By Matt Phifer, J.D.
CVS allegedly forced health care providers to use its newly-acquired Wellpartner as drug pricing program administrator.
CVS and its Wellpartner drug pricing program administrator were not entitled to dismissal of tying claims, where RxStrategies—a complaining 340B Drug Pricing Program administrator, included enough additional allegations to show that CVS had market power in the 340B Medicaid Drug Pricing Program market, remedying a deficiency a Florida federal district court had pointed out in a prior order. The amended complaint contended that CVS had a 30 percent or greater market share in many local geographic markets and that there was no meaningful alternative to CVS for a covered entity, like RXStrategies, that participated in the 340B program (RxStrategies, Inc. v. CVS Pharmacy, Inc., December 4, 2019, Moody, J.).
The 340B Drug Pricing Program is a federal program which requires drug manufacturers participating in Medicaid to provide outpatient drugs at a significant discount to eligible health care providers, known as covered entities. Plaintiff 340B Drug Pricing Program administrator RxStrategies alleged illegal tying by claiming that CVS required covered entities that wanted to use CVS for 340B contract pharmacy services to also use Wellpartner for 340B program administrator services.
In 2016, CVS approached RxStrategies with the idea that RxStrategies could serve as a 340B program administrator for CVS. The two entities entered into a mutual non-disclosure agreement, and RxStrategies began designing, building, and testing software solutions for CVS. RxStrategies alleged it shared proprietary information with CVS during these development phases, including lists of RxStrategies’ covered entity customers and data processing solutions. In December 2017, CVS announced it acquired Wellpartner, LLC. to serve as CVS’s exclusive program administrator for the 340B Program. CVS required any covered entity that wants to fill 340B Program prescriptions at a CVS pharmacy to use Wellpartner as its program administrator.
RxStrategies filed suit against CVS and Wellpartner, alleging claims for illegal tying in violation of the Sherman Act, among other claims. The court previously dismissed the tying claim without prejudice because RxStrategies did not sufficiently allege CVS’s power in the relevant market. The defendants’ motion to dismiss the amended complaint was before the court.
Market power. RxStrategies included enough additional allegations in its amended complaint to show CVS had market power in the 340B market, the court determined. RxStrategies alleged that CVS has a 30 percent or greater market share in many local geographic markets and that its power is "evidenced in the twenty-two core-based statistical areas." It alleged the covered entities in the identified core based statistical areas (CBSAs) get most of their patient population within a 30-mile radius, need contract pharmacies close to where patients live and work, and cannot "turn to contract pharmacies with locations located only outside these CBSAs in response to a price increase for contract pharmacy services located within those CBSAs."
RxStrategies also asserted that CVS’s market power was "amplified by its control over access to specialty pharmaceuticals and its network of payer contracts making CVS the exclusive or preferred supplier of specialty pharmaceuticals for tens of millions of patients nationwide." The covered entities include specialty pharmacies for their network based on their number of patients covered by third-party buyers "with whom a specialty pharmacy has contracted with and entered into an exclusive or preferred relationship." RxStrategies also alleged that for those covered entities dependent upon access to CVS for a substantial percentage of their 340B program revenues, there are no substitutes for access to CVS as a contract pharmacy, and therefore CVS and Wellpartner have the ability to force an unwelcome tie and higher prices on those covered entities. Further, covered entities participating in the 340B program have no meaningful alternative to CVS and if an entity’s patent filled a 340B-eligible prescription at CVS, but it had not contracted with Wellpartner, then the entity would not get the savings for the prescription, according to the amended complaint.
These allegations were sufficient for the antitrust claim to move forward, the court ruled. CVS and Wellpartner would also face allegations of tortious interference, misappropriation of trade secrets. CVS would face allegations of breach of contract, fraud in the inducement, fraudulent misrepresentation, negligent misrepresentation, and unjust enrichment.
The case is No. 8:18-cv-01087-JSM-TGW.
Attorneys: Gregory P. Brown (Hill Ward Henderson, PA) for RxStrategies, Inc. Andrew Clarke Watts (Connolly LLP) for CVS Pharmacy, Inc. Ellen Koehler Lyons (Carlton Fields Jorden Burt, PA) for Wellpartner, LLC.
Companies: RxStrategies, Inc.; CVS Pharmacy, Inc.; Wellpartner, LLC
MainStory: TopStory Antitrust FloridaNews
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