Antitrust Law Daily Wrap Up, ANTITRUST—W.D. Wash.: Class action against PBMs can proceed, (Feb 14, 2025)

By Donielle Tigay Stutland, J.D.

A class action brought by pharmacies alleging that pharmacy benefit managers engaged in a price fixing scheme survives a motion to dismiss.

The federal district court in Seattle denied a motion to dismiss class action claims brought by a group of pharmacies alleging that the defendants, including Express Scripts, Inc. (ESI), a large pharmacy benefit manager (“PBM”), engaged in a horizontal price-fixing scheme in violation of the Sherman Act. ESI and its parent company Evernorth Health (Evernorth) also filed a motion to transfer the suit and to dismiss Evernorth. The court denied the motion to transfer based on ESI’s argument that claims are subject to a forum-selection clause pursuant to their Pharmacy Provider Agreements with ESI. The court found that the claims do not relate to the Pharmacy Provider Agreements, rather ESI’s agreements with its alleged Co-Conspirators. The court also denied a motion to dismiss the antitrust claims, after finding the pharmacies alleged an antitrust injury and adequately plead that the agreements between the alleged Co-Conspirators were a horizontal price-fixing scheme. The court dismissed Evernorth from the suit for failure to show that Evernorth was liable as a parent corporation of ESI (Osterhaus Pharmacy, Inc. v. Express Scripts, Inc., No. 2:24-cv-00039-RAJ (W.D. Wash. Feb. 13, 2025)).

ESI, CVS Caremark, and OptumRx control more than 80% of the prescriptions filled in the United States, which means pharmacies must contract with these three PBMs in order to effectively serve their patients. Smaller PBMs, such as the alleged co-conspirators Prime, Benecard, and Magellan, have substantially less market share than the three largest PBMs, and have ordinarily and historically offered pharmacies more favorable and competitive reimbursement rates and fees. The class action was filed by a group of pharmacies challenging agreements that ESI made with Prime, Benecard, and Magellan. The pharmacies assert that these agreements constitute a horizontal price-fixing scheme in violation of the Sherman Act.

Transfer. The court began its analysis by looking at ESI’s request to transfer venue. ESI argued that the pharmacies’ claims are subject to a forum-selection clause pursuant to their Pharmacy Provider Agreements with ESI. The court disagreed and found that the agreements between ESI and the pharmacies are separate and unrelated to ESI’s agreements with Co-Conspirators, non-parties in this action. As the pharmacies’ antitrust claims arise under the agreements between ESI and its Co-Conspirators, the court found that a transfer of venue is not necessary.

Motion to dismiss. In determining that there has been an antitrust injury, the court found that the agreements between ESI and its Co-Conspirators to share the large firm’s market power allowed the Co-Conspirators to receive more favorable rates and reimbursements at the expense of the pharmacies, and plausibly at the expense of consumers. The pharmacies’ injuries are “causally linked” because the injury stems from Co-Conspirators change of rates to match ESI’s rates, that would not have prevailed in the free market absent the restraint of trade.

Next, looking at the PBM’s agreements with its Co-Conspirators, and whether they violate the Sherman Act, the pharmacies allege that these agreements are horizontal price-fixing agreements because after they were made, the Co-Conspirators uniformly changed their fees and reimbursement rates to match the higher rates that ESI has historically charged. ESI does not dispute that horizontal price-fixing is considered per se unlawful. Rather, ESI argues that PBMs are “effectively purchasing cooperatives,” immune from per se antitrust scrutiny and offers caselaw describing the function of PBMs. The court noted that horizontal agreements in which competitors fix prices, divide markets, or refuse to deal are per se violations of the Sherman Act. ESI also argued that it, along with its Co-Conspirators are joint purchasers rather than competitors and thus are not subject to per se antitrust scrutiny.

The court stressed that, “[t]he [cooperative buying defense] should generally be rejected where there is no integration of agency services, negotiation, contracting, or delivery, but that the firms have simply agreed on a price.” Here, the pharmacies’ complaint alleges that the network rental agreements have not generated any efficiencies or integration and the only joint activity is price-fixing. The court found that the complaint plausibly alleges that the network rental agreements are a horizontal price-fixing scheme. The complaint demonstrates that ESI and Co-Conspirators matched their rates and fees after they entered into the network rental agreements and ESI and Co-Conspirators provide the same services to pharmacies.

When the allegations are taken as plausibly true, the court found that they indicate a price-fixing scheme that is an unreasonable restraint of trade that antitrust laws forbid. The court determined that the pharmacies have met the burdens of asserting a per se antitrust violation for horizontal price-fixing and the court denied the motion to dismiss the antitrust claims under §1 of the Sherman Act.

Evernorth. The court did dismiss defendant Evernorth from the suit. The court determined that the complaint did not provide sufficient factual detail to support that Evernorth is liable as a parent corporation of ESI.

The Case is No. 2:24-cv-00039-RAJ.

Judge: Jones, R.

Attorneys: Amanda M. Steiner (Terrell Marshall Law Group PLLC) for Osterhaus Pharmacy Inc. Jonathan G. Cooper (Quinn Emanuel Urquhart & Sullivan LLP) for Express Scripts Inc.

Companies: Osterhaus Pharmacy Inc.; Express Scripts Inc.

Cases: Antitrust WashingtonNews