Medco 2014 Annual Report Download - page 33

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Express Scripts 2014 Annual Report
Item 3 – Legal Proceedings
Weand/oroursubsidiariesaredefendantsinanumberoflawsuits.Wecannotascertainwithanycertaintyatthis
timethemonetarydamagesorinjunctivereliefthatanyoftheplaintiffsmayrecover.Wealsocannotprovideanyassurancethe
outcomeofanyofthesematters,orsomenumberofthemintheaggregate,willnotbemateriallyadversetoourfinancial
condition,resultsofoperations,cashflowsorbusinessprospects.Inaddition,theexpensesofdefendingthesecasesmayhavea
materialadverseeffectonourfinancialresults.
Thesemattersare:
• JerryBeeman,etal.v.Caremark,etal.(UnitedStatesDistrictCourtfortheCentralDistrictofCalifornia,Case
No.021327)(filedDecember2002).AcomplaintwasfiledagainstESI,NextRXLLCf/k/aAnthemPrescription
ManagementLLC,MedcoHealthSolutions,Inc.(forpurposesofthisItem3,“Medco”)andseveralotherpharmacy
benefitmanagementcompaniesbyseveralCaliforniapharmaciesasaputativeclassaction,allegingrightstosueasa
privateattorneygeneralunderCalifornialaw.PlaintiffsallegethatESIandtheotherdefendantsfailedtocomplywith
statutoryobligationsunderCaliforniaCivilCodeSection2527toprovideCaliforniaclientswiththeresultsofabi-
annualsurveyofretaildrugprices,andseekmoneydamages.InJuly2004,thecasewasdismissedwithprejudicedue
tolackofstanding.InJune2006,theUnitedStatesCourtofAppealsfortheNinthCircuitreversedthedistrictcourt's
opiniononstandingandremandedthecase.Thedistrictcourt’sdenialofdefendants’motiontodismissonfirst
amendmentconstitutionalitygroundswasappealedtotheNinthCircuitasdiscussedfurtherbelow.Plaintiffshave
filedamotionforclasscertification,butthatmotionhasnotbeenbriefedpendingtheoutcomeoftheappeal.
InJuly2011,theUnitedStatesCourtofAppealsfortheNinthCircuitaffirmedthedistrictcourt’sdenialof
defendants’motiontodismiss.InJune2012,anenbancpaneloftheNinthCircuitCourtofAppealsissuedadecision
certifyingthequestionofconstitutionalityofCaliforniaCivilCodeSection2527totheCaliforniaSupremeCourt,
requestingconsiderationoftheissueandaruling.InDecember2013,theCaliforniaSupremeCourtheldthat
CaliforniaCivilCodeSection2527doesnotinfringeuponstateconstitutionalfreespeechprotections.
InJanuary2014,theNinthCircuitenbancpanelissuedarulingvacatingthepriorpanelopinionandremandedthe
casetotheoriginalNinthCircuitthree-judgepaneltoeitherconsiderthefederalconstitutionalissuesorremandthe
casetothedistrictcourt.InMarch2014,theNinthCircuitCourtofAppealsenteredanorderliftingthestayand
remandedthecasetothedistrictcourtforfurtherproceedings.Defendants’objectionsbasedonplaintiffs’lackof
standingandtheunconstitutionalityoftheCalifornialawduetodefendants’firstamendmentrightshavebeen
rejectedbythecourtsandarenotsubjecttofurtherappeals.
• Inre:PBMAntitrustLitigation(UnitedStatesDistrictCourtfortheEasternDistrictofPennsylvania).Thefollowing
threecasesweretransferredtotheUnitedStatesDistrictCourtfortheEasternDistrictofPennsylvaniabeforethe
JudicialPanelonMulti-DistrictLitigationinAugust2006:(i)BradyEnterprises,Inc.,etal.v.MedcoHealth
Solutions,Inc.(filedinAugust2013intheUnitedStatesDistrictCourtfortheEasternDistrictofPennsylvania);(ii)
NorthJacksonPharmacy,Inc.,etal.v.MedcoHealthSolutions,Inc.,etal. (UnitedStatesDistrictCourtforthe
NorthernDistrictofAlabama),consolidatedwithNorthJacksonPharmacy,Inc.,etal.v.ExpressScripts,Inc.,etal.
(UnitedStatesDistrictCourtfortheNorthernDistrictofAlabama)(filedinOctober2003);and(iii)Mike’sMedical
CenterPharmacy,etal.v.MedcoHealthSolutions,Inc.,etal.(UnitedStatesDistrictCourtfortheNorthernDistrict
ofCalifornia)(filedDecember2005).TheBradyEnterprisescasewasfiledagainstMerck&Co.,Inc.(“Merck”)and
Medco.PlaintiffsmovedforclasscertificationtorepresentanationalclassofretailpharmaciesandallegethatMedco
conspiredwith,actedasthecommonagentfor,andusedthecombinedbargainingpowerofplansponsorstorestrain
competitioninthemarketforthedispensingandsaleofprescriptiondrugs.Plaintiffsallegethat,throughconspiracy,
Medcohasengagedinvariousformsofanticompetitiveconductincluding,amongotherthings,settingartificiallylow
pharmacyreimbursementrates.PlaintiffsassertclaimsforviolationoftheShermanActandseektrebledamagesand
injunctiverelief.TheNorthJacksonPharmacycasepurportstobeaclassactionagainstESIandMedcoonbehalfof
independentpharmacieswithintheUnitedStates.ThecomplaintallegesthatcertainofESI’sandMedco’sbusiness
practicesviolatetheShermanAntitrustAct.Plaintiffsseekunspecifiedmonetarydamages(includingtrebledamages)
andinjunctiverelief.Plaintiffs’motionforclasscertificationagainstESIandMedcowasgrantedinMarch2006.
FollowingoralargumentsonESI’smotiontodecertifytheclassin2007,thecaseremaineddormantuntilApril2011,
whenitwasreassignedtoanewjudgewhoorderedsupplementalbriefing.Oralargumentofalltheclasscertification
motionswasheardinJanuary2012,andthecourttookESI’smotionundersubmission.TheMike’sMedicalCenter
PharmacycasewasfiledagainstMedcoandMerck.Plaintiffsseektorepresentaclassofallpharmaciesand
pharmaciststhatcontractedwithMedcoandCaliforniapharmaciesthatindirectlypurchasedprescriptiondrugsfrom
Merck.PlaintiffsassertclaimsforviolationoftheShermanAct,CaliforniaantitrustlawandCalifornialaw
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