By Jim Suhr, Associated Press
August 19, 2004
ST. LOUIS (AP) -- Just two weeks after being accused
by New York state of fraud, the legal headaches of
Express Scripts Inc. -- among the nation's largest
pharmacy benefit managers -- appear to be intensifying
with a string of shareholder lawsuits.
Since New York filed its case Aug. 4, at least eight lawsuits seeking class-action status have been launched in federal court here -- Express Scripts' home turf -- for shareholders wanting reimbursement for lost investments.
Among other things, the shareholder cases -- one filed just a day after New York filed suit -- accuse Express Scripts of artificially inflating its stock price through a series of false or misleading statements.
A day after Express Scripts announced late last month that 20 states were investigating its business practices, the company's stock slumped $6.49 -- about 9 percent -- to $65.36.
In trading Thursday on the Nasdaq Stock Market, Express Scripts shares fell $2.09 -- or 3.3 percent -- to close at $61.52.
Express Scripts has maintained its innocence, saying Thursday that the lawsuits were meritless, its disclosures met all federal regulatory requirements, and "we intend to vigorously defend ourselves."
The shareholder lawsuits do not specify damages sought for Express Scripts stockholders of record generally between Oct. 29, 2003, and Aug. 3 of this year.
Messages left with many of the law firms behind the lawsuits were not returned.
Such cases are common, often following revelations of federal investigations of a company or governmental lawsuits or criminal charges involving a business or key executives. In many cases, such news can cause a company's stock to slide, prompting "stock drop" lawsuits by trial attorneys on behalf of shareholders.
Over this year's first half, there have been 128 class-action shareholder lawsuits nationwide, most of the "stock drop" variety, said Bruce Carton, executive director of Maryland-based Institutional Shareholder Services, which tracks such lawsuits.
"Anytime there's a material drop in the price of a stock, it's very common a securities class-action will follow," he said. "Is it (the frequency of shareholder lawsuits) lawyer-driven? Yes. But are they achieving positives for shareholders? Yes."
New York authorities accused Express Scripts of pocketing as much as $100 million in drug rebates that should have gone to the state.
Based in the St. Louis suburb of Maryland Heights, Express Scripts essentially serves as a middleman who negotiates on behalf of its clients for discounts from drug makers.
The New York lawsuit accuses Express Scripts of inflating the cost of generic drugs -- and of fraudulently or deceptively inducing physicians to switch patients' prescriptions and then collecting a fee from the new drug maker. New York Attorney General Eliot Spitzer alleged that Express Scripts called rebates an administrative fee or similar term and kept it.
Spitzer said the civil lawsuit will seek up to $100 million in restitution to the state over a five-year contract and undetermined restitution to individuals who may have paid unnecessary co-pays for medication and medical services.
Express Scripts countered that it has saved New York state more than $2 billion in drug costs since 1998. The state got all rebates for which it contracted and more rebates than guaranteed, initially deep retail discounts got better, and use of low-cost generic drugs increased, the company said.
Express Scripts said that it never recommends switches to a higher-cost drug in connection with any client's plan and does not accept pharmaceutical manufacturer funding for such programs.
Express Scripts has received a subpoena from Vermont requesting documents regarding various business practices, and said it has been advised to expect identical subpoenas or inquiries from attorneys general in 18 other states.
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