Health Law Daily Claims that Rite Aid inflated generic drug prices go forward
Friday, August 9, 2019

Claims that Rite Aid inflated generic drug prices go forward

By Nicole D. Prysby, J.D.

The customer was not required to administratively exhaust his claims that Rite Aid inflated prices for generic drugs for insured customers, and he demonstrated that the limitations period should be equitably tolled.

A customer’s claims that Rite Aid Corporation inflated prices it charged to insured customers go forward, because he was not required to exhaust Medicare administrative remedies and he demonstrated equitable tolling of the statute of limitations, held a federal district court in California. Administrative exhaustion was not required since the claims did not arise under the Medicare Act; the customer was not alleging a challenge to Medicare statutes or regulations and his allegations are solely focused on Rite Aid’s alleged misconduct. Equitable tolling of the limitations period is appropriate because it would have been difficult for a customer to detect Rite Aid’s alleged dual-payment track, under which it charged cash-paying customers a lower price than it reported as its usual and customary price to insurers (Josten v. Rite Aid Corp.,August 7, 2019, Battaglia, A.).

Inflated copayment. The customer alleged that he was forced to pay an inflated copayment for prescription drugs under his insurance plan because Rite Aid reported prices to his insurer that were not its usual and customary (U&C) prices for those drugs. Specifically, he alleged that he is paying more for certain generics than Rite Aid’s cash-paying customers who fill their prescriptions through Rite Aid’s discount generic drug program (the Rx Savings Program, or RSP). Ultimately, Rite Aid charges cash-paying customers its U&C price for a drug but inflates the price for that drug when submitting claims for reimbursement to an insurer. The customer brought putative class claims, including negligent misrepresentation, unjust enrichment, and violations of the Unfair Competition Law and Consumer Legal Remedies Act (CLRA).

Jurisdictional challenge. Rite Aid asserted that the court lacked jurisdiction over the claims because the customer alleged that his purchases were made through his Medicare and Medicare Advantage membership but failed to exhaust his Medicare administrative remedies. The court rejected that argument, holding that the claims did not arise under the Medicare Act because the customer was not alleging a challenge to Medicare statutes or regulations, or attempting to elude administrative review of a Medicare claim. His allegations are solely focused on Rite Aid’s alleged misconduct, therefore he is challenging unfair conduct that is collateral to any claim for benefits.

Rite Aid also asserted that the claims are time-barred. But again, the court rejected Rite Aid’s argument and sided with the customer, who argued that the claims should be tolled because he had no knowledge of the facts until recently. He claimed that he discovered the alleged misconduct in January 2018 through investigation of counsel, and could not have discovered it earlier because Rite Aid misrepresented at the point of purchase that the copayment was accurate and omitted that he was not receiving any benefit from his insurance. He also alleged that Rite Aid failed to post drug prices in a clear manner that would have alerted him to the artificially inflated prices. The court also found that a reasonable person in the customer’s position would have lacked the means for discovery of the alleged scheme. It would have been difficult for a customer to detect that he was being charged an inflated copayment amount because Rite Aid set a dual-payment track for cash-paying customers, which it did not include in its U&C prices. Without having the sophisticated knowledge of the U&C reporting requirements and having gathered multiple pieces of the puzzle together such as the RSP prices and the copayment prices, even a person exercising reasonable diligence would have had a hard time discovering the alleged misconduct. Accordingly, the complaint pleaded equitable tolling.

The case is No. 3:18-cv-00152-AJB-JLB.

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