Grasso Enterprises, LLC v. Express Scripts, Inc.
809 F.3d 1033
8th Cir.2016Background
- Plaintiffs are three compounding pharmacies that contracted with Express Scripts, Inc. (ESI) as in-network providers under Provider Agreements; plaintiffs allege ESI pays them while health plans reimburse ESI.
- In mid-2014 ESI implemented a program to reduce compound-drug costs, including denying claims and recommending removal of certain compound ingredients; plaintiffs say many previously approved refills began being denied.
- Plaintiffs sued under ERISA, alleging ESI systematically denies compound-drug claims without complying with ERISA’s Claims Regulation (29 C.F.R. § 2560.503-1), asserting remedies under 29 U.S.C. § 1132(a)(1)(B) and (a)(3).
- Plaintiffs sought a preliminary injunction requiring ESI to pay claims until it complied with the Claims Regulation, to issue compliant EOBs, and to provide patient access procedures under the ACA; the district court denied the injunction.
- The district court found plaintiffs lacked standing as ERISA beneficiaries and could proceed only as assignees of plan beneficiaries; it also found plaintiffs failed to show irreparable harm or that injunction relief was appropriate; the Eighth Circuit affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether pharmacies may obtain injunctive relief under ERISA §§ 502(a)(1)(B) or (a)(3) as "plan-designated beneficiaries" | Pharmacies argued plan materials and SPDs give them direct-payment rights from ESI and thus make them ERISA beneficiaries entitled to procedural protections and equitable relief | ESI argued direct-payment status does not make providers ERISA beneficiaries; ERISA protections apply to participants/beneficiaries (patients), not providers | Court held pharmacies are not ERISA beneficiaries and cannot sue in their own right under §§ 502(a)(1)(B) or (a)(3); they may sue only as assignees of beneficiaries |
| Whether plaintiffs have standing as assignees to seek the requested preliminary injunction | Plaintiffs argued valid assignments from beneficiaries let them sue to enforce benefits and procedural rights under ERISA | ESI and court noted assignees stand in assignor’s shoes but remedies are limited and must respect ERISA enforcement scheme | Court held plaintiffs may only proceed as assignees but denial of preliminary injunction was proper; injunctive relief mandating future plan procedures is not appropriate here |
| Whether failure to follow the Claims Regulation justifies immediate equitable relief (preliminary injunction) without exhaustion | Plaintiffs contended ESI’s notices and procedures violated the Claims Regulation and § 1133, excusing exhaustion and entitling them to injunction to stop denials | ESI argued judicial review is normally of final adverse benefit determinations; remedies usually remand for full and fair review or benefits if record shows denial unsupported | Court held claims-regulation violations may excuse exhaustion but typical remedy is remand or benefits on review; preliminary injunction requiring ongoing procedural changes was improper and would disrupt plan administration |
| Whether plaintiffs showed irreparable harm warranting a preliminary injunction | Plaintiffs relied on declared revenue drops and business harm tied to ESI’s program | Defendant argued plaintiffs have adequate legal remedies under § 502(a)(1)(B); alleged business losses were speculative | Court held plaintiffs failed to prove irreparable harm; absence of inadequate legal remedy independently justified denying the injunction |
Key Cases Cited
- Dataphase Sys., Inc. v. C L Sys., Inc., 640 F.2d 109 (8th Cir.) (benchmarks for preliminary injunction analysis)
- Richardson v. Cent. States, S.E. & S.W. Areas Pension Fund, 645 F.2d 660 (8th Cir.) (purpose of Claims Regulation: fair, efficient claim processing)
- Brown v. J.B. Hunt Transp. Servs., Inc., 586 F.3d 1079 (8th Cir.) (failure to provide full and fair review excuses exhaustion)
- Midgett v. Wash. Grp. Int’l Long Term Disability Plan, 561 F.3d 887 (8th Cir.) (substantial-compliance standard for Claims Regulation)
- Great-West Life & Annuity Ins. Co. v. Knudson, 534 U.S. 204 (U.S.) (equitable relief under ERISA § 502(a)(3) limited to traditional equity remedies)
- Lafleur v. La. Health Serv. & Indem. Co., 563 F.3d 148 (5th Cir.) (substantial compliance standard applied to ERISA procedures)