Current and former Centene board members, along with former senior executives, have beat a pension fund derivative lawsuit alleging the company overbilled state Medicaid programs for pharmacy services.
"Plaintiff has fallen short of demonstrating a majority of Centene's current directors face a substantial likelihood of liability, either in the maintenance of the Board’s reporting systems, or in failing to respond to the alleged notice of the underlying wrongdoing," the Delaware Chancery Court wrote July 12.
When Centene acquired Health Net in 2016, the company received favorable reimbursements and discounts for prescription drugs because of Health Net's contract with CVS Caremark, the lawsuit alleged. The payer did not disclose its arrangements with CVS, and instead reported "inflated expenditures" to state Medicaid agencies, thereby overcharging them, the plaintiffs said.
Centene has settled with at least 15 states over the issue — the company created a $1.25 billion reserve to pay for them in 2021. In 2023, Centene agreed to pay California $215 million, the largest of the settlements to date.
"I will assume that adding knowledge of a known faulty compliance system to knowledge of investigations, a subpoena, and regulatory scrutiny would put the Board on notice that Centene was heading for major corporate trauma," the chancellor wrote. "But Plaintiff has not supported the essential conclusion that the Board ignored that information in bad faith."
The lawsuit was directed at five of Centene's 10 current directors, along with seven former directors and senior executives. It was filed by the Bricklayers Pension Fund of Western Pennsylvania and sought damages for alleged breaches of fiduciary duty and unjust enrichment.