Express Scripts Just Got Sued for Racketeering. Here’s What That Means.

Plaintiffs say a shadowy offshore entity helped Cigna and its PBM quietly siphon money meant for employers, unions and patients

Health Care un-covered

Author: Wendell Potter

A powerhouse law firm has filed a class action lawsuit that should make everyone who pays for prescription drugs through an employer or union health plan sit up and take notice. The target: Express Scripts, the nation’s largest pharmacy benefit manager — and its parent company, Cigna, where I used to work.

The lawsuit was filed on February 17 in the U.S. District Court for the Northern District of Illinois by Bernstein Litowitz Berger & Grossmann, one of the most formidable class action firms in the country. The lead plaintiff is the Plumbers’ Welfare Fund, which provides health benefits for members of Chicago-based Plumbers Local 130. The suit was brought on behalf of all Express Scripts PBM customers — a class that potentially encompasses thousands of employers, unions, and other plan sponsors across the country. The class has not yet been certified; the case is in its early stages.

The allegations are stunning, even by the standards of an industry I spent years working in.

Here’s the core of what the plaintiffs claim: Because Express Scripts’ contracts with its PBM clients required that money it received from drug companies be passed along as rebates, Express Scripts didn’t want to receive those payments directly. So it created Ascent, an offshore entity in Switzerland, to receive the money from drug companies instead — then characterized those payments as “fees” to avoid its contractual obligation to share them with customers.

In other words, they allegedly built a Swiss pass-through entity specifically to hide money from their own clients.

The timing matters. Effective January 1, 2019, the Plumbers’ Welfare Fund had amended its contract to require Express Scripts – which is part of Cigna’s massive Evernorth division and which is also named in the lawsuit – to pass along the full amount of rebates and administrative fees paid by drug companies. Shortly after, the defendants created Ascent — majority-owned and controlled by Cigna — based in Switzerland. The lawsuit alleges that Ascent assumed responsibility for negotiating rebates and other payments from drug manufacturers. Instead of passing those payments through as rebates, drug companies were directed to pay “rebate administration” and other service fees to Ascent in exchange for favorable formulary placement.

And it gets worse. According to the lawsuit, Cigna’s own chief medical officer at the time, Steve Miller, admitted that Ascent’s creation had enabled Express Scripts and its parent companies to “double, triple dip on fees” without their customers ever knowing. That’s not an allegation from a plaintiffs’ lawyer. That’s an admission from a senior executive of the company.

The lawsuit also names several major drug companies in the U.S. as participants in these alleged schemes. The legal theory is built around RICO — the Racketeer Influenced and Corrupt Organizations Act, a statute originally designed to take down organized crime... Continue Reading