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Newlife Homecare Inc. v. Express Scripts

May 4, 2007


The opinion of the court was delivered by: (Judge Munley)


Before the court for disposition is Plaintiff NewLife Homecare Inc.'s (hereinafter "plaintiff" or "NewLife") motion for a temporary restraining order (hereinafter "TRO"). NewLife asks the court to order Defendant Express Scripts, Inc. (hereinafter "defendant" or "ESI") to pay NewLife over 1.6 million dollars that NewLife claims it is owed. The court held a hearing in this matter on May 2, 2007, and the motion is ripe for disposition. For the reasons that follow, the motion will be granted.


I. General Background

This case turns on the interpretation of two contracts, one between Blue Cross of Northeastern Pennsylvania and the plaintiff and one between Defendant ESI and the plaintiff. The main legal issue is whether ESI can offset alleged overpayments by Blue Cross under its contract by withholding payments under its own contract for charges that it does not necessarily dispute are due and owing to plaintiff.

NewLife is a licensed pharmacy with its principal place of business in Pittston, Pennsylvania. (Complaint, Doc. 1, hereinafter "Compl." ¶ 11). NewLife serves individuals with hemophilia, bleeding disorders and other chronic conditions. (Compl. ¶ 13).

Patients bring prescriptions from their physicians to NewLife.

Pursuant to the prescriptions, NewLife dispenses specialized medications, products and services directly to the patient and submits the applicable charges to the patient's respective insurance carrier. Among these insurance companies is Blue Cross of Northeastern Pennsylvania. (hereinafter "BCNEPA"). (Compl. ¶ 14). NewLife obtains the medicines from pharmaceutical companies and pays for them from the money received from the insurance companies.

BCNEPA contracts with Defendant ESI to manage the pharmacy claims submitted in accordance with the various health insurance policies and plans issued by BCNEPA. (Compl. ¶ 15). In order to submit charges on behalf of BCNEPA insureds, NewLife entered into an agreement with ESI in 2001 (the "ESI-NewLife contract"). (Compl. ¶ 16). According to the ESI-NewLife contract, NewLife must merely examine the identification card presented by the BCNEPA member to determine if the holder is entitled to benefits under the BCNEPA Prescription Drug Program.*fn1 (Compl. ¶ 20). ESI then verifies, with information from BCNEPA, that the insured is eligible for the benefits at the time the claim is made. (Compl. ¶ 21).

NewLife submits bills and charges incurred by BCNEPA insureds to ESI for payment electronically. At the time the claim is transmitted, ESI sends NewLife either an approval or denial of the claim. (Compl. ¶ 24).

II. Basis for the Lawsuit

Since February 27, 2007, NewLife has submitted claims on behalf of various BCNEPA members to ESI for medications, products and services in the amount of $896,850.30. ESI approved these claims. (Compl. ¶ 41).

ESI, however, has not paid this amount. (Compl. ¶ 43). Additionally, since April 4, 2007, NewLife has submitted claims to ESI for an additional $734,508.88. (Compl. ¶ 45). ESI has also approved these claims but has not paid them. (Compl. ¶ 46). Accordingly, ESI owes plaintiff a total of $1,631,359.18 under the ESI-NewLife contract.

Because ESI has withheld payments since February 2007, NewLife is significantly overdue and in arrears to its pharmaceutical suppliers and other suppliers and is unable to pay those debts. (Compl. ¶ 54). NewLife has exhausted its credit limits and is unable to obtain any new products to meet its clients' urgent medical needs. (Compl. ¶ 55). Suppliers that are owed money by NewLife include ASD Specialty Healthcare, Inc., Baxter Healthcare, Corp., Wyeth Pharmaceuticals and Rochester Drug CoOperative. These companies are owed in excess of $330,000.00. NewLife has an additional $1,372,792.27 due immediately. (Pl. Ex. 1, Bell Declaration ¶ 49).

III. Why is ESI not Paying?

NewLife has group health insurance for its officers and employees through BCNEPA ("BCNEPA-NewLife contract"). (Compl. ¶ 25). The BCNEPA-NewLife contract is separate from the ESI-NewLife contract discussed above.

Employees covered by the group health insurance policy include Reverend Gregory M.J. Malia and another employee identified in the complaint only as R.D.*fn2 (Compl. ¶ 27, 34). Both of these individuals had certain prescriptions filled through NewLife between February 28, 2005 and March 31, 2007. (Compl. ¶ 36). Evidently, NewLife submitted claims on behalf of these patients in the relevant time frame, and they were paid by ESI. On March 31, 2007, ESI announced that it was reviewing these payments made on behalf of Malia and R.D. (Compl. ¶ 44). ESI determined that certain of the claims submitted on behalf of R.D. were actually not eligible for coverage as they appeared to be covered by Medicare. The total amount was $273,990.00. (Compl. ¶ 47).

Further, ESI determined it had paid claims on behalf of Malia that were covered by Medicare in the amount of $2,018,655.61.*fn3 (Compl. ¶ 51).

ESI contends that NewLife did not comply with the terms of the BCNEPA-NewLife contract in submitting the claims for Malia and R.D. ESI's position is that NewLife should have coordinated these benefits with Medicare. NewLife vigorously denies any duty to coordinate benefits. ESI notified NewLife that it was withholding all outstanding payments presently due and owing to NewLife under the ESI-NewLife contract in the amount of $1,631,359.18, and any further payments that become due, pending the repayment of the amounts they overpaid on Malia and R.D. (Compl. 53).

ESI argues that it has the right to offset the overpayment under the BCNEPA-NewLife contract by withholding payments under its own agreement with NewLife, the ESI-NewLife contract. ESI maintains this position even though the payments it is withholding may very well be for prescriptions of other patients besides Malia and R.D.

Plaintiff thus filed the instant complaint alleging the following four causes of action: Count I: Breach of fiduciary duties pursuant to ERISA; Count II: Breach of duties under ERISA § 1133; Count III: Breach of Contract; and Count IV: Conversion.

Plaintiff has moved for a Temporary Restraining Order and Preliminary Injunction Pursuant to Federal Rule of Civil Procedure 65 bringing the case to its present posture. The plaintiff seeks to enjoin the defendant from adjusting, altering, modifying, withholding or otherwise retaining any or all portions of remittance payments for prescription medications, products and services provided by plaintiff since February 2007 and any future remittances for prescription medications, products and services provided by the plaintiff. In other words, plaintiff wants us to direct the defendant to pay the 1.6 million dollars it allegedly owes and enjoin it from withholding future payments.


This action is brought pursuant to both federal question jurisdiction, 28 U.S.C. § 1331 and diversity jurisdiction, 28 U.S.C. § 1332. We have supplemental jurisdiction over the ...

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