Antitrust Law Daily Wrap Up, ANTITRUST—E.D. Pa.: Hospital’s tying claim against CVS Health again deficient for single-brand product market, (Mar 5, 2026)

By Kenneth H. Ryesky, M.B.A., J.D.

"Instead of alleging anticompetitive effects on the tied product market as a whole, Plaintiffs narrowed their tied product market definition to exclude all [third party administrator] providers except [the defendant]."

A federal district court judge in Philadelphia has dismissed with prejudice the amended putative class action complaint of a now defunct hospital, alleging illegal tying under the antitrust laws against CVS Health Corporation and its subsidiaries. The court found that it did not have jurisdiction over the parent corporation, and that an illegal tying claim was not plausibly stated under either a per se analysis or a rule of reason analysis. Finding that further amendment would be futile, the court dismissed the complaint with prejudice (Brandywine Hospital, LLC v. CVS Health Corp., No. 2:23-cv-01458-MRP (E.D. Pa. Mar. 3, 2026)).

Background. To address the difficulties of low-income patients who require high cost pharmaceuticals, Congress enacted Section 340B of the Public Health Service Act (PHSA) in 1992, establishing the 340B Drug Pricing Program (340B Program) [42 U.S.C. § 256b]. The 340B Program is administered by the Health Resources and Services Administration (HRSA), an agency of the U.S. Department of Health and Human Services. Per the 340B Program, healthcare providers purchase the designated drugs at significantly discounted prices from the manufacturers (which the manufacturers are required to avail to the healthcare providers as a condition for the drugs to be covered by Medicaid); the drugs are then distributed by the healthcare providers to the patients through (1) an in-hospital pharmacy; or (2) a pharmacy under contract with the healthcare provider (Contract Pharmacy). The patient's insurance carrier, government or otherwise, pays the retail price, and the participating healthcare provider retains the excess (340B Savings). There is no limit to the number of Contract Pharmacies a healthcare provider may engage, but a healthcare cannot benefit from any 340B Savings if the prescription is not filled at an in-hospital pharmacy or a Contract Pharmacy.

Healthcare providers who participate in the 340B Program must adhere to not only the complexities in the more than 3,000-word statute [42 U.S.C. § 256b], but also to the even more verbose regulations promulgated by HRSA [42 C.F.R. Part 10], as well as other HRSA directives. Participating healthcare providers usually engage the services of a third-party administrator (TPA) to attend to the intricacies of compliance; the TPA is typically paid per prescription on a flat fee or percentage basis.

Many large pharmacy chain stores become 340B Program Contract Pharmacies, including CVS Pharmacy Inc. (CVS Pharmacy), America's largest pharmacy chain and a wholly-owned and controlled subsidiary of CVS Health, Inc. (CVS Health). In 2018, CVS Health acquired Wellpartner, LLC (Wellpartner), a TPA.

In 2023, Brandywine Hospital LLC (Brandywine) filed a putative class action lawsuit against CVS Health and several of its subsidiaries, including Wellpartner (collectively, CVS), alleging that CVS, through its subsidiary Caremark LLC, the largest pharmacy benefit manager (PBM) in the United States, compels many insured patients to fill their prescriptions at a CVS pharmacy. Brandywine alleges that the CVS corporate family is thus engaged in illegal tying of Wellpartner's TPA services to CVS pharmacies.

The lawsuit was dismissed in February 2025. Brandywine filed an amended complaint on April 1, 2025. CVS now moved to dismiss the amended complaint.

Personal jurisdiction. The court ruled that Brandywine did not establish personal jurisdiction over CVS Health under the Clayton Act. Here, the court construed Third Circuit precedent as requiring Brandywine to establish that CVS Health "is an inhabitant of, may be found in, or transacts business in the district" if jurisdiction is to be had under the Clayton Act. Brandywine admittedly could not establish this, and had made no other arguments implicating any authorizing statute other than the Clayton Act, and accordingly could not trigger personal jurisdiction over the parent corporation CVS Health by nationwide process service.

Failure to state a claim-per se analysis. The judge found that Brandywine had not stated an illegal tying claim under a per se analysis. Here, the tying product market was defined by Brandywine as the "CVS Contract Pharmacy Market." This, the court found, was "a single-brand product market" which the court did not recognize because Brandywine did not show that "the market for 340B Savings is so unique as to warrant recognition of" such a market.

Even if Brandywine's defined product market had been plausible, its defined geographic market of the entire United States was implausible for several reasons, including being at odds with its assertion that "location and convenience are the most critical factors for patients choosing a pharmacy."

Failure to state a claim-rule of reason analysis. The judge found that Brandywine had not stated an illegal tying claim under a rule of reason analysis. A rule of reason analysis requires definition of the market for the tied product (as distinguished from the tying product market requisite to show a per se tying violation). Brandywine's tied product market was defined as the "TPA Services Market for CVS Contract Pharmacies." This definition, noted the court, does not take into account that healthcare providers "can and do contract with a variety of TPA providers," and also ignores Brandywine's admission that TPAs compete among themselves for healthcare providers' business.

The Case is No. 2:23-cv-01458-MRP.

Judge: Perez, M.

Attorneys: David W. Asp (Lockridge Grindal Nauen PLLP) for Brandywine Hospital, LLC. Alexis C. Blackmore (Williams & Connolly LLP) for CVS Health Corp.

Companies: Brandywine Hospital, LLC; CVS Health Corp.

Cases: Antitrust PennsylvaniaNews