Rutgers University Sues Over Failure to Pay 340(b) Reimbursements

On Wednesday a case was filed in the District of New Jersey by Rutgers, the State University of New Jersey against ai Varuni Pharmacy, LLC, which does business as Metro Pharmacy, Sai Chandi Pharmacy, LLC doing business as QuickStop Pharmacy, and the manager of both Metro and QuickStop. The case is regarding breach of contract and failure to remit payments from the Medicare and Medicaid 340(b) pharmacy program.

The 340(b) program, administered by the Health Resources and Services Administration, requires participating pharmaceutical manufacturers to provide certain outpatient prescription drugs , clinic-administered drugs, and over-the-counter drugs to eligible health care organizations, known as “Covered Entities” under the Program, at significantly reduced prices. This allows clinics and hospitals in under-served communities to provide greater services to patients who do not have the financial resources to pay for more costly treatments.

The complaint explained that Rutgers, as a part of its medical school, supports two clinics. These clinics allow the students to gain hands on experience under the supervision of licensed practitioners and teachers, while also providing medical services to lower income and other underserved communities. In order to provide medication support, Rutgers entered into a 340(b) contract with the defendants and with 340Basics, a third party administrator of 340(b) programs. In the contract, the defendants would submit all claims to 340Basics, which would then track patient eligibility, inventory, and verify the dispensing fees for the defendants. As a part of the contract, the defendants were required to use 340Basics software, to collect copayments from the patients, and to maintain records subject to audit. The defendants were also required to remit the remainder of the 340(b) payments to Rutgers to reimburse the costs of purchasing the medications.

The plaintiffs accuse the defendants of failing to submit the reimbursement payments from the 340(b) payments to Rutgers. The plaintiffs confirm that payments in the amount of $212,349.57 were made, however a remaining balance of $514,875.87 was not made and per the plaintiff, the defendants indicated that they disputed this amount.

The plaintiffs are suing for breach of contract, unjust enrichment, conversion, breach of good faith and fair dealing, fraudulent misrepresentation, negligent misrepresentation, and demands an audit of the records for verification of the underpayment. Plaintiff is represented by Fein, Such, Kahn & Shepard, PC.