Corcoran et al v. CVS Health Corporation

Northern District of California, cand-4:2015-cv-03504

Exhibit 9

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Exhibit 9 Transcript of Michael D. Reichardt Date: December 20, 2016 Case: Corcoran, et al. -v- CVS Pharmacy, Inc. Planet Depos Phone: 888-433-3767 Fax: 888-503-3767 Email: transcripts@planetdepos.com Internet: www.planetdepos.com Worldwide Court Reporting | Interpretation | Trial Services Transcript of Michael D. Reichardt 1 (1 to 4) Conducted on December 20, 2016 1 3 1 UNITED STATES DISTRICT COURT 1 A P P E A R A N C E S 2 NORTHERN DISTRICT OF CALIFORNIA 2 3 ------------------------------x 3 ON BEHALF OF THE PLAINTIFFS: 4 CHRISTOPHER CORCORAN, et al.,: 4 RICHARD LEWIS, ESQUIRE 5 Plaintiffs,: 5 MICHAELA SPERO, ESQUIRE 6 v.: Case No. 6 HAUSFELD 7 CVS PHARMACY, INC.,: 3:15-cv-03504-YGR 7 1700 K Street, NW 8 Defendant.: 8 Suite 650 9 ------------------------------x 9 Washington, DC 20006 10 10 (202) 540-7200 11 Videotaped Deposition of MICHAEL D. REICHARDT 11 12 Schaumburg, Illinois 12 ON BEHALF OF THE DEFENDANT: 13 Tuesday, December 20, 2016 13 GRANT A. GEYERMAN, ESQUIRE 14 9:08 a.m. 14 VIVAAN NEHRU, ESQUIRE 15 15 WILLIAMS & CONNOLLY, LLP 16 16 725 Twelfth Street, NW 17 17 Washington, DC 20005 18 18 (202) 434-5000 19 19 20 20 21 21 22 Job No.: 130134 22 23 Pages: 1 - 286 23 24 Reported by: Melanie L. Humphrey-Sonntag, 24 25 CSR, RDR, CRR, FAPR 25 2 4 1 Videotaped deposition of MICHAEL D. REICHARDT, 1 A P P E A R A N C E S C O N T I N U E D 2 held at the location of: 2 3 3 ON BEHALF OF THE THIRD PARTY AND WITNESS: 4 OPTUMRx 4 GARRETT HEENAN, ESQUIRE 5 1600 McConnor Parkway 5 OptumRx 6 Third Floor 6 2300 Main Street 7 Schaumburg, Illinois 60173 7 CA134-1000 8 (800) 282-3232 8 Irvine, California 92614 9 9 (949) 252-4386 10 10 11 11 ALSO PRESENT: 12 12 STEPHEN GOETHALS, Videographer 13 Pursuant to subpoena before Melanie L. Humphrey- 13 14 Sonntag, a Certified Shorthand Reporter, Registered 14 15 Diplomate Reporter, Certified Realtime Reporter, and 15 16 a Notary Public in and for the State of Illinois. 16 17 17 18 18 19 19 20 20 21 21 22 22 23 23 24 24 25 25 PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM Transcript of Michael D. Reichardt 31 (121 to 124) Conducted on December 20, 2016 121 123 1 MR. LEWIS: Sure. 1 Optum agreed to the change, striking the 2 A THE WITNESS: The last part was unclear. 2 word "include," replacing it with the word 3 Q So -- so you agree that CVS struck language 3 "exclude"; correct? 4 that reads "Including all applicable customer 4 MR. GEYERMAN: Objection to form. 5 discounts, such as special customer, senior citizen, 5 MR. HEENAN: Join. 6 and frequent shopper discounts"; correct? 6 MR. GEYERMAN: Which clause are you talking 7 A I do. That's correct. 7 about? 8 Q And you would agree that that language would 8 Q Can you answer that? 9 include a discount card program? 9 A Do you need to answer his question? 10 MR. GEYERMAN: Objection to form. 10 Q No. 11 Q Correct? 11 A Okay. I didn't think so. 12 MR. GEYERMAN: Objection to form. 12 MR. GEYERMAN: Objection to form. 13 A THE WITNESS: If you could clarify that it 13 A THE WITNESS: Sorry. One more time. 14 could or it did. 14 MR. LEWIS: Yeah. 15 MR. LEWIS: It could. 15 Q You're looking at your declaration. 16 MR. GEYERMAN: Objection to form. 16 A Okay. 17 A I think it could. It does mention examples 17 Q You're comparing the language in the 18 of what was intended. But it's hard for me to judge 18 agreement that was in place from 1999 to 2015 to the 19 the interpretation, not being a part of the 19 new agreement put in place January 29, 2015; 20 negotiations. 20 correct? 21 Q But the language that CVS asked for you can 21 A Yes, that's correct. 22 judge. It clearly says the discount card programs 22 Q And CVS, beginning in 2013 in the 23 would be excluded; correct? 23 negotiation, asked Optum to change the language from 24 MR. GEYERMAN: Objection; form. 24 including discounts to excluding discounts; correct? 25 MR. HEENAN: Same for form. 25 MR. GEYERMAN: Objection to form. 122 124 1 A Yes. 1 A Let me just read through it one more time. 2 Q And Optum ultimately agreed to that change 2 Q Sure. 3 as -- as indicated in the January 29, 2015, 3 A Correct. 4 agreement? 4 Q All right. And you've stated in your 5 A If I could just clarify that. 5 declaration that it was Optum's understanding that 6 Q Sure. 6 the HSP prices did not need to be included as 7 A I have to go off my declaration. I thought 7 U&C prices during the time frame the HSP program 8 we had a copy of that agreement as one of the 8 existed from 2008 up until the new contract in 9 exhibits. 9 January of 2015; correct? 10 Could someone help me with the reference 10 A Correct. 11 number? 11 Q Then why did they need to change the 12 Q You mean the 2015 agreement? 12 language if they had an understanding in place for a 13 A Yes. 13 seven-year period? 14 Q I can -- I can mark one and give it to you, 14 MR. GEYERMAN: Objection to form. 15 if you'd like, or you can use your declaration, 15 A So we're asking me the intent. It's hard, 16 whatever you prefer. 16 as a contract negotiator, to know if you're not 17 A I can use the declaration. 17 there. Are you asking for my opinion? 18 There are slight differences, so I -- 18 Q Yes. 19 I don't think it's word for word. 19 A That the market changes, language becomes 20 Q Sorry. Have you completed your answer? 20 out of date, definitions become obsolete or in need 21 A Yes. 21 of a change. 22 Q So my question is a little different. But 22 Those are some of the reasons we often 23 the language that CVS asked for you can judge. It 23 update definitions or change them. Sometimes you 24 clearly says that the discount card programs -- 24 have the "included but not limited to" language, and 25 I'm sorry. Let me withdraw that. 25 there needs to be more clarification around what PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM Transcript of Michael D. Reichardt 32 (125 to 128) Conducted on December 20, 2016 125 127 1 that means but not exhaust all the options. 1 updated because of either market conditions, changes 2 Q Do you ever remember making a contract 2 in programs, et cetera. 3 change when you took a word like "include" and you 3 Q Did something in the HSP program change? 4 substituted a word like "exclude," which was the 4 A I'm not aware. 5 opposite? 5 MR. LEWIS: Can I have the 2015 manual? 6 MR. GEYERMAN: Objection to form. 6 I'm going after the manual. 7 A In this particular situation -- 7 That's for you and this is the next exhibit. 8 Q Any situation where you took a word that 8 And it's No. -- I'm sorry. 9 meant something and then you took a word that meant 9 THE COURT REPORTER: 698. 10 the opposite and substituted it in. 10 (Plaintiffs' Exhibit 698 marked for 11 A Yes. 11 identification and attached to the transcript.) 12 Q When was that? 12 Q I'm showing you an excerpt from the 2015 13 A There are several occasions when we 13 Optum provider manual, and I have the full document 14 negotiate risk contracts for medical providers. 14 here. If, for any reason, you want to look at it, 15 Sometimes you include a service -- for example, in a 15 just tell me. 16 capitation -- that would pay them. Sometimes you 16 A Okay. 17 exclude it. 17 Q Or anybody does. But I'm only marking an 18 Q Sometimes you -- you include it for a number 18 excerpt, page 19. 19 of years and then you change your mind and decide to 19 A Okay. 20 exclude it? 20 Q Do you have that before you? 21 A We usually change our decision based on some 21 A I do. 22 relevant facts and data. 22 Q And the 2015 manual, this was a manual to 23 Q But if it was already excluded under your 23 give guidance and instruction to CVS for how to 24 prior interpretation, why would you change the 24 carry out the relationship between the two 25 language? 25 companies; correct? 126 128 1 MR. GEYERMAN: Objection to form. 1 A It was one of the documents, I would say, 2 A Again, I wasn't part of the negotiations, so 2 the contract being the other. 3 the exact reason why I can't interpret. 3 Q Okay. What's the relationship between 4 But going back to my previous examples, 4 the two? 5 there might have been services that the hospital, 5 A The contract really is the binding document 6 for example, did not offer but they built a new wing 6 that outlines the terms and conditions. The manual 7 and now they have an MRI or they have a cancer 7 is oftentimes binding but has more procedural. 8 center. And we include those services. 8 Q And did you review the 2015 manual at any 9 Q Okay. So the HSP was in place from 2008 to 9 time when you were working at Catamaran or Optum? 10 2016; correct? 10 A My hesitation is I just want to see -- can I 11 A That's my understanding. 11 see the full document, please? 12 Q And from 2008 through January 1st of 2015, 12 Q Sure. 13 Optum had an understanding of what it -- of what its 13 A When was this published? Do you know? 14 contract and its definition of "U&C" meant; correct? 14 Q I don't recall. 15 A I would believe so. 15 A Okay. If you just could give me a moment to 16 Q And their understanding was U&C doesn't -- 16 verify that. 17 doesn't include HSP; right? That's their 17 Can you repeat your question, please? 18 understanding? 18 Q Did you review the 2015 manual at any time 19 A Correct. 19 when you were working at Catamaran or Optum? 20 Q So there was no need to change the language? 20 A Yes, I did. 21 They already had an understanding; correct? 21 Q On -- what were the circumstances that led 22 MR. GEYERMAN: Objection to form. 22 you to do that? 23 A Again, not being part of the negotiations, 23 A As part of my training when I was onboarded 24 it's hard for me to say yes or no. But, again, 24 or recently hired. 25 these definitions from time to time need to be 25 So I would look through and review and get PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM Transcript of Michael D. Reichardt 50 (197 to 200) Conducted on December 20, 2016 197 199 1 understanding of the business practices at Optum and 1 Q Okay. Fair enough. 2 Prescription Solutions, neither company interpreted 2 Tell me, sir, in the first sentence, when 3 the predecessor agreement's definition of 'usual and 3 you say "Based on my understanding of the business 4 customary' to require CVS to submit its Health 4 practices at Optum and Prescription Solutions," what 5 Savings Pass price as its U&C price. Optum did not 5 did you do to satisfy yourself before executing this 6 consider HSP members, who had affirmatively enrolled 6 declaration that, in fact, the business practices at 7 in a program, to be 'cash customers.' Similarly, 7 Optum and Prescription Solutions back to 1999 -- or 8 they did not interpret the predecessor agreement's 8 strike that. 9 phrase 'applicable discounts' to encompass the 9 What did you do to satisfy yourself that the 10 Health Savings Pass." 10 business practices of Optum and Prescription 11 Did I read that correctly? 11 Solutions, back to the time of 2008 when the CVS 12 A Yes. 12 Health Savings Pass was launched, did not consider 13 Q Is -- the "they" that is in the last 13 the Health Savings Pass to be part of the 14 sentence of paragraph 11, who's the "they"? 14 contractual definitions of "usual and customary 15 MR. LEWIS: Objection. 15 price"? 16 Q Let me -- I'll say it differently. 16 A So the -- the research was, of course, the 17 Who did you mean to refer to when you said 17 agreement research I mentioned earlier. 18 the word "they" in this declaration? 18 We had the luxury at the time of comparing 19 MR. LEWIS: Objection. 19 the legacy Catamaran agreement and the OptumRx 20 A Optum. 20 agreement, so you had, basically, two sources of 21 Q And when you say "Optum," are you intending 21 truth of what that meant. 22 to exclude Prescription Solutions, or are you using 22 And then my website research. I think those 23 "Optum" as Optum and Prescription Solutions that are 23 three elements led me to these statements. 24 now the same company? 24 Q And would part of your understanding of the 25 A I believe in the recitals there that -- 25 business practices have been the fact that Optum and 198 200 1 No. 6, it defines who Optum is. And the 1 Prescription Solutions never sought a recoupment 2 predecessor. 2 from CVS for alleged overreimbursement on the basis 3 So the "they" that's referred to in the 3 that you submitted a usual and customary price that 4 second half of 11 on page 3 under all of our 4 wasn't your Health Savings Pass to us? 5 scenarios would be OptumRx. 5 A Not that I'm aware of. There was nothing. 6 Q So -- and Optum -- strike that. 6 Q Let me ask -- let me ask my question a 7 Prescription Solutions was renamed Optum; 7 little more precisely. 8 correct? 8 Are you aware, from 2008 to the present, of 9 A I believe OptumRx. 9 Optum or Prescription Solutions ever pursuing from 10 Q Okay. And that happened sometime in the 10 CVS any type of collection of an alleged overpayment 11 mid-2000s? We -- 11 on the basis that you didn't submit to us your 12 A Yes. 12 Health Savings Pass price as your usual and 13 Q -- addressed the year earlier -- 13 customary price but you should have? 14 A Correct. 14 A Okay. Thanks for the clarification. 15 Q -- in the deposition. 15 No, I am not. 16 I guess what my question is, is the last 16 Q Okay. And is the fact that you're not aware 17 sentence that says, "Similarly, they did not 17 of any such pursuit by Optum and Prescription 18 interpret the predecessor agreement's phrase 18 Solutions of such an alleged overpayment a basis 19 'applicable discounts' to encompass the Health 19 upon which you are comfortable saying that it's the 20 Savings Pass" -- you are referring to not just the 20 business practices of Optum and Prescription 21 entity after the name change in the mid-2000s but, 21 Solutions to consider Health Savings Pass outside 22 also, the entity back to 1999 when the agreement 22 the contractual definition of "usual and customary 23 that you're referring to was executed; fair? 23 price"? 24 A Fair. "They" would incorporate the 24 A Yes. 25 predecessors. 25 Q Who -- just tell me who you report to in the PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM Transcript of Michael D. Reichardt 51 (201 to 204) Conducted on December 20, 2016 201 203 1 hierarchy here at OptumRx. 1 A Yes, that's fair. 2 A Sure. 2 Q And so there are other membership programs 3 So I directly report to Joe Zavalishin. 3 offered by other pharmacies besides CVS; fair? 4 Q And who does Joe report to? 4 A Yes. 5 A Joe reports to Edward Lagerstrom. 5 They might be owned or partnered with, 6 Q And do you know what level or what title 6 et cetera, but -- yes. So they might not actually 7 Joe has? 7 own the entity that they're promoting. 8 A Yes. He's our SVP, senior VP. 8 Q I'm not sure I understood that comment. 9 And Ed is our executive vice president, EVP. 9 A So there's other programs that may function 10 Q And is Joe a senior vice president of 10 out of a pharmacy but they may not be wholly owned 11 OptumRx? 11 by the pharmacy corporation. They might be 12 A Yes. 12 partnering with them to offer members a need that 13 Q And is your title still today, 13 are paying a cash price, a -- for example -- a 14 Mr. Reichardt, senior director of network relations 14 discount card. 15 at OptumRx? 15 Q Optum doesn't consider cash discount card 16 A Yes, it is. 16 prices to be within their contractual definitions of 17 Q And who does Edward Lagerstrom report to, as 17 "usual and customary"; fair? 18 far as you know? 18 A Correct. 19 A I believe Mark Thierer. 19 Q Please look at still that last sentence of 20 Q And who's that? 20 paragraph 11. Again, it says, "Similarly, they did 21 A He is the CEO of OptumRx. 21 not interpret the predecessor agreement's phrase 22 Q Have you had any conversations with your 22 'applicable discounts' to encompass the Health 23 direct supervisor -- and I'm not going to say his 23 Savings Pass." 24 last name because I know I won't get it right -- 24 Do you remember plaintiffs' counsel was 25 Joe, Joe Z -- have you had any conversations with 25 asking you some questions about the phrase 202 204 1 him about the topics of usual and customary pricing 1 "applicable discounts" and whether it could 2 and membership programs, whether they fall in or out 2 encompass a membership program? 3 of that term? 3 A I do. 4 A Not for CVS'. 4 Q Okay. And I just don't want there to be any 5 Q But -- I'm talking in general. Have you had 5 ambiguity in the record. 6 conversations with him about that topic? 6 While one might be able to make the argument 7 A Yeah. I think they came up naturally 7 that that language ought to include a membership 8 because we would review U&C. That might not be the 8 program, is it your testimony that Optum and 9 impetus of our review, but when -- we review that 9 Prescription Solutions did not interpret the phrase 10 and the "lesser of" language to make sure we're 10 "applicable discounts" to include the Health Savings 11 capturing everything. 11 Pass? 12 Q And so you've had conversations with your 12 MR. LEWIS: Objection. 13 senior vice president about perhaps not CVS' 13 MR. HEENAN: Join. 14 specific membership program but other pharmacies' 14 A That's correct. 15 membership programs and whether or not membership 15 Q Nor did Optum or Prescription Solutions 16 program prices fall within "usual and customary 16 interpret any other language in either the 17 price" definition; is that fair? 17 predecessor agreement from 1999 or the superseding 18 MR. LEWIS: Objection. 18 agreement in 2015, in the "usual and customary 19 A That's fair. I think the -- most of the 19 price" definition, as encompassing the Health 20 discussions were around constructing a new base 20 Savings Pass; correct? 21 agreement to see if these terms fit the current 21 MR. LEWIS: Objection. 22 marketplace. 22 A THE WITNESS: Can you break that apart and 23 Q And can you -- and so that discussion with 23 give me a couple segments? 24 your senior vice president obviously happened before 24 MR. GEYERMAN: Yeah. That was pretty long. 25 you executed this declaration. Fair? 25 No problem. PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM Transcript of Michael D. Reichardt 52 (205 to 208) Conducted on December 20, 2016 205 207 1 A THE WITNESS: I can answer them as you 1 of paragraph 12? 2 break. 2 MR. LEWIS: Objection. 3 Q Let's take the 1999 agreement first. 3 A Yeah, I think some of that does. Although 4 Neither Prescription Solutions nor OptumRx 4 we weren't specifically relating it to the Health 5 interpreted any aspect of the definition of "usual 5 Savings Pass, it was a -- more of a strategic 6 and customary price" in that contract as 6 session to say, "Here's our current "lesser of" 7 encompassing the Health Savings Pass program price; 7 language. Are we missing anything or has anything 8 correct? 8 changed in the marketplace that would behoove us to 9 A Correct. 9 make modifications to that language?" 10 Q And neither -- strike that. 10 Q And it's still the position today of 11 OptumRx did not interpret any aspect of the 11 OptumRx, is it not, that membership programs are not 12 definition of "usual and customary price" in the 12 part of usual and customary pricing? 13 2015 agreement that replaced the 1999 agreement as 13 A Correct. 14 encompassing the Health Savings Pass program price; 14 It goes back to my comments that they're 15 correct? 15 separate and distinct and the two programs cannot be 16 A Correct. 16 used in conjunction with one another. 17 Q The last paragraph in your declaration that 17 Q In paragraph 11 of the declaration, there's 18 says, "I understand that Optum and Prescription 18 no reference when describing the business practices 19 Solutions took a consistent position with respect to 19 of Optum and Prescription Solutions with respect to 20 membership-based generic programs offered by 20 the Health Savings Pass to the enrollment fee that 21 pharmacies other than CVS," do you see that 21 was charged as part of the Health Savings Pass, only 22 sentence? 22 in reference to the affirmative enrollment in a 23 A I do. 23 program? Do you agree? 24 Q What are you saying here? 24 I'm sorry. I'm jumping around on you. 25 A That the position was that the -- programs 25 A It's okay. 206 208 1 similar to the Health Savings Pass that CVS offers 1 Q Go to paragraph 11. 2 were excluded, as well. 2 A That's correct. 3 Q In other words, Prescription Solutions and 3 Q And from this am I correct in inferring that 4 Optum wasn't giving CVS special treatment? 4 the presence or absence of an enrollment fee is not 5 MR. LEWIS: Objection. 5 necessary -- strike that. 6 A If I could paraphrase that, I think that the 6 Would I be correct in inferring from your 7 term "consistent approach" could be synonymous with 7 declaration that Optum and Prescription Solutions 8 that no one chain was treated differently and that 8 did not view the presence of an enrollment fee as 9 our consistent approach was applied to the network, 9 being necessary to a membership program being 10 not a specific chain or independent pharmacy. 10 outside of the contractual definition of "usual and 11 Q Optum and Prescription Solutions' position 11 customary price"? 12 with respect to membership programs was the same 12 A I would agree with that under the basis that 13 regardless of which pharmacy was offering the 13 others had programs that maybe did not have a fee. 14 membership program? Is that -- 14 So it was the action of the member or the 15 A That's my understanding, correct. 15 customer enrolling, receiving some kind of card, 16 Q And tell me what that understanding is based 16 et cetera. Whether or not they all had to pay 17 upon. 17 enrollment fees, I think that varied. 18 A I -- the agreement research that was 18 Q Sitting here today, can you name any 19 previously done. On the -- then the 2015 agreement 19 pharmacy membership program that you believe did not 20 for Optum and the -- likewise -- the 2015 agreement 20 charge an enrollment fee? 21 for Catamaran. 21 A I'm trying to think if Walmart did. I don't 22 Q And would you also consider the discussion 22 think Walmart charged an enrollment fee, but they 23 you had with your senior vice president about 23 had a benefit -- 24 membership programs and usual and customary pricing 24 Q And -- 25 as part of your understanding that forms the basis 25 A -- for generic drugs. PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM Transcript of Michael D. Reichardt 72 (285 to 288) Conducted on December 20, 2016 285 1 THE VIDEOGRAPHER: Off the record. The time 2 is 1652. 3 (A recess was taken from 4:52 p.m. to 4 4:58 p.m. The following proceedings were outside 5 the video record:) 6 MR. LEWIS: All right. This is Richard 7 Lewis. 8 I've conferred with counsel for CVS and 9 counsel for Optum. We have completed the individual 10 declarant deposition. We are not going to open the 11 noticed and subpoenaed 30(b)(6) deposition at this 12 time. 13 We're going to meet and confer on it in the 14 coming days and get back to Optum counsel on whether 15 or not we think it needs to go forward and, if so, 16 if it can be scheduled. 17 MR. HEENAN: Great. 18 MR. GEYERMAN: Okay. 19 Thank you to the witness. 20 MR. LEWIS: Thank you. 21 MR. GEYERMAN: We appreciate your time. 22 MR. LEWIS: Thank you. 23 (Off the record at 4:59 p.m.) 24 25 286 1 CERTIFICATE OF COURT REPORTER - NOTARY PUBLIC 2 3 I, Melanie L. Humphrey-Sonntag, Certified 4 Shorthand Reporter No. 084-004299, CSR, RDR, CRR, 5 CRC, FAPR, and a Notary Public in and for the County 6 of Kane, State of Illinois, the officer before whom 7 the foregoing deposition was taken, do hereby 8 certify that the foregoing transcript is a true and 9 correct record of the testimony given; that said 10 testimony was taken by me stenographically and 11 thereafter reduced to typewriting under my 12 direction; that reading and signing was not requested; 13 and that I am neither counsel for, related to, nor 14 employed by any of the parties to this case and have 15 no interest, financial or otherwise, in its outcome. 16 IN WITNESS WHEREOF, I have hereunto set my 17 hand and affixed my notarial seal this 2nd day of 18 January, 2017. 19 20 My commission expires: May 31, 2017 21 22 _____________________________ 23 Notary Public in and for the 24 State of Illinois 25 PLANET DEPOS 888.433.3767 | WWW.PLANETDEPOS.COM