Judge Leery of Class Claims Against CVS

OAKLAND, Calif. (CN) — A federal judge indicated Tuesday she would not certify 11 state classes in a federal class action accusing CVS Pharmacy of overcharging customers for generic drugs, though she signaled she may allow the plaintiffs to amend their motion for certification.

Lead plaintiff Christopher Corcoran sued CVS in August 2015, claiming it charged insured customers and their insurers up to four times more for generic prescription drugs than they charged uninsured customers.

Corcoran says that by law the co-pay that CVS charges insured customers can't exceed its “usual and customary price” — the amount it charges uninsured customers for a prescription. But CVS does do that, Corcoran claims.

U.S. District Judge Yvonne Gonzalez Rogers pummeled class counsel throughout a contentious hour-long hearing Tuesday, doubting that the case could proceed as a class action because it does not appear to satisfy commonality and reliance requirements.

“The problem I see is that there are fiftyish in that group of [claims administrators] and 1,200 contracts, all of which were separately negotiated by sophisticated parties, and somehow you have common evidence that suggests that there have been affirmative representations?” she asked class attorney Robert Gilmore about the drug purchase contracts that CVS negotiates with insurers and their claims administrators. “I don't see how you are going to get over this hurdle.”

Gilmore responded that CVS’s customary prices render its contracts “materially the same,” and that “they all involve the [usual and customary] prices.”

In calculating a customary price, a pharmacy takes into account the most common prices it charges for drugs without insurance. The pharmacy then reports its customary price to insurers, and insurers and patients pay the pharmacy what they owe based on that price, according to the motion to certify the class.

In 2008, CVS launched its Health Savings Pass program, a discount program for generic drugs aimed at uninsured patients. When CVS rolled it out, a 90-day supply of a covered drug cost $9.99. The plaintiffs say that the cheaper drug prices available under the program were CVS's most common prices, and that it should have used them to calculate its customary price, but did not.

On Tuesday, CVS attorney Frank Heard echoed the judge’s assessment that a class action is impossible.

“Each plaintiff has his own health plan. The evidence shows you have to go [insurer] by [insurer]. That is why individualized proof dominates,” Heard said, echoing the argument in CVS’s motion in opposition to class certification.

Heard said that determining whether a class member has an injury means looking at that member's insurance policy, and that “only if you go back to the individual's policy will you know if they had a $5 co-pay, and if they did, such a plaintiff would have no loss, no injury.”

Gilmore countered that looking at individual plans is unnecessary.

“If the [customary] price is lower, that's the number the [claims administrator] tells the pharmacy to collect, so the variations in plan design don't matter. It makes the class uniform,” he said.

Gonzalez Rogers did not appear persuaded, telling Gilmore that damages can't be determined without analyzing a class member's health plan.

She also rejected the plaintiffs’ request for an injunction, saying, “There is no conduct to enjoin at this point.”

The plaintiffs asked in their 2015 complaint that CVS be barred “from continuing to engage in the unlawful acts, omissions and practices described herein,” at which time its health savings program was active.

On Tuesday, Gilmore told Gonzalez Rogers that though CVS discontinued the program in February 2016, it moved the program's members to new discounted memberships, and has continued to exclude discounted prices from its customary price calculations.

“Is that part of the lawsuit? How can I enjoin conduct that is not in front of me?” Gonzalez Rogers asked before tossing the claim.

The plaintiffs want to certify 11 classes of CVS customers, in Arizona, California, Florida, Georgia, Illinois, Massachusetts, New Jersey, New York, Ohio, Pennsylvania and Texas, who between November 2008 and the present bought a generic drug through CVS's health savings program, used insurance to buy their prescriptions, or paid an out-of-pocket price for a prescription that was higher than the price offered through the program.

They allege consumer law violations, fraud, negligent misrepresentation and unjust enrichment.

Gilmore is with Stein Mitchell Cipollone Beato & Missner; Heard with Williams & Connolly, both of Washington, D.C.

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