Article: Some charges dropped in retirement fund suit

Monday, November 28, 2005

By James McNair
Cincinnati Enquirer staff writer

The legal case examining whether retired Ohio teachers were cheated by a New Jersey company handling their pharmaceutical benefits will resume next Monday – minus a few of the original allegations.

The trial before Hamilton County Common Pleas Judge David Davis is taking a planned break this week because of a vacationing juror. Meanwhile, Davis has granted Medco Health Solutions some relief by dismissing several counts from the lawsuit filed by the State Teachers Retirement System of Ohio.

Medco lawyer Earle Maiman of Thompson Hine asked last Wednesday that the entire case be dismissed, but Davis found cause to drop only pieces of it. He threw out the retirement system’s claim that Medco marked up the price of generic drugs by an average of 400 percent from 1993 to 2001, resulting in $48 million in overcharges.

Davis also dismissed claims that Medco’s actions amounted to fraud, unjust enrichment and violations of Ohio’s consumer sales practices and deceptive trade practices statutes. And he said he heard insufficient evidence of improper pharmacy practices such as filling prescriptions with incorrect or inadequate drugs.

“I think that the case is significantly narrowed,” said Betsy Ferguson, an in-house lawyer for Medco, the nation’s largest manager of group pharmaceutical benefits. “I can’t say that our exposure to damages has dropped. I can’t speak to how the plaintiffs are going to argue their damages at closing.

Robert Heuck, one of the three local lawyers trying the case for Ohio
Attorney General Jim Petro on the retirement fund’s behalf, said the rulings wouldn’t alter the amount of damages sought by the 430,000-member retiree group. The state fund is seeking $152 million from withheld rebates, excessive fees and overpriced drugs. It also wants jurors to award punitive damages.

Heuck said Davis’ rulings leave intact the fund’s allegations of breach of contract, breach of fiduciary duty, tortuous interference and constructive fraud. He also said Davis rejected a motion to dismiss Merck & Co., which spun off Medco in 2003, as a defendant.

“We were very pleased,” Heuck said. “The judge did grant some of their motions for directed verdict, but he left in the case some of the things that we care most about.”

Unless the retirement system chooses to present additional evidence next Monday, it will be Medco’s turn to introduce witnesses. Ferguson said she thinks Medco will need a week to present its case.

One party interested in the outcome of the trial is the U.S. Justice Department, which filed criminal fraud charges against Medco in 2003.

It alleged that the Franklin Lakes, N.J., company falsified records and made false statements in the handling of federal employees’ drug benefits program. It also accused Medco of paying an $87.4 million kickback to a health insurer – Oxford Health – for sending business its way. Medco denies the charges.