UnitedHealth Beats Would-Be Class Action Over Drug Costs

Employee Benefits News examines legal developments that impact the employee benefits and executive compensation employers provide, including federal and state legislation, rules from federal...

By Jacklyn Wille

UnitedHealthcare Inc., OptumRX Inc., and others defeated a lawsuit accusing the companies of operating a scheme that charged customers hidden, unauthorized, and excessive fees for prescription drugs.

A federal judge dismissed the proposed class action Dec. 19, saying the would-be class of “thousands, and potentially millions,” of patients failed to show that the defendants violated the Employee Retirement Income Security Act or federal racketeering law. In particular, there was no indication the defendants were acting as ERISA fiduciaries when they engaged in the challenged conduct, the judge said.

This is the first substantial ruling in a series of recent cases challenging the way large health insurers charge for prescription drugs. The lawsuits claim that when a given prescription drug costs less than a patient’s copayment amount, insurers including UnitedHealth, Cigna, and Humana “claw back” the difference through an improper scheme kept hidden from patients. This sometimes causes insured patients to pay more for drugs than they would without insurance, with pharmacists contractually prohibited from telling patients this information, according to the lawsuits.

This action, which was consolidated from at least eight separate lawsuits, targets UnitedHealth and several of its subsidiaries, including pharmacy benefit manager OptumRx and insurer Oxford Health. Similar cases are pending against Cigna and Humana, and cases against CVS Health and Walgreens were voluntarily dismissed earlier this year.

UnitedHealth is the country’s largest health insurer, with annual revenue expected to top $200 billion in 2017, according to data on the Bloomberg Terminal. United’s perch atop the health insurance market was threatened earlier this month by the announcement of a planned merger between rival insurer Aetna Inc. and CVS Health.

Claims Dismissed

The lawsuit included 18 separate claims against the defendants, and the judge dismissed each one. In most cases, the patients will have another opportunity to refile their claims.

The claims for ERISA benefits were dismissed for two reasons: because the health plan participants hadn’t first exhausted their administrative remedies and because some of the relevant health plans didn’t allow participants to pay a lower price for drugs than the plan’s specified copayment.

The fiduciary breach claims also were dismissed, largely because they challenged ministerial actions such as claims processing and not discretionary activities that would give rise to fiduciary status.

The plan participants also argued that the challenged drug pricing policies constituted discrimination based on medical status, but the judge disagreed, saying that discrimination doesn’t occur when plan terms apply uniformly to similar patients.

Finally, the judge dismissed claims under the Racketeer Influenced and Corrupt Organizations Act, various state laws, and ERISA’s prohibited transaction rules.

Judge Joan N. Ericksen of the U.S. District Court for the District of Minnesota wrote the decision.

Dorsey & Whitney represented United. The patients were variously represented by Izard Kindall & Raabe LLP, Gustafson Gluek PLLC, Gray Plant Mooty Mooty & Bennett PA, Scott & Scott LLP, Keller Rohrback LLP, Lockridge Grindal Nauen PLLP, Lemmon Law Firm LLC, Zimmerman Reed PLLP, Wood Law Firm LLC, Law Office of Nicholas Palerino, Sangisetty Law Firm LLC, Reinhardt Wendorf & Blanchfield, David P. McLafferty, Spector Roseman Kodroff & Willis PC, Teske Katz Kitzer & Rochel PLLP, and Saltz Mongeluzzi Barrett & Bendesky PC.

The case is In re: UnitedHealth Group PBM Litig. , D. Minn., No. 0:16-cv-03352-JNE-BRT, order granting motion to dismiss 12/19/17 .

To contact the reporter on this story: Jacklyn Wille in Washington at jwille@bloomberglaw.com

To contact the editor responsible for this story: Jo-el J. Meyer at jmeyer@bloomberglaw.com

Copyright © 2017 The Bureau of National Affairs, Inc. All Rights Reserved.

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