Lawsuit Claims CalPERS Members Overpaid for Prescription Medication
Last week, a member of a CalPERS health plan filed a lawsuit claiming that members of the public pension fund have been overpaying for prescription medications because of alleged wrongdoing between CalPERS and pharmacy benefits manager Medco, theÂ Sacramento Business JournalÂ reports (Robertson,Â Sacramento Business Journal, 3/18).
Background on CalPERS-Medco Contract
In 2006, CalPERS awarded a three-year, $26 million contract to Medco to administer prescription drug benefits for state workers, retirees and their families.
The pension fund renewed the contract in 2009 and extended it through this year, bringing the total value of the three contracts to $48 million (California Healthline, 3/7).
Last week, CalPERS announced that it will not renew its drug benefits contract with Medco,Â following a reportÂ about improper payments Medco made to former CalPERS board member Alfred Villalobos (California Healthline, 3/17).
The lawsuit was filed in Sacramento County Superior Court by retired state worker Michael Desrys on behalf of other CalPERS members (Kasler,Â Sacramento Bee, 3/20).
The lawsuit claims that clandestine meetings and bribes took place between Medco and senior CalPERS staff members (Kell,Â Dow Jones/Wall Street Journal, 3/18).
According to the lawsuit, the court should:
- Suspend the current contract between CalPERS and Medco;
- Require Medco to reimburse money paid to the company and its agents; and
- Grant class-action status to the lawsuit to allow CalPERS members to seek compensation.
The U.S. Securities and Exchange CommissionÂ and the California attorney general also are investigating the case (Sacramento Business Journal, 3/18).
Medco Subpoenaed for Documents
Meanwhile, Medco announced on Friday that it received a subpoena from the U.S. Securities and Exchange Commission for documents relating to the company's relationship with Villalobos (Christie/Levine, Reuters, 3/18).
The subpoena requests information pertaining to $4 million in consultancy payments Villalobos received to negotiate the contract between Medco and CalPERS. SEC officials also are seeking additional information about "current and former affiliates" of the two organizations (Lifsher, Los Angeles Times, 3/19).
Headlines and links on more articles and editorials addressing the CalPERS-Medco situation appear below.
- "Calpers Probe Touches Medco" (Wisenberg Brin,Â Wall Street Journal, 3/18).
- "A Cloud Over CalPERS" (Los Angeles Times, 3/20).
- "CalPERS Must Hold Overseers Accountable" (Sacramento Bee, 3/19).