A class action lawsuit filed in the U.S. District Court for the District of Connecticut on October 13, 2016 against Cigna Corporation (“Cigna”), a fully integrated health insurance company with reported revenue in excess of $37.9 billion in 2015, alleges that Cigna and/or its agents violated the Employee Retirement Income Security Act of 1974 (“ERISA”) and violated the Racketeering Influenced and Corrupt Organizations Act (“RICO”), by requiring network pharmacies to charge insured patients unauthorized and excessive amounts for prescription drugs.
According to the federal complaint, some of the charges for prescription drugs were more than ten times the actual amount that the insurer paid the pharmacy. Cigna is alleged to have “clawed back” the excessive payments by forcing the pharmacies to pay the unauthorized and excessive charges to Cigna and/or its agents after collecting them from the insureds.
An Example Of Alleged Wrongdoing
The federal complaint alleges the following example of wrongdoing experienced by a class member: the class member paid a $20 co-payment to a pharmacy to purchase the prescription drug Amlodipine, which in fact was a premium of 1,043% over the actual fee paid by Cigna to the pharmacy. Cigna and/or its agents contracted with the pharmacy to pay the pharmacy only $1.75 for the Amlodipine prescription. Unknown to and hidden from the class member, Cigna and/or its agents required the pharmacy to collect the $20 “co-payment” from the insured patient and then pay to Cigna and/or its agents the unlawful $18.25 “spread” between the supposed “co-payment” and the actual cost of the drug to Cigna and/or its agents. The secret payment of the “spread” to Cigna and/or its agents is known as a “clawback.”
How Pharmacy Benefits Work
Optum, a pharmacy benefits manager (“PBM”), allegedly provides pharmacy care services to a substantial majority of Cigna members. PBMs manage pharmacy benefits for 266 million Americans as of 2016 and operate as part of integrated retail pharmacies (e.g., CVS Health and Caremark) or as part of health insurance companies (e.g., UnitedHealth Group and Optum).
When a patient presents a prescription at a pharmacy, key information such as the patient’s name, drug dispensed, and quantity dispensed is transmitted via interstate wire to a “switch” that then directs the information to the correct PBM. The PBM instantaneously processes the claim according to the benefits plan assigned to the patient. The PBM electronically transmits via interstate wire a message back to the pharmacy indicating whether the drug and patient are covered and, if so, the amount the pharmacy must collect from the patient as a co-payment, coinsurance, or to be paid toward a deductible.
The PBM is supposed to pay the pharmacy any amounts owed to the pharmacy over the co-payment, co-insurance or deductible amount paid by the patient approximately every two weeks for the claims that were processed by any given pharmacy in the prior two-week period. If the patient’s payment is greater than the amount that the insurer or its PBM has negotiated to pay the provider pharmacy, however, there will be a “negative reimbursement” to the pharmacy for the “spread” between the patient’s payment and the actual cost of the drug to the insurer or its PBM. The “negative reimbursement” is paid by the pharmacy to Cigna and/or its agents as part of the reconciliation every two weeks. This payment of a “spread” to the insurer and/or its PBM — referred to in the industry as a “Clawback” — evidences the overcharge to the insured. The federal complaint alleges that the pharmacy has no role in setting the amount of the patient’s payment and thus must accept the “Clawback” amount as determined by the PBM.
The federal complaint alleges that pursuant to the health insurance policies, insurers must ensure that, when they contract with a PBM to act as their agent to manage prescription drug benefits under the health insurance policies, the PBM follows the policies’ terms, such that subscribers are not overcharged for their prescription drug benefits. The federal complaint alleges that PBMs, acting as agents and/or in concert with health insurance companies, routinely charge insureds substantially higher prices for prescription drugs than are allowed under the health insurance policies.
The federal complaint alleges that Cigna and/or its agents have taken the general employer-insurer-PBM-pharmacy structure and, through various agreements, created their unlawful scheme. Under these agreements, the pharmacy charges the insured patients a prescription drug price that is set by the PBM and/or insurer, which price typically is based on a percentage of the so-called average wholesale price or “AWP” (the “Insureds’ Price”). Alternatively, the pharmacy charges the insured patients a co-payment, which also is set by Cigna and/or its agent PBMs. The Insureds’ Price or co-payment routinely is higher than the price the PBM pays the pharmacy for providing the drug to the insured patients — particularly for many low-cost, high volume generic prescription drugs, although some brand drugs are also subject to “Clawbacks.” Moreover, under the confidentiality provisions of the PBM-Pharmacy Agreements, pharmacies cannot tell patient insureds that they are being overcharged, much less sell drugs to them at a lower price separate and apart from the insurance policies.
The federal complaint alleges that the the PBM–Pharmacy Agreements: (1) require pharmacies to charge insureds more for drugs than Cigna and/or its agents and their PBM pay the pharmacies, with the difference between the two amounts known as the “Spread;” (2) require the pharmacies to collect the “Spread” from patient insureds; (3) require payment of Spread or deduction of the “Spread” from future reimbursement to the pharmacy by the PBM as a “Clawback;” (4) prohibit pharmacies from disclosing to insureds the existence or amount of the “Spread” and “Clawback;” (5) prohibit pharmacies from disclosing to insureds that they can purchase drugs at lower prices; and (6) prohibit pharmacies from selling to insureds covered prescription drugs at prices that are lower than the price that the insurer/PBM orders the pharmacies to charge the insureds. Instead, the “Spread” and “Clawback” overcharges are pocketed secretly and unlawfully by the insurance companies and/or their agents.
The federal complaint requests a jury trial and requests that the Court find that the defendants engaged in prohibited transactions and award the plaintiff and the ERISA Subclass such relief as the Court deems proper; that the Court award the plaintiff, the Class, and the Subclass damages as deemed appropriate by the Court; that the Court award treble damages for all damages sustained as a result of the defendants’ violation of RICO; that the Court award the plaintiffs’ counsel attorneys’ fees, litigation expenses, expert witness fees and other costs pursuant to ERISA § 502(g)(1), 29 U.S.C. 1132(g)(1), and/or the common fund doctrine; and, that the Court award such other and further relief as may be just and proper, including prejudgment and post-judgment interest on the above amounts, among other claims for relief.
Source Negron v. Cigna Corporation, Case 3:16-cv-01702
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