Retail pharmacy giant Walgreens has asked a D.C. federal court to toss out an arbitration award that would require the company to pay $642 million to Humana in a drug-pricing dispute.
In a filing to the U.S. District Court for the District of Columbia last week, attorneys for Walgreens said the "staggering" arbitration award "began in betrayal and ended in a miscarriage of justice."
In a separate filing, Humana asked the U.S. court to confirm the award. The insurer said Walgreens submitted "millions of falsely-inflated 'usual and customary' prices," which "overcharged Humana and its members for prescription drugs," according to the court filing.
Humana filed an arbitration demand in August 2019 "alleging a decade-and-a-half-long scheme to overcharge Humana through Walgreens’ submission of unlawfully inflated 'usual and customary' prices," the insurer claimed in its court filing.
At issue is Walgreen's pharmacy savings club designed to give the uninsured and underinsured access to lower prices. For roughly a decade, Humana was aware of Walgreens' prescription savings club and its lower prices, but "reimbursed Walgreens, without any complaint, based on Walgreens’ reporting of its retail prices, not PSC prices, as its U&C prices," attorneys for the pharmacy giant wrote.
An arbitrator issued the $642 million award in March.
But Walgreens argued in its filing that the arbitrator "rewrote" its contracts with Humana and used a flawed model to calculate the alleged damages.
"The result is that, because the arbitrator improperly compared the prices Walgreens charged Humana to prices that were neither 'usual' nor 'customary,' Walgreens has been ordered to pay the staggering sum of $642 million—more than a half a billion dollars—when no ordinary reader of the contract at issue would find that Walgreens had done anything wrong," the retail pharmacy wrote in the filing.
"The result was that the arbitrator awarded a massive windfall to Humana," Walgreens' attorneys wrote.
In its filing last week, Humana argued that a "highly-qualified arbitrator issued a 73-page reasoned Final Award that applied the law to the facts and awarded Humana $642.7 million in damages and prejudgment interest."
"The arbitration was extraordinarily methodical and thorough," the insurers' attorneys wrote.
Also, Walgreens also accused law firm Crowell & Moring of "switching sides" by representing Humana in the drug pricing dispute after the firm previously advised Walgreens years earlier on its drug pricing policies.
"Crowell’s decision to switch sides and solicit (and then pursue) litigation against its former client on the subject of its former advice was unconscionable and a blatant violation of ethical rules," Walgreens' attorneys wrote in the filing.
In a statement to Reuters, a spokesperson for Crowell called Walgreens' ethics claim "meritless" and said the firm was "confident that the arbitrator's thorough and well-reasoned award will be affirmed," the publication reported.
Walgreens separately sued Crowell in 2021 in the District of Columbia Superior Court seeking, among other things, indemnification from any arbitral award, an injunction against Crowell and disgorgement of the firm's profits from its work for Humana, Reuters reported.