Insights

PBM Contracts to be Analyzed Under Rule of Reason

The Northern District Court of Illinois, in a decision issued August 12, held that a PBM's arrangements with health plan sponsors are not per se unlawful and should be analyzed under the rule of reason.

North Jackson Pharmacy, an independent retail pharmacy, filed suit against Caremark Rx, a PBM, alleging two violations of Section 1 of the Sherman Act. The first claim asserts a conspiracy between health plan sponsors, using Caremark as their common agent, to fix the prices paid to pharmacies for dispensing prescription drugs to health plan members. The second claim charges a conspiracy between Caremark and other PBMs to fix those same prices.

Caremark filed a Rule 16 motion to narrow the issues for litigation and discovery, arguing that the per se rule did not apply to its agreements with plan sponsors. The court agreed with Caremark and rejected North Jackson's argument that the arrangement between Caremark and plan sponsors was a per se violation of the antitrust laws. According to the court, the services provided by Caremark to plan sponsors is similar to the services provided by a cooperative buying agreement and have efficiency-enhancing potential. The alleged anticompetitive agreements between plan sponsors are ancillary to the agreements between Caremark and the plan sponsors and should thus be analyzed under the rule of reason. The court pointed out that these arrangements might result in lower drug prices for consumers and thus to hold such agreements illegal per se, without careful examination of the agreement's competitive effects, "would seem at odds with the Sherman Act's purpose." Furthermore, any decision regarding the lawfulness of Caremark's arrangements would have far-reaching consequences and warrants a thorough analysis under the rule of reason.

Caremark did not seek to apply the rule of reason to North Jackson's claim that Caremark conspired with other PBMs to fix prices.

A copy of the opinion is available at this link.

For additional information about this Antitrust Development, please contact Toby G. Singer, leader of the Health Care Antitrust Practice.

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