Klein, Hockel, Iezza & Patel PC is pleased to report that its client, a California school district, prevailed against a Midwest pharmacy benefit manager (“PBM”) in a three-day binding arbitration before an American Arbitration Association (“AAA”) Arbitrator and former California Superior Court Judge.  Various industry experts and executives from the PBM testified at the arbitration.  The case concerned the School District’s request for an audit pursuant to its Management Services Agreement (“MSA”) with the PBM.

Following the District’s termination of the contract, the PBM refused to transfer protected health information (“PHI”) to the succeeding PBM unless the District signed a full settlement agreement and release.  After deciding it needed the data to provide a safe and efficient transition for its members, the District signed the release.  Upon receipt of the data, the District then brought an arbitration against the PBM, alleging that it signed the release under duress.  An arbitration ensued, and following a 3-day hearing and 75 pages of post-hearing briefing from the PBM, the arbitrator ruled that the release had indeed been signed under duress.  Accordingly, the release is void.

Klein, Hockel, Iezza & Patel PC has been battling against the PBM since mid-2015 and is thrilled that the Arbitrator held that the PBM’s conduct was against public policy.  Of particular concern to our health plan and pharmacy clients should be this PBM’s contention that the PHI was unnecessary and even “useless” to the subsequent PBM.  Here, the arbitrator rejected those arguments, but clients should be concerned that PBMs are making such arguments with abandon.  With the release void the health plan can now pursue its audit right under the contract.

A copy of the decision can be read here — Arbitrator Findings and Ruling 4-21-17.  The PBM filed a copy of this Decision with the Superior Court, State of California, County of San Francisco.

Congratulations to Jonathan Allan Klein and Sweta Patel for the victory.