221 F. Supp. 3d 227
D.R.I.2016Background
- Plaintiffs (two Indiana Third-Party Payors and a putative nationwide class of TPPs) allege CVS reported inflated Usual & Customary (U&C) prices for generic drugs instead of the lower prices charged through CVS’s Health Savings Pass (HSP), causing TPPs to overpay.
- CVS introduced the HSP in 2008 offering discounted cash prices to members; plaintiffs allege HSP prices were the common cash price and thus should have been reported as U&C.
- Plaintiffs assert CVS electronically submitted inflated U&C prices to TPPs via the NCPDP reporting system over an eight-year period.
- CVS moved to dismiss on multiple grounds: failure to plead fraud with particularity (Rule 9(b)), IDCSA consumer-status and pre-2014 statute issues, lack of standing for non-Indiana state-law claims, failure to plead each state statute’s elements, and that negligent misrepresentation/unjust enrichment are barred by the economic-loss doctrine.
- The court denied CVS’s motion to dismiss and declined to certify the definitional question of “consumer” to the Indiana Supreme Court; many defenses were left open to be revisited at class-certification or later stages.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Rule 9(b) adequacy | Complaint alleges who (CVS), what (inflated U&C reports), where/when (NCPDP submissions to TPPs over time) and how (reporting HSP-not-U&C) | Complaint lacks transaction-level details (specific submissions to Indiana Funds, amounts, dates) | Complaint meets Rule 9(b); allegations provide fair notice and missing details are likely in CVS’s possession |
| Whether TPPs are "consumers" under Indiana Deceptive Consumer Sales Act (IDCSA) | TPPs paid for prescriptions for members and thus are consumers for purposes of IDCSA | "Consumer" should mean the end-user who uses the product; TPPs are not end-users | TPPs can qualify as consumers under IDCSA; court declines to certify question to Indiana Supreme Court |
| Applicability of pre‑July 1, 2014 IDCSA | CVS’s conduct fits pre‑2014 “specific price advantage” deceptive-act category | Plaintiffs did not plead that specific pre‑2014 category expressly | Allegations of deceptive/misleading U&C prices sufficiently plead conduct that could fall under the pre‑2014 price-advantage provision |
| Nationwide/state-law claims & standing | Nationwide claims appropriate; class representatives have aligned incentives and common issues | Named Indiana plaintiffs lack standing to assert other states’ laws on behalf of absent class members | Denied dismissal on these grounds; standing and state-law variances deferred to class-certification stage |
| Failure to plead elements of each state statute | General allegations put CVS on notice; details can be addressed at certification | Pleading is a “blunderbuss” that fails to show how each statute is violated | Pleading is sufficient at this stage; specifics may be required for class certification |
| Economic-loss doctrine re: tort claims | CVS engaged in an independent fraudulent scheme (HSP design and misreporting) beyond contract duties | Claims are contract-based and barred by economic-loss rule | Economic-loss doctrine does not bar claims at this stage given allegations of independent fraudulent conduct |
| Justifiable reliance for negligent misrepresentation | Plaintiffs could not determine from public HSP publicity whether HSP was the majority cash price (U&C) without CVS data | HSP publicity put plaintiffs on notice; reliance unjustified; public-disclosure authority (Winkelman) undermines claim | Justifiable reliance sufficiently pleaded at motion-to-dismiss stage |
| Unjust enrichment | Plaintiffs allege CVS retained money by misreporting prices | Claim duplicates other statutory/common-law claims and lacks independent basis | Unjust enrichment may proceed given the court’s finding that fraudulent-scheme allegations survive dismissal |
Key Cases Cited
- Suna v. Bailey Corp., 107 F.3d 64 (1st Cir. 1997) (explains Rule 9(b) particularity elements)
- Shields v. Citytrust Bancorp, Inc., 25 F.3d 1124 (2d Cir. 1994) (framework for pleading fraud particulars)
- United States ex rel. Ge v. Takeda Pharm. Co. Ltd., 737 F.3d 116 (1st Cir. 2013) (describes the who, what, when, where, how standard for fraud pleading)
- Cooper v. Pickett, 137 F.3d 616 (9th Cir. 1997) (fraud complaint need not plead specific shipments/amounts to survive dismissal)
- Warshaw v. Xoma Corp., 74 F.3d 955 (9th Cir. 1996) (Rule 9(b) aims to give defendants fair notice)
- Corcoran v. CVS Health Corp., 169 F. Supp. 3d 970 (N.D. Cal. 2016) (denying dismissal in a similar HSP/U&C case; cited for pleading sufficiency and merits distinctions)
- In re Actiq Sales & Mktg. Practices Litig., 790 F. Supp. 2d 313 (E.D. Pa. 2011) (held TPPs can be consumers under Indiana statute)
- In re Bextra & Celebrex Mktg. Sales Practices & Prod. Liab. Litig., 495 F. Supp. 2d 1027 (N.D. Cal. 2007) (same conclusion on TPPs as consumers under IDCSA)
- Plumbers’ Union Local No. 12 Pension Fund v. Nomura Asset Acceptance Corp., 632 F.3d 762 (1st Cir. 2011) (discusses class standing and when named plaintiffs’ claims establish class members’ claims)
- Ortiz v. Fibreboard Corp., 527 U.S. 815 (1999) (Rule 23 and Article III sequencing guidance)
- Amchem Prods., Inc. v. Windsor, 521 U.S. 591 (1997) (class certification considerations and typicality/notice concerns)
- Indianapolis–Marion Cnty. Pub. Library v. Charlier Clark & Linard, P.C., 929 N.E.2d 722 (Ind. 2010) (explains economic-loss doctrine in Indiana)
- United States ex rel. Winkelman v. CVS Caremark Corp., 827 F.3d 201 (1st Cir. 2016) (FCA public-disclosure bar held to preclude certain HSP-based claims)