Sentry Data Sys., Inc. v. CVS Health

361 F. Supp. 3d 1279
CourtDistrict Court, S.D. Florida
DecidedAugust 27, 2018
DocketCase No. 18-cv-60257-BLOOM/Valle
StatusPublished
Cited by18 cases

This text of 361 F. Supp. 3d 1279 (Sentry Data Sys., Inc. v. CVS Health) is published on Counsel Stack Legal Research, covering District Court, S.D. Florida primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Sentry Data Sys., Inc. v. CVS Health, 361 F. Supp. 3d 1279 (S.D. Fla. 2018).

Opinion

BETH BLOOM, UNITED STATES DISTRICT JUDGE

THIS CAUSE is before the Court upon Defendant CVS Pharmacy, Inc. ("CVS")'s Motion and Incorporated Memorandum of Law in Support of Defendant's Motion to Dismiss Plaintiff's Claims, ECF No. [43] ("Motion"), filed on March 13, 2018. The Court heard oral argument on the Motion on July 19, 2018. ECF No. [111]; see also Oral Argument Transcript, ECF No. [112]. The Court has reviewed Motion, the record, and is otherwise fully advised.

I. FACTUAL BACKGROUND

Plaintiff Sentry Data Systems, Inc. ("Sentry" or "Plaintiff") is a developer and provider of information technology systems that assist certain hospitals and hospital-like entities-which the parties refer to as "covered entities"-in monitoring compliance with a federal drug pricing program, the 340B Program. ECF No. [1] ¶ 1; see also Public Health Services Act, 42 U.S.C. § 256b. The 340B Program allows hospitals that serve a disproportionate share of low-income patients to buy certain outpatient drugs at a discount, but seek reimbursement through the patient or a third-party payer at a non-discounted price, thereby providing an additional revenue *1285stream for the hospital. Id. ¶ 14. The program helps a participating hospital defray other operating losses, including costs incurred by providing care to under-or uninsured patients. Id. ¶ 15. Drug manufacturers participating in Medicaid are required to participate in the 340B Program. Id. ¶ 14.

In order for a hospital to participate in the program, it must register with the Health Resources and Services Administration ("HRSA") and comply with multiple reporting and auditing requirements to insure that the covered entity is operating within the restrictions of the 340B Program. Id. ¶¶ 16-17, 19-23. This is where Plaintiff Sentry comes in. Id. ¶ 24. Sentry has developed tracking software to assist covered entities in managing their prescription inventory, tracking reimbursements and rebates, and maintaining records of eligible drugs and patients. Id. ¶¶ 36-40. Sentry's products further help covered entities comply with self-auditing requirements of the 340B Program, as well as respond to reporting inquiries from HRS. Id.

For both cost and convenience, most hospitals do not dispense the 340B Program drugs themselves. Id. ¶¶ 25, 26-27, Rather, they contract with certain pharmacies to dispense prescribed 340B Program outpatient medication. Id. A covered entity may contract with several "contract pharmacies" to dispense its 340B Program-eligible drugs. Id. Thus Sentry, and 340B administrators like it, provide tracking software to their covered entity customers and serve as a conduit of information between the covered entity and the contract pharmacy. Id. ¶ 25. Defendant CVS is one of these contract pharmacies.

According to the Complaint, since 2007, Sentry has not only provided its tracking software to its covered entity customers, but also worked directly with CVS to develop contracts between CVS and covered entities, improve CVS's operational procedures, and develop proprietary software programs for CVS. Id. ¶¶ 41-45. During this process, CVS was given a "front-row seat to Sentry's core business model and internal business methods ...," subject to several confidentiality, non-disclosure, and non-compete agreements. Id. ¶¶ 46-53. In this capacity for CVS, Sentry also worked with Wellpartner, Inc. ("Wellpartner"), a competitor 340B administrator, to provide CVS with operational and software support for administering CVS's side of the 340B Program where Wellpartner served as the 340B administrator. Id. ¶ 54. As part of this arrangement, Wellpartner and Sentry also entered into several non-disclosure and confidentiality agreements. Id. ¶¶ 56-57.

On December 18, 2017, CVS announced that it had acquired Wellpartner and that all covered entities seeking to maintain CVS as a contract pharmacy must use Wellpartner for their 340B tracking and program administration by December 31, 2018. Id. ¶ 58. Specifically, the announcement stated:

CVS Health has completed an acquisition of Wellpartner, Inc., a leading provider of 340B program management solutions. Wellpartner has a reputation for industry leading technology solutions, excellent Health Resources & Service Administration (HRSA) compliance record, and consistently high levels of customer satisfaction, making it an excellent fit for CVS Health.
Over the last two years, CVS Health has significantly expanded its 340B contract pharmacy program to include hundreds of covered entities (CEs) and thousands of pharmacies across the country. This increased scale and complexity has driven a need to focus on a single administrator to help insure optimal results for our CEs.
*1286...
In addition, by having Wellpartner as the exclusive 340B program administrator for all CVS Health retail and specialty pharmacies, we will also eliminate the restriction of limiting one CVS Pharmacy location to one administrator per CE, enabling us to offer clients expanded access to all CVS Pharmacy locations.
To ensure all clients benefit from these enhancements, we will transition all covered entities to Wellpartner by December 31, 2018.
...
Account teams will contact you to discuss next steps and answer any questions about the integration and transition, and continue providing future updates.

ECF No. [1-11] at 2 (emphasis in original); see also ECF No. [1] ¶ 58. In furtherance of this announcement, representatives from Wellpartner reached out individually to covered entities, including entities listed on Sentry's confidential customer lists that had been shared with CVS subject to the confidentiality and non-disclosure agreements. ECF No. [1] ¶ 64.

According to the Complaint, CVS's announcement effectively displaced Sentry as the 340B program administrator for at least some of its clients which relied heavily on CVS. Id. ¶ 61. At least fifty-six Sentry customers were contacted by CVS or Wellpartner and expressed to Sentry that they felt forced or coerced to switch to Wellpartner and terminate their relationship with Sentry or not renew their Sentry contracts. Id. One customer stated that it felt "handcuffed" by the announcement, while another stated that it had "little choice" but to switch to Wellpartner. Id. ¶ 63.

Plaintiff alleges that through this process, CVS misappropriated Sentry's trade secrets, including its customer lists and proprietary software to target Sentry customers to switch to Wellpartner and pitch a seamless transition from Sentry's system to Wellpartner. Id. ¶¶ 64-65. Specifically, Plaintiff alleges that when CVS reached out to Sentry customers, it misappropriated the customer lists and breached the non-disclosure and confidentiality agreements. Id.

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361 F. Supp. 3d 1279, Counsel Stack Legal Research, https://law.counselstack.com/opinion/sentry-data-sys-inc-v-cvs-health-flsd-2018.