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Class Action Defense Cases-Bickley v. Caremark: ERISA Class Action Plaintiff Properly Required To Exhaust Administrative Remedies Eleventh Circuit Holds

Circuit Court Affirms District Court Order Granting Defense Motion to Dismiss ERISA Class Action Complaint Because Plaintiff Failed to Exhaust Administrative Remedies

An employee filed a putative ERISA class action on behalf of his employer’s health insurance plan against the Pharmacy Benefits Manager alleging breach of fiduciary duties for profiting from “undisclosed discounts, rebates, coupons and other forms of compensation from drug companies and pharmacies.” The district court granted the defense motion to dismiss the class action with prejudice because plaintiff failed to exhaust his administrative remedies, and the Eleventh Circuit affirmed. Bickley v. Caremark RX, Inc., 461 F.3d 1325 (11th Cir. 2006).

The Circuit Court summarized the allegations in plaintiff’s class action complaint at page 1328 as follows:

. . . Caremark creates undisclosed pricing “spreads” between the discounted price it pays to retail pharmacies and drug manufacturers and the discounted price it contracts to be reimbursed by the Plan. [Plaintiff] alleges that Caremark receives undisclosed discounts, rebates, and soft dollars from drug manufacturers in exchange for favoring that drug manufacturer’s drug over another in its standardized formulary and drug switching programs.

In affirming the judgment, the Court held that in the Eleventh Circuit plaintiffs are required to exhaust their administrative remedies before bringing ERISA actions in federal court, and that this requirement “applies equally to claims for benefits and claims for violation of ERISA itself.” Bickley, at 1328. The Circuit Court rejected plaintiff’s claim that the Plan excused him from exhausting administrative remedies before filing suit, id., at 1329, and rejected further plaintiff’s claim that no administrative procedure existed for his claims, id., at 1329-30. Finally, the Court held “that the district court did not abuse its discretion in failing to apply the futility exception, id., at 1330.

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