Health Law Daily Wrap Up, END-STAGE RENAL DISEASE—D.C. Cir.: Courts precluded from reviewing CMS classification of XPHOZAH as renal dialysis services, (Jul 6, 2026)

By Jody Coultas, J.D.

CMS has the authority to include oral-only drugs in a bundled Medicare payment for renal dialysis services.

CMS properly defined “renal dialysis services” as including oral-only drugs and properly identified XPHOZAH as a renal dialysis service, according to the U.S. Court of Appeals for the District of Columbia. Ardelyx, Inc., the maker of XPHOZAH, together with a health care research and advocacy organization and an organization representing the interests of kidney patients filed suit challenging the CMS rule defining “renal dialysis services” to include oral-only drugs furnished for the treatment of end-stage renal disease (ESRD) and the identification of XPHOZAH as a “renal dialysis service” included in the bundled payment. The district court held the CMS had acted within its statutory authority, and the appellate court agreed. The court found that “renal dialysis services” included oral-only drugs furnished for the treatment of ESRD and for which payment was made separately “before the application of [that] paragraph.” Because the regulation accorded with the statutory definition, the court was precluded reviewing the regulation any further (Ardelyx, Inc. v. Kennedy, No. 24-5290 (D.C. Cir. June 26, 2026)).

Background. In 2008, Congress directed the Secretary of HHS to “implement a payment system” that would provide a “single payment” for the reimbursement of “renal dialysis services” under Medicare. Congress was concerned that dialysis facilities had an incentive to administer separately reimbursable drugs, outside the bundled rate. Renal dialysis services include oral-only drugs furnished for the treatment of end-stage renal disease.

In August 2023, Ardelyx submitted a letter to CMS asking it to continue excluding oral-only drugs such as XPHOZAH from the definition of “renal dialysis services” beyond January 1, 2025. Two months later, XPHOZAH received FDA approval and first became available to patients. XPHOZAH was initially covered under Medicare Part D and reimbursed separately from the bundled payment.

On May 13, 2024, CMS notified Ardelyx that it had “identified XPHOZAH™ [as] a renal dialysis service under 42 C.F.R. 413.171, because it is furnished to individuals to treat a condition associated with ESRD and is essential to the delivery of maintenance dialysis.” The letter informed Ardelyx that XPHOZAH would be included in the bundled payment for renal dialysis services beginning January 1, 2025.

The American Association of Kidney Patients, the National Minority Quality Forum, and Ardelyx challenged the HHS classification of oral-only drugs, including XPHOZAH, as “renal dialysis” services subject to Medicare Part B bundled reimbursement. Specifically, the advocates alleged that the relevant CMS implementing regulation, 42 C.F.R. § 413.171, was inconsistent with the definition of “renal dialysis services” with respect to drugs only available in oral form. The advocates contended the bundle was underfunded to the point of negative margins for Medicare patients, thus discouraging certain treatments. They said the bundle discouraged innovation, and minority and rural patients would suffer the most.

CMS argued it categorized the drugs based on drug action and then assessed whether they would be used to treat end-stage renal disease (ESRD) conditions in a dialysis unit. Congress explicitly acknowledged the inclusion of oral-only drugs in the bundle when it delayed implementation to allow ESRD facilities to establish a pharmacy.

The district court dismissed Ardelyx’s complaint for lack of jurisdiction on the ground that the challenged actions were “identification[s] of renal dialysis services” within the meaning of 42 U.S.C. § 1395rr(b)(14)(G), which bars judicial review of such actions by the Secretary (see Congress precluded review of CMS classification of Ardelyx drug XPHOZAH as ‘renal dialysis services,’ Nov. 13, 2024). Ardelyx appealed.

Judicial review. Section 42 U.S.C. § 1395rr(b)(14)(G) bars judicial review of “the identification of renal dialysis services included in the bundled payment.” Ardelyx argued that (14)(G) did not cover the challenged actions because CMS lacked authority to take those actions. There is a strong presumption that Congress intends judicial review of administrative action, especially where a party claims an agency has acted in excess of delegated authority. The presumption can be overcome by specific language showing Congressional intent to preclude judicial review. Section (14)(G) states there “shall be no administrative or judicial review” of “the identification of renal dialysis services included in the bundled payment.” If CMS acted within its authority by including oral-only drugs and XPHOZAH in the bundled payment, then the court lacked authority to review whether those actions were reasonable. Therefore, the appellate court reviewed the merits of Ardelyx’s challenge only to the extent necessary to determine whether the challenged actions fell within the scope of the preclusion of judicial review.

Identification. CMS has defined “renal dialysis services” to include drugs furnished for the treatment of ESRD that have “only an oral form.” 42 C.F.R. § 413.171(3). Ardelyx argued CMS’s promulgation of the rule was not an “identification” for purposes of subparagraph (14)(G). As to Ardelyx’s first argument that the rule was not an “identification,” the court found that CMS’s promulgation of the regulation fit comfortably within the meaning of “identification” in (14)(G). Nothing in the statute or in the definitions offered by Ardelyx supports its narrower reading, which would preclude CMS from making categorical determinations about which drugs to include in the bundle.

Definition of “renal dialysis services.” Based upon the plain text of this subpart (B)(iii), the court held that CMS has the authority to include oral-only drugs in the bundled payment. (14)(B) excludes oral-only drugs. That subparagraph lists four categories that Congress “include[d]” in the definition of “renal dialysis services.” Ardelyx maintained those categories provide an exhaustive definition of “renal dialysis services,” and none of them includes oral-only drugs that are not provided by dialysis facilities during dialysis. The court found that Congress spoke clearly when it wanted to address drugs administered in a certain form and when it wanted to omit particular items from the definition of “renal dialysis services.” It did so by referring to oral drugs in both subparts (B)(ii) and (B)(iii), and by expressly excluding vaccines from subparagraph (B). Congress did not exclude oral-only drugs from the first clause of subpart (iii), and the court could not read that limitation into the statute. The court also noted that Congress was aware of CMS’s position regarding oral-only drugs and subpart (B)(iii) and repeatedly acted in a manner consistent with that position rather than undermining or correcting it.

Furthermore, the court rejected Ardelyx’s contention that “renal dialysis services” include only drugs “provided by dialysis facilities during dialysis.” That limitation appears nowhere in the subpart (B)(iii) definition of “renal dialysis services,” which instead refers broadly to drugs furnished “for the treatment of” ESRD without regard to where or when they are furnished.

The court declined to address the precise meaning of “before the application of this paragraph” in subpart (B)(iii). The district court concluded that “before the application of this paragraph” meant before January 1, 2025, for oral-only drugs such as XPHOZAH because Congress delayed the implementation of 42 C.F.R. § 413.171(3) until then. The court concluded that the meaning of the phrase had no influence on the outcome of the case. Insofar as the meaning of this phrase may matter for the identification of any other drugs as “renal dialysis services,” those drugs were not before the court.

Identification of XPHOZAH. Ardelyx challenged CMS’s identification of XPHOZAH as a renal dialysis service covered by the bundled payment because it is not furnished for the treatment of ESRD. XPHOZAH is furnished to treat hyperphosphatemia, not ESRD. “Treatment” as used in the definition of “renal dialysis services” in (B)(iii) includes the management and care of a medical condition. That definition includes not only drugs that treat ESRD specifically but also drugs such as XPHOZAH that treat conditions closely associated with ESRD. Hyperphosphatemia, which is most commonly caused by ESRD, occurs in 80% of ESRD patients on maintenance dialysis. XPHOZAH’s only approved use is to treat hyperphosphatemia “in adults with chronic kidney disease on dialysis as add-on therapy in patients who have an inadequate response to phosphate binders or who are intolerant of any dose of phosphate binder therapy.” Even Ardelyx describes XPHOZAH as a treatment option for patients with ESRD on dialysis who experience an inadequate response to phosphate binders.

Finally, Ardelyx argument that CMS’s identification of XPHOZAH was “at odds” with its exclusion of other drugs that treat conditions commonly associated with or caused by ESRD went to the quality of CMS’s reasoning rather than the scope of its authority. Per subparagraph (14)(G), the court lacked jurisdiction to consider it.

The case is No. 24-5290.

Judge: Ginsburg, D.

Attorneys: Michael Bern (Latham & Watkins LLP) for Ardelyx, Inc. Amit Kumar Sharma (AKS Law, LLC) for National Minority Quality Forum. Anna O. Mohan (Cooley LLP) for Robert F. Kennedy, Jr.

Companies: Ardelyx, Inc.; National Minority Quality Forum

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