The State of Alaska v. Express Scripts, Inc.The State of Alaska v. Express Scripts, Inc.
ORDER ON PARTIAL MOTION TO DISMISS AND MOTION FOR PARTIAL STAY
Before the Court are two motions filed by Defendants Express Scripts, Inc., Express Scripts Administrators, LLC, Medco Health Solutions, ESI Mail Pharmacy Services, and Express Scripts Pharmacy, Inc. (collectively, “Express Scripts“). At Docket 77 is Express Scripts’ Partial Motion to Dismiss for Failure to State a Claim, to which Plaintiff State of Alaska (“State“) filed a response in opposition at Docket 84, and Express Scripts replied at Docket 86.1 At Docket 83 is Express Scripts’ Motion for a Partial Stay, which the State opposed at Docket 85. Express Scripts replied at Docket 87.2 Oral argument on both motions was held on September 10, 2024.3 For the reasons set forth below, the partial motion to dismiss is DENIED IN PART
BACKGROUND
The State brings this action against Express Scripts for its alleged role in the opioid crisis. The facts, as pled in the State‘s Second Amended Complaint and taken as true for the purposes this partial motion to dismiss, are as follows:
Express Scripts is a Pharmacy Benefits Manager (“PBM“), an administrator hired by third-party payors, such as government entities, insurers, and employers, to administer prescription drug programs.4 In its capacity as a PBM, Express Scripts designs prescription drug benefits programs and creates formularies, or lists of prescription medications that set the terms under which pharmaceutical drugs are covered and reimbursed under health plans.5 Additionally, Express Scripts controls a network of retail pharmacies, including pharmacies in Alaska.6 And it independently dispenses prescription medications through its mail-order pharmacy.7
The State alleges that Express Scripts substantially contributed to the opioid epidemic in Alaska in its capacity as a PBM, a research provider, and a mail-order pharmacy.8 First, it asserts that Express Scripts colluded with opioid manufacturers to increase prescription opioid sales in Alaska by favorably placing certain opioids on its formularies and by not implementing utilization management (“UM“) practices that would have reduced the illegitimate use and dissemination of these drugs.9 Second, the State alleges that, by virtue of Express Scripts’ position as a middleman in the prescription drug market, it collected vast troves of data regarding prescribing practices and patient drug use and, despite indications of opioid abuse and diversion in this data, failed to take any steps to address these issues.10 Additionally, the State asserts Express Scripts aided opioid manufacturers in misleading marketing efforts.11 Finally, the State alleges that Express Scripts dispensed opioids from its mail-order pharmacy to high-volume prescribers despite data that indicated that prescriptions from these providers were not written for medically legitimate purposes.12
On August 31, 2023, the State commenced this action in Alaska Superior Court and asserted two state law claims—one for public nuisance and one for violations of the Alaska Unfair Trade Practices and Consumer Protection Act (“UTPA“).13 Express Scripts then removed the suit to this Court on the basis of federal officer removal and federal question jurisdiction.14 The State then amended its complaint to disclaim liability in connection with Express
Express Scripts moved to dismiss the First Amended Complaint (“FAC“) for failure to state a claim.16 After briefing and argument, the Court granted in part and denied in part that motion to dismiss on May 22, 2024.17 The Court held that the State may maintain its public nuisance and UTPA state law claims insofar as they do not implicate Medicare Part D plans, because Medicare Part D preempts the State‘s claims with respect to those plans.18 The Court also denied the State‘s oral motion to stay the case pending resolution of an Alaska state court appeal.19
While the motion to dismiss the FAC was pending, the State moved to amend its complaint to add an additional claim for violation of the federal Racketeer-Influenced and Corrupt Organization Act (“RICO“),
Express Scripts now moves to dismiss the State‘s RICO claim for failure to state a claim,23 and also moves, as the State did previously, for a partial stay of this action pending resolution of a similar case before the Alaska Supreme Court.24
LEGAL STANDARDS
I. Dismissal for Failure to State a Claim
A party may seek dismissal under
II. Stay
“[T]he power to stay proceedings is incidental to the power inherent in every court to control the disposition of the causes on its docket with economy of time and effort for itself, for counsel, and for litigants.”27 “A trial court may, with propriety, find it is efficient for its own docket and the fairest course for the parties to enter a stay of an action before it, pending resolution of independent proceedings
In deciding whether to grant a stay, the Ninth Circuit instructs courts to weigh “the competing interests which will be affected,” which include (1) “the possible damage which may result from the granting of a stay“; (2) “the hardship or inequity which a party may suffer in being required to go forward“; and (3) “the orderly course of justice measured in terms of the simplifying or complicating of issues, proof, and questions of law which could be expected to result from a stay.”29 “The proponent of a stay bears the burden of establishing its need”30 and “must make out a clear case of hardship or inequity in being required to go forward, if there is even a fair possibility that the stay . . . will work damage to some one else.”31 “Generally, stays should not be indefinite in nature” and “should not be granted unless it appears likely the other proceedings will be concluded within a reasonable time.”32
DISCUSSION
I. Motion to Dismiss the State‘s RICO Claim
Express Scripts puts forward three arguments for dismissal of the State‘s RICO claim. Express Scripts first contends that the State‘s request for injunctive relief is precluded by Ninth Circuit precedent. Second, Express Scripts contends that the State‘s RICO claim for damages is time-barred. And third, Express Scripts contends that the State fails to plausibly allege the elements of a RICO claim, including RICO‘s statutory standing requirements. The Court addresses each contention in turn.
A. Ninth Circuit Precedent Bars the State‘s Claim for Equitable Relief Under RICO
As part of its RICO claim, the State seeks “all legal and equitable relief as allowed by law, including . . . equitable and/or injunctive relief.”33 Express Scripts contends that this request for equitable relief is barred by Ninth Circuit precedent; specifically, Express Scripts asserts that Religious Technology Center v. Wollersheim bars civil RICO claims that seek any form of equitable relief by plaintiffs other than the U.S. Attorney General.34 In response, the State urges the Court to adopt the view that Wollersheim addressed only whether private plaintiffs may seek injunctive relief, leaving other forms of equitable relief still available to private plaintiffs.35
In Wollersheim, the Ninth Circuit analyzed the text, structure, and legislative
Although Wollersheim only expressly involved injunctive relief, its reasoning applies with equal force to all forms of equitable relief. The statutory text of
Accordingly, the Court GRANTS Defendants’ partial motion to dismiss as it pertains to the State‘s RICO claim for equitable relief.
Because the State cannot seek equitable relief under RICO, the remaining portion of the State‘s RICO claim is a claim for damages and is subject to a four-year statute of limitations.44 The question of when a RICO damages claim begins to accrue is governed by the “injury discovery” rule.45 Under this rule, RICO claims accrue when the plaintiff either knows or should have known of its injury.46 In other words, the four-year RICO limitations period is triggered by the actual or constructive “discovery of the injury, not discovery of the other elements of a claim.”47
The parties here agree that the “injury discovery” rule applies, but disagree about whether application of the rule renders the State‘s RICO damages claim time-barred.48 Express Scripts points to the State‘s allegations that opioid-related deaths rose steadily over the past two and a half decades, as well as public announcements by Alaska‘s governor in 2017 and the Centers for Medicare and Medicaid Services in 2011 about the harmful proliferation of opioids, to support its contention that “the State discovered its alleged injury over a decade ago.”49 Express Scripts also asserts that “the State‘s prior opioid litigation confirms the State was on notice of its alleged injuries by at least October 2017,” when the State filed a lawsuit against Purdue claiming injuries based on the proliferation of prescription opioids.50
In response, the State invokes three doctrines: nullum tempus, the separate-accrual rule, and the equitable tolling doctrine of fraudulent concealment.51 The State further argues that resolving a statute of limitations defense involves fact questions that cannot be decided on a Rule 12(b)(6) motion,52 to which Express Scripts replies that “there are no ‘disputed facts’ regarding the State‘s knowledge” of its injuries, and that dismissal at this stage is warranted because “the running of the statute is apparent on the face of the [State‘s] complaint.”53
In deciding a motion to dismiss based on the statute of limitations, a court may only grant the motion “if, accepting all well-pled facts in the complaint as true, ‘it appears beyond doubt that the plaintiff can prove no set of facts that would establish the timeliness of the claim.‘”54 Here, the State does not concede that it knew of its injury more than four years before it filed its initial complaint,55 but in its briefing
The Court agrees with Express Scripts that the SAC, taken as true for the purposes of this motion, establishes that the State knew of at least some of its injuries before August 2019.57 Take, for example, the State‘s alleged injury of the “[c]osts associated with providing police officers, firefighters, and emergency and/or first responders with naloxone, an opioid antagonist used to block the deadly effects of opioids in the context of overdose.”58 The Complaint alleges that in the one-year period “from June 1, 2017 to May 31, 2018, Emergency Medical Services and law enforcement administered 550 doses of Narcan, [(a brand of naloxone),] and Project Hope, a state-wide program to get Narcan into the hands of heroin users, distributed 7,082 kits in Alaska.”59 This allegation establishes that the State was purchasing naloxone, and therefore knew or should have known that it was incurring costs associated with those purchases, before May 31, 2018. The Court also agrees with Express Scripts that the State‘s complaints against opioid manufacturers and distributors, which the Court may consider on this motion to dismiss, assert many of the same opioid-related harms alleged here and show the State‘s knowledge of its injuries as early as 2017.60 The Court thus turns to each of the State‘s arguments for extending the statute of limitations in turn.
1. Nullum Tempus
First, the State contends that the doctrine of nullum tempus excuses the State, as a sovereign, from the operation of the RICO statute of limitations because Congress has not “explicitly subjected” states to RICO‘s statute of limitations.61 Express Scripts, on the other hand, asserts that nullum tempus is a privilege that “the sovereign grants itself to excuse non-compliance with its own statutes of limitation,” and therefore does not excuse the State from compliance with a ”federal statute of limitations.”62
The Court finds persuasive Express Scripts’ argument that the doctrine does not—and, under the Supremacy Clause, could not—insulate the State from statutes of limitations applicable to federal laws.63 Moreover, even if nullum tempus
2. Separate Accrual Rule
Second, the State contends that its RICO claim is timely pursuant to the separate accrual rule. When the Ninth Circuit adopted the “injury discovery” rule in Grimmett v. Brown, it retained the “separate accrual rule” as a second part of the RICO accrual analysis.66 The separate accrual rule “provides that a new cause of action accrues for each new and independent injury, even if the RICO violation causing the injury happened more than four years before.”67 For the separate accrual rule to apply, a plaintiff must identify a “new overt act[]” within the limitations period, which must (1) “be a new and independent act that is not merely a reaffirmation of a previous act” and (2) “inflict new and accumulating injury on the plaintiff.”68
Because the State fails to identify which, if any, of Express Scripts’ acts constitutes a new overt act inflicting a new injury within the limitations period, the Court finds that the separate accrual rule does not apply. The SAC contains specific, dated allegations of certain acts by Express Scripts, but those allegations all pre-date August 2019 and therefore fall outside of the four-year limitations period.69 And because the State fails to identify a “new and independent act” after August 2019, it does not (and logically cannot) point to any “new and accumulating injur[ies]” caused by such an act.70 Nor does the State‘s allegation that Express Scripts’ injurious conduct is “ongoing” warrant application of the separate accrual rule, as the State
3. Fraudulent Concealment
The State also contends that its RICO damages claim is tolled under the doctrine of fraudulent concealment. “Equitable tolling doctrines, including fraudulent concealment, apply in civil RICO cases.”73 Unlike the injury discovery rule, which runs from the discovery of the injury, fraudulent concealment applies when the defendant “actively misled” the plaintiff and the plaintiff had “neither actual nor constructive knowledge of the facts constituting his cause of action despite her due diligence.”74
Although allegations of fraudulent concealment—like all allegations of fraud—must be pled with particularity, “it is generally inappropriate to resolve the fact-intensive allegations of fraudulent concealment at the motion to dismiss stage.”75 And the Ninth Circuit has recognized that, “in cases of corporate fraud, plaintiffs will not have personal knowledge of all the underlying facts,” such that Rule 9(b)‘s particularity requirement “may be relaxed.”76
Consistent with these principles, the Court finds that State has adequately pleaded its fraudulent concealment allegations, as the State‘s allegations give “defendants notice of the particular misconduct which is alleged to constitute the fraud charged so that they can defend against the charge and not just deny that they have done anything wrong.”77 The
(1) manipulating and distorting public information, knowledge, and facts; (2) misrepresenting its role in the pharmaceutical market as promoting safe use and appropriate opioid dispensing; (3) assuring the public and governmental authorities that it was complying with its obligations and was acting to prevent diversion and drug abuse; (4) hiding the true nature of its relationships with the Opioid Enterprise Manufacturers; (5) failing to make public or otherwise produce nonpublic information, over which Express Scripts had exclusive possession, dominion, and control, that would have revealed the truth; (6) entering into overly broad confidentiality agreements with entities in the supply chain with whom it contracted; and (8) by deliberately and fraudulently concealing the truth.79
These allegations, if proven, could establish that Express Scripts engaged in wrongful concealment of the facts underlying the State‘s claim for relief.
of its injuries does not preclude tolling of its claimsapprovingly discussed In re Beef Industry Antitrust Litigation,88 which held that the filing of a similar lawsuit that received “widespread industry publicity . . . was ‘not as a matter of law tantamount to actual or constructive knowledge of their claim’ without awareness of ‘some evidence tending to support it.‘”89
The State here alleges that it “did not and could not have known that Express Scripts developed its national formularies based on profit and rebates, not based on the safety and efficacy of the medications as they claim,” until documents related to Express Scripts were produced in the national multidistrict litigation in the Northern District of Ohio and other opioid cases.90 According to the Complaint, “[t]hese documents—and the facts they contain—have never before been made public, nor have they ever before been in Plaintiff‘s possession, and not otherwise available to Plaintiff before being produced in discovery.”91 It is thus plausible that the State did not discover—and could not have discovered, given Express Scripts’ alleged fraudulent misrepresentations—evidence to support its case against Express Scripts until its counsel received discovery in the MDL.92 Because it does not “appear[] beyond doubt that the plaintiff can prove no
For the reasons above, the Court rejects Express Scripts’ position that the State‘s RICO damages claim is time-barred on its face. Express Scripts’ arguments as to the nonapplicability of fraudulent concealment are better reserved for summary judgment or for trial.94 The partial motion to dismiss is DENIED with respect to the issue of timeliness.
C. The State Has Plausibly Alleged the Elements of a Civil RICO Claim, Including Statutory Standing
There are two parts to a private civil RICO claim. The civil RICO violation is defined in
Express Scripts asserts that the State fails to plausibly allege both elements of RICO standing—namely, (1) injury to its business or property and (2) proximate causation.98 With respect to the substantive elements, Express Scripts asserts that the State fails to adequately plead (3) a RICO enterprise, (4) Express Scripts’ participation in the enterprise‘s affairs, and (5) predicate acts of racketeering. The Court addresses each assertion in turn.99
1. Injury to Business or Property
To meet RICO‘s statutory standing requirement, a civil RICO plaintiff must allege a cognizable injury to its “business or property.”100 The SAC pleads 13 types of damages, which the Court groups into the following five categories: (1) losses caused by purchasing or paying reimbursements for opioids that the State would not otherwise have paid for; (2) extraordinary costs to provide additional public services; (3) forced purchases of naloxone; (4) diminished property values; and (5) lost tax revenue.101
The Court noted that the law “commonly distinguishes between the status of a governmental entity acting to enforce the laws or promote the general welfare and that of a governmental entity acting as a consumer or other type of market participant.”105 Applying that distinction, the Ninth Circuit concluded that “a governmental entity [is not] ‘injured in its property’ when its spends money to provide public services, given that those services are based on legislative mandates and are intended to further the public interest.”106 The Circuit Court further held that the county did not have a property interest in the public services themselves.107
The State responds that the expenses at issue in this case are “extraordinary” and not the sort of typical government expenditures addressed by Canyon County.108 Judge Polster accepted this distinction in the national opioid MDL.109 Although Judge Polster is not bound by the Ninth Circuit‘s decision, he nonetheless distinguished Canyon County on the basis that “the scope and magnitude of the opioid crisis—the illicit drug market and attendant human suffering—allegedly created by Defendants . . . forced Plaintiffs to go far beyond what a governmental entity might ordinarily be expected to pay to enforce the laws or promote the general welfare.”110 Judge Polster interpreted Canyon County to limit what a public entity can recover under RICO, but not to bar recovery for the extraordinary expenses—of a different quantity and quality than normal
District courts within the Ninth Circuit have reached varying conclusions on this issue. In City and County of San Francisco v. Purdue Pharma, Judge Breyer rejected the distinction between ordinary and extraordinary government expenditures.112 He concluded that Canyon County established a bright line rule that “governmental entities cannot assert a RICO claim based on expenditures or services provided in their sovereign or quasi-sovereign capacities,” even if those expenditures are the result of an epidemic and of a scope far beyond typical government expenditures.113 Judge Breyer also rejected the City‘s contention that its purchases of naloxone, opioid screening equipment, training courses and materials for opioid disposal, and buprenorphine were distinct from the services at issue in Canyon County, and thus he held that those purchases were not recoverable.114 Judge Breyer did find that the City had adequately pled injury as to “damage to the City‘s physical property, such as its main library, and losses incurred in the consumer marketplace,” as well as “damage to the City‘s [commercial parking lot and advertising] businesses in the form of lost revenue and clean-up costs.”115
In a similar case in the same district, Judge Orrick deferred determining the precise categories of damages available to government-entity plaintiffs for RICO claims arising from the youth vaping epidemic at the motion to dismiss stage.116 The government-entity plaintiffs alleged that they had “suffered damage directly to their physical property“—namely, hazardous waste was wrongfully disposed of and littered on their property and they had to install e-cigarette detectors, cameras, and anti-vaping signs around their property.117 Judge Orrick found that these allegations of injury to the plaintiffs’ properties “suffic[ed] to confer [RICO] standing.”118 And he noted that, with the statutory standing question resolved, the scope of RICO damages would be “better determined on a full, evidentiary record” after discovery.119
This Court agrees with Judge Breyer that Canyon County does not support a distinction between ordinary and extraordinary spending on government services.120 As Express Scripts points out, many of the costs that the State contends are “extraordinary” mirror those that the Ninth Circuit rejected in Canyon County.121
While Canyon County bars RICO recovery for the costs of providing government services even when those costs are extraordinary, the Court also reads Canyon County to support a distinction between spending on the provision of services by government personnel—including training expenses, salaries and wages, and other personnel costs—and other expenditures that the State is forced to undertake in the marketplace. Canyon County expressly addressed spending on government services provided by public servants,125 based on the following animating concern:
All government actions require the expenditure of money in this sense, insofar as the government acts through public servants who are paid for their services. If government expenditures alone sufficed as injury to property, any RICO predicate act that provoked any sort of governmental response would provide the government entity with standing to sue under § 1964(c)—an interpretation of the statute that we think highly improbable.126
Here, the State has alleged that Express Scripts’ conduct forced it to do more than simply spend more on government services provided by public servants. Most saliently, the State asserts that it incurred costs to purchase naloxone, “an opioid antagonist used to block the deadly effects of opioids in the context of overdose.”127 The Court finds no suggestion in the Canyon County record that the plaintiffs there sought to recover for this type of marketplace purchase.128 Indeed, this alleged injury—stemming from a commercial transaction with a third party—is categorically different from the general provision of government services. It is also distinct from other marketplace purchases that a government entity might make to support the provision of government services generally, such as the purchase of police cars. The State‘s marketplace purchases of naloxone relate exclusively to combating the opioid epidemic allegedly fueled by Express Scripts’ predicate acts of racketeering. These are not purchases precipitated simply by “greater demand” for “public services” of the type the State already provided.129 Rather, they are novel consumer expenditures the State has alleged were necessitated by Express Scripts’ conduct and intended to combat the effects thereof.
Other of the State‘s alleged injuries are also not clearly precluded by Canyon County, but additional discovery appears necessary to determine the contours of those injuries. The State‘s allegation that it suffered “[l]osses caused by purchasing and/or paying reimbursements for the Formulary & UM Enterprise Defendants’ prescription opioids, that [the State] would not have paid for or purchased but for the Formulary & UM Enterprise Defendants’ conduct”130 appears to describe costs that were allegedly fraudulently induced by Express Scripts and incurred by the State in its “capacity as an ordinary marketplace actor[].”131 This allegation, too, therefore appears to satisfy RICO‘s injury to business or property requirement, at least at the motion to dismiss stage of this case.132 And the State‘s allegation that it suffered “losses caused by diminished property values in neighborhoods where the opioid epidemic has taken root,” separate and apart from the State‘s allegations that it suffered losses from decreased tax revenue, creates the plausible inference that the State has been injured at its own property, which is sufficient for RICO standing.133 Whether decreased tax revenue is a cognizable RICO injury in the Ninth Circuit is less clear.134 In the absence of both briefing and discovery addressing these injuries,
Accordingly, Express Scripts’ motion to dismiss for lack of RICO injury is GRANTED IN PART insofar as the State seeks to recover for increased personnel costs for State employees and DENIED IN PART as to the remaining alleged injuries.
2. Proximate Cause
Express Scripts next maintains that the State has not alleged sufficient proximate cause. The proximate cause standard for RICO claims demands some “‘direct relation between the injury asserted and the injurious conduct alleged.‘”136 The Ninth Circuit has directed courts to focus on three non-exhaustive factors when considering whether a RICO injury is sufficiently direct: “(1) whether there are more direct victims of the alleged wrongful conduct who can be counted on to vindicate the law as private attorneys general; (2) whether it will be difficult to ascertain the amount of the plaintiff‘s damages attributable to defendant‘s wrongful conduct; and (3) whether the courts will have to adopt complicated rules apportioning damages to obviate the risk of multiple recoveries.”137 These factors are “not an elements test,” so “even if one factor tips in favor of [one party‘s position], the totality of the circumstances” can compel a court find in favor of the other party.138 When factual questions control the outcome of the analysis, the plaintiff “must be allowed to make their case through presentation of evidence.”139
Because the Court will defer deciding the scope of the State‘s recoverable RICO injuries until after discovery, and because the proximate cause inquiry scrutinizes the relationship between those injuries and the defendants’ conduct, the Court cannot yet determine whether proximate cause will be satisfied as to each of those injuries. In addition, even as to those injuries that the Court has found may be recoverable, such as the costs of purchasing naloxone, the proximate cause analysis turns on factual questions that cannot be resolved at the
Express Scripts urges the Court to instead adopt Judge Breyer‘s determination in San Francisco that the City failed to allege proximate cause in its case against opioid manufacturers.141 Notably, however, Judge Breyer‘s analysis was based on his view that the City‘s only cognizable injuries under Canyon County were damages to its physical property (such as the City library‘s toilet grinders) and its advertising and parking lot businesses. These limited injuries, Judge Breyer found, were not “surely attributable” to Defendants’ misconduct.”142 Instead, the City‘s injuries resulted from drug-users’ separate conduct of improperly discarding needles. The district court concluded that such “distinct third-party conduct severed any continuity stemming from Defendants’ predicate acts, making the relationship between those acts and the City‘s injury insufficiently direct.”143
As discussed above, this Court reads Canyon County‘s holding more narrowly than Judge Breyer and finds that more of the State‘s injuries are plausibly recoverable and warrant discovery. This Court‘s proximate cause analysis therefore is (and, at summary judgment, will be) based on a broader selection of harms than Judge Breyer‘s.144 The State will therefore be allowed to test its theory of causation following discovery.
Accordingly, the Court DENIES Express Scripts’ motion to dismiss the State‘s RICO claim based on proximate cause.
3. The Existence of a RICO Enterprise
Express Scripts directs its final set of arguments for dismissal at the substantive elements of a civil RICO claim. The first of these arguments is that the State has not plausibly alleged a RICO enterprise. To show the existence of an “association-in-fact” RICO enterprise, “plaintiffs must plead that the enterprise has (A) a common purpose, (B) a structure or organization, and (C) longevity necessary to accomplish the purpose.”145 “[T]he very concept of an association in fact is expansive.”146
The State alleges an “association-in-fact” enterprise composed of Express Scripts and manufacturers of prescription opioids including Allergan, Johnson &
As the State points out in response, the Complaint also alleges that the manufacturers cooperated with each other and with Express Scripts in various non-competitive ways to further the common purpose of loosening restrictions on the prescribing and dispensing of prescription opioids and collectively profiting as a result.149 This Court agrees with the MDL court that, although manufacturers “may have competed over the ever-mushrooming opioid market, that does not shield [Express Scripts] from allegations of racketeering activity in furtherance of a scheme to grow that market.”150 Nor does a profit motive negate a common purpose.151
Express Scripts next asserts that the alleged Formulary & UM Enterprise lacks the requisite structure because it is not “an entity separate and apart from the pattern of activity in which it is engages.”152 The State responds that the Complaint alleges relationships between Express Scripts and other enterprise members both through informal associations and through formal organizations such as the Pharmaceutical Care Management Association (“PCMA“), and that these relationships are sufficiently structured.153
The Court finds that the SAC sufficiently alleges a structure between members of the enterprise that is separate from the alleged pattern of racketeering activity itself.154 The PCMA allegedly “served as a conduit of information between the Opioid
Finally, as to this point, Express Scripts does not contest that the State‘s allegations of decades-long conduct show that the enterprise existed over a period of “longevity sufficient to permit [its] associates to pursue the enterprise‘s purpose.”158 Thus, the State has plausibly alleged a RICO enterprise.
4. Conduct or Participation in the RICO Enterprise
Express Scripts next contends that the State has not plausibly alleged that Defendants “conduct[ed]” or “participate[d]” in the RICO enterprise‘s affairs.159 “In order to ‘participate, directly or indirectly, in the conduct of such enterprise‘s affairs,’ one must have some part in directing those affairs.”160 In other words, the State must allege that “Defendants made decisions or knowingly carried out acts that helped to further the common purpose of the enterprise.”161 Express Scripts further contends—based primarily on out-of-circuit precedent—that a defendant‘s actions must be on behalf of the enterprise as opposed to its own business interest to trigger RICO liability.162 Even accepting this point as true, the State‘s allegations meet this bar.
The SAC alleges that opioid manufacturers “contracted and agreed with Express Scripts to coordinate unfettered formulary placement with no or limited [utilization management] measures regarding each opioid drug on Express Scripts’ standard formulary offerings, such that there would be as little impediment as possible to opioid prescribing and dispensing.”163 Express Scripts is alleged to have made formulary and utilization management decisions that contradicted their representations to the public and to their clients, as well as their contractual obligations,164 and therefore were made plausibly on behalf of the enterprise and its purpose as opposed to simply in Express Scripts’ business interests.165
The RICO element of racketeering activity requires predicate acts, which are set out in
The mail and wire fraud statutes are identical except for the method used to disseminate the fraud, and contain three elements: (A) the formation of a scheme to defraud, (B) the use of the mails or wires in furtherance of that scheme, and (C) the specific intent to defraud.167 A plaintiff must “plead the circumstances of the fraudulent acts that form the alleged pattern of racketeering activity with sufficient specificity pursuant to
Express Scripts contends that the State‘s allegations do not meet this heightened pleading standard because they do not show “the time, place, and specific content of the false representations” or the “identities of the parties to the misrepresentation.”169 But in complex fraud schemes, as alleged here, Rule 9(b) does not require a plaintiff to allege “all facts supporting each and every instance” of fraud; rather, it requires only “some level of specificity” such that defendants can defend against the fraud claims against them.170
In this case, the State has alleged the elements of mail and wire fraud with adequate specificity. The “scheme to defraud” alleged in this case is a scheme to defraud the public and others into expanding the prescription and dissemination of opioids by making false and fraudulent statements, representations, and concealing certain facts.171 The SAC identifies specific patterns of misrepresentations and alleges that the misinformation campaign was pursued collectively by the named members of the Formulary & UM Enterprise.172 These allegations are sufficient to put Express Scripts on notice of the fraud claims against them.
Moreover, the State alleges that Express Scripts violated the CSA,
Express Scripts points out that the CSA applies only to pharmacies.175 However, the Complaint alleges that three Express Scripts entities—ESI Mail Pharmacy Service, Inc., Express Scripts Pharmacy, Inc., and Medco Health Solutions, Inc. (the “mail pharmacy defendants“)—provide mail pharmacy services.176 The CSA therefore applies to these three defendant entities.
As to the mail pharmacy defendants, Express Scripts contends that the CSA criminalizes only the “knowing or intentional” dispensing of a controlled substance “except as authorized,”177 and that “the scienter requirement extends to authorization, meaning the defendant must ‘knowingly or intentionally’ dispense the drug in an ‘unauthorized manner,’ by intending to dispense drugs ‘outside the usual course of professional practice and without a legitimate medical purpose.‘”178 The State‘s Second Amended Complaint alleges as much: “Express Scripts’ mail order pharmacy dispensed massive amounts of branded and generic opioids without performing the requisite due diligence on prescriptions or refusing to fill prescriptions that could not be resolved through due diligence.”179 The State further alleges that Express Scripts failed “to report to DEA losses that occurred during the mail order delivery process” and that Express Scripts’ “employees generated invalid DEA registration numbers where it lacked registration numbers from pharmacists.”180 The Court finds these allegations sufficient to plausibly allege CSA violations, and by extension, additional predicate acts of racketeering by the mail pharmacy defendants.
II. Motion for Partial Stay
In its Motion for a Partial Stay, Express Scripts moves to stay discovery on the State‘s public nuisance and UTPA claims pending the outcome of the State‘s appeal in State of Alaska v. Walgreens Co., et al.181 Former Judge Kindred previously denied what was then the State‘s motion to stay,182 stating that:
Staying this case to await the outcome of [the Walgreens appeal] would significantly delay this case and only resolve one of several issues. Furthermore, the Alaska Supreme Court‘s ultimate decision in Walgreens is not likely to severely disrupt this litigation . . . There is the possibility that the Supreme Court affirms Judge Gandbhir‘s decision and undermines this Court‘s analysis of the public nuisance claim. If that occurs, the parties may have conducted some superfluous discovery. However, because each of the claims in this case stems from the same core set of facts, the Court expects that discovery as to the public nuisance claim will significantly overlap with the other two claims183 at stake and reduce the likelihood of unnecessary discovery.184
The Court‘s conclusion has not changed. A stay would delay this litigation, and that delay may be significant, as oral argument on the Walgreens appeal has only recently been heard.185 Any hardship that Express Scripts may suffer in being required to move forward with discovery on the State‘s public nuisance and UTPA claims is limited. As the parties jointly acknowledged in their Scheduling and Planning Conference Report, much of the discovery from Express Scripts in this case has been or will be produced in other active and ongoing opioids cases, and will need only to be re-produced or re-designated to be produced in this action.186 Express Scripts has also acknowledged that, beyond the discovery produced in other opioids cases, this case will require only “limited supplementation of the fact discovery record for matters directly related to Defendants’ operations in Alaska.”187 And because the Court will allow the State‘s RICO claim to proceed, the parties will need to engage in discovery related to that claim regardless of the outcome of the motion to stay and the outcome of the Walgreens appeal. Because of the overlapping nature of the facts underlying the State‘s claims, it will be most efficient if Alaska-specific supplementation related to the State‘s public nuisance and UTPA claims is allowed to proceed in tandem with discovery on the RICO claim.188 Allowing discovery to proceed in this case will also reduce the likelihood of any dispute about the State‘s participation in upcoming
In light of the minimal hardship or inequity to Express Scripts from this litigation proceeding, and the inefficiencies and potential for prejudice to the State that would result from a stay, Express Scripts’ Motion for Partial Stay is DENIED.
CONCLUSION
In light of the foregoing, Express Scripts’ Partial Motion to Dismiss at Docket 77 is GRANTED IN PART and DENIED IN PART as set forth herein, and Express Scripts’ Motion for a Partial Stay at Docket 83 is DENIED. The State‘s RICO claim is DISMISSED to the extent that it seeks equitable relief and damages for increased personnel costs for State employees. The State shall file either an amended complaint alleging additional facts in support of the application of the separate accrual rule or a notice that no amended complaint will be filed and that the State will proceed solely on its fraudulent concealment theory of timeliness within 14 days of the date of this order. Express Scripts shall file its answer within 14 days thereafter.
DATED this 10th day of March, 2025, at Anchorage, Alaska.
/s/ Sharon L. Gleason
UNITED STATES DISTRICT JUDGE