A state appeals panel has agreed to pause Walgreens’ attempt to force third-party pharmaceutical claims processer Prime Therapeutics to share in the potentially massive liability Walgreens could face in its legal battle with the corporate parent of Blue Cross Blue Shield, which has accused the retail pharmacy giant of committing fraud to inflate the prices the insurer paid for certain medications.
According to court records, in a January 2021 lawsuit Blue Cross-parent Health Care Services Corporation alleged Walgreens inflated prices on several million BCBS client claims, which allowed Walgreens to obtain excess reimbursements.
In May 2022 Walgreens asked Cook County Circuit Judge Caroline Moreland to decree Prime would be partially liable for any judgment Walgreens might face. Moreland dismissed that request with respect to Prime’s contribution, but stayed the request regarding indemnification pending the underlying litigation.
Walgreens challenged the decision before the Illinois First District Appellate Court. Justice Margaret Stanton-McBride wrote the panel’s opinion, issued Aug. 30; Justices Jesse Reyes and Rena Van Tine concurred, affirming Moreland’s order.
On appeal, Walgreens argued the stay of the indemnity claims went against established public policy of allowing it to press the claim against Prime at the same time the courts dealt with the underlying litigation from HCSC. Walgreens also said Moreland was wrong to decide a stay was mandatory and that Prime didn’t properly request the stay or offer clear and convincing evidence for its argument. Walgreens also said its claim of anticipatory repudiation doesn't depend on how the HCSC litigation concludes.
To begin, Stanton-McBride wrote, the appeals panel rejected Walgreens’ argument it should review the issue Moreland decided from the beginning. It said Moreland did not determine state law required her to issue a stay, as Walgreens insisted, and proceeded to address whether Moreland abused judicial discretion.
“Prime contended that discovery into its contract with Walgreens used to raise the indemnification claims differs from the type of discovery needed to resolve HCSC’s fraud claims against Walgreens,” Stanton-McBride wrote, referencing a 2008 deal between the companies regarding Prime’s role as a pharmacy benefit manager funneling payments from HCSC to Walgreens. “According to Prime, the indemnification counts would only ripen for adjudication if and when Walgreens was first found liable to HCSC.”
But Walgreens said its legal theory is the merit of HCSC’s claims inherently determines whether Prime breached the 2008 contract. It also alleged Prime didn’t inform HCSC of Walgreens’ obligation to report its customary pricing conventions or that Walgreens doesn’t include Prescription Savings Clubs pricing in that reporting, among other alleged shortcomings.
“This legal framework notwithstanding, Walgreens devotes much of its brief to asserting procedural or tangential issues rather than addressing whether the stay was improperly granted,” Stanton-McBride wrote. “If Walgreens is not found liable, the indemnification claims would be moot. The trial court reached the same conclusion and found no determination on the indemnity claims could be made until the HCSC claims are resolved. It would be a burden on Prime to participate in the underlying actions when it may have no liability to Walgreens. In contrast, Walgreens still has the remedy of indemnification if and when any liability is entered against it in the HCSC claims.”
The panel further rejected concerns about inconsistent verdicts, saying there are different liability theories at play and suggesting a reasonable outcome could involve a determination Walgreens was liable to HCSC, while Prime may not be liable to Walgreens.
“The question of whether Prime breached its marketing-related obligations or committed negligent acts or omissions in its performance under the 2008 contract ‘is a significant and wholly separate issue’ from the fraud claims alleged by HCSC related to Walgreens’ reporting of (usual and customary) prices for prescription drugs,” Stanton-McBride wrote. “The trial court’s decision to stay the indemnification counts was not arbitrary, fanciful, or unreasonable, or such that no reasonable person would take the same view.”
Concerning Walgreens’ final argument - that the pharmacy chain believes Prime will repudiate its indemnification duty and force Walgreens to defend itself differently against HCSC - the panel said Walgreens’ can’t make that allegation until the duty to indemnify materializes.
“Walgreens does not cite any relevant case law in which a duty to indemnify under anticipatory repudiation had accrued before the liability determination in the underlying action,” Stanton-McBride wrote. “We also observe that Walgreens’s anticipatory repudiation claim for indemnification is premised upon the same allegations as its declaratory judgment claim. Both claims allege that Prime breached the 2008 contract and committed negligent acts or omissions related to its performance under the contract. With both claims based on the same alleged wrongdoing, both claims still require the requisite liability judgment to ripen.”
Walgreens is represented by Jeffrey J. Bushofsky, Laura G. Hoey, Timothy R. Farrell, and Charles D. Zagnoli, of Ropes & Gray, of Chicago.
Prime is represented by Kathleen A. Hill and Andrew L. Evans, of Salvatore Prescott Porter & Porter, of Evanston; and Robert J. Gilbertson, Virginia R. McCalmont and Caitlinrose H. Fisher, of Forsgren Fisher McCalmont DeMarea Tysver, of Minneapolis.