Second Circuit Court
Second Circuit Court Of Appeals Reverses and Remands An In Improper and Inadequate Settlement of the Medco Class Action Litigation.
In 1997, Linda Cahn initiated the first class action litigation in the country against PBMs. The suit alleged that Medco Health Solutions had breached its fiduciary duty to its employee benefit plan clients in numerous ways, including by: (a) switching plan members from low-to-high cost drugs; (b) preferring higher-cost drugs over lower-cost drugs on Medco’s Preferred Prescriptions Formulary; and (c) secretly collecting - and retaining - rebates and other payments from manufacturers to favor their higher-cost drugs in Medco’s drug-switching programs and on Medco’s Formulary.
Although attorneys litigating the case estimated total damages from Medco’s wrongdoing, as of August 2001, at $2.3 billion, class action attorneys agreed to an improper and inadequate settlement of $42.5 million thereafter. Over Cahn’s strenuous objections, the district court approved the settlement. As a result, Cahn - and certain other attorneys - filed appeals in the Second Circuit Court of Appeals to overturn the settlement.
In December 2005, the Second Circuit reversed and remanded the settlement, adopting the arguments that Cahn had advanced in her brief almost in their entirety. Newspaper articles in the New York Times and Wall Street Journal reflected the importance of the Second Circuit’s decision.
- Download “Appeals Court Orders A Review Of Medco Settlement Challenge”
- Download “Medco Settlement Runs Into A Snag”
As a result of Cahn’s repeated challenges and her appeal, there is now a greater likelihood that Medco’s wrongdoing will ultimately be exposed, and a proper settlement struck.