BCBS Case Against Walgreens to Proceed

On Friday, the court issued an order in a case brought by Blue Cross Blue Shield of Minnesota, and others, against Walgreen Co. The order, issued in the Northern District of Illinois, ruled on a motion to dismiss filed by Walgreens regarding a large multi-state lawsuit filed by multiple BCBS divisions concerning the billing practices of Walgreens for prescription drugs.

The original complaint centers around the billing practices for Walgreens. Contracts between Walgreens and Pharmacy Benefit Managers (PBMs) require Walgreens to provide a “usual and customary price” list to the PBMs, who in turn contract with the health insurance providers for payment at a discount from that usual and customary pricing. However, the definition of the “usual and customary pricing” is the price to be paid by customers who are purchasing drugs and paying in cash instead of using insurance coverage. Walgreens offers several drug discount plans to customers who do not have insurance that mark a steep discount from the usual and customary rate, resulting in no one paying the usual and customary amount. The complaint alleges that this makes the usual and customary rate that is given to the PBMs and used in the contracts with hospitals and artificially elevated rate for the sole purpose of fraudulently receiving higher payments from insurance companies.

Walgreens moved for dismissal under Rule 12(b)(7) for failing to join the PBMs as a necessary party. The court denied the 12(b)(7) motion because while the original complaints included counts for fraud, fraudulent concealment, negligent misrepresentation, unjust enrichment, and statutory protection claims, none of the claims related to contract law, which would have required the inclusion of the PBMs as a necessary third party. The court also noted that there was no allegation of wrongful action either directly taken by, or condoned by the PBMs as the full action of the purported fraud was made by Walgreens.

The court also ruled against the majority of Walgreen’s 12(b)(6) dismissal for failure to state a claim. Walgreens sought a heightened requirement for pleading the fraud, fraudulent concealment and other claims by requiring that the plaintiffs cite a contractual obligation for Walgreens to specifically disclose the discount plans offered to customers as a part of the usual and customary pricing. The court noted that such a heightened plan was contrary to law of the jurisdiction, which does not require a contract in order for an action to be potentially fraudulent.

The case now proceeds to discovery and possible further amended complaints. The plaintiffs were represented by Crowell & Moring and Williams Montgomery & John. The defendants are represented by Ropes & Gray