Author: WorkCompAcademy

A legal battle has pitted a major national insurer and its pharmacy benefit manager (PBM) against each other in dueling legal actions in litigation that seeks class action status that could include tens of thousands of claimants.

Anthem is one of the nation’s largest health insurers with more than 38 million members. Express Scripts handled more than 175 million claims for Anthem in 2015 alone, according to the complaint.

The saga starts when Anthem sued Express Scripts last March, accusing it of excessive pricing and operational failures. It also sought the right to terminate its 10-year contract with Express Scripts, which began in 2009.

Express Scripts was contracted as Anthem’s exclusive provider of PBM services for Anthem-administered health insurance plans for a ten year period. Part of the agreement was a “periodic pricing review” to ensure that Anthem was receiving competitive benchmark pricing for drugs. However, when Anthem engaged Health Strategy, LLC. as a private consultant to conduct a comprehensive market analysis Anthem discovered that Express Scripts did not provide competitive benchmark pricing.

Based on the Health Strategy’s analysis, ESI’s current pricing to Anthem exceeded competitive benchmark pricing by more than $3 billion annually, and $13 billion over the remaining term of the Agreement. This was the basis of the March Anthem v Express Scripts litigation.

In its counterclaims against Anthem, Express Scripts said the insurer rejected several proposals to renegotiate prices. In addition, Express Scripts’ legal document says Anthem was offered a choice of “less money up front but lower pricing” or a bigger upfront payment “with higher pricing for Express Scripts’ services.”

It chose the higher prices over the course of the contract in exchange $4.6 billion more in upfront fees, according to the PBM’s counterclaim. That money, Express Scripts’ documents allege, was then used by Anthem to buy back its own stock, rather than passing it along to health plan members. The stock buyback “applied upward pressure to Anthem’s stock price, thereby enriching shareholders and management,” the filing alleges.

Two months later, two health plan participants sued both companies under the Employee Retirement Income Security Act challenging Express Scripts’ alleged overbilling.

Express Scripts Inc. and Anthem Inc. are accused in a proposed class action of breaching their ERISA fiduciary duties by entering into the 10-year, multibillion-dollar prescription-drug agreement that caused plan participants to overpay for benefits ( Burnett v. Express Scripts, Inc. , S.D.N.Y., No. 1:16-cv-04948, complaint filed 6/24/16 ). “This action seeks to recover losses suffered by the plaintiffs…who overpaid and continue to overpay for the portions of the costs of prescription drugs…they are responsible for paying as plan participants,” says the lawsuit.

Express Scripts spokesman David Whitrap said the firm denies “the allegations and will defend ourselves vigorously.” Anthem, too, denied the allegations and said it would fight the charges. However, the “denied” allegations echo those in Anthem’s March lawsuit against Express Scripts, and counterclaims filed shortly thereafter by Express Scripts against Anthem.

The court has not yet decided if the suit will have class action status.

The federal judge has dismissed two of the six counterclaims that Express Scripts raised in Anthem $15 billion lawsuit. In a decision recently made public, U.S. District Judge Edgardo Ramos in Manhattan dismissed Express Scripts’ claim that Anthem breached an implied covenant of good faith and fair dealing, saying it duplicated a breach of contract claim. He also dismissed an unjust enrichment claim filed by Express Scripts.

Express Scripts has contracts with insurers and other administrators of workers’ compensation benefits in California. It is unclear if any of Anthem’s allegations apply to any of the California workers’ compensation pharmacy benefit contracts.

A Maine woman has filed suit in federal court against a California security services firm, saying the company retaliated against her when she complained about allegedly illegal acts being committed by one of its executives, Ousama Karawia.

Karawia was convicted in Los Angeles in 2012 for grand theft, insurance fraud and possession of an assault weapon for offenses committed at a security service he co-owned at the time that had provided security for sites in California and the Statue of Liberty in New York.

He was found guilty in 2012 of setting up a shell company to hide the true number of his employees as a way to avoid paying higher workers’ compensation premiums.

The trial court sentenced Karawia to five years in state prison on the fraud by misrepresentation count, suspended execution of that sentence, and placed him on probation for a period of five years on the condition that he serve 240 days in custody, which could be served by electronic monitoring.

According to the report in the Portland Press Herald, Pamela Treadwell, who worked for Vescom from 1988 until she resigned in March 2014, said in court documents that many of the problems began when Vescom, her employer, hired a man named Ousama Karawia to help with management of the firm.

Vescom is a part of Worldwide Sourcing Group, or WWSG, which also owns the security firms Vets Securing America, American Guard Service and Professional Building Maintenance, a property management company. The company says it is one of the largest privately owned security firms in the country.

Vescom had an office in Hampden Maine that has since been closed, and the company is now based in California. Treadwell’s lawsuit was filed in Maine state court and subsequently moved to the U.S. District Court in Portland because Vescom is located out of state.

According to the 2017 lawsuit, Karawia allegedly committed insurance fraud while at Vescom by getting a policy that covered employees of WWSG’s other companies at a low rate, but using Vescom’s claims history rather than the higher claims rate of the other companies.

Treadwell said in the lawsuit that she told the company’s owners that Karawia was getting kickbacks from the insurer and that having him involved in the company ran afoul of state licensing regulations that bar felons from having management positions in a security firm. Karawia had of course been convicted in the above California criminal case before he was hired at Vescom, and his appeal of his sentence was turned down by the California Court of Appeal in 2014.

After forwarding those concerns to the company’s owners, the lawsuit claims, Treadwell was shunned by the top management in the company and told she had to pay for insurance coverage for her husband on her employer-provided health care policy at a cost of $7,800 a year.

Finally, Karawia moved money out of the company’s payroll account, meaning that employees’ checks would bounce, according to the lawsuit. Treadwell said Karawia reminded her that as the company vice president, her name was on the checks, suggesting she might be liable if they bounced.

At that point, Treadwell said she resigned so as not to be implicated in the check-bouncing and accused of submitting false documents to state regulators.

An amendment that extends the deadline to file for the Return-to-Work Supplement Program (RTWSP) has been approved by the Office of Administrative Law (OAL) and filed with the Secretary of State, effective March 20, 2017.

The regulation amendment extends the deadline to file for RTWSP benefits for certain individuals who received the Supplemental Job Displacement Benefit (SJDB) voucher between April 13, 2015 and December 1, 2015, and who may not have received notice of their eligibility to apply for the RTWSP benefit.

The amendments to 8 CCR section 17304 are shown below with new language underlined and deleted language struck through:

(a) An application for the Return-to-Work Supplement must be received by the Return-to-Work Supplement Program within one year from the date the Voucher (DWC-AD Form 10133.32 (SJDB) Rev: 10/1/15, or later version) was served on the individual.

(b) Notwithstanding subdivision (a) of this section, an application for the Return-to-Work Supplement from any individual who was issued a Voucher prior to December 1, 2015, for an injury occurring on or after January 1, 2013, must be received by the Return-to-Work Supplement Program no later than or within one year from the effective date of this subdivisionese regulations, whichever is later.

Applicants who were previously denied due to the eligibility deadline due to the eligibility deadline do not need to reapply. Their case will be reopened, reviewed, and a new determination made within 60 days.

The amended regulations can be found on the DIR website.

A CWCI analysis of the California workers’ comp independent medical review (IMR) process used to resolve medical disputes finds that in 2016, IMR physicians once again upheld about 90% of utilization review (UR) physician’s modifications or denials of treatment, yet IMR volume continued to grow, climbing 6.5% last year.

The California Workers’ Compensation Institute (CWCI) analysis is based on a review of data from 477,045 IMR decision letters issued in 2014, 2015, and 2016 in response to applications submitted to the state after a UR physician modified or denied a requested medical service.

State lawmakers who included IMR in the 2012 workers’ comp reforms expected the process would reduce workers’ comp treatment disputes once doctors, attorneys and other participants came to understand which services could be approved because they meet evidence-based medicine standards. Three years in, however, IMR volume is at a record high, as the Division of Workers’ Compensation reports there were 10,477 more cases in 2016 than in 2015.

The 2016 IMR outcomes data show that IMR physicians upheld the UR doctor’s modification or denial of a requested service 91.2% of the time, which was up from an 88.4% uphold rate in 2015 and matched the rate noted in 2014.

The mix of services reviewed by IMR physicians in 2016 showed little change from the two prior years, as prescription drug requests (28.5% of which were for opioids) again accounted for nearly half of all IMRs, with UR modifications or denials of pharmaceutical requests upheld 92.5% of the time.

Notably, requests for compounded drugs (typically gels or creams) did represent a declining share of the 2016 prescription drug IMRs, as they fell from 8.0% of the 2015 determinations to 6.2% last year, which may have to do with their consistently low IMR overturn rate (IMR physicians deemed them not medically necessary 99% of the time in 2014, 2015, and 2016).

Requests for physical therapy, injections and durable medical equipment together represented about 24% of the 2016 IMRs, while no other medical service category accounted for more than 5% of the disputed requests.

Among the medical service categories, uphold rates in 2016 ranged from 78.9% for evaluation and management services (primarily referrals for consultations) to 93.6% for acupuncture.

As in the prior 2 years, the analysis found that most of the disputed medical services that went through IMR in 2016 were requested by a small number of physicians. The top 10% of physicians named in the 2016 IMR decision letters (1,248 physicians) accounted for 85% of the disputed service requests, while the top 1% (125 providers) accounted for 44%.

Significant geographic variation was again evident as well, as 32.8% of the IMR decision letters were addressed to Los Angeles County recipients even though the region only accounted for 23.6% of all workers’ comp medical services in the state.

IMR volume also was disproportionately high in the Bay Area, which accounted for 20.1% of the IMR letters vs. 15.2% of the medical services; while less populated regions of the state had a disproportionately small share of the IMRs, as did the Inland Empire, Orange County and San Diego.

A complete analysis of the latest IMR results has been released in a CWCI Spotlight Report, “Independent Medical Review Decisions: January 2014 Through December 2016.”

This January, the city of Everett, in Washington filed a first-of-its-kind lawsuit against Purdue Pharma alleging the drug maker “supplied OxyContin to obviously suspicious physicians and pharmacies,” ultimately failing “to prevent the illegal diversion of OxyContin into the black market.”

While other suits against the company by states and municipalities have accused Purdue Pharma of deceptive marketing – allegedly playing up OxyContin’s effectiveness while playing down its addictiveness – Everett’s lawsuit is the first to claim the company knew its drugs were being diverted and did nothing to stop it.

In particular, the complaint outlines a drug ring that began with a sham clinic in Los Angeles and ended with a kingpin running OxyContin on the streets of Everett. The unravelling was detailed in a Los Angeles Times investigation that triggered the idea for Everett’s lawsuit.

The so-called Los Angeles pill mill was ultimately shut down and the cadre of physicians, pharmacists, and dealers that kept it churning were prosecuted.

In Everett, Washington, the jail is overflowing with addicts, the detox facility is set to double in size, and the city spends a fortune clearing its streets and parks of needles and tiny plastic bags.Those are the hallmarks of a heroin epidemic that began, city officials said, as a crisis dating back to the late 2000s that involved different drugs: opioid prescription painkillers.

Nearly a decade after the opioid onslaught, Everett is still struggling with the cost. And now the city wants the company that manufactured OxyContin to pay the bill.

Key to the complaint are internal Purdue emails outlined by the Los Angeles Times, including a 2009 excerpt from an exchange between the company’s compliance director and a sales manager who had become suspicious of the number of OxyContin prescriptions traced back to the clinic’s doctors.

After paying the clinic a visit, the sales manager wrote that “the line was out the door, with people who looked like gang members. I feel very certain that this is an organized drug ring.”

Purdue Pharma disputes the allegations in the lawsuit. In a statement to NBC News, the company said the city “paints a flawed and inaccurate portrayal of events that led to the crisis in Everett.”

The company said it has been a leader in developing abuse-deterrent medications, “which the FDA and National Institute on Drug Abuse have said are making a difference in the fight against abuse.” The company also said that OxyContin accounts for less than 2 percent of all opioid prescriptions in the United States.

The first Oxycontin lawsuit to successfully procure a settlement came in 2007. The federal Oxycontin lawsuit alleged that the company had fraudulently encouraged over-prescription of the drug.This Oxycontin lawsuit distributed $130 million to victims of Oxycontin addiction. The “settlement” of the civil case was however part of a package settlement of criminal charges also pending against the company, and may not have been accomplished otherwise.

Private Oxycontin lawsuits concerning side effects have not been widely successful; however, a large number of Oxycontin lawsuits were settled out-of-court.

Santa Clara and Orange counties filed a case in 2015 in Orange County Superior Court. They alleged that Purdue Pharma, Cephalon, Janssen Pharmaceuticals, Endo Health Solutions and Actavis violated California’s false advertising and unfair competition laws and created a public nuisance. The case was placed on hold in 2015 pending the outcome of FDA investigations that were underway at the time.

Chicago sued Teva Pharmaceuticals, Purdue Pharma Inc. and other drugmakers in 2014, saying they misled doctors and the public about the addictive nature of opiates and pushed prescriptions despite known dangers of addiction. A defense request for a stay order pending FDA investigations was denied in September 2016, and the Chicago case is still active.

The case is City of Chicago v. Purdue Pharma LP et al., case number 1:14-cv-04361, in the U.S. District Court for the Northern District of Illinois. The current federal court docket shows the case to be in the discovery stage with 439 documents filed in the case so far. The Third Amended Complaint filed on October 25, 2016 contains 341 pages of specific allegations against the defendant drugmakers (not counting exhibits) and reads like an organized crime fiction novel laced with intrigue. The information in this document would certainly steer a competent subrogation lawyer in the right direction to find evidence to make a case.

The outcome of these pending cases, and certainly more to follow, will weigh heavily on the answer to the question about the subrogation potential against opiate drugmakers for recovery of the costs of some of our most costly and protracted injury claims.