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Bon Secours Health Systems, Inc. v. Express Scripts, Inc.

United States District Court, D. Maryland

March 28, 2019

BON SECOURS HEALTH SYSTEM, INC., et al., Plaintiffs,
v.
EXPRESS SCRIPTS, INC., Defendant.

          MEMORANDUM OPINION

          George L. Russell, III United States District Judge

         THIS MATTER is before the Court on Defendant Express Scripts, Inc.'s (“ESI”) Partial Motion to Dismiss Plaintiffs' First Amended Complaint (ECF No. 21).[1] The Motion is ripe for disposition, and no hearing is necessary. See Local Rule 105.6 (D.Md. 2018). For the reasons outlined below, the Court will grant the Motion.

         I. BACKGROUND [2]

         This dispute arises out of ESI's agreement to manage pharmacy benefits for Plaintiff Bon Secours Health System, Inc.'s (“BSHSI”) self-insured employee prescription plan (the “Plan”). (1st Am. Compl. ¶¶ 1-2, ECF No. 14). The contract at issue is the Pharmacy Benefit Management Agreement and related Amendment (the “Agreement”), effective February 1, 2010 and September 1, 2012 respectively. (Id. ¶ 1).

         Three provisions of the Agreement are relevant to ESI's Motion. In pertinent parts, Section 6.3(d) of the Agreement, entitled “Indemnification, ” provides:

(i) In addition to any indemnification obligations set forth in the Business Associate Agreement, ESI will indemnify and hold [BSHSI] harmless from and against any loss, cost, damage, expense or other liability, including, without limitation, reasonable costs and attorney fees (“Costs”) incurred in connection with any and all third[-]party claims, suits, investigations or enforcement actions (“Claims”) which may be asserted against, imposed upon or incurred by [BSHSI] and arising as a result of (A) ESI's negligent acts or omissions or willful misconduct (including those of the Mail Service Pharmacy and CuraScript), or (B) ESI's breach of this Agreement.
(iii) As a condition of indemnification, the party seeking indemnification will notify the indemnifying party in writing promptly upon learning of any Claim for which indemnification may be sought hereunder, and will tender the defense of such claim to the indemnifying party. No. party will be obligated to indemnify the other with respect to any claim settled without the written consent of the other.

(1st Am. Compl. Ex. 1, ECF No. 14-2; Compl. Ex. 1 [“Agreement”] § 6.3(d)(i), (iii), ECF No. 1-2; Def.'s Mem. Supp. Partial Mot. Dismiss Pls.' 1st Am. Compl. [“Def.'s Mot.”] at 3, ECF No. 21-1).[3]

         The Business Associate Agreement (“BAA”), an exhibit to the Agreement, contains an indemnification provision, which provides, in relevant part:

Each party (the “Indemnifying Party”) shall indemnify and hold the other party and its officers, directors, employees and agents (each an “Indemnified Party”) harmless from and against any claim, cause of action, liability, damage, cost or expense (“Liabilities”) to which the Indemnified Party becomes subject to as a result of third[-]party claims (including reasonable attorneys' fees and court or proceeding costs) brought against the Indemnified Party, which arise as a result of: (i) the material breach of this Business Associate Agreement by the Indemnifying Party; or (ii) the gross negligence or willful misconduct of the Indemnifying Party, except to the extent such Liabilities were caused by the Indemnified Party.

(Agreement Ex. C [“Bus. Assoc. Agreement”] § 6).

         Among the services ESI offered its clients was the Compound Management RX Program (the “Program”), which was designed to combat fraud and abuse by pharmacies. (1st Am. Compl. ¶¶ 3, 29) According to ESI's own guidelines, BSHSI should have been auto-enrolled in the Program no later than September 15, 2014, but it was not. (Id. ¶¶ 3-4, 32). In 2014 and 2015, a BSHSI employee in South Carolina, conspiring with others, caused unauthorized or improper prescriptions for compounded medications to be issued, which ESI processed and the Plan paid for. (Id. ¶ 48). ESI's failure to enroll BSHSI in the Program allowed “multiple, fraudulent pharmacy claims” to be processed and paid from September 15, 2014 through May 31, 2015, when “it appears that ESI did start to exclude these compounds from being filled.” (Id. ¶¶ 5, 40). On December 21, 2016, Plaintiff Federal Insurance Co. (“Federal”) paid a BSHSI claim for $4, 571, 483.96 under BSHSI's Health Care Portfolio policy. (Id. ¶ 52).

         On May 29, 2018, BSHSI filed its initial Complaint. (ECF No. 1). On July 24, 2018, BSHSI and Federal, to whom BSHSI had assigned certain of its rights against ESI, filed the First Amended Complaint. (1st Am. Compl. ¶ 8, ECF No. 14). The First Amended Complaint alleges three breach of contract claims: failure to perform (Count I); failure to indemnify (Count II); and, by Federal only, subrogation (Count III). (1st Am. Compl. ¶¶ 57-91). BSHSI and Federal seek money damages. (Id. at 15-16).

         On August 7, 2018, ESI filed its Partial Motion to Dismiss Plaintiffs' First Amended Complaint, seeking to dismiss Count II. (ECF No. 21). On August 21, 2018, Plaintiffs filed an Opposition. (ECF ...


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