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Oxford Health Insurance Prescription Overcharges ERISA Class Action

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The complaint for this class action claims that Oxford Health Insurance, Inc. (OHI) arranged with pharmacies to overcharge patients for prescription drugs and return the overcharges as “clawbacks” to Oxford. According to the complaint, the insurer’s actions violate not just the Employee Retirement Income Security Act (ERISA) but also the Racketeering Influenced and Corrupt Organizations Act (RICO).

The class for this action all individuals in the US or its territories enrolled in an OHI-issued or -administered health benefit plan who bought prescription drugs under the plan and paid more than the payment amount provided by the plan. An ERISA subclass has also been proposed, for those whose plans are subject to ERISA.

Oxford Health Insurance is a licensed health insurance company and a wholly-owned subsidiary of UnitedHealth Group, Inc. Other defendants in this case include Optum, Inc., another subsidiary of United that manages OHI’s pharmacy benefits, and OptumRx, its pharmacy benefit manager (PBM), the agent that administers Oxford’s prescription plan.

When an insured patient presents a prescription to the pharmacy, the pharmacy transmits the information to the PBM, which transmits back to the pharmacy the amount to be charged to the patient. Later, the PBM sends the pharmacy the insurer’s share of the payment. However, the complaint says, if the patient’s payment is greater than the price of the drug that the pharmacy and insurer have agreed to, a “negative payment” will be due to the insurer—the difference between what the patient paid and the agreed-upon drug price.

According to the complaint, however, plaintiff Anna Mohr-Lercara’s insurance plan promises that she will not pay more for prescription drugs than the Oxford’s “contracted fee” with the pharmacy, that is, the amount Oxford would pay the pharmacy for the drug.

However, the complaint alleges, Oxford arranged with pharmacies to charge customers amounts that exceeded the covered fee, sometimes by more than 250%, and then required that the pharmacy pay them the extra money charged to the patient.

As an example, the complaint cites a $15 copayment charged to Mohr-Lercara, which it says was over 250% of the contracted fee the pharmacy was paid for the prescription. The overcharge, which is the difference between what she was charged and Oxford’s covered fee is known as the spread. The complaint claims that Oxford initially allowed pharmacies to keep the spread but that, during the class period, it began “clawing back” the spread, or requiring pharmacies to pay the spread to the company. Also, the complaint claims that the pharmacies were not permitted to disclose the clawbacks or overcharges to patients.

The complaint claims that the clawbacks violate the very purpose of insurance, forcing patients to sometimes pay more than the cost of the drug, despite the fact that they’ve already paid premiums for their insurance coverage.

According to the complaint, Oxford has violated ERISA laws in a number of ways, including by breaching its fiduciary duty in taking undisclosed and excessive payments and in using the plan for its own interests at the expense of the participants; and it has violated RICO laws in engaging a scheme to defraud.

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