ST. CROIX — Frederiksted Health Care Inc. is suing Neighborhood Pharmacy LLC, alleging the pharmacy improperly handled transactions under a federal drug pricing program and breached a longstanding contract, resulting in underpayments that may exceed $5 million.
Neighborhood Pharmacy disputes the allegations. Through its attorney, Kye Walker, the pharmacy says it has complied with the contract and its amendments and that FHC has acknowledged owing the pharmacy millions of dollars.
The complaint, filed August 27 in Superior Court on St. Croix by attorney Charles Lockwood, of Dudley Newman Feuerzeig LLP, alleges breach of contract, breach of the duty of good faith and fair dealing, fraud, intentional and negligent misrepresentation, interference with business relations, contractual indemnity, and attorney’s fees.
FHC and Neighborhood Pharmacy entered into an agreement in 2014 that took effect in January 2015 and governed the pharmacy’s dispensing of covered outpatient drugs under the federal 340B drug pricing program. FHC is a covered entity under the program, according to the complaint.
Under the agreement, Neighborhood Pharmacy was to order covered 340B drugs, receive and maintain the inventory, dispense the drugs to eligible FHC outpatients, and charge and collect for the drugs on FHC’s behalf. The parties used a 340B processing service called Sentry to track prescriptions, determine which transactions qualified for 340B pricing, and reconcile payments between the pharmacy and health center.
FHC alleges that audits conducted by its staff and Optimal 340B, a consultant it hired beginning September 20, 2023, uncovered problems with the pharmacy’s reporting and charges.
According to the complaint, Neighborhood Pharmacy improperly reported and deducted patient co-pays, overcharged FHC for some uninsured prescriptions, failed to reverse charges when prescriptions were later determined to be eligible for 340B pricing, and charged FHC more for some co-pays than the amounts reported by the pharmacy.
The complaint provides an example involving a prescription with a $20 insurance-determined co-pay and a $100 insurance reimbursement. According to FHC, the total receipts for the transaction should have been reported as $120, subject to applicable fees. Instead, Neighborhood Pharmacy’s monthly reports showed only the $100 insurance payment and then deducted the $20 co-pay, resulting in a net payment of $80 rather than $100.
FHC also alleges Neighborhood Pharmacy overcharged it for uninsured and non-captured drug dispensations, failed to provide records required under the agreement, and did not provide reporting for insured FHC patients earlier this year from February through April. The complaint says the missing information means as much as $1.3 million in additional payments could be owed to FHC.
The health center alleges the discrepancies and other breaches collectively resulted in underpayments to FHC that “may exceed $5 million.”
FHC said it raised the reporting and charging discrepancies with Neighborhood Pharmacy in about November 2024 but alleges the pharmacy failed to provide all the requested information.
The dispute ultimately led to the termination of the pharmacy agreement.
Neighborhood Pharmacy sent FHC a letter dated April 1, giving 30 days’ notice that it would stop providing services unless the parties resolved financial and reconciliation issues and agreed to several other conditions, according to the complaint. FHC did not agree to the conditions, and Neighborhood Pharmacy stopped providing services April 30, the complaint states. FHC alleges the termination violated the agreement.
Kisha Christian, owner of Neighborhood Pharmacy, deferred comment to Walker.
Walker said FHC and Neighborhood Pharmacy had operated under a contract provided by FHC for several years and that FHC amended the contract terms several times in writing.
“Neighborhood Pharmacy has always acted in accordance with the contract and various amendments provided,” Walker said, adding that Neighborhood Pharmacy remained committed to providing prescription medication to some of the community’s most vulnerable residents.
Walker said changes in FHC’s board membership, executive team, and vendor relationships resulted in what she described as inconsistent administration of the contract by the health center.
“FHC has also acknowledged in writing that it owes Neighborhood Pharmacy millions of dollars,” Walker said.
Walker said FHC is seeking to offset what it acknowledges it owes Neighborhood Pharmacy by pursuing claims based on terms of the contract that FHC amended years ago and under which the parties continued to operate for several years.
“While Neighborhood Pharmacy remains committed to providing the best healthcare it can to the community, it cannot, and will not, continue to be taken advantage of by Frederiksted Health Clinic,” Walker said.
Walker said Neighborhood Pharmacy will respond to the complaint within the time allowed by law, and “looks forward to a very vigorous defense” of the claims.
FHC further alleges Neighborhood Pharmacy’s reporting constituted fraudulent or negligent misrepresentations because the financial statements did not accurately reflect co-pays, drug charges, and other transactions. The health center alleges it relied on those reports to its detriment.
FHC also alleges the termination disrupted its ability to provide prescription drugs to patients and damaged its business relationships with patients, drug wholesalers and manufacturers. FHC is asking the court to award compensatory and consequential damages, punitive damages, costs and attorney’s fees, as well as pre- and post-judgment interest and any other relief the court deems appropriate.
