Rxstrategies, Inc. v. CVS Pharmacy, Inc.
Rxstrategies, Inc. v. CVS Pharmacy, Inc.
Opinion of the Court
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 *1347significant 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 ,
*1348To 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,
DISCUSSION
Count I: Tying in Violation of the Sherman Act,
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. ,
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. ,
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 ,
*1349Cobb Theatres III, LLC v. AMC Entm't Holdings, Inc. ,
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."
Market Power
Market power exists when a "seller has some special ability ... to force a purchaser to do something that he would not do in a competitive market." Illinois Tool Works Inc. v. Indep. Ink, Inc. ,
"[In] all cases involving a tying arrangement, the plaintiff must prove that the defendant has market power in the tying product." Illinois Tool Works,
*1350"Relevant determinants of the market power of a prospective predator ... include its absolute and relative market shares, and those of competing firms; the strength and capacity of current competitors; the potential for entry; the historic intensity of competition; and the impact of the legal or natural environment." U.S. Anchor Mfg., Inc. v. Rule Indus., Inc. ,
Defendants argue that RxStrategies alleges information about CVS's dominance among retail pharmacies, not 340B contract pharmacies. Therefore, Defendants argue, RxStrategies does not allege market power in the relevant market. Defendants also argue that RxStrategies does not allege enough for the Court to infer that CVS's retail pharmacy market power (a market share of 23.6% of retail pharmacies) is sufficient to establish market power for 340B contract pharmacies. The Court addresses each argument.
RxStrategies alleges many facts about CVS. According to RxStrategies, 82% of the population lives within 10 miles of a CVS pharmacy location; CVS is the second-largest contract pharmacy; CVS has grown its number of locations by 281% since 2013, and has 9,800 pharmacy locations ("the most pharmacy locations"); patients fill their prescriptions, including prescriptions pursuant to the 340B Program, close to where they live; covered entities utilize pharmacies that a large percentage of their patients already use to fill prescriptions; and covered entities view CVS as an "essential" contract pharmacy. RxStrategies also urges the Court to accept that available data about CVS's market share in the 340B contract pharmacy market is understated because of CVS's recent changes to its policies for partnering with covered entities.
In a way, RxStrategies asks the Court to infer that CVS's dominance among retail pharmacies results in dominance in the 340B contract pharmacy market. Though this may be true, RxStrategies' Amended Complaint does not include enough for the Court to infer the level of dominance that equates to market power in the relevant product market. Importantly, as Defendants argue, RxStrategies alleges much about CVS's national market power and market share in certain states. But RxStrategies alleged its geographic markets are local. The allegations are not inconsistent, but they are lacking for the geographic market RxStrategies defined.
The parties argue over the importance of CVS's alleged 23.6% nationwide market share of retail pharmacies. Though the number would likely be insufficient to establish market power, the figure is for a different product market, so it does not have as much relevance here. With 23.6% of the retail pharmacy market share, CVS could have a 10% market share of 340B contract pharmacies or a 90% share. RxStrategies alleges that the five largest pharmacy chains (as alleged, "CVS, Walgreens, Walmart, Rite Aid, and Kroger") represent 60% of 340B contract pharmacies.
*1351Dkt. 30, p. 12. It is unclear what percentage of this share CVS occupies.
RxStrategies does allege that CVS has a 60% market share for specialty drugs in the 340B Program. But RxStrategies does not allege how this figure translates to the 340B drug market as a whole, and importantly, CVS's share of the market.
RxStrategies also alleges that "nearly 8,000 covered entities participate" in the 340B Program. Dkt. 30, p. 4. And since CVS's partnership with Wellpartner, 1,200 covered entities that previously used only RxStrategies as their 340B program administrator now use only Wellpartner. These figures, among others, help explain the alleged effects CVS's decision has had on some of the contract pharmacy market. But they are not enough to establish market power in the relevant market, especially when RxStrategies' geographic markets are local markets.
Though the Amended Complaint paints the picture of CVS's dominance in the retail pharmacy market, the facts do not establish the requisite market power. Accordingly, the Court will dismiss the claim, without prejudice.
Counts V and VI; Misappropriation of Trade Secrets, against both Defendants
A misappropriation claim requires a showing that "(1) the plaintiff possessed secret information and took reasonable steps to protect its secrecy and (2) the secret it possessed was misappropriated, either by one who knew or had reason to know that the secret was improperly obtained or by one who used improper means to obtain it." Audiology Distribution, LLC v. Simmons , 812CV02427JDWAEP,
The DTSA defines "misappropriation" as the "acquisition of a trade secret of another by a person who knows or has reason to know that the trade secret was acquired by improper means" or "disclosure or use of a trade secret of another without express or implied consent by a person who ... at the time of disclosure or use, knew or had reason to know that the knowledge of the trade secret was ... acquired under circumstances, which gives rise to a duty to maintain the secrecy or limit the use of the trade secret." Temurian v. Piccolo , 18-CV-62737,
The DTSA defines a "trade secret" as
all forms and types of financial, business, scientific, technical, economic, or engineering information, including patterns, plans, compilations, program devices, formulas, designs, prototypes, methods, techniques, processes, procedures, programs, or codes, whether tangible or intangible, and whether or how stored, compiled, or memorialized physically, electronically, graphically, photographically, or in writing if--
(A) the owner thereof has taken reasonable measures to keep such information secret; and
(B) the information derives independent economic value, actual or *1352potential, from not being generally known to, and not being readily ascertainable through proper means by, another person who can obtain economic value from the disclosure or use of the information
Customer Information
Defendants first argue RxStrategies' customer information is not a trade secret because the information, such as a covered entity's "authorizing official and primary contact," is publicly available on a government website. Dkt. 36, p. 23. RxStrategies argues that each covered entity's 340B program administrator is not available on the website. As presented, the issue is a factual dispute, not a legal one.
Defendants also argue that RxStrategies' customers' "needs and goals" are too broad to be considered trade secrets. But RxStrategies alleged sufficient facts to establish, at this stage, that it expended effort to compile this information and transform it into a trade secret. For example, RxStrategies alleged it "devote[d] substantial resources and investment ... to prospecting, identifying, and developing covered entities interested in participating in the 340B program.... [and] deploy[ed] its professionals to study a covered entity and the patient community it serves in order to understand the covered entity's needs and goals for participation in the 340B program, and to develop meaningful relationships with various individuals within the covered entity." Dkt. 30, p. 20. See SMS Audio, LLC v. Belson , 9:16-CV-81308,
Defendants also argue RxStrategies failed to allege any facts showing Defendants misappropriated any of the information. RxStrategies responded to Defendants' argument with caselaw the Court finds persuasive. And to allege misappropriation, RxStrategies alleged facts about its reliance on its NDA with CVS, among other things. At this stage, RxStrategies has alleged sufficient facts to support its claim.
Data Processing Solutions
Defendants also argue that RxStrategies failed to show its "proprietary data processing solutions" are trade secrets. As alleged, however, RxStrategies does more than allege "the existence of general categories of 'confidential information.' " Elsevier Inc. v. Doctor Evidence, LLC , 17-CV-5540 (KBF),
Defendants again argue RxStrategies failed to allege enough to support any misappropriation of the processing solutions. Defendants focus on one of RxStrategies' allegations and deem it insufficient: Wellpartner transitioned customers from RxStrategies to Wellpartner at a quicker rate than it would have been able to absent information from RxStrategies' data processing solutions. But RxStrategies alleged other facts to indicate that Defendants disclosed or used RxStrategies' data processing solutions. Among them, RxStrategies alleges that CVS would not have been able to eliminate its one-to-one policy without RxStrategies' processing solutions. The alleged facts taken together plausibly establish misappropriation of the data processing solutions to survive a motion to dismiss.
Count II, Breach of Contract, against CVS
Defendants urge dismissal of RxStrategies' breach of contract claim for the same reasons Defendants argued the misappropriation claims should be dismissed. Because the Court rejected the arguments, the breach of contract claim remains.
Further, RxStrategies alleged that CVS and RxStrategies entered into an NDA, CVS breached the NDA, and RxStrategies suffered damages as a result of the alleged breach. With these allegations, RxStrategies plausibly alleged a breach of contract claim.
Counts III and IV, Tortious Interference with a Contractual Relationship and Tortious Interference with a Business Relationship, against both Defendants
A plaintiff must prove four elements to establish tortious interference with a contractual or business relationship: "(1) the existence of a business relationship or contract; (2) knowledge of the business relationship or contract on the part of the defendant; (3) an intentional and unjustified interference with the business relationship or procurement of the contract's breach; and (4) damage to the plaintiff as a result of the interference." Howard v. Murray ,
RxStrategies alleged all four elements for each of its tortious interference claims. But Defendants argue that RxStrategies' claims fail because they are based on a failed antitrust claim and are otherwise preempted by FUTSA.
As to Defendants' preemption argument, FUTSA "displace[s] conflicting tort, restitutory, and other law[s] of [the state of Florida] providing civil remedies for misappropriation of a trade secret."
RxStrategies' tortious interference claims do not consist only of allegations of misappropriation. For example, RxStrategies alleged CVS interfered with RxStrategies' contracts and business relationships by forcing customers to use Wellpartner as their exclusive 340B program administrator. The Court concludes that RxStrategies' tortious interference claims are not preempted by FUTSA. And because neither tortious interference claim depends on the success of RxStrategies' antitrust claim, the claims withstand Defendants' Motion to Dismiss.
Counts VII, VIII, IX, Fraud in the Inducement, Fraudulent Misrepresentation, and Negligent Misrepresentation, against CVS
Claims for fraudulent misrepresentation and fraudulent inducement require a showing of: "(1) a false statement concerning a material fact; (2) the representor's knowledge that the representation is false; (3) an intention that the representation induce another to act on it; and (4) consequent injury by the party acting in reliance on the representation." Moriber v. Dreiling ,
RxStrategies "must state with particularity the circumstances constituting [the] fraud or mistake" for these three claims. Fed. R. Civ. P. 9. This requires RxStrategies to allege "(1) precisely what statements were made in what documents or oral representations or what omissions were made, and (2) the time and place of each such statement and the person responsible for making (or, in the case of omissions, not making) same, and (3) the content of such statements and the manner in which they misled the plaintiff, and (4) what the defendants obtained as a consequence of the fraud." Smiley v. Nationstar Mortgage LLC ,
Defendants argue these three claims should be dismissed because the claims are preempted by FUTSA. Defendants also argue RxStrategies did not comply with Rule 9(b)'s particularity requirement and RxStrategies failed to allege that Defendants intended to deceive RxStrategies. The Court will discuss RxStrategies' claims for fraudulent inducement, fraudulent misrepresentation, and negligent misrepresentation together because Defendants' arguments for dismissal apply to each claim equally.
First, because these claims do not consist only of allegations relating to Defendants' alleged misappropriation of trade secrets, they are not preempted by FUTSA.
Second, in support of its claims, RxStrategies alleged that Christian Reid ("Reid"), the Senior Director of the 340B Program for CVS, and Jaclyn Baptista ("Baptista"), the "Senior Implementation Manager, Health System Alliances, for *1355CVS," falsely assured several RxStrategies' representatives (whom RxStrategies lists) that RxStrategies' software was going live soon but had technical issues. Dkt. 30, p. 46. These individuals also allegedly made representations that "a timeline for going live was pending."
And finally, RxStrategies alleged that Reid and Baptista, on behalf of CVS, "intended to induce RxStrategies to rely and act on the misrepresentations." Dkt. 30, p. 47, 49, 51. This satisfies the requirement that RxStrategies plead "intent" for each of the three claims. To the extent Defendants argue RxStrategies' allegations of intent lack detail, Rule 9 specifically permits "[m]alice, intent, knowledge, and other conditions of a person's mind [to] be alleged generally." Fed. R. Civ. P. 9. Accordingly, the Court will not dismiss RxStrategies' claims for fraudulent inducement, fraudulent misrepresentation, and negligent misrepresentation.
Count X Unjust Enrichment, against CVS
"A claim for unjust enrichment is an equitable claim, based on a legal fiction created by courts to imply a 'contract' as a matter of law." Tooltrend, Inc. v. CMT Utensili, SRL ,
The elements of a claim for unjust enrichment are: "(1) the plaintiff has conferred a benefit on the defendant; (2) the defendant voluntarily accepted and retained that benefit; and (3) the circumstances are such that it would be inequitable for the defendants to retain it without paying the value thereof." Virgilio v. Ryland Grp., Inc.,
RxStrategies alleged each element required for the cause of action. But CVS argues RxStrategies' claim is preempted by FUTSA. The Court agrees that the alleged benefits RxStrategies conferred to CVS mimic the proprietary information and trade secrets found in RxStrategies' misappropriation claims. See PB Legacy , 2:17-CV-9-FTM-29CM,
CVS also argues it entered into a mutual NDA with RxStrategies, and the NDA governs the use (and misuse) of confidential information RxStrategies references in its unjust enrichment claim. The Court recognizes that "Florida courts have held that a plaintiff cannot pursue a quasi-contract claim for unjust enrichment if an express contract exists concerning the same subject matter." Diamond "S" Dev. Corp. v. Mercantile Bank ,
Upon review and consideration, it is therefore
ORDERED AND ADJUDGED that:
1. Defendants' Motion (Dkt. 36) is GRANTED in part, as described herein.
2. Plaintiff's Count I is dismissed without prejudice.
3. Plaintiff may file an amended complaint within twenty-one (21) days from the date of this Order.
DONE and ORDERED in Tampa, Florida, this 29th day of March, 2018.
According to RxStrategies, before acquiring Wellpartner, CVS had a "one-to-one" policy where one CVS pharmacy location would serve as a contract pharmacy to only one covered entity. RxStrategies alleges this policy protected CVS from potential 340B Program compliance violations. Dkt. 30, p. 17. Today, CVS allows each of its pharmacies to contract with more than one covered entity for the 340B Program.
RxStrategies does allege that "[i]n 2016, CVS received $32 billion from specialty drugs, or 28% of all specialty drug prescription revenues." Dkt. 30, p. 15. But this fact does not allow the Court to glean CVS's market power in the relevant, 340B contract pharmacy market.
Reference
- Full Case Name
- RXSTRATEGIES, INC. v. CVS PHARMACY, INC. and Wellpartner, LLC
- Cited By
- 9 cases
- Status
- Published