Dive Brief:
- Centene’s board members have won a lawsuit blaming them for mounting settlement losses after the insurer was embroiled in a Medicaid fraud scandal.
- The Bricklayers Pension Fund of Western Pennsylvania argued current and former board members failed in their oversight responsibilities and ignored red flags about a scheme to overbill states for Medicaid pharmacy services, which resulted in settlements costing the insurer hundreds of millions of dollars.
- However, a Delaware judge dismissed the suit last week, saying the fund hadn’t proved Centene’s current board is liable.
Dive Insight:
The case arose from allegations that Centene, the largest Medicaid managed care provider in the country, had profited by overcharging states for prescription drugs.
Centene acquired fellow insurer Health Net in 2016, which had its own contract with major pharmacy benefit manager CVS Caremark. The deal with CVS allowed the company to negotiate more favorable pharmacy reimbursement rates and prescription drug discounts, but Centene didn’t report those savings to state Medicaid agencies, according to the judge’s decision.
The insurer has since negotiated settlements with a number of states, including a $215 million settlement with California in early 2023. Centene created a $1.25 billion reserve to cover the payouts, according to the decision.
The pension fund, a stockholder in the insurer, brought the suit in 2022 to hold Centene’s directors and officers liable for the settlement losses. It sought damages for a breach of fiduciary duty and unjust enrichment.
The suit argues board directors failed to implement and monitor compliance policies to ensure Centene was following the law and ignored red flags about the alleged Medicaid scheme.
Centene moved to dismiss the case, arguing its current board can decide whether to bring claims against officers who allegedly perpetrated the scheme and directors overseeing the company when it took place.
The judge determined the fund had “fallen short” in proving Centene’s current board couldn’t be impartial about bringing claims against officers and directors related to the alleged Medicaid fraud scheme.
“Plaintiff has not shown the Board failed to respond in bad faith,” the judge wrote. “Rather, the Board accepted management’s statements that both the compliance issues and the regulatory risks were being handled. The Board did not make a conscious decision to violate the law.”
