Blue Cross Illegally Crippled Company, Stole Trade Secrets, Lawsuit Alleges; "A well-planned version of corporate highway robbery".

SEATTLE--(BUSINESS WIRE)--May 8, 1995--Today, HealthCare Dispense Inc., a Seattle-based, family-owned pharmaceutical care management company filed suit in King County Superior Court claiming that Blue Cross of Washington and Alaska intentionally deceived the company into revealing company trade secrets in order to create its own system before terminating its operating agreement and purchase negotiations with the company.

The suit claims that Blue Cross led HealthCare Dispense to believe that it planned to purchase the company. In reality, the suit says that Blue Cross was only interested in uncovering the organization's well-developed design for capitated pharmaceutical care in order to quickly establish its own system and retain the profits that would otherwise go to HealthCare Dispense.

HealthCare Dispense is asking the courts for $14 million in damages, $3 million of which will be earmarked for the creation of a non-profit watchdog group to monitor Blue Cross of Washington and Alaska's compliance with state and federal regulations.

Steve Berman, HealthCare Dispense's Seattle-based attorney, said that Blue Cross's actions are deeply troubling. "In my view, we have a company that claims non-profit status using its position in the marketplace to literally crush a small, family-owned business, all in the quest for higher profits," he said.

HealthCare Dispense uses its carefully researched delivery model to provide customized capitated pharmacy plans for a wide variety of health care plans including the state's AFDC (Aid to Families with Dependent Children).

According to Berman, Blue Cross contracted with HealthCare Dispense to provide pharmaceutical services to AFDC recipients throughout Washington State for a period of two years. The agreement, signed July 18, 1994, by Betty Woods, CEO of Blue Cross, took the form of a letter of agreement, with the understanding that Blue Cross and HealthCare Dispense would execute a more extensive contract later that would be "substantially similar."

In the following months, HealthCare Dispense began providing services for Blue Cross while trying to get Blue Cross to prepare a full-fledged contract. Finally, on Jan. 20, 1995, Blue Cross gave HealthCare Dispense a contract, but it was significantly different than the letter of agreement. Blue Cross threatened to withhold payments to HealthCare Dispense unless HealthCare Dispense signed the agreement, according to Berman, making it impossible for HealthCare Dispense to pay its subcontractors, including a number of individual pharmacists across the state.

According to Berman, during the time HealthCare Dispense was wrestling with Blue Cross over the contract issue, Blue Cross also approached HealthCare Dispense with a buy-out proposal.

"We believe that Blue Cross used the ruse of a buy-out agreement to get HealthCare Dispense to reveal its trade secrets to them," Berman said. "In fact, Blue Cross even sent a staff person to work at HealthCare Dispense's offices. HealthCare Dispense thought he was there to help move the sale along. We contend Blue Cross had no intention of consummating the sale, that this was an elaborate, well-planned version of corporate highway robbery."

According to the suit, after Blue Cross learned what it wanted, Blue Cross illegally terminated the contract and refused to pay hundreds of thousands of dollars for unpaid invoices.

"In effect, what Blue Cross did was trick HealthCare Dispense into sharing confidential information under the guise of a purchase in order to set up its own operation. Then Blue Cross fired HealthCare Dispense, refused to pay the company for services rendered and disclosing that HealthCare Dispense was under Blue Cross management," said Berman. "To add insult to injury, Blue Cross even retroactively canceled HealthCare Dispense's employee health benefits."

According to Berman, Blue Cross's actions have had a tremendous impact on the Lair family, owners of HealthCare Dispense. Jess Lair, the 38-year-old board member, suffered a debilitating stroke in the midst of the dispute.

Blue Cross of Washington and Alaska is the state's second largest insurer, with approximately $1 billion in annual revenues.

Earlier this month Blue Cross was cited by State Insurance Commissioner Deborah Senn for numerous violations of the law governing non-profit health insurers. Blue Cross was assessed a $19,000 fine and was scorned by Senn in a news conference.

HealthCare Dispense is a Seattle-based company founded in 1994. The company designs and implements high-quality, low-cost specialty systems for the administration of managed care health plans.

CONTACT: FIRMANI AND ASSOCIATES

Mark Firmani, 206/443-9357