CZ Servs., Inc. v. Express Scripts Holding Co., Case No. 3:18-cv-04217-JD

• Court: United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. Northern District of California
• Writing for the Court: JAMES DONATO United States District Judge
• Parties: CZ SERVICES, INC., et al., Plaintiffs, v. EXPRESS SCRIPTS HOLDING COMPANY, et al., Defendants.
• Docket Number: Case No. 3:18-cv-04217-JD
• Decision Date: 15 October 2018

CZ SERVICES, INC., et al., Plaintiffs,
v.
EXPRESS SCRIPTS HOLDING COMPANY, et al., Defendants.

Case No. 3:18-cv-04217-JD

UNITED STATES DISTRICT COURT NORTHERN DISTRICT OF CALIFORNIA

October 15, 2018

ORDER RE MOTION FOR TEMPORARY RESTRAINING ORDER AND ORDER TO SHOW CAUSE

Re: Dkt. No. 27

Plaintiff CareZone Pharmacy LLC ("CareZone"), a Tennessee pharmacy, seeks a temporary restraining order and an order to show cause for a preliminary injunction on the basis of the Tennessee "Any Willing Provider" law, Tenn. Code Ann. § 56-7-2359 ("AWP"), which prohibits insurers from excluding a licensed pharmacy from their networks if the pharmacy agrees to the same terms and conditions offered to other participants. Dkt. No. 27. CareZone says that it willingly accepted the terms offered by defendant Express Scripts, Inc. ("ESI"), a pharmacy benefits manager ("PBM"), for participation in ESI's retail pharmacy network, but that ESI nevertheless terminated it on pretextual claims of breach of its participation agreement. Id. at 4-6. CareZone contends the real reason behind the termination was ESI's belief that CareZone operates a rival mail order service and is otherwise a competitive threat. Id. at 1. CareZone asks to be restored to ESI's network pending resolution of the case.

STANDARDS

CareZone's noticed TRO motion is subject to the same standards that apply to a preliminary injunction motion. Fang v. Merrill Lynch, Pierce, Fenner & Smith, Inc., No. 16-cv-06071-JD, 2016 WL 9275454, at *1 (N.D. Cal. Nov. 10, 2016), aff'd, 694 F. App'x 561 (9th Cir. 2017). Because CareZone seeks a return to its status pendente lite as a participating pharmacy in

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ESI's network -- its last, uncontested status preceding this litigation -- the TRO request is evaluated under the standards for a prohibitory injunction, and not under the heightened inquiry for a mandatory injunction. See Garcia v. Google, Inc., 786 F.3d 733, 740 and n.4 (9th Cir. 2015) (en banc).

Preliminary injunctions are "an extraordinary remedy never awarded as of right." Winter v. Natural Res. Def. Council, Inc., 555 U.S. 7, 24 (2008); see also Lopez v. Brewer, 680 F.3d 1068, 1072 (9th Cir. 2012) ("A preliminary injunction is 'an extraordinary and drastic remedy, one that should not be granted unless the movant, by a clear showing, carries the burden of persuasion.'") (citation omitted and emphasis in original). "A plaintiff seeking a preliminary injunction must establish that he [or she] is likely to succeed on the merits, that he [or she] is likely to suffer irreparable harm in the absence of preliminary relief, that the balance of equities tips in his [or her] favor, and that an injunction is in the public interest." Winter, 555 U.S. at 20; see also Garcia, 786 F.3d at 740 (same). In our circuit, a plaintiff may also obtain a preliminary injunction under a "sliding scale" approach by raising "serious questions" going to the merits of its claims and showing that the balance of hardships tips "sharply" in plaintiff's favor. A Women's Friend Pregnancy Res. Clinic v. Becerra, 901 F.3d 1166, 1167 (9th Cir. 2018); Vanguard Outdoor LLC v. City of Los Angeles, 648 F.3d 737, 740 (9th Cir. 2011). But "at an irreducible minimum," the party seeking the injunction "must demonstrate a fair chance of success on the merits, or questions serious enough to require litigation." Airbnb, Inc. v. City and County of San Francisco, 217 F. Supp. 3d 1066, 1072 (N.D. Cal. 2016) (citation omitted); see also Garcia, 786 F.3d at 740 (likelihood of success on the merits is "the most important" factor, and a failure to show that likelihood relieves any need to consider the remaining Winter elements).

DISCUSSION

CareZone has not shown serious questions or a likelihood of success on the merits of the AWP claim at this stage of the case. The AWP prohibits a "health insurance issuer" or "managed health insurance issuer" from denying a licensed pharmacy or pharmacist "the right to participate as a participating provider in any policy, contract or plan on the same terms and conditions as are offered to any other provider of pharmacy services under the policy, contract or plan." Tenn.

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Code Ann. § 56-7-2359(a)(1). In effect, the AWP "requires insurance companies to include all pharmacies on their lists of providers if the pharmacy agrees to the terms and conditions offered to others on the list." Reeves-Sain Medic., Inc. v. BlueCross BlueShield of Tenn., 40 S.W.3d 503, 505 (Tenn. Ct. App. 2000).

The key concept here is "insurer," and it is far from clear that ESI is a health insurance or coverage issuer within the purview of the AWP. The statute does not define "health insurance issuer" and the parties have not identified any Tennessee court decisions that have treated a PBM as subject to the AWP. Other courts have typically concluded that PBMs are not health insurers, but rather are "third-party health plan administrators which manage and administer prescription drug benefits on behalf of health insurance plans." Pharm. Care Mgmt. Ass'n. v. Tufte, 297 F. Supp. 3d 964, 970 (D.N.D. 2017); see also Beeman v. TDI Managed Care Servs., Inc., 449 F.3d 1035,...