Searching over 5,500,000 cases.

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.

T. Zenon Pharmaceuticals LLC v. Wellmark, Inc.

Court of Appeals of Iowa

November 21, 2018

T. ZENON PHARMACEUTICALS LLC, (d/b/a PHARMACY MATTERS), Plaintiff-Appellee/Cross-Appellant,
WELLMARK, INC., Defendant-Appellant/Cross-Appellee, WELLMARK HEALTH PLAN OF IOWA, Intervenor-Appellant/Cross-Appellee.

          Appeal from the Iowa District Court for Johnson County, Paul D. Miller, Judge.

         A mutual insurance company appeals a damage award for its breach of contract with an Iowa pharmacy and contests the common-law attorney fees. The pharmacy cross appeals on an interest-rate issue.

          John F. Lorentzen of Nyemaster Goode, PC, Des Moines, and Kevin H. Collins and Sarah J. Gayer of Nyemaster Goode, PC, Cedar Rapids, for appellant.

          Anthony Paduano and Jason Joseph Snyder of Paduano & Weintraub LLP, New York, New York, and Richard C. Garberson and Nancy J. Penner of Shuttleworth & Ingersoll, PLC, Cedar Rapids, for appellee.

          Heard by Vogel, P.J., Tabor, J., and Carr, S.J. [*]

          TABOR, JUDGE.

         This appeal marks the second time our court has considered the breach-of-contract dispute between T. Zenon Pharmaceuticals (doing business as Pharmacy Matters) and mutual insurance company Wellmark, Inc. Pharmacy Matters sued Wellmark after the insurer refused to reimburse more than six million dollars in claims for Factor drugs, a blood clotting treatment prescribed to hemophilia patients. Wellmark (and intervenor Wellmark Health Plan of Iowa, Inc. (WHPI)) counterclaimed with allegations Pharmacy Matters breached its contracts.

         In the first appeal, we reversed the district court's finding Pharmacy Matters materially breached anti-assignment clauses in the contracts, or, in the alternative, did not provide "covered services" to patients. T. Zenon Pharmaceuticals, LLC v. Wellmark, Inc., No. 14-0769, 2015 WL 9450469, at *15 (Iowa Ct. App. Dec. 23, 2015). We concluded Wellmark breached its contracts with Pharmacy Matters by refusing to reimburse claims submitted for 114 drug shipments. Id. We remanded for the district court to determine the proper amount of damages. Id. On remand, the district court awarded Pharmacy Matters $6, 335, 388 in damages and $3, 106, 313.49 in common-law attorney fees, plus interest on both awards.

         In the instant appeal, Wellmark attacks those awards on many fronts. Contesting the damages, Wellmark claims (1) Pharmacy Matters suffered no actual loss; (2) if it did suffer a loss, Pharmacy Matters failed to prove the amount of damages; (3) the district court should have excluded an award of $138, 093 to WHPI; and (4) the district court miscalculated interest on the damages. In its cross appeal, Pharmacy Matters asserts the district court should have awarded 10% interest on the unpaid claims under Iowa Code section 507B.4A(2) (2018). Finding no error in the district court's determination of damages or interest rates, we decline to disturb the awards.

         As for common-law attorney fees, Wellmark argues (1) Pharmacy Matters did not specifically plead entitlement to attorney fees; (2) the district court used the wrong standard and, under the correct standard, fees were not warranted; (3) Pharmacy Matters had no obligation to pay attorney fees; and (4) pre-judgment interest was improper. Because Pharmacy Matters did not prove Wellmark's conduct was oppressive or a connivance to harass or injure the pharmacy, we reverse the award of common-law attorney fees.

         I. Factual Background

         Pharmacy Matters entered contracts with Wellmark to provide "covered services" to patients in return for claim reimbursement by the insurer. The covered services at issue entailed the distribution of Factor drugs to twenty-four patients with hemophilia, a blood-clotting disorder. Those patients had insurance plans administered by a Blue Cross Blue Shield Association (BCBSA) licensee, and were clients of Factor Health Management (FHM), a disease-management company and pharmaceutical wholesaler based in Florida.[1]

         One of those patients was A.K., a child living in Iowa and insured through hawk-i (Healthy and Well Kids in Iowa). The hawk-i program covered A.K.'s Factor drugs only if obtained from a provider within Wellmark's network. As part of coordinating A.K.'s care, FHM searched online for an in-network provider of home-infusion therapy and found Pharmacy Matters in Iowa City.

         That pharmacy belonged to Michael Stein, who was its only full-time pharmacist. In July 2008, Pharmacy Matters and FHM entered a "contract pharmacy agreement" to deliver Factor drugs to patients around the country. Because Pharmacy Matters was an in-network provider, the patients could receive the drugs at a lower cost.

         To carry out the pharmacy's agreement, Stein received Factor shipments from FCS and dispensed the drugs to the hemophilia patients according to their prescriptions. After shipping the drugs, Pharmacy Matters sought reimbursement from Wellmark. Under its contract with FHM, Pharmacy Matters agreed to pay FHM the entire reimbursement from Wellmark. Then FHM would remit a 1.5% dispensing fee to Pharmacy Matters.

         After noticing Stein's submission of a large volume of claims for the expensive Factor drugs, Wellmark launched an investigation into Pharmacy Matters. Wellmark's investigator first met with Stein in November 2008. Stein explained FHM's referral of hemophilia patients to his pharmacy. Wellmark declined to reimburse Pharmacy Matters while its inquiry progressed but advised Stein to continue submitting claims. He did so-filing 118 claims between August 2008 and July 2009. All remained unpaid. Wellmark's reasons for rejecting Stein's claims shifted during its investigation.[2]

         After Pharmacy Matters filed its lawsuit, Wellmark finally denied all the claims, alleging Stein did not provide covered services. In the first appeal, we rejected Wellmark's rationale for denying the claims.[3] We then remanded for the district court to determine what damages Wellmark owed Pharmacy Matters. The district court's determination of damages is the subject of this second appeal.

         II. Damage Award

         A. Scope and Standard of Review

         We review breach-of-contract claims for correction of legal error. NevadaCare, Inc. v. Dep't of Human Servs., 783 N.W.2d 459, 465 (Iowa 2010). If we find the district court misapplied the law in a manner materially affecting its decision, we will reverse its judgment. Id. But the district court's factual findings are binding when supported by substantial evidence. Id.

         B. Actual Loss

         As its initial salvo, Wellmark argues the district court erred in failing to find Pharmacy Matters suffered actual loss before calculating the amount of damages. Wellmark insists our court did not decide Pharmacy Matters incurred damages in the first appeal. Thus, in Wellmark's view, the district court needed to make a specific finding of actual loss rather than presupposing Wellmark owed some amount in unpaid claims to Pharmacy Matters. ...

Buy This Entire Record For $7.95

Download the entire decision to receive the complete text, official citation,
docket number, dissents and concurrences, and footnotes for this case.

Learn more about what you receive with purchase of this case.