Court Certifies PCS PBM Class Action Suit

August 6, 2003 ( - A class action suit alleging pharmaceutical benefits manager (PBM) PCS Health Systems Inc. breached its fiduciary duties to Oxford Health Plans Inc. participants by not passing on drug rebates and discounts has been certified.

A federal judge in the US District Court for the District of New Jersey certified the suit for those members of Oxford’s health maintenance organization (HMO) that received drug benefits through PCS. However, US District Judge William Bassler also refused certification for a class action to proceed on behalf of participants in 1,250 other health plans that contracted with PCS, according to Washington-based legal publisher BNA.

The court said the class would be limited to members of Oxford’s HMO, because each of the 1,250 separate health plans that contracted with PCS had different contractual arrangements with PCS and, because of these differences, the class action could not include these additional plans.

Class Action

Ed Mulder participated in an employer-sponsored health plan administered by an Oxford HMO. Oxford contracted with PCS to act as a PBM. However, after PCS switched Mulder’s cholesterol-reducing prescription to a more expensive drug, Mulder brought a class action against PCS. In the suit, Mulder alleged that PCS breached its fiduciary duties under ERISA:

  • entering into contracts with employee benefit plans, HMOs, and insurance companies to secure illegal windfall profits for PCS
  • implementing programs to influence pharmacists and physicians to switch the drugs of plan participants
  • utilizing a method of determining formulary and preferred drugs that did not serve the best interests of plan participants.

Mulder proposed that his class action include all PCS beneficiaries covered by ERISA plans during the period March 5, 1995, to March 5, 1998. Although the court agreed to certify the lawsuit as a class action, the court decline to accept Mulder’s proposed class.

The case is Mulder v. PCS Health Systems Inc., D. N.J., No. 98-1003 (WGB), 7/17/03.