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.
from the Iowa District Court for Johnson County, Paul D.
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
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.
by Vogel, P.J., Tabor, J., and Carr, S.J. [*]
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
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.
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.
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.
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.
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.
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.
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.
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
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. 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.
Scope and Standard of Review
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.
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. ...