Anthem, Inc. v. Express Scripts, Inc.

Background

Anthem, Inc. and Express Scripts, Inc. entered into an agreement under which Express Scripts purchased NextRx and became Anthem’s exclusive pharmacy benefit manager for ten years. Anthem later sued for breach of contract and declaratory relief, alleging, among other things, that Express Scripts failed to meet operational obligations.

The motions addressed Anthem’s allegations concerning the Super PA claims-processing system. Anthem alleged that a software design error overrode required prior-authorization criteria and caused Express Scripts to approve and pay claims that should have been rejected. Anthem sought damages for those payments under Section 3.7 of the agreement, among other contract provisions.

Section 3.7(g) required Express Scripts to recover certain overpayments or incorrect payments and credit Anthem for recovered amounts. The court had previously ruled that the provision clearly required Express Scripts to credit Anthem with 100 percent of recovered overpayments, but had not determined that Anthem was entitled to credits for unrecovered overpayments.

Express Scripts’ Motion for Partial Summary Judgment

Summary judgment is a ruling entered when the evidence shows no genuine dispute about a fact that could affect the outcome and the moving party is entitled to judgment under the law. Express Scripts argued that Anthem had not pleaded a Section 3.7 claim and that the evidence did not support a breach.

The court rejected the pleading argument. It held that Anthem’s complaint sufficiently alleged that Express Scripts failed to correct the Super PA defects and reimburse Anthem for incorrectly approved claims, and Anthem did not have to identify every potentially applicable contract section in its complaint.

The court nevertheless granted Express Scripts’ partial motion for summary judgment regarding Section 3.7. It held that Section 3.7(g) applied to overpayments or incorrect payments made to network pharmacies that were recovered, not to payments that could not be recovered from pharmacies. Anthem agreed that the Super PA payments could not be recovered from the pharmacies because the pharmacies had dispensed the drugs as instructed and were not at fault. The record also contained no evidence that Express Scripts failed to credit Anthem for recovered payments covered by Section 3.7(g).

The ruling did not foreclose Anthem from seeking damages for Super PA errors under other portions of the agreement. It only held that Section 3.7 was not the proper basis for that claim on the facts presented.

Motion to Exclude Expert Testimony

Express Scripts asked the court to exclude testimony from six Anthem experts concerning prior-authorization issues and damages. The court applied Federal Rule of Evidence 702, which requires expert testimony to be relevant, based on sufficient information, supported by reliable methods, and reliably applied to the case.

The court granted the motion in full as to Andrea Foulkes, Michael Lonergan, Brian McCormick, and Arthur Shinn for the challenged opinions concerning Anthem’s audit claim. The experts’ opinions used performance standards inconsistent with the court’s earlier ruling that the agreement’s performance guarantees established the required standards for different types of prior authorizations.

The court granted the motion in part and denied it in part as to Amy Matthews and Jacob Abarca. Matthews could testify about the methodology and results of Anthem’s Super PA damages calculation. Anthem could also offer testimony about Super PA damages that relied on the Sentinel Effect, an analysis concerning what happens after a prescription triggers a rejection.

The court concluded that the Super PA opinions were relevant and sufficiently reliable for presentation to a jury. Disagreement about whether the Sentinel Effect applied to a particular category of claims, including Migrated claims, went to competing conclusions about the data rather than making the testimony inadmissible under Rule 702.

Supplemental Expert Report

The court granted Anthem’s motion for leave to file a supplemental expert report, but limited the permission to a narrowly tailored report by Foulkes. The report could address how Anthem’s damages conclusions differed from Express Scripts’ expert’s calculations in light of the court’s earlier ruling about the contract’s performance guarantees.

The court found that Anthem acted promptly after the earlier ruling changed the applicable damages theories. It also found that the evidence was important, that any prejudice to Express Scripts was limited by the report’s narrow scope, and that no trial date had been set, making a limited continuance possible.

Disposition

The court granted Express Scripts’ partial motion for summary judgment regarding Section 3.7. It granted in part and denied in part Express Scripts’ motion to preclude expert testimony. It granted Anthem’s motion for leave to file a supplemental expert report. The court directed the parties to appear for a telephonic status conference on March 23, 2023, and directed the clerk to terminate the three motions.