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From Health Law Daily, January 13, 2015

Pharmacy used patient list, lied to consumers to steal competitor’s business

By Patricia K. Ruiz, J.D.

The Northern District of Illinois granted in part and denied in part a motion to dismiss by My Script, LLC in a suit brought by Medscript Pharmacy, LLC alleging false advertising, deceptive trade practices under both Illinois and Florida law, tortious interference with prospective economic advantage, common law unfair competition, unjust enrichment, conversion, civil conspiracy, and a violation of the Illinois Pharmacy Practice Act. In its decision, the court largely found that Medscript had made sufficient allegations as to the claims in its amended complaint (Medscript Pharmacy, LLC v. My Script, LLC, January 12, 2015, Gettleman, R.).

Background. Illinois-based Medscript is certified by the Professional Compounding Centers of America (PCCA) as a compounding pharmacy. My Script is a Michigan-based compounding pharmacy. Patel Khader, LLC (Khader LLC), Ziad Khader, Neil Patel, Nikhil Patel, and Daniel Leben (collectively, the non-pharmacy parties), former owners and members of Medscript, sold their interests in Medscript to Maryam Alrazzaq. In allowing the buyers to evaluate the sale, Medscript provided the non-pharmacy parties with a list of patients that contained protected health information (PHI). The non-pharmacy parties gave the patient list to My Script and Valuscript for marketing use, a use that Medscript alleges violates the Health Insurance Portability and Accountability Act (HIPAA) (P.L. 104-191).

In its marketing, My Script called the patients on the list and told them one of two false statements: (1) Medscript was out of business and My Script was taking over for it; and (2) Medscript had changed its name to My Script. Medscript alleged that My Script also falsely advertised itself to be a PCCA certified pharmacy and used the list to fill prescriptions in Illinois, where it was not licensed to do so. Medscript further alleged that My Script sold ownership interests to physicians in Florida, creating a kickback scheme in which physicians would receive rewards for referring patients to My Script.

Fraud, heightened pleading standard. In its motion to dismiss, My Script argued that Medscript failed to meet the heightened pleading standard for claims based on fraud, which require allegations of “the who, what, when, where, and how” of the fraudulent conduct. My Script claimed that Medscript did not plead what was said, to whom the representations were made, who engaged in the conduct, what conduct actually occurred, or how the fraud was accomplished. However, the court determined that the allegations regarding the false statements made to customers were sufficient. The court also determined that Medscript was permitted to make these allegations based on information and belief, as it does not have access to the names of the patients My Script called. The court thus allowed Medscript’s fraud claims to survive.

Civil conspiracy. The court held that Medscript’s civil conspiracy claim was not pleaded with sufficient particularity. Such a claim requires that Medscript establish (1) an agreement between two or more persons for the purpose of accomplishing an unlawful purpose or lawful purpose by unlawful means; and (2) at least one tortious act by one of the coconspirators in furtherance of the agreement, causing injury to Medscript. While Medscript concludes that My Script and the non-pharmacy parties engaged in a conspiracy to commit torts of unfair competition, intentional interference with its prospective economic advantage, conversion, and violations of Illinois and Florida law, it does not provide any factual detail about the alleged agreement. Thus, the court granted the motion to dismiss as to the civil conspiracy count.

Lanham Act, IUDTPA. My Script and the non-pharmacy parties argued that, as to Medscript’s Lanham Act (15 U.S.C. §1051, et seq.) claim, Medscript’s allegations do not amount to commercial advertising or promotion. However, the court noted that, for a communication to be within the Lanham Act’s scope, it does not need to be made to the general public—only to a significant portion of the relevant industry. Based on the complaint, construed liberally, the court held that it is plausible that the patients contacted represented a significant portion of the compounding pharmacy industry and, thus, denied the motion to dismiss. Using the same reasoning, the court also denied the motion as to the Illinois Uniform Deceptive Trade Practices Act (IUDTPA) claim.

FDUTPA. My Script argued that it qualified for exceptions under the Florida Deceptive and Unfair Trade Practices Act (FDUTPA) usually restricting the referral by physicians of patients to health care service providers in which they are investors. Furthermore, My Script argued that Medscript does not have standing to bring a claim under the FDUTPA, which only allows claims by consumers. However, the court noted that amendments to the law authorized persons or entities who suffered a loss as a result of an unfair or deceptive trade practice to bring a suit for damages.

Remaining claims. The court found that Medscript sufficiently pled its tortious interference claim, as it alleged the specific conduct in which it argues My Script engaged (using the patient list to interfere with Medscript’s relationships with prescribers and patients). The court further held that Medscript’s unfair competition claim is not duplicative of its claims under the Lanham Act and the IUDTPA. Finally, while the court denied the motion to dismiss as to Medscript’s unjust enrichment claim, reasoning that Medscript sufficiently alleged that My Script improperly benefitted by contacting Medscript’s patients and prescribers, the court granted the motion to dismiss Medscript’s conversion claim, as Medscript conceded that it gave the patient list to the non-pharmacy parties and thus does not have an absolute right to the possession of the list.

The case number is 14 C 0469.

Attorneys: Mark Daniel Roth (Orum & Roth, LLC) for Medscript Pharmacy, LLC. Thadford A. Felton (Greensfelder, Hemker & Gale, PC) for My Script, LLC, Khader David Pharmacy Services, LLC.

Companies: Medscript Pharmacy, LLC; My Script, LLC; Khader David Pharmacy Services, LLC

MainStory: TopStory AdvertisingNews AntikickbackNews FraudNews HIPAANews PrescriptionDrugNews IllinoisNews FloridaNews

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