Antitrust Law Daily Wrap Up, ANTITRUST NEWS: State pharmacy board allegedly misused authority to restrict competition, (Feb 1, 2016)

By Linda O’Brien, J.D., LL.M.

A state pharmacy board and its members have engaged in anticompetitive conduct by initiating investigations and letter-writing campaigns against an out-of-state home delivery pharmacy service provider that were designed to restrict competition, according to a complaint filed in the federal district court in Las Vegas (Strategic Pharmaceutical Solutions, Inc. v. Nevada State Board of Pharmacy, January 29, 2016).

Portland, Oregon-based Strategic Pharmaceutical Solutions operates a veterinary pharmacy services company, VetSource Home Delivery, which ships pet medications directly to pet owners at the prescription of licensed veterinarians. Nevada State Board of Pharmacy is a state agency that licenses and regulates pharmacists and consists of board members who are licensed pharmacists.

The complaint states that VetSource competes with individual pharmacists and traditional pharmacies in the distribution of pet medications in the State of Nevada. VetSource’s business model provides veterinarians and pet owners with an alternative to the less efficient and more expensive practice of veterinarians directly disbursing pet medications to their patient-clients, the plaintiff asserted. However, VetSource’s innovative business model allegedly threatens individual pharmacists and traditional pharmacies with increased competition and potential loss of business and profits.

VetSource claims that, in February 2015, the Board issued a “cease and desist” letter to VetSource to discontinue its outsourced hospital pharmacy service immediately as a pretext for its unreasonable exclusionary conduct. In response, VetSource filed a petition for an informal review and attended meetings at which the Board agreed to allow VetSource to provide additional evidence. However, in June 2015, the Board issued a second cease and desist letter and initiated a proceeding to revoke or suspend VetSource’s pharmacy license. Additionally, the Board communicated to veterinarians that VetSource’s business model violated the state veterinary board’s regulations and caused certain veterinarians to cease doing business with VetSource.

According to the complaint, a hearing on the Board’s allegations has been continued to March 2016 and the Board has indicated that it will go forward with the hearing and possibly impose sanctions on VetSource. While VetSource has “refused to be intimidated” by the Board’s actions, at least two outsourced pharmacy service providers targeted by the Board have limited or ceased their pharmacy activities in Nevada.

In North Carolina State Board of Dental Examiners v. Federal Trade Commission, 135 S. Ct. 1101 (2015), the U.S. Supreme Court held that a state agency controlled by active market participants in the same occupation as regulated by the agency must be actively supervised by a politically accountable state official in order to have immunity from federal antitrust laws, the complaint alleges.

The complaint also claims that the Board has misused its position to exclude competitors, such as VetSource, from effectively competing in the distribution of pet medications in Nevada. By doing so, the Board has exceeded its authority granted by the State of Nevada and exercised its authority without adequate state oversight and supervision, the plaintiff charged. Therefore, the Board’s conduct allegedly was not entitled to immunity from federal antitrust laws.

The plaintiff asserts claims for restraint of trade, monopolization, and attempted monopolization in violation of Sections 1 and 2 of the Sherman Act and the Nevada Unfair Trade Practices Act. The action seeks declaratory and injunctive relief, treble damages, costs of suit, attorney fees, and any other just and proper relief.

The case is No. 2:16-cv-00171-RFB-VCF.

Attorneys: James D. Boyle and Brittany W. Puzey (Holley Driggs Walch Fine Wray Puzey & Thompson) and Robert A. Jaffe, Nicole P. Moriarty, Kevin E. Burr, and Paul Gwilt (Kutak Rock LLP) for Strategic Pharmaceutical Solutions, Inc.

Companies: Strategic Pharmaceutical Solutions, Inc.

News: Antitrust NevadaNews