Corcoran et al v. CVS Health Corporation

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

ORDER by Judge Yvonne Gonzalez Rogers granting 271 Motion for Summary Judgment; granting in part 274 Motion to Certify Class; granting in part 287 Motion to Exclude Certain Opinions by Dr. Hay. Defendants to file a proposed judgment, approved as to form by all parties, within five business days of this Order.

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2 1 2 3 4 5 6 7 8 UNITED STATES DISTRICT COURT 9 NORTHERN DISTRICT OF CALIFORNIA 10 11 CHRISTOPHER CORCORAN, ET AL., CASE NO. 15-cv-03504-YGR 12 Plaintiffs, ORDER GRANTING IN PART PLAINTIFFS' Northern District of California United States District Court MOTION FOR CLASS CERTIFICATION; 13 vs. GRANTING IN PART DEFENDANTS' MOTION TO EXCLUDE CERTAIN OPINIONS BY DR. 14 CVS HEALTH, ET AL., HAY; GRANTING DEFENDANTS' MOTION FOR SUMMARY JUDGMENT 15 Defendants. Re: Dkt. Nos. 271, 274, 287 16 17 Plaintiffs bring this putative class action against defendants alleging that they knowingly 18 overcharged millions of insured patients by submitting falsely inflated drug prices to pharmacy 19 benefit managers ("PBMs") and third-party payor insurance providers ("TPPs"), which resulted in 20 higher copayment obligations for plaintiffs. Specifically, plaintiffs raise claims under the laws of 21 eleven states: (i) each state's statutory laws proscribing unfair and deceptive acts and practices 22 ("UDAP"); and common law claims for (ii) fraud, (iii) negligent misrepresentation, and (iv) unjust 23 enrichment. 24 Now before the Court are the following motions: First, plaintiffs have filed a renewed 25 motion for class certification, significantly narrowing the classes and issues which they seek to 26 certify. Second, defendants move to exclude certain opinions from Dr. Hay, submitted in support 27 of plaintiffs' motion for class certification. And third, defendants' move for summary judgment 28 2 1 on all claims in this action arguing that plaintiffs have failed to demonstrate either any 2 misrepresentations or reliance, essential elements of their claims.1 3 Having carefully reviewed the pleadings, the papers submitted on each motion, the parties 4 oral arguments at the hearing held on July 18, 2017, and for the reasons set forth more fully below, 5 the Court ORDERS as follows: The Court GRANTS IN PART plaintiffs' motion for class 6 certification, certifying a California, Florida, Illinois, and Massachusetts class, but limited only to 7 the PBM that adjudicated each class representative's claim. The Court DENIES the motion to 8 certify a New York and Arizona class because the proposed class representatives fail to satisfy the 9 typicality requirement of Rule 23(a). The Court GRANTS IN PART defendants' motion to exclude 10 certain opinions by Dr. Hay and STRIKES Dr. Hay's opinion that CVS's Health Savings Pass 11 ("HSP") prices are the "Usual and Customary" ("U&C") prices as defined in CVS's contracts. 12 The Court GRANTS defendants' motion for summary judgment finding no triable issue of fact Northern District of California United States District Court 13 exists with regard to whether CVS misrepresented its U&C price to the PBMs. 14 I. BACKGROUND 15 Plaintiffs seek to certify eleven state classes composed of individuals who "have filled 16 prescriptions for generic drugs at CVS pharmacies using coverage provided by their [TPP] plans." 17 (Dkt. No. 101, Third Amended Complaint ("TAC") ¶ 10.) The following facts and allegations 18 relate to the instant motions: 19 CVS is a national retail pharmacy chain with over seven thousand pharmacies operating 20 under its trade name in the United States and Puerto Rico, managing more than one billion 21 prescriptions annually. (Id. at ¶ 4.) In 2014, CVS' retail pharmacy business generated more than 22 $67 billion in revenues, 70% of which came from prescription drugs. Since 2008, CVS has 23 1 24 The parties have also filed administrative motions to seal certain exhibits and portions thereof at Docket Numbers 272, 281, 286, 300, 302, and 314. The Court addresses each by 25 separate order, under the appropriate "compelling reasons" standard. See Kamakana v. City and Cty. of Honolulu, 447 F.3d 1172, 1178–80 (9th Cir. 2006) (holding that the moving party must 26 present "compelling reasons" to outweigh the public's interest in disclosure with regard to dispositive motions such as summary judgment); see also Aldapa v. Fowler Packing Co., Inc., No. 27 15-CV-420-DAD, 2017 WL 2546606, at *2 n.2 (E.D. Cal. June 13, 2017) (applying heightened "compelling reasons" standard to motions to seal connected with a motion for class certification 28 where the certification issues are "clearly more than tangentially related to the merits of the case" and where denial of the same "would almost certainly be dispositive of th[e] case"). 2 2 1 captured more than one third of total prescription growth in the United States. (Id.) 2 Approximately ninety percent of Americans—including plaintiffs— are enrolled in a private or 3 public health care plan that shares prescription drug costs. (Id. at ¶ 8.) Generally, when plan 4 participants fill a prescription under one of these TPP health care plans, the plan "pays a portion of 5 the cost, and the plan participant pays the remaining portion of the cost directly to the pharmacy in 6 the form of a copayment or copay." (Id.) Many TPPs typically contract with a PBM to administer 7 their prescription benefits with a pharmacy. 8 When a plan participant fills a prescription at CVS, the pharmacist generates a claim by 9 transmitting patient, prescription, and insurance information electronically to the customer's 10 insurer directly or the PBM. (Id. at ¶¶ 47–48.) The electronic CVS claims process utilizes 11 standardized data fields developed by the National Council for Prescription Drug Programs 12 ("NCPDP"), a standard-setting organization in the healthcare industry. (Id. at ¶¶ 50–51.) One Northern District of California United States District Court 13 data field on NCPDP's standard layout is Field No. 426-DQ, the U&C price. (Id. at ¶ 53.) The 14 U&C price is "generally defined as the cash price to the general public, which is the amount 15 charged [to] cash customers for the prescription, exclusive of sales tax or other amounts claimed." 16 (Id.) Under most of CVS's contracts with TPPs and PBMs, the copayment must generally be the 17 lower of the following: (a) the drug's average wholesale price as set by the industry; (b) a 18 maximum allowable cost determined by the pharmacy's contract with the PBM or TPP; or (c) the 19 U&C price. 20 In 2008, CVS introduced its HSP program. (Id. at ¶ 60.) The HSP program provides 21 discounted pricing on hundreds of generic prescription medications, including some of the most 22 commonly prescribed drugs for cardiovascular, allergy, and diabetes conditions, among others. 23 (Id. at ¶ 62.)2 Plaintiffs allege that the price charged by CVS under the HSP program for the HSP 24 generics was the true U&C price for those drugs. (Id. at ¶ 70.) However, CVS continued to 25 submit amounts higher than the HSP price for all HSP generics (rather than the HSP program 26 2 27 From November 9, 2008 through 2010, cash paying customers could join the HSP program for a $10 fee, and be entitled to $9.99 prices for a ninety-day supply of an HSP generic. 28 (Id. at ¶ 62.) Beginning in 2011, CVS raised the HSP enrollment fee to $15 a year and the cost of a ninety-day supply of an HSP generic rose to $11.99. (Id.) 3 2 1 price) as the U&C price to TPPs and PBMs. (Id. at ¶ 71.) As a result, in some instances, plaintiffs 2 allege they paid copayments that exceeded the HSP price or the "true U&C price." (Id. at ¶¶ 76, 3 80.) Defendants discontinued the HSP program on February 1, 2016. 4 II. LEGAL FRAMEWORK 5 A. Motion for Class Certification 6 Under Federal Rule of Civil Procedure 23(a), the Court may certify a class only where "(1) 7 the class is so numerous that joinder of all members is impracticable; (2) there are questions of law 8 or fact common to the class; (3) the claims or defenses of the representative parties are typical of 9 the claims or defenses of the class; and (4) the representative parties will fairly and adequately 10 protect the interests of the class." Fed. R. Civ. P. 23(a). Courts refer to these four requirements as 11 "numerosity, commonality, typicality[,] and adequacy of representation." Mazza v. Am. Honda 12 Motor Co., Inc., 666 F.3d 581, 588 (9th Cir. 2012). Northern District of California United States District Court 13 Once plaintiffs establish that the threshold requirements of Rule 23(a) are met, plaintiffs 14 must then show "through evidentiary proof" that a class is appropriate for certification under one 15 of the provisions in Rule 23(b). Comcast Corp. v. Behrend, 569 U.S. 27, 133 S. Ct. 1426, 1432 16 (2013). Here, plaintiffs seek certification under Rule 23(b)(3) only. 17 Rule 23(b)(3) requires plaintiffs to establish "that the questions of law or fact common to 18 class members predominate over any questions affecting only individual members, and that a class 19 action is superior to other available methods for fairly and efficiently adjudicating the 20 controversy." Fed. R. Civ. P. 23(b)(3). The predominance inquiry focuses on "whether proposed 21 classes are sufficiently cohesive to warrant adjudication by representation." Hanlon v. Chrysler 22 Corp., 150 F.3d 1011, 1022 (9th Cir. 1998) (quoting Amchem Prods., Inc. v. Windsor, 521 U.S. 23 591, 623 (1997)). 24 B. Motion to Exclude Expert Opinion 25 Rule 702 permits opinion testimony by an expert as long as the witness is qualified and 26 their opinion is relevant and reliable. Fed. R. Evid. 702. An expert witness may be qualified by 27 "knowledge, skill, experience, training, or education." Id. 28 4 2 1 At the class certification stage, courts analyze challenges to expert testimony under the 2 standards set forth in Daubert v. Merrell Dow Pharmaceuticals, Inc., 509 U.S. 579 (1993). See 3 Ellis, 657 F.3d at 982. "[A]t this early stage, robust gatekeeping of expert evidence is not 4 required; rather, the court should ask only if expert evidence is useful in evaluating whether class 5 certification requirements have been met." Culley v. Lincare Inc., No. 15-CV-00081-MCE-CMK, 6 2016 WL 4208567, at *1 (E.D. Cal. Aug. 10, 2016) (quoting Tait v. BSH Home Appliances Corp., 7 289 F.R.D. 466, 492–93 (C.D. Cal. 2012)). 8 The trial judge has discretion to determine reasonable measures of reliability. Kumho Tire 9 Co., Ltd. v. Carmichael, 526 U.S. 137, 153 (1999). The proponent of expert testimony has the 10 burden of proving admissibility in accordance with Rule 702. Fed. R. Evid. 702, Advisory 11 Committee Notes (2000 amendments). An expert should be permitted to testify if the proponent 12 demonstrates that: (1) the expert is qualified; (2) the evidence is relevant to the suit; and (3) the Northern District of California United States District Court 13 evidence is reliable. See Thompson v. Whirlpool Corp., No. 06-CV-1804-JCC, 2008 WL 14 2063549, at *3 (W.D. Wash. May 13, 2008) (citing Daubert, 509 U.S. at 589–94). 15 C. Motion for Summary Judgment 16 Summary judgment is appropriate when no genuine dispute as to any material fact exists 17 and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). A party 18 seeking summary judgment bears the initial burden of informing the court of the basis for its 19 motion, and of identifying those portions of the pleadings, depositions, discovery responses, and 20 affidavits that demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. 21 Catrett, 477 U.S. 317, 323 (1986). Material facts are those that might affect the outcome of the 22 case. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). The "mere existence of some 23 alleged factual dispute between the parties will not defeat an otherwise properly supported motion 24 for summary judgment; the requirement is that there be no genuine issue of material fact." Id. at 25 247–48 (dispute as to a material fact is "genuine" if sufficient evidence exists for a reasonable jury 26 to return a verdict for the non-moving party) (emphases in original). 27 Where the moving party will have the burden of proof at trial, it must affirmatively 28 demonstrate that no reasonable trier of fact could find other than for the moving party. Soremekun 5 2 1 v. Thrifty Payless, Inc., 509 F.3d 978, 984 (9th Cir. 2007). On an issue where the opposing party 2 will bear the burden of proof at trial, the moving party can prevail merely by pointing out to the 3 district court that the opposing party lacks evidence to support its case. Id. If the moving party 4 meets its initial burden, the opposing party must then set out "specific facts" showing a genuine 5 issue for trial in order to defeat the motion. Id. (quoting Anderson, 477 U.S. at 250). The 6 opposing party's evidence must be more than "merely colorable" and must be "significantly 7 probative." Anderson, 477 U.S. at 249–50. Further, that party may not rest upon mere allegations 8 or denials of the adverse party's evidence, but instead must produce admissible evidence that 9 shows a genuine issue of material fact exists for trial. Nissan Fire & Marine Ins. Co., Ltd. v. Fritz 10 Cos., Inc., 210 F.3d 1099, 1102–03 (9th Cir. 2000); Nelson v. Pima Cmty. College, 83 F.3d 1075, 11 1081–82 (9th Cir. 1996) ("mere allegation and speculation do not create a factual dispute"); Arpin 12 v. Santa Clara Valley Transp. Agency, 261 F.3d 912, 922 (9th Cir. 2001) ("conclusory allegations Northern District of California United States District Court 13 unsupported by factual data are insufficient to defeat [defendants'] summary judgment motion"). 14 When deciding a summary judgment motion, a court must view the evidence in the light 15 most favorable to the non-moving party and draw all justifiable inferences in its favor. Anderson, 16 477 U.S. at 255; Hunt v. City of Los Angeles, 638 F.3d 703, 709 (9th Cir. 2011). However, in 17 determining whether to grant or deny summary judgment, a court need not "scour the record in 18 search of a genuine issue of triable fact." Keenan v. Allan, 91 F.3d 1275, 1279 (9th Cir. 1996) 19 (internal quotations and citation omitted). Rather, a court is entitled to "rely on the nonmoving 20 party to identify with reasonable particularity the evidence that precludes summary judgment." 21 See id. (internal quotations and citation omitted); Carmen v. San Francisco Unified Sch. Dist., 237 22 F.3d 1026, 1031 (9th Cir. 2001) ("The district court need not examine the entire file for evidence 23 establishing a genuine issue of fact, where the evidence is not set forth in the opposing papers with 24 adequate references so that it could conveniently be found."). Ultimately, "[w]here the record 25 taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no 26 'genuine issue for trial.'" Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 27 587 (1986) (citation omitted). 28 6 2 1 III. MOTION FOR CLASS CERTIFICATION 2 Plaintiffs now seek to certify six state classes under Federal Rule of Civil Procedure 3 23(b)(3) defined as follows: 4 All CVS customers in [California,] [Arizona,] [Florida,] [Illinois,] [Massachusetts,] [and New York] who, between November 2008 and July 31, 5 2015 (the "Class Period"), (1) purchased one or more generic prescription drugs that were offered through CVS's Health Savings Pass ("HSP") program at the 6 time of the purchase; (2) were insured for the purchase(s) through a third-party 7 payor plan administered by one of the following pharmacy benefit managers: Caremark/PCS, Express Scripts, Medco, MedImpact, or Optum/Prescription 8 Solutions (prior to January 29, 2015); and (3) paid CVS an out-of-pocket payment for the purchase greater than the HSP price for the prescription. 9 Plaintiffs proffer the following representatives for each state class: California (Tyler 10 Clark); Arizona (Zulema Avis); Florida (Debbie Barrett and Robert Jenks); Illinois 11 (Robert Jenks and Carl Washington); Massachusetts (Robert Garber); and New York 12 Northern District of California (Onnolee Samuelson). United States District Court 13 Defendants contend that certification of these classes is inappropriate because the classes 14 and class representatives fail to satisfy the requirements for a Rule 23(b)(3) class, namely: (i) 15 typicality; (ii) predominance and commonality;3 and (iii) superiority.4 The Court addresses each. 16 A. Typicality 17 Defendants raise three arguments with respect to typicality: first, each state representative 18 is not typical of other class members in their state whose claims were adjudicated by a different 19 PBM; second, given the limited time period, plaintiffs Avis (Arizona) and Samuelson (New York) 20 21 3 22 For efficiency, the Court addresses commonality under Rule 23(a) together with predominance under Rule 23(b)(3). See, e.g., Collins v. ITT Educ. Servs., Inc., No. 12-CV-1395, 23 2013 WL 6925827, at *3 (S.D. Cal. July 30, 2013) (addressing commonality and predominance together) (citing Amchem Prods., 521 U.S. at 609 ("Rule 23(a)(2)'s 'commonality' requirement is 24 subsumed under, or superseded by, the more stringent Rule 23(b)(3) requirement that questions common to the class 'predominate over' other questions.")); Steven Ades & Hart Woolery v. Omni 25 Hotels Mgmt. Corp., No. 13-CV-2468, 2014 WL 4627271, at *8 (C.D. Cal. Sept. 8, 2014). 4 26 Defendants also raise adequacy issues to preserve the same for purposes of appeal, but concede that the Court has previously rejected the very same argument in its prior order denying 27 plaintiffs' first motion for class certification. (Dkt. No. 301 at 30.) For the same reasons the Court previously rejected defendants' arguments in this regard, they are rejected here. 28 Accordingly, the Court finds that plaintiffs have satisfied the adequacy requirement for class certification. 7 2 1 have no qualifying transactions; and third, all plaintiffs except for Samuelson continued shopping 2 at CVS after learning of the alleged deception. The Court previously rejected defendants' third 3 argument, and, for the same reasons, does so again here. (Dkt. No. 249 at 14.) Thus, the Court 4 addresses only defendants' first and second arguments. 5 1. Different PBM Adjudicators 6 Defendants argue that each class representative is atypical with respect to other potential 7 class members whose claims were adjudicated by a different PBM. For instance, Clark is the sole 8 representative of the California class, and he claims that he was overcharged on purchases 9 adjudicated by Caremark. Defendants explain that Clark would be atypical of other California 10 class members whose claims were adjudicated by ExpressScripts, Medco, MedImpact, or Optum. 11 The Court agrees. "The test of typicality 'is whether other members have the same or 12 similar injury, whether the action is based on conduct which is not unique to the named plaintiffs, Northern District of California United States District Court 13 and whether other class members have been injured by the same course of conduct.'" Hanon v. 14 Dataproducts Corp., 976 F.2d 497, 508 (9th Cir. 1992) (quoting Schwartz v. Harp, 108 F.R.D. 15 279, 282 (C.D. Cal. 1985)). Plaintiffs here are seeking to certify six different state classes to 16 demonstrate that defendants submitted incorrect or false U&C prices to five different PBMs within 17 each state. To illustrate, for instance, the Illinois class would seek to demonstrate that under 18 Illinois' UDAP law, defendants breached their contracts to Caremark, Express Scripts, Medco, 19 MedImpact, and Optum by failing to submit accurate U&C prices to each. However, plaintiffs put 20 forward only two class representatives for Illinois—Washington and Jenks—and both of their 21 claims were adjudicated by only one PBM, Caremark. The evidence with respect to Caremark— 22 discussed in greater depth herein in the context of defendants' summary judgment motion—does 23 not necessarily apply to the other PBMs. Whether defendants failed to honor their agreement with 24 Caremark is not necessarily dispositive of whether they breached their agreement to other PBMs. 25 Each of these agreements was carefully negotiated between highly sophisticated parties, and the 26 nuances among them could induce varying results. 27 Thus, the classes here must necessarily be limited in scope to the PBMs, which adjudicated 28 the class representative's claims. See O'Connor v. Boeing N. Am., Inc., 197 F.R.D. 404, 412 (C.D. 8 2 1 Cal. 2000) ("The premise of the typicality requirement is simply stated: as goes the claim of the 2 named plaintiff, so go the claims of the class. Where the premise does not hold true, class 3 treatment is inappropriate." (citations omitted)); see also In re WellPoint, Inc. Out-of-Network 4 "UCR" Rates Litig., No. 09-MDL-2074-PSG, 2014 WL 6888549, at *4 (C.D. Cal. Sept. 3, 2014) 5 (finding certification not appropriate because "[usual, customary, and reasonable] obligations are 6 governed by its contracts, and the relevant terms of those contracts vary across the proposed 7 classes" even where a standard, industry definition existed); Westways World Travel, Inc. v. AMR 8 Corp., No. 99-CV-386, 2005 WL 6523266, at *9 (C.D. Cal. Feb. 24, 2005) (denying certification 9 where the "sheer number of additional agreements, even though many are form contracts, suggests 10 that individualized issues would predominate"). However, that these limits are necessary does not 11 require denial of plaintiffs' motion for class certification. Rather, to the extent that the proposed 12 classes satisfy the remaining requirements for class certification, the Court narrows each class to Northern District of California United States District Court 13 the specific PBMs, which adjudicated the claims of the class representatives. 14 Thus, the proposed classes are so narrowed and limited to the following: (i) California 15 limited only to Caremark; (ii) Arizona to Caremark; (iii) Florida to Optum and Caremark; (iv) 16 Illinois to Caremark; (v) Massachusetts to Express Scripts and MedImpact;5 and (vi) New York to 17 MedImpact. 18 2. Lack of Qualifying Transactions 19 Defendants have proffered evidence demonstrating that plaintiffs Avis and Samuelson— 20 the named representatives for the Arizona and New York classes, respectively—have no 21 transactions adjudicated by any of the five PBMs at issue for purposes of class certification during 22 the Class Period. Plaintiffs' expert Dr. Hay disclosed the following regarding what plaintiffs 23 considered the relevant purchases for Samuelson and Avis during the Class Period: first, twenty- 24 five purchases by Samuelson from January 19, 2010 to November 14, 2011, bearing Condor Code 25 7434; second, four purchases by Avis from May 25, 2009 to June 18, 2010, bearing Condor Code 26 27 5 Plaintiffs listed Robert Garber as having purchases associated with Medco in their 28 motion for class certification. However, defendants indicate that plaintiffs' expert did not identify any Medco-related purchases with respect to Garber during the Class Period. 9 2 1 15800. (Dkt. No. 272-6 at 105–108.) With regard to Samuelson, claims bearing Condor Code 2 7434 pertained to Excellus as the relevant PBM. (Dkt. No. 277-8 at 6.)6 With regard to Avis, 3 claims bearing the Condor Code 15800 pertained to transactions between CVS and Aetna until 4 January 1, 2011. (Dkt. No. 283-18 at 5–6; see also Dkt. No. 277-8 at 6.) 5 Plaintiffs' only rebuttal is that defendants' current assertion is inconsistent with their prior 6 discovery responses identifying Caremark and MedImpact contracts as applicable to Avis and 7 Samuelson. However, those discovery responses were issued prior to this Court's first order 8 denying class certification and plaintiffs' renewed motion narrowing the class definition. In this 9 context, plaintiffs' own expert identified the relevant transactions. Defendants' evidence, the 10 accuracy and reliability of which plaintiffs do not dispute, demonstrates that Avis and Samuelson 11 do not have any qualifying transactions under the new class definition. Thus, the Court finds that 12 neither is typical of the classes, which they seek to represent. See McKinnon v. Dollar Thrifty Northern District of California United States District Court 13 Automotive Grp., Inc., No. 12-CV-4457-YGR, 2016 WL 879784, at *9 (N.D. Cal. Mar. 8, 2016) 14 (finding proposed representative atypical because he lacked a qualifying purchase). 15 Accordingly, the Court DENIES WITHOUT PREJUDICE plaintiffs' motion to certify a New 16 York and Arizona class because they lack proper class representatives. 17 B. Predominance and Commonality 18 Defendants raise four categories of arguments explaining why individual issues 19 predominate rendering class certification untenable. First, the evidence as to whether a 20 misrepresentation was made to a PBM is not common because five different PBMs administered 21 each class member's prescriptions under plaintiffs' proposed class definition. Second, whether 22 plaintiffs are third-party beneficiaries of the defendants' contracts with the PBMs varies depending 23 on the state and the contract at issue. Third, evidence of reliance as to each class member must be 24 considered. And finally, fourth, evidence of damages differs among each class member. 25 6 26 Plaintiffs cite an article dated September 28, 2010 wherein MedImpact announced that it would be partnering with Excellus to "provide select pharmacy benefit services for Medicare Part 27 D and Part B beginning January 1, 2011," arguing that the article demonstrates that Samuelson made qualifying purchases adjudicated by MedImpact after January 1, 2011. No evidence 28 demonstrates, however, that Samuelson's claims fell into Excellus' Medicare Part D and Part B pharmacy benefit services. 10 2 1 As an initial matter, the Court finds that defendants' first two arguments are mooted by the 2 Court's decisions herein. With regard to their first argument, the Court has already narrowed the 3 class definition such that each class relates only to the PBMs that adjudicated a named 4 representative's prescriptions. (See supra.) With regard to their second argument regarding third- 5 party beneficiary provisions, as discussed below, the Court finds that those concerns are 6 immaterial to plaintiffs' claims. The Court next turns to defendants' remaining arguments. 7 1. Reliance 8 Defendants contend that reliance and materiality cannot be presumed in this action 9 because, as the transaction data demonstrates, many potential class members knew about HSP 10 pricing as some of them were HSP members. Specifically, the data reflects that 96,800 members 11 of the putative class were enrolled in HSP at some time, of which 69,786 were either enrolled in 12 HSP at the same time that they carried insurance or purchased insurance after having been an HSP Northern District of California United States District Court 13 member. Thus, defendants contend, the issue of reliance must be determined on a case-by-case 14 basis. See In re ConAgra Foods, Inc., 90 F. Supp. 3d 919, 982 (C.D. Cal. 2015) ("[T]he Ninth 15 Circuit has held that if a misrepresentation is not material to all class members, the issue of 16 reliance varies from consumer to consumer, and no classwide inference arises." (internal 17 quotations omitted)). 18 Defendants do not persuade. Putting aside the fact that not all of the statutes at issue here 19 require a showing of reliance,7 the evidence proffered by defendants does not sufficiently 20 21 7 Arizona's and California's UDAP statutes require a showing of reliance. See Kuehn v. 22 Stanley, 91 P.3d 346, 351 (Ariz. Ct. App. 2004) ("An injury occurs when a consumer relies, even unreasonably, on false or misrepresented information."); Cohen v. DIRECTV, Inc., 101 Cal. App. 23 4th 966, 980 (2009) ("[A]ctual reliance must be established for an award of damages under the CLRA."); I.B. ex rel. Fife v. Facebook, Inc., 905 F. Supp. 2d 989, 1012 (N.D. Cal. 2012) 24 ("California law. . . require[s] a UCL claim to allege actual reliance."). The UDAP statutes in Florida, Illinois, Massachusetts, and New York require a showing of "causation," which, in some 25 cases, is similar to a reliance requirement. See Rollins, Inc. v. Butland, 951 So. 2d 860, 869 (Fla. Dist. Ct. App. 2006) ("causation" as a listed element); Clark v. Experian Info. Sols., Inc., 256 F. 26 App'x 818, 821 (7th Cir. 2007) (proximate causation required in Illinois); Small v. Lorillard Tobacco Co., 252 A.D.2d 1, 7 (N.Y. App. Div. 1998) ("[A] plaintiff seeking compensatory 27 damages [under New York's consumer protection statute] must show that the defendant engaged in a material deceptive act or practice that caused actual. . . harm." (internal quotation and 28 citations omitted)); Kinoo, Inc. v. Bechtel/Parsons Brinckerhoff, No. 05-CV-0953-BLS, 2009 WL 2449879, at *6 (Mass. Super. Ct. 2009) ("[P]laintiff must prove a causal connection between the 11 2 1 demonstrate that potential class members, even those who were members of HSP, knew of the 2 allegedly deceptive practices. The copayment adjudication process from the perspective of the 3 consumer is opaque, as one of defendants' experts concedes: "A pharmacy customer has limited 4 insight into the processes that occur 'behind the scenes' when they have a prescription filled at 5 their local retail pharmacy." (Dkt. No. 313-2 at 4.) Putative class members likely did not 6 understand the relationship between the pharmacy's U&C and what the pharmacy charges them, 7 which may be at times less than or more than the HSP program prices. Thus, that a small 8 percentage of putative class members were also HSP members does not necessarily demonstrate 9 that putative class members were aware of the fraudulent acts alleged here. 10 2. Damages 11 In this regard, defendants argue that there is no common evidence establishing a class 12 member's damages because Dr. Hay's calculation is dependent on their individual insurance plans. Northern District of California United States District Court 13 Specifically, defendants proffer evidence demonstrating that several named plaintiffs had 14 insurance coverage that provided for caps on individual members' out-of-pocket expenditures, and 15 the transaction data suggests that many other potential class members also had out-of-pocket caps 16 as part of their insurance coverage. 17 Defendants present a hypothetical situation wherein a patient's out-of-pocket expenses are 18 capped at $100 per annum. If, for instance, the proper U&C for that patient's medication was set 19 at $10, in years when that patient filled that prescription ten or more times, that patient would have 20 suffered no injury even if defendants had charged them more than $10 because the cap would have 21 been reached. Defendants' expert Dr. Barlag observed that 7.7% of the putative class members 22 made at least one purchase where the patient's copayment was $0.00, suggesting that those 23 patients had, and reached, an out-of-pocket cap during the Class Period. 24 The Court disagrees. The Ninth Circuit has held that "differences in damage calculations" 25 among class members does "not defeat class certification." Pulaski & Middleman, LLC v. Google, 26 Inc., 802 F.3d 979, 987 (9th Cir. 2015). Rather, plaintiffs need only demonstrate that their 27 28 deception and the loss and that the loss was foreseeable as a result of the deception." (internal quotations omitted)). 12 2 1 damages stemmed from the defendants' actions that created the legal liability. Id. (citations 2 omitted). Here, assuming that defendants are liable, plaintiffs' damages calculations are tied to the 3 delta between what plaintiffs were charged by defendants and defendants' true U&C price, which 4 plaintiffs allege is the HSP program price for each drug. For the percentage of putative class 5 members whose insurance provided them with out-of-pocket caps, damages can be determined by 6 calculating the difference between those caps and what they would have paid had defendants 7 submitted the correct U&C price. That some of these calculations will involve individualized and 8 fact-specific determinations is insufficient to defeat class certification. Id.8 9 C. Superiority 10 To make this determination, the Court considers the following four non-exhaustive factors: 11 (1) the interests of members of the class in individually controlling the prosecution or defense of 12 separate actions; (2) the extent and nature of any litigation concerning the controversy already Northern District of California United States District Court 13 commenced by or against the members of the class; (3) the desirability of concentrating the 14 litigation of the claims in the particular forum; and (4) the difficulties likely to be encountered in 15 the management of a class action. Fed. R. Civ. P. 23(b)(3)(A)–(D). "Where classwide litigation 16 of common issues will reduce litigation costs and promote greater efficiency, a class action may be 17 superior to other methods of litigation." Valentino v. Carter-Wallace, Inc., 97 F.3d. 1227, 1235 18 (9th Cir. 1996). 19 Defendants' arguments focus on the fourth factor outlined above, namely the difficulties 20 likely to be encountered in the management of the class action. Specifically, defendants argue that 21 plaintiffs have failed to demonstrate how a trial could proceed with six classes under seven 22 relevant statutes, on top of each states' jurisprudence on contract interpretation applied to five 23 different PBM-CVS contracts. Moreover, defendants complain that the trial plan reveals 24 inadequate planning and lack of thoughtfulness as to how the case could actually be tried to a jury. 25 For instance, defendants argue, plaintiffs represented that they only intend to offer two to three 26 27 8 Plaintiffs also put forth evidence suggesting that prior to 2014, "copays at the doctor or 28 pharmacist did not count toward [patients'] deductible or out-of-pocket maximum." (Dkt. No. 313-4 at 3.) If so, the individualized inquiry would be further minimized. 13 2 1 class representatives as witnesses, yet do not explain how they intend to prove their case as to all 2 claims without presenting more. 3 The Court finds that plaintiffs have sufficiently demonstrated how jury instructions and a 4 verdict form may be structured to account for statewide classes in light of the fact that many of the 5 state-law claims raise common issues. While further modifications may be necessary, the showing 6 suffices. Moreover, the Court's limitation of each state class only to the PBMs that adjudicated 7 the named representative's claims and finding that the Arizona and New York classes lack a 8 typical representative further reduces the complexity of any potential trial. 9 While, defendants do not address the other factors courts must consider in evaluating the 10 superiority of a class action, the Court does so here. Briefly: 11 The first factor—the interest of each member in "individually controlling the prosecution 12 or defense of separate actions"—here weighs in favor of class certification, given that the potential Northern District of California United States District Court 13 damages suffered by each putative class member are not large. See Zinser v. Accufix Research 14 Inst., Inc., 253 F.3d 1180, 1190 (9th Cir. 2001). The second factor—the extent and nature of any 15 litigation concerning the controversy already commenced by or against members of the class— 16 also weighs in favor here, given that neither party has indicated that any related actions exist with 17 respect to the putative class members. And, finally, the third factor—the desirability of 18 concentrating the litigation in this forum—weighs slightly against class certification. No adequate 19 justification exists for concentrating the litigation in this particular forum given that the potential 20 plaintiffs, witnesses, and evidence are located across the country. See Zinser, 253 F.3d at 1191–92 21 (citing Haley v. Medtronic, Inc., 169 F.R.D. 643, 653 (N.D. Cal. 1996)). 22 The Court finds, based on its analysis of the Rule 23(b)(3) factors, that plaintiffs have 23 satisfied the superiority requirement for class certification of the remaining four proposed state 24 classes, as amended herein. 25 D. Summary 26 For the foregoing reasons, the Court GRANTS IN PART plaintiffs' motion for class 27 certification, and CERTIFIES the following state classes: 28 14 2 1) California Class: All CVS customers in California who, between November 1 2008 and July 31, 2015 (the "Class Period"), (1) purchased one or more generic 2 prescription drugs that were offered through CVS's Health Savings Pass ("HSP") program at the time of the purchase; (2) were insured for the purchase(s) through 3 a third-party payor plan administered by Caremark/PCS; and (3) paid CVS an out- of-pocket payment for the purchase greater than the HSP price for the 4 prescription. 5 2) Florida Class: All CVS customers in Florida who, between November 2008 and July 31, 2015 (the "Class Period"), (1) purchased one or more generic 6 prescription drugs that were offered through CVS's Health Savings Pass ("HSP") program at the time of the purchase; (2) were insured for the purchase(s) through 7 a third-party payor plan administered by Caremark/PCS or Optum; and (3) paid 8 CVS an out-of-pocket payment for the purchase greater than the HSP price for the prescription. 9 3) Illinois Class: All CVS customers in Illinois who, between November 2008 10 and July 31, 2015 (the "Class Period"), (1) purchased one or more generic prescription drugs that were offered through CVS's Health Savings Pass ("HSP") 11 program at the time of the purchase; (2) were insured for the purchase(s) through a third-party payor plan administered by Caremark/PCS; and (3) paid CVS an out- 12 of-pocket payment for the purchase greater than the HSP price for the Northern District of California United States District Court prescription. 13 4) Massachusetts Class: All CVS customers in Massachusetts who, between 14 November 2008 and July 31, 2015 (the "Class Period"), (1) purchased one or more generic prescription drugs that were offered through CVS's Health Savings 15 Pass ("HSP") program at the time of the purchase; (2) were insured for the 16 purchase(s) through a third-party payor plan administered either by Express Scripts or MedImpact; and (3) paid CVS an out-of-pocket payment for the 17 purchase greater than the HSP price for the prescription. 18 The Court DENIES plaintiffs' motion to certify a New York and Arizona class because the 19 proposed class representatives fail to satisfy the typicality requirement of Rule 23(a). 20 IV. MOTION TO EXCLUDE CERTAIN OPINIONS FROM DR. HAY 21 Plaintiffs offer Dr. Hay to present the following opinions: first, CVS customers and 22 transactions associated with the PBMs that adjudicated the named plaintiffs' claims can be 23 identified in CVS's transaction data; second, the transaction data for the named plaintiffs' relevant 24 purchases indicate that plaintiffs meet the class definition; third, CVS charged 6.6 million class 25 members copayments that exceeded CVS's true U&C price; and fourth, the damages for the class 26 are common and uniform, and totals $123,702,100.96 across the classes. Defendants do not 27 contend that Dr. Hay is unqualified to offer opinions relating to damages. However, they argue 28 15 2 1 that two opinions are unreliable, namely his contention that defendant's true U&C price is the 2 HSP program price and Dr. Hay's damages calculation.9 3 A. Opinion 1: HSP Prices Are U&C 4 Dr. Hay opines that the plaintiffs in the class have all suffered the same harm, namely that 5 defendants charged copayments higher than their true U&C prices, which "should have been based 6 on CVS's HSP prices." (Dkt. No. 272-6 at ¶ 23.) Defendants challenge this opinion because Dr. 7 Hay's analysis is premised merely on his conclusion that the HSP price is the most common price 8 observed in defendants' transaction data, despite the lack of any contract, statute, or other relevant 9 publication defining the U&C price as the "most common price." 10 Plaintiffs disagree and counter that Dr. Hay defines U&C as the "cash price for which a 11 drug is sold," and concludes on that basis that the HSP price is the U&C price. Plaintiffs contend 12 that Dr. Hay does not, in fact, opine that U&C is defined as the "most common price" charged. Northern District of California United States District Court 13 The Court disagrees. According to Dr. Hay himself, he analyzed "whether and to what 14 extent CVS transacted at the HSP price" and then concluded that CVS "frequently transact[ed] at 15 the HSP prices." (Dkt. No. 302-8 at 6.) This is simply another way of stating that the HSP price 16 should be considered the U&C price because it was frequently charged, or, the most common 17 price. As this Court previously held with respect to striking Dr. Navarro's opinion that the HSP 18 price was the U&C price, where the expert conducted no specific investigation to determine what 19 the PBMs meant relative to the contract provisions, the opinion cannot stand. (See Dkt. No. 316-4 20 (Hay Dep.) 74:3–76:11.) 21 Next, plaintiffs attempt to salvage the opinion by arguing that Dr. Hay's analysis 22 demonstrates that the HSP program was not a true membership program: 23 First, Dr. Hay opines that HSP prices were sometimes charged to non-HSP members, and 24 thus, HSP was not a true membership program. However, there is no indication that in situations 25 where the HSP-price was charged to a non-HSP member, that price was not submitted to the PBM 26 27 9 Defendants also challenge Dr. Hay's opinions regarding the "1st Percentile 28 methodology." Plaintiffs represent that Dr. Hay is no longer putting forward those opinions in light of this Court's prior order denying class certification. (Dkt. No. 302-8 at 7.) 16 2 1 or TPP as the U&C price. To the contrary, the data suggesting that HSP prices were charged to 2 non-HSP cash members is consistent with defendants' established Minimum Retail Price 3 according to CVS internal policies.10 The Minimum Retail Price was $10.99 through July 31, 4 2010 and $11.99 thereafter. (Dkt. No. 283-16 at 13.) Dr. Barlag explains that whenever 5 defendants charged a non-HSP cash customer $9.99 or $11.99, the data demonstrates that 6 defendants "submitted a U&C price equal to, if not lower than, $9.99 or 11.99 for 99.8% of the 7 comparable Third Party prescription purchases." (Id. at 22.) Neither plaintiffs nor their experts 8 dispute that analysis. 9 Second, Dr. Hay opines that the transaction data reveals that 31.68% of HSP members did 10 not pay the membership fee at least once every 365 days, and 8.53% did not ever pay fees, giving 11 further credence to plaintiffs' theory that the HSP program was not a bona fide membership 12 program. However, these figures are misleading. Plaintiffs do not dispute that membership fee Northern District of California United States District Court 13 payments paid prior to September 29, 2009 are not contained in the prescription purchase data. 14 (See Dkt. No. 283-16 at 6; Dkt. No. 303-7 at 11–12.) Based on Dr. Hay's chart in his rebuttal 15 report filed on January 9, 2017, beginning in 2010, the data demonstrates that the vast majority of 16 HSP members paid their membership fees. (Dkt. No. 214-25 at 12 (indicating that no payment 17 data exists for 20.01% of HSP members in 2010, 7.21% in 2011, 6.24% in 2012, 6.23% in 2013, 18 5.66% in 2014, and 4.78% in 2015).) Dr. Barlag also reported that HSP members sometimes paid 19 their membership fees over the phone or online and such payments were not reflected in the 20 prescription purchase data. (Dkt. No. 283-16 at 8.) Neither Dr. Hay nor plaintiffs address the 21 impact of this fact on their conclusions regarding payment of HSP membership fees. In any event, 22 plaintiffs have not demonstrated at what point failure to collect membership fees renders the 23 program illegitimate for purposes of U&C. For instance, at least one PBM testified that it was the 24 25 10 Dr. Barlag describes CVS's Minimum Retail Price as follows: CVS calculates an 26 adjusted working price based, primarily, on the unit cost multiplied by the quantity dispensed. (Dkt. No. 283-16 at 16.) Dr. Barlag then explains that in situations where the adjusted working 27 price for a given dispensed quantity is less than the Minimum Retail Price, the cash customer is charged the Minimum Retail Price as the final retail price. (Id.) For instance, if the Minimum 28 Retail Price were $10.00 and the per-unit price of a certain drug were $0.50 cents, a cash customer purchasing less than twenty tablets of that drug would still routinely pay $10.00. (Id.) 17 2 1 act of enrolling in a membership program, not paying a fee, that was the relevant action. (Dkt. No. 2 316-7 (Express Scripts) at 58:4–14.) 3 Dr. Hay's opinion that the HSP price should have been reported as the U&C price lacks 4 sufficient foundation to satisfy Federal Rule of Evidence 702. Accordingly, the Court GRANTS 5 defendants' motion to exclude the same. 6 B. Opinion 2: Damages 7 Defendants' central concern with Dr. Hay's damages calculation is that it is based on his 8 conclusion that the HSP prices were defendants' true U&C.11 Thus, defendants argue, as that 9 conclusion goes, so too does Dr. Hay's damages calculation. Plaintiffs, on the other hand, counter 10 that attacking the factual bases and inputs into the damages calculation is inappropriate for a 11 Daubert motion. See Bergen v. F/V St. Patrick, 816 F.2d 1345, 1352 n.5 (9th Cir. 1987) ("The 12 relative weakness or strength of the factual underpinning of the expert's opinion goes to weight Northern District of California United States District Court 13 and credibility, rather than admissibility."); see also Internmatch, Inc. v. Nxtbigthing, LLC, No. 14 14-CV-5483-JST, 2016 WL 1212626, at *4–5 (N.D. Cal. Mar. 28, 2016). 15 The Court need not resolve this question at this stage. Absent a U&C figure to enter into 16 his analysis, Dr. Hay does not, in fact, have a damages figure to present to the Court. Thus, his 17 opinion on damages is effectively moot. Defendants do not otherwise challenge Dr. Hay's 18 methodology in this regard, nor do they challenge his qualifications to perform the calculations. 19 Accordingly, the Court DENIES defendants' motion to strike Dr. Hay's damage 20 calculations as moot. 21 V. MOTION FOR SUMMARY JUDGMENT 22 Defendants move for summary judgment on all claims arguing that no evidence exists to 23 satisfy the elements of plaintiffs' claims, namely (i) a misrepresentation of a material fact and (ii) 24 25 11 Defendants also briefly argue that Dr. Hay's damages calculation is unreliable for the 26 additional reason that he used the purchase price for 90-day quantities of drugs to analyze prices for 10- and 30-day prescriptions, without sufficient support in the record for doing so. Plaintiffs 27 respond that for the purposes of their amended motion for class certification, Dr. Hay did not extrapolate prices for 10- and 30-day prescriptions from the 90-day price, but rather only 28 calculated damages on copayments based on the 90-day HSP price. In light of plaintiffs' clarification, the Court finds that defendants' argument in this regard is moot. 18 2 1 reliance or causation. Rather, defendants argue, the evidence produced demonstrates the contrary. 2 The parties have raised certain preliminary matters in arguing the merits of defendants' motion. 3 Specifically: first, whether the parol evidence rule ("PER") applies to bar evidence regarding the 4 meaning of the contracts at issue; and second, whether, in any event, evidence submitted by 5 defendants regarding the meaning of the contracts is competent and admissible. The Court 6 addresses the preliminary matters first, and then proceeds to discuss the merits of defendants' 7 motion for summary judgment. 8 A. Preliminary Matters 9 1. Parol Evidence Rule 10 Whether the PER bars defendants' evidence regarding the meaning of the contracts 11 depends on state law. While the application of PER varies among the states, the essence of the 12 rule is the same: "The parol evidence rule is a substantive rule of law that prohibits the admission Northern District of California United States District Court 13 of evidence of prior or contemporaneous oral agreements, or prior written agreements, whose 14 effect is to add to, vary, modify, or contradict the terms of a writing which the parties intend to be 15 a final, complete, and exclusive statement of their agreement." 11 Williston on Contracts § 33:1 16 (4th ed. 2017).12 On that basis, plaintiffs contend that evidence demonstrating the PBMs' 17 understanding of certain terms in the agreements is inadmissible because each of the contracts are 18 12 19 Federal courts deciding state-law causes of action apply the state's parol evidence rule. See Jinro Am. Inc. v. Secure Investments, Inc., 266 F.3d 993, 998–99 (9th Cir. 2001) (stating that 20 the district court's application of the parol evidence rule is an "issue of state law"). Despite some differences within each state as to the application of the PER, the Court is aware of no meaningful 21 differences regarding the basic elements of the PER as set forth herein. See, e.g., In re Marriage of Shaban, 88 Cal. App. 4th 398, 404 (2001) ("Parol evidence, of course, may be received to 22 interpret a term of art used within a contract."); Winston v. Mezzanine Investments, L.P., 170 Misc.2d 241, 249 (N.Y. Sup. Ct. 1996) ("Turning to the criteria for contract interpretation, if a 23 contract provision is reasonably susceptible of more than one interpretation, facts and circumstances extrinsic to the agreement can be considered to determine the intention of the 24 parties."); Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997) ("But when there is uncertainty in the meaning and application of contract language, the reviewing 25 court must consider the evidence offered in order to arrive at a proper interpretation of contractual terms."); Perlman v. First Nat. Bank of Chicago, 305 N.E.2d 236, 244 (Ill. App. Ct. Nov. 5, 1973) 26 ("The testimony of witnesses is admissible to explain * * * words or phrases having a local meaning or a special meaning in a particular calling, trade, business or profession. Such evidence 27 does not contradict or change the written instrument." (alteration in original) (quoting Steidtmann v. Joseph Lay Co., 84 N.E. 640, 642 (Ill. 1908))); see also LaSalle Nat. Bank v. Gen. Mills Rest. 28 Grp., Inc., 854 F.2d 1050, 1052 (7th Cir. 1988) (holding that extrinsic evidence is admissible if a judge cannot "make sense of a written contract without" additional evidence). 19 2 1 fully integrated and thus were intended to be a "final, complete, and exclusive statement of" the 2 agreements. 3 Plaintiffs do not persuade. The evidence defendants have submitted in favor of their 4 interpretation of the contracts between CVS and the BPMs simply do not fall within the ambit of 5 the PER. The declarations and depositions of the PBM witnesses and CVS representatives about 6 their understanding of the term U&C vis-a-vis the HSP program, along with any documents and 7 emails generated around the time that the HSP program was being established in 2008 and 2009, 8 are not "evidence of prior or contemporaneous oral agreements, or prior written agreements," 9 introduced to vary the terms of the contracts. Rather, they have been put forward to explain key 10 terms in the contracts related to what the parties viewed as the "usual" and "customary" price for 11 prescription drugs. Plaintiffs' argument that the contracts are clear and unambiguous is belied by 12 the contractual language itself. The term at issue—i.e., "Usual and Customary"—necessarily Northern District of California United States District Court 13 requires an understanding of what is "usual" and "customary" between the parties and within the 14 industry. Furthermore, the definitions of "U&C" within each contract introduce further 15 ambiguities. For instance, under the Caremark contract, the definition states that the U&C price 16 "must include any applicable discounts offered to attract customers." (Dkt. No. 285-2 at 22 17 (emphases supplied); see also Medco Pharmacy Services Manual, Dkt. No. 283-9 at 43 (same).) 18 Which discounts are applicable is open to interpretation and thus requires further evidence of the 19 parties' intent and understanding. 20 Thus, under the circumstances present here, the PER does not apply.13 Accordingly, the 21 Court finds that the evidence submitted by defendants regarding the meaning of U&C is not barred 22 on this ground. 23 2. Admissibility of Defendants' Evidence 24 Plaintiffs next contend that the declarations and testimony of the PBM witnesses are not 25 admissible because the witnesses (i) did not testify in their capacity as corporate representatives 26 27 13 28 The Court need not address defendants' alternative argument that plaintiffs are incompetent to raise PER arguments because they are strangers to the agreements. 20 2 1 and therefore have no authority to bind their respective companies and (ii) lack personal 2 knowledge of the contracts. 3 Plaintiffs, again, do not persuade. While the majority of the declarants and deponents were 4 not designated as corporate representatives pursuant to Federal Rule of Civil Procedure 30(b)(6), 5 that does not necessarily render their testimony as lacking in foundation.14 The record put forward 6 by the parties demonstrates otherwise. Each declarant has demonstrated sufficient knowledge of 7 their respective PBM's contractual arrangement with CVS with regard to the HSP program and 8 U&C prices, either through their actual involvement in crafting the contracts at issue or their 9 duties in implementing reimbursement programs between their respective companies and CVS. 10 Specifically: 11  John Lavin (Caremark): Mr. Lavin is currently the Senior Vice President ("SVP") of Network Administration for Caremark, and has held that position since 2011. 12 (Dkt. No. 280-32 ("Lavin Decl.") at ¶ 1.) Prior to holding that position, Mr. Lavin Northern District of California United States District Court worked in various roles within Caremark and its predecessor, PCS Health Systems. 13 (Id. at ¶ 2.) In his current capacity as SVP, he is responsible for "managing 14 Caremark's relationship with all of its network pharmacies," including "pharmacy contracting, pharmacy enrollment, network operations, provider-pharmacy audit, 15 pharmacy communications, network development, and other operations responsibilities." (Id. at ¶ 4.) Moreover, Mr. Lavin participated in the drafting and 16 negotiation of the agreement between CVS and PCS in 1997, which has been the controlling base agreement between Caremark and CVS since November 2008. 17 (Dkt. No. 276-5 ("Lavin Dep.") at 41:10–42:14; Lavin Decl. ¶ 7.) 18  Amber Compton (Express Scripts): Ms. Compton is the current Vice President ("VP") of Retail Strategy & Contracting, which she has held since 2010. (Dkt. No. 19 280-24 ("Compton Decl.") at ¶¶ 1, 4.) Prior to that role, she held several 20 managerial and administrative roles at Express Scripts dating back to 2001. (Id. at ¶ 4.) In her current role, she is responsible for "managing relationships and 21 negotiating provider agreements with pharmacies, ensuring network integrity, and overseeing Express Scripts' retail network." (Id. at ¶ 3.) Through this work, 22 Compton avers that she has knowledge of U&C pricing. (Id. at ¶ 6.) Ms. Compton further avers that she was aware that CVS was not submitting membership prices as 23 its U&C and that Express Scripts did not object to that practice because it 24 25 14 26 These arguments pertain to the persuasiveness of the declarants' evidence in demonstrating their corporations' understanding and interpretation of the agreements. Moreover, 27 as defendants represented to the Court at oral arguments—a representation which plaintiffs did not contest—plaintiffs had actually designated certain witnesses as Rule 30(b)(6) designees, yet 28 withdrew those designations after they testified in their individual capacities. Thus, the lack of 30(b)(6) evidence exists, in part, due to plaintiffs' strategic decisions in this litigation. 21 2 "understood the membership program price did not meet the definition of the U&C, 1 as set forth in the Contract." (Id. at ¶ 17.) 2  Michael Reichardt (Optum): Mr. Reichardt currently serves as the Senior Director for Network Relations, which he has held since January 2015. (Dkt. No. 280-30 3 ("Reichardt Decl.") at ¶ 1.) In that role, he is primarily responsible for "negotiating 4 contracts and managing relationships with Optum's network pharmacies, including CVS" along with "managing staff and reviewing the pharmacy manual that applies 5 to network pharmacies." (Id.) Mr. Reichardt avers that throughout his career, he has negotiated approximately eight contracts with network pharmacies. (Id.) Mr. 6 Reichardt further avers that Optum takes a "consistent position with respect to membership-based generic programs" and he is aware that "CVS did not submit its 7 HSP price as its [U&C] price on claims adjudicated by Optum or its predecessors at 8 any point during the duration of the program." (Id. at ¶¶ 5, 12.)  William Barre (MedImpact): Mr. Barre is currently the VP of Business 9 Development, a role he has held since 2010, and prior to that role Mr. Barre was 10 the VP of Strategic Network Development ("SND"). (Dkt. No. 276-2 ("Barre Dep.") at 11:19–21, 12:7–19.) In his capacity as the VP of SND, Mr. Barre was 11 responsible for negotiating pharmacy contracts for MedImpact, and he estimates that he negotiated over a hundred such agreements. (Id. at 11:9–18.) Mr. Barre 12 testifies that he negotiated the network agreement between CVS and MedImpact, Northern District of California United States District Court which governs the current relationship between the two companies vis-a-vis 13 reimbursements. (Id.at 17:10–22:4.) 14  Franceen Spadaccino (Medco): Ms. Spadaccino worked at Medco from 1998 through 2013, and served as its Senior Director of Provider Relations and Network 15 Strategy from 2006 through 2013. (Dkt. No. 280-26 ("Spadaccino Decl.") at ¶ 1.) 16 In that capacity, she was responsible for negotiating contracts with network pharmacies, provider relations, and network strategy. (Id.) Ms. Spadaccino 17 recalled "discussing membership-based generic programs with a number of [her colleagues" and decided "that pharmacies who charged customers a fee to enroll in 18 a membership-based generic program were not required to submit the program 19 price as U&C" and she believes that she and her colleagues "discussed Medco's position with most of the pharmacies that offered membership-based generic 20 programs." (Id. at ¶ 6.) Though not part of her role, Ms. Spadaccino recalls that Medco's team "audited the U&C prices being submitted by pharmacies to ensure 21 that Medco's clients were getting the benefit of discounted pricing." (Id. at ¶ 11.) 22  William Strein (Medco): Mr. Strein worked for Medco from 1999 through 2012, and served as VP of Provider Relations from 2008 through 2012. (Dkt. No. 280-25 23 ("Strein Decl.") at ¶ 2.) In that capacity, he was responsible for "negotiating PBM contracts with pharmacies and representation for Medco at state and national 24 professional pharmacy organizations, network pharmacy communications; policy 25 development; dispute resolution and regulatory input at local, state, and national levels as well as indirect support for Audit and Finance on network pharmacy 26 matters." (Id. at ¶ 3.) Mr. Strein avers that, upon learning of membership-based programs, he and his colleagues "considered whether membership programs in any 27 way affected the U&C price [their] pharmacies were required to include in each claim" and "determined that Medco's definition of 'usual and customary' in its 28 Pharmacy Services Manual did not encompass membership program prices." (Id. 22 2 at ¶ 9.) Mr. Strein further avers that he was aware of the HSP program and, based 1 on his understanding of that program, concluded that "CVS was not required to 2 submit the HSP price as its U&C price on Medco claims." (Id. at ¶ 11.)  Joseph Zavalishin (Aetna): Mr. Zavalishin is currently the SVP for Network 3 Relations for Optum, but joined Aetna in February 2004 as Head of Planning & 4 Business Strategy. (Dkt. No. 273-25 ("Zavalishin Decl.") at ¶ 4.) In October 2006, Mr. Zavalishin became VP of Pharmacy Networks and was responsible for 5 "provider infrastructure, provider relations and contracting, and quality management." (Id.) Mr. Zavalishin further avers that during his tenure at Aetna, 6 Aetna operated in-house PBM services, and he served as VP of that department. (Id.) In his capacity as a VP at Aetna, he "negotiated and signed a new national 7 agreement with CVS Pharmacy, Inc.[]—the National Pharmacy Services 8 Agreement (Jan. 15, 2009) between CVS and Aetna," the contract at issue in this litigation. (Id. at ¶ 6.) Mr. Zavalishin recalls "CVS asking Aetna to modify the 9 proposed language. . . to make clear that prescriptions purchased under CVS's HSP program would be exempt from the claim-submission requirement." (Id. at ¶ 10 16.) Aetna "agreed to modify [that section] to exclude HSP purchases from those claims." (Id.) 11 Such experience and background is sufficient to give each witness enough personal 12 Northern District of California United States District Court knowledge to provide competent testimony regarding their respective organization's 13 understanding of the contractual relationship with CVS. While some of the witnesses may not 14 have been personally involved with crafting the contracts at issue, their positions and job duties 15 pertain to managing the relationship between CVS and their respective companies and involve an 16 understanding of how their companies viewed U&C pricing. Whether that evidence is ultimately 17 persuasive does not pertain to the admissibility of their testimony and declarations. Accordingly, 18 the Court finds that such evidence is admissible for purposes of the instant summary judgment 19 motion, and hereby OVERRULES plaintiffs' objection to the same. 20 B. Merits of the Summary Judgment Motion 21 Plaintiffs bring claims under the UDAP laws of eleven different states,15 along with 22 common law claims for fraud, negligent misrepresentation, and unjust enrichment. While the 23 elements of each claim under the laws of each state differ, each claim shares certain elements. For 24 the purposes of the instant motion for summary judgment, each of the causes of action raised by 25 26 27 15 Specifically, plaintiffs bring claims under the laws of the following states: Arizona, 28 California, Florida, Georgia, Illinois, Massachusetts, New Jersey, New York, Ohio, Pennsylvania, and Texas. 23 2 1 plaintiffs requires (i) a misrepresentation or omission of a material fact16 that (ii) caused plaintiffs' 2 injury.17 Because the Court finds, for the reasons set forth below, that plaintiffs have failed to 3 raise a triable issue of fact with regard to the first element—that defendants made a 4 misrepresentation or omission of a material fact—the Court need not address any issues relating to 5 reliance or causation. 6 The Court now turns to its analysis of the first element of plaintiffs' claims. First, the 7 Court provides a summary of the evidence submitted by both parties regarding the definition of 8 U&C as it relates to the HSP program. Second, the Court discusses whether a triable issue of 9 material fact exists as to any of plaintiffs' causes of action. 10 11 12 Northern District of California United States District Court 13 16 Each of the causes of action under the UDAP laws of the eleven states and the common 14 law claims for fraud and negligent misrepresentation require the existence of a misrepresentation or otherwise deceptive or fraudulent action. See, e.g., Castle v. Barrett-Jackson Auction Co., LLC, 15 276 P.3d 540, 542 (Ariz. App. 2012) (holding that the Arizona Consumer Fraud Act requires a "false promise or misrepresentation"); Vasic v. PatentHealth, LLC, 171 F. Supp. 3d 1034, 1043 16 (S.D. Cal. 2016) (stating that California's Unfair Competition Law requires material misrepresentations); Cumis Ins. Soc'y, Inc. v. BJ's Wholesale Club, Inc., 918 N.E.2d 36, 47 (Mass. 17 2009) (common law fraud claim in Massachusetts requires a "false representation of material fact"); Pasternack v. Lab Corp. of Am. Holdings, 59 N.E.3d 485, 491 (N.Y. 2016) (common law 18 fraud claim in New York requires a "misrepresentation or a material omission of fact"); Bortz v. Noon, 729 A.2d 555, 561 (Pa. 1999) (Pennsylvania negligent misrepresentation claim requires a 19 "misrepresentation of a material fact"); Li-Conrad v. Curran, 50 N.E.3d 573, 578 (Ohio App. 2016) (negligent misrepresentation in Ohio requires provision of "false information"). Because 20 plaintiffs' causes of action for unjust enrichment rest on the same allegations of wrongdoing, they also require a showing of a material misrepresentation. See, e.g., Levine v. Blue Shield of Cal., 21 189 Cal. App. 4th 1117 (2010) ("[T]he trial court properly [dismissed] . . . [plaintiffs'] claims for fraudulent concealment, negligent misrepresentation, and unfair competition. The [plaintiffs] thus 22 have not demonstrated any basis on which they would be entitled to restitution pursuant to a theory of unjust enrichment." (citations omitted)). 23 17 Each cause of action requires a showing that the misrepresentation was the cause of 24 plaintiffs' injury, and, in some cases, requires a showing of reliance. See, e.g., Kuehn, 91 P.3d at 351 (holding that under the Arizona Consumer Fraud Act, an "injury occurs when a consumer 25 relies, even unreasonably, on false or misrepresented information"); Rikos v. Procter & Gamble Co., 799 F.3d 497, 514 (6th Cir. 2015) (under Illinois' UDAP, plaintiff must demonstrate that 26 plaintiff's injury arises as "a result of the deception"); Townsend v. Morton, 36 So. 3d 865, 868 (Fla. App. 2010) (common law fraud claim in Florida requires showing "consequent injury by the 27 party acting in reliance on the representation"); Allstate N.J. Ins. Co. v. Lajara, 117 A.3d 1221, 1231 (N.J. 2015) (fraud requires "reasonable reliance thereon by the other person"); Home Depot 28 U.S.A., Inc. v. Wabash Nat'l Corp., 724 S.E.2d 53, 60 (Ga. App. 2012) (Georgia negligent misrepresentation claim requires "reasonable reliance upon [the] false information"). 24 2 1 1. The Evidence Regarding the Parties' Understanding of the Agreements 2 a. The Relevant Terms of the Agreements 3 The parties have provided evidence relating to CVS's agreements with five PBMs 4 (Caremark, Express Scripts, Optum, Medco, and MedImpact) and one TPP (Aetna) (collectively, 5 the "Six Intermediaries"). At issue in the instant action is whether defendants misrepresented the 6 true U&C price to the PBMs, thereby resulting in higher copayments charged to the consumer at 7 the point-of-sale. The relationship between each PBM and CVS generally is governed by a master 8 agreement and sometimes supplemented by a pharmacy provider manual. Below are the 9 definitions of U&C contained either in the relevant agreements or provider manuals between CVS 10 and the Six Intermediaries for which the parties have provided evidence: 11  Caremark/PCS Agreement: "Usual and Customary price means the lowest price the Provider would charge to a particular retail customer if such customer were 12 paying cash for an identical prescription on that particular day. This price must Northern District of California United States District Court include any applicable discounts offered to attract customers." (Dkt. No. 285-2 at 13 22.) 14  MedImpact Agreement: "Usual and Customary or U&C means the lowest price Member Pharmacy would charge to a cash paying customer at that location for an 15 identical prescription on that day. This price must include any applicable 16 discounts, promotions, or other offers to attract customers." (Dkt. No. 283-12 at 21.) 17  Express Scripts Agreement: "'Usual and Customary Retail Price' means the 18 usual and customary retail price of a Covered Medication in a cash transaction at the Pharmacy dispensing the Covered Medication (in the quantity dispensed) on the 19 date that it is dispensed, including any discounts or special promotions on such date." (Dkt. No. 285-1 at 5.) 20  Medco (2009 Provider Manual): "The lowest net price a cash patient or customer 21 would have paid the day the prescription was dispensed, inclusive of all applicable discounts. These discounts include, but are not limited to, senior citizen discounts, 22 'loss leaders,' frequent shopper or special customer discounts, competitor's matched price, and other discounts offered to customers, including but not limited 23 to buyer's clubs with nominal membership fees, discount buying cards and 24 programs." (Dkt. No. 285-3 at 77.)  Medco (2009/2010 Provider Manual): "The lowest net cash price a cash patient 25 or customer would have paid the day the prescription was dispensed, inclusive of 26 all applicable discounts." (Dkt. No. 283-9 at 43.)  Optum Agreement: "'Usual and Customary' shall mean and refer to the price that 27 the Company Pharmacy would have charged the Member for the Prescription if the 28 Member was a cash customer. This includes all applicable discounts including, but 25 2 not limited to Senior citizen discounts, frequent shopper and special customer 1 discounts, or other discounts." (Dkt. No. 285-8 at 14.) 2  Optum Amended Agreement (January 29, 2015): "[T]he price that a cash paying customer pays [Optum] for same Drug Products, devices, products and/or 3 supplies and same amount on date of service excluding any coupons or discount 4 card programs." (Reichardt Decl. ¶ 8–9.)  Aetna Agreement: "The cash price less all applicable customer discounts which 5 Pharmacy usually charges customers for providing pharmaceutical services." (Dkt. 6 No. 285-11 at 9.) The evidence demonstrates that many of these definitions were negotiated and set in place prior to 7 the establishment of defendants' HSP program at issue in this litigation. 8 b. The Establishment of the HSP Program 9 Defendants operated the HSP program from November 9, 2008 through February 1, 2016. 10 (Defendants' Statement of Undisputed Fact ("DSUF") 2.) The following facts relate to the 11 development of the HSP program: 12 Northern District of California United States District Court In September 2006, Walmart announced that it would offer all customers 30-day supplies 13 of certain generic drugs for $4, without joining a program or paying a fee. (Id. at 35.) Similarly, 14 several other large stores such as Safeway followed suit and announced price reductions for select 15 generic drugs. (Id. at 36.) PBMs were aware of these price reductions and considered the new $4 16 prices charged by these stores as their U&C price. (Id. at 37–38.) 17 Beginning in November 2007, other pharmacies established savings club programs. For 18 instance, Walgreens launched a Prescription Savings Club, which required enrollment and 19 payment of a fee, and in September 2008, Rite Aid launched its Rx Savings program. (Id. at 39.) 20 In November 2008, defendants launched their own membership program called Health Savings 21 Pass. (Id. at 2.) The HSP program provided discounted pricing on hundreds of generic 22 prescription medications, including some of the most commonly prescribed drugs for 23 cardiovascular, allergy, and diabetes conditions, among others. (TAC ¶ 62.) From November 9, 24 2008 through 2010, cash paying customers could join the HSP program for a $10 fee, and be 25 entitled to $9.99 prices for a ninety-day supply of an HSP generic. (Id.) Beginning in 2011, CVS 26 raised the HSP enrollment fee to $15 a year and the cost of a ninety-day supply of an HSP generic 27 rose to $11.99. (Id.) 28 26 2 1 c. The PBM and TPP Testimony Regarding the HSP Program 2 The evidence related to the Six Intermediaries demonstrates that each was aware of the 3 HSP program soon after it launched. (See, e.g., Compton Decl. ¶ 12 (Express Scripts "was aware 4 of CVS having a membership program"); Lavin Decl. ¶ 22 (Caremark learned of HSP "[a]t or 5 within several months of. . . launch"); Zavalishin Decl. ¶¶ 7–8 (Aetna "learned that CVS was 6 launching a generic drug membership program called Health Savings Pass" around the time Aetna 7 was negotiating its contract with CVS late in 2008).) The following summarizes the evidence in 8 the record related to the understanding and knowledge of the Six Intermediaries with respect to 9 CVS's HSP program: 10  Caremark/PCS: Lavin testified that after Walgreens instituted its program in 2007, Caremark worked with its legal team to evaluate that and similar programs 11 under Caremark's contracts. (Lavin Dep. 105:22–106:25.) He averred that within several months of the HSP program's launch, he discussed HSP with CVS's then 12 Northern District of California Vice President of Managed Care, and was informed that CVS would not be United States District Court 13 submitting the HSP program as its U&C. Lavin further averred that he agreed that the CVS-Caremark agreement did not require HSP prices to be passed through as 14 U&C, and that the term "applicable discounts" did not include the HSP price. (Lavin Decl. ¶¶ 21–22.) 15  MedImpact: Barre testified that MedImpact considered U&C as the "price of that 16 product [] at that store at that given point in time" for "someone that has walked off the street" without a form of prescription benefit. (Barre Dep. 24:6–27:3.) Barre 17 further testified that MedImpact distinguished between "active" and "passive" pricing. Simply put, in an active model, the person had to have undertaken an 18 action to register into the program whereas in a passive model, the person 19 automatically receives the lower price. (Id.) According to Barre, MedImpact did not consider active pricing models, such as HSP, as an applicable discount for the 20 purposes of its U&C definition. (Id. at 30:16–33:7.) 21  Express Scripts: Compton testified that Express Scripts made a business decision that when the "[p]atient had to choose to participate in the program," it was Express 22 Scripts' position that that person "was outside of the usual and customary retail pricing." (Compton Dep. 19:16–22:4.) Compton averred that Express Scripts was 23 "aware that CVS was not submitting. . . the membership program prices as U&C price" and "did not object to CVS's approach because Express Scripts understood 24 that the membership program price did not meet the definition of the U&C, as set 25 forth in the contract." (Compton Decl. ¶¶ 17–18.)  MedCo: Strein testified that MedCo had a general policy that membership 26 programs were not considered U&C because it "wasn't available to all" but rather 27 only to some "who chose to take additional actions." (Strein Dep. 91:7–94:22.) As such, MedCo did not consider HSP prices to constitute U&C because "CVS 28 required HSP members to affirmatively opt into the program." (Strein Decl. ¶ 11; 27 2 see also Spadaccino Decl. ¶ 10 (averring the same because a "regular customer 1 paying the retail price (i.e., the cash customer) who did not join the program was 2 not entitled to the same pricing structure").)  Optum: Reichardt avers that the amendment to the agreement in 2015 explicitly 3 excluding discount programs "memorialized both parties' prior understanding that 4 CVS was not required to submit its [HSP] price as its [U&C] price on claims submitted to Optum." (Reichardt Decl. ¶ 10.) Reichardt explained that "Optum 5 did not consider HSP members, who had affirmatively enrolled in a program, to be "cash customers." (Id. at ¶ 11.) Reichardt further explained that Optum's general 6 policy was that if a "pharmacy required a customer to enroll in a program in order to access the membership program's prices, then neither Optum nor Prescription 7 Solutions required the pharmacy to submit the program's prices as U&C." (Id. at ¶ 8 12.)  Aetna: Zavalishin averred that on or about December 15, 2008, while he was 9 negotiating Aetna's contract with CVS, he received an email from CVS about the 10 HSP program. He agreed with defendants that under the agreement, defendants did not need to submit the HSP price as U&C. (Zavalishin Decl. ¶¶ 10–13.) 11 Defendants contend that the evidence described above demonstrates the PBM and TPP 12 Northern District of California understanding of the agreements, and therefore proves that no misrepresentations were made. United States District Court 13 d. Evidence Purporting to Demonstrate HSP Prices Should Be U&C 14 In addition to the contractual language, plaintiffs proffer that the following types of 15 documents demonstrate—or at least create a genuine dispute of material fact—that defendants 16 were aware of and were concerned that its HSP program prices would be considered as U&C: 17  May 9, 2008 Presentation: An internal presentation discussing "Cash card 18 program offering recommendations," in which defendants recognized that "[m]aking the program 'too attractive' creates higher risk for our 3rd party plan 19 pricing and profitability." (Dkt. No. 306-2 at 5.) 20  August 18, 2008 Presentation: Slide in the presentation calls for the need to "understand financial implications" because "PBM clients are likely to request 21 access to that level of pricing for their plan participants" and "[c]reation of a CVS retail cash program may put increasing pressure on 3rd party reimbursements from 22 other payers." (Dkt. No. 302-9 at 9.) 23  January 19, 2009 Email: Emails between CVS executives demonstrating concern over the broad definition of U&C in Medco's 2009 provider manual. (Dkt. No. 24 302-22 at 2.) Scott Tierney writes the he is "concerned that it is asking for our HSP 25 rates" and indicates that the manual "appears to be fairly recent" and that CVS "should challenge it." (Id.) 26  February 2009 Email Chain: Internal CVS emails asking employees to gather 27 definitions of U&C within PBM and TPP contracts and provider manuals. (Dkt. No. 302-12.) 28 28 2  June 25, 2010 Landscape Strategy Document: Discussing a scenario where state 1 Medicaid programs required HSP pricing, defendants hypothesized that such 2 "would lead to Private payers demanding the same price" leading to HSP becoming U&C. (Dkt. No. 302-24 at 17.) 3  July 2010 Email and Memos: After Connecticut instructed CVS to report its HSP 4 price as its U&C for Connecticut Medicaid purposes, defendants prepared an internal memorandum to "[i]dentify alternative solutions, whereby the passing of 5 the HSP pricing on CT Medicaid claims would not place CVS at risk with our HSP customers, the state of CT, all other state Medicaid programs, and the commercial 6 sector." (Dkt. No. 306-6 at 5.) 7  December 6, 2012 ScriptSave Business Case: ScriptSave sought to administer defendants' CVS program and presented defendants with their plan for doing so. 8 In this presentation, ScriptSave indicated that they could minimize "the risk of third party U&C 'discussions,'" indicating that a "ScriptSave program can allow CVS to 9 protect its third party reimbursement levels." (Dkt. N0. 302-21 at 4.) A January 10 25, 2013 email further explains that ScriptSave has "proven strength and expertise" in their "comprehensive analytical approach throughout the product life cycle, 11 including formulary management and innovation, Usual and Customary pricing strategies to 'protect' loyalty member price from third parties, competitive market 12 intelligence, and compliance with state and federal guidelines—specific to Northern District of California United States District Court 13 pharmacy savings programs." (Dkt. No. 302-23 at 2.) In addition to demonstrating defendants' acknowledgement of the risks that PBMs and TPPs will 14 consider their HSP prices as U&C, the documents cited above and other documents refer to the 15 HSP program as a "cash" program, which, plaintiffs argue, further demonstrates that HSP prices 16 should have been submitted as U&C.18 17 2. No Genuine Dispute of Material Fact 18 Plaintiffs argue that at least triable issues of fact exist that under the agreements defendants 19 were required to submit their HSP prices as U&C prices. Specifically, plaintiffs argue: (i) that the 20 contracts each define U&C as a cash price; (ii) several documents refer to HSP as a "cash" 21 program; (iii) the contracts require CVS to include all applicable discounts as part of their U&C 22 calculation; and (iv) contemporaneous internal emails demonstrate that defendants acknowledged 23 that HSP could be considered by others as a U&C price. 24 25 26 18 27 Plaintiffs also argue that a triable issue of material fact exists as to whether the HSP program was a bona fide membership program, based on Dr. Hay's analysis. For the same reasons 28 the Court rejected those arguments in the context of defendants' motion to exclude Dr. Hay's opinions, the Court rejects them here. (See supra.) 29 2 1 Plaintiffs' claims of misrepresentation rely on defendants breaching their contract with the 2 PBMs and TPPs by submitting false U&C prices. That analysis turns on whether defendants were 3 required to submit HSP program rates as their U&C prices under each of the relevant agreements. 4 With regard to how PBMs and TPPs viewed defendants' HSP programs in that context, the only 5 evidence that exists in the record is that of the PBM and TPP executives who filed declarations or 6 were deposed on behalf of defendants. Invariably, each averred to their understanding that 7 defendants were not required to submit the HSP program prices as U&C. Plaintiffs have offered 8 no contrary evidence. 9 The evidence plaintiffs have put forward is not sufficient to create a dispute of material 10 fact as to whether defendants breached their agreements with the PBMs and TPPs. That 11 defendants exhibited concern about how PBMs and TPPs would view the HSP program—while 12 relevant—is ultimately inconsequential in light of evidence demonstrating that the PBMs and Northern District of California United States District Court 13 TPPs were aware of the HSP program, knew that defendants were not submitting HSP rates as 14 their U&C, and yet did nothing to compel defendants to do so. Rather, that sequence of events 15 provides further support for defendants' position that the PBMs and TPPs legitimately did not 16 view HSP prices as U&C. In some cases, the PBMs even amended the agreement to exclude 17 explicitly membership programs from their definition of U&C. Equally unavailing is plaintiffs' 18 argument that because defendants have referred to the HSP program as a cash program and U&C 19 is the price paid by a cash-paying customer, HSP is therefore U&C. Some references to the HSP 20 program as a "cash script" or "cash discount program" do not contradict the evidence in the record 21 demonstrating the PBMs' and TPP's understanding of their agreements with defendants. 22 Thus, the Court finds that no genuine issue of material fact exists as to whether defendants 23 misrepresented the U&C price to the PBMs.19 The Court need not address issues related to 24 19 25 Plaintiffs have further argued that whether defendants made misrepresentations to the PBMs is immaterial to their claims because defendants had independent obligations to their 26 customers who are third-party beneficiaries of the CVS-PBM agreements. Specifically, they argue that as third-party beneficiaries to the agreements, they can bring consumer-protection claims 27 arising out of a breach of contract. However, and without resolving whether plaintiffs are actually third-party beneficiaries to the contracts, that claim still requires an underlying breach of contract. 28 And, if a breach did exist, plaintiffs need not be third-party beneficiaries to the agreements to raise the UDAP and common law claims brought here. However, absent a misrepresentation from 30 2 1 reliance or causation here, where plaintiffs have failed to satisfy a necessary element of each of 2 their claims. Accordingly, the Court GRANTS summary judgment in favor of defendants. 3 VI. CONCLUSION 4 For the foregoing reasons, the Court ORDERS as follows: The Court GRANTS IN PART 5 plaintiffs' motion for class certification, and CERTIFIES the following state classes: 6 1) California Class: All CVS customers in California who, between November 2008 and July 31, 2015 (the "Class Period"), (1) purchased one or more generic 7 prescription drugs that were offered through CVS's Health Savings Pass ("HSP") program at the time of the purchase; (2) were insured for the purchase(s) through 8 a third-party payor plan administered by Caremark/PCS or Optum; and (3) paid 9 CVS an out-of-pocket payment for the purchase greater than the HSP price for the prescription. 10 2) Florida Class: All CVS customers in Florida who, between November 2008 and July 31, 2015 (the "Class Period"), (1) purchased one or more generic 11 prescription drugs that were offered through CVS's Health Savings Pass ("HSP") 12 program at the time of the purchase; (2) were insured for the purchase(s) through Northern District of California a third-party payor plan administered by Caremark/PCS; and (3) paid CVS an out- United States District Court 13 of-pocket payment for the purchase greater than the HSP price for the prescription. 14 3) Illinois Class: All CVS customers in Illinois who, between November 2008 15 and July 31, 2015 (the "Class Period"), (1) purchased one or more generic prescription drugs that were offered through CVS's Health Savings Pass ("HSP") 16 program at the time of the purchase; (2) were insured for the purchase(s) through a third-party payor plan administered by Caremark/PCS; and (3) paid CVS an out- 17 of-pocket payment for the purchase greater than the HSP price for the 18 prescription. 4) Massachusetts Class: All CVS customers in Massachusetts who, between 19 November 2008 and July 31, 2015 (the "Class Period"), (1) purchased one or 20 more generic prescription drugs that were offered through CVS's Health Savings Pass ("HSP") program at the time of the purchase; (2) were insured for the 21 purchase(s) through a third-party payor plan administered either by Express Scripts or MedImpact; and (3) paid CVS an out-of-pocket payment for the 22 purchase greater than the HSP price for the prescription. 23 The Court DENIES WITHOUT PREJUDICE plaintiffs' motion to certify a New York and Arizona 24 class because the proposed class representatives fail to satisfy the typicality requirement of Rule 25 23(a). 26 27 defendants to the PBMs regarding their true U&C price, no such breach of contract exists. Thus, 28 as the Court has previously explained, plaintiffs' claims are inextricably tied to whether defendants made any misrepresentations to the PBMs in the first instance. 31 2 1 The Court GRANTS IN PART defendants' motion to strike certain opinions by Dr. Hay and 2 STRIKES Dr. Hay's opinion that HSP prices are U&C, but DENIES defendants' motion otherwise. 3 The Court GRANTS defendants' motion for summary judgment. 4 Defendants must file a proposed judgment, approved as to form by all parties, within five 5 business days of this Order. 6 This Order terminates Docket Numbers 271, 274, and 287. 7 IT IS SO ORDERED. 8 9 Dated: September 5, 2017 YVONNE GONZALEZ ROGERS 10 UNITED STATES DISTRICT COURT JUDGE 11 12 Northern District of California United States District Court 13 14 15 16 17 18 19 20 21 22 23 24 25 26 27 28 32