I have previously covered a case of HM Compounding Services LLC, which sued Express Scripts for contractual termination. To remind, Express Scripts terminated the pharmacy for misrepresenting during a re-credentialing process that it never waived or discounted member copayments. In return, HM sued Express Scripts asserting various statutory and common law claims. See my blog post covering the case.
Now – after four years of litigation – the pharmacy not only lost the case but also agreed to pay $20 million to Express Scripts. How did this happen… that the pharmacy asking for $120 million in breach of contract claims had to pay $20 in counter-claims to the PBM?
Looking at the case pleadings and records, I can see several tough roadblocks that the pharmacy had to overcome and which eventually tripped it along the way.
Roadblock No.1: Waiving co-pays. During the litigation, Express Scripts presented ample evidence that the pharmacy was in fact not collecting some of the required co-pays. Waiving copays is a violation of state and federal anti-kickback laws and PBM contracts.
Roadblock No.2: Misrepresenting information on its application. Because Express Scripts was able to prove that the pharmacy was waiving copays, it was easy to show that the pharmacy misrepresented this fact on its re-credentialing application. This constituted a breach of contract warranting immediate termination.
Roadblock No.3: Aggressive litigation by Express Scripts. It’s not easy to litigate a PBM case. Litigation records show that every time a pharmacy sues a PBM, the case is aggressively litigated by the PBM, causing financial difficulties to the pharmacy, which is often forced to settle early or dismiss the case all together. In this action, however, Express Scripts went a step further by bringing multiple counter-claims, motions for sanctions, motions for dismissing the case and summary judgment.
Roadblock No.4: Early unfavorable rulings. The judge in this case refused to consider the antitrust claim brought by the pharmacy and decided to focus on the breach of contract claims first. Eventually he sided with Express Scripts and the pharmacy never got to argue its anti-trust claims. The judge ruled on the summary judgment motion holding for Express Scripts: “no reasonable jury could find HM substantially complied with its contractual obligation to collect copayments.” Because the judge dismissed pharmacy’s breach of contract claims, the trial would have focused only on Express Script’s counter-claims. Therefore, the pharmacy was forced into an unfavorable settlement.
Roadblock No.5: Pharmacy’s attorneys tried to back away from the case. Two weeks before the trial, the law firm representing the pharmacy filed a motion to withdraw from the case citing “irreconcilable differences” with the client. The motion was denied because it would have left the pharmacy unrepresented at the trial. But you must agree that having an attorney who wants to get out is not a good thing in the middle of litigation.
Roadblock No.6: Sanctions and procedural misconduct. The pharmacy failed to meet many filing deadlines and misrepresented facts during the discovery stage. The judge ordered monetary and evidentiary sanction for “gross misconduct.” This misconduct led the judge to exclude most of the pharmacy’s evidence from the case.
As a result of these roadblocks, a consent judgement was filed under which the pharmacy is to pay $20 million to Express Scripts with 9% annual rate. The consent judgement constitutes the final judgment and may not be appealed.
The case reinforces the notion that litigation with PBMs is extremely risky, costly, and often unfair. This case, however, teaches many lessons. Some of them are: scrutinize the facts prior to suing anyone, choose a right litigation team, meet all the deadlines and cooperate with the court and other parties. Despite this unfavorable precedent, a successful case could nevertheless be brought against a PBM – it all depends on how prepared you are and your ability to tolerate the risk.