Client Alert – Compounding Pharmacy Turns the Table on Insurers, Files Proposed Class Action

Oct 19, 2018
  • FisherBroyles News
  • Health Care

In a rather novel approach to an ongoing issue with health insurance coverage for compounded pain creams, mail-order pharmacy Excel Pharmacy Services LLC (Excel) has filed a complaint in a Pennsylvania state court alleging that Liberty Mutual Insurance Co., (Liberty) violated the Pennsylvania Workers’ Compensation Act (WCA) and the Unfair Insurance Practices Act (UIPA) by refusing to cover the cost of the creams. The proposed class action includes approximately 2,000 pharmacies across Pennsylvania and seeks a declaratory judgment from the court, “establishing that Liberty Mutual’s systematic and continuing course of conduct violates the WCA and the UIPA.”

Excel asserts that it has attempted to resolve disputes through the workers’ compensation system, but that Liberty has still refused to pay for the prescriptions, or has delayed payments to the pharmacies, even when ordered to cover the prescription costs by workers’ compensation hearing officers, specifically:

Liberty Mutual has failed to comply with the provisions of the WCA and has instead made unilateral and unsupported decisions to pay less than the full amounts of reimbursement to Excel (or to simply not pay at all). When Liberty Mutual does attempt to justify their behavior along these lines, their stated reasons do not comply with the WCA, and are vague, contradictory, and/or inapposite in the context of Excel’s reimbursement requests. Additionally, Liberty Mutual’s payment patterns appear to be random. As an example, Defendants may have reimbursed Excel for the initial distribution of pharmaceutical products, and then, without explanation, refuse to reimburse Excel for refills of the same prescriptions, only to later reimburse Excel without any intervening action.

Excel argues that the behavior described above and its inability to collect monies owed under existing WCA administrative procedures undermines the WCA itself, and that without declaratory action through the court, “the enforcement mechanisms in the WCA would be rendered futile.”

Liberty, for its part, had already filed suit in Pennsylvania last year against a number of pharmacies and doctors alleging that they conspired to overcharge the insurer for compounded pain creams – creams that Liberty asserted were being mass produced and were not individually tailored to the needs of each patient. The number of compounded pain cream prescriptions, had skyrocketed in recent years, as physicians sought alternatives to opioids for pain management. Liberty, however, asserts in its suit that a collection of pain-management doctors, pharmacists and others formed “illegal, collusive” relationships in order to exploit weaknesses in Pennsylvania’s workers’ compensation system to bilk the insurer of nearly $5 million.

The dueling lawsuits present an apt illustration of the competing interests in the coverage of pain medications for patients under state workers’ compensation acts. Some states have attempted to address the issues legislatively. Ohio, California, and New York, for example, have instituted formularies under their workers’ compensation systems to address prescription costs, as well as issues associated with opioid addiction. Similar legislation was proposed in Pennsylvania in 2017 but was not enacted.

The Excel suit was filed on October 11, 2018, and Liberty has yet to file its response. The FisherBroyles Pharmacy and Health Care Law team will continue to track the competing Liberty and Excel suits as they make their way through the courts in Pennsylvania. Questions may be directed to any of the following attorneys:

Brian Dickerson, FisherBroyles Partner
Brian E. Dickerson
[email protected]

Anthony Calamunci, FisherBroyles Partner
Anthony Calamunci
[email protected]

Nicole Waid, FisherBroyles Partner
Nicole Hughes Waid
[email protected]

Amy Butler, FisherBroyles Partner
Amy Butler
[email protected]

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