount of that reimbursement, and do so only where a physician has not certified that a prescribed drug which costs more than MAC levels is medically necessary for his patient. Plaintiffs’ second § 1395x(t) argument is that the MAC regulations unlawfully delegate the selection of covered drugs under Medicare and Medicaid to a committee of HEW employees (the Pharmaceutical Reimbursement Board) rather than to the medical organizations specified by § 1395x(t). We repeat that the MAC regulations determine reimbursable costs, not coverage, of drugs. The regulations do not interfere with the selection of drugs for inclusion in institutional formularies. They only establish upper limits on reimbursement for certain multiple-source drugs. Therefore, we conclude that the regulations are not inconsistent with § 1395x(t). In summary, the motion of the AMA plaintiffs for judgment on the pleadings regarding the violation of the reimbursement standards is denied; and the defendant’s cross-motion for summary judgment on this issue is granted. B. Alleged Violation of § 1395 Plaintiffs next urge that the MAC regulations constitute unlawful supervision and control over the practice of medicine in violation of 42 U.S.C. § 1395. The section provides, in pertinent part, that: Nothing in this subchapter shall be construed to authorize any Federal officer or employee to exercise any supervision or control over the practice of medicine or the manner in which medical services are provided . . . or to exercise any supervision or control over the administration or operation of any ... institution, agency, or person [providing health services]. In evaluating the merits of the § 1395 issue, it is helpful to identify at the start those propositions about which the parties agree. First, the MAC regulations will control the level of reimbursement for multiple-source drugs prescribed by physicians for Medicare-Medicaid patients. Second, the MAC limits on reimbursement will not apply where the physician certifies that the particular drug he has prescribed is medically necessary for his patient. Third, the regulations by their terms do not require nor ask the physician to prescribe only those drugs which fall within MAC levels or to alter his medical judgment concerning the proper drugs to prescribe for his patients. Fourth, the regulations will have some effect on the prescribing habits of physicians. The crucial question is whether this effect is sufficient to constitute “supervision or control” within the meaning of § 1395. Plaintiffs first argue that the test of interference under § 1395 is whether the regulations will have the practical effect of controlling professional judgment in a significant number of instances. Plaintiffs assert that they will, and contend that physicians will be effectively required to prescribe only MAC drugs because neither the hospitals, pharmacists and physicians that furnish the drugs, nor the Medicare-Medicaid patients who procure them, will be able or willing to shoulder the added unreimbursable cost of non-MAC drugs. They argue, therefore, that the regulations will unlawfully restrict the physician’s range of practical choice by introducing financial considerations into his decision as to the course of treatment to recommend to his patients. He will be unable to prescribe care solely upon what he analyzes the patient’s need to be and must weigh his diagnosis in terms of what the patient (or the hospital or pharmacy) can afford. Plaintiffs envision a situation where the physician will in many instances prescribe drugs which are different from those he would have prescribed in the absence of the MAC regulations. Analysis of this argument necessitates an inquiry into the impact of cost controls on professional independence. Plaintiffs’ prediction of a substantial impact on their medical practice is a claim which is beyond the scope of a motion for judgment on the pleadings and requires evidence for support. But if we assume the validity of their prediction, the resulting effect of the MAC regulations on the aggregate prescription practices of physicians does not fall within the prohibition of § 1395. Congress made it clear in 1972 that it did not view certain cost limitation mechanisms as within the ambit of § 1395. By enacting a strengthened cost limitation section (§ 1395x(v)(l)(A)) and authorizing the Secretary to exercise extensive cost control .powers, Congress struck a balance between cost controls and professional independence. This balance is not upset by the incidental effects predicted by plaintiffs. The legislative history of § 1395x(v)(l)(A) demonstrates that Congress wanted the judgmental process in the health care delivery system to be influenced and animated by a consciousness of the costs of medical care: Health care institutions, like other entities in our economy should be encouraged to perform efficiently and when they fail to do so should expect to suffer the . consequences . . . . The committee believes that [these] objectives can only be accomplished by reimbursement mechanisms that limit reimbursement to the costs that would be incurred by a reasonably prudent and cost-conscious management. S.Rep.No.92-1230, supra, at 187. In short, Congress did not intend to shield the medical decision-making process from financial consequences. If the MAC regulations have the effect of altering present drug prescription habits in the medical profession to reflect greater cost efficiency, that effect is consistent with Congressional intent. We recogniz