CVS Health Corp. has asked a New York state court to dismiss the state’s antitrust lawsuit alleging that the pharmacy chain is forcing the state’s 340B covered entities to use its 340B third party administrator Wellpartner as a condition for letting the entities contract with CVS retail and specialty pharmacies to dispense 340B-purchased drugs. CVS’s motion argues the suit fails to state a claim under New York’s anti-trust laws.
CVS also alleged that the suit, filed in late July by New York State Attorney General Letitia James, ignores the benefits its third-party administrator (TPA) deal with Wellpartner achieves by maximizing 340B savings for covered entities, and points out that contract pharmacy competitors such as Walgreens have a similar TPA contract with 340B providers.
“This Court should reject the New York Attorney General’s effort to unwind a nationwide transaction that closed five years ago and has, in the interim, brought extraordinary benefits—and hundreds of millions of dollars—to some of New York’s neediest health centers,” lawyers for CVS said in the September 19 filing. “Through its acquisition of 340B administrator Wellpartner, Inc., CVS Pharmacy adopted an integrated model through which its covered entity customers could realize the financial and regulatory benefits of consolidating 340B-administration services for CVS Pharmacies to increase 340B participation.”
In its motion to dismiss, CVS said its deal with Wellpartner eliminates compliance risks, allowing 340B covered entities to realize bigger savings under the program, while expanding access to contract pharmacies.
Under the TPA arrangements, companies like Wellpartner sell software to 340B covered entities to help the providers manage their inventories to determine, for example, if a drug prescription is eligible for 340B pricing. The covered entity can then request 340B pricing from the drug manufacturers when it is replenishing its inventory.
In its suit, New York State alleges that CVS’s policy requiring covered entities that use CVS pharmacies to dispense 340B drugs also use Wellpartner’s services creates a monopolistic “tying” of services, which is prohibited under the state’s Donnelly Act, that mirrors federal antitrust law. However, CVS countered in its motion that complaints about CVS’s TPA deal have come from a “handful of covered entities supposedly unable or unwilling to use different administrators for different pharmacy chains—even though that is precisely what covered entities that contract with Walgreens and other chains already do.”
The pharmacy added, “Under the guise of an antitrust lawsuit claiming that CVS has engaged in unlawful ‘tying,’ the Attorney General now seeks to undo years of nationwide progress by destroying the integrated model, splitting up CVS Pharmacy and Wellpartner, and sending covered entities back to a time when CVS pharmacies were extremely limited in the number of covered entities they could serve.” CVS also argued that New York has failed to make a case that the pharmacy chain exerts power over the tying market – i.e., the contract pharmacy market – since covered entities are free to use non-CVS pharmacies to dispense 340B drugs.
“As a matter of law, CVS lacks the market share, in a properly defined market, necessary to support a tying claim,” the motion said.
CVS’s motion also claimed that New York’s suit makes inconsistent arguments, alleging on one hand, that each CVS pharmacy is its own “monopolistic” business, while at the same time, claiming CVS’s contract pharmacy market is national in scope. “It cannot be simultaneously true that, on the one hand, every pharmacy location constitutes its own relevant market because patients of a covered entity who live near that pharmacy will tend to fill their prescriptions there and, on the other, that the market is national in scope,” the motion said. “Thus, while it is theoretically possible that a covered entity in New York could contract with a CVS pharmacy in Iowa, that assertion defies common sense and does not reflect the market realities alleged in Plaintiff’s complaint.”
Finally, the state has failed to make a case that the CVS/Wellpartner deal caused harm in the TPA market, the motion alleged. “Plaintiff has not alleged that the ‘tying arrangements have driven numerous [TPAs] from the market, have deterred entry into the [TPA] market, [or] have had deleterious effects on the development of [TPA] technology,” it said.
AG James filed the suit July 28 in state trial court (which in New York is called Supreme Court) in Manhattan. The suit alleges that, since 2017 when CVS acquired Wellpartner, CVS has told entities, “if they want to realize 340B savings from patient prescriptions filled at CVS pharmacies and CVS specialty pharmacies, they have to use Wellpartner as their TPA. They cannot choose another TPA.”
The suit charges that, via CVS’s TPA requirement, the pharmacy chain effectively forces covered entities to either forgo substantial savings from the 340B program (i.e., not collect any savings at all for patients who fill their 340B eligible prescriptions at a CVS pharmacy) or forgo utilization of another TPA that might offer better pricing, quality, or service to the covered entity, or with which it already has a business relationship.
In 2019, CVS reached a settlement with 340B TPA Sentry Data Systems, which sued CVS in federal district court in Florida alleging violations of state and federal antitrust laws.
In 2020, CVS settled a similar antitrust suit filed in federal district court in Florida by 340B TPA RxStrategies.