On September 21, 2017, J&S Community Pharmacy, Inc., a neighborhood pharmacy located in Chicago, filed a lawsuit against Walgreens, pharmacy benefit manager (PBM) Prime Therapeutics, Blue Cross and Blue Shield of Illinois, and Health Care Services Corporation—the parent company of Blue Cross and Blue Shield of Illinois and a part owner of Prime Therapeutics—claiming $1.5 billion in punitive damages in J&S Community Pharmacy, Inc. v. Prime Therapeutics LLC et al., No. 17-cv-06873 (N.D. Ill.). The complaint alleges Walgreens and Prime Therapeutics worked together to push the plaintiff pharmacy out of the market through an anti-competitive agreement.
Specifically, the plaintiff pharmacy alleges that Prime Therapeutics wrongfully terminated it from participation in the prescription drug plans for which Prime Therapeutics manages the pharmacy benefits, including Medicare, Medicaid and Blue Cross and Blue Shield. The termination is alleged to be based on a 2016 audit of the pharmacy by Prime Therapeutics that allegedly revealed findings that J&S did not provide sufficient purchase documentation to Prime Therapeutics to demonstrate it lawfully purchased certain drugs that it dispensed to Prime Therapeutics' members, and for which it billed Prime Therapeutics. The complaint goes on to allege, however, that the termination was a pretext for diminishing competition among pharmacies who compete with Prime Therapeutics' own mail-order pharmacy as well as Walgreens. It states that "there is no means by which Prime can increase Walgreens' market share, other than shutting down competitors, which terminating their participation from Medicare, Medicaid and Blue Cross & Blue Shield will surely do." Prime Therapeutics members make up roughly 75 percent of J&S's customers.
According to the complaint, Prime Therapeutics and Walgreens entered into a joint venture in August 2016 for the purpose of creating a specialty pharmacy and mail-order pharmacy company. The agreement made Walgreens the primary retail pharmacy provider for the Prime Therapeutics network. The complaint alleges that the Prime Therapeutics-Walgreen agreement was designed to "help [defendants] capture a greater share of the prescription-drug market."
While this lawsuit is certainly not the first antitrust case brought against pharmacy benefit managers and will not be the last, its inclusion of both competitor Walgreens and a major insurance company, plus the substantial level of punitive damages alleged, make it an important case to watch. A positive ruling for the plaintiff pharmacy could yield in an uptick in similar lawsuits being brought against pharmacy benefit managers and could represent another forum for relief for aggrieved pharmacies who have also been terminated from a major pharmacy benefit manager's network.
Duane Morris attorneys will continue to monitor developments in this case and other related litigation as it arises, and report on issues that might be important to our clients and others in the industry.
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If you have any questions about this Alert, please contact Jonathan L. Swichar or any of the attorneys in our Specialty Pharmacy Litigation Practice Group, or the attorney in the firm with whom you are regularly in contact.
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