BioScrip, Inc. Derivative Litigation

On May 7, 2015, Park Employees’ and Retirement Board Employees’ Annuity and Benefit Fund of Chicago (the “Fund” or “Plaintiff”) filed a derivative action complaint on behalf of BioScrip, Inc. (“BioScrip” or the “Company”), in the Court of Chancery of the State of Delaware (the “Action”). The complaint alleges wrongdoing by the BioScrip directors and officers for repeatedly and intentionally disregarding regulatory and compliance requirements. Specifically, BioScrip’s management caused the Company to accept illegal kickbacks from Novartis Pharmaceuticals Corporation (“Novartis”) on the sale of a dangerous Novartis drug called Exjade in violation of various federal and state laws and regulations. This scheme resulted in over 40,000 false claims, and tens of millions of dollars paid to the Company by Medicare and Medicaid that should not have been paid.

Moreover, in 2011, relator David Kester filed a qui tam action against BioScrip for its participation in the Exjade kickback scheme. The Department of Justice (“DOJ”) joined the Kester qui tam in 2012 in addition to launching its own investigation into BioScrip’s distribution of Exjade. According to DOJ documents, multiple BioScrip employees corroborated the involvement of BioScrip executives in the Exjade kickback scheme. In 2013, the New York Attorney General’s Medicaid Fraud Unit joined forces with the DOJ in its investigation (“NYAG” or collectively with DOJ, the “Government”). Meanwhile, for nearly a year, the Individual Defendants concealed the fact that the Government was investigating the Company despite their obligation to disclose such a serious regulatory matter to investors.

By the end of 2012, the Company also began experiencing significant declines in its pharmacy benefits management (“PBM”) services segment which the Individual Defendants concealed from investors in violation of federal securities laws.

In further violation of federal disclosure obligations, the Individual Defendants with material assistance from Jefferies LLC (“Jefferies”) and Kohlberg & Co., L.L.C., Kohlberg Management V, L.L.C., Kohlberg Investors V, L.P., Kohlberg Partners V, L.P., Kohlberg TE Investors V, L.P. and KOCO Investors V, L.P. (collectively, “Kohlberg”), caused the Company to issue two major stock offerings in 2013, successfully raising hundreds of millions of dollars in proceeds for the Company and Kohlberg while simultaneously concealing the Exjade Kickback Scheme, the related Government investigation and the known declines in the PBM services segment.

Finally, while in possession of the above material non-public information, certain Individual Defendants and Kohlberg engaged in insider trading.

Plaintiff seeks damages, disgorgement and other equitable relief on behalf of BioScrip.

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Attorneys for this case:

Robert J. Kriner, Jr.
A. Zachary Naylor