Wal-Mart, CVS drug case sent back to West Virginia court

WASHINGTON – Wal-Mart Stores Inc., CVS Caremark Corp. and four other drug retailers lost their bid to move to federal court a lawsuit by the state of West Virginia over pricing of generic drugs on claims the case was a class action.

The U.S. Court of Appeals in Richmond, Va., said Friday that the drug retailers failed to show that the state was pursuing a group lawsuit, or class action, which would have required the litigation to be handled by a federal court. The four other defendants are Target Corp., Walgreen Co., Kroger Co. and Sears Holdings Corp.’s Kmart chain.

The lawsuit “was brought under a West Virginia statute regulating the practice of pharmacy and the West Virginia Consumer Credit Protection Act, neither of which includes provisions providing for a typical class action,” the appeals court wrote in its 2-1 decision.

West Virginia Attorney General Darrell McGraw sued the retailers in state court in Boone County, alleging the stores overcharged state residents while filling prescriptions in violation of two state laws. West Virginia law requires substitution of generic drugs when available and requires pharmacies to pass on the savings from using generics to consumers, according to the state’s lawsuit.

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The defendants sought to move the case to federal court in Charleston, W. Va., claiming the lawsuit was a “disguised class action.”

Lower Costs

The state, which is seeking disgorgement and other civil penalties, alleges the defendants aren’t giving consumers the full benefit of the lower wholesale costs pharmacies pay for generic drugs.

In a dissent, U.S. appeals judge Ronald Lee Gilman, said West Virginia’s case has the elements of a class action and should remain with the federal court.

“There is a saying that if something looks like a duck, walks like a duck, and quacks like a duck, it is probably a duck,” Gilman said.

Greg Rossiter, a spokesman for Bentonville, Ark.-based Wal-Mart, said Gilman’s dissent sums up the company’s view “nicely.”

Molly Koenst, a spokeswoman for Minneapolis-based Target, declined to comment.

Kimberly Freely, a spokeswoman for Sears, based in Hoffman Estates, Ill., and Keith Dailey, a spokesman for Cincinnati-based Kroger, declined to comment. Tiffani Washington, a spokeswoman for Deerfield, Ill.-based Walgreen, and Christine Cramer, a spokeswoman for Woonsocket-based CVS Caremark, also declined to comment.

The case is West Virginia v. CVS Pharmacy Inc., 11-1251, 4th U.S. Circuit Court of Appeals (Richmond).

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