U.S. District Court dismisses most elements of antitrust suit against ESI-Medco

ESI's request to dismiss antitrust suit as it relates to specialty pharmacy is denied

PITTSBURGH — U.S. District Court judge Cathy Bissoon on Monday dismissed many of the claims levied against Express Scripts by the National Association of Chain Drug Stores, the National Community Pharmacist Association and nine independent pharmacies, regarding the allegedly anti-competitive nature of Express Scripts' merger with Medco.

Under the 23-page ruling, however, claims regarding the anti-competitive impact the combined ESI-Medco will have on specialty pharmacies will proceed. "[Plaintiffs] allege the merged defendants will use their increased market power to force consumers away from … specialty pharmacy businesses and into their own mail-order and in-house specialty pharmacies," Bissoon wrote. "The anti-competitive acts alleged by plaintiffs would include forcing patients to use defendants' specialty pharmacy — regardless of the patient's wishes — by denying claims for specialty drugs purchased in any other manner."

In her decision, Bissoon identified the four antitrust violations charged by the plaintiffs:

  • First, the retail pharmacy groups alleged that because a combined Express Scripts-Medco would collectively control 72% of the "privately insured lives in the United States," a combined Express Scripts-Medco could account for a significant percentage of a pharmacy's prescription sales. So much, in fact, that these pharmacies would be unable to negotiate around any reduction in pharmacy reimbursement rates, and would either have to accept those lower rates out of hand, significantly lower overhead costs by restricting services to accommodate those lower rates or go out of business altogether;

  • Second, regarding specialty pharmacies, pharmacy benefit managers are able to enter exclusive distribution agreements with manufacturers of specialty pharmaceuticals and can thereby direct which pharmacies can be reimbursed for adjudicating those specialty prescriptions. "These agreements, which allegedly are entered into by the manufacturers because of [Express Scripts'] size, and which allegedly will become more attractive to drug manufacturers due to [Express Scripts'] increased size post-merger, allegedly create high barriers to new competitors seeking to enter this field," Bissoon wrote. "This product market allegedly becomes even more inaccessible due to defendants’ ability to use its claims adjudication process to block competitors from filling prescriptions for specialty drugs;"

  • Third, because national employers require a pharmacy benefit management service that is national in scope, the choices available to them post merger are restricted now to two PBMs — Express Scripts-Medco and CVS Caremark. "Indeed,the so-called 'Big Three' [Express Scripts, Medco and CVS Caremark] allegedly provide PBM services to approximately 90% of the privately insured lives for which large employees are responsible," Bissoon wrote; and

  • Fourth, pharmacies and the mail-order entities owned and operated by the PBMs are in direct competition with one another in any given local market.

Bissoon dismissed without prejudice the portion of the suit arguing that retail pharmacy competes directly with pharmacy benefit managers for prescriptions. "Plaintiffs have failed to allege a cognizable antitrust injury with respect to this claim, and it will be dismissed," Bissoon ruled. However, NACDS, NCPA and the nine independent pharmacies that initially filed the suit in March 29 will have until Sept. 10 to amend the claim.

The plaintiffs' allegation that they will suffer harm from the merger as consumers of PBM services was dismissed altogether.

Click here to view the entire ruling.


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