By Victoria Moran, J.D., M.H.A.
A New York federal district court granted Anthem, Inc. and Express Scripts, Inc.’s motions to dismiss a proposed class action which asserted seventeen causes of action under the Employee Retirement Income Security Act of 1974 (ERISA) (29 U.S.C. § 1001 et seq.), the Racketeering Influenced and Corrupt Organizations Act (RICO) (18 U.S.C. § 1961 et seq.), and the Patient Protection and Affordable Care Act (ACA) (P.L. 111-148) anti-discrimination provisions (42 U.S.C. § 18116) based on allegations related to drug pricing methods. Plaintiffs have been granted leave to file a third amended complaint by January 26, 2018 (In re Express Scripts/Anthem ERISA Litigation, January 5, 2018, Ramos, E.).
Background. On December 1, 2009, Anthem and ESI entered into a 10 year agreement (PBM Agreement), whereby ESI agreed to process Anthem participant prescription claims or fill them through mail-order pharmacies and provide administrative services related to prescription drugs for Anthem, its health plans, and its participants. That same day, Anthem and ESI also entered an agreement involving the sale of three Anthem companies to ESI. The PBM Agreement was amended in 2012. In March 2015, Anthem informed ESI that its drug pricing exceeded "competitive benchmark pricing." Anthem subsequently filed suit against ESI on March 21, 2016, based on the pricing dispute; that case is still pending.
The plaintiffs in this case (six individuals and two fiduciaries of ERISA health plans) filed their Complaint on May 6, 2016, with the Second Amended Complaint (SAC) filed March 2, 2017. The SAC contains seventeen causes of action under ERISA, RICO, and the ACA anti-discrimination provisions. Anthem and ESI both moved to dismiss the SAC on April 24, 2017.
The court dismissed the SAC, with its decision focusing heavily on whether Anthem and ESI qualified as ERISA fiduciaries. The following highlights the court’s findings:
Standing. Anthem challenged plaintiffs’ Article III standing; however, the court disagreed and found that Plaintiffs adequately alleged injury-in-fact through allegations they overpaid for prescription drugs resulting from inflated pricing set through the PBM Agreement. ESI argued that two of the plaintiffs lacked standing because their injury was not "fairly traceable" and the court agreed.
Statute of limitations. The court determined that defendants did not have an affirmative duty to disclose content of the PBM Agreement, nonpublic financial information related to Anthem and ESI’s contractual arrangements, or the third-party evaluation of the PBM Agreement conducted by Anthem. Therefore, plaintiffs were not entitled to equitable tolling under ERISA’s "fraud or concealment" exception for conduct before May 6, 2010. However, the court found that conduct pre-dating May 6, 2010, for plaintiffs’ allegations against Anthem for breach of duty to monitor was timely. Finally, the court held that plaintiffs’ ERISA claims based on conduct after May 6, 2010, are not time-barred.
ERISA. Anthem and ESI successfully argued that plaintiffs did not sufficiently allege they were fiduciaries. With regard to ESI, the court found that ESI was not a fiduciary for acting pursuant to the terms of the PBM Agreement, for receiving compensation by charging Anthem more than it paid to a retail pharmacy (or its own pharmacy), or based on its discretion over pricing and alleged plan administration. With regard to Anthem, the court found that Anthem’s decision to sell its PBM business and contract with ESI for PBM services was a business decision and did not trigger fiduciary duties.
RICO. The court dismissed plaintiffs’ RICO claims against ESI because plaintiffs failed to plead the requisite predicate acts.
ACA anti-discrimination provision. Plaintiffs argued the alleged inflated pricing disproportionately impacts Anthem subscribers with chronic conditions, subjecting them to higher co-insurance rates. More specifically, two plaintiffs with HIV overpaid for their HIV-related drugs because of the inflated prices resulting in "disparate economic harm." The court declined to rule on whether plaintiffs could bring a disparate impact claim. Rather, the judge ruled that plaintiffs did not plead sufficient facts because they did not show plaintiffs paid disproportionately high rates for the HIV drugs compared to non-HIV subscribers or for non-HIV drugs.
State law claims. Because all of plaintiffs’ federal claims were dismissed, the court declined to exercise jurisdiction over the state law claims.
Plaintiffs request for leave to amendgranted. Because plaintiffs did not receive an unredacted copy of the PBM Agreement until after they filed the SAC, the judge granted leave for plaintiffs to file their Third Amended Complaint by January 26, 2018.
The case is No. 1:16-cv-03399-ER.
Attorneys: Glenn Kurtz (White & Case LLP) and James T. Irvin (Nelson Mullins Riley & Scarborough, LLP) for Anthem, Inc.. Andrew Stuart Corkhill (Quinn Emanuel Urquhart & Sullivan, LLP) and Eric G. Serron (Steptoe & Johnson LLP) for Express Scripts, Inc.
Companies: Anthem, Inc.; Express Scripts, Inc.; Stamford Health, Inc.; Brothers Trading Company, Inc.; NextRx, LLC; NextRx, Inc.; NextRx Services; Health Strategy, LLC
Cases: CaseDecisions NewsFeed AgencyNews InsurerNews PharmaServicesNews NewYorkNews
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