Rxstrategies, Inc. v. CVS Pharmacy, Inc.

390 F.Supp.3d 1341

RXSTRATEGIES, INC., Plaintiff,

v.CVS PHARMACY, INC. and Wellpartner, LLC, Defendants.

Case No: 8:18-cv-1087-T-30TGW

United States District Court, M.D. Florida, Tampa Division.

Signed May 29, 2019

Gregory P. Brown, Ryan James Leuthauser, Tori Simmons, Hill Ward Henderson, PA, Tampa, FL, for Plaintiff.

Andrew Clarke Watts, Pro Hac Vice, Connolly LLP, Enu A. Mainigi, Pro Hac Vice, Jonathan B. Pitt, Pro Hac Vice, Katherine A. Trefz, Pro Hac Vice, Tom W. Ryan, Pro Hac Vice, Williams & Connolly, LLP, Mike Cowie, Pro Hac Vice, Dechert, LLP, Washington, DC, Ellen Koehler Lyons, Carlton Fields Jorden Burt, PA, Tampa, FL, Emlyn Rose Mandel, Pro Hac Vice, Dechert LLP, San Francisco, CA, Michael S. Doluisio, Pro Hac Vice, Stuart T. Steinberg, Pro Hac Vice, Tiffany E. Engsell, Pro Hac Vice, Dechert LLP, Philadelphia, PA, for Defendants.

ORDER

JAMES S. MOODY, JR., UNITED STATES DISTRICT JUDGE

THIS CAUSE comes before the Court upon Defendants' Motion to Dismiss (Dkt. 36), Plaintiff's Response in Opposition (Dkt. 42), Defendants' Memorandum in Support of the Motion (Dkt. 48), and Plaintiff's Response to Defendants' Memorandum (Dkt. 55). The Court, having reviewed the filings and being otherwise advised in the premises, concludes that Defendants' Motion should be granted in part.

BACKGROUND

The 340B Drug Pricing Program ("340B Program" or "340B") is a federal government program that allows qualifying healthcare providers, called "covered entities," to purchase outpatient drugs at a significant discount. After purchasing the discounted drugs, covered entities can dispense them to patients directly, or through third-party pharmacies called "contract pharmacies." The 340B Program provides covered entities with savings based on the discounted prices of drugs. And participants in the program can choose how to use the savings they realize, including "caring for more patients, providing charitable medical care, and offsetting losses incurred from treating underinsured, uninsured, and indigent patients." Dkt. 30, p. 5.

The 340B Program holds participating covered entities responsible for complex tasks such as managing the contract pharmacies, preventing duplicate discounts for certain drugs, and ensuring compliance with government regulations. Plaintiff RxStrategies, Inc. ("RxStrategies") is a 340B program administrator, hired by covered entities to ensure their compliance with the 340B Program. Defendant CVS Pharmacy, Inc. ("CVS") is a retail pharmacy chain with some (or as RxStrategies argues, many) contract pharmacies that dispense outpatient drugs pursuant to the 340B Program.

According to RxStrategies, in 2016, CVS approached RxStrategies with the idea that RxStrategies could serve as a program administrator for CVS. The two entities entered into a mutual non-disclosure agreement ("NDA"), 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.

On December 18, 2017, CVS announced it acquired Defendant Wellpartner, LLC ("Wellpartner") to serve as CVS's exclusive program administrator for the 340B Program. RxStrategies alleged that CVS shared RxStrategies' proprietary information with Wellpartner, and Wellpartner contacted some of RxStrategies' covered entity customers. Wellpartner and RxStrategies are direct competitors.

CVS now requires any covered entity that wants to fill 340B Program prescriptions at a CVS pharmacy to use Wellpartner as its program administrator. If the covered entity does not want to use Wellpartner as its 340B program administrator, it cannot utilize CVS as a contract pharmacy for the 340B Program.

RxStrategies filed suit against CVS and Wellpartner alleging claims for illegal tying in violation of the Sherman Act against both Defendants (Count I); breach of contract against CVS (Count II); tortious interference with a contractual relationship against both Defendants (Count III); tortious interference with a business relationship against both Defendants (Count IV); misappropriation of trade secrets against both Defendants (Counts V and VI); fraud in the inducement against CVS (Count VII); fraudulent misrepresentation against CVS (Count VIII); negligent misrepresentation against CVS (Count IX); and unjust enrichment against CVS (Count X). Defendants move to dismiss RxStrategies' Amended Complaint.

MOTION TO DISMISS STANDARD

Federal Rule of Civil Procedure 12(b)(6) allows a court to dismiss a complaint when it fails to state a claim upon which relief can be granted. When reviewing a motion to dismiss, a court must accept all factual allegations in the complaint as true. Erickson v. Pardus , 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (internal citation omitted). It must also construe those factual allegations in the light most favorable to the plaintiff. Hunt v. Aimco Properties, L.P. , 814 F.3d 1213, 1221 (11th Cir. 2016) (internal citation omitted).

To withstand a motion to dismiss, the complaint must include "enough facts to state a claim to relief that is plausible on its face." Bell Atl. Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A claim has facial plausibility "when the plaintiff pleads factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged." Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). Pleadings that offer only "labels and conclusions," or a "formulaic recitation of the elements of a cause of action," will not do. Twombly, 550 U.S. at 555, 127 S.Ct. 1955.

DISCUSSION

Count I: Tying in Violation of the Sherman Act, 15 U.S.C. § 1, against both Defendants

As an initial matter, the Court notes that RxStrategies is required to establish antitrust standing to assert its antitrust claim. See Palmyra Park Hosp. Inc. v. Phoebe Putney Mem'l Hosp. , 604 F.3d 1291, 1298 (11th Cir. 2010) ("courts require parties to show that they are the proper plaintiffs to vindicate the public's interest in enforcing the antitrust laws.") "Standing in an antitrust case involves more than the ‘case or controversy’ requirement that drives constitutional standing." Todorov v. DCH Healthcare Auth. , 921 F.2d 1438, 1448 (11th Cir. 1991). The Eleventh Circuit has established a two-prong test for antitrust standing: "(1) the plaintiff must establish that it has suffered an antitrust injury, and (2) the plaintiff must be an ‘efficient enforcer’ of the antitrust laws." Sunbeam Television Corp. v. Nielsen Media Research, Inc. , 711 F.3d 1264, 1271 (11th Cir. 2013) (internal citations omitted). Neither party disputes RxStrategies' antitrust standing, and the Court concludes that RxStrategies has established standing to bring its antitrust claim.

With its antitrust claim, RxStrategies takes issue with CVS's mandate: covered entities that want to use CVS for 340B contract pharmacy services must also use Wellpartner for 340B program administrator services. RxStrategies alleges that Defendants violate the Sherman Act by tying these two services.

To bring a claim under section one of the Sherman Act, RxStrategies "must define the relevant market and establish that the defendants possessed power in that market." Duty Free Americas, Inc. v. Estee Lauder Companies, Inc. , 797 F.3d 1248, 1263 (11th Cir. 2015) (citation omitted). See also Jacobs v. Tempur-Pedic Intern., Inc. , 626 F.3d 1327, 1336 (11th Cir. 2010). The relevant market includes the geographic market and the product market. Id. Defendants argue the Court should dismiss RxStrategies' claim because RxStrategies fails to establish the geographic market and the requisite market power. The Court discusses each element below.

Geographic Market

The relevant geographic market is "the area of effective competition in which a product or its reasonably interchangeable substitutes are traded." Duty Free Americas , 797 F.3d at 1263 (citing L.A. Draper & Son v. Wheelabrator-Frye, Inc. , 735 F.2d 414, 423 (11th Cir.1984) ). It is "comprised of the area where [ ] customers would look to buy [ ] a product." Tunis Bros. Co., Inc. v. Ford Motor Co. , 952 F.2d 715, 726 (3d Cir. 1991). When determining a geographic market, a court must consider "economic and physical barriers to expansion [such] as transportation costs, delivery limitations and customer convenience and preference."

Cobb Theatres III, LLC v. AMC Entm't Holdings, Inc. , 101 F. Supp. 3d 1319, 1336 (N.D. Ga. 2015). And markets that involve services offered only at a particular location "like those provided by hospitals [and] theaters ... will often be defined by how far consumers are willing to travel." Id. (citing Earl W. Kintner, Federal Antitrust Law § 10.15 (2013)).

RxStrategies alleges the relevant geographic market in this case "consists of local relevant geographic markets across the country ... limited to the distance that a covered entity's patients travel to fill their prescriptions." Dkt. 30, p. 35. RxStrategies supports this allegation with facts including a covered entity's strong preference for utilizing contract pharmacies located close to the entity's patients and ways in which covered entities compete with one another. RxStrategies notes the "area of competition is typically small" based on patients' travel preferences. Id. at p. 35.

Defendants argue that "local" markets are not proper geographic markets and that RxStrategies does not provide the specific size or boundary of any local market. Defendants cite to Spanish Broadcast System of Fla., Inc. v. Clear Channel Communications, Inc. , where the Eleventh Circuit described a relevant geographic market as "a distinct market, with a specific set of geographical boundaries." 376 F.3d 1065, 1074 (11th Cir. 2004). But this description was not made in the context of pleading requirements. See Thompson v. Metro....