A shareholder of Caremark Rx is suing the fourth-largest pharmacy benefits manager for $3.2 billion for hiding the existence of an insurance policy that allegedly limited the amount of a 1999 legal settlement.
In a suit filed Friday in Jefferson County Circuit Court in Birmingham, Ala., John Lauriello says he and other shareholders of Caremark--then a physician practice management company called MedPartners--were led to believe that the company was covered for only $50 million when the shareholders agreed to a $56 million settlement in 1999.
The complaint says MedPartners actually bought an unlimited excess insurance policy for $22.5 million from American International Group--also named as a defendant in Friday's suit. Lauriello alleges that the $56 million settlement was "far lower than it would have been" had shareholders known of this unlimited coverage.
Lauriello is seeking class action status for an estimated 13,600 other parties to the 1999 settlement.
Lauriello asks for $3.2 billion in compensatory and punitive damages, to be shared among an estimated 13,600 affected shareholders. The claim is based on transcripts of statements made in open court by MedPartners and Caremark officials.
Both Caremark and AIG deny the charges.
The original settlement ended a 1998 suit that stemmed from a failed $8.1 billion merger attempt between Birmingham-based MedPartners and its larger rival, PhyCor, of Nashville, Tenn. The dissolution of that merger started the downfall of the multispecialty PPM industry, as both companies eventually sought Chapter 11 bankruptcy protection.
Caremark now is attempting to acquire competitor AdvancePCS, the nation's second-largest PBM, for $6 billion. That deal is awaiting federal antitrust approval.