Anthem, Inc. v. Express Scripts, Inc.

Background

Anthem brought claims for breach of contract and declaratory judgment concerning two related contracts executed in 2009. Express Scripts purchased NextRx and became Anthem’s exclusive pharmacy benefit manager for ten years. Express Scripts also asserted counterclaims, including a request for a declaration concerning the contract’s pricing-review provision.

The contract’s Section 5.6 required Anthem to conduct a market analysis every three years. If Anthem determined that its pricing was not competitive, it could propose new pricing terms, and the parties agreed to negotiate in good faith. The provision also stated that new pricing terms would not take effect unless Express Scripts agreed to them in writing.

Anthem also alleged that Express Scripts breached operational obligations involving Medicare Part D services, prescription-drug-event data, processing deadlines, the parties’ issue-tracking log, and prior-authorization requests. The contract included performance guarantees requiring specified accuracy levels for certain prior-authorization determinations, as well as provisions addressing recovery of overpayments or incorrect payments.

Summary-judgment standard

The court applied the summary-judgment standard under Federal Rule of Civil Procedure 56. Summary judgment is proper when the evidence shows no genuine dispute about a fact that could affect the outcome and a reasonable jury therefore could not find for the opposing party. The court viewed disputed facts and reasonable inferences in favor of the party opposing the motion.

Pricing claims and Section 5.6

The court held that Section 5.6 was unambiguous. In the court’s reading, the first sentence required Anthem to conduct market analyses, the second required Express Scripts to negotiate in good faith over proposed new pricing terms, and the third required Express Scripts’ written agreement before new terms could take effect. The provision did not require Express Scripts to guarantee competitive benchmark pricing or to reach a new agreement.

The court therefore granted Express Scripts’ motion as to the portion of Anthem’s Count II seeking a declaration that Express Scripts had to provide competitive benchmark pricing. The court also dismissed Count II in its entirety because Anthem sought expectation damages—the value of a hypothetical agreement it claimed should have resulted—but the available remedy for failure to negotiate in good faith was limited to out-of-pocket costs incurred during good-faith partial performance. Anthem had sought expectation damages rather than those out-of-pocket costs.

The court separately granted the motion to dismiss Count I, which sought $14.8 billion in damages. Because Section 5.6 required negotiation rather than a completed pricing agreement, expectation damages were unavailable unless the agreement that would have resulted from the negotiations was reasonably discernable. The court concluded that the evidence did not suggest that the parties ultimately would have reached an agreement. The court also held that Anthem’s proposed restitution-damages theory was barred because Anthem had not pleaded or disclosed that theory during the litigation.

The court granted summary judgment on Express Scripts’ third counterclaim. It declared, in substance, that Section 5.6 did not require Express Scripts to provide competitive benchmark pricing and required it only to negotiate in good faith over proposed new pricing terms.

Operational claims

The court granted Express Scripts’ motion as to Anthem’s Count III claims involving prescription-drug-event data, processing deadlines, and the issue-tracking log. Anthem claimed at least $150 million in damages but did not provide evidence supporting that amount. The court rejected Anthem’s attempt to rely at that stage on non-monetary injuries or nominal damages, which Anthem had not pleaded.

The court denied the motion as to Anthem’s Count III claim seeking reimbursement for incorrectly approved prior authorizations. Express Scripts argued that meeting the contract’s 98-percent accuracy guarantees eliminated any reimbursement obligation. The court disagreed that the performance guarantees resolved the separate reimbursement claim. It interpreted Section 3.7(g) as requiring Express Scripts to recover and credit Anthem for overpayments or incorrect payments caused by Express Scripts’ errors, regardless of whether Express Scripts satisfied the 98-percent performance guarantees. The court noted that Anthem had not yet shown an entitlement to unrecovered overpayments, but it denied summary judgment on this portion of Count III.

Disposition

Express Scripts’ partial motion for summary judgment was granted in part and denied in part. The court granted it as to Count I, Count II, the Count III claims involving prescription-drug-event data, processing deadlines, and the issue-tracking log, and Express Scripts’ third counterclaim. It denied it as to Count III’s claim for reimbursement of improperly approved prior authorizations. The clerk was directed to terminate the motion.