UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI

Transcription

1 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 1 of 12 UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EXPRESS SCRIPTS, INC., ) ) Plaintiff, ) ) vs. ) Cause No.: 4:08-cv-1915 ) WALGREEN CO., ) JURY TRIAL DEMANDED ) Defendant. ) ) FIRST AMENDED COMPLAINT COMES NOW Express Scripts, Inc., and for its First Amended Complaint ( Complaint ) against Walgreen Co., states as follows: PARTIES, JURISDICTION AND VENUE 1. Plaintiff, Express Scripts, Inc. ( ESI ), is, and at all times material hereto was, a corporation organized and existing under the laws of the state of Delaware, with its principal place of business in St. Louis County, Missouri. It is a citizen of the states of Missouri and Delaware. 2. Defendant, Walgreen Co. ( Walgreens ), is, and at all times material hereto was, a corporation organized and existing under the laws of the state of Illinois, with its principal place of business in Deerfield, Illinois. Walgreens is a citizen of the state of Illinois and is conducting business in the state of Missouri. 3. This Court has subject matter jurisdiction over this controversy under 28 USC 1332 because the amount in controversy exceeds Seventy-Five Thousand Dollars ( $75, ), exclusive of interest, attorney s fees and costs, and complete diversity exists between ESI and Walgreens. 1

2 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 2 of Venue is proper in the Eastern District of Missouri under 28 USC 1391(a) because a substantial part of the events or omissions giving rise to these claims occurred in this District and Walgreens is subject to personal jurisdiction in the District. FACTUAL BACKGROUND A. The Relationship Between ESI and Walgreens. 5. ESI is one of the nation s leading companies offering full-service pharmacy benefit management ( PBM ), which includes network pharmacy claims processing, mail pharmacy services, and developing networks of retail pharmacies with negotiated rates. ESI s clients include managed-care organizations, health insurers, employer groups, third-party administrators and government-sponsored plans. 6. Prior to August 2005, Walgreens provided pharmacy services to eligible members of certain ESI pharmacy benefit plans. 7. On August 26, 2005, ESI and Walgreens entered into the Express Scripts PERx Managed Care Pharmacy Provider Agreement ( Agreement ), pursuant to which Walgreens provides pharmacy services to eligible members of ESI s prescription drug programs. A true and accurate copy of the Agreement is attached hereto and filed under seal as Exhibit The provided pharmacy services include verification of eligibility for participation in the plan, dispensing of covered medications, submission of the prescription drug claims using ESI s on-line system, collection of applicable co-payments, maintenance of records for prescriptions dispensed and delivered, and provision of reasonable consultation services. 9. In exchange for Walgreens services, ESI is to provide on-line verification of member eligibility, claims processing, and distribution of remittance reports and payment of 2

3 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 3 of 12 claims. Further, Walgreens is to receive payments from ESI in accordance with the payment schedule attached to the Agreement. 10. The Agreement incorporates the terms of ESI s Provider Manual, including all revisions thereto ( Provider Manual ), which sets forth the guidelines, policies and procedures for ESI network pharmacies. See Ex. 1, Section 1. A true and correct copy of the 2005 Provider Manual is attached hereto and filed under seal as Exhibit Pursuant to the terms of the Agreement, Walgreens is required to: maintain required records relating to Members and their prescriptions for Covered Drugs in accordance with applicable laws and as required for quality assurance and peer review programs for the time period required by applicable law from the date any such prescription is dispensed. See, Ex The Agreement and the Provider Manual give ESI the right to inspect, review, and audit Walgreens records. See Ex. 1, Section 5; Ex. 2, Section In addition to ensuring compliance with the Agreement, ESI s audit program is a service to ESI s clients who receive the bulk of any monies recovered as the result of an audit. 14. Pursuant to the terms of the Agreement and the Provider Manual, ESI may also deduct from its remittances to Walgreens any claims which failed to comply with the Agreement and/or the Provider Manual. See Ex. 1, 2.A.3 and 3.A; Ex. 2, 2.11, 6.3, ESI performed both on-site and telephone audits of Walgreens prior to entering into the Agreement and has continued performing these audits since the inception of the Agreement. As a result of these audits, ESI has routinely deducted from its remittances to Walgreens adjustments for claims paid on incorrectly submitted data or that failed to comply with ESI s quality assurance or audit process. 3

4 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 4 of 12 B. Overview of the Parties Dispute. 16. In 2005, ESI became aware of potential issues in the pharmacy industry regarding improper substitution of ranitidine dosage forms. Ranitidine is the generic form of Zantac, a hugely popular prescription antacid. 17. In November 2006, Omincare Inc., a provider of pharmaceutical care for seniors, announced a settlement with federal and state authorities which included allegations of increasing reimbursement from Medicaid by switching the form of the drug dispensed to Medicaid patients while providing no additional medical benefit to the patients. In particular, it was alleged that Omnicare switched the tablet form of ranitidine to the more expensive capsule version. 18. ESI began reviewing ranitidine claims submitted by its pharmacy providers, including Walgreens. Based on this review, it was apparent that Walgreens was substituting the more expensive capsule form of ranitidine for the tablet form. Walgreens had a capsule dispensing rate of nearly 97% compared to less than 3% for ESI s book of business during the same time period, excluding Walgreens. 19. In correspondence dated December 19, 2006, ESI informed Walgreens that an analysis of the ranitidine claims submitted to ESI by Walgreens pharmacies from January 2002 through June 30, 2006, indicated a pattern of dispensing ranitidine capsules at a significantly higher rate than average, resulting in a substantial overpayment to Walgreens. 20. From December 2006 through May 2008, ESI and Walgreens engaged in a number of discussions and exchanged correspondence regarding the on-going dispute in which Walgreens was provided with additional documentation regarding the ranitidine claims. 4

5 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 5 of In May 2008, at a meeting between executives of ESI and Walgreens, the ranitidine issue was again discussed. At that meeting, Walgreens refused to enter into any compromise agreement to settle the ranitidine issue based on the claims audited up to that time and insisted that if ESI wanted to recover monies for any discrepancies related to ranitidine claims, it would have to conduct on-site audits of each of the claims. 22. Approximately two weeks later, Walgreens entered into a $35 Million settlement with the federal government and forty-six states to resolve claims that Walgreens had violated various state and federal regulations by substituting dosage forms of three medications commonly prescribed for Medicaid patients, including ranitidine. This was the first notice that ESI received of the federal and state claims against Walgreens, and further solidified the fact that Walgreens had wrongfully engaged in improper claims practices to the detriment of ESI. 23. Following Walgreens audit challenge and the announcement of the settlement of the federal and state claims against Walgreens, ESI conducted audits in August and September 2008 of a sampling of Walgreens stores that had a high incidence of ranitidine claims. 24. Walgreens refused to allow any audits to be conducted of claims that were submitted prior to the inception of the Agreement and restricted ESI s ability to fully audit ranitidine claims submitted after the inception of the Agreement. As such, ESI was unable to determine the true extent of overpayments made to Walgreens as a result of its wrongful claims practices. 25. Despite the limited audits that ESI was able to conduct, ESI uncovered numerous discrepancies for both ranitidine and other types of claims that resulted in an overpayment to Walgreens exceeding Twenty-Five Million Dollars ($25,000,000). Undoubtedly, a complete audit of Walgreens claims would have revealed a significantly higher overpayment. 5

6 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 6 of As a result of the improper claims practices discovered during the course of the August and September audits, pursuant to the terms of the Agreement and the Provider Manual, ESI withheld funds from certain remittances to Walgreens. 27. On December 1, 2008, ESI received a letter from Walgreens outside counsel demanding, among other things, that ESI return $7,826,752, plus interest, provide an accounting of ESI s performance under the Agreement and cease and desist from conducting any further telephone audits. COUNT I DECLARATORY RELIEF 28. ESI re-alleges and incorporates by reference each and every allegation contained in paragraphs 1 through 27 of this Complaint as if fully set forth herein. 29. ESI brings its Declaratory Judgment Count in accordance with 28 USC 2201 and 2202 and Rule 57 of the Federal Rules of Civil Procedure. 30. ESI brings this suit for a declaration of its rights and liabilities under the Agreement and the Provider Manual. 31. Walgreens has made various statements and undertaken various actions indicating that it contests the parties rights and liabilities under the Agreement and the Provider Manual. 32. Specifically, Walgreens alleges that ESI is not permitted under the Agreement and/or the Provider Manual to conduct telephone audits; that ESI may conduct only a limited number of on-site audits per month; that ESI may not audit claims submitted prior to the inception of the Agreement; that ESI is not permitted under the Agreement and/or the Provider Manual to audit claims that were electronically submitted and approved; and that ESI is not permitted under the Agreement and/or the Provider Manual to withhold any amounts from its remittance payments to Walgreens during the audit and appeals process. 6

7 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 7 of As a result, ESI has not been permitted to fully audit claims submitted by Walgreens to determine the true extent of overpayments made to Walgreens resulting from Walgreens wrongful claims practices. 34. An actual justiciable controversy exists between the parties, and litigation as to the controversy is imminent and inevitable. 35. Thus, a present controversy and dispute exists between ESI and Walgreens concerning the rights and obligations of the parties under the terms of the Agreement and the Provider Manual. 36. All necessary and proper parties are before the Court for the matter in controversy. 37. ESI has no adequate remedy at law and will suffer irreparable harm if its rights and obligations under the Agreement and the Provider Manual are not declared by this Court. 38. ESI requests a declaratory judgment declaring and adjudicating that the Agreement and the Provider Manual allow ESI: (1) to conduct telephone audits of claims submitted by its members to Walgreens; (2) that ESI is not limited in the number of on-site audits it may conduct; (3) that ESI may audit claims submitted prior to the inception of the Agreement; (4) that ESI may audit claims that were electronically submitted and approved; and (5) that ESI may withhold overpayment amounts from its remittance payments to Walgreens. WHEREFORE, Plaintiff Express Scripts, Inc. respectfully requests that this Court determine that the Agreement and the Provider Manual allow ESI: (1) to conduct telephone audits of claims submitted by its members to Walgreens; (2) that ESI is not limited in the number of on-site audits it may conduct; (3) that ESI may audit claims submitted prior to the inception of the Agreement; (4) that ESI may audit claims that were electronically submitted and approved; 7

8 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 8 of 12 and (5) that ESI may withhold overpayment amounts from its remittance payments to Walgreens and that ESI be entitled to recovery from Walgreens; and that ESI be granted costs, attorneys fees, and such other and further relief as this Court deems just and proper. COUNT II-BREACH OF CONTRACT 39. ESI re-alleges and incorporates herein each and every allegation contained in paragraphs 1 through 38 of this Complaint as if fully set forth set forth herein. 40. The Agreement is a valid and binding contract. 41. The Agreement and Provider Manual dictate the specific manner in which Walgreens is to submit prescription drug claims to ESI. See, Ex. 1, Section 2.A The Agreement further provides that ESI may refuse to pay any claim not submitted in accordance with the provisions of this Section 3.A. and of Section 2.A.3 hereof. See, Ex. 1, 3.A. 43. Walgreens breached the Agreement by failing to properly submit prescription drug claims to ESI and by accepting payment for improperly submitted claims, which did not entitle Walgreens to payment under the Agreement and/or the Provider Manual. following: 44. Examples of improperly submitted claims include, but are not limited to, the a) Walgreens submitted improper substitutions for prescriptions, without supporting physician authorization, including, but not limited to, prescriptions written for Zantac but filled with ranitidine capsules and prescriptions written for ranitidine tablets but filled with ranitidine capsules; b) Walgreens submitted numerous prescriptions with the pharmacists instruction as use as directed without obtaining the proper direction or clarification as required; c) Walgreens submitted prescriptions that did not have the appropriate DEA numbers that are required for certain drugs; and 8

9 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 9 of 12 d) Walgreens submitted unauthorized refills without appropriate documentation. 45. The Agreement also requires Walgreens to maintain required records relating to members of prescription benefit plans and their prescriptions for the time period required by applicable law and to allow said records to be inspected, reviewed, and audited by ESI. See, Ex The Agreement and the Provider Manual give ESI the right to inspect, review, and audit Walgreens records to ensure compliance with the Agreement and to deduct from remittances to Walgreens the amount of any claims that fail to comply with the Agreement and/or the Provider Manual. See Ex. 1, 2.A.3, 3.A, and 5; Ex. 2, 2.11, 6.3, Walgreens has breached the Agreement by refusing to allow ESI to inspect, review and audit its records as required by the Agreement and Provider Manual. 48. ESI has performed all conditions precedent and duties under the Agreement. 49. As a direct and proximate result of Walgreens breach of the Agreement, ESI has incurred damages in the overpayment of claims that were wrongfully submitted by Walgreens. ESI has further been damaged in that it has been unable to properly audit Walgreens records to determine the true extent of its loss resulting from Walgreens wrongful claims practices. Due to the limited audits conducted to date, ESI in good faith believes its loss is in the millions of dollars, exclusive of interest and costs. WHEREFORE, Plaintiff Express Scripts, Inc. prays this Court to enter judgment in its favor and against Walgreens for actual damages fairly and reasonably believed to be in the millions of dollars, exclusive of interest and costs, and for consequential damages, as the evidence will show, together with interest at a rate of nine percent (9%) per annum from the 9

10 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 10 of 12 relative dates to the date of judgment, for its court costs and attorneys fees incurred herein, and for such other and further relief which the Court deems necessary and just under the circumstances. COUNT III - UNJUST ENRICHMENT 50. ESI re-alleges and incorporates herein each and every allegation contained in paragraphs 1 through 49 of this Complaint as if fully set forth set forth herein. 51. ESI pleads, in the alternative, that it is entitled to restitution of any amounts paid to Walgreens prior to the inception of the Agreement resulting from Walgreens improper claims practices. 52. Prior to the inception of the Agreement, ESI made payments to Walgreens for its pharmacy services, under the belief that the claims submitted by Walgreens were proper. 53. ESI was at all relevant times unaware that Walgreens was engaging in wrongful claims practices, including the improper substitution of prescription dosage forms, which led to the repeated submission and ultimate payment of claims for which Walgreens was not entitled to payment. 54. Walgreens has therefore received the benefit of and been unjustly enriched by the receipt and retention of payments for which it is not entitled, at the expense of ESI, the payor. 55. It is unjust and inequitable for Walgreens to retain any amounts paid as a result of its wrongful claims practices, including the improper substitution of prescription dosage forms. Rather, it is equitable for Walgreens to return all such amounts to ESI. WHEREFORE, Plaintiff Express Scripts, Inc. prays, in the alternative, for judgment against Walgreens in an amount equal to all amounts paid to Walgreens prior to the inception of the Agreement, as a result of Walgreens wrongful claims practices, including improper dosage 10

11 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 11 of 12 form substitutions, and for consequential damages, as the evidence will show, together with interest at a rate of nine percent (9%) per annum from the relative dates to the date of judgment, for its court costs incurred herein, and for such other and further relief which the Court deems necessary and just under the circumstances. Respectfully submitted, CARMODY MACDONALD P.C. By /s/ Gerard T. Carmody Gerard T. Carmody, #2786 Kelley F. Farrell, #46929 Teresa Dale Pupillo, # S. Central, Suite 1800 St. Louis, Missouri (314) (314) (facsimile) gtc@carmodymacdonald.com kff@carmodymacdonald.com tdp@carmodymacdonald.com Attorneys for Plaintiff Express Scripts, Inc. 11

12 Case 4:08-cv TCM Document 48 Filed 04/28/2009 Page 12 of 12 CERTIFICATE OF SERVICE I hereby certify that a copy of the foregoing was served electronically by operation of the Court s CM/ECF system and by Federal Express on this 28th day of April 2009, on the following: Richard C. Godfrey Sallie G. Smylie D. Joseph Piech KIRKLAND & ELLIS, LLP 200 East Randolph Drive Chicago, IL Edward M. Goldenhersh David P. Niemeier GREENSFELDER AND HEMKER, PC 2000 Equitable Building 10 South Broadway St. Louis, MO Attorneys for Defendant Walgreen Co. /s/ Gerard T. Carmody 12