By Patrick Hoff, LAW 360
August 8, 2022
CVS Pharmacy can't avoid a proposed class action alleging its prescription drug benefits program discriminates against people with HIV and AIDS, as a California federal judge said the company's separate corporate entities can't shield it from federal health care law.
U.S. District Judge Edward M. Chen denied the pharmacy company's motion to dismiss the suit Friday, rejecting the arguments that none of the five CVS subsidiaries being sued for disability discrimination under the Affordable Care Act can be held responsible.
A California federal judge said CVS Pharmacy must face a lawsuit alleging its prescription drug benefits program discriminates against people with HIV and AIDS.
Under Section 1557 of the ACA, an entity administering a health program or activity and receiving federal funding cannot discriminate on the same grounds prohibited by Title VI of the Civil Rights Act, Title XI or the Age Discrimination Act. CVS argued that none of its subsidiaries alone administered the pharmacy benefits program or received federal funding for it, but Judge Chen said the text of the law and its regulatory history indicates Section 1557 was meant to be construed broadly.
"All defendants are directly or indirectly federally funded through one or more related arms of the enterprise," Judge Chen wrote in his opinion. "To permit the CVS entities to escape responsibility as a result of the establishment of corporate structures which cabin their functions would exalt form over substance, and would be antithetical to the overarching purpose of the anti-discrimination provision of the ACA."
Even if Section 1557 weren't broadly construed, Judge Chen said, he still wouldn't toss the suit. According to the opinion, several courts have held that entities are subject to anti-discrimination provisions of the civil rights statutes that the ACA references if they have the ability to reject federal funding or have a "controlling authority" over a federally funded program.
"The legal distinctness of the entities involved is not dispositive; rather, what is important is their functional role relative to decisions to receive federal funds or their control over the funded program," Judge Chen said.
Five anonymous patients, whose prescription drugs were covered through their employers, initially filed suit in February 2018, arguing that the health plans are discriminatory because they provide in-network specialty medications solely through mail orders delivered to their homes or to a CVS store.
The patients said that these delivery methods can cause delays or privacy concerns and that they rob the patients of the personal relationships they had with community pharmacists who know their medical records and are better able to monitor how their medications might react together. Counsel for the patients told Law360 in September that two of the five patients have died while the case has made its way through the courts.
Judge Chen tossed the suit in December 2018, but the Ninth Circuit revived it two years later, ruling the patients sufficiently alleged that the structure of CVS' program is discriminatory because it prevents them from getting the same level of care that non-HIV/AIDS patients regularly receive. CVS Pharmacy subsequently challenged the decision to the U.S. Supreme Court but agreed to drop that appeal in November.
Jerry Flanagan, litigation director for Consumer Watchdog and counsel for the plaintiffs, told Law360 that he's very pleased the John Does will have the opportunity to litigate their case.
"Next step is to certify the class, and then onto trial," Flanagan said.
Representatives for CVS did not immediately respond to requests for comment Monday.
The employees are represented by Jerry Flanagan, Benjamin Powell and Daniel L. Sternberg of Consumer Watchdog and by Alan M. Mansfield, Joe R. Whatley Jr., Edith M. Kallas and Henry C. Quillen of Whatley Kallas LLP.
CVS Pharmacy is represented by Enu Mainigi, Craig D. Singer, Grant A. Geyerman, Sarah O'Connor and Benjamin W. Graham of Williams & Connolly LLP and by John J. Atallah of Foley & Lardner LLP.
The case is John Doe One et al. v. CVS Pharmacy Inc. et al., case number 3:18-cv-01031, in the U.S. District Court for the Northern District of California.
--Additional reporting by Amanda Ottaway. Editing by Neil Cohen.