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Principal Life Ins. Co. v. Caremark PCS Health, L.L.C.

United States District Court, S.D. Iowa, Central Division

October 9, 2014

PRINCIPAL LIFE INSURANCE COMPANY, THE PRINCIPAL WELFARE BENEFIT PLAN FOR EMPLOYEES, and THE PRINCIPAL WELFARE BENEFIT PLAN FOR INDIVIDUAL FIELD, Plaintiffs,
v.
CAREMARK PCS HEALTH, L.L.C., Defendant

For Principal Life Insurance Company, The Principal Welfare Benefit Plan for Employees, The Principal Welfare Benefit Plan for Individual Field, Plaintiffs: Emily Hildebrand Pontius, Jesse Linebaugh, LEAD ATTORNEYS, FAEGRE BAKER DANIELS, LLP (IA), Des Moines, IA; Philip J. Gutwein, II, LEAD ATTORNEY, PRO HAC VICE, FAEGRE BAKER DANIELS LLP, INDIANAPOLIS, IN.

For CaremarkPCS Health, L.L.C., Defendant: Michael D. Leffel, LEAD ATTORNEY, PRO HAC VICE, FOLEY & LARDNER LLP, Madison, WI; Brian P Rickert, Jonathan M Gallagher, BROWN WINICK, DES MOINES, IA; Robert H. Griffith, PRO HAC VICE, FOLEY & LARDNER LLP, CHICAGO, IL.

Page 1014

ORDER

JAMES E. GRITZNER, Chief United States District Judge.

This matter comes before the Court on Motion to Compel Arbitration, ECF No. 26, by Caremark PCS Health, L.L.C. (Defendant). Plaintiffs Principal Life Insurance Company, the Principal Welfare Benefit Plan for Employees, and the Principal Welfare Benefit Plan for Individual Field (collectively, Plaintiffs) resist. Neither party requested an oral argument on this Motion, and the Court finds tat an oral argument is unnecessary for the resolution of this matter. The Motion is fully submitted and ready for disposition.

I. BACKGROUND

Defendant is a vendor of pharmacy benefit management services, which involve management of prescription drug plans for employers offering or sponsoring prescription drug benefit plans. In 2005, the parties entered a contract in which Defendant agreed to provide Plaintiffs with a minimum discount from the average wholesale price for generic drugs. This is known as the Generic Effective Rate (GER). At times, the copayment of a participant in Plaintiffs' drug benefit plans equals or exceeds the retail cost of a prescription drug. This is called a Zero Balance Claim (ZBC). Pharmacies may create ZBCs in order to

Page 1015

attract customers. The 2005 contract excluded ZBCs from the calculation of the GER. Plaintiffs contend that a 2011 Pricing Implementation Document (PID), which relates to the 2005 contract, did not alter the exclusion of ZBCs from the calculation of the GER. Yet, Defendant included the ZBCs in the calculation.

Plaintiffs contend that including the ZBCs in the calculation of the GER was a breach of contract. Plaintiffs further contend that Defendant is liable for equitable fraud and fraud in the inducement because Plaintiffs relied on Defendant's false representations that the 2011 PID would yield Plaintiffs an additional seven percent savings, and it would not affect the GER calculations. Plaintiffs apparently also have similar claims regarding PIDs for 2012 and 2013. Plaintiffs have agreed to arbitrate the 2012 and 2013 claims.

The 2011 PID provides that Plaintiffs " will receive the benefit of the pricing and terms within this PID under the Existing [2005] Agreement . . . through December 31, 2011," and the parties will negotiate a new agreement to take effect on January 1, 2012. Pl.'s Compl. Ex. B. 4, ECF No. 5, 5. The parties did adopt a new agreement, which took effect as scheduled. The 2012 agreement contains the same pricing terms as 2011 PID.

The 2012 contract contains an arbitration clause. In relevant part, the clause provides as follows:

Any dispute arising out of or relating to this Agreement which is not settled by agreement of the parties within a reasonable time will be settled exclusively in a binding arbitration by a single arbitrator. However, in no event will a dispute involving, or potentially involving, a class of claimants be subject to any mediation or arbitration nor shall either party be prohibited from seeking appropriate equitable relief to enforce its rights under this Agreement. The location of any arbitration proceeding will be in New York, New York. The arbitration will be governed by the Federal Arbitration Act. The arbitrator will be selected and the arbitration conducted in accordance with the Commercial Arbitration Rules of the American Arbitration Association (AAA), except that the provisions of this Agreement will control over the AAA rules.

Id. ΒΆ 13.16. The 2012 contract further provides that it will " be governed by the laws of the state of Iowa, without reference to conflict of law ...


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