CVS Unlikely to Dodge Price-Gouging Suit

OAKLAND, Calif. (CN) - A federal judge said Tuesday she won't dismiss a class action accusing CVS of overcharging for generic drugs by up to 400 percent, but hinted it may not belong in a California court.

Lead plaintiff Christopher Corcoran sued CVS Health and CVS Pharmacy, saying that the companies submit fraudulently inflated claims to insurers through a so-called Health Savings Pass - which the complaint calls "the centerpiece" of CVS's fraud.

At Tuesday's hearing, U.S. District Judge Yvonne Gonzalez Rogers seemed impatient with CVS's motion to dismiss the class action.

"There's enough here. We are not going to argue about it," Rogers said.

"We're not going to spend all day arguing about things that are frankly about judgment calls. It's my judgment call."

The question, she said, was whether to grant the plaintiffs leave to amend on the few claims against CVS that she said she was inclined to dismiss, such as a constructive fraud claim.

"Is there any court anywhere that has ever said that this kind of factual situation creates a fiduciary relationship or confidential relationship?" Rogers asked Robert Gilmore, who argued for the plaintiffs. "Have you found any case anywhere to support this theory?

"I'm asking if you have any authority to suggest that a customer who gets their prescriptions at a particular pharmacy - if anyone has said that that creates a special duty."

Enu Mainigi, who argued for CVS, pointed out that a finding of such a relationship in this case would lead to a similar finding "in every single consumer fraud case."

The parties also argued as to whether the case should be adjudicated in California, since CVS is based in Rhode Island.

Rogers said she was inclined to grant CVS's jurisdictional motion.

"If I grant the motion for lack of jurisdiction, does this case go away?" she asked.

Elizabeth Pritzker, who argued for the plaintiffs on that motion, said that it would not since there would be jurisdiction in Rhode Island.

Pritzker is with Pritzker Levine in Oakland, Calif., and Gilmore is with Stein Mitchell in Washington.

Mainigi is with Williams & Connolly, also in Washington.

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