The New York State attorney general last week reasserted that CVS Health abused its market power by forcing 340B covered entities who use CVS to dispense 340B-priced drugs to use the retail chain’s third-party administrator Wellpartner to process their 340B claims.
The state sued CVS in state court in July. CVS moved to dismiss the case in September. The state responded to CVS’s motion Oct. 19.
State Attorney General Letitia James said CVS’s TPA arrangement is a classic anti-competitive “tying” in violation of New York’s antitrust law and should be enjoined.
“Contrary to its unsupported statements to the court, CVS implemented this tying scheme not for any procompetitive purpose, but, rather, to make hundreds of millions of dollars in unjust profits, at the expense of the covered entities and the communities they serve,” the filing said.
The AG said the state’s complaint alleged the facts necessary to show an illegal tying. “CVS is quite simply abusing its market power in one product to force hospitals and other covered entities to buy a second product that they do not want,” the response charged.
James argued that CVS derives its market power from the unique realities of the 340B contract pharmacy market.
“This market is unusual: Because of the way this market is structured—by regulation and for practical reasons—a covered entity that benefits from including CVS in its contract pharmacy network simply cannot substitute another contract pharmacy for CVS,” the filing said.
Another essential element of the antitrust claim, that the relevant market is national in scope, is present in this case, the state argued. “In addition to retail, CVS offers mail order and specialty pharmacy services, which operate on a nationwide basis,” the filing said. “Moreover, CVS implemented the tie-in policy nationwide.”
The state also countered CVS’s assertion that its TPA arrangement had not thwarted market competition in the TPA services market since only a handful of covered entities had complained. “The tie-in has resulted in exclusion of numerous competitors from the tied market,” it said. “And, there has already been millions of dollars of harm, which far exceeds the de minimis requirement of a ‘not insubstantial amount of commerce.’”
Specifically, the state alleged that, “Regardless of the covered entities’ preferences, they had little choice since the alternatives were either to pay for duplicative fees for multiple TPAs (with added regulatory risk), or entirely forgo collecting the 340B savings for patients who choose to go to CVS.”
In its Sept. 19 motion to dismiss, CVS’s arguments included that its requirement that 340B providers use Wellpartner, which CVS acquired in 2017, was not an anti-competitive tying because covered entities could freely use non-CVS pharmacies to dispense 340B drugs. It further argued that the state’s lawsuit ignores the benefits of the TPA deal in maximizing 340B savings, eliminating compliance risks for covered entities, and increasing their access to contract pharmacies.
CVS also relied on the fact that other large retail pharmacy chains such as Walgreens had similar TPA arrangements.
But the state responded, “Walgreens’ conduct is irrelevant to CVS’ wrongdoing,” and, in any case, CVS had not shown that Walgreens also requires covered entities to use a single TPA. The antitrust suit, filed in state trial court in Manhattan, charges that CVS’s TPA requirement forces covered entities to either forgo savings 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. 340B TPAs sell software that tracks inventory and identifies 340B discount-eligible claims.
