Pittsburgh judge throws out antitrust claim against major pharmacy benefits merger

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A nationwide group of pharmacies has failed in its bid to stop the merger of two of the country's largest pharmaceutical benefits management companies -- Medco Health Solutions and Express Scripts -- with the ruling of a federal judge in Pittsburgh, who dismissed all of the group's antitrust claims save one regarding the sale of certain specialty drugs.

The pharmacies sought an injunction days before the April merger, a $29 billion transaction, they argued, that violated a federal antitrust act, known as the Clay Act.

The acquisition of New Jersey's Medco by Express Scripts of St. Louis creates the largest pharmacy benefits manager in the industry. CVS Caremark is now the second largest, based on 2011 revenues. Smaller pharmacies, as well as regulators with the Federal Trade Commission, have expressed concern that the deal might reduce competition.

U.S. District Judge Cathy Bissoon of the Western District of Pennsylvania tossed the pharmacies' claims. The companies had argued that, as purchasers of pharmaceutical benefit management services, they'd be harmed because there would be less competition in the market after the merger.

But because any harm that they would suffer would be purely monetary, Judge Bissoon said, and the pharmacies only sought injunctive relief, she dismissed the claim.

However, she granted them leave to amend their claims.

Judge Bissoon also let stand the pharmacies' claim that the merger could effectively end competition for the dispensing of specialty drugs that require specific handling.

"Merged defendants will use their increased market power to force consumers away from plaintiffs' specialty pharmacy businesses, and into their own mail-order and in-house specialty pharmacies.

The anti-competitive acts alleged by plaintiffs would include forcing patients to use defendants' specialty pharmacy -- regardless of the patient's wishes -- by denying claims for specialty drugs purchased in any other manner," Judge Bissoon said in National Association of Chain Drug Stores v. Express Scripts.

Express Scripts and Medco had argued that the pharmacies were reluctant to see increased competition for the sale of specialty drugs.

They leaned on the U.S. Supreme Court's 1986 opinion in Cargill v. Monfort of Colorado, which held that a plan that would result in what the court called "vigorous competition for market share."

The pharmacies relied on a 2010 opinion from the U.S. Court of Appeals for the Third Circuit in West Penn Allegheny Health System v. UPMC that held that the reduced payments from a monopsonist health insurer "could lead to 'suboptimal output, reduced quality, allocative inefficiencies, and ... higher prices for consumers in the long run,'" according to the opinion.

That holding was based on the allegation of conspiracy between two defendants, Judge Bissoon said.

Neither Charles Gibbons of Buchanan Ingersoll & Rooney in Pittsburgh, who represented the pharmacies, nor Arthur Stroyd Jr. of Del Sole Cavanaugh Stroyd in Pittsburgh, who represented the benefits managers, could be reached for comment.

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Saranac Hale Spencer: sspencer@alm.com or 215-557-2449. To read more articles like this, visit www.thelegalintelligencer.com.


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