This year we saw some positive litigation outcomes for independent pharmacies. Let’s talk about two recent victories in PBM litigation. (Both cases were brought by Mark Cuker who represents several groups of pharmacies across the nation).
One of the cases was brought in California against Optum alleging misrepresentation, fraud, and breach of contract. Optum filed a motion to compel arbitration. California Superior court in Alameda denied the motion on procedural and substantive unconscionability. The court ruled that Optum had not demonstrated the existence of an enforceable arbitration agreement. The court reasoned that Optum had provider agreements with PSAOs and pharmacies were not provided with copies of the provider agreements, did not sign them and have not even seen them. Therefore, the pharmacies were not party to the provider agreements. In additional to this procedural unconscionability, the court found substantive unconscionability because arbitration provisions unreasonably limited discovery, precluded the presentation of live testimony, imposed costs greater than the cost of a court proceeding.
Optum argued that even if the provider agreement was unconscionable, pharmacies operated under Optum’s Pharmacy Provider Manual, which also had an arbitration provision. The court also dismissed this argument on procedural and substantive unconscionability grounds. The court explained that the manuals are a take-it-or-leave with Optum reserving the right to unilaterally change the terms without notice. The arbitration provision in the manual is also substantially unconscionable because it allows Optum to exercise “self-help” but requires the pharmacies to use the arbitration process. For example, the manual allows Optum to withhold the funds as deemed necessary. It also places unreasonable constrains on discovery in violation of the state law (precludes presentations of live testimony and does not allow cross-examination). In addition the arbitration clause in the manual requires that the arbitration is presided by a panel of three arbitrators, each with at least a 10-year experience in healthcare law. The court noted in its decision that the cost (to pay for such arbitrators) is likely to run into hundreds of thousands of dollars, effectively precluding smaller providers from bringing arbitration in the first place.
Mark Cuker, who is of counsel at Jacobs Law Group says that this victory “…opens the door for independent pharmacies to hold Optum publicly accountable in court for its violations of California’s MAC law, breach of contract, steering patients to mail order and underpaying on certain brand drug prescriptions.”
Recently he also defeated a similar motion to arbitrate in a federal court in Pennsylvania against OptumRx. The federal court ruled – as California state court did – that Optum’s arbitration provisions are unconscionable. Mark could be contacted at firstname.lastname@example.org