Forth et al v. Walgreen Co. et al
Filing
421
MEMORANDUM Opinion and Order Signed by the Honorable John Z. Lee on 3/23/2021. For the foregoing reasons, Walgreens's partial motion to dismiss 276 is granted. Mailed notice. (jjr, )
Case: 1:17-cv-02246 Document #: 421 Filed: 03/23/21 Page 1 of 11 PageID #:5998
IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
DOROTHY FORTH, DONNA BAILEY, ∗ )
LISA BULLARD, RICARDO GONZALES, )
CYNTHIA RUSSO, TROY TERMINE,∗
)
INTERNATIONAL BROTHERHOOD OF )
ELECTRICAL WORKERS LOCAL 38
)
HEALTH AND WELFARE FUND,
)
INTERNATIONAL UNION OF
)
OPERATING ENGINEERS LOCAL
)
295-295C WELFARE FUND, AND
)
STEAMFITTERS FUND LOCAL 439,
)
on behalf of themselves and all others )
similarly situated,
)
)
Plaintiffs,
)
)
v.
)
)
WALGREEN CO.,
)
)
Defendants.
)
No. 17 C 2246
Judge John Z. Lee
MEMORANDUM OPINION AND ORDER
In 2017, Plaintiffs Dorothy Forth, Lisa Bullard, Ricardo Gonzales, and
Cynthia Russo (“Consumer Plaintiffs”), and Plaintiffs International Brotherhood
of Electrical Workers Local 38 Health and Welfare Fund, International Union of
Operating Engineers Local 295-295C Welfare Fund, and Steamfitters Fund Local
439 (“the Fund Plaintiffs”) (collectively, “Plaintiffs”), filed this putative class
action against Defendant Walgreen Co. (“Walgreens”).
Donna Bailey and Troy Termine are included in the caption of the Third Amended
Complaint, but their claims were voluntarily dismissed prior to its filing. See Stip. Voluntary
Dismissal Pl. Donna Bailey, ECF No. 124; Stip. Voluntary Dismissal Pl. Troy Termine, ECF
No. 140.
∗
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Plaintiffs claim that Walgreens engaged in fraudulent pricing practices to
artificially inflate the “usual and customary prices” reported to health insurance
companies and related third-party payors, which caused Plaintiffs to overpay for
generic drugs. Plaintiffs plead claims of fraud and unjust enrichment, as well as
violations of state consumer-protection statutes in twenty states. 1 They also seek
declaratory and injunctive relief under the Declaratory Judgment Act, 28 U.S.C.
§ 2201, et seq.
Nearly three years after Plaintiffs filed their original complaint, they sought
leave to file a third amended complaint asserting that Walgreens’s scheme
involved another category of generic drugs—called non-Value Priced Generics—in
addition to the Value Priced Generics put at issue in the operative complaint. See
Tr. Proceedings on 3/4/20, ECF No. 260. The Court permitted the amendment,
and now Walgreens moves to dismiss the third amended complaint as it relates to
the non-Value Priced Generics. For the reasons provided below, the Court grants
the motion to dismiss.
Plaintiffs allege violations of state consumer protection statutes in the following
states: Arizona, California, Colorado, Connecticut, Delaware, Florida, Georgia, Illinois,
Louisiana, Massachusetts, Minnesota, Nevada, New Mexico, New York, North Carolina,
Ohio, Pennsylvania, South Carolina, Texas, and Wisconsin. See Third Am. Consolidated
Class Action and Jury Demand (“3d Am. Compl.”) Counts III–XXVII, ECF No. 269.
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I.
A.
Background
Facts 2
The Court assumes familiarity with the facts of this case as set forth in
detail in Forth v. Walgreen Co., No. 17-CV-2246, 2018 WL 1235015 (N.D. Ill. Mar.
9, 2018). Accordingly, the Court provides only those facts necessary to resolve
Walgreens’s motion to dismiss.
Walgreens is the largest retail pharmacy in the United States; in fiscal year
2016, it filled 928.5 million prescriptions 3 and earned approximately $56.1 billion
in pharmacy sales in the United States. Pls.’ Third Am. Consolidated Class Action
Compl. and Jury Demand (“3d Am. Compl.”) ¶ 7, ECF No. 269. In 2006, major
retailers with pharmacy departments like Target and Walmart began offering
hundreds of generic prescription drugs at reduced prices—for example, $4 for a 30day supply and $10 for a 90-day supply—likely because pharmacy sales
represented a low percentage of the retailers’ total sales and they were able to
absorb the lower margins. Id. ¶¶ 66–67.
In 2007, Walgreens created the “Prescription Savings Club” (“PSC”), which
offers generic drug prices that are competitive with the prices offered by these
major retailers. Id. ¶ 69. For a nominal annual enrollment fee ($20 for individuals
and $35 for families), customers can access discounts on thousands of generic
The Court “accept[s] as true all well-pleaded facts alleged” in reviewing a motion to
dismiss. See Tamayo v. Blagojevich, 526 F.3d 1074, 1081 (7th Cir. 2008).
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That number is adjusted to 30-day equivalents. See 3d Am. Compl. ¶ 7.
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prescription drugs.
Id. ¶ 71.
Any customers can enroll—even if they have
insurance—unless they are on Medicare or Medicaid. Id. Walgreens does not limit
the eligibility for or duration of PSC prices other than to require direct payment
(in other words, customers must pay for the drugs themselves without using
insurance).
A subset of approximately 500 PSC generics are on Walgreens’s ValuePriced medication list. See Pl.’s Ex. A, Value-Priced Medication List, ECF No. 2691. The parties refer to this subset as the “Value-Priced Generics” or “VPG drugs.”
A VPG drug is assigned a set price according to its “tier” and whether the customer
is purchasing a 30- or 90-day supply. Id. A tier 1 drug costs $5 for a 30-day supply
and $10 for a 90-day supply; a tier 2 drug costs $10 for a 30-day supply and $20
for a 90-day supply; and a tier 3 drug costs $15 for a 30-day supply and $30 for a
90-day supply.
Id.
But the PSC formulary includes thousands of generic
medications—not just those on the Value-Priced medication list—that are offered
at a discount to PSC members. 3d Am. Compl. ¶ 9. The prices of these “non-VPG
drugs” vary, depending on the drug and the days’ supply, among other things. Id.
¶ 8.
The complaint alleges that, at the same time it offered low prices through
the PSC to direct-pay customers, Walgreens charged higher prices to customers
purchasing those same drugs through private insurance or through Medicare or
Medicaid.
Id. ¶ 4.
According to Plaintiffs, pharmacies cannot charge such
consumers—or report to insurance companies or other third-party providers (such
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as Medicare and Medicaid)—a higher price for prescription drugs than what is
known as the “usual and customary” (“U&C”) price. Id. ¶ 5. Plaintiffs allege that
the U&C price is known, throughout the pharmaceutical industry, as the price
that the pharmacy charges the direct-pay public. Id.; see also id. ¶ 58 (providing
examples of industry sources defining the U&C price). Plaintiffs contend that
Walgreens’ PSC prices qualified as the pharmacy’s U&C prices, and that by
reporting higher-than-PSC prices as its U&C prices on claims for reimbursement
submitted to insurance companies and other third-party providers, Walgreens
operated an undisclosed, dual-pricing scheme for generic PSC-listed drugs. Id. ¶
12.
Plaintiffs allege significant damages due to Walgreens’ dual-pricing scheme.
Id. ¶ 13. Because the reported U&C price is used to calculate the amount of
copayments, coinsurance, or deductible amounts, Plaintiffs claim that Walgreens
overcharged them and other consumers when it collected from them inflated
copayments, coinsurance, and deductibles. Id. ¶ 12. The Consumer Plaintiffs
claim that they were under the impression that, because they had health
insurance with prescription benefits coverage, they would not be paying more than
direct-pay customers for their prescriptions. Id. ¶¶ 15, 18, 21, 24. Additionally,
the Fund Plaintiffs assert that because they reimburse or pay for their
beneficiaries’ purchases of prescription drugs, they were harmed by paying more
for PSC-listed generic drugs than they would have if Walgreens had accurately
reported its U&C prices. Id. ¶¶ 27, 31, 35, 40.
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B.
Procedural History
Plaintiffs’ second amended complaint focused only on the VPG drugs when
it laid out Walgreens’s allegedly fraudulent scheme. See, e.g., Def.’s Ex. 1, Redline
Comparison of Pls.’ Second Am. Compl. and Third Am. Complaint (“Redline
Comparison”) ¶ 8 (showing that the Second Amended Complaint alleged that
Walgreens’s PSC “has allowed cash-paying customers to purchase more than 500
widely prescribed generic drugs for $5, $10, and $15 for 30-day prescriptions and
$10, $20, and $30 for 90-day prescriptions”), ECF No. 277-1; id. ¶ 9 (alleging that
the PSC formulary is the “‘PSC Value-Priced Medication List’ attached as Exhibit
A”).
After a dispute regarding the scope of discovery, Walgreens filed a motion
asking this Court to “declar[e] that only Value-Priced Generic prescription drugs
that are part of Walgreens[’s] Prescription Savings Club are at issue in this case.”
See Mot. Requesting Court Declare Only Value-Priced Generics Are at Issue at 1,
3, ECF No. 234. The Court ruled in favor of Walgreens, holding that the claims in
the operative complaint were limited to the VPGs that appeared on the ValuePriced medication list. See 3/4/20 Minute Entry, ECF No. 258; Tr. Proceedings on
3/4/20 at 36:20–37:12, 39:7–12, ECF No. 260. Nonetheless, the Court permitted
Plaintiffs to amend their complaint “to the extent they can, limited strictly to the
[VPG] issue.” Tr. Proceedings on 3/4/21 at 39:13–22.
Plaintiffs then filed their Third Amended Complaint, which changed the
complaint’s definition of “PSC Generics”—i.e., the drugs at issue in the alleged
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scheme. See Redline Comparison ¶ 9. In their prior complaint, Plaintiffs had
defined “PSC Generics” as the “most commonly used generics for cardiovascular,
diabetes, pain, psychiatric illnesses, gastrointestinal disorders, and other common
ailments” identified on the Value-Priced medication list. Id. The Third Amended
Complaint defines “PSC Generics” as the “thousands of generic mediations” on the
“PSC formulary;” it no longer cites to the Value-Priced medication list. Id.
Walgreens has moved to dismiss the Third Amended Complaint “to the
extent that it attempts to state claims as to non-VPG [g]enerics.” Def. Walgreens’s
Mem. Supp. Partial Mot. Dismiss Pls.’ Third Am. Compl. at 3, ECF No. 277.
Specifically, Walgreens contends that the Third Amended Complaint fails to state
a claim relating to the non-VPG drugs under Rule 12(b)(6) and Rule 9.
II.
Legal Standard
A motion to dismiss under Rule 12(b)(6) challenges whether a plaintiff’s
complaint “contain[s] sufficient factual matter, accepted as true, to ‘state a claim
to relief that is plausible on its face.’” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009)
(quoting Twombly, 550 U.S. at 570).
When “reviewing the sufficiency of a
complaint under the plausibility standard,” courts “accept the well-pleaded facts
in the complaint as true.” Alam v. Miller Brewing Co., 709 F.3d 662, 665–66 (7th
Cir. 2013). At the same time, “allegations in the form of legal conclusions are
insufficient to survive a Rule 12(b)(6) motion.” McReynolds v. Merrill Lynch &
Co., Inc., 694 F.3d 873, 885 (7th Cir. 2012) (citing Iqbal, 556 U.S. at 678).
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In general, a complaint must simply “give the defendant fair notice of what
the claim is and the grounds upon which it rests.” Bell Atl. Corp. v. Twombly, 550
U.S. 544, 555 (2007) (citation omitted); see also Fed. R. Civ. P. 8(a)(2). But when
a plaintiff brings a claim that “sounds in fraud”—“in other words, one that is
premised upon a course of fraudulent conduct,” see Camasta v. Jos. A. Bank
Clothiers, Inc., 761 F.3d 732, 737 (7th Cir. 2014) (cleaned up)—then “a party must
state with particularity the circumstances constituting fraud,” Fed. R. Civ. P. 9(b).
“While the precise level of particularity required under Rule 9(b) depends upon
the facts of the case, the pleading ‘ordinarily requires describing the who, what,
when, where, and how of the fraud.’” Camasta, 761 F.3d at 737 (quoting
AnchorBank, FSB v. Hofer, 649 F.3d 610, 615 (7th Cir. 2011)).
III.
Analysis
Walgreens argues that Plaintiffs’ Third Amended Complaint fails to
adequately plead with particularity that the alleged fraudulent scheme involved
non-VPG drugs. Plaintiffs’ prior complaint identified examples—by date, tier, and
price—of Plaintiffs’ purchases of VPGs for which they claim Walgreens
overcharged them. But, as Walgreens correctly points out, the Third Amended
Complaint does not add any similar examples of non-VPG drugs Plaintiffs
allegedly purchased.
Plaintiffs admit that, instead of specifically pleading that Plaintiffs
purchased (and were overcharged for) non-VPG drugs, they simply “expand[ed]
the definition of PSC Generics.” Pls.’ Resp. Opp’n Mot. Dismiss (“Pls.’ Resp.”) at
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6, ECF No. 293. But, in Plaintiffs’ view, that is enough, because “when pleading a
fraudulent scheme involving a number of misrepresentations over a number of
years, . . . representative examples will suffice under Rule 9(b).” Petrizzo v. DeVry
Educ. Grp. Inc., No. 16 CV 9754, 2018 WL 827995, at *3 (N.D. Ill. Feb. 12, 2018).
But Plaintiffs’ stance ignores the procedural history of this case. See Pirelli
Armstrong Tire Corp. Retiree Med. Benefits Tr. v. Walgreen Co., 631 F.3d 436, 442
(7th Cir. 2011) (noting that what constitutes “particularity” “necessarily differ[s]”
from case to case (quoting Shushany v. Allwaste, Inc., 992 F.2d 517, 521 (5th Cir.
1993))). Here, the Court allowed Plaintiffs to file a Third Amended Complaint
after the case had been pending for approximately three years with the
understanding that Plaintiffs would “mirror [their] contentions with regard to
[Value Priced Generics] to include [non-Value Priced Generics].” Tr. Proceedings
on 3/4/20 at 39:13–22. And the Court took Plaintiffs’ counsel “at his word—that
[Plaintiffs] would have filed . . . a separate cause of action” had the Court not
permitted Plaintiffs to amend. Id. at 44:8–14.
Clearly, a separate cause of action would have required Plaintiffs to allege
“representative examples of the alleged fraud” involving non-VPG drugs just as
they had with VPG drugs. See U.S. ex rel. Schramm v. Fox Valley Physical Servs.,
S.C., No. 12 C 8262, 2015 WL 3862954, at *3 (N.D. Ill. June 22, 2015). And such
examples must be “tied to the plaintiffs.”
Petrizzo, 2018 WL 827995, at *3.
Plaintiffs’ new complaint falls well short of the mark. To hold otherwise would
allow Plaintiffs to substantially broaden the scope of this fraud action by making
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their allegations less specific, rather than more. Such a result would be contrary
to the purposes of Rule 9(b) and the intent of the Court when it granted Plaintiff
leave to file the amended complaint.
Moreover, “[o]ne of the purposes of the particularity and specificity required
under Rule 9(b) is ‘to force the plaintiff to do more than the usual investigation
before filing his complaint.’” Camasta, 761 F.3d at 737 (quoting Ackerman v. Nw.
Mut. Life Ins. Co., 172 F.3d 467, 469 (7th Cir. 1999)). During its colloquy with
counsel prior to granting Plaintiffs’ motion to amend, the Court stated its
expectation that in order to adequately plead a claim as to the non-VPG drugs,
Plaintiffs would need to “find someone or try to make some allegations with regard
to drugs that are not on [the Value-Priced medication list].” Tr. Proceedings on
3/4/20 at 32:9–15. Given that discovery had been underway in this case for over a
year by the time Plaintiffs’ Third Amended Complaint was filed, as well as
Plaintiffs’ assertion that there are thousands of non-VPG drugs on Walgreens’s
PSC formulary, see 3d Am. Compl. ¶ 8, Rule 9 required Plaintiffs to investigate
and plead representative transactions involving non-VPG drugs. 4
Plaintiffs also claim that the Court cannot parse their claims as they relate to VPG
and non-VPG drugs. See Pls.’ Resp. at 8 (“[A] ‘claim’ is binary.”). Plaintiffs are incorrect;
courts frequently dismiss claims as to one theory or set of facts but not another. See, e.g.,
Petzel v. Kane County Dep’t of Transp., 16 CV 5435, 2018 WL 3740629, at *3, 5 (N.D. Ill. Aug.
7, 2018) (dismissing portions of three counts that related to specific time-barred claims or
claims that were insufficiently pled); Reed v. Positive Connections, Inc., 16 C 3377, 2016 WL
4394166, at *3 n.2 (N.D. Ill. Aug. 16, 2016) (dismissing claims within a complaint to the
extent they related to anything other than a specific type of compensation); High 5 Games,
LLC v. Int’l Game Tech., 185 F. Supp. 3d 1067, 1074 (N.D. Ill. 2015) (granting defendant’s
partial motion to dismiss relating to one of two sets of claims alleged under a specific count).
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Because Plaintiffs merely changed the definition of “PSC Generics” to
include non-VPG drugs and offered little else, Plaintiffs have failed to plead any
“factual content” that goes beyond Plaintiffs’ prior complaint and that would
permit the Court to “draw the reasonable inference” Plaintiffs had plausibly been
overcharged for non-VPGs. See Iqbal, 556 U.S. at 678. Therefore, Walgreens’s
motion to dismiss the Third Amended Complaint as to non-VPG drugs is granted.
CONCLUSION
For the above-stated reasons, Walgreens’s partial motion to dismiss is
granted. The Third Amended Complaint is dismissed to the extent it asserts
claims involving non-VPG drugs.
IT IS SO ORDERED.
ENTERED: 3/23/21
__________________________________
JOHN Z. LEE
United States District Judge
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