Forest Drugs Ltd. (o/a Pharmasave No. 423) - v. -, 2013 SKPC 49

IN THE PROVINCIAL COURT OF SASKATCHEWAN CIVIL DIVISION Citation: 2013 SKPC 049 Date: March 26, 2013 File: 2010-9 Location: Melfort _____________________________________________________________________________ Between: Forest Drugs Ltd. (o/a Pharmasave No. 423) - and - Express Scripts Canada Company (Formerly known as ESI) Grant A. Stefanson For the Plaintiff George A. Green For the Defendant _____________________________________________________________________________ JUDGMENT I. J. CARDINAL , J _____________________________________________________________________________ I.

INTRODUCTION [ 1 ] Forest Drugs Ltd. (“Forest”) owns and operates a pharmacy in Hudson Bay, Saskatchewan. Express Scripts Canada Company (“Express”) is a third party payor of claims. In 1998 Forest entered into a Pharmacy Provider Agreement (“Agreement”) with Express and it is acknowledged this Agreement was in force at all relevant times.

[ 2 ] The Agreement (Exhibit P-1; Tab 1) set out the dispensing fee of $6.93 and provided certain provisions governing notice for various events, including Forest providing notice to Express of any change in its dispensing fee.

The Agreement was automatically renewed every year since the date of its initial signing on July 22, 1998. [ 3 ] Over the course of a number of years there was no issue with respect to the payment of the dispensing fee. [ 4 ] In September 2008, the Defendant decided to perform an on site audit of the transactions concerning the dispensing fee paid to the Plaintiff for two years spanning 2006 - 2008. As a result, Express determined they had overpaid Forest in the amount of $21,101.04 by virtue of Forest claiming a dispensing fee in excess of the amount agreed to by the parties.

This amount was “clawed back” by the Defendant and the monies withheld from ongoing payments to the Plaintiff. [ 5 ] Forest has brought a claim against Express for $20,000.00, the maximum amount allowable under The Small Claims Act, 1997, S.S. 1997, c. S-50.1. The trial proceeded on the basis of a transcript from previous proceedings, as well as written and oral argument by counsel on behalf of the parties. [ 6 ] For the following reasons I find the Plaintiff has not proven its case on a balance of probabilities and I dismiss its claim. II. ISSUES [ 7 ] The main issue is one of notice.

The question is whether notice as required under the Agreement was given by Forest to Express concerning any change in their dispensing fee. This also requires a consideration of whether the parties, through their actions, waived the notice requirement. III. FACTS [ 8 ] The facts are not in dispute. Forest, operating as Pharmasave #423, operates a pharmacy in Hudson Bay, Saskatchewan. Express is a third party payor of claims.

Customers attend at Forest to fill their prescriptions; Forest fills the prescription and immediately submits the claim electronically to Express through a direct link between their computers (Exhibit P-1; Tab 3). Express adjudicates the claim immediately and advises whether approved and in what amount, and if not covered, what is owed to Forest by the individual customer. Included in the claim is the dispensing fee, referred to as the “Usual & Customary Professional Fee” in the Agreement, to which Forest is entitled to receive for filling the prescription. [ 9 ] The Agreement is a standard form used by Express.

It has a large box at the outset which is separated into two boxes by a horizontal line. At the top of the box it states “Required Pharmacy Information”. The first part of the box provides the store operating name and address as well as contact information.

Immediately below that, within the same large box but separated by a line, is information concerning the insurance carrier on the left-hand side of the box; to its right is a statement about the expected liability coverage to be maintained. [ 10 ] Directly below the insurance information, still within the smaller box, to the left, is information regarding hours of operation and usual and customary professional fee, which is indicated as $6.93.

Immediately to the right of this information it states: Note: It is the responsibility of the provider to notify ESI Canada in writing of any changes to their required pharmacy information. [ 11 ]

Part 9, Miscellaneous, paragraph A states:

A Any notice required to be given pursuant to the terms hereof shall be in writing and sent by ordinary or express mail to the other party at the address listed below or to the last reported address of such party: If to ESI Canada: Attn: Provider Relations 5770 Hurontario St., Suite 606 Mississauga, Ontario L5R 3G5 Plaintiff ’s Evidence [ 12 ] Mr. Zapski testified on behalf of the Plaintiff. He has been a pharmacist for 27 years, and is an officer, director and shareholder of Forest Drugs Ltd., and has been so for more than 25 years.

During those 25 years he has been a continuous member of the Pharmacists Association of Saskatchewan, a voluntary organization that advocates on behalf of pharmacists and dialogues with agencies with which they deal. It is he who signed the contract on behalf of the Plaintiff Forest on July 22, 1998. [ 13 ] Mr. Zapski testified that since the inception of the contract in 1998, Forest has always charged and been paid the government set maximum dispensing fee rate. [ 14 ] However, after the audit was completed in September 2008, Mr.

Zapski became aware that no one at, or on behalf of Forest had been notifying Express of the change to the “Usual & Customary Professional Fee” being charged by Forest. The only exception to this was a note he faxed to Express in February 2001 (Exhibit P-1; Tab 12) asking why they had not changed the fee to the new rate ($7.22) from the old rate ($7.15) as the maximum allowable government rate had been increased but was not reflected in the payment. Express immediately corrected it and paid the new dispensing fee.

Express agrees they accepted this note as fulfilling the notice requirement concerning a change in the dispensing fee. [ 15 ] In cross-examination Mr. Zapski was forthright and honest. He agreed he had not complied with the requirement to notify Express in writing of any change to the dispensing fee charged by Forest.

He testified he did not read the contract for ten years and that the contract was shelved with all other contracts and it sat (Transcript, page 93; Lines 10-18). [ 16 ] He agreed, when he read the contract on November 24, 2012 in Court during the initial trial, that it required the pharmacy to give specific notice of an increase in the dispensing fee.

He also agreed that while he thought the Pharmacy Association was doing it on his behalf, he did not make any inquiries of them to confirm that such action was being taken. [ 17 ] Further, he agreed that prior to September 1, 2008, he did not advise Express the Pharmacy Association would be providing notice of changes to his “Usual & Customary Professional Fee” on his behalf. He agreed that he had never provided such notification to Express over the last ten years (Transcript, page 109; Lines 8-18).

He did not dispute the evidence from Express that the Pharmacy Association had not been providing any notice of any change in the dispensing fee charged on behalf of Forest Drugs or any other pharmacy. [ 18 ] Other than the faxed note in February 2001, Mr. Zapski admitted Forest had not provided any notice of a change or increase in its dispensing fee to Express. Defendant ’s Evidence

[ 19 ] The evidence on behalf of Express came through Ms. M. Bozoian, a business integrity consultant with Express who conducts audits on their behalf of providers such as Forest. She explained that Express processes over 70 million claims a year from approximately 8,200 providers across Canada on behalf of various insurers. [ 20 ] This large volume of claims necessitates an automatic electronic approval process.

It is as she described, an “instantaneous process that goes through our adjudication process” (Transcript, page 151; Line 15 to page 152; Line 9). [ 21 ] Express undertakes random and targeted audits to ensure the proper amounts are being paid out to providers. Such checks and balances are performed for various reasons. For example, an “Extemporaneous Mixture Audit” (Exhibit P-1; Tab 11), referred to as a Desk Audit, is directed at ensuring the products inside the mixture are eligible benefits under the insurer’s plan.

It does require the provider to indicate its dispensing fee, but the fee itself is not the focus of the audit according to Ms. Bozoian. [ 22 ] In September 2008, Express performed a Desk Audit directed at the dispensing fee of Forest being charged over the course of two years, being July 2006 to July 2008. Ms. Bozoian points to

Part 5 of the Agreement as the authority which allows Express to conduct audits and requires providers to maintain records that be kept for two years. The Plaintiff accepts

Part 5 of the Agreement allowed for such audits. [ 23 ]

Part 3 of the Agreement allows Express to claw back any overpayments and return those monies to the appropriate insurers, as was done in this case. Forest accepts this occurred. IV. ANALYSIS [ 24 ] Forest, through Mr. Zapski, admitted that it was required to give written notice to Express of any changes, including increases, in its dispensing fee.

However, Forest submits actual notice was provided to Express each time it submitted a claim electronically, as well as when it responded to Desk Audits, as each of these documents contains a reference to its dispensing fee in effect at the time the document was submitted.

I do not agree with counsel in this regard. [ 25 ] If such electronic submission of a claim constituted notice of the change in the dispensing fee, it is not difficult to imagine that Express would need to closely scrutinize each and every claim submitted by Forest and each of the other approximately 8,200 pharmacies with which it does business to ensure the correct dispensing fee is being charged and reimbursed upon its immediate submission. [ 26 ] Further, such close and careful scrutiny of each electronically submitted claim would put the pharmacies themselves in serious jeopardy of not being paid in a timely matter.

Such a process would be time consuming and virtually unworkable given the approximate 70 million claims submitted annually. Both Forest and Express benefit from a streamlined operation that pays the claim immediately while the customer waits for the prescription. [ 27 ] With respect to the Desk Audits, I accept Ms. Bozoian’s evidence that those are directed at a specific issue related to the components of the drug being audited, and are not specifically aimed at the dispensing fee being charged. While the fee itself is indicated on the audit, it is not the main focus of the audit.

While it may appear to be an easy matter for Express to check the dispensing fee on the Desk Audit with the dispensing fee being paid to the pharmacy, that is not the case. Express would have to manually check each and every Desk Audit, literally thousands, with their file information to determine whether the correct dispensing fee is being paid.

This is unworkable and would cause delay in payment to providers, including Forest. [ 28 ] Forest argues that by always paying the maximum dispensing fee allowed under provincial law (which coincidentally was the amount Forest was charging according to the daily claims submitted and the Desk Audits), and not advising Forest this was not acceptable notice, Express was estopped from clawing back any overages discovered during the audit. [ 29 ] I do not agree. What is apparent from the evidence is that Express automatically programs its computer system to pay the

maximum dispensing fee allowed by the province to every provider in that province. While the evidence indicates most pharmaciescharge the maximum dispensing fee allowed by the province, some pharmacies charge less. Thus, those pharmacies that charge less willactually receive an overpayment and benefit from it, at least until they are audited.

In this case, Forest benefited from February 2001 toJuly 2006 from being paid the maximum allowed under provincial law even though they had not notified Express they were charging themaximum. [30] Given the volume of claims and number of providers Express handles, it is understandable that they impose a cap of themaximum provincial dispensing fee allowed, rather than inputting each individual provider’s dispensing fee into the computer system.

The audit is part of the checks and balances to ensure that providers are paid according to the terms of the Agreement. [31] Those pharmacies which do charge the maximum dispensing fee allowed by the province and who notify Express inaccordance with the terms of the Agreement each time they increase their dispensing fee to that of the maximum allowed by theprovince, may also be subject to an audit of the dispensing fee.

That will not result in a claw back because Express will have beenadvised and the audit will disclose such notice was provided. [32] While it may be easier if Express simply agreed to pay the maximum provincial dispensing fee to all providers and do awaywith the notice requirement, that is not what is outlined in the Agreement. By establishing the maximum fee allowed by the province asthe cap and paying that amount automatically unless and until an audit is conducted, Express allows for expediency in processing claimsand initial payment thereof.

Such a process works to the advantage of providers overall as most charge the maximum fee allowed by theprovince and will not be subject to any claw back of payments provided notice was given to Express. [33] While some provisions contain time limitations, such as

section 2D which requires “immediate” written notice of a changeregarding licences, no such time limitation is indicated regarding notice of the change in the dispensing fee. Forest argues that thismakes the notice requirement ambiguous. I do not agree. One would expect that when a provider changed its dispensing fee there wouldbe prompt notification to Express, as it is the pharmacy who will eventually suffer if they do not provide prompt notification of thechange in their dispensing fee.

As happened here, overpayments can be clawed back and the provider left without any real recourse torecoup those monies from the individual customers whose claims were involved. Time is of the essence. [34] I also find Express did not waive the notice requirement by accepting notice by means such as facsimile or email, despite thenotice clause in

section 9A stipulating it “shall be in writing and sent by ordinary or express mail”. Simply allowing other forms ofcommunication regarding the change in the fee does not prevent Express from continuing to rely on that part of the clause requiringnotice be given. Nor does accepting the notice even though it was sent to another department other than “Provider Relations” asstipulated in

section 9A amount to conduct which varied the terms of the notice requirement. [35] When one looks at the entire Agreement, as I must do (See: Marquest Industries Ltd. v. Willows Poultry Farms Ltd. (1968), (BC CA), 66 WWR 477 (BCCA)), the intentions of the parties are clear. The Agreement itself is clear, and there is noambiguity. Written notice of any change to the dispensing fee must be given by Forest to Express. V. CONCLUSION [36] I find the Plaintiff has not proven its case on a balance of probabilities and dismiss the claim accordingly. I.J. Cardinal, J