A federal appeals court ruled on Friday that Rite Aid must face a class action that accuses the giant drug store chain of fraudulently inflating prescription drug prices it negotiated with insurance companies in court, per a Reuters report. 

The unanimous finding by the 9th Circuit Court of Appeals affirms a lower court’s ruling that Rite Aid’s price-negotiation agreements with pharmacy benefit managers (PBMs) that set drug prices between Rite Aid and health insurance companies are non-binding to beneficiaries. 

Plaintiff Bryon Stafford sued Rite Aid in 2017. He alleged that Rite Aid inflated the “usual and customary” prices of prescription drugs that it reported to PBMs, per Reuters. 

Prices that insurers usually pay are negotiated between PBMs, pharmacies and health insurance companies. But customers such as Stafford, who were not covered by a health insurance policy, and therefore paid out-of-pocket, were charged more than customers who were paying the “usual and customary” prices, Stafford’s suit alleges. 

Consequently, customers like Stafford overpaid for their prescriptions. 

Rite Aid argued that Stafford’s claims that he brought forth under the California’s Unfair Competition Law and Consumer Legal Remedies Act should be unable to proceed as a class action because of arbitration clauses. 

However, U.S. District Judge Anthony Battaglia found Stafford’s claims were independent of Rite Aid’s contracts. Circuit Judge Milan Smith concurred with Battaglia’s finding. Smith said that Rite Aid allegedly purposely inflated the usual and customary price. 

According to Reuters, Judge Smith added, “Rite Aid’s duty not to commit fraud is independent from any contractual requirements with the pharmacy benefit managers.”