Antitrust Law Daily Wrap Up, ANTITRUST—E.D.N.Y.: State antitrust claims referred to arbitration in compound medications case, (Oct 28, 2014)

By Greg Hammond, J.D.

New York Donnelly Act claims that CVS Caremark Corp., OptumRx, Inc., and Prime Therapeutics LLC engaged in a coordinated effort to eliminate competition and place illegal restrictions on patient access to compounded medications were referred to arbitration. In reaching its decision to partially grant the drug companies’ motions to sever antitrust claims and compel arbitration, the federal district court in Central Islip, New York found that public policy does not militate against arbitration (Paduano v. Express Scripts, Inc., October 27, 2014, Spatt, A.).

Background. HM Compounding Services, LLC (HMC) operates one of the largest compounding pharmacies in the eastern United States. The company, along with three individuals, filed suit against CVS Caremark Corp. (CVS), OptumRx, Inc. (Optum), Prime Therapeutics LLC (Prime), and Express Scripts, Inc. (ESI), alleging that they engaged in a concerted effort to eliminate HMC, and other independent compounding pharmacies, as competitors in the prescription benefit drug market by placing unwarranted and illegal restrictions on patient access to compounded medications. The relationship between HMC and each defendant is governed by a Pharmacy Network Agreement. The agreements with CVS, Optum, and Prime each contain an arbitration agreement for resolving disputes and the agreement with ESI contains a forum selection clause. Consequently, CVS, Optum, and Prime moved to sever HMC’s claims and to refer them to arbitration, and ESI moved to sever HMC’s claims and to transfer them to Missouri.

Arbitration. The court partially granted each of CVS’, Optum’s, and Prime’s motions to sever the antitrust claims and to refer them to arbitration. Specifically, the court determined that: (1) public policy does not militate against arbitration of HMC’s Donnelly Act claims; (2) HMC agreed with CVS, Optum, and Prime that the arbitrator shall have the power to rule on his or her own jurisdiction; and (3) the arbitration provisions were not procedurally unconscionable, and to the extent any of them were substantively unconscionable, the court severed those terms.

Transfer. The court also granted ESI’s motion to sever HMC’s claims against it and to transfer those claims to the U.S. District Court for the Eastern District of Missouri, pursuant to the forum selection clause in ESI’s provider agreement. It was determined that: (1) the forum selection clause encompassed ESI’s extra-contractual claims; (2) the clause was mandatory, not permissive; and (3) the public interest of avoiding duplicative proceedings and potentially inconsistent results did not significantly outweigh the private interest in litigating a portion of the dispute in Missouri.

The case number is 14-CV-5376 (ADS)(ARL).

Attorneys: Steven R. Schlesinger, Stanley A. Camhi, Jessica M. Baquet, Shannon E. Boettjer, and Daniel E. Shapiro (Jaspan Schlesinger LLP) for Plaintiffs. Christopher Smith, Jason Husgen, and Sarah Hellmann (Husch Blackwell LLP), Menachem J. Kastner and Ally Hack (Cozen O’Connor) for Express Scripts, Inc. Yonaton Aronoff, Michael D. Leffel, and Connor A. Sabatino (Foley & Lardner LLP) for CVS Caremark Corp. Richard H. Silberger, Christopher George Karagheuzoff, and Dai Wai Chin Feman (Dorsey & Whitney, LLP) for OptumRx, Inc. Jill M. Wheaton (Dykema Gossett PLLC) and Peter Joseph Fazio (Aaronson, Rappaport, Feinstein & Deutsch) for Prime Therapeutics LLC.

Companies: HM Compounding Services, LLC; Express Scripts, Inc.; CVS Caremark Corp.; OptumRx, Inc.; Prime Therapeutics LLC.

Cases: Antitrust NewYorkNews