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From Antitrust Law Daily, June 12, 2015

Independent pharmacies failed to show harm to competition by pharmacy benefit manager

By Linda O’Brien, J.D., LL.M.

A pharmacy benefit management provider could not be liable for monopolization for implementing a prescription drug network, limiting the provision of professional services by independent local pharmacies, absent evidence of harm to competition in general, as opposed to harm to a particular competitor, the U.S. Court of Appeals in Atlanta has decided. Dismissal of the claim was affirmed (Star Discount Pharmacy, Inc. v. MedImpact Healthcare Systems, Inc., June 11, 2015, Per Curiam).

The Alabama Public Education Employees’ Health Insurance Plan (PEEHIP) was created to provide health insurance benefits to individuals working in the field of public education. In 2010, PEEHIP entered into an agreement with MedImpact Systems—a provider of pharmacy benefit management services to health plan members, hospitals, and employers—to serve as the third-party administrator of its prescription medication program. MedImpact then contracted directly with pharmacies and implemented prescription drug networks establishing reimbursement rates for pharmacies that were less than the usual and customary rates paid by consumers not covered by a third party plan.

Star Discount Pharmacy, Propst Discount Drugs, and C & H Pharmacy operate independent local pharmacies within Alabama, providing pharmaceutical services and prescription medications to the public. The three pharmacies refused to enter into agreements with MedImpact and filed suit, alleging a violation of Section 2 of the Sherman Act. Specifically, the pharmacies asserted that MedImpact engaged in a scheme to limit them from providing prescription benefits within the state by requiring pharmacies to enter into agreements for reimbursement upon unfavorable, unlawful, or unprofitable terms. The district court granted summary judgment in favor of the defendant, and the plaintiffs appealed.

The appellate court found that the district court did not err in concluding that the plaintiffs failed to adduce genuine issues of material fact with respect to the prerequisite of harm to competition in general as opposed to a particular competitor. The plaintiffs contended that their expert’s report—indicating that a pharmacy excluded from the defendant’s network could no longer compete for the business of PEEHIP enrollees—was rejected. The court noted that, while the plaintiffs have declined to join MedImpact’s networks, virtually all other pharmacies in the state eventually joined. This indicated that any alleged harm was to a single competitor and not to competition in general among pharmacies.

Moreover, the plaintiffs’ expert’s opinion that MedImpact’s lower reimbursement rates reduced a pharmacy’s profit—a disincentive to their providing better point-of-sale services and jeopardized long-term viability—was rejected as unsupported speculation. According to the court, there was no evidence of pharmacies closing due to the defendant’s reimbursement rates, notwithstanding the significant number of pharmacies that joined MedImpact’s provider network and agreed to the reimbursement rates.

Finally, the plaintiffs failed to assert facts to demonstrate that MedImpact possessed monopsony power, the court concluded. The plaintiffs presented no evidence of actual, sustained adverse effects on competition. MedImpact controlled only five percent of the purchases in the market. The plaintiffs and all other pharmacies which were not in the defendant’s network had access to the remaining 95 percent of available purchases in the market and were free to join networks of providers that competed with MedImpact.

The case is No. 14-14581.

Attorneys: David Balto (The Law Offices of David A. Balto) and Jeffrey Glenn Blackwell (Hornsby Watson Hornsby & Blackwell) for Star Discount Pharmacy, Inc., Propst Discount Drugs, Inc., and C & H Pharmacy, Inc. Harlan Irby Prater, IV (Lightfoot Franklin & White, LLC) and Blake J. Brownshadel (Dentons US LLP) for MedImpact Healthcare Systems, Inc.

Companies: Star Discount Pharmacy, Inc.; Propst Discount Drugs, Inc.; C & H Pharmacy, Inc.; MedImpact Healthcare Systems, Inc.

MainStory: TopStory Antitrust AlabamaNews FloridaNews GeorgiaNews

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