SMART PHARMACY, INC. et al v. MEDCO HEALTH SOLUTIONS, INC.
Filing
18
OPINION. Signed by Judge Dennis M. Cavanaugh on 7/30/12. (jd, )
NOT FOR PUBLICATION
UNITED STATES DISTRICT COURT
DISTRICT OF NEW JERSEY
:
:
SMART PHARMACY, INC., and
:
HIGHLAND PHARMACY, LLC,
individually, and on behalf of all others :
:
similarly situated,
:
:
Plaintiffs,
:
:
v.
:
MEDCO HEALTH SOLUTIONS, INC., :
:
:
Defendant.
:
Hon. Dennis M. Cavanaugh
OPINION
Civil Action No. 11-cv-6485 (DMC-JAD)
DENNIS M. CAVANAUGH, U.S.D.J.
This matter comes before the Court upon the Motion of Defendant Medco Health Solutions,
Inc. (“Defendant”) to Dismiss the Class Action Complaint of Plaintiffs Smart Pharmacy, Inc.
(“Smart”) and Highland Pharmacy, LLC (“Highland”) (collectively, “Plaintiffs”) pursuant to FED.
R. CIV. P. 12(b)(6). ECF No. 10. Pursuant to FED. R. CIV. P. 78, no oral argument was heard. After
carefully considering the submissions of the parties, and based upon the following, it is the finding
of this Court that Defendant’s Motion is granted, and that the Complaint is dismissed without
prejudice.
I.
BACKGROUND1
This putative class action concerns allegedly abusive audit and reimbursement practices.
1
The facts in the Background section have been taken from Complaint. On this Motion
to Dismiss, the Court will accept the factual allegations in the Complaint as true and construe all
facts in Plaintiffs’ favor.
Compl. ¶ 1, ECF No. 1. Smart is a community and compounding pharmacy servicing the
Jacksonville, Florida area, and is a corporation organized and existing under the laws of the State
of Florida. Compl. ¶¶ 10, 11. Highland is a community and compounding pharmacy servicing the
Waterford, Michigan area, and is a limited liability company organized and existing under the laws
of the State of Michigan. Compl. ¶¶ 12, 13. Defendant is a Pharmacy Benefit Manager (“PBM”)
organized and existing under the laws of the State of Delaware, and is responsible for processing and
paying prescription drug claims. Compl. ¶¶ 14-17. Together, Plaintiffs seek to represent three
different classes: the “Vacation Supply Class,” the “Overpriced Compound Class,” and the “Florida
Class.” Compl. ¶¶ 18, 19.2
Defendant created an on-line system of “adjudicating” prescriptions with pharmacies in its
network called the TelePAID system. Compl. ¶ 28. The adjudication process is when a pharmacy
and Defendant agree on the terms of a prescription drug claim submitted by the pharmacy to
Defendant, including the price of the prescription. Compl. ¶ 28. Through this system, Defendant
reimburses pharmacies that fill prescriptions for their customers. Compl. ¶¶ 29–34. In accordance
with various contracts between Defendant and the pharmacies, Defendant retains the right to audit
2
The Vacation Supply Class includes “[a]ll pharmacies who have submitted at least one
claim to Medco for reimbursement for the refill of a prescription based on a patient’s request for
an early refill because the patient was not going to be available on the day the refill otherwise
became due,” and where monies paid by Defendant were either recouped or are subject to
recoupment for an alleged “Refill Too Soon” discrepancy. Compl. ¶ 19a. The Overpriced
Compound Class includes “[a]ll pharmacies who have submitted at least one claim to Medco for
reimbursement . . . and which claim(s) was subsequently audited by Medco and for which monies
were either recouped by Medco, or are subject to recoupment by Medco, for an alleged
‘Overpriced Compound’ discrepancy . . . .” Compl. ¶ 19b. The Florida Class includes “[a]ll
pharmacies licensed in the State of Florida that have submitted at least one claim to Medco for
reimbursement, which claim(s) was subsequently audited by Medco, and for which monies were
subsequently recouped” in violation of Florida Law. Compl. ¶ 19c.
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a pharmacy’s claims submissions through TelePAID. Compl. ¶ 39. If, in connection with an audit,
Defendant determines that it has overpaid a pharmacy, Defendant issues a letter advising the
pharmacy that there is a discrepancy and that Defendant will retract the overpaid amounts from
future payments. Compl. ¶ 40.
With respect to the putative Vacation Supply Class, Plaintiffs state that the class members
would grant patient requests for early re-fills when those patients would be on vacation during their
normal re-fill time. Compl. ¶ 47. Plaintiffs state that the class members would properly enter an
override code in the TelePAID system for this purpose and submit the claims, and that Defendant
initially accepted these claims. Compl. ¶ 47. According to the Complaint, Defendant would then
unilaterally and improperly determine that many of these claims constituted a “Refill Too Soon”
discrepancy. Compl. ¶ 49. Plaintiffs complain that Defendant has improperly recovered monies
from the Class based on these alleged discrepancies, or alternatively, that monies are subject to
improper recovery by Defendant for the same reasons. Compl. ¶¶ 50-53.
Plaintiffs state that the putative Overpriced Compound Class members offered patients a
compounding prescription service, which is a pharmacy “specialty” service that involves the
combination, mixing, or altering of ingredients to create a medication tailored to the needs of an
individual patient. Compl. ¶¶ 56-57. To adjudicate claim pricing, Defendant uses TelePAID’s
complex compound prescription algorithm. Compl. ¶ 59. Plaintiffs allege, however, that Defendant
uses a completely different adjudication system during audits, and that this second methodology is
not referenced in any of the contracts and agreements between Defendant and the class members.
Compl. ¶ 62-64, 74. Plaintiffs alleged that over the last six years, Defendant “has recouped monies
and/ or subjected monies to recoupment from the Overpriced Compound Class members based on
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[Defendant’s] unilateral and improper on-site, telephone and desk audit conclusions.” Compl. ¶ 71.
Finally, with respect to the putative Florida Class, Plaintiffs allege that during audits,
Defendant unilaterally and improperly determined that it had overpaid the class members for claims,
and sent class members a letter indicating that it will be retracting the alleged overpayments from
future reimbursements. Compl. ¶¶ 84-85. Plaintiffs alleged that Defendant’s actions violate the
Florida Prompt Pay Act, FLA. STAT. § 641.3155, et seq. (2008), and FLA. STAT. § 627.6131, et seq.
(2008). Compl. ¶¶ 86-95.
Plaintiffs filed the present Complaint on November 4, 2011, alleging three counts of breach
of contract, three counts of violation of the covenant of good faith and fair dealing, three counts of
promissory estoppel, two counts of unjust enrichment, and two counts of conversion. Defendant
filed the present Motion on December 30, 2011, contending that while Plaintiffs have alleged various
wrongs with respect to the putative classes, Plaintiffs have not alleged any individual facts with
respect to Smart and Highland, the only current parties to this lawsuit. Def.’s Mot. Br. 2. Plaintiffs
filed a Brief in Opposition on January 23, 2012. ECF No. 11. Defendant filed a Reply on January
30, 2012. The matter is now before this Court.
II.
STANDARD OF REVIEW
In deciding a motion under Rule 12(b)(6), the district court is “required to accept as true all
factual allegations in the complaint and draw all inferences in the facts alleged in the light most
favorable to the [Plaintiff].” Phillips v. Cnty. of Allegheny, 515 F.3d 224, 228 (3d Cir. 2008). “[A]
complaint attacked by a Rule 12(b)(6) motion to dismiss does not need detailed factual allegations.”
Bell Atl. Corp. v. Twombly, 550 U.S. 544, 555 (2007). However, the Plaintiff’s “obligation to
provide the ‘grounds’ of his ‘entitle[ment] to relief’ requires more than labels and conclusions, and
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a formulaic recitation of the elements of a cause of action will not do.” Id. To survive a motion to
dismiss, the complaint must state a plausible claim. Ashcroft v. Iqbal, 129 S. Ct. 1937, 1950 (2009).
Thus, assuming that the factual allegations in the complaint are true, those “[f]actual allegations must
be enough to raise a right to relief above a speculative level.” Bell Atl. Corp., 550 U.S. at 555.
III.
DISCUSSION
Defendant’s primary argument on this Motion to Dismiss is that “Plaintiffs have not alleged
facts here to plausibly suggest they personally suffered any cognizable injury as a result of the
alleged actions of the Defendant.” Def.’s Mot. Br. 6. To this end, Defendant contends that while
Plaintiffs have attempted to set forth claims on behalf of “putative members of nonexistent classes,”
Plaintiffs have not shown “that they, Smart Pharmacy Inc. and Highland Pharmacy, LLC . . . are
entitled to relief or, in other words, have standing to pursue these claims.” Def.’s Mot. Br. 6.
Defendant’s argument therefore relies on the notion that the allegations on behalf of the putative
classes are insufficient to demonstrate that the named Plaintiffs in this matter are entitled to relief.
Plaintiffs’ Opposition relies heavily on two paragraphs from the Complaint, which allege that
“Smart is a member of each of the three (3) Classes and is a representative of the putative class
members in each of the three (3) Classes,” and that “Highland is a member of the Vacation Supply
Class and Overpriced Compound Class and is a representative of the Vacation Supply Class and
Overpriced Compound Class.” Compl. ¶¶ 21, 22; Pl.’s Opp’n Br. 9. Plaintiffs state that the
Complaint “discusses the contractual relationship between Medco and the Plaintiffs, the transaction
between Plaintiffs and Medco at the point-of-sale including the electronic claims adjudication
process, the audit process, Medco’s auditing methodology, the specific discrepancy types at issue
in this lawsuit, Medco’s improper and unilateral audit conclusions, and Medco’ [sic] improper
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retraction of monies from future payments owed to Plaintiffs.” Pl.’s Opp’n Br. 12. Plaintiffs’
Opposition generally contends that since the Complaint repeatedly discusses these types of facts
between the three putative classes and Defendant, and because Smart and Highland are both
members and representatives of the classes, the Complaint sufficiently pleads facts specific to Smart
and Highland.
Defendant correctly asserts that Plaintiffs must include allegations specific to themselves,
and not to the putative classes. A complaint must show that the alleged injury has affected a plaintiff
“in a personal and individual way.” Lujan v. Defenders of Wildlife, 504 U.S. 555, 561 (1992). “In
the ordinary course, a litigant must assert his or her own legal rights and interests, and cannot rest
a claim to relief on the legal rights or interests of third parties.” Powers v. Ohio, 499 U.S. 400, 425
(1991). Importantly, “[t]he standing inquiry does not change in the context of a putative class action
. . . . [S]tanding cannot be predicated on an injury which the plaintiff has not suffered, nor can it be
acquired through the back door of a class action.” Koronthaly v. L’Oreal, No. 07–cv–5588, 2008
WL 2938045, at *4 (D.N.J. July 29, 2008) (citing In re Franklin Mut. Funds Litig., 388 F.Supp.2d
451, 461 (D.N.J. 2005). As the Supreme Court explained in Lewis v. Casey, “[t]hat a suit may be
a class action . . . adds nothing to the question of standing, for even named plaintiffs who represent
a class ‘must allege and show that they personally have been injured, not that injury has been
suffered by other, unidentified members of the class to which they belong and which they purport
to represent.” 518 U.S. 343, 356 (1996) (quotations omitted).
The Complaint, as presently composed, fails this standard for a lack of plaintiff-specific
details. Plaintiffs set forth a significant amount of facts that indicate the existence of a claim, and
that thoroughly discuss the nature of that claim. Plaintiffs must, however, go beyond simply
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asserting that they are representatives of a class, and that members of that class have suffered harm.
Plaintiffs must instead inject facts into the Complaint to show that they personally have been injured
by Defendant’s alleged actions, and that they personally have a right to relief. For example, the
Complaint fails to indicate details of the specific contracts between Smart and Medco and between
Highland and Medco, or whether Smart and Highland specifically have suffered harm by having
monies recouped by Medco as opposed to having monies currently subject to being recouped.
Without details of this nature, Defendant is hard pressed to respond to the Complaint substantively,
and the Court is unable to review the Complaint with precision and accuracy.
Defendant does not assert that granting Plaintiffs leave to re-file their Complaint would be
futile, and Plaintiffs have specifically requested that if the factual allegations are currently
insufficient, the Complaint should only be dismissed without prejudice. The Court agrees that
Plaintiffs should be granted the opportunity to demonstrate the existence of an injury in fact, to
Smart and Highland personally, that is concrete, particularized, and actionable. Plaintiffs will
therefore be granted leave to re-file their Class Action Complaint.
IV.
CONCLUSION
For the foregoing reasons, Defendant’s Motion to Dismiss the Complaint is granted, and the
Complaint is dismissed without prejudice. An appropriate Order accompanies this Opinion.
S/ Dennis M. Cavanaugh
Dennis M. Cavanaugh, U.S.D.J.
Date:
Orig.:
cc:
July 30 , 2012
Clerk
All Counsel of Record
Hon. Joseph A. Dickson, U.S.M.J.
File
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