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Trone Health Services, Inc. v. Express Scripts Holding Co.

United States District Court, E.D. Missouri, Eastern Division

March 14, 2019

TRONE HEALTH SERVICES, INC.; REDDISH PHARMACY, INC.; JABOS PHARMACY, INC.; OAK TREE PHARMACY; APEX PHARMACY; and AMRUT JAL, LLC, Plaintiffs,
v.
EXPRESS SCRIPTS HOLDING COMPANY; EXPRESS SCRIPTS MAIL PROCESSING, INC.; EXPRESS SCRIPTS MAIL PHARMACY SERVICES, INC.; and DOES 1-20, Defendants.

          MEMORANDUM AND ORDER

          RONNIE L. WHITE, UNITED STATES DISTRICT JUDGE.

         This matter is before the court on Defendants' Motion to Dismiss Plaintiffs' Complaint (ECF No. 14). This matter is fully briefed and ready for disposition.

         BACKGROUND [1]

         Defendant Express Scripts, Inc. ("ESI") is the largest Pharmacy Benefit Manager ("PBM") in the United States. (Complaint, ECF No. 1, ¶2). ESI, as a PBM, acts as a middleman between Plan Sponsors (insurers, employers and government agencies who provide prescription drug coverage) and retail pharmacies who dispense prescription drugs. Id. Plaintiffs are retail pharmacies that contract with ESI to participate in ESI's nationwide retail pharmacy network. (Complaint, ¶l). ESI, as a PBM, also offers mail order dispensing pursuant to its agreements with Plan Sponsors. See Pharmacy Provider Agreements (the "PPA") at 1 (identifying mail order dispensing as one of ESI's service obligations to its Plan Sponsors).[2]

         ESI requires Plaintiffs to include customer information and prescription data in the claims for payment they submit to ESI. Plaintiffs allege Defendants used confidential, proprietary information regarding Plaintiffs' customers and their prescriptions to forcibly switch customers from Plaintiffs' retail pharmacies to Defendants' own mail-based pharmacies without Plaintiffs' or their customers' authorization. Plaintiffs allege they have no ability to prevent ESI from accessing customer information and prescription data because ESI requires Plaintiffs to transmit the customer information to ESI or else ESI will not remit payment for customers' prescriptions. (Complaint, ¶34).

         Plaintiffs bring claims against Defendants for (1) attempted monopolization, (2) unfair competition, (3) breach of contract, (4) breach of implied covenant of good faith and fair dealing, (5) interference with prospective economic advantage, (6) violation of the uniform trade secrets act, and (7) fraud.

         DISCUSSION

         I. Standard of Review

         To survive a 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.'" Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 1949, 173 L.Ed.2d 868 (2009) (quoting Bell Atlantic Corp., v. Twombly, 550 U.S 544, 570 (2007). A "formulaic recitation of the elements of a cause of action" will not suffice. Twombly, 550 U.S. at 555. "The plausibility standard is not akin to a 'probability requirement,' but it asks for more than a sheer possibility that a defendant has acted unlawfully." Iqbal, 556 U.S. at 678 (quoting Twombly, 550 U.S. at 556).

         II. Discussion

         A. Parties' Agreement

         ESI's obligations to its Plan Sponsors are governed, in part, by the PPA and Network Provider Manual (the "Provider Manual") (collectively, the "Agreements"). Under the Agreements, "ESI is the owner of all information it obtains through the administration and processing of any and all pharmacy claims submitted by" Plaintiffs. (Provider Manual at 17). The Agreements contain several references to Plaintiffs' obligations to provide ESI with Member information. (ECF No. 18, Exhibit C at 3 (citing PPA §2.3d ("Provider shall ... cooperate with ESI and ... provide any information requested by ESI in order to verify any information submitted with a claim necessary to pay the claim.")).

         Further, ESI's Agreements with Plaintiffs identify ESI's "mail service dispensing" program as one of ESI's "service obligations to its [Plan] Sponsors." See PPA at 1. Likewise, section 2.8 of the PPA provides, "Provider shall ... cooperate with ESI, including providing to ESI any and all information requested by ESI necessary for coordinating any benefits provided to any Member, as directed by and in accordance with ESFs then current policies and procedures." (ECF No. 18 at 1, PPA §2.8). Thus, the Agreements allow for ESI to use information provided by Plaintiffs' customers to be used in connection with any service obligations, including mail service dispensing.

         B. Breach of Contract or Implied Covenant

         Plaintiffs assert their breach of contract claim is based on ESFs failure to comply with section 5.3 of the PPA, which requires ESI to comply with all federal and state laws, rules and regulations regarding the confidentiality of patient information, including Health Insurance Portability and Accountability Act of 1996 (HIPPA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act. (Complaint, ¶76).[3] Plaintiffs argue "it is irrelevant what the Contract does nor does not permit ESI to do. Instead, the only relevant consideration is what HIPAA and the HITECH Act permit ESI to do." (ECF No. 23 at 4). Plaintiffs assert ESI violates HIPAA by "using the patient data it receives from Plaintiffs to switch those patients to mail order," which, in turn, breaches section 5.3 of the PPA. (ECF No. 23 at 3). Plaintiffs' Complaint alleges that patients did not authorize a switch to mail order, but only learned that their prescriptions were switched to mail order when they attempted to refill those prescriptions at Plaintiffs' pharmacies. (Complaint, ¶42). Plaintiffs argue that the patients' general consent to receive prescriptions by mail order does not satisfy HIPAA's requirement. Rather, HIPAA authorizations must specifically identify the information to be used or disclosed, specifically identify who is authorized to make the disclosure and who may use the disclosed information, and be signed by the individual authorizing the disclosure. (ECF No. 23 at 4 (citing 45 C.F.R. §164.508)).

         The Court holds Plaintiffs' breach of contract claim against Defendants fails to state a claim because it cannot be based upon HIPAA/HITECH. First, no private cause of action exists for a HIPAA violation, even under a contract claim. Adams v. Eureka Fire Prot. Dist, 352 Fed.Appx. 137, 138 (8th Cir. 2009) (HIPAA does not create a private right of action); see also Cairel v. Jessamine Cty. Fiscal Court, No. 5:15-CV-186-JMH, 2015 WL 8967884, at *4 (E.D. Ky. Dec. 15, 2015)("Regardless of whether the contract included a HIPAA provision, there simply is no private right of action for violations of HIPAA, at the state or federal level."). Similarly, Plaintiffs (the pharmacies) cannot direct the use of the patient's information. Only the patient can authorize how his or her information is used. See 45 C.F.R. §164.508(c)(1)(a valid authorization under HIPAA must contain the "signature of the individual and date.")[4] Thus, Plaintiffs' breach of contract claim fails to state a claim as a matter of law.

         Plaintiffs further assert ESI breached the implied covenant of good faith and fair dealing. Plaintiffs allege "ESI breached its duty of good faith and fair dealing owed to Plaintiffs by using the patient information supplied pursuant to contracts' requirements in order to take customers away from Plaintiffs and move those customers to Express Scripts' competing mail order pharmacy." (Complaint, ¶82). Plaintiffs state the Provider Manual does not give ESI any claim to ownership over the customer and prescription information at issue. (ECF No. 23 at 4-5). Plaintiffs maintain the Provider Manual distinguishes between (1) the "claims submitted by" Plaintiffs and (2) the information ESI obtains through the administration and processing of those claims. See Provider Manual, ECF No. 17 at 17, §2.4 ("ESI is the owner of all information it obtains through the administration and processing of any and all pharmacy claims submitted by" Plaintiffs). Plaintiffs allege ESI "requires Plaintiffs to include customer information and prescription data in the claims for payment they submit to ESI." (Complaint, ¶25). Plaintiffs contend this is separate and apart from ESI's processing of their claims because the relevant patient and prescription information is provided to ESI by Plaintiffs when they submit their claims and as part of those claims (Complaint, ¶25), which occurs prior to ESI administering or processing those claims. That is, "[o]nly after Plaintiffs submit those claims and provide that information does ESI administer anything." (ECF No. 23 at 5 (citing Complaint, ¶¶26-27)); see also Complaint, ¶29 ("After ESI receives Plaintiffs' claims (including the customer and prescription information Plaintiffs are required to include with those claims), it administers and processes Plaintiffs' claims"). At that later point, ESI obtains other information, including, for example, patients eligibility for coverage and the co-pay owed by the patient and restrictions on the patients' prescriptions, through ESI's processing and administration of Plaintiffs' claims. (ECF No. 23 at 5 (citing Complaint, ¶29). Plaintiffs contend that only the information utilized in the second processing step is owned by ESI according to the ...


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