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443 HEALTH SERVICES & INSURANCE PLAN V. CHOU 2020 Del. Ch. LEXIS 274 (2020)

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Nature of the Case

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Facts

Ps are stockholders in AmerisourceBergen Corporation (ABC). ABC acquired Medical Initiatives, Inc. d/b/a Oncology Supply Pharmacy Services (Pharmacy) as an indirect wholly-owned subsidiary in 2001 as part of a larger merger. Pharmacy was run as a criminal organization. Pharmacy was not a state-licensed pharmacy, although it operated in a way that made it appear as such to avoid Food and Drug Administration (FDA) oversight. Pharmacy's business was to buy single-dose sterile vials of oncology drugs, put those drugs into syringes, and sell the syringes for injection into a cancer patient's body. Pharmacy created the pre-filled syringes by removing FDA-approved drug products from their original glass vials and repackaging them into single-dose plastic syringes. The single-dose vials were intentionally overfilled by the manufacturer to account for human error in filling syringes and to permit the medical provider to discharge a small amount before injection to avoid air bubbles but still have a full dose. Instead of discarding the overfill, Pharmacy illegally 'pooled' the overfill and used it to fill additional syringes. This process was unsterile and led to the contamination of the drugs so pooled. ABC pocketed the extra revenue, and undercut the competition by providing kickbacks to buyers to increase market share. In 2006, the Board approved a capital expenditure plan to expand Oncology's Dothan, Alabama facility that housed the Pre-Filled Syringe Program. The Pre-Filled Syringe Program sold more than 1 million pre-filled syringes annually after the expansion and at the height of its operation generated more than $14 million in profit for ABC each year. Pharmacy was registered with the FDA as a drug manufacturer or repackager. Pharmacy did not maintain records of medication history, diagnosis, laboratory data, or other pertinent information for the patients to whom pre-filled syringes were administered. They used sham prescriptions to make it appear that Pharmacy was, a pharmacy, and thus shielded from FDA oversight. When the pooled drugs were so grossly contaminated that particulates were visible to the naked eye, Pharmacy filtered out these 'floaters' and sold the drug, nonetheless. Out of more than nine million pre-filled syringes created by Pharmacy, only eighty-two were submitted to an outside laboratory for sterility testing. On September 11, 2017, DOJ filed a Criminal Information resulting from allegations related to the Pre-Filled Syringe Program. On September 27, 2017, Specialty pleaded guilty to violating the FDCA. It admitted that it did not register Pharmacy with the FDA as required by the FDCA and that Pharmacy did not qualify for an exemption to the registration requirement for pharmacies that maintained establishments in conformance with applicable local laws regulating the practice of pharmacy. Specialty paid $260 million to the DOJ, consisting of a $208 million criminal fine and a criminal money forfeiture of $52 million ABC had obtained from unlawful sales of pre-filled syringes in violation of the FDCA. Specialty settled civil claims for $625 million. Ps sued Ds for a failure of their duty to oversee operations, in bad faith. Ds have moved to dismiss under Rules 23.1 and 12 (b)(6).