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State v. Walgreen Co.

Supreme Court of Mississippi, En Banc

August 9, 2018

STATE OF MISSISSIPPI
v.
WALGREEN CO., AND SUPER D DRUGS ACQUISITION CO. d/b/a WALGREENS # 15737 STATE OF MISSISSIPPI
v.
CVS HEALTH CORPORATION, CVS PHARMACY 00047, CVS PHARMACY 01119, CVS PHARMACY 02038, CVS PHARMACY 03124, CVS PHARMACY 03426, CVS PHARMACY 04376, CVS PHARMACY 04519, CVS PHARMACY 04536, CVS PHARMACY 04782, CVS PHARMACY 04883, CVS PHARMACY 04966, CVS PHARMACY 04993, CVS PHARMACY 04997, CVS PHARMACY 05277, CVS PHARMACY 05573, CVS PHARMACY 05604, CVS PHARMACY 05739, CVS PHARMACY 05740, CVS PHARMACY 05744, CVS PHARMACY 05745, CVS PHARMACY 05746, CVS PHARMACY 05756, CVS PHARMACY 05777, CVS PHARMACY 05801, CVS PHARMACY 05808, CVS PHARMACY 05825, CVS PHARMACY 05835, CVS PHARMACY 05842, CVS PHARMACY 05846, CVS PHARMACY 05850, CVS PHARMACY 05865, CVS PHARMACY 05870, CVS PHARMACY 05876, CVS PHARMACY 05878, CVS PHARMACY 05883, CVS PHARMACY 05900, CVS PHARMACY 05908, CVS PHARMACY 05923, CVS PHARMACY 05925, CVS PHARMACY 05933, CVS PHARMACY 06031, CVS PHARMACY 06396, CVS PHARMACY 07065, CVS PHARMACY 07963, CVS PHARMACY 08273, CVS PHARMACY 08310, CVS PHARMACY 08311, CVS PHARMACY 08491, CVS PHARMACY 08954, CVS PHARMACY 08955, CVS PHARMACY 08992, CVS PHARMACY 08993, CVS PHARMACY 08994, CVS PHARMACY 10020, CVS PHARMACY 10400, CVS PHARMACY 10755, CVS 5168 MS LLC, CVS 7070 MS LLC, CVS 8956 MS LLC, CVS ORLANDO FLORIDA DISTRIBUTION, LLC, CVS/PHARMACY #16230 DBA, CVS/PHARMACY #17038 DBA, CVS/PHARMACY #17144 DBA, CVS/PHARMACY # 17498 DBA, CVS/PHARMACY #17532 DBA, CVS RX SERVICES, INC., CVS TN DISTRIBUTION, LLC AND CVS PHARMACY, LLC STATE OF MISSISSIPPI
v.
FRED'S INC., FRED'S STORES OF TENNESSEE, INC., AND FRED'S PHARMACY OF QUITMAN, LLC

          DATE OF JUDGMENT: 02/23/2017

          DeSOTO COUNTY CHANCERY COURT HON. MITCHELL M. LUNDY, JR., JUDGE

          ATTORNEYS FOR APPELLANT: OFFICE OF THE ATTORNEY GENERAL BY: GEORGE W. NEVILLE JACQUELINE H. RAY DONALD L. KILGORE D. RONALD MUSGROVE MICHAEL SHELTON SMITH, II WILSON DANIEL “DEE” MILES, III H. CLAY BARNETT ALLISON DOUILLARD HAWTHORNE JESSE MITCHELL, III

          ATTORNEYS FOR APPELLEES: DAVID F. MARON BARRY K. COCKRELL BRADLEY CLAYTON MOODY SAMUEL DEUCALION GREGORY

          ATTORNEYS FOR APPELLEES: J. CAL MAYO SARAH KATHERINE EMBRY ENU MAINIGI CRAIG D. SINGER ASHLEY W. HARDIN

          ATTORNEYS FOR APPELLEES: JEFFREY SCOTT NEWTON ROBERT F. WALKER D. STERLING KIDD

          BEAM, JUSTICE

         ¶1. This matter stems from a lawsuit filed by the State of Mississippi against the defendant pharmacies. The State alleges deceptive trade practices and fraudulent reporting of inflated "usual and customary" prices in the defendant's reimbursement requests to the Mississippi Department of Medicaid. The State argues that Walgreens, CVS, and Fred's pharmacies purposefully misrepresented these prices to obtain higher prescription drug reimbursements from the State of Mississippi. Finding that the circuit court was better equipped to preside over this action, Chancellor Lundy of the DeSoto County Chancery Court transferred the matter to the DeSoto County Circuit Court in response to the defendants' request. Aggrieved, the State timely filed its interlocutory appeal disputing the chancellor's decision to transfer the cause.

         ¶2. After a thorough review of the parties' positions, this Court finds that the chancery court properly could have retained the action, but that the chancellor correctly used his discretion to transfer the case, allowing the issues to proceed in front of a circuit-court jury. As a result, we affirm the chancellor's decision.

         FACTS AND PROCEDURAL HISTORY[1]

         I. Underlying Action

         ¶3. The State filed suit against Walgreens, CVS, and Fred's pharmacies on September 30, 2016.[2] Through its complaint, the State detailed the complexities of Mississippi's Medicaid reimbursement program which led to the Legislature's creation of the Department of Medicaid (DOM). As the State explains, the Department was created to administer the Mississippi Medicaid program and to pay for the prescription drugs of individuals covered under the plan. Rather than reimbursing Medicaid recipients for eligible prescriptions directly, those recipients fill their medications with a pharmacy of their choice, and the dispensing pharmacies later request reimbursement from DOM.

         ¶4. Upon receipt of a pharmacy's request for reimbursement, DOM applies one of four statutory and federally approved reimbursement formulas to determine how the State will reimburse the provider for the Medicaid participant's prescription. The formulas include separate price indices from which the State may calculate its reimbursement. From those indices, DOM selects the lowest price or rate to determine the reimbursement amount to remit.

         ¶5. The State's complaint against the pharmacies concerns only one of the indices: the "usual and customary charge" (UC). This rate identifies the amount which providers-including the retail pharmacies at issue-are required to report. The Mississippi Division of Medicaid Provider Billing Handbook defines the UC price as "the amount charged by the provider for the same service when provided to private-pay patients." The Mississippi Division of Medicaid refers to this as the "charge to non-medicaid patients" and previously has explained that this is the same as the price charged to a cash-paying customer.

         ¶6. Neither party disputes that the defendants-as retail pharmacies dispensing drugs to Medicaid customers-have entered into Medicaid Provider Agreements with the Mississippi Division of Medicaid. The State argues that, through these agreements, the defendants have agreed to comply with all state and federal Medicaid laws, including the conditions outlined for drug-claims payments. Because the pharmacies were aware of the State's definition of UC and voluntarily have entered into these provider agreements, the State claims that the pharmacies are bound by Mississippi Division of Medicaid's UC definition as well as the price reporting requirements implemented by the State.

         ¶7. Although the pharmacies are both aware of and bound to the UC price-reporting requirement, the State asserts that the defendants do not report their discount drug program prices[3] as their UC prices. Rather, the pharmacies report the full price they might charge, before applying their program's discount. Because the discounted price is the amount charged to "non-Medicaid" or "cash paying" patients, the State argues that the pharmacies should report these lower, discounted amounts as their UC prices for the drugs on the discount drug list. Instead, the defendants have continued to report much higher UC prices than their everyday discounted prices, causing Mississippi Medicaid to reimburse the pharmacies at a much higher rate.

         ¶8. The State claims that by disregarding the everyday, discounted prices regularly charged to private-pay, non-Medicaid patients, the defendants have continued to submit false UC prices, amounting to fraudulent claims for reimbursement, causing the State to remit excessive Medicaid payments to the pharmacies. The State argues that by knowingly and willingly submitting these inaccurate prices, and then fraudulently concealing the true UC prices for the drugs, the defendants violated the Mississippi Medicaid Fraud Act (Mississippi Code Section 43-13-201, et seq.), causing the State to suffer actual damages.

         ¶9. Further, the State argues these same actions constitute unfair and deceptive practices in violation of the State's Consumer Protection Act (Mississippi Code Section 75-24-1, et seq.). Because the defendants knew or should have known that the State would rely on their misrepresentation of the UC prices, their deceptive practices caused the State to suffer actual damages in the form of gross overpayments for prescription drugs. The State requests relief from this burden under Mississippi Code Sections 75-24-9 and 75-24-11, praying for restitution, civil penalties, and injunctive relief.

         ¶10. Citing the defendants' misrepresentations and the damage caused by their inflation of their UC prices, the State also presents claims of fraud and unjust enrichment. As a result, the State requests restitution under both claims.

         ¶11. Of note is the State's prayer for relief, which has become the impetus for the jurisdictional arguments on appeal. The State requested that the chancery court grant the following relief against the defendants:

(1) an order enjoining the Defendants from continuing the fraudulent, deceptive and/or unfair acts or practices complained of herein, and requiring correcting measures;
(2) an award of compensatory damages to the State in such amount as is proved at trial;
(3) an award of actual damages;
(4) an award of all civil penalties provided for by statute;
(5) an award of punitive damages;
(6) an accounting of all profits or gains derived in whole or in part by the Defendants through their fraudulent, unfair and/or deceptive acts or practices complained of herein;
(7) a constructive trust of the moneys illegally and impermissibly obtained from the ...

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