Stockholders v Express Scripts, Inc.
Express Scripts Stock Crashes on News of NY AG Investigations
Several class actions have been filed against pharmacy benefit management company Express Scripts, Inc., (Nasdaq:ESRX) and certain of its officers and directors by stockholders who purchased the company's common stock between October 29, 2003, and August 3, 2004. The actions claim that the defendants violated federal securities laws by issuing a series of material misrepresentations to the market over this time period, thereby artificially inflating the price of the company's securities. The stockholders seek to recover compensatory damages for the loss of value of their stock.
The complaint alleges that, during the applicable period, the defendants caused Express Scripts' shares to trade at artificially inflated levels through the issuance of false and misleading statements and other illegal practices, including its improper practice of changing patients' medications. Ultimately, Express Scripts disclosed a number of investigations into those improper practices and recorded additional litigation reserves of $15 million.
The New York Attorney General filed suit against Express Scripts, alleging that the company conducted an elaborate scheme that grossly inflated the costs of prescription drugs to New York state's largest employee health plan, the Empire Plan. That lawsuit alleges that Express Scripts:
• Enriched itself at the expense of the Empire Plan and its members by inflating the cost of generic drugs;
• Diverted to itself millions of dollars in manufacturer rebates that belonged to the Empire Plan;
• Engaged in fraud and deception to induce physicians to switch a patient's prescription from one prescribed drug to another for which Express Scripts received money from the second drug's manufacturer;
• Sold and licensed data belonging to the Empire Plan to drug manufacturers, data collection services and others without the permission of the Empire Plan and in violation of the State's contract; and
• Induced the State to enter into the contract by misrepresenting the discounts the Empire Plan was receiving for drugs purchased at retail pharmacies.
On the news of the investigation and lawsuit, Express Scripts stock fell to $62.48 compared to a class period high of $79.81.
