State of Michigan Ex Rel Marcia Gurganus v. Cvs Caremark Corp
496 Mich. 45
| Mich. | 2014Background
- Plaintiffs (two class actions and a qui tam relator) allege Michigan pharmacies violated MCL 333.17755(2) by keeping savings when dispensing generics rather than passing on the difference between brand and generic wholesale costs.
- Plaintiffs further claim violations of the Health Care False Claim Act (HCFCA) and Medicaid False Claim Act (MFCA) arise from reimbursement claims submitted to insurers/Medicaid based on those allegedly improper transactions.
- Initial complaints relied on public reports; after dismissal, plaintiffs amended to rely principally on proprietary 2008 wholesale/cost data from a single Kroger pharmacy in West Virginia and extrapolated those costs to many Michigan defendants.
- Trial court granted summary disposition (MCR 2.116(C)(8)) dismissing the complaints for failure to plead with sufficient particularity and for not alleging substitution transactions; the Court of Appeals reversed in part.
- Supreme Court held (1) § 17755(2) applies only when a generic is substituted for a prescribed brand-name drug, (2) “savings in cost” means the difference between the two wholesale costs, and (3) plaintiffs’ pleadings failed the heightened particularity requirement for fraud-based claims because they relied on tenuous extrapolation and did not identify specific substitution transactions.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Scope of MCL 333.17755(2) | Applies to all transactions where a generic is dispensed | Applies only when a generic is substituted for a prescribed brand-name | §17755(2) applies only to substitution transactions (generic replacing prescribed brand) |
| Meaning of “savings in cost” | Plaintiffs sought broad remedies tied to retail price differences | Statute defines savings as difference in wholesale costs between the two drugs | "Savings in cost" = brand wholesale cost minus generic wholesale cost; caps allowable profit from substitution |
| Pleading sufficiency / particularity (fraud-based claims) | Extrapolation from Kroger WV data suffices to allege systemic violations across defendants | Extrapolation is too speculative; plaintiffs must plead substitution instances and proprietary acquisition costs with particularity | Plaintiffs failed MCR 2.112(B)(1); complaints lacked specific substitution examples and relied on tenuous assumptions; dismissal affirmed |
| Derivative false-claims liability (HCFCA/MFCA) | Violations of §17755(2) give rise to false-claim liability when reimbursement claims made | Without adequately pleaded §17755(2) violations, false-claim claims fail | Because §17755(2) violations were not adequately pleaded, derivative HCFCA/MFCA claims fail; court declines to decide broader questions as unnecessary |
Key Cases Cited
- Malpass v. Dep’t of Treasury, 494 Mich 237 (statutory interpretation principles)
- In re MCI Telecom Complaint, 460 Mich 396 (avoid constructions rendering statute surplusage)
- Spiek v. Dep’t of Transp, 456 Mich 331 (standards for MCR 2.116(C)(8) dismissal)
- Cooper v. Auto Club Ins. Ass’n, 481 Mich 399 (fraud proof standards referenced re: pleading)