Opinion ID: 1428164
Heading Depth: 3
Heading Rank: 2

Heading: Provisions of the Settlement Agreement

Text: The Settlement Agreement defined the class to include all employee welfare benefits Plans that had either direct contracts with Medco or indirect contracts with Medco through insurance companies, third-party administrators, HMOs, Blue Cross Blue Shield entities, or any other intermediaries (collectively, third-party administrators or TPAs), where the contracts were in force at any time between December 17, 1994 and the date of the final approval of the settlement and were subject to ERISA. Under the Settlement Agreement, Medco agreed, among other things, to pay $42.5 million into a settlement fund to be paid to class members. Attorneys' fees, not to exceed 30%, together with expenses, also would come from the fund. In exchange, Plaintiffs agreed to release all claims of the class insofar as they arose under ERISA or were in any way connected to the actions that were the subject of the Complaint against Medco. Plaintiffs further agreed to release those claims against TPAs, as well as Plan sponsors that contracted with TPAs, that were connected to Medco's alleged conduct. Plaintiffs did not, however, release antitrust claims or any contract claims not arising under ERISA. The settlement fund allocates an amount to the settling class members that is based primarily on the amount of each settling Plan's proportionate share of the total drug spend of all settling Plans for the class period. Accordingly, each Plan's proportionate share of the total drug spend varies depending on the nature of the Plan's relationship with Medco. Insured or capitated Plans, which paid set premiums to an insurance company or Medco in exchange for full payment of their members' drug prescriptions, receive an allocation that is reduced by 55% to reflect the fact that they were more insulated from the conduct alleged in the Complaint. Said differently, if a Plan pays for prescription drug benefits on an insured or capitated basis (e.g., a fixed premium or per-member, per-month sum) or if [the] Plan does not participate in any brand-to-brand therapeutic interchange program administered by Medco, [its] proportionate share of the total drug spend will be reduced by fifty-five percent (55%) to reflect the fact that [the] Plan could not have been damaged directly by certain of the conduct that Plaintiffs allege increase[d] costs to Plans. By contrast, Plans that were self-funded and assumed the financial risk of paying for their members' prescriptions in their entirety receive a proportionate share of the total drug spend without any reduction.