660 F.Supp.3d 169
S.D.N.Y.2023Background
- Anthem contracted with Express Scripts in 2009 when Express Scripts acquired NextRx and became Anthem’s exclusive PBM under a ten‑year agreement with periodic pricing negotiations and multiple operational obligations.
- Between 2013–2015 Express Scripts’ claims processing system (the “Super PA”) allegedly malfunctioned, causing approvals and payments for claims that should have been denied; Anthem claims millions in damages from those erroneous approvals.
- Anthem sued Express Scripts in 2016 for breach of contract and declaratory relief; Express Scripts asserted counterclaims. The Court previously decided motions in 2017 and 2022 resolving various pleading and summary judgment issues (Anthem I and Anthem II).
- Central contract provision at issue here is Section 3.7 (Claims Processing Services), particularly 3.7(g), which requires Express Scripts to recover and credit recovered overpayments to Anthem (100% credit for certain businesses).
- Key disputes: whether Anthem pleaded a Section 3.7 breach; whether Section 3.7(g) covers unrecovered Super PA payments made to Network Pharmacies; admissibility of Anthem’s PA/Super PA expert testimony (including Sentinel Effect analysis); and whether Anthem may file a supplemental expert report after the Court’s March 2022 ruling.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Pleading of Section 3.7 breach | Anthem says complaint alleges Express Scripts failed to timely correct Super PA defects and reimburse Anthem, giving fair notice of a Section 3.7 claim | Express Scripts argues Anthem never pleaded Section 3.7 specifically until late in the case | Court: Pleading adequate under Rule 8; Anthem gave fair notice, so pleading challenge rejected |
| Scope of §3.7(g): Does it require credit for Super PA payments that cannot be recovered from pharmacies? | Anthem contends §3.7(g) applies because Express Scripts received payment from Anthem for claims incorrectly paid | Express Scripts says §3.7(g) conditions credit on recovery from Network Pharmacies and applies only to recovered overpayments | Court: §3.7(g) requires recovery before credit; Super PA payments to pharmacies were not recoverable, so no breach under §3.7(g); summary judgment for Express Scripts on that theory |
| Exclusion of Anthem’s PA/Super PA expert testimony (Daubert/702) | Anthem defends Matthews and Abarca (Super PA damages, Sentinel Effect) as relevant and methodologically sound; concedes some expert views are foreclosed by prior opinion | Express Scripts seeks exclusion of six experts as methodologically unsound or inconsistent with Court’s March 2022 rulings | Court: Excluded four experts (Foulkes, Lonergan, McCormick, Shinn) in full; allowed Matthews and Abarca in part to testify on Super PA damages and Sentinel Effect (methodology found sufficiently reliable/fitting) |
| Leave to file a supplemental expert report after March 2022 Opinion | Anthem seeks narrow supplement to account for the Court’s holding as to performance guarantees (98% PGs) and to reconcile damages with Abernathy’s model | Express Scripts argues the supplement is untimely, prejudicial, and an improper belated theory | Court: Granted limited leave for a narrowly‑tailored supplemental report (Foulkes) considering the intervening March 2022 decision, limited prejudice, and ability to continue if needed |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (establishes moving party’s burden on summary judgment)
- Anderson v. Liberty Lobby, 477 U.S. 242 (defines "genuine" issue of material fact standard at summary judgment)
- Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 (trial court gatekeeping duties for expert testimony)
- Bourjaily v. United States, 483 U.S. 171 (proponent bears burden to show admissibility of expert evidence)
- Nimely v. City of New York, 414 F.3d 381 (factors for assessing expert reliability in Second Circuit)
- Zaremba v. General Motors Corp., 360 F.3d 355 (Daubert applies to technical and specialized expert testimony)
- Design Strategy, Inc. v. Davis, 469 F.3d 284 (district court discretion to impose Rule 37 sanctions)
- Brod v. Omya, Inc., 653 F.3d 156 (Second Circuit on construing facts in light most favorable to non‑movant)
- Port Authority Police Asian Jade Society v. Port Authority of N.Y. & N.J., 681 F. Supp. 2d 456 (discussion of admissibility of statistical methods and expert gatekeeping)