Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Mo.: PBMs unable to win dismissal of compounding pharmacies’ boycott claims, (Aug 25, 2016)

By Jeffrey May, J.D.

Independent pharmacies that fill prescriptions for compounded medicines adequately alleged that the nation’s four largest pharmacy benefit managers (PBMs) conspired to boycott compounding pharmacies and eliminate them from the market by ending insurance coverage for compounded prescription medications, the federal district court in St. Louis has decided. The plaintiffs contended that they were the victims of a boycott by Express Scripts, CVS Health Corporation, OptumRx, Inc., and Prime Therapeutics, LLC because the PBMs wanted to shift the fulfillment of compounded prescriptions to pharmacies in which they had an economic interest. The defendants’ motion to dismiss was denied (Precision Rx Compounding, LLC v. Express Scripts Holding Co., August 24, 2016, Jackson, C.).

The plaintiffs identified parallel conduct by the PBMs to eliminate the plaintiffs and other independent compounding pharmacies following Express Scripts’ announcement of its compound management solution. The purported "solution" was a plan to eliminate 95 percent of revenues paid to plaintiffs and other compounding pharmacies. The other PBMs allegedly used similar tactics following the announcement.

While the defendants contended that the parallel conduct was not sufficient to support a conspiracy claim, the plaintiffs also offered so-called "plus factors" that raised a suggestion of a preceding agreement. The court pointed to conduct that began in the summer of 2014, such as a drastic increase in the rejection rates for claims submitted for compounded medicines, the sending of letters to patients and doctors regarding the lack of Food and Drug Administration (FDA) approval for compounded medicines, and the creation of other obstacles for compounding pharmacies to receive reimbursements.

The court also noted that the defendants’ joint involvement in a trade association lent support for an inference of a conspiracy, particularly where parallel conduct directly followed trade association meetings. This provided a correlation to support an inference of a plausible relationship between the PBMs’ meetings and their concerted actions. Also identified as a plus factor was the highly concentrated nature of the PBM industry. The court agreed with the plaintiffs that Express Scripts’ June 2014 publication of the compound management solution appeared to run counter to the company’s self-interest in competing against other PBMs for clients, and that this type of "broadcasting of sensitive business information, plans or strategies" could provide further circumstantial evidence of a conspiracy among competitors.

"Taken as a whole and read in the light most favorable to the plaintiffs, the factual allegations in the complaint are sufficient to support the inference that defendants and their co-conspirators had a preceding agreement to engage in concerted, unlawful action," the court decided. The plaintiffs stated a plausible conspiracy claim under Section 1 of the Sherman Act and the corresponding state antitrust statutes.

State deceptive practices, unfair competition claims. Because the complaint alleged sufficient facts to support an antitrust conspiracy claim, the challenged conduct could constitute an unfair practice in support of a Florida Deceptive and Unfair Trade Practices Act (FDUTPA) claim, the court also ruled. The defendants unsuccessfully contended that the plaintiffs had not alleged a deceptive or unfair practice under FDUTPA. The plaintiffs also adequately pleaded plausible unfair competition claims under Florida, Missouri, and Texas common law. The defendants’ alleged conduct interfered with the plaintiffs’ ability to conduct their businesses, providing the independent substantive torts or illegal conduct to support their common law claims of unfair competition, in the court’s view.

This is Case No. 4:16-CV-0069 (CEJ).

Attorneys: Anthony G. Simon (The Simon Law Firm, P.C.) and Cary L. Joshi (Bailey Glasser LLP) Precision Rx Compounding LLC, C&M Healthpro LLC and Northern VA Compounders, PLLC. Christopher A. Smith (Husch Blackwell LLP) and Clifford H. Aronson (Skadden, Arps, Slate, Meagher & Flom) for Express Scripts Holding Co. and Express Scripts, Inc.

Companies: Precision Rx Compounding LLC; C&M Healthpro LLC; Northern VA Compounders, PLLC; Express Scripts Holding Co.; Express Scripts, Inc.

Cases: Antitrust StateUnfairTradePractices MissouriNews