Wholesale Alliance, LLC v. Express Scripts, Inc.

366 F. Supp. 3d 1069
CourtDistrict Court, E.D. Missouri
DecidedFebruary 4, 2019
DocketCase No. 4:18CV01015 AGF
StatusPublished
Cited by8 cases

This text of 366 F. Supp. 3d 1069 (Wholesale Alliance, LLC v. Express Scripts, Inc.) is published on Counsel Stack Legal Research, covering District Court, E.D. Missouri primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Wholesale Alliance, LLC v. Express Scripts, Inc., 366 F. Supp. 3d 1069 (E.D. Mo. 2019).

Opinion

AUDREY G. FLEISSIG, UNITED STATES DISTRICT JUDGE

This antitrust action is before the Court on Defendant Express Scripts, Inc.'s ("Express *1073Scripts") motion (ECF No. 15 ) to dismiss all five claims filed by Plaintiff Wholesale Alliance, LLC, d/b/a Pharmacy First ("Pharmacy First"). Express Scripts contends that Pharmacy First fails to state a claim under Section 1 of the Sherman Act in Counts I and II. If Counts I and II are dismissed, Express Scripts argues that the Court should decline to exercise supplemental jurisdiction over the state law claims asserted in Counts III and IV. Express Scripts also maintains that Counts III and IV should be dismissed for failure to state a claim. Finally, Express Scripts argues that Count V, asking for injunctive relief, should be dismissed as it is not an independent cause of action. For the reasons set forth below, the motion will be granted.

BACKGROUND

Pharmacy First is a pharmacy services administrative organization ("PSAO"). PSAOs provide administrative services to pharmacies, including processing claims, providing operational support, and negotiating contracts with insurance companies and pharmacy benefit managers ("PBMs"). There are 22 PSAOs nationwide.

Express Scripts is a PBM. As such, Express Scripts administers prescription drug programs for its clients, which include commercial health plans, self-insured employer plans, Medicare Part D plans, the Federal Employees Health Benefits Program, and various state government employee plans. PBMs such as Express Scripts create pharmacy networks through which their clients' members may obtain prescription drugs at covered, discounted rates. Express Scripts' pharmacy network includes large chain pharmacies and smaller, independent pharmacies. According to the complaint, PBMs manage the prescription drug benefits of approximately 90-95% of Americans with insurance covering prescription drugs, and to be successful, independent pharmacies must participate in the largest PBM networks. Express Scripts controls 30-50% of the nationwide PBM market.

Pharmacies enter into contracts with Express Scripts to obtain access to its network of 83 million insured patients. These contracts between the pharmacies and Express Scripts detail, among other things, the rates that Express Scripts pays the pharmacies for prescription drugs and the credentialing and other requirements that Express Scripts, in turn, imposes on the pharmacies. Rather than negotiate these contracts with the PBMs themselves, many pharmacies-including roughly 80% of the 22,000 independent pharmacies in the United States-outsource this negotiation and other administrative tasks to PSAOs like Pharmacy First. Pharmacy First manages approximately 2,300 independent pharmacies nationwide.

On October 4, 2013, Pharmacy First and Express Scripts entered into the Amended and Restated PSAO Services Agreement. Pursuant to this Agreement, Express Scripts recognized Pharmacy First as a PSAO authorized to act on behalf of its affiliated pharmacies to negotiate network participation terms and conditions on the pharmacies' behalf. The PSAO Services Agreement required Express Scripts and the pharmacies affiliated with Pharmacy First to enter into a Pharmacy Provider Agreement, under which the pharmacies would participate in and provide prescription drugs and pharmacy services to Express Scripts' network of individuals with prescription drug benefits. The PSAO Services Agreement could "be terminated by [Express Scripts] without cause upon at least thirty (30) days written notice." ECF No. 9, Ex. A to Compl., § 4.2.a.

On March 11, 2018, Express Scripts sent a letter to Pharmacy First, *1074terminating the PSAO Services Agreement without cause, effective June 29, 2018. Pharmacy First attached to its complaint correspondence from Express Scripts in which Express Scripts referenced the competitive Request for Proposal ("RFP") process that Express Scripts conducted prior to terminating Pharmacy First as an authorized PSAO. In the correspondence, Express Scripts noted that Pharmacy First submitted an unsuccessful bid but invited Pharmacy First to bid for its business in the future. See ECF No. 10, Ex. C to Compl., letter dated Mar. 22, 2018 (stating that Express Scripts "foresee[s] engaging in the RFP process again" and that it "look[s] forward to the possibility of partnering together in the future."); id. , letter dated Apr. 23, 2018, at 1-2 (describing the RFP process and Pharmacy First's bid).1

Pharmacy First contends that its termination by Express Scripts "was the result of an agreement and other agreements reached between Express Scripts and four PSAOs that Express Scripts determined 'best align[ed]' with its 'organizational objectives' and 'm[et]' Express Scripts' 'terms and conditions.' " ECF No. 1 at ¶ 39. Pharmacy First maintains that prior to its termination, Express Scripts communicated its decision to use the four chosen PSAOs, to pharmacies affiliated with Pharmacy First. Pursuant to Pharmacy First's termination as an authorized PSAO, independent pharmacies wishing to access Express Scripts' network of insured members had to either work directly through Express Scripts or use the PSAO services of one of the four authorized PSAOs. Pharmacy First alleges that the four chosen PSAOs controlled approximately 70% or more of the market for PSAO services.

According to Pharmacy First, Express Scripts imposed the following burdens on independent pharmacies who attempted to access Express Scripts' network directly rather than through one of the four authorized PSAOs: (i) punitively low and non-negotiable reimbursement rates; (ii) fees; (iii) network restrictions; (iv) administrative burdens; and (v) a narrowed list of Express Scripts' selected reconciliation vendors who could be used to process electronic remittance advice from Express Scripts.

Pharmacy First alleges that Express Scripts' actions caused Pharmacy First to lose existing and prospective pharmacy associations due to its exclusion from Express Scripts' network. Pharmacy First claims that access to Express Scripts' network is essential to PSAOs and pharmacies in order to compete in the pharmacy market.

On June 21, 2018, Pharmacy First filed suit against Express Scripts, seeking damages and injunctive relief. Pharmacy First alleges Express Scripts' actions were unlawful and anti-competitive, as independent pharmacies are essentially forced to use the four chosen PSAOs in order to access Express Scripts' network. Pharmacy First asserts that Express Scripts' actions constitute an exclusive dealing agreement (Count I) and a tying agreement (Count II), in violation of Section 1 the Sherman Act. In Count III, Pharmacy First brings a state law claim asserting that Express Scripts has tortiously interfered with Pharmacy First's contracts with its affiliated pharmacies. In Count IV, Pharmacy First alleges that Express Scripts' conduct constitutes a breach of the covenant of good faith and fair dealing implied by law into the parties' PSAO Services *1075Agreement. In Count V, Pharmacy First seeks injunctive relief.

ARGUMENTS OF THE PARTIES

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Bluebook (online)
366 F. Supp. 3d 1069, Counsel Stack Legal Research, https://law.counselstack.com/opinion/wholesale-alliance-llc-v-express-scripts-inc-moed-2019.