United States District Court, E.D. Missouri, Eastern Division
MEMORANDUM AND ORDER
L. WHITE, UNITED STATES DISTRICT JUDGE
case is before the Court on the motion of Express Scripts
Holding Company and Express Scripts, Inc., to dismiss for
failure to state a claim the eight-count complaint filed
against them by Park Irmat Corp. For the reasons set forth
below, the motion will be granted.
as true the allegations in the complaint, see Tension
Envelope Corp. v JBM Envelope Corp., 876 F.3d
1112, 1116 (8th Cir. 2017), the following gave
rise to this action.
Scripts Holding Company and Express Scripts, Inc.
(collectively referred to in the complaint as "Express
Scripts") administer pharmacy benefits for third parties
and also own and operate a mail-order pharmacy. (Compl.
¶¶l, 18; ECF No. 1.) Express Scripts is the largest
pharmacy benefits manager ("PBM") in the United
States, with over 97 percent of all retail pharmacies
participating in its network. (Id. ¶17.) A PBM
"manage[s] the pharmacy benefits for health plans and
self-insured entities, negotiate[s] drug discounts with
pharmaceutical manufacturers, and develop[s] ... lists of
drugs approved for reimbursement." (Id.
¶28.) The decision of which PBM to use is made by
patients' health insurance plans, which are usually
chosen by patients' employers. (Id. ¶29.)
"For a pharmacy that is not owned by a PBM to operate
successfully, it is essential for the pharmacy to participate
in all of the largest PBMs' networks, including Express
Scripts'." (Id. ¶30.) To do so,
independent pharmacies either contract directly with PBMS or
indirectly through the pharmacy's agent, usually a
Pharmacy Services Administrative Organization
("PSAO"). (Id. ¶31.)
Irmat Corp. ("Irmat"), a New York-based pharmacy in
business since 1978, began concentrating on dermatological
pharmaceuticals in 2013. (Id. ¶34-35.) "As
Irmat's dermatology business began to flourish, Irmat
agreed to participate in patient assistance programs
sponsored by leading drug manufacturers." (Id.
¶36.) Under such a program, the manufacturer covers a
portion of the patient's insurance co-payment, thereby
"allow[ing] patients to obtain medications that their
doctors prescribe without having to make burdensome ...
co-payments ...." (Id.) Participation in these
programs provided Irmat with the "opportunity to
significantly expand its business." (Id.)
"[The] manufacturers provided Irmat with marketing
channels and a potential customer base that extended
nationwide." (Id. ¶37.) Consequently,
"Irmat could no longer confine its operations to its
Park Avenue storefront... [and] began providing mail-order
services to customers throughout the country."
(Id.) "From 2012 to 2015, Irmat's business
grew exponentially, both in revenue and geographic
scope." (Id.) Its staff drew from 20 employees
in 2012 to a high of 208. (Id.) Also in 2012, Irma
enrolled with a PSAO, AccessHealth, thereby gaining access to
over 100 payors' pharmacy networks, including Express
Scripts. (Id. ¶40.)
October 2014, Express Scripts, Inc. ("ESI") sent a
Pharmacy Provider Agreement (the "Agreement").
(Compl. Ex. 3.) This Agreement provided, in relevant part,
1.4 "Pharmacy" or "Pharmacies" means the
pharmacy or pharmacies listed on Exhibit B ... which are
owned or operated by Provider, ... meets the definition of
Retail Provider (as defined in Section 1.8) and has been
approved by ESI to provide services hereunder....
1.8 "Retail Provider" shall mean a pharmacy that
primarily fills and sells prescriptions via a retail,
storefront location, is determined by ESI to fulfill an ESI
business need with respect to participation in its retail
network(s), and meets such other criteria established by ESI
from time to time including any specific needs of a
population, as determined by ESI in its sole discretion.
"Retail Provider" shall not include mail order,
specialty, home infusion, dispensing physician or internet
pharmacies or such other provider types that do not meet
ESI's Retail Provider criteria established from time to
2.2.b Credentialing and Recredentialing. Provider
and its Pharmacies shall be eligible to provide services
hereunder, including dispensing Covered Medications, only
upon satisfaction of any credentialing/recredentialing and
additional requirements imposed by ESI, including the
providing of prompt written notice with any updates to the
Provider Certification, as further prescribed in the Provider
Manual. Failure to provide prompt updated information to the
Provider Certification or to comply with Provider's
obligations ... or any other credentialing/recredentialing
requirements required by ESI from time to time shall
constitute a breach of this Agreement and ESI may terminate
Provider ... in ESI's sole discretion.
4.1 Term. Unless earlier terminated as provided in
Section 4.2 of this Agreement, the term of this Agreement
shall begin on the Effective Date and continue for a period
of three (3) years ....
4.2.a Without Cause. This Agreement may be
terminated by ESI without cause upon at least thirty (30)
days written notice to Provider ..., with such termination
effective at the end of such notice period.
4.2.b Breach. In the event a party defaults in the
performance of any of its obligations under this Agreement
(the "Defaulting Party"), the other party (the
"Non-Defaulting Party") may give written notice to
the Defaulting Party of such breach. ... These rights and
remedies are in addition to any and all other rights that
exist or are available or may exist or be available to ESI
pursuant to this Agreement, at law or in equity.
4.2.c Immediate Termination. Notwithstanding the
provisions contained in Section 4.2.b, ESI shall have the
right to immediately terminate this Agreement upon written
notice to Provider in the event that ... (v) [Provider] no
longer meets credentialing requirements ....
7.9 Waiver. No. waiver of a breach of any covenant
or condition shall be construed to be a waiver of any
subsequent breach. No. act, delay, or omission done,
suffered, or permitted by the parties shall be deemed to
exhaust or impair any right, remedy, or power of the parties
(Compl. Ex. 3 at 4, 5, 8, 12.) Irmat was identified in the
Agreement as the Pharmacy. (Id. at 3.) No.
pharmacies were listed on the Exhibit B form. (Id.
2015, Irmat was required by ESI to submit a re-credentialing
application. (Compl. ¶44 & Ex. 1.) This application
included eight practice types. (Ex. 1. at 6, 22.) Irmat
checked "Open Door Retail/Community" and "Mail
Order." (Id.) The former was 35 percent of its
business; the latter was 65 percent. (Id.) Of the
mail order business, 5 percent was local and 95 percent was
out-of-state. (Id.) The application also asked,
among other things, the names and license numbers of the
pharmacists, the Drug and Enforcement Administration and the
Medicaid license numbers of the pharmacy, the hours of
operation, whether the pharmacy was an open-door pharmacy
that filled prescriptions for walk-in customers, whether the
pharmacy had been the subject of any disciplinary or legal
action, and whether the pharmacy provided any compounding
services. (Id. at 6-12, 22-30.) In response to a
question whether the pharmacy had previously participated in
an ESI or Medco pharmacy network, Irmat replied it had as
of June 2013. (Id. at 23.) The completed application
was submitted on July 31, 2015. (Id. at 18, 30.)
August 7, ESI sent Irmat a two-sentence email. (Compl.
¶45 & Ex. 2 at 2.) The subject was "Express
Scripts credentials approved" and the signatory was
"Express Scripts Provider Credentialing." (Ex. 2 at
2.) The first sentence read: "We are pleased to inform
you that your recently submitted credentials have been
reviewed and you are approved to continue in the Express
Scripts Holding Company pharmacy networks."
(Id.) The other sentence read: "To access
member and claims information, Payer Sheets and regulatory
information register at our Pharmacist Resource
Center." (Id.) It was sent from an email
box that did not receive emails but had the name of
"Ingrid Dominguez" at the top. (Id.) There
is no indication of what position at Express Scripts Ms.
Dominguez held; she did not sign the Agreement.
(Id.; Compl Ex. 1-3 at 14.)
on the first sentence, "Irmat made substantial
investments in its mail-order business, " including
"hir[ing] scores of employees, constructing] a
multi-million dollar facility in New York, " and
spending "considerable time and resources to
obtain" two pharmaceutical industry accreditations.
2016, "Express Scripts sent Irmat a cease-and-desist
letter." (Id. ¶47.) The primary infraction
allegedly committed by Irmat "was dispensing medications
to Express Scripts members by mail." (Id.)
"Express Scripts' letter wrongly claimed that Irmat
misrepresented the nature of its pharmacy operations."
(Id.) Other alleged infractions included
"fail[ing] to use its best efforts to achieve formulary
compliance" and discounting member copayments.
(Id. ¶48-49.) The latter apparently referred to
the co-payment assistance programs Irmat participated in with
drug manufacturers. (Id. ¶49.) Both allegations
were incorrect. (Id. ¶48-49.)
2016, Irmat replied to the letter, "remind[ing] Express
Scripts" of its August 2015 email representations and of
its erroneous allegations about Irmat's formulary
compliance and copayment collections. (Id.
¶50.) Irmat also reminded Express Scripts of its earlier
inquiry into whether Express Scripts maintained a separate
mail-order pharmacy network and, when being informed it did
not, of Irmat's willingness to join one should Express
Scripts establish such a network. (Id.)
letter dated July 15, 2016, Express Scripts informed Irmat it
was terminating Irmat from the network effective September
14, 2016. (Id. ¶51.) Reasons given were
Irmat's mailorder business, in contravention of the
definition of'"retail provider, '" and
alleged failure to use its best efforts to dispense formulary
drugs. (Id.) Irmat appealed its termination,
"again noting that Express Scripts expressly approved
Irmat's mail-order business" and again explaining
that its dispensation of formularies was in compliance with
New York law. (Id. ¶52.) On August 22, fourteen
days after Irmat's appeal, Express Scripts informed Irmat
its decision to terminate Irmat was affirmed and, in addition
to the reasons earlier given, cited three disputes Irmat had
had with state boards of pharmacy - disputes Irmat had
already resolved. (Id. ¶53.) Express Scripts
further stated that it was terminating Irmat
'"without cause'" and also for cause based
on the alleged infractions. (Id.)
Scripts' termination of Irmat from its networks has
caused Irmat "catastrophic injury" and significant
harm to Irmat's customers. (Id. at 16.)
foregoing course of dealing between Express Scripts and Irmat
reflects a conspiracy between Express Scripts and
co-conspirator PBMs, including CVS Health Corporation
("CVS Health"), to suppress competition from
independent pharmacies, including Irmat, for mail-order
pharmacy business. (Id. at 1, 2-3, 5, 17.) All the
co-conspirator PBMs belong to a trade association, the
Pharmaceutical Care Management Association
("PCMA"). (Id. ¶3.) Indeed,
executives of Express Scripts and the co-conspirator PBMs
serve on the PCMA's board of directors. (Id.
¶84.) "PBMs manage 95% of all the drugs prescribed
and covered under group and individual health plans in the
country. Express Scripts, CVS Health, and the two other
largest PBMs control approximately 80% of the PBM market,
" with "Express Scripts and CVS Health alone
cover[ing] over 65% of this market." (Id.
¶75.) CVS Health terminated Irmat from its pharmacy
health networks in January or February 2017 "after
conducting several abusive audits of Irmat."
(Id. ¶11, 91, 92.) Irmat had been a participant
in the networks since 2012, and been subjected "for a
number of years" to meritless audits. (Id.
alleges that the anticompetitive conduct of Express Scripts
prevents customers "from obtaining the benefit of
competitive pharmacy expertise, " harms those customers
who would benefit from Irmat's dermatological expertise,
and "deprives consumers of the cost-saving benefits that
they enjoy through Irmat's participation in drug
manufacturer patient assistance programs." (Id.
¶80-81.) Moreover, Express Scripts' conduct violates
the Sherman Act, breaches their contract, and violates three
states' Any Willing Provider laws. (Id.
¶13.) Express Scripts counters that Irmat has failed to
state a claim for any of the purported violations or breach.
12(b)(6) Standard. "Federal Rule of Civil Procedure
8(a)(2) requires only 'a short and plain statement of the
claim showing that the pleader is entitled to relief, '
in order to 'give the defendant fair notice of what the
... claims is and the grounds on which it rests.'"
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555
(2007) (quoting Conley v Gibson, 355 U.S. 41, 47
(1957)) (alteration in original). Federal Rule of Civil
Procedure 12(b)(6) does not require detailed factual
allegations, but does require "more than labels and
conclusions"; "a formulaic recitation of a cause of
action will not do." Id. Thus, to survive a
12(b)(6) motion to dismiss, 'a complaint must contain
sufficient factual matter, accepted as true, to state a claim
to relief that is plausible on its face."'
McShane Constr. Co. v. Gotham Ins. Co., 867 F.3d
923, 927 (8th Cir. 2017) (quoting Ashcroft v.
Iqbal, 556 U.S. 662, 678 (2009)). "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.'" Id. (quoting Iqbal, 556
U.S. at 678). '" [Determining whether a complaint
states a plausible claim for relief... [is] a
context-specific task that requires [this] [C]ourt to draw on
its judicial experience and common sense.'"
Id. (quoting Iqbal, 556 U.S. at 678-79)
(second and third alterations in original).
Twombly, the Supreme Court addressed the question
whether a complaint alleging violations of § 1 of the
Sherman Act included sufficient factual matter to survive a
Rule 12(b)(6) challenge. 556 U.S. at 554-55. "[A]n
allegation of parallel conduct and a bare assertion of
conspiracy will not suffice." Id. at 556. This
is so even if the conduct is "consciously
undertaken." Id. at 557. Additionally, the
Court noted that "it is one thing to be cautious before
dismissing an antitrust complaint in advance of discovery,
but quite another to forget that proceeding to antitrust
discovery can be expensive." Id. at 558
(interim citation omitted).
I: Illegal Group Boycott. Irmat first claims that the
continuing conduct of Express Scripts and its co-conspirators
is an illegal group boycott in violation of § 1 of the
Sherman Act, 15 U.S.C. § 1. "Liability under §
1 of the Sherman Act ... requires a 'contract,
combination ..., or conspiracy, in restraint of trade or
commerce.'" Twombly, 550 U.S. at 548
(quoting 15 U.S.C. § 1). '"[T]he crucial
question is whether the challenged anticompetitive conduct
stem[s] from independent decision or from an agreement, tacit
or express.'" Id. at 553 (quoting
Theatre Enters., Inc. v. Paramount Film Distrib.
Corp., 346 U.S. 537, 540 (1954)) (first alteration
added). "Concerted action forms the essence of a §
1 claim, unilateral actions do not give rise to antitrust
liability under § 1." Minn. Ass 'n of Nurse
Anesthetists v. Unity Hosp., 5 F.Supp.2d 694, 703 (D.
Scripts argues that Irmat's claim lacks the specificity
required by Twombly in that Irmat fails to (a)
identify any communication between anyone at Express Script
and another PBM; (b) allege any specific PCMA meeting at
which the alleged conspiracy was conceived; and (c) allege
any context removing the complained-of conduct from the realm
of lawful parallel conduct. In response, Irmat argues that it
has alleged many of the same plus factors found in this
District to be sufficient in "the Compounding
Cases" - antitrust cases brought by compounding
pharmacies against one or more PBMs, including Express
Scripts, Inc., and Express Scripts Holding Company - to
withstand a Rule 12(b)(6) motion. See HM Compounding
Servs., Inc. v. Express Scripts, Inc., 2015 WL 4162762
(E.D. Mo. ...