Blue Cross Blue Shield is suing Walgreens for allegedly overcharging for discount drugs, but a Chicago federal judge is allowing Walgreens to counterclaim that Blue Cross is improperly making use of a law firm that once advised the pharmacy chain on its discount program.
The recent ruling was issued by Judge Virginia Kendall, of U.S. District Court for the Northern District of Illinois. Walgreens is based in suburban Deerfield. Blue Cross is based in Chicago.
In 2020, five suits were lodged by various Blue Cross Blue Shield companies against Walgreens for allegedly overcharging Blue Cross for prescription drugs.
Walgreens' Prescription Savings Club (PSC) is at the center of the litigation. The program is aimed at making prescriptions more affordable for uninsured and underinsured consumers. Blue Cross alleged Walgreens did not include PSC prices in its calculations of the "usual and customary" prices it reports in insurance reimbursement claims, the suits said. One of the firms representing Blue Cross is Crowell & Moring, a global firm headquartered in Washington, D.C.
In 2008-2009, Walgreens used the services of Crowell & Moring for advice regarding the PSC program and insurance reporting requirements, according to court papers. Walgreens said that Crowell gained inside knowledge of PSC, and as a consequence, owes a fiduciary duty to Walgreens as a former client to not work for Blue Cross. By having done so, Crowell has allegedly breached rules of professional responsibility, according to Walgreens.
Walgreens filed a counterclaim alleging Blue Cross is "facilitating, encouraging, and assisting" Crowell in violating its duty to Walgreens.
Blue Cross responded with what they styled as a motion for qualification of counsel, which asked Judge Kendall to declare Crowell qualified to represent Blue Cross. The insurer argued there is no conflict of interest and Walgreens has forfeited any right to claim otherwise.
Kendall, however, rejected Blue Cross' motion, pointing out there is no such thing as a motion to qualify.
"There is no case law to suggest that a 'motion to qualify' such as Plaintiffs’ is recognized under the Federal Rules. Moreover, the motion would flip the legal standard governing disqualification on its head — effectively forcing Walgreens to argue a motion to disqualify that it has not brought and may never bring," Kendall said.
Kendall noted the American Bar Association's rules generally govern the responsibilities of lawyers in federal court. To this effect, the Bar Association prohibits a lawyer from representing a person in a same or similarly related matter, in which that person's interests are adverse to any of the lawyer's former clients. Kendall said Walgreens' right to "loyal counsel" is the issue at stake.
Kendall also struck down Blue Cross' motion to dismiss Walgreens' counterclaim.
Kendall dealt Walgreens a loss on the retailer's motion, filed under the law of contribution, that Prime Therapeutics should have to contribute to any damages for which Walgreens may be found liable.
Prime, which is one of Walgreens' pharmacy benefit managers, is owned by several of the Blue Cross companies involved in the litigation, court papers said. Prime, based in Eagan, Minn., adjudicates Walgreens' reimbursement claims and administers drug benefits for some of the Blue Cross entities.
Walgreens contended Prime knew it was common among pharmacy chains to not report discounted prices as "usual and customary" prices. Further, Walgreens alleged Prime never told plaintiffs of this practice nor told Walgreens the plaintiffs expected PSC prices to be included.
Kendall tossed the motion, saying for such a motion to succeed, Walgreens must share potential liability, not shift it all onto Prime. Kendall noted "common liability" is at the heart of the law of contribution.
In addition to Crowell & Moring, Blue Cross Blue Shield entities have been represented by: Harris, Wiltshire & Grannis, and Wiltsire & Grannis, both of Washington, D.C.; Perkins Coie LLP, of Chicago and Denver; and Williams & John, of Chicago.
Walgreens has been defended by Jeffrey Bushofsky, Laura Gaffney Hoey and Charles Zagnoli, of Ropes & Gray, of Chicago.