Negron v. Cigna Health & Life Ins. & Optumrx, Inc.

• Decision Date: 12 March 2018
• Docket Number: 3:16cv1702 (WWE) consolidated with 16cv1904 (WWE)
• Citation: 300 F.Supp.3d 341
• Court: U.S. District Court — District of Connecticut
• Parties: Kimberly NEGRON, individually and on behalf of all others similarly situated Daniel Perry, individually and on behalf of all others similarly situated Courtney Gallagher, individually and on behalf of all others similarly situated Nina Curol, individually and on behalf of all others similarly situated, and Roger Curol, individually and on behalf of all others similarly situated, Plaintiffs, v. CIGNA HEALTH AND LIFE INSURANCE and OptumRx, Inc., Defendants.

300 F.Supp.3d 341

Kimberly NEGRON, individually and on behalf of all others similarly situated Daniel Perry, individually and on behalf of all others similarly situated Courtney Gallagher, individually and on behalf of all others similarly situated Nina Curol, individually and on behalf of all others similarly situated, and Roger Curol, individually and on behalf of all others similarly situated, Plaintiffs,

v.CIGNA HEALTH AND LIFE INSURANCE and OptumRx, Inc., Defendants.

3:16cv1702 (WWE) consolidated with 16cv1904 (WWE)

United States District Court, D. Connecticut.

Signed March 12, 2018

Brian C. Gudmundson, Zimmerman Reed, PLLP, Minneapolis, MN, Daniel K. Bryson, Jeremy R. Williams, Whitfield Bryson & Mason, LLP, Raleigh, NC, Derek W. Loeser, Gretchen S. Obrist, Keller, Rohrback, L.L.P., Seattle, WA, Robert A. Izard, Jr., Christopher M. Barrett, Craig A. Raabe, Izard, Kindall & Raabe, LLP, West Hartford, CT, Carey Alexander, Scott & Scott, LLP, Joseph P. Guglielmo, Scottscott, Attorneys at Law, LLP, New York, NY, Erin Green Comite, Scott & Scott LLP, Colchester, CT, Mathew P. Jasinski, William H. Narwold, Motley Rice LLC, Hartford, CT, Ronen Sarraf, Sarraf Gentile, LLP, Great Neck, NY, for Plaintiffs.

Brian W. Shaffer, Eleanor R. Farrell, Evan K. Jacobs, Margaret M. McDowell, Matthew D. Klayman, Joseph J. Costello, Morgan Lewis & Bockius LLP, Philadelphia, PA, Lisa Rose Veasman, Morgan Lewis & Bockius LLP, Los Angeles, CA, Michael D. Blanchard, Michael C. D'Agostino, Morgan, Lewis & Bockius LLP, Hartford, CT, for Defendants.

MEMORANDUM OF DECISION ON DEFENDANTS' MOTIONS TO DISMISS

Warren W. Eginton, Senior United States District Judge

In this putative class action, plaintiffs Kimberly Negron, Daniel Perry, Courtney Gallagher, Nina Curol and Roger Curol allege that defendants Cigna Health and Life Insurance Company ("CIGNA") and OptumRx, Inc., have violated the Employee Retirement Income Security Act ("ERISA") and the Racketeer Influenced and Corrupt Organizations Act ("RICO"). Plaintiffs allege that defendants have artificially inflated prescription drug costs in violation of the terms of their health insurance policies.

In count one, plaintiffs assert their action against defendants pursuant to ERISA § 502(a)(1)(B), which provides that a participant or beneficiary may bring an action to enforce rights under the terms of the plan. In counts two and three, plaintiffs assert violations of ERISA’s prohibited transactions enumerated in ERISA § 406(a) and (b). In count four, plaintiffs allege that defendants have breached their fiduciary duties of loyalty and prudence in violation of ERISA § 404(a)(1). In count five, plaintiffs allege that defendants violated ERISA’s antidiscrimination provision of ERISA § 702(b). In counts six and seven, plaintiffs allege that defendants are liable as co-fiduciaries or non-fiduciaries based on knowing participation in the asserted breaches of fiduciary duty. In counts eight through ten, plaintiffs assert RICO claims against defendants.

Defendants now move to dismiss this complaint for failure to state plausible claims for relief. For the following reasons, the motion to dismiss will be granted in part and denied in part.¹

BACKGROUND

For purposes of ruling on a motion to dismiss, the Court accepts all allegations of the complaint as true. The Court assumes familiarity with the allegations of the complaint. However, the Court will include this brief factual background.

Plaintiffs receive prescription drug benefits through individual or group health plans issued or administered by defendants. Cigna offers both administrative services only ("ASO") plans and insured plans. Both types of plan offer the same range of administrative services.

Cigna has an in-house pharmacy benefit manager known as Cigna Pharmacy Management that provides and administers health and pharmacy benefits to patients. Cigna Pharmacy Management outsources certain functions to other providers, including defendant OptumRx and another entity known as Argus Health Systems Inc. Cigna utilizes OptumRx’s technology and service platforms, retail network contracting and claims processing services. Argus was the primary pharmacy benefit manager prior to 2013, and it remains part of Cigna’s pharmacy benefits delivery system. Plaintiffs allege that Argus and OptumRx have been directed by Cigna and are involved in administering pharmacy benefits for the relevant plans.

Plaintiffs assert that defendants and other co-conspirators engaged in a scheme to defraud patients by overcharging for the cost of medically necessary prescription drugs. Patients allegedly pay excess charges to participating pharmacies in exchange for receiving their prescription drugs. Defendants allegedly misrepresent the costs of the prescription drugs in the form of increased charges to patients and then "clawback" from the pharmacies a large portion of the patients' payments.

In their complaint, plaintiffs have included an example of the asserted Clawback scheme applied to a prescription Vitamin D that a pharmacy purchased from the manufacturer or wholesaler for $0.60. Pursuant to the Pharmacy Benefit Manager Pharmacy Agreement (PBM Pharmacy Agreement), defendants' pharmacy benefit manager paid the pharmacy 0.96 for the Vitamin D, a fulfillment fee of $1.40, and $0.21 in tax. Thus, in accordance with the PBM Pharmacy Agreement, the contracted charge made by the pharmacy was $2.57. The PBM Pharmacy Agreement required the pharmacy to charge the patient a $7.68 "copayment" for the prescription Vitamin D, which represents almost 300% of an overcharge. The PBM-Pharmacy Agreement then required the pharmacy to pay the PBM or insurer the "Spread" between the contracted fee and the "copayment" amount collected from the patient. Thus, plaintiffs allege that defendants received a $5.11 Clawback. The PBM Pharmacy Agreement prohibited the pharmacy from disclosing to the patient the amount paid to the pharmacy or the Clawback.

Plaintiffs allege that the relevant plans provide that "[i]n no event will" a copayment or coinsurance amount paid by an insured exceed the amount paid by the plan to the pharmacy.² However, plaintiffs assert that contrary to the plan provisions, defendants have forced network pharmacies to charge patients unauthorized and excessive amounts for prescription drugs that far exceed the charges made by the pharmacy under their agreements; and that defendants have "clawed back" some or all of the excessive charges by forcing the pharmacies to pay the unauthorized charges to defendants after collecting them from the patients.

Plaintiffs' plans provide for (1) a claim determination and appeal process relative to coverage claims; and (2) a customer or member service for complaints if the insured has, inter alia, "a concern regarding a person, a service, the quality of care, [or] contractual benefits." The customer or member service provision instructs that an insured who is not satisfied with the results of a coverage decision "may start the appeals procedure."

The plan provisions relevant to filing a reimbursement or filing a claim for prescription drugs provide that upon purchase of a drug at a retail participating pharmacy, an insured or beneficiary pays an applicable Copayment, Coinsurance or Deductible and does not need to file a claim form.

DISCUSSION

The function of a motion to dismiss is "merely to assess the legal feasibility of the complaint, not to assay the weight of the evidence which might be offered in support thereof." Ryder Energy Distrib. v. Merrill Lynch Commodities, Inc., 748 F.2d 774, 779 (2d Cir. 1984). When deciding a motion to dismiss, the Court must accept all well-pleaded allegations as true and draw all reasonable inferences in favor of the pleader. Hishon v. King, 467 U.S. 69, 73, 104 S.Ct. 2229, 81 L.Ed.2d 59 (1984). The complaint must contain the grounds upon which the claim rests through factual allegations sufficient "to raise a right to relief above the speculative level." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A plaintiff is obliged to amplify a claim with some factual allegations to allow the court to draw the reasonable inference that the defendant is liable for the alleged conduct. Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009).

With regard to allegations of fraud or fraudulent conduct, a plaintiff must comply with the higher pleading standard required by Federal Rule of Civil Procedure 9. In order to satisfy Rule 9(b), a complaint must: (1) specify the statements that the plaintiff contends were fraudulent; (2) identify the speaker; (3) state where and when the statements or omissions were made; and (4) explain why the statements or omissions were fraudulent. Anatian v. Coutts Bank (Switzerland) Ltd., 193 F.3d 85, 88 (2d Cir. 1999). A plaintiff may make general allegations of malice, intent, knowledge or other state of mind, but the facts must give rise to a strong inference of fraudulent intent. Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124, 1128 (2d Cir. 1994). The purpose of the specificity requirement is: (1) to ensure that a complaint provides a defendant with fair notice of plaintiff’s claim; (2) to safeguard a defendant’s reputation from improvident charges; and (3) to protect defendant from a strike suit. O'Brien v. Nat'l Prop. Analysts Partners, 936 F.2d 674, 676 (2d Cir. 1991).

Count One

In count one, plaintiffs allege a claim under ERISA § 502(a)(1)(B), asserting that they have been denied their rights under the plans due to defendants' Clawbacks from the inflated prescription drug costs. Defendants respond that plaintiffs were required to exhaust their administrative remedies by appealing a denial of benefits. Plaintiffs counter that there were no claim denials to appeal; that imposing the exhaustion requirement would be inequitable; and that pursuing administrative remedies would be futile.

Courts have generally required participants...