Case: 1:22-cv-01362 Document #: 1 Filed: 03/15/22 Page 1 of 50 PageID #:1
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`IN THE UNITED STATES DISTRICT COURT
`FOR THE NORTHERN DISTRICT OF ILLINOIS
`EASTERN DIVISION
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`CAREFIRST OF MARYLAND, INC., GROUP
`HOSPITALIZATION AND MEDICAL SERVICES,
`INC., CAREFIRST BLUECHOICE, INC., BLUE
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`CROSS AND BLUE SHIELD OF SOUTH
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`CAROLINA, BLUECHOICE HEALTHPLAN OF
`SOUTH CAROLINA, INC., LOUISIANA HEALTH
`SERVICE & INDEMNITY COMPANY, D/B/A
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`BLUE CROSS AND BLUE SHIELD OF
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`LOUISIANA, and HMO LOUISIANA, INC.,
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`Plaintiffs,
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`v,
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`WALGREEN CO. AND WALGREENS BOOTS
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`ALLIANCE, INC.,
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`Defendants.
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`COMPLAINT
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`Civil No.:
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`Jury Trial Demanded
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`Plaintiffs CareFirst of Maryland, Inc. (“CFMI”), Group Hospitalization and Medical
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`Services, Inc. (“GHMSI”), CareFirst BlueChoice, Inc. (“CareFirst BlueChoice”), Blue Cross and
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`Blue Shield of South Carolina (“BCBSSC”), BlueChoice HealthPlan of South Carolina, Inc.
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`(“BCHPSC”), Louisiana Health Service & Indemnity Company, d/b/a/ Blue Cross and Blue Shield
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`of Louisiana (“BCBSLA”), and HMO Louisiana, Inc. (“HMOLA”) (collectively, “Plaintiffs”)
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`bring this Complaint against Defendants Walgreen Co. and Walgreens Boots Alliance, Inc.
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`(collectively, “Walgreens” or “Defendants”) seeking damages for fraud, fraudulent nondisclosure,
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`unjust enrichment, and state statutory claims. In support of this action, Plaintiffs state and allege
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`as follows:
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`I. PRELIMINARY STATEMENT
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`For more than a decade, Walgreens—one of the largest retail drugstore chains in
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`1.
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`the United States—has knowingly and intentionally engaged in an ongoing fraudulent scheme to
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`overcharge Plaintiffs for prescription drugs by submitting claims for payment at artificially inflated
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`prices. To conceal its scheme, Walgreens has made false statements and omitted material facts in
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`connection with its true usual and customary (“U&C”) prices—the payment ceiling generally
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`defined as the cash price to a member of the general public paying for a prescription drug without
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`insurance—for prescription drugs dispensed to individuals covered by Plaintiffs’ health plans.
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`Walgreens fraudulently submitted inflated U&C prices on millions of claims reimbursed by
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`Plaintiffs. Through its fraudulent scheme, Walgreens has overcharged Plaintiffs hundreds of
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`millions of dollars for prescription drugs.
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`2.
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`Significantly, on January 15, 2019, Walgreens settled claims brought by the United
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`States, 39 states, and the District of Columbia alleging that, from January 2008 through December
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`2017, Walgreens violated the False Claims Act, 31 U.S.C. § 3729, et seq., by submitting false
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`U&C prices that were higher than the prices it charged for the same drugs sold through its
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`Prescription Savings Club cash discount program (“PSC Program”), thereby obtaining more
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`money in reimbursements for Medicaid fee-for-service claims than it was entitled to receive.1
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`Walgreens has now admitted—for the first time—that “in submitting claims for reimbursement,”
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`Walgreens “did not identify its PSC program prices as its U&C prices for drugs on the PSC
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`program formulary,” despite being so required.2 Walgreens further admitted—for the first time—
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`facts demonstrating that the PSC Program itself was a sham, including that it “offered a savings
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`guarantee pursuant to which PSC program members could recoup (in the form of store credit) the
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`difference between the amount they paid to enroll in the program in a given year and the amount
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`1 U.S. ex rel. Baker v. Walgreens, Inc. and Walgreen Co., No. 12 Civ. 00300-JPO, Stipulation and Order
`of Settlement and Dismissal ¶ 2(e) (S.D.N.Y. docket filed Jan. 24, 2019) (ECF No. 53) (hereinafter
`“Walgreens’ DOJ Settlement”).
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`2
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` 2
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` Id.
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`they received in discounted savings under the program in that year.”3 Plaintiffs similarly have
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`been damaged by the same fraudulent course of conduct, as described and admitted to by
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`Walgreens in the Walgreens’ DOJ Settlement.
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`3.
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`Plaintiffs are health care plans offering comprehensive health care services and
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`coverage, including prescription drug coverage, to their members residing in Maryland, Virginia,
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`the District of Columbia, South Carolina, Louisiana, and other states in which they operate. When
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`plan members fill prescriptions covered by Plaintiffs at a Walgreens pharmacy, Walgreens submits
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`electronic claims to Plaintiffs for reimbursement for those prescriptions (through Plaintiffs’
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`contracted pharmacy benefit managers (“PBMs”)). In submitting electronic claims for payment,
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`Walgreens is required to truthfully and accurately submit its U&C price for each dispensing event,
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`in accordance with, inter alia, the National Council for Prescription Drug Program (“NCPDP”)4
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`requirements.
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`4.
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`Plaintiffs calculate the drug price to be paid to the pharmacy based on whether the
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`U&C reported by Walgreens for a particular drug is less than or greater than the price that has been
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`otherwise negotiated for that drug. The U&C price functions as a reimbursement ceiling, ensuring
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`that health plans do not pay Walgreens more than what Walgreens charges cash-paying customers
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`paying without insurance. This payment methodology is consistent across government standards,
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`PBM
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`instructions manuals, and decades-long
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`industry practice, which recognize
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`that
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`reimbursements are to be adjudicated under this formula.
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`5.
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`In 2006, “big box” retailers like Walmart, Target, and Costco disrupted the retail
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`pharmacy market by offering deeply discounted generic drugs—$4 for 30-day supplies—to their
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`3 Id.
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` 4
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` NCPDP is an accredited, non-profit organization that maintains the industry standard for electronic
`transmission and adjudication of pharmacy claims.
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`3
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`customers while also giving third-party payors, including Plaintiffs, the benefit of that deal by
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`reporting their discount prices as their U&C prices for the same drugs, consistent with NCPDP
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`and industry standards. Federal health regulators at the Centers for Medicare and Medicaid
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`Services (“CMS”) also made clear that generic discount program prices were to be considered the
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`pharmacy’s U&C prices for the purposes of billing government healthcare programs.
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`6.
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`Walgreens recognized the need to retain and attract new customers, but—unlike the
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`“big box” retailers—decided not to absorb substantially reduced margins in connection with
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`lowering its U&C prices submitted to third-party payors, including Plaintiffs. Concerned with
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`maintaining its massive pharmacy revenue, which historically accounts for a vast majority of
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`Walgreens’ total revenue, and at the same time competing with “big box” retailers and other
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`pharmacies for in-store traffic and cash sales, Walgreens developed and carried out a massive fraud
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`that resulted in substantial financial harm to Plaintiffs.
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`7.
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`In or around 2007, Walgreens created the PSC Program to maintain its margins on
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`brand and generic drugs by systematically overcharging Plaintiffs for prescription drugs dispensed
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`to their members. Walgreens created the PSC Program for two reasons: first, to maintain and
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`increase its market share for cash customers by offering deep discounts on prescription drugs, and
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`second—and more importantly—to obfuscate its true U&C prices from third-party payors,
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`including Plaintiffs. Walgreens artificially divided its cash business, which formerly consisted
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`solely of customers who pay cash, into two segments: customers who pay the high cash price
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`(which it would include in its U&C price) and customers who pay the low cash price (i.e., the price
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`offered by the PSC Program or other similar programs, which would be excluded from U&C). In
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`short, Walgreens created the PSC Program in a covert attempt to insulate its high U&C prices by
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`artificially dividing its customer base in a way that would undermine the central purpose of any
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`4
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`health insurance company’s prescription drug benefit—that Plaintiffs do not pay more than what
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`cash customers pay for the same drugs.
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`8.
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`But unbeknownst to Plaintiffs, Walgreens submitted U&C prices that were
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`regularly five, ten, or even twenty times higher than what Walgreens actually charged cash
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`customers through its PSC Program (and other programs). Still, on its claims for reimbursement
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`to Plaintiffs, Walgreens reported those artificially inflated “U&C” prices, which were neither usual
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`nor customary, as its U&C prices. By submitting false and inflated U&C prices to Plaintiffs,
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`Walgreens knowingly and wrongfully overcharged Plaintiffs on millions of claims.
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`9.
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`Walgreens knowingly and intentionally concealed from Plaintiffs the actual cash
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`prices offered to members of the general public paying without insurance—i.e., Walgreens’ true
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`U&C prices—on both brand and generic prescription drugs. To conceal its fraudulent scheme,
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`Walgreens knowingly made false statements and omitted material facts in connection with its true
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`U&C prices, including, but not limited to, the scope of PSC Program membership; PSC Program
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`eligibility; the enrollment process; the enrollment “fee”; and frequency, share, number, and other
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`key data points related to Walgreens’ cash sales under the PSC Program and other similar discount
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`programs; and other discounts (not associated with a discount program) offered to the individuals
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`paying without insurance for drugs also dispensed to Plaintiffs’ Members.
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`10.
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`For example, Walgreens also effectuated this fraud by offering a prescription
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`savings club called “JustRx” (“JustRx Program”) to customers at more than 1,900 Walgreens-
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`owned Rite Aid-branded pharmacy locations and at Walgreens and Duane Reade pharmacy
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`locations and failing to report these prices as U&C. Additionally, Walgreens further effectuated
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`this fraud by charging third-party branded discount card prices to individuals who pay without
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`5
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`insurance, e.g., RxSaver and GoodRx (“third-party discount card programs”) and, similarly, failing
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`to report these prices as U&C.
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`11.
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`As a result of Walgreens’ fraudulent scheme, Walgreens has substantially
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`overcharged Plaintiffs for prescription drugs purchased by their Members at Walgreens’
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`pharmacies. Plaintiffs reimbursed Walgreens for their Members’ brand and generic prescription
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`drugs based on Walgreens’ inflated U&C prices and, as a result, Plaintiffs were overcharged
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`millions of dollars.
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`II. THE PARTIES
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`A.
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`12.
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`Plaintiffs
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`Plaintiff CFMI is a not for profit corporation organized under the laws of Maryland
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`with its principal place of business in Baltimore, Maryland. CFMI operates as a nonprofit health
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`services plan in Maryland.
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`13.
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`Plaintiff GHMSI is a congressionally chartered corporation with its principal place
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`of business in Washington, D.C. GHMSI operates as a not for profit health services plan in two
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`counties of Maryland, Northern Virginia, and the District of Columbia.
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`14.
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`Plaintiff CareFirst BlueChoice is a corporation organized under the laws of the
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`District of Columbia with its principal place of business in Washington, D.C. CareFirst
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`BlueChoice operates as a health services plan in Maryland, Northern Virginia, and the District of
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`Columbia.
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`15.
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`Plaintiff BCBSSC is a mutual insurance company organized under the laws of
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`South Carolina with its principal place of business in Columbia, South Carolina.
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`16.
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`Plaintiff BCHPSC is a wholly owned subsidiary of BCBSSC and a corporation
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`organized under the laws of South Carolina with its principal place of business in Columbia, South
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`Carolina.
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`6
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`17.
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`BCBSLA is a Louisiana domestic health insurance corporation organized under the
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`laws of Louisiana with its principal place of business in Baton Rouge. BCBSLA provides and
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`manages health benefits to more than 1 million insureds and members throughout the United
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`States. BCBSLA also provides third-party administrative services for insured and members.
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`18.
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`HMOLA is a wholly owned subsidiary of BCBSLA and a Louisiana domestic
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`health maintenance corporation organized under the laws of Louisiana with its principal place of
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`business in Baton Rouge, Louisiana. HMOLA provides and manages health benefits to insureds
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`and members throughout the United States.
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`B.
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`Defendants
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`19.
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`Defendant Walgreen Co. (“Walgreen Co.”) is an Illinois corporation that maintains
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`its corporate headquarters at 200 Wilmot Road in Deerfield, Illinois 60015. Until December 31,
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`2014, Walgreen Co. had no corporate parent. On December 31, 2014, Walgreen Co. became a
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`wholly-owned subsidiary of Defendant Walgreens Boots Alliance, Inc. pursuant to a merger to
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`affect a reorganization of Walgreen Co. into a holding company structure (“Reorganization”), with
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`Walgreens Boots Alliance, Inc. becoming the parent holding company.5
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`20.
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`Defendant Walgreens Boots Alliance, Inc. (“WBA”) is a Delaware corporation
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`with its principal place of business and corporate headquarters at 108 Wilmot Road in Deerfield,
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`Illinois 60015. On December 31, 2014, WBA became the successor of Walgreen Co., pursuant to
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`5 Form 10-K for Fiscal Year ending 08/31/2018, WALGREENS BOOTS ALLIANCE, INC. (Oct. 11, 2018)
`(“WBA 2018 10-K”), at 1, available at
`https://www.sec.gov/Archives/edgar/data/1618921/000162828018012472/wba-2018831x10k.htm
`(accessed Aug. 10, 2020).
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`7
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`the Reorganization, with WBA becoming the direct parent holding company and Walgreen Co.
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`becoming a wholly-owned subsidiary of WBA.6
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`21.
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`All WBA profits are derived from its wholly-owned operating subsidiaries,
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`including Walgreen Co. Because of their integrated operations, Walgreen Co. and WBA are
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`referred to herein as “Walgreens.”
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`22.
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`During the course of the events alleged in this action, Walgreens operated under
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`the trade name Walgreens or through various Walgreens-affiliated store banners across the United
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`States, including but not limited to: Duane Reade, Kerr Drug, Super D Drug, USA Drug, Happy
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`Harry’s, Med-X Drug, May’s Drug, and Drug Warehouse (collectively, “Walgreens-affiliated
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`banners”).
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`23. Walgreens is one of the largest retail drugstore chains in the United States based on
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`both revenues and number of stores. Walgreens operates 9,277 retail pharmacies in all fifty states,
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`the District of Columbia, Puerto Rico, and the U.S. Virgin Islands, including 154 drugstores in
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`Maryland, 14 drugstores in Washington, D.C., 150 drugstores in South Carolina, and 271
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`drugstores in Tennessee.7
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`24.
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`In September 2017, Walgreens announced that it had secured regulatory clearance
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`to purchase 1,932 Rite Aid pharmacy stores “located primarily in the Northeast and Southern U.S.”
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`for approximately $4.2 billion.8 By March 27, 2018, Rite Aid completed the transfer of all 1,932
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`6 Id.
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` 7
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` Id. at 3; see also “Store Count by State,” WALGREENS (Aug. 31, 2020), available at
`https://news.walgreens.com/fact-sheets/store-count-by-state.htm (accessed Feb. 2, 2020).
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` 8
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` WBA 2018 10-K at 72; see also “Walgreens Boots Alliance Secures Regulatory Clearance for Purchase
`of Stores and Related Assets from Rite Aid,” WALGREENS BOOTS ALLIANCE, INC. (Sept. 17, 2017),
`available at https://www.walgreensbootsalliance.com/news-media/press-releases/2017/walgreens-boots-
`alliance-secures-regulatory-clearance-purchase (accessed Aug. 10, 2020).
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`8
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`stores to Walgreens,9 and Walgreens now publicly identifies those locations as “Walgreens-owned
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`Rite Aid stores.”10
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`25.
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`In fiscal year 2019, Walgreens’ U.S. retail pharmacies filled 843.7 million
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`prescriptions (including immunizations). In fiscal year 2019, Walgreens’ U.S. retail pharmacy
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`sales revenue exceeded $104.5 billion.11
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`26. Walgreens refers to itself as “the largest retail pharmacy, health and daily living
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`destination across the United States and Europe.”12 Approximately 78 percent of the U.S.
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`population lives within five miles of a Walgreens retail pharmacy location.13
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`27.
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`At all relevant times, Walgreens is and has been a network pharmacy for Plaintiffs,
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`meaning that Plaintiffs’ Members can use their prescription drug benefit to fill their prescriptions
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`at Walgreens pharmacy locations at in-network pricing. When a Walgreens pharmacy dispenses
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`a prescription to a Member, Walgreens causes an electronic claim for reimbursement to be sent to
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`Plaintiffs’ PBM, which then submits a claim for payment to Plaintiffs. During the relevant time
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`period, Plaintiffs have paid Walgreens through PBMs.
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`9 “Rite Aid Completes Transfer of Stores to Walgreens Boots Alliance and Terminates Tax Benefits
`Preservation Plan,” RITE AID CORP. (Mar. 28, 2018), available at
`https://www.riteaid.com/corporate/news/-/pressreleases/news-room/2018/rite-aid-completes-transfer-of-
`stores-to-walgreens-boots-alliance-and-terminates-tax-benefits-preservation-plan (accessed Aug. 10,
`2020).
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`10 See “Welcome Rite Aid Pharmacy Patients,” WALGREENS, available at
`https://www.walgreens.com/topic/pharmacy/welcome_rite_aid.jsp (accessed Aug. 10, 2020).
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`11 Form 10-K for Fiscal Year ending 08/31/2019, WALGREENS BOOTS ALLIANCE, INC. (Oct. 28, 2019)
`(“WBA 2019 10-K”), at 4, available at
`https://www.sec.gov/Archives/edgar/data/1618921/000161892119000069/wba-2019831x10k.htm
`(accessed Aug. 10, 2020).
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`12 Id. at 1.
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`13 Id. at 4.
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`9
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`28. Walgreens is a defendant in six related actions pending in this Court. On March
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`23, 2017, a putative nationwide class of third-party payors and insured consumers filed a complaint
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`in Forth, et al. v. Walgreen Co. and Walgreens Boots Alliance, Inc., Civ. No. 17-cv-02246, ECF
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`No. 1 (N.D. Ill.) (Lee, J.). The allegations in the Forth complaint share a similar factual and legal
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`nexus to Plaintiffs’ allegations here; for example, that Walgreens “used its PSC [Program] as a
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`mechanism to knowingly and intentionally overcharge consumers and third-party payors . . . in
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`excess of Walgreens’ actual U&C prices” for drugs discounted by Walgreens’ retail drug
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`programs. Id. ¶ 6. On March 18, 2020, a complaint was filed in BCBSM, Inc. (d/b/a Blue Cross
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`and Blue Shield of Minnesota), et al. v. Walgreen Co., et al., Civ. Case No. 1:20-cv-01853, ECF
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`No. 1 (N.D. Ill.) (Kendall, J.). On June 5, 2020, a complaint was filed in Horizon Healthcare
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`Services, Inc. (d/b/a Horizon Blue Cross Blue Shield of New Jersey), et al. v. Walgreen Co., et al.,
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`Civ. Case No. 1:20-cv-03332, ECF No. 1 (N.D. Ill.), (Kendall, J.). On June 15, 2020, an amended
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`complaint was filed in HealthNow New York Inc., et al. v. Walgreen Co., et al., Civ. Case No.
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`1:20-cv-1929, ECF No. 33 (N.D. Ill.), (Kendall, J.). On August 12, 2020, a complaint was filed
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`in Blue Cross and Blue Shield of Arizona, Inc. (d/b/a Blue Cross Blue Shield of Arizona and d/b/a
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`AZBlue) v. Walgreen Co., et al., Civ. Case No. 1:20-cv-04738, ECF No. 1 (N.D. Ill.). On August
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`21, a complaint was filed in Asuris Northwest Health et al. v. Walgreen Co. et al., Civ. Case No.
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`1:20-cv-04940, ECF No. 1 (N.D. Ill.). On January 28, 2021, the Plaintiffs in the BCBSM, Horizon,
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`HealthNow, Blue Cross and Blue Shield of Arizona, and Asuris Northwest Health et al. actions
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`filed a consolidated First Amended Complaint. The allegations in the First Amended Complaint
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`shares a similar factual and legal nexus to Plaintiffs’ allegations here, including, inter alia,
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`Defendants’ fraudulent misrepresentation of the usual and customary prices of prescription drugs
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`dispensed by Defendants’ pharmacies.
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`10
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`III.
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`JURISDICTION AND VENUE
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`A.
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`29.
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`Jurisdiction
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`This Court has subject matter jurisdiction pursuant to 28 U.S.C. §§ 1332 and 1367
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`because Plaintiffs are citizens of Maryland, Washington, D.C., South Carolina, and Louisiana; the
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`Defendants are citizens of Delaware and Illinois; and the amount in controversy exceeds $75,000.
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`30.
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`This Court has general personal jurisdiction over Defendants because Defendants
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`maintain their principal places of business at 108 Wilmot Road and 200 Wilmot Road, both in
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`Deerfield, Illinois, which is located within the Northern District of Illinois.
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`B.
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`31.
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`Venue
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`Venue is proper in the United States District Court for the Northern District of
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`Illinois (Eastern Division) pursuant to 28 U.S.C. §§1391(b-d) because, inter alia, both Defendants
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`reside in, and are subject to personal jurisdiction in, this District at the time Plaintiffs commenced
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`this action and because Defendants’ contacts within this District are significant and sufficient to
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`subject them to personal jurisdiction. Further, venue is appropriate in this District because a
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`substantial part of the events or omissions giving rise to Plaintiffs’ claims occurred in this District.
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`IV. FACTS APPLICABLE TO ALL CLAIMS
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`A.
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`32.
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`U&C Is The Price Paid By Customers Without Insurance.
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`U&C is the price customers without insurance pay a given pharmacy for
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`prescription drugs, i.e., the cash or uninsured price. Per the “lesser of” reimbursement formulation,
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`it also serves as a ceiling to how much a pharmacy can charge a health plan (like Plaintiffs) for the
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`drug.
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`11
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`33.
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`Industry organizations endorse this definition. The Academy of Managed Care
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`Pharmacy (“AMCP”)14 Guide to Pharmaceutical Payment Methods (October 2007) defines U&C
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`as “the price for a given drug or service that a pharmacy or other provider would charge a cash-
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`paying customer without the benefit of insurance provided through a payer or intermediary with a
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`contract with the provider.” The NCPDP standards define the U&C price as the “[a]mount charged
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`cash paying customers for the prescription exclusive of sales tax or other amounts claimed.”15 The
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`U&C price, the NCPDP standards explain, “represents the value that a pharmacist is willing to
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`accept as their total reimbursement for dispensing the product/service to a cash-paying
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`customer.”16
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`34.
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`For over a decade, federal health programs have consistently required the cash
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`prices offered by pharmacy discount programs to be reported as a pharmacy’s U&C prices. These
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`government rules, regulations, and guidance include:
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`a.
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`CMS Guidance to Medicare Part D Sponsors. CMS published a memo
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`in 2006 that explained: “Wal-Mart recently introduced a program offering a reduced price
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`for certain generics to its customers. The low Wal-Mart price on these specific generic
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`drugs is considered Wal-Mart’s ‘usual and customary’ price, and is not considered a one-
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`14 AMCP is an industry-wide organization whose membership includes both health systems and PBMs.
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`15 See NCPDP Reference Manual, Ch. 3 at 72 (rev. Oct. 2005), available at
`https://www.cms.gov/Medicare/Billing/ElectronicBillingEDITrans/downloads/NCPDPflatfile.pdf
`(accessed Aug. 10, 2020).
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`16 See Telecommunications Version 5, NCPDP, at 38 (Feb. 2010), available at
`https://ncpdp.org/members/pdf/Version_5_questions_v35.pdf (accessed Mar. 12, 2020).
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`12
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`time ‘lower cash’ price. Part D sponsors consider this lower amount to be ‘usual and
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`customary’ and will reimburse Wal-Mart on the basis of this price.”17
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`b.
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`Medicare Part D Regulations. U&C price is defined as “the price that an
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`out-of-network pharmacy or a physician’s office charges a customer who does not have
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`any form of prescription drug coverage for a covered Part D drug.”18
`
`c.
`
`Medicare Prescription Drug Benefit Manual. U&C price is defined as
`
`“the price that an out-of-network pharmacy or a physician’s office charges a customer
`
`who does not have any form of prescription drug coverage for a covered Part D drug.”19
`
`d.
`
`TRICARE Pharmacy Manuals. The pharmacy manual for TRICARE,
`
`the health care program for uniformed service members, retirees, and their families, defines
`
`U&C price to include “loss leaders, frequent shopper or special customer discounts or
`
`programs, competitor’s matched price or any and all other discounts, special promotions,
`
`and programs causing a reduction in the price offered to that Member . . . Additionally, the
`
`Usual and Customary Retail Price must include any applicable discounts offered to attract
`
`customers . . . .”20
`
`e.
`
`Federal Employees Health Benefits Plan Pharmacy Manuals. The
`
`FEHBP pharmacy manual defines U&C as “the lowest price Provider would charge a
`
`particular patient if such patient were paying cash for an identical prescription on that
`
`
`17 HPMS Q&A – Lower Cash Price Policy, Memorandum to All Part D Sponsors, Centers for Medicare &
`Medicaid Services, at 1 (Oct. 11, 2006).
`
`18 42 C.F.R. § 423.100 (emphasis added); see also 42 C.F.R. §423.160 (incorporating NCPDP standards
`into the Medicare Part D program).
`
`19 See ch. 5, § 10.2, Benefits and Beneficiary Protections (rev. 9/20/2011) (emphasis added).
`20 TRICARE Express Scripts Pharmacy Manual (2013).
`
`
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`Case: 1:22-cv-01362 Document #: 1 Filed: 03/15/22 Page 14 of 50 PageID #:14
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`particular day at that particular location. This price must include any applicable discounts
`
`offered to attract patients.”21
`
`f.
`
`Walgreens PBM—Walgreens Health Initiative. Walgreens Health
`
`Initiative (“WHI”) was a wholly-owned PBM subsidiary of Walgreen Co. until WHI was
`
`acquired by Catalyst Health Solutions in 2011. WHI’s Pharmacy Manual defines U&C as
`
`“the cash price including all applicable discounts, coupons or sale price which a cash-
`
`paying customer would pay at the pharmacy.”22 In addition, WHI directed its own network
`
`pharmacies to use the standard NCPDP form containing the “usual and customary” field
`
`discussed above.
`
`35.
`
`State Medicaid programs likewise require cash prices offered by pharmacy discount
`
`programs to be reported as a pharmacy’s U&C prices. See, e.g., Walgreens’ DOJ Settlement.
`
`36. More specifically, Walgreens knew that the U&C prices for prescription drugs
`
`dispensed to Plaintiffs’ Members must include prices that Walgreens charged to cash customers
`
`paying without insurance, including “discount” prices.
`
`37.
`
`At all relevant times, Walgreens knew that Plaintiffs contracted to receive the
`
`benefit of the prices that Walgreens charged to its customers who paid without insurance, including
`
`“discount” prices, in their reported U&C prices.
`
`38.
`
`Plaintiffs’ contracts with their PBMs recognized and implemented the NCPDP
`
`requirements and industry standards for reporting U&C prices.
`
`
`21 FEHBP CVS/Caremark Manual (2009) (emphasis added).
`
`22 Pharmacy Manual, WALGREENS HEALTH INITIATIVES, INC., 25 (Jan. 2011), available at
`http://www.walgreenshealth.com/pdf/forms/Revised_Pharmacy_Manual_2010_Revised_04072010.pdf
`(accessed Aug. 10, 2020).
`
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`39.
`
`Furthermore, under a Participating Pharmacy Agreement and Amendments thereto,
`
`between Prime Therapeutics and Walgreens (“Walgreens Prime PPA”), Walgreens agreed to
`
`report its U&C charge on all claims submitted to Prime Therapeutics for payment by Plaintiffs,
`
`who contracted with Prime as their PBM.
`
`40.
`
`The Walgreens Prime PPA required Walgreens to accept as payment the lesser of
`
`the U&C charge or a negotiated rate.
`
`41.
`
`On information and belief, the Walgreens Prime PPA23 and other contracts between
`
`Plaintiffs’ PBMs and Walgreens (in place at various times throughout the relevant time period)
`
`define U&C using the same or similar definition as the Plaintiffs’ PBM agreements, and consistent
`
`with NCPDP requirements and industry standards. The Walgreens Prime PPA and other PBM
`
`contracts require Walgreens to submit claims electronically or in writing using the industry
`
`standard NCPDP Universal Claims Form.
`
`42.
`
`Additionally, the Prime Therapeutics Pharmacy Provider Manual instructs
`
`Walgreens to submit, as its U&C charge, “the lowest price [Walgreens] would charge to a
`
`particular customer if such customer were paying cash for the identical Prescription Drug Services
`
`on the date dispensed. This includes any applicable discounts including, but not limited to, senior
`
`discounts, frequent shopper discounts and other special discounts offered to attract customers.”24
`
`
`
`23 The Walgreens Prime PPA contains a confidentiality provision preventing disclosure without both
`parties’ consent. Prime Therapeutics consented to provide the Walgreens Prime PPA, and at Plaintiffs’
`request, Prime Therapeutics sought Walgreens’ consent to provide the Walgreens Prime PPA to Plaintiffs.
`Walgreens, however, refused to consent.
`
`24 Pharmacy Provider Manual, PRIME THERAPEUTICS LLC, § 6, at 30 (Mar. 1, 2015) (emphasis added),
`available at
`https://www.primetherapeutics.com/content/dam/corporate/Documents/Resources/Pharmacists/Pharmacy
`ProviderResources/ProviderManual/March12015PharmacyProviderManualEffectiveMarch12015.pdf.
`
`
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`43.
`
`The current OptumRx Pharmacy Provider Manual,25 which “includes the policies
`
`and procedures for pharmacies . . . which serve Members pursuant to [OptumRx’s] participating
`
`pharmacy provider network agreements,” contains this U&C guidance:
`
`Usual and Customary (U&C):
`
`Price charged by Network Pharmacy Provider to the general public at the time of
`dispensing for the same Drug Product including all applicable customer discounts,
`such as advertised or sale prices, special customer, senior citizen, frequent shopper,
`coupons or other discounts, a cash paying customer pays Network Pharmacy
`Provider for Drug Products, devices, products and/or supplies. Network Pharmacy
`Provider must supply proof of a cash Prescription (i.e. without any disclosure of
`PHI) when necessary to evaluate the appropriate adjudication of the Transaction.
`Alteration of the U&C price to attempt to increase Claim payment without a true
`change to the cash price being offered to the general public will be considered non-
`compliance and a violation of the Agreement. The Network Pharmacy Provider
`must be able to communicate the U&C price to Administrator upon inquiry, failure
`to disclose this information may be considered noncompliance.
`
`44.
`
`The Catamaran Provider Manual published in 2013 told Cataraman’s pharmacy
`
`providers, including Walgreens, that U&C meant “the usual and customary price charged by the
`
`Provider to the general public at the time of dispensing, including any advertised or sale prices,
`
`discounts, coupons or other deductions.”26
`
`45.
`
`Further, at the outset of Walgreens’ fraudulent scheme, its own Illinois-based
`
`subsidiary created and issued statements confirming – falsely – that discounted pricing would be
`
`treated as U&C. Walgreens’ wholly-owned PBM subsidiary until 2011, WHI, defined U&C
`
`consistent with NCPDP requirements and industry standards. WHI’s Pharmacy Manual defined
`
`U&C as “the cash price including all applicable discounts, coupons or sale price which a cash-
`
`
`25 2020 Pharmacy Provider Manual, OPTUMRX, available at https://learn.optumrx.com/content/dam/orx-
`rxmicros/pharmacy-manual/OptumRxPharmacyProviderManual2020-Version%203.1.pdf (last accessed
`July 31, 2020).
`
`26 Provider Manual, CATAMARAN (2013), available at https://silo.tips/download/provider-manual-2013-4
`(last accessed July 31, 2020).
`
`
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`paying customer would pay at the pharmacy.”27 In addition, WHI directed its own network
`
`pharmacies to use the standard