ERISA Attorneys Win Twice for Caremark

Preemption, Lack of Fiduciary Status Lead to Dismissal of PBM Cases
July 18, 2006

On Monday, June 26, 2006, the Georgia Supreme Court ruled unanimously that ERISA preempted a nationwide class action alleging that our client, a pharmaceutical benefits manager (PBM) that administers prescription drug benefit programs for its customers, unjustly enriched itself by "misclassifying" the prescription drug tamoxifen as a brand name drug, rather than a generic drug, in assessing co-payments under employer-sponsored health benefit plans. 

The case was before the Georgia Supreme Court on the denial of a motion to dismiss, which had been affirmed in a split 4-3 decision by the Georgia Court of Appeals.   

Steptoe's other Caremark win—a case that lasted eight years—involved the critical issue of fiduciary status under ERISA. Judge Bassler, a New Jersey federal district court judge, granted Caremark's summary judgment motion and dismissed a class action suit filed against our client in 1998, alleging that Caremark had breached its fiduciary obligations to persons receiving those prescription drug benefits. 

The Court found that Caremark was not acting as an ERISA fiduciary when engaging in the challenged conduct and dismissed the case in its entirety.  The plaintiffs did not appeal the decision.  Because the activities that were attacked by the plaintiff were common to the PBM industry, the case has been regarded as one of unusual significance.