New York State is appealing a state trial court’s dismissal of its antitrust case against CVS Health that alleges the pharmacy giant unlawfully forces 340B covered entities to use its 340B third party administrator Wellpartner in order to contract with CVS retail and specialty pharmacies to dispense 340B-purchased drugs.
In a May 3 notice of appeal, the state attorney general’s office set forth the grounds for its appeal, saying the lower court erred in finding that the state “had not properly pleaded market power in a relevant product market.” The notice was filed with the New York Supreme Court’s Appellate Division, County of New York. The state has not yet filed its first appellate brief. (In New York’s court system, the Supreme Court is the lowest court of general jurisdiction.)
The lawsuit is based on New York’s antitrust law, the Donnelly Act, which mirrors federal antitrust laws, and prohibits anti-competitive activity including illegal “tying,” or selling a product or service on the condition that the buyer must also buy a different product or service.
In its March 7 decision dismissing the state’s claim, the trial court ruled that the state had not shown that CVS had sufficient market power to coerce 340B entities to use CVS pharmacies to dispense 340B-priced drugs. rather than contracting with rival pharmacies.
In his opinion, Judge Robert Reed said CVS did not violate state antitrust laws because covered entities “typically work with multiple contract pharmacies” and the state “does not allege that CVS has done anything to prevent switching to competing pharmacies or to make switching costly.”
He also noted that 86 percent of New York covered entities that use contract pharmacies do not contract with a single CVS pharmacy location and that 71 percent of New York covered entities do not contract with any of the major pharmacy chains.
The state sued CVS in July 2022. It charged that, since 2017 when CVS acquired Wellpartner, CVS has told entities they have to use Wellpartner as their TPA if they want to realize 340B savings from prescriptions filled at CVS pharmacies. “They cannot choose another TPA,” the suit alleged.
The trial court dismissed the suit without prejudice, leaving the state the option to refile its case under another legal theory.