On Tuesday, March 21st, the U.S. District Court for the Northern District of California denied class certification in a suit alleging that CVS had overcharged insurance companies for generic prescriptions, resulting in higher copayments for customers. Corcoran, et al. v. CVS Health, et al., No. 15-cv-03504-YGR.
The putative class alleged that in 2008 CVS introduced the Health Savings Pass (“HSP”) program, which provided customers with discounts on certain generic prescription drugs. The plaintiffs further alleged that the prices charged to customers for generic drugs purchased under the HSP program should have been considered the Usual and Customary (“U&C”) prices that were submitted to Pharmacy Benefit Managers (“PBMs”) and third party insurers. Instead, plaintiffs alleged that CVS submitted claims to these insurers using prices that were higher than the HSP program’s discount prices, which resulted in plaintiffs paying copayments that were higher than what they allege should have been the U&C price. Plaintiffs sought to certify 11 individual representatives to represent consumers from 11 states.
CVS raised two arguments challenging the plaintiffs’ motion for class certifications: (1) certain plaintiff class representatives lacked standing; and (2) the plaintiffs had not met the requirements for class certification set forth in Federal Rule of Civil Procedure 23.
CVS claimed that one state’s representative had never used insurance at CVS to fill generic prescriptions, and that other plaintiff representatives had purchased generic drug quantities that were not included in the HSP program’s drug formulary. The court did not find either of these arguments persuasive and held that all of the plaintiffs had standing to act as class representatives.
Federal Rule of Civil Procedure 23
CVS’ argument that the putative class failed to satisfy Rule 23, the court agreed with CVS that all plaintiffs failed to meet the class requirements of commonality and predominance, and that four of the plaintiffs did not meet the typicality requirement, both of which are required for class certification under Federal Rule of Civil Procedure 23.
The court reviewed the requirements of commonality under Rule 23(a) in conjunction with the predominance requirement under Rule 23(b)(3). The CVS Defendants had argued that determining whether they had submitted inflated U&C prices to insurers would require an individual analysis of each contract entered into between the PBM/third party insurer and CVS. Furthermore, each contract contained its own U&C definition, and certain insurers had their own understanding of what constituted the U&C price pursuant to those definitions. Despite plaintiffs’ argument that the contracts at issue were “materially the same with regard to the definition of U&C[,]” the court found that there was significant variation in how the contracts defined the U&C price. In addition, the court noted that representatives from many large PBMs had submitted declarations in the matter stating that they had understood the U&C price definitions in their contracts with CVS to exclude discount prices charged under the HSP program for the generic drugs covered by the program. As a result, the court found that the plaintiffs had not met the class certification requirements of commonality or predominance.
The CVS Defendants further argued that the claims of certain plaintiffs were not typical of the claims or defenses of the class because these individuals purchased generic drugs at quantities that were not included under the HSP program. The court, noting the limited record, found plaintiffs’ allegations both speculative and dependent upon individualized analyses of certain claims. Accordingly, the court found that four of the plaintiffs were atypical of the classes they sought to represent.
The court dismissed the case without prejudice to plaintiffs’ filing an amended motion for class certification, should they choose to do so.