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Exact Sciences Corp. v. Blue Cross and Blue Shield of North Carolina

United States District Court, M.D. North Carolina

March 27, 2017

EXACT SCIENCES CORPORATION, and EXACT SCIENCES LABORATORIES, LLC Plaintiffs,
v.
BLUE CROSS AND BLUE SHIELD OF NORTH CAROLINA, Defendant.

          MEMORANDUM OPINION AND ORDER

          N. Carlton Tilley, Jr. Senior United States District Judge

         Plaintiffs Exact Sciences Corporation (“Exact Sciences”) and Exact Sciences Laboratories, LLC (“Exact Labs”) (collectively referred to as “Exact”) have sued Defendant Blue Cross and Blue Shield of North Carolina (“BCBS-NC”) for BCBS-NC's alleged failure to pay Exact for the performance of its proprietary colorectal cancer screening test on BCBS-NC Subscribers and have asserted fourteen claims stemming from this alleged failure to pay. (See generally Am. Compl. [Doc. #16].) BCBS-NC has moved to dismiss the entire Amended Complaint pursuant to Rule 12(b)(6) of the Federal Rules of Civil Procedure. [Doc. #21]. For the reasons explained below, the motion is granted in part and denied in part. It is granted as to Counts 2, 4, 5, 6, 8, 9, 10, 11, 12, 13, and 14. It is denied as to Counts 1, 3, and 7.

         I.

         For purposes of evaluating a motion to dismiss, well-pled facts are accepted as true and construed in the light most favorable to Exact. Nemet Chevrolet, Ltd. v. Consumeraffairs.com, Inc., 591 F.3d 250, 255 (4th Cir. 2009). Exact Sciences, along with researchers at the Mayo Clinic, developed Cologuard®, a non-invasive colorectal cancer stool DNA (“sDNA”) screening examination. (Am. Compl. ¶¶ 17, 20.) It is a proprietary test provided by and exclusively processed at Exact Labs. (Id. ¶ 29.)

         Cologuard®, the only multi-target sDNA screening test for colorectal cancer, uses advanced sDNA technology to find elevated levels of altered DNA in abnormal cells that have been shed from the lining of the colon and picked up by stool passing through the colon. (Id. ¶¶ 18, 19, 28.) Cologuard® also uses a fecal immunochemical test to find elevated levels of hemoglobin in these abnormal cells. (Id. ¶ 19.) In the Multi-Target Colorectal Cancer Screening Test for the Detection of Colorectal Advanced Adenomatous Polyps and Cancer (“DeeP-C”) Study, involving over 10, 000 subjects, Cologuard® demonstrated sensitivity at 92% of that seen with colonoscopy in detecting colorectal cancer. (Id. ¶ 21.) It demonstrated sensitivity significantly greater than that seen for the fecal immunochemical test in detecting colorectal cancer and advanced adenomas. (Id.) The results of the DeeP-C Study were published in the New England Journal of Medicine in April 2014. (Id. ¶ 22.) These sensitivity and specificity results were corroborated in a subsequent study involving over 600 Alaska natives. (Id. ¶ 23.)

         Cologuard® received premarket approval from the U.S. Food and Drug Administration (“FDA”) on August 11, 2014 and was the first DNA screening test for colorectal cancer approved by the FDA. (Id. ¶¶ 24, 25.) Effective October 9, 2014, the Centers for Medicare and Medicaid Services (“CMS”) extended coverage to Cologuard® across the Medicare Program by the National Coverage Determination for Colorectal Cancer Screening Tests. (Id. ¶ 26.) As a result, Cologuard® became the first medical product successfully to complete the joint FDA-CMS parallel review process. (Id. ¶ 27.) Numerous commercial health plans have extended coverage to Cologuard® such that seventeen months following FDA approval, Cologuard® has a coverage footprint of 110 million or more Americans in the Medicare Program and commercial health plans. (Id. ¶¶ 32, 33.) In addition, the American Cancer Society (“ACS”) specifies sDNA tests and Cologuard® in its current guidelines for colorectal screening. (Id. ¶ 34.) Not only do the guidelines state, “Beginning at age 50, people at average risk with no symptoms should follow one of the testing options below: . . . Stool DNA test (sDNA), every 3 years”, but the ACS endorses Cologuard® as “the test currently available” in its recommendations. (Id. ¶¶ 35, 36.)

         BCBS-NC provides healthcare insurance, administration, and/or benefits to policyholders or plan participants pursuant to a variety of healthcare benefit plans and insurance policies, including employer-sponsored benefit plans, government-sponsored benefit plans, Medicare Advantage plans, and individual health benefit plans (collectively referred to as “the Plans”). (Id. ¶ 2.) As of the date of the Amended Complaint, since October 2014, Exact has performed approximately 1, 341 Cologuard® tests for BCBS-NC Subscribers in at least nine different states and billed BCBS-NC for those services. (Id. ¶¶ 4, 55.) These Subscribers “generally provide Exact with a ‘Patient Assignment of Benefits Notice (AOB)'”. (Id. ¶ 43.) Although the language of the AOBs has changed from time to time, Subscribers assign to Exact their right to receive benefits and challenge benefit denials under the applicable Plans for the Cologuard® test. (Id. ¶ 44; see also Id. ¶¶ 45-47 (providing relevant language from three AOBs).) All BCBS-NC Plans provide coverage for colorectal screening tests or examinations, unless the test or examination fits within the definition of “Experimental” or “Investigational” under the terms of the applicable Plan. (Id. ¶ 41.)

         As of the date of the Amended Complaint, BCBS-NC has denied 507 Cologuard® claims under commercial plans, Medicare Advantage plan, and otherwise, totaling in excess of $321, 893 and has underpaid a number of claims.[1](Id. ¶¶ 1, 54, 62, 64 (citing Ex. 1 to Am. Compl.[2] [Doc. #16-1]).) It has also denied at least 65% of the claim denials that Exact has appealed. (Id. ¶ 64 (citing Ex. 1 to Am. Compl.).) According to Exact, regardless of the Plans' language, N.C. Gen. Stat. § 58-3-179, referred to as “the Coverage Mandate”, requires BCBS-NC to cover costs for colorectal cancer screening tests recommended by the ACS for colorectal screening. (Id. ¶¶ 3, 39.) The Coverage Mandate states

(a) Every health benefit plan, as defined in G.S. 58-3-167, shall provide coverage for colorectal cancer examinations and laboratory tests for cancer, in accordance with the most recently published [ACS] guidelines or guidelines adopted by the North Carolina Advisory Committee on Cancer Coordination and Control [(“NC Advisory Committee”)] for colorectal cancer screening, for any nonsymptomatic covered individual who is:
(1) At least 50 years of age, or
(2) Less than 50 years of age and at high risk for colorectal cancer according to the most recently published colorectal cancer screening guidelines of the [ACS] or guidelines adopted by the [NC Advisory Committee].
The same deductibles, coinsurance, and other limitations as apply to similar services covered under the plan apply to coverage for colorectal examinations and laboratory tests required to be covered under this section.
(b) Reserved.

         After Exact demanded that BCBS-NC provide benefits for Cologuard® as the Coverage Mandate allegedly requires, BCBS-NC responded by letter dated November 23, 2015. (Id. ¶ 57 (citing Ex. 2 to Am. Compl. (Letter from Janet L. McCauley, M.D., Sr. Med. Dir. Med. & Reimbursement Policy, BCBS-NC to Michael D. Dugan, M.D., Sr. V.P. Clinical Development & Med. Affairs, Exact Sciences) [Doc. #16-2]).) After acknowledging that “[c]urrently, [BCBS-NC] does not provide benefits for Cologuard”, BCBS-NC asserted that it was in compliance with the Coverage Mandate. (Nov. 23, 2015 Letter at 1.) BCBS-NC explained that its “benefits for colorectal screening match what is recommended by the [NC Advisory Committee] as well as the U.S. Preventive Services Task Force”. (Id.) BCBS-NC further explained eligibility for benefits and the development of its medical policies before stating, “[a]t this time, we find there is insufficient medical and scientific evidence to permit BCBSNC to evaluate the therapeutic value of Cologuard and to make conclusions regarding the efficacy and long-term effects on the net health outcomes of this technology.” (Id. at 1-2.) At the time of the letter, Blue Cross Blue Shield Association considered Cologuard® “to be investigational due to the uncertainty of the diagnostic accuracy of stool DNA analysis and a lack of demonstrated clinical utility.” (Id. at 2.) BCBS-NC explained that it “welcome[d] and encourage[d] providers to forward any current peer-reviewed literature based on well-designed studies that may not have been included in [its] own search” and that it would “review and make any changes indicated.” (Id. at 2.) BCBS-NC offered Exact the option to submit additional evidence-based references through the Evidence Street program recently established by the Blue Cross Blue Shield Association. (Id. at 2-3.)

         On December 29, 2015, Exact responded by letter to BCBS-NC's November correspondence. (See Am. Compl. ¶ 58 (citing Ex. 3 to Am. Compl. (Letter from Gary S. Qualls, Counsel for Exact Sciences to Lou Patalano, V.P. & Deputy Gen. Counsel BCBS-NC) [Doc. #16-3]).) In sum, Exact contended that the Coverage Mandate compelled coverage for two independent reasons. (Dec. 29, 2015 Letter at 3.) First, according to Exact, coverage is required if tests are included in either the ACS guidelines or guidelines, if any, of the NC Advisory Committee. (Id.) Second, the NC Advisory Committee's statements do not purport to be guidelines. (Id.) Because Cologuard® meets the ACS guidelines, BCBS-NC must cover Cologuard®. (Id.)

         BCBS-NC responded on January 29, 2016 by letter. (Am. Compl. ¶ 59 (citing Ex. 4 to Am. Compl. (Letter from Melissa K. Kaluzny, Managing Counsel BCBS-NC to Gary S. Qualls, Counsel for Exact Sciences) [Doc. #16-4]).) It acknowledged that the NC Advisory Committee document it had considered to be guidelines were not, in fact, guidelines. (Jan. 29, 2016 Letter at 1.) “Nevertheless, ” BCBS-NC's “position” was that it could “continue to deny stool DNA tests even though they are referenced under the [ACS] Guidelines due to the lack of clinical support for the test.” (Id.) BCBS-NC based this conclusion on language in the Coverage Mandate that states, “The same . . . other limitations as apply to similar services covered under the plan apply to coverage for colorectal examinations and laboratory tests required to be covered under [the Coverage Mandate].” (Id. at 1-2) According to BCBS-NC, “whether a service meets the health plan's definition of ‘medical necessity' is a ‘limitation' under the plan. As such, BCBSNC may apply its medical necessity definition to colorectal examinations and laboratory tests that may appear to be covered under [the Coverage Mandate].” (Id. at 2.) Applying the definition of medical necessity from BCBS-NC's benefit booklets, it noted that medical services are not medically necessary if, among other things, they are investigational. (Id.) Because BCBS-NC had determined that there was insufficient medical and scientific evidence to permit it to evaluate the therapeutic value of Cologuard® and to make conclusions as to its efficacy and long-term effects on the net health outcomes, it found Cologuard® to be investigational, as that term was defined in BCBS-NC's benefit booklets, and, thus, not medically necessary. (Id. at 3-4.)

         According to Exact, it “has repeatedly and in good faith sought to exhaust all known available appeal avenues under [the] Plans in an effort to convince BCBS-NC to reimburse Exact properly on its claims for Cologuard® tests that it provided to the BCBS-NC Subscribers.” (Am. Compl. ¶ 63.) “BCBS-NC has not favorably responded to Exact's demands or otherwise given any indication that it is willing to reconsider” its “policy . . . to exclude all Cologuard® claims.” (Id. ¶¶ 68, 69.) In support of this allegation, Exact directs the Court to “a Sample Notice of First Level Internal Adverse Benefit Determination” that “demonstrates that BCBS-NC is entrenched in its general policy position for its Plans to exclude all Cologuard® claims.” (Id. ¶ 71 & Ex. 6 to Am. Compl. [Doc. #16-6]; see also Id. ¶ 72 (citing Exs. 2 & 4 in further support of this contention).)

         As a result, Exact sued BCBS-NC and asserted fourteen claims: (1) Benefits under ERISA § 502(a)(1)(B), 29 U.S.C. § 1132(a)(1)(B); (2) Breach of Fiduciary Duties under ERISA § 502(a)(3), 29 U.S.C. § 1332(a)(3); (3) Denial of Full and Fair Review under ERISA § 503, 29 U.S.C. § 1133; (4) Declaratory Judgment for Violation of Coverage Mandate, N.C. Gen. Stat. § 58-3-179; (5) Unfair and Deceptive Trade Practices, N.C. Gen. Stat. § 75-1.1, Violation of Coverage Mandate, and Violation of Insurance Claims Settlement Act, N.C. Gen. Stat. § 58-63-15(11); (6) Unfair and Deceptive Trade Practices and Violation of Coverage Mandate; (7) Breach of Contract (non-ERISA); (8) Breach of Contract as Third-Party Beneficiary (non-ERISA); (9) Breach of Fiduciary Duty (non-ERISA); (10) Breach of Duty of Good Faith and Fair Dealing (non-ERISA); (11) Declaratory Judgment for Violation of Prompt Pay Act, N.C. Gen. Stat. § 58-3-225, (non-ERISA); (12) Unfair and Deceptive Trade Practices and Violation of Prompt Pay Act (non-ERISA); (13) Unfair and Deceptive Trade Practices, Violation of Coverage Mandate, and Violation of Prompt Pay Act (non-ERISA); and (14) Quantum Meruit (non-ERISA).

         II.

         BCBS-NC presents a number of challenges to Exact's ERISA claims. As to each of them, it argues that Exact lacks standing to bring the claims. (Mem. of Law in Supp. of Def.'s Mot. to Dismiss (“Def.'s Br. in Supp.”) at 4-11 [Doc. #26].) In addition, as to Count 1, BCBS-NC argues that Exact failed to allege sufficiently a claim for benefits and exhaustion of administrative remedies. (Id. at 3, 11-12.) As to Count 2, BCBS-NC argues that § 502(a)(3) of ERISA does not afford equitable relief, that Exact has not alleged a basis for a fiduciary duty owed to Exact other than through the AOBs, and that Exact has failed to allege sufficiently exhaustion of administrative remedies. (Id. at 11-13.) As to Count 3, BCBS-NC argues that Exact has failed to allege any facts pertaining to BCBS-NC's review process and, even if it had, the appropriate remedy is remand, and that Exact has failed to allege sufficiently exhaustion of administrative remedies. (Id. at 11-12, 13-14.)

         A.

         BCBS-NC argues, and Exact seemingly concedes, that Exact lacks direct standing as a health care service provider to bring a claim under ERISA. (Id. at 4.) Further, BCBS-NC contends that Exact lacks derivative standing for its ERISA claims because the AOBs are ineffective pursuant to the anti-assignment provision in BCBS-NC Plans, it has only vaguely alleged “that some of [its] patients signed one of three different AOBs”, and two of the AOBs do not assign to Exact the right to bring this lawsuit while the third is an unconscionable contract of adhesion. (Id. at 4-11.)

         1.

         In support of its argument that the AOBs are ineffective pursuant to the anti-assignment provision in BCBS-NC Plans, BCBS-NC attached to its Memorandum of Law in Support of its Motion to Dismiss “[a] sample of a BCBS-NC ERISA and a non-ERISA plan's cover page and anti-assignment clause”, both of which “contain BCBS-NC's standard anti-assignment clause”. (Id. at 4 (referring to Ex. A. [Doc. #26-1]).) It also argues that, in its anti-assignment clause, it specifically manifested its intent not to waive the assignment prohibition. (Id. at 5-6). BCBS-NC focuses on this Court's opinion in Total Renal Care of NC, L.L.C. v. The Fresh Market, Inc., No. 1:05CV00819, 2008 WL 623494 (M.D. N.C. Mar. 6, 2008), in support of its argument that, “Under federal law in North Carolina, the content of an assignment need not even be considered when, as is the case here, a valid anti-assignment provision is in place.” (Def.'s Reply Br. in Further Supp. of Mot. to Dismiss the Am. Compl. at 3-4 [Doc. #35]; see also Def.'s Br. in Supp. at 5.) Yet, BCBS-NC fails to recognize that before the Court in Total Renal Care of NC, L.L.C. were motions for summary judgment, not a motion to dismiss, as here.

         Exact contests the Court's consideration of the sample anti-assignment clauses because the terms of all relevant Plans are not in the Amended Complaint, not attached to the motion, and not known to Exact. (Pls.' Br. Opposing Def.'s Mot. to Dismiss (“Pls.' Br. in Opp'n”) at 4-5 [Doc. #31].) While a court may consider documents attached to a motion to dismiss, it may do so only when they are integral to the complaint and authentic. Philips v. Pitt Cty. Mem'l Hosp., 572 F.3d 176, 180 (4th Cir. 2009). Although BCBS-NC argues that the anti-assignment language reflected in the sample anti-assignment clauses it attached to its Memorandum of Law is its standard anti-assignment language, even BCBS-NC acknowledges that it only attached a sample ERISA Plan cover page and anti-assignment clause and a sample non-ERISA Plan coverage page and anti-assignment clause. Exact argues that there has been no discovery thus far and, at this stage, “[r]eliance on these purported clauses is misplaced”. (Pls.' Br. in Opp'n at 5.) The Court agrees. For purposes of this motion to dismiss, the two sample anti-assignment clauses that BCBS-NC attached to its Memorandum of Law as Exhibit A and its associated arguments based on those anti-assignment clauses are not considered at this time.

         2.

         Nevertheless, the question remains whether Exact has sufficiently alleged derivative standing, at least at this stage of the proceedings, to pursue its ERISA claims against BCBS-NC. It is presumed “that a statutory cause of action extends only to plaintiffs whose interests ‘fall within the zone of interests protected by the law invoked.'” Lexmark Int'l, Inc. v. Static Control Components, Inc., __ U.S. __, 134 S.Ct. 1377, 1388 (2014) (concluding that the zone-of-interests test was “an appropriate tool for determining who may invoke the cause of action” under the relevant statute). “Statutory standing applies only to legislatively-created causes of action and concerns whether a statute creating a private right of action authorizes a particular plaintiff to avail [itself] of that right of action.” CGM, LLC v. Bellsouth Telecomms., Inc., 664 F.3d 46, 52 (4th Cir. 2011). The Fourth Circuit Court of Appeals “has framed the statutory standing inquiry as whether the plaintiff ‘is a member of the class given authority by a statute to bring suit . . . .'” Id. (quoting In re Mutual Funds, 529 F.3d 207, 216 (4th Cir. 2008)). In addition, for a plaintiff to have Article III standing, it “must have suffered or be imminently threatened with a concrete and particularized ‘injury in fact' that is fairly traceable to the challenged action of the defendant and likely to be redressed by a favorable judicial decision.” Lexmark Int'l, Inc., 134 S.Ct. at 1386 (citing Lujan v. Defenders of Wildlife, 504 U.S. 555, 560 (1992)).

         Only a “participant” or “beneficiary” may bring an action under ERISA “to recover benefits due him under the terms of his plan, to enforce his rights under the terms of the plan, or to clarify his rights to future benefits under the terms of the plan”. 29 U.S.C. § 1132(a). “Healthcare providers . . . are generally not ‘participants' or ‘beneficiaries' under ERISA and thus lack independent standing to sue under ERISA.” Kearney v. Blue Cross & Blue Shield of N.C. , No. 1:16-cv-191, 2017 WL 530521, *4 ...


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