Anthem Inc. and Express Scripts Inc. defeated a proposed class action challenging their drug pricing methods under federal benefits, racketeering, and health discrimination law.
The companies couldn’t be liable under the Employee Retirement Income Security Act for allegedly setting high drug prices, because they weren’t acting as ERISA fiduciaries when they set those prices, a federal judge ruled Jan 8. The judge also rejected claims by HIV-positive patients who said the high drug prices were discriminatory under the Affordable Care Act. He dismissed all claims in the 17-count lawsuit, although he gave the patients and health plans that filed suit another chance to litigate.
The ruling is the latest chapter in the $15 billion battle between health insurer Anthem and pharmacy benefit manager (PBM) Express Scripts. Anthem sued Express Scripts in 2016, claiming the company was overcharging for prescription drug benefits in violation of the parties’ agreement. That case remains pending after a federal judge dismissed some of Express Scripts’ counterclaims against Anthem.
Both cases stem from a 2009 deal in which Express Scripts agreed to provide prescription drug services for Anthem health plans and Anthem sold Express Scripts three PBM companies for more than $4 billion. The patients who filed this lawsuit say Express Scripts paid a multibillion-dollar premium for the PBM companies and in turn began significantly overcharging Anthem patients for prescription drugs.
Anthem has since announced plans to start its own PBM unit and signed a five-year deal with Express Scripts’ biggest competitor, CVS Health Corp.
The decision focused on whether Anthem and Express Scripts qualified as ERISA fiduciaries of the relevant health plans, and thus whether they could be liable for fiduciary breach.
The patients said Express Scripts was an ERISA fiduciary because the company’s deal with Anthem gave it discretion to set drug prices and therefore to determine what compensation it received from ERISA plan assets. The judge disagreed, saying service providers don’t act as fiduciaries when they merely follow the terms of a contract.
The patients also argued for Anthem’s fiduciary status, saying the company exercised fiduciary discretion in creating this deal with Express Scripts. The judge again disagreed, saying Anthem was making business decisions—and not plan administration decisions—when it contracted with Express Scripts and negotiated drug pricing terms.
Finally, the judge rejected the idea that the pricing terms violated the ACA’s nondiscrimination rules. The HIV-positive patients who advanced this argument didn’t show they paid a disproportionately high amount for HIV-related drugs compared with other drugs, the judge said.
In so ruling, the judge declined to decide whether the ACA’s nondiscrimination rules, which prohibit health-based discrimination against people with disabilities, allows for a claim based on the “disparate impact” a policy could have on people with disabilities.
Judge Edgardo Ramos of the U.S. District Court for the Southern District of New York wrote the decision.
The patients are represented by Keller Rohrback LLP, Consumer Watchdog, Whatley Kallas LLP, and Neubert Pepe & Monteith PC. Express Scripts is represented by Quinn Emanuel and Steptoe & Johnson LLP. Anthem is represented by White & Case LLP and Nelson Mullins Riley & Scarborough.
The case is In re Express Scripts, Inc. , 2018 BL 5645, S.D.N.Y., No. 1:16-cv-03399-ER, order granting motion to dismiss 1/5/18 .
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