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In re UnitedHealth Group PBM Litigation

United States District Court, D. Minnesota

December 19, 2017

In re UnitedHealth Group PBM Litigation THIS RELATES TO Nos. 16-CV-3352, 16-CV-3496, 16-CV-3914, 16-CV-3996, 16-CV-4119, 16-CV-4129, 16-CV-4130, and 16-CV-4136



         Plan members bring suit against UnitedHealth Group, Inc. and some of its wholly-owned subsidiaries[1] under the Employee Retirement Income Security Act of 1974 (“ERISA”), the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and various state laws relating to breach of contract, fraud, and deceptive trade practices for Defendants' conduct in administrating pharmacy benefits that allegedly caused Plaintiffs to overpay for prescription drugs purchased at retail network pharmacies. (See Consolidated Class Action Compl. (“CAC”), Dkt. No. 52.) Defendants filed a motion to dismiss the CAC. (See Dkt. No. 67.) For the following reasons, the Court grants Defendants' motion to dismiss.


         Defendants move to dismiss Plaintiffs' claims under Fed.R.Civ.P. 12(b)(6) and 9(b). (See Dkt. No. 67.) When ruling on a motion to dismiss under the rules, the Court accepts the alleged facts as true, drawing all reasonable inferences in favor of the non-moving party. See Drobnak v. Andersen Corp., 561 F.3d 778, 781 (8th Cir. 2009). “This tenet does not apply, however, to legal conclusions or ‘formulaic recitation of the elements of a cause of action'; such allegations may properly be set aside.” Braden v. Wal-Mart Stores, Inc., 588 F.3d 585, 594 (8th Cir. 2009); see United States ex rel. Raynor v. Nat'l Rural Utils. Coop. Fin., Corp., 690 F.3d 951, 955-56 (8th Cir. 2012).

         Under Rule 12(b)(6), the Court evaluates whether the alleged facts are sufficient to “state a claim to relief that is plausible on its face.” Ashcroft v. Iqbal, 556 U.S. 662, 678 (2009) (quoting Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570 (2007)). The Court draws on “its judicial experience and common sense” to determine if the factual statements nudge a claim “across the line from conceivable to plausible.” Iqbal, 556 U.S. at 679-80. When reviewing a complaint for compliance with Rule 9(b), the Court determines whether the plaintiff “state[s] with particularity the circumstances constituting fraud or mistake.” Fed.R.Civ.P. 9(b).


         Plaintiffs received prescription drug benefits through health plans purchased directly from Defendants or issued or administered by Defendants for Plaintiffs' employers. (CAC ¶ 2.) The non-Optum Defendants are health insurance and/or plan administrators (the “United insurers”), and Defendant OptumRx (a subsidiary of Optum) is a pharmacy benefit manager (“PBM”). (Id. ¶ 5.) The United insurers retained OptumRx as a PBM to provide prescription drug benefits to plan members. (See id.) OptumRx participated in curating drug formularies, setting copayment, coinsurance, and deductible requirements (member “contributions”), and providing plan members with access to a network of pharmacies that have contracted with OptumRx to adhere to certain terms, including accepting discounted rates for providing prescription drugs. (See Id. ¶¶ 5, 64(c).)

         Before filling a prescription, pharmacies within OptumRx's network of pharmacies transmit key information about a plan member and the prescription via interstate wires to OptumRx, which “instantaneously processes the claim according to the prescription drug plan assigned to the patient.” (Id. ¶ 58.) OptumRx then transmits a message back “indicating whether the drug and patient are covered and, if so, the amount the pharmacy must collect from the patient as a copayment or coinsurance, or to be paid toward a deductible.” (Id.) Sometimes, a copayment amount is greater than the amount OptumRx otherwise agreed to pay the pharmacy, leading to a positive “spread.” (Id. ¶¶ 60, 185.) The spread is the difference between the amount the pharmacy agreed to be paid and the amount it received from the plan member. (See Id. ¶ 7.) The agreements between the network pharmacies and OptumRx require the pharmacies to remit the spread to OptumRx-what Plaintiffs term the “clawback.” (See Id. ¶¶ 61-62, 71.) The pharmacies are not entitled to keep the spread. (See Id. ¶¶ 7-8.) In addition, the agreements between OptumRx and pharmacies require pharmacies to forebear from informing plan members if there is a spread and that it is remitted to OptumRx. (See Id. ¶¶ 70, 82, 85-87, 92.)

         Plaintiffs' plan documents outline what plan members must pay to receive prescription drugs under their plans. Under each of Plaintiffs' plans, the plan documents provide that plan members must pay copayments or coinsurance when filling prescriptions at retail pharmacies. (See Id. ¶¶ 4.) Plaintiffs allege, however, that they were entitled to pay less than they were charged as copayments or coinsurance under the terms of their plans because their plans entitled Plaintiffs to receive the benefit of the discounted rate, in the form of lower copayments or coinsurance amounts. (See Id. ¶ 181.) Plaintiffs allege that they purchased certain drugs on numerous occasions and were overcharged due to OptumRx's contribution calculations, resulting in spreads and clawbacks. (See Id. ¶¶ 128-42, 318.) They bring claims for damages and equitable relief on behalf of two classes and five subclasses. (See Id. ¶¶ 209-211.)

         III. ANALYSIS

         A. Count I under ERISA § 502(a)(1)(B)

         Plaintiffs' first count, which is brought under ERISA § 502(a)(1)(B) by the ERISA Plaintiffs on behalf of themselves and the ERISA Subclass, is to recover benefits due to the ERISA Plaintiffs under the terms of their plans, to enforce their rights under the terms of their plans, and to clarify their rights to future benefits under the terms of their plans. (See CAC ¶ 233.)

         1. Plan Terms

         Claims brought pursuant to this section stand or fall by the terms of the plan.[2] Kennedy v. Plan Adm'r for DuPont Sav. & Inv. Plan, 555 U.S. 285, 300 (2009). “When construing the language of an ERISA plan [courts] begin by examining the language of the plan documents. ‘Each provision should be read consistently with the others and as part of an integrated whole.'” Bond v. Cerner Corp., 309 F.3d 1064, 1067-68 (8th Cir. 2002) (citation omitted); see Spizman v. BCBSM, Inc., 855 F.3d 924, 927 (8th Cir. 2017); Kitterman v. Coventry Health Care of Iowa, Inc., 632 F.3d 445, 448 (8th Cir. 2011). “Further, the terms must be construed so as to render none of them nugatory and to avoid illusory promises.” Barker v. Ceridian Corp., 122 F.3d 628, 638 (8th Cir. 1997) (citation omitted). “If the plan is deemed ambiguous, extrinsic evidence may be considered. But any ambiguities should be construed against the drafter only as a last step.” Bond, 309 F.3d at 1068 (citation omitted).

         Defendants argue that Count I should be dismissed with respect to most of the ERISA Plaintiffs because the relevant plans do not entitle the ERISA Plaintiffs to the discounted rate. (See Defendants' Memorandum in Support of Their Motion to Dismiss (“Def. Br.”) 13-16, Dkt. No. 69.) They do not dispute that Ellington and Sohmer's (2016 only) plans entitle plan members to the discounted rate. (See Defendants' Reply Memorandum (“Def. Reply Br.”) 3 n.3, Dkt. No. 106.) Plaintiffs respond that all Plaintiffs' plans prohibit the collection of spread and clawbacks. (See Plaintiffs' Response Memorandum in Opposition to the Motion to Dismiss (“Pl. Br.”) 5-9, 12-13, Dkt. No. 97.)

         Starting with the alphabetically-first ERISA Plaintiff, Ackerman, the Court finds that his plan does not entitle him to any discounted rates. The “Outpatient Prescription Drug Rider” to Ackerman's plan states that he is responsible for paying the lower of: (1) “the applicable Out-of-Pocket Expense, ” or (2) “the Network Pharmacy's Usual and Customary Charge.” (Dkt. No. 80 at 157.) The Rider explains that “Out-of-Pocket Expenses” are those outlined in the “Summary of Benefits” and are “either a specific dollar amount or a percentage of the Prescription Drug Cost.” (Id.) The Summary of Benefits for Ackerman's plan lists different flat copayment amounts for different tiers of drugs. (See Id. at 16.) The Rider defines “Usual and Customary Charge” as “the usual fee that a pharmacy charges individuals for a Prescription Drug Product without reference to reimbursement to the pharmacy by third parties.” (Id. at 162.)

         Plaintiffs argue that a “UCR Rider” defines the “Usual, Customary and Reasonable (UCR) Charge” as the lesser of several things, including “the amount the provider agrees to accept as reimbursement for the particular covered services, supplies and/or drugs.” (Id. at 65; see Pl. Br. 8.) However, as Defendants point out, that term is not equivalent to “Usual and Customary Charge, ” which is used in the Outpatient Prescription Drug Rider. (See Def. Reply Br. 3.) Under the plain and unambiguous terms of Ackerman's plan, he was not entitled to pay the discounted rate if it was less than the copayment amount.

         ERISA Plaintiff Mohr's plans for 2011 through 2013 contain similar language to Plaintiff Ackerman's plan. (See Dkt. No. 80 at 1043, 1077, 1089, 1123, 1136, 1170.) However, Plaintiffs argue that Mohr's plan documents indicate that Mohr was entitled to the discounted rate during those years. (See Pl. Br. 8-9.) For example, Plaintiffs point to a sentence under the heading of “How Covered Services are Reimbursed” in Mohr's “Member Handbook, ” which states: “We reimburse the Network Provider directly when you receive Covered Services and you will not be responsible for any amount billed in excess of the contracted fee for the Covered Service.” (Dkt. No. 98-7 at 55; see Pl. Br. 9.) Because the Summary of Benefits for Mohr's 2011-13 plans lists her supplemental prescription drug coverage under the heading of “Covered Service, ” Plaintiffs argue that this language from the handbook applies. (See Pl. Br. 9.)

         Except as stated in the Member Handbook, the terms of Mohr's 2011 to 2013 plans do not appear to entitle members to the discounted rate for outpatient pharmacy benefits and are structured similarly to Ackerman's plan. (See, e.g., Dkt. No. 98-7 at 67-149.) The 2013 plan, for example, states that the terms and conditions of the plan are subject to changes made by rider and that the terms of a rider supersede conflicting terms in the main plan documents. (See Id. at 97.) The Outpatient Prescription Drug Rider provides for coverage at “Network Pharmacies, ” and does not provide for use of the discounted rate in determining member contribution amounts, except where the Summary of Benefits provides for coinsurance as “a percentage of the Prescription Drug Cost” (in essence, the discounted rate). (Id. at 143, 148.) However, because the Member Handbook implies that plan members will be entitled to the discounted rate for all Covered Services, which could be interpreted to include outpatient prescription drugs, the Court will assume, without deciding, that she may be entitled to the discounted rate under the terms of her plans for 2011 to 2013.

         Mohr's 2014 plan has a different structure and is ambiguous with regard to entitlement to the discounted rate. The 2014 plan states, under the heading of “Section VI-Covered Services, ” that for “Prescription Drugs purchased at a retail or mail order or designated Participating Pharmacy, [the plan member is] responsible for paying the lower of:” (1) “The applicable Cost-Sharing” or (2) “The Participating Pharmacy's Usual and Customary Charge.” (Dkt. No. 80 at 974.) The plan defines “Cost-Sharing” as “[a]mounts [the plan member] must pay for Covered Services, expressed as Coinsurance, Copayments, and/or Deductibles.” (Id. at 933.) Section IV, entitled “Cost-Sharing Expenses and Allowed Amount, ” states: “Except where stated otherwise, after [the plan member has] satisfied the annual Deductible . . . [the plan member] must pay the Copayments, or fixed amounts, in the Schedule of Benefits in Section XV . . . . However, when the Allowed Amount for a service is less than the Copayment, [the plan member is] responsible for the lesser amount.” (Id. at 944.) Section IV defines the term “Allowed Amount” to mean “the amount we have negotiated with the Participating Provider.” (Id. at 945.) The plan definitions section defines “Allowed Amount” as “[t]he maximum amount on which Our payment is based for Covered Services.” (Id. at 933.)

         Mohr's 2014 plan does not separate the outpatient prescription drug coverage from the main plan via a supplemental rider. Although the 2014 plan states that the Cost-Sharing Expenses are outlined in the “Schedule of Benefits in Section XV . . . when Covered Prescription Drugs are obtained from a retail or mail order or Designated pharmacy, ” and the Schedule of Benefits sets forth specific copayment amounts for certain drug tiers, [3] the terms of Section IV appear to entitle Mohr to the discounted rate. (Id. at 973-74.) For present purposes, the Court assumes that Mohr's 2014 plan entitled her to the discounted rate if it was less than the listed copayment amounts. See Bond, 309 F.3d at 1067-68.

         The next ERISA Plaintiffs, M. and R. Chambers, have a plan that Plaintiffs term “Design 2.” Other ERISA Plaintiffs with the same or similar plan design include Hawks, Mastra, Sohmer (2015 only), and Youngs.[4] (See Dkt. No. 80 at 590, 756, 821, 859, 903, 1561, 2140.) These plans do not provide for outpatient prescription drug coverage within the main plan documents, but instead provide for the coverage through an “Outpatient Prescription Drug Rider.” (E.g., Dkt. No. 80 at 420.) The Rider directs plan members to the “Outpatient Prescription Drug Schedule of Benefits” for information about “applicable Copayments and/or Coinsurance.” (Id. at 424.) The Schedule of Benefits states that plan members “are responsible for paying the applicable Copayment and/or Coinsurance described in the Benefit Information table.” (Id. at 432.) Under the heading of “Payment Information, ” the Schedule of Benefits provides that, for prescription drugs purchased at a network retail pharmacy, plan members are responsible for paying the lower of either (1) the “applicable Copayment and/or Coinsurance”, or (2) the “Network Pharmacy's Usual and Customary Charge.”[5] (Id. at 433.) That table also directs plan members to the Benefit Information table and defines, for example, copayment as “a specific dollar amount.” (Id.) Two pages later, the Benefit Information table states that the plan pays “100% of the Prescription Drug Charge” after the member pays a set Copayment amount (depending on the tier of the drug). (Id. at 436.)

         Defendants argue that the Rider clearly sets forth what plan members must pay and does not entitle them to the discounted rate for drugs filled at retail network pharmacies. (See Def. Br. 7-9.) Plaintiffs argue the opposite. (See Pl. Br. 6-7.) They start by pointing to the first page of the Rider, which states: “Certain capitalized words have special meanings. We have defined these words in either the [plan definitions section] or in this Rider in Section 3: Defined Terms.” (E.g., Dkt. No. 80 at 420 (emphasis omitted); see Pl. Br. 6.) The Rider's definition section does not define “Copayment, ” but the plan's definition section does. There, the plan defines “Copayment” as “the charge, stated as a set dollar amount, that [a plan member is] required to pay for certain Covered Health Services.” (Dkt. No. 80 at 357.) It continues: “Please note that for Covered Health Services, you are responsible for paying the lesser of the following: The applicable Copayment [or] The Eligible Expense.” (Id.) Plaintiffs argue that this language is part of the definition of “Copayment.” (See Pl. Br. 7.) They then point to the plan's Schedule of Benefits, which defines “Eligible Expenses, ” for “Covered Health Services [that] are received from a Network provider, ” as “our contracted fees with that provider.” (Dkt. No. 80 at 397.) They contend that Eligible Expenses is imported, by way of the main-policy Copayment definition, to the Rider's articulation of member contribution responsibilities. (See Pl. Br. 7.)

         The Court disagrees with Plaintiffs' interpretation of the plan documents. The central flaw in Plaintiffs' argument is that the “please note” language appended to the plan's definition of “Copayment” is not part of the definition of that term, but rather an additional note added to reiterate that, for services covered under the main plan, plan members must pay the lesser of the listed copayments or the “Eligible Expense.” The same provision is included in the Schedule of Benefits attached to the main plan, which governs plan member contribution amounts for services covered by the main plan. (See Dkt. No. 80 at 369.) As the plan makes clear, though, Riders are not subject to main plan terms if the Riders amend otherwise applicable terms. (See Id. at 362-63.) The Outpatient Prescription Drug Rider plainly modifies the member contribution scheme. It amends the “lesser of” options that determine the amount plan members are required to pay, as a plan term, by replacing “Eligible Expenses” with “Usual and Customary Charge” and keeping the applicable “Copayment” as an option, using approximately the same definition of the term-a “specific, ” rather than “set, ” dollar amount. (Compare Dkt. No. 80 at 433, with Id. at 357.) The plan unambiguously states what plan members must pay for outpatient prescription drugs. Therefore, ERISA Plaintiffs with “Design 2” plans (M. Chambers, R. Chambers, Hawks, Mastra, Sohmer (2015 only), and Youngs) are not entitled to the discounted rate as a “lesser of” copayment option when filling drugs at retail network pharmacies.

         Defendants assert that Holm's plan does not provide coverage for outpatient prescription drugs, [6] but that his employer entered into a prescription drug benefit administration agreement directly with OptumRx. (See Def. Br. 9 n.10.) Nevertheless, they note that this administration agreement provides that member copayments are the lesser of (1) “Ingredient Cost applicable dispensing fee applicable Sales Tax, or” (2) the “[a]pplicable Copay.” (Dkt. No. 71 at 57; see Def. Br. 10.) The “Ingredient Cost” takes into account the discounted rate. (See Dkt. No. 71 at 57; Pl. Br. 9.) In addition, the administration agreement states, under the heading of “Pharmacy Program Fees, ” that “[f]or each Covered Drug claim, member will be charged: Member's Copayment.” (Dkt. No. 71 at 61.) In view of these provisions, Holm appears to have been entitled to pay an amount based on the discounted rate. The Court therefore assumes, without deciding, that Holm's plan entitled him to the discounted rate.

         Lastly, it is undisputed that Ellington and Sohmer's (2016 only) plans entitled them to the discounted rate. (See Dkt. No. 80 at 1778, 1848, 2201.)

         In summary, Ellington's and Sohmer's (2016 only) plans entitled them to pay the discounted rate if the rate was less than stated copayment amounts. The Court assumes that Holm's and Mohr's plans entitled plan members to the discounted rate. The plans for all other ERISA Plaintiffs do not entitle those ERISA Plaintiffs to the discounted rate as a “lesser of” payment option when filling prescription drugs at retail network pharmacies. Because those ERISA Plaintiffs do not allege that Defendants violated the terms of their Plans other than by not allowing them to pay lesser, discounted rates, such Plaintiffs fail to state claims for benefits under ERISA § 502(a)(1)(B).[7] See Alves v. Harvard Pilgrim Health Care Inc., 204 F.Supp.2d 198, 208-09 (D. Mass. 2002), aff'd, 316 F.3d 290 (1st Cir. 2003).

         2. Exhaustion

         Defendants argue that all ERISA Plaintiffs failed to exhaust their administrative remedies, which is a prerequisite to claims for benefits. (See Def. Br. 17-18.) The CAC implicitly states that Plaintiffs have not exhausted administrative remedies by asserting that such remedies are inapplicable or would be futile. (See CAC ¶¶ 193-98.) Plaintiffs argue that the exhaustion doctrine does not apply because the ERISA Plaintiffs' claims are not for denial of benefits; they never submitted a claim that was denied. (See Pl. Br. 13-15.) They also argue that the administrative process is not implicated because the plans do not provide for a process unless benefits were denied. (See Id. at 16.) Defendants reply that participants have the right and duty to invoke ERISA's claims procedures whenever participants pay more than they should have paid under their plans. (See Def. Reply Br. 4.) Because Plaintiffs believe they should have paid less, this requires exhaustion. (See id.)

         ERISA does not explicitly require exhaustion of administrative or plan remedies, see 29 U.S.C. § 1133; 29 C.F.R. § 2560.503-1(b), (m), but exhaustion is required if a plan requires exhaustion of administrative remedies. Conley v. Pitney Bowes, 34 F.3d 714, 716-17 (8th Cir. 1994). Exhaustion need not be “required” in the sense that it is mandatory under the plan; “whether it is a denial letter or a plan document that uses permissive language to describe a review procedure, ‘claimants with notice of an available review procedure should know that they must take advantage of that procedure if they wish to bring wrongful benefit denial claims to court.'” Wert v. Liberty Life Assurance Co. of Boston, Inc., 447 F.3d 1060, 1066 (8th Cir. 2006). “This judicially created exhaustion requirement serves many important purposes, including ‘giving claims administrators an opportunity to correct errors, promoting consistent treatment of claims, providing a non-adversarial dispute resolution process, decreasing the cost and time of claims resolution, assembling a fact record that will assist the court if judicial review is necessary, and minimizing the likelihood of frivolous lawsuits.'” Angevine v. Anheuser-Busch Cos. Pension Plan, 646 F.3d 1034, 1037 (8th Cir. 2011) (quoting Galman v. Prudential Ins. Co. of Am., 254 F.3d 768, 770 (8th Cir. 2001)). Exhaustion is not required, however, if (1) pursuing an administrative remedy would be futile, or (2) there is no available administrative remedy. Id. To show futility, a plan participant must show it is certain the claim will be denied on appeal. Brown v. J.B. Hunt Transp. Servs., Inc., 586 F.3d 1079, 1085 (8th Cir. 2009).

         Because the Court dismisses Count I as to those ERISA Plaintiffs with plans that do not entitle plan members to the discounted rate, the Court only considers exhaustion for the remaining Plaintiffs: Ellington, Holm, Mohr, and Sohmer (2016 only). The Court begins by reviewing the administrative provisions within each of these Plaintiffs' plan documents.

         Ellington's plan provides: “If you wish to receive reimbursement for a prescription, you may submit a post-service claim as described in this section if: . . . you pay Coinsurance and you believe that the amount of the Coinsurance was incorrect.” (E.g., Dkt. No. 80 at 1788.)[8] The plan provides a comprehensive claims and appeals process. (See Id. at 1788-99.) It also requires exhaustion by limiting the availability of legal action until after plan members exhaust or complete claims and appeals procedures. (See Id. at 1799.) Ellington's plan plainly requires exhaustion and provides procedures for challenging coinsurance calculations.

         Sohmer's 2016 plan uses similar language to Ellington's plan, but substitutes “Coinsurance” for “Copay.” (Id. at 2176.) It also provides a comprehensive claims and appeals process and requires exhaustion by limiting the availability of legal remedies. (See Id. at 2176-86.) Thus, Sohmer's 2016 plan plainly requires exhaustion and provides procedures for challenging copayment calculations.

         Mohr's 2014 plan allows members to file claims for benefits and states: “If You disagree with Our claim determination you may submit a Grievance pursuant to Section XI-Grievance, Utilization Review & External Appeals of this Certificate.” (Dkt. No. 80 at 988.) It also states that the “Grievance procedure applies to any issue not relating to a Medical Necessity or experimental or investigational determination by Us. For example, it applies to contractual benefit denials or issues or concerns You have regarding Our administrative policies.” (Id. at 990.) It then provides for a grievance review and appeals process. (See Id. at 990-91.) Although the plan does not appear to limit the availability of legal actions, it does designate courts located in New York as the forum for legal disputes related to the plan. (See Id. at 1016.) The plan's administrative procedures are sufficient to advance the purposes for requiring exhaustion. See Angevine, 646 F.3d at 1037. Pursuing these procedures will allow the plan to correct any errors in its calculation of plan benefits and will create a fact record to assist the Court if judicial review does indeed become necessary. See Id. Therefore, the Court holds that Mohr's 2014 plan required exhaustion due to the availability of grievance procedures for resolving contractual disputes.

         Mohr's 2011 through 2013 plans also require exhaustion. For example, the 2013 plan's Member Handbook states: “Our Grievance, Appeal and Complaint Procedures provide Members with a meaningful, dignified and confidential process to hear and resolve issues between Members, Us and Providers in a timely manner.” (Dkt. No. 80 at 1047.) The “Grievance and Appeal procedure” is designed for “denials based on benefits exclusions or limitations and claims payment disputes.”[9] (Id. at 1055.) The procedure allows for appeals. (See Id. at 1055-57.) The plan also provides for a “Complaint Procedure” to handle “expression[s] of dissatisfaction with any aspect of Our or a Network Provider's business operations, activities or behaviors regardless of whether any remedial action is required.” (Id. at 1057; see Id. at 1057-59.) The plan documents for years 2011 to 2013 also provide for the Grievance and Complaint Procedures. (See Id. at ...

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