PacifiCare Sued Over Drug Discounts

A medical group that treats patients insured through PacifiCare Health Systems Inc. has sued the health maintenance organization, saying it deserves part of the rebates and discounts that drug makers gave the HMO. The suit by Monarch Healthcare Medical Group charges the HMO with fraud, unfair business practices and breach of contract in a suit that seeks compensation of more than $1 million and punitive damages of more than $10 million. PacifiCare is the No. 1 U.S. operator of HMOs through the government’s Medicare health insurance program for the elderly. The suit alleges that PacifiCare hid information from the medical groups it does business with regarding rebates and discounts on drugs. Both companies declined to comment on the lawsuit, which was filed Oct. 20 in Orange County Superior Court. Separately, it was revealed that PacifiCare mistakenly sent letters to 19,000 members inviting them to participate in a special program for diabetic patients after a computer-coding error incorrectly identified them as being diagnosed with the disease. The mix-up occurred last month after a programmer flagged a group of patients as being diabetic because they had undergone retinal exams, an indicator that the plan said should not have been used to identify diabetics. The HMO operator on Nov. 16 sent apology letters to members, doctors and medical groups. PacifiCare shares rose 25 cents to close at $71 on Nasdaq.