Lehigh Valley Health Network filed a complaint in the U.S. District Court for the Eastern District of Pennsylvania against a New York corporation registered to do business in Pennsylvania.

The suit requests a jury trial and seeks damages in excess of $75,000 on two counts, plus punitive damages, interest, attorney’s fees, expert fees and other costs.

The complaint against Capital RX Inc. and Anthony J. Loiacono, a New York resident and president and CEO of Capital, alleges fraud and negligent misrepresentation the defendants committed in business transactions with the plaintiff because it allegedly withheld dealings the defendants had with St. Luke’s University Health Network.

The suit involves pursuits initiated in 2022 by LVHN to secure a contract with a pharmacy benefit manager to administer prescription drug insurance benefits for its employee health plan, and alleges Capital on numerous occasions concealed material facts to the hospital network during negotiations between the two parties “to LVHN’s detriment.”

Specifically, LVHN contends Capital and Loiacono were contractually forbidden from providing those services to LVHN because the firm was under contract with St. Luke’s at the time, and St. Luke’s had insisted on an “exclusivity term” whereby Capital “explicitly promised not to work with LVHN.”

The filing states the terms of the exclusivity were “insisted on because of its (St. Luke’s) animosity toward LVHN.” The plaintiff asserts that 18 months before the defendants began talks with LVHN, Capital signed an allegedly confidential contract with St. Luke’s.

LVHN contends Capital and Loiacono courted the hospital network for a period of over 15 months, claiming the firm could save LVHN tens of millions of dollars over what LVHN’s then-existing provider could provide, during which time the firm assured LVHN it was “free and clear” to contract with it, when, in fact, it was not and was constrained to do so because of St. Luke’s exclusivity clause.

The complaint states with 60 days to go between LVHN’s planned transition to Capital, the pharmacy benefit manager (PBM) “revealed — for the first time — that Capital was contractually prohibited from LVHN by the terms of a contract that pre-existed the parties’ negotiations.”

LVHN said it began seeking a pharmacy benefits manager to manage and administer prescription drug insurance benefit for its employee health plan around May 2022, and had intended to modernize its benefits administrator function to increase efficiency, realizing substantial savings, beginning in 2024.

The hospital system says is invested time, money and other negotiations with Capital and repeatedly sought assurances the firm was in a position to contract with LVHN. On numerous occasions specified in the suit, LVHN said it was assured by Loiacono of Capital’s ability to enter contract.

On Oct. 31, 2023, the suit says, Loiacono disclosed St. Luke’s contacted him because it saw Capital’s press release reporting LVHN’s relationship with Capital, with Loiacono telling the vice president of operations and health management at Populytics Inc. (LVHN’s health plan) that St. Luke’s demanded Capital immediately cease working with LVHN on its transition to Capital. The suit says Loiacono “blamed SLUHN for the situation.”

In its two counts, LVHN claims the misrepresentations by Loiacono caused the hospital network to expend more than 1,000 hours of effort in preparing to transition its health plans PBM services to Capital; expend substantial resources and sums of money to prepare for the transition to Capital; and forego the opportunity to transition its PBM services to one of the other providers offering to provide more modern and efficient services and thereby experience substantial savings, increased profits and other financial benefits.

LVHN is represented in the case by Thomas R. DeCesar, and Nathan A. Huff and Anderson M. Shackelford of the law firm of K&L Gates LLP, Harrisburg.