Although the Superior Court panel, led by Judge Carolyn Nichols, with Judges Victor Stabile and James Gardner Colins joining, agreed with Liberty Mutual on some issues, the panel ultimately sided with the lower court that there was not enough evidence to allow the case to proceed.

"In sum, although we conclude that the trial court erred in its resolution of the jurisdictional issues, i.e. appellants' failure to join indispensable parties and the applicability of the Workers' Compensation Act, those errors do not affect our disposition," Nichols said.

Havertown lawyer Daniel Siegel was appellate counsel for 700 Pharmacy, and he said the ruling is significant because the intermediate appellate court makes clear that when dealing with the necessity of treatments stemming from a work-related injury, those disputes must be handled through the workers' compensation system.

"it affirms the need to proceed under the workers' comp system where there's a dispute over a medication, or anything else," Siegel said. "The legislature, they've created this whole system and we have to live with it."

The lawsuit was filed after the National Insurance Crime Bureau launched an investigation on the heels of a report by another insurance company that was not a party to the complaint. The report alleged that one of the pharmacies named in the case had been auto-filling compound pain cream prescriptions every 30 days, whether or not the patient needed the prescription filled.

Liberty Mutual, according to court papers, also investigated a claim that another pharmacy filled questionable compound medications. Specifically, that the "letters of medical necessity" were identical in some instances, and the doctors making the prescriptions had ownership stakes in the pharmacy.

The NICB expanded its investigation to several other pharmacies and the pharmacies' CEO, but, according to court documents, the agency closed its investigation in January 2018.

Liberty Mutual filed its lawsuit in September 2017, alleging common-law fraud, insurance fraud, unjust enrichment and aiding and abetting. In total, the lawsuit made claims against 18 doctors, nine pharmacies, nine pharmacists, three lay investors and two physician assistants.

In September 2019, Philadelphia Court of Common Pleas Judge Gary Glazer granted summary judgment to the pharmacies, finding that the plaintiffs failed to show that the pharmacies' ownership structure or the physicians' "self-referrals" were unlawful. The ruling dismissed the case entirely and cleared the pharmacies.

The insurance companies argued that the structure of the pharmacies in which the physicians held minority ownership stakes provided a means for the defendants to be paid alleged kickbacks for the prescriptions, but Glazer said the carrier gave no evidence that the Pharmacy Act had been violated.

"Physician ownership is not prohibited by the Pharmacy Act as long as the practitioner holding a proprietary or beneficial interest in the pharmacy does not exercise supervision or control over the pharmacist in his professional responsibilities and duties," Glazer said.

The carrier appealed to the Superior Court, arguing that, when it came to the question of whether there was a medical necessity for the medications, the court improperly deferred to the administrative process outlined in the Workers' Compensation Law. Further, the carrier argued there was sufficient evidence of misrepresentation regarding the compound pain creams and the business structure to raise genuine questions that should be allowed to go before a jury.

Nichols said Liberty Mutual was correct about the lower court improperly deferring to the Workers' Compensation Law's administrative process, but ultimately, the court decided that the carrier failed to raise sufficient questions about the pharmacies misrepresenting materials facts.

"Based on our review of the record, we conclude that appellants have failed to identify any evidence, let alone material issues of fact, to support this claim," Nichols said. "Even accepting appellants' assertions that 'gastrointestinal issues were not reflected in every patient's medical records' or that the creams did not appear to reduce opioid levels, those facts do not establish that the providers misrepresented their patients' need for topical pain creams."

Louis Long of Thomas, Thomas & Hafer represented Liberty Mutual. Long did not return a message seeking comment.