A Centene investor is taking the nation's largest Medicaid managed care insurer to court, seeking access to company records to determine how much its leaders are to blame for the $1.25 billion the company expects to pay out in drug fraud settlements.
Shareholder Robert Garfield filed the lawsuit in Delaware Chancery Court Tuesday. Under state law, stock owners have the right to inspect corporations' internal books and records. The plaintiff aims to ascertain whether company leaders breached their fiduciary duties and engaged in wrongdoing, according to the complaint.
Based on company reports, speeches and decisions that are publicly available, Garfield argues that "the board and management either knew or should have known that their haphazard approach to compliance facilitated and permitted widespread fraud," the lawsuit says.
Centene did not respond to an interview request.
The for-profit insurer has reserved $1.25 billion to settle allegations it's now defunct pharmacy benefit manager, Envolve, defrauded state Medicaid programs. The setaside for those cases is equivalent to more than half the company's 2020 profits, the lawsuit says.
Centene paid out a combined $214 million to Arkansas, Illinois, Mississippi and Ohio in Medicaid settlements so far this year.
The same day Garfield filed his complaint, Kansas prosecutors announced Centene would pay another $32.4 million over its PBM operations. More than a dozen other states have hired the law firm Liston & Deas to investigate Centene and other PBMs' Medicaid billing and clawback practices, which the states say sidestep bans on spread pricing.
The settlements will cut into Centene's bottom line and threaten its ability to secure new Medicaid contracts, Garfield alleges. Fraud accusations also tarnish the company's reputation among policymakers, taxpayers and investors, the complaint says.
In August, Garfield requested records related to Centene's compliance procedures. Centene denied him, according to the lawsuit.
In October, Garfield tried again, demanding to inspect minutes from past board meetings, company compliance policies, Medicaid billing receipts and more. The two parties talked later that month about Centene's desire for Garfield to sign a confidentiality agreement before handing over hundreds of documents related to its PBM operations, he alleges.
The following month, Centene presented Garfield with a proposed confidentiality agreement. Garfield returned the contract with his edits, which included removing a provision that would prevent him from seeking additional legal action after viewing the records. Centene responded by restoring that language in another version of the agreement, the complaint says.
To date, the two have not agreed on the language of the confidentiality agreement and Centene has not produced any of the materials related to its Medicaid drug pricing, according to the lawsuit.
"The company's extended delays in negotiating its desired confidentiality agreement are
indicative of its obstructionist approach," the complaint says.
Garfield seeks access to those records, reimbursement for court fees and any other relief the court deems equitable and just.
Centene has Medicaid contracts in 30 states and covers 14 million enrollees. The company restructured its PBM in 2019 to serve solely as a third-party administrator and is now on the hunt for an outside operator manage its $300 billion in annual drug spending.
Last month, the hedge fund Politan Capital Management acquired a $900 million stake in Centene as part of its bid to shake up the company's leadership and operations.