Paduano v. Express Scripts, Inc.
| Decision Date | 27 October 2014 |
| Docket Number | No. 14–CV–5376 ADSARL.,14–CV–5376 ADSARL. |
| Parties | Victor PADUANO, Frank Scala, Nick Canner on behalf of themselves and other similarly situated individuals, and HM Compounding Services, LLC, Plaintiffs, v. EXPRESS SCRIPTS, INC. CVS Caremark Corp., OptumRx, Inc., and Prime Therapeutics LLC, Defendants. |
| Court | U.S. District Court — Eastern District of New York |
Jaspan Schlesinger LLP, by: Steven R. Schlesinger, Esq., Stanley A. Camhi, Esq., Jessica M. Baquet, Esq., Shannon E. Boettjer, Esq., Daniel E. Shapiro, Esq., of Counsel, Garden City, NY, for the Plaintiffs.
Husch Blackwell LLP, by: Christopher Smith, Esq., Jason Husgen, Esq., Sarah Hellmann, Esq., of Counsel, Saint Louis, MO, for the Defendant Express Scripts, Inc.
Cozen O'Connor, by: Menachem J. Kastner, Esq., Ally Hack, Esq., of Counsel, New York, NY, for the Defendant Express Scripts, Inc.
Foley & Lardner LLP, by: Yonaton Aronoff, Esq., Michael D. Leffel, Esq., Connor A. Sabatino, Esq., of Counsel, New York, NY, for the Defendant CVS Caremark Corp.
Dorsey & Whitney, LLP, by: Richard H. Silberger, Esq., Christopher George Karagheuzoff, Esq., Dai Wai Chin Feman, Esq., of Counsel, New York, NY, for the Defendant OptumRx, Inc.
Dykema Gossett PLLC, by: Jill M. Wheaton, Esq., Ann Arbor, MI, for the Defendant Prime Therapeutics LLC.
Aaronson, Rappaport, Feinstein & Deutsch, by: Peter Joseph Fazio, Esq., New York, NY, for the Defendant Prime Therapeutics LLC.
This multi-party antitrust action is brought by the Plaintiff HM Compounding Services, LLC (“HMC”) and three individuals, Victor Paduano (“Paduano”), Frank Scala (“Scala”), and Nick Canner (“Canner”)(collectively the “Individual Plaintiffs”), on behalf of themselves and all others similarly situated, who desire to purchase compound medications from HMC.
According to the complaint, the Individual Plaintiffs purchase compound medications from HMC, which operates one of the largest compounding pharmacies in the Eastern United States. HMC provides custom-made medications, i.e., compounded medicines, to numerous patients, including pediatric patients who cannot take pill versions of particular drugs; patients that cannot tolerate one or more ingredients in manufactured drugs; drugs that are no longer manufactured but are still determined to be safe and effective; and compounds for particular types of treatment, including pain management, dermatological specialties, biologically identical hormone replacement, sexual dysfunction and enhancement; compounds for autism
; compounds for weight management; and compounds for veterinary use.
The named defendants—Defendants Express Scripts, Inc. (“ESI”), CVS Caremark Corporation, now known as “CVS Health Corporation” (“Caremark”), Optum Rx, Inc. (“Optum”), and Prime Therapeutics, LLC (“Prime”)(collectively the “Defendants”)—are or are affiliated with prescription benefit managers (“PBMs”). PBMs administer the prescription pharmaceutical portion of healthcare benefit programs, which are typically purchased by a plan sponsor. As part of their functions, PBMs provide bundled services related to the administration of pharmaceutical benefits, including claims adjudication, formulary design, management and negotiation of branded drug rebates; management and negotiation of networks of retail pharmacies; review of drug utilization; processing claims from pharmacies for payment; and the operation of specialty and home-delivery pharmacies such as mail order pharmacies used to dispense medications directly to patients. Some chain pharmacies, such as CVS, have merged with PBMs.
Collectively, the Defendants dominate the PBM market in the United States with a market share of more than 80%. The Defendant ESI is the largest PBM and the Defendant Caremark is the second largest PBM.
In short, the Plaintiffs allege that the Defendants have engaged in a concerted and coordinated effort to eliminate HMC, and other independent compounding pharmacies, as competitors in the prescription benefit drug market by placing unwarranted and illegal restrictions on patient access to compounded medications.
Although not emphasized by the complaint, the relationships between HMC and the respective defendant-PBMs are each governed by a Pharmacy Network Agreement. The HMC agreement with Caremark (the “Caremark Provider Agreement”), the HMC agreement with Optum (the “Optum Provider Agreement”), and the HMC agreement with Prime (the “Prime Provider Agreement”) each contain or incorporate an arbitration provision for resolving disputes arising therefrom. The HMC agreement with ESI (the “ESI Provider Agreement”) contains a forum selection clause for resolving disputes arising therefrom.
Presently pending before the Court are a number of motions, including separate motions by Caremark, Optum, and Prime to sever HMC's claims against them and to refer those claims to arbitration. Also pending before the Court is a motion by ESI to sever HMC's claims against it and transfer those claims to the contractually-designated forum in Missouri.
The Court first recounts the termination of the contractual relationships between HMC and each of the Defendants, save for Prime, which has not terminated its contractual relationship with HMC. Unless stated otherwise, the following facts are drawn from the complaint.
By letter dated June 30, 2014, Caremark informed HMC of an “ongoing audit” of its pharmacy “covering the period of April 2013 through September 30, 2013.” (Compl., at ¶ 55.) That “ongoing audit” had not been previously disclosed to HMC. In that letter, Caremark informed HMC that “CVS Caremark is placing your pharmacy under payment and adjudication suspension” effective immediately based upon purported “compliance issues” identified in the ongoing audit. (Id. ) Caremark informed HMC that, pursuant to this decision, HMC “may not submit claims to Caremark for adjudication” and that “future cycle checks for prior claims will be withheld pending resolution of our audit review.” (Id. ) Accordingly, effective June 30, 2014, Caremark stopped paying claims submitted by HMC and precluded HMC from submitting any future claims.
By letter dated July 16, 2014, HMC addressed its stated audit concerns, and requested that Caremark reinstate HMC. By letter dated July 28, 2014, Caremark denied HMC's request to reconsider the payment and adjudication suspension placed upon HMC. In that letter, Caremark admitted that it had instituted a policy of rejecting compounded prescriptions and requiring prior authorizations “based upon plan edits.” (Id. at ¶ 56.) No information about the “plan edits” was provided in that letter, nor were those “plan edits” disclosed to HMC prior to the termination letter. (Id. ) Caremark also stated: “We do not believe that there is any patient harm with our decision to suspend payment and claims adjudication for HM Compounding ...” (Id. )
On or about August 15, 2013, a pharmacy services administrative organization, Wholesale Alliance TPS LLC DBA Third Party Station (“TPS”) entered into the Optum Provider Agreement with Optum. TPS entered into the Agreement “on behalf of itself and each of the Pharmacies” in TPS's network, including HMC. (Doc No. 39, Ex. A, at 1.)
By Termination Letter dated March 3, 2014, Optum informed Third Party Station (“TPS”), a Third Party Administrator in Optum's prescription benefit program, that HMC was being terminated as a network provider because the Pharmacy Network Agreement “prohibits delivering, shipping, mailing and/or dispensing Covered Prescription Services to members” and demanded that HMC cease and desist from engaging in such activity. (Compl. at ¶ 51.)
By letter dated March 17, 2014, attorneys for HMC responded to that termination letter, explaining that the contract provision cited by Optum did not prohibit “delivering, shipping” and or “dispensing” prescription services to members, nor could it if it were to comply with governing legal and ethical requirements for these services under New York law.
By letter dated May 29, 2014, Optum responded to that letter by asserting that HMC's contract was being terminated immediately “for cause” on the basis that the “that mailing, shipping and or delivering of Covered Prescription Services is not allowed under the retail contract with [Optum].” (Id. at ¶ 52.)
Subsequently, by letters dated June 25, 2014, Optum informed HMC that it was terminating “for cause” the Optum Provider Agreement due to alleged “Fraud, Waste and Abuse” for purportedly engaging in “prescription splitting to obtain multiple dispensing fees, etc.” (Id. at ¶ 54.)
By letter dated July 16, 2014, HMC explained that it was not “splitting” prescriptions and receiving multiple dispensing fees and requested that the contract be reinstated until an appeal hearing on the issue was held. Optum denied that request, allegedly causing HMC money damages.
By letter dated July 22, 2014, HMC informed ESI that it had become aware that ESI was directly notifying providers that they were not to continue prescribing compounded medications even if it was in the patient's best interest to receive compounded medicine.
On July 31, 2014, ESI sent HMC a “notice of immediate termination” of the ESI Provider Agreement. In its letter, ESI alleged that HMC had purportedly made material misrepresentations to ESI regarding collecting patients' co-payments and, as a result, was terminating HMC's contract immediately.
By letter dated August 1, 2014, ESI responded to HMC's July 22, 2014 letter. In that letter, ESI did not deny making such statements to prescribing physicians; rather, it took the position that ESI “has a legal right to communicate with providers regarding benefit coverage issues.” (Id. at ¶ 57.)
On September 10, 2014, the Individual Plaintiffs, on behalf of themselves and all others...
To continue reading
Request your trial
-
Presidential Hospitality, LLC v. Wyndham Hotel Grp., LLC
...render transfer appropriate under § 1404(a), then severance, too, would be proper.’ ")(quoting Paduano v. Express Scripts, Inc., 55 F.Supp.3d 400, 431-32 (E.D.N.Y. 2014) (Spatt, J.) ) The Court therefore turns to the 1404(a) factors to determine whether it should transfer Presidential Hospi......
-
Mercadante v. XE Servs., LLC, Civil Action No. 11–1044 CKK
...Inc., No. 1:11CV371, 2013 WL 1332028, at *5 (E.D.Va. Mar. 29, 2013) ; but see Paduano v. Express Scripts, Inc., No. 14–CV–5376 ADS ARL, 2014 WL 5431320, at *25, 55 F.Supp.3d 400, 429 (E.D.N.Y. Oct. 27, 2014).9 The Court notes that Plaintiffs continue to ignore the Court's repeated warnings ......
-
DJ's Tree Serv. & Logging, Inc. v. Bandit Indus., Inc.
...Atl. Marine , 571 U.S. at 64, 134 S.Ct. 568, do not render the forum selection clause unenforceable. See Paduano v. Express Scripts, Inc. , 55 F. Supp. 3d 400, 434-35 (E.D.N.Y. 2014) (citations omitted) ("[T]he efficiency and economy achieved by trying interrelated claims in one forum shoul......
-
Mobile Real Estate, LLC v. Newpoint Media Grp., LLC
...("[B]y incorporating the [AAA Rules,] the parties agreed to have the arbitrators decide arbitrability."); Paduano v. Express Scripts, Inc. , 55 F. Supp. 3d 400, 415 (E.D.N.Y. 2014) ("[V]irtually every circuit to have considered the issue has determined that incorporation of the [AAA] ... [R......