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Bitter Pill: MTA Loses Suit to Recoup Millions Lost in Rx Fraud

The verdict in Manhattan federal court comes four years after the NYC Transit Authority first claimed that Express Scripts Inc. wasn’t properly keeping its eye on the till.

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A health care company for transit employees got off the hook for alleged prescription fraud.

Hiram Alejandro Durán/THE CITY

A Manhattan jury has rejected the New York City Transit Authority’s bid to recoup close to $80 million from its former pharmacy benefits firm, which it had sued for failing to curb “fraudulent, abusive or excessive claims” for pricey prescription drugs.

The transit authority sued Express Scripts Inc. in Manhattan federal court four years ago, as THE CITY reported at the time, charging that the company hired to manage its prescription plan did not deter the fulfillment of tens of millions of dollars in claims for costly compound medications.

On March 23, however, a jury decided that the NYCTA failed to prove that it had suffered any damages as a result of Express Scripts not stopping a surge in claims for medications mixed by pharmacies to create customized substances for patients — and which can cost up to tens of thousands of dollars more than standard prescription drugs.

“We’re very pleased with the result,” Michael Lyle, co-managing partner of the law firm Quinn Emanuel, which represented Express Scripts, told THE CITY. 

The Express Scripts headquarters in St. Louis.


The May 2019 lawsuit was filed months after the MTA board — which encompasses the NYCTA — had voted to reject a one-year option on its three-year deal with Express Scripts, citing “exceedingly high contract cost overruns” in awarding a $944 million contract to CVS Health.

The pre-pandemic court papers also pointed to the “substantial financial challenges” faced by the transit system, with officials at the time saying it was losing hundreds of millions annually as a result of fare evasion.

The MTA, which has a $19 billion annual budget, said it is still considering the verdict.

“We are reviewing the jury’s determination as we assess appellate options, and will always take appropriate action in situations when we feel that the public’s money has not been properly spent by a vendor,” Joana Flores, an MTA spokesperson, told THE CITY in a statement.

Ballooning Claims

Soon after Express Scripts (ESI) was contracted in April 2016, transit authority officials said the monthly cost of worker claims for compound medications spiked — growing from less than $500,000 in 2015 to $8.8 million in March 2017.

Officials at the transit authority flagged one individual’s $405,326 claim for three months worth of erectile dysfunction medication — though that was later determined to be non-fraudulent, according to court papers.

“Yet, compound medication costs continued to rise for suspicious reasons that should have provoked an aggressive response from ESI,” the NYCTA alleged in the lawsuit, which also cited a single Utah pharmacy as responsible for $20 million of the transit authority’s compound medication bills in 2017.

Lawyers for Express Scripts countered during the trial that the transit authority had the final say to implement cost controls on compound medications and that a solution was put in place in 2019 by the MTA’s then-chairperson, Patrick Foye.

Express Scripts, which in 2017 was the largest pharmacy benefits manager in the country, also contended that transit authority officials did not go for its internal cost-containment solution after the company sounded the alarm on how much the agency was spending.

“Express Scripts admits that it raised concerns about compound drugs, that it communicated its concerns to NYCTA and that NYCTA was unwilling or unable to implement many of Express Scripts’ recommendations to address the problems,” company lawyers wrote in court papers.

It’s not the first time the MTA has been caught up in big-bucks problems involving compound medication.

In July 2020, the owner of a New Jersey marketing company pleaded guilty in Newark federal court to a nearly $9 million scheme to rip off health insurance providers for MTA employees. Christine Myers copped to the insurance fraud after she and two former MTA bus drivers offered cash bribes to other transit workers to obtain compound medications they did not need. 

In February 2019, former MTA bus operator Enver Kalaba — who prosecutors said was recruited by Myers — received a 20-month prison sentence for his part in a plot to stiff the transit agency’s health benefits plan of nearly $3 million for the billing of medically unnecessary compound prescriptions. 

And in March 2018, another former bus driver, Christopher Frusci, pleaded guilty in Newark federal court to conspiring to defraud the transit agency’s health-care plan out of $5 million.

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