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Blue Cross Conspired to Destroy Company Serving Hemophiliacs, Firm Says

WEST PALM BEACH (CN) - Blue Cross Blue Shield destroyed a health care company by refusing to pay claims of its hemophiliac patients and conducting a "witch hunt" that destroyed its reputation, the company claims in court.

Factor Health Management sued The Blue Cross Blue Shield Association, six of its licensees, several employees, and pharmacy benefit management company Express Scripts Holding Co., in Palm Beach County Court. Factor subsidiaries FHM Group and FCS Pharmacy also are plaintiffs.

Factor Health was a disease management company and pharmaceutical wholesaler that provided specialty drugs and services to hemophiliacs.

FCS Pharmacy was a Boca Raton-based specialty pharmacy that focused on hemophilia, hepatitis and HIV treatments.

Factor Health claims that Blue Cross Blue Shield and its licensees conspired to drive it out of business and steer its hemophilia patients to pharmacy chains and pharmacy benefit management companies and to government programs such as Medicare and Medicaid.

According to the lawsuit, the conspirators falsely accused the FHM companies of fraud, reported them to state and federal law enforcement, fabricated reasons to deny payment of their patients' claims, defamed them to patients, vendors, insurance companies and regulators, and harmed their relationships with customers.

They also reduced payouts to the FHM companies to sabotage a deal to sell FHM's pharmacy business to a private equity firm and to force it out of business, according to the complaint.

Factor Health and FCS Pharmacy claim that before the defendants drove them out of business they were the preferred suppliers of drugs and disease management services for hemophiliacs in the United States.

Hemophilia, a hereditary genetic disorder, impairs the body's ability to control blood clotting. It affects around 20,000 people in the United States. Hemophiliacs often suffer from spontaneous internal bleeding that can cause serious injuries or death, and rely on synthetic drugs, known as factor drugs, to replace the missing clotting factor in their blood.

Pharmaceutical companies developed the drugs, which can cost tens of thousands of dollars a month, after the 1990s, when the blood supply in the United States was contaminated with hepatitis and the HIV virus, infecting 6,000 to 10,000 hemophiliacs who used drugs derived from human blood plasma.

Most pharmacies do not stock synthetic clotting factor drugs, which are expensive and have a limited shelf life.

Factor Health and FCS Pharmacy claim they had experience in meeting the specific needs of patients with hemophilia, and also provided disease management services - including counseling, education and disease-tracking services - at no cost to patients or insurers.

Factor Health claims that by the end of 2009, Blue Cross Blue Shield, several of its licensees and affiliated pharmacies managed to destroy its once-profitable business through a series of investigations based on unfounded allegations and their refusal to pay its patients' claims.


The complaint states: "In a concerted, calculated and intentional effort to neutralize and ultimately extinguish a quickly growing competitor, defendants, under the guise of completely bogus various and never-ending 'investigations,' actively participated in a scheme to: (a) drive plaintiffs out of business by improperly withholding millions of dollars in payments for factor drugs dispensed by plaintiffs to the licensees defendants' insureds after the licensee defendants had specifically authorized the delivery of factor drugs to those insureds, (b) steer plaintiffs' hemophilia patients to chain pharmacies and pharmacy benefit managers ('PBMs') from whom defendants receive a direct or indirect financial benefit and/or in which defendants have a financial interest, and (c) purge hemophiliacs from the rosters of their insureds and push plaintiffs' hemophilia patients to government programs such as Medicare and Medicaid. Defendants accomplished this scheme by: (a) filing wild, baseless and completely false reports to state and federal law enforcement authorities alleging criminal conduct on the part of plaintiffs, (b) actively conspiring to create ways to avoid paying plaintiffs sums owed pursuant to health insurance contracts, (c) falsely and regularly defaming plaintiffs to patients, vendors, workers, insurance companies, regulators and others, (d) tortiously interfering in the existing and prospective business relationships plaintiffs enjoyed with their customers and potential customers, and (e) reducing payouts to the FHM parties in order to scuttle a deal to sell the FHM parties' pharmacy business to a private equity firm and to force the FHM parties out of business."

The Factor Health companies claim that Blue Cross Blue Shield, its licensees and pharmacy benefit management companies such as defendant Express Scripts conspired to drive hemophilia patients away from Factor Health's business, to their own benefit.

Pharmacy benefits managers process and pay prescription drug claims on behalf of health insurance companies. They also oversee, and can investigate and audit, pharmacies on their own initiative or at the request of their health insurer clients, according to the complaint.

"PBMs therefore, on the one hand, directly compete with independent pharmacies by owning and operating their own retail and mail order pharmacies and, on the other hand, play a role in the adjudication of claims and the investigation of pharmacies by health insurers, including the investigation of the very pharmacies with whom the PBMs compete," the complaint states.

"This conflict of interest is intensified when the health insurers own or have direct or indirect interests in PBMs. On information and belief, PBMs associated with defendants - including Express Scripts - participated in the 'investigation' of the FHM parties at the same time as the licensee defendants were 'suggesting' that patients switch to the pharmacies run by those same PBMs."

Blue Cross Blue Shield of Florida and other Blue Cross licensees contacted the FBI, the Food and Drug Administration and other federal and state agencies with baseless allegations that Factor Health was diverting millions of dollars worth of factor drugs, according to the complaint.

Factor Health claims all the investigations were closed without any finding of wrongdoing.

It claims the defendants tried to persuade satisfied patients to switch to pharmacies preferred by the insurers, including by telling patients that they would process claims only from those pharmacies.

The 38 licensees of the Blue Cross Blue Shield Association insure more than 100 million Americans, about one-half of all Americans with private health insurance. They each have a license for an exclusive geographic area and an agreement not to compete with each other, according to the lawsuit.

Factor Health claims that some licensees tried to cancel health coverage for its employees, many of whom suffered from hemophilia.

It claims the investigations and audits triggered by the Blue Cross licensees and affiliates were "nothing more than a convenient excuse for defendants to use as cover for their witch hunt and as a reason to deny timely payment."

Blue Cross Blue Shield and its licensees in fact were trying to purge their rolls of patients with hemophilia, to avoid "exposure" to claims for expensive drugs, according to the complaint.

Factor Health claims that Blue Cross and its licensees have a policy of denying claims for expensive medical treatment and trying to remove patients requiring expensive treatment from their insurance rolls.

The defendants' refusal to reimburse Factor Health for millions of dollars worth of pre-authorized drugs, even after no evidence of wrongdoing was found, caused the company's accounts receivable to spike and left it unable to pay its creditors, according to the lawsuit.

Factor Health claims that as a result of the conspiracy, its revenue dropped by nearly half in a very short time, it defaulted on loans, and reported millions of dollars in losses.

It claims it was forced out of business, its hemophilia patients were denied the services of the health care provider of their choice, and the market for hemophilia drugs and related disease management services was destroyed.

What's more, independent pharmacies may not be willing to carry expensive specialty drugs to avoid being harassed by insurers, the complaint states.

Factor Health claims that by reducing the payout on claims, Blue Cross Blue Shield of Florida caused it to lose a deal with a private investment firm one day before the transaction was completed.

Factor Health seeks more than $100 million in damages for tortious interference with business relationships, civil conspiracy, defamation and unfair competition.

It is represented by Ryon McCabe with McCabe Rabin of West Palm Beach and Anthony Paduano and Jason Snyder with Paduano & Weintraub of New York City.

"Defendants have destroyed a once-thriving business and deprived the hemophilia community of a valued and trusted provider of life-saving medicine and disease management services," attorney Jason Snyder said in a statement. "The FHM parties look forward to the opportunity to vindicate their rights, and the rights of the hemophilia community, in court."

Representatives for the Blue Cross Blue Shield Association did not reply to requests for comment.

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