A Federal Judge in the Northern District of Illinois recently dismissed one of several class actions filed against pharmaceutical manufacturers involving the use and marketing of copayment savings card programs or “copay subsidy programs,” as the Court referred to them. The case, New England Carpenters Health and Welfare Fund v. Abbott Laboratories, et al., Case No. 12-CV-01662, involved a class action suit brought by health insurance plan sponsors against Abbott Laboratories and Abbvie, Inc., and alleged that they had violated the federal Racketeer Influenced and Corrupt Organizations Act (RICO) by forming an illegal “enterprise” with third party administrators and pharmacies.
In a September 2014 opinion, Judge Robert M. Dow stated: “Plaintiff contends that the fraudulent processing of Defendants’ savings cards—as secondary insurance as opposed to coupon discounts—constitutes a scheme to defraud that includes predicate acts of mail and wire fraud.” In addition, the Court noted in its opinion that the Plaintiffs had alleged that the pharmacies processing the cards, at the direction of Defendants and their co-pay subsidy administrators, misrepresented to the insurance companies that the insured has secondary insurance, when actually, a coupon had been “fraudulently” processed as secondary insurance. The Plaintiffs alleged that these “omissions and misrepresentations” were part of a larger scheme to systematically conceal the use of savings cards to thwart Plaintiff’s efforts to implement cost-sharing provisions through pharmacy network agreements.
However, the judge dismissed the RICO claims, citing that the Plaintiff failed to allege a viable RICO “enterprise.” Under RICO, an “enterprise” is a requisite “association-in-fact” which is “separate and distinct from Defendants.” Courts have stated that an enterprise must have certain characteristics, including a purpose, relationships among those associated with it, adequate longevity, and an ascertainable structure. The Court noted that it is not enough for the defendants to have a commercial relationship; the fraudulent conduct must be “undertaken on behalf of the enterprise,” not simply on behalf of each of the Defendant’s individual interests.
As such, the Court held that the pharmacies alleged participation in the enterprise was not sufficiently pled, since there was no evidence that they had participated in the program for the goal of increasing the pharmaceutical manufacturers’ sales, as opposed to merely fulfilling their own, individual business goals.
This decision may have an impact not only on the outcome of other, similar class actions, but may also impact contracting decisions and procedures by and among health insurers and pharmacy benefits managers, as the existence of pharmacy network agreements was implicated within the Court’s opinion. Therefore, pharmacies must be fully abreast of all contract obligations with the PBMs, particularly as they relate to copayment collection. Contact Frier Levitt to speak to an attorney.
