ERISA-Eighth Circuit Denies Request For Preliminary Injunction That Would Have Required A Pharmacy Benefits Manager To Honor Its Contracts And Pay The Pharmacies For Medicines Dispensed

In Grasso Enterprises, LLC v. Express Scripts, Inc., No. 15-1578 (8th Cir. 2016), the plaintiffs (the “Plaintiffs”) are compounding pharmacies that prepare and sell customized compound drugs in accordance with doctors’ prescriptions. The defendant, Express Scripts (“ESI”), is a pharmacy benefits manager that contracts with health plan sponsors and administrators to administer the pharmacy benefits provided in their group health plans, many of which are subject to ERISA. Plaintiffs have entered into separate Provider Agreements with ESI, under which, as members of ESI’s pharmacy provider network, Plaintiffs “look solely to ESI for payment of Covered Medications” provided to health plan participants and beneficiaries. ESI pays Plaintiffs pursuant to the Provider Agreements for the medicines Plaintiffs dispense; the health plans reimburse ESI.

In June 2014, ESI announced a program to reduce the increasing costs being incurred by health plans for compound drugs, and consequently began denying Plaintiffs’ claims for payment for medicines they dispensed. Plaintiffs commenced this action on November 18, 2014, alleging that ESI is systematically denying payment of compound drug claims without adhering to the procedural requirements of ERISA’s “Claims Regulation,” 29 C.F.R. § 2560.503-1. Plaintiffs asserted claims for relief under two ERISA remedial provisions, §§ 502(a)(1)(B) and (a)(3), codified at 29 U.S.C. §§ 1132(a)(1)(B) and (a)(3).

Plaintiffs amended their complaint and moved for a preliminary injunction declaring that ESI must pay all claims for compound medications until it is in compliance with the Claims Regulation. After hearing oral arguments, the district court denied the requested preliminary injunction on numerous grounds. Plaintiffs appeal. Concluding that Plaintiffs failed to meet the well-established standards for preliminary injunctive relief, the Eighth Circuit Court of Appeals (the “Court”) affirmed the district courts holding. Court’s primary finding was that there is no precedent for upholding a private plaintiff’s claim for injunctive relief mandating the future procedures an ERISA plan must follow to comply with the Claims Regulation.

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