Trone Health Servs., Inc. v. Express Scripts Holding Co.

• Decision Date: 04 September 2020
• Docket Number: No. 19-1774,19-1774
• Citation: 974 F.3d 845
• Parties: TRONE HEALTH SERVICES, INC. ; Reddish Pharmacy, Inc. ; Jobos Pharmacy, Inc.; Oak Tree Pharmacy ; Apex Pharmacy; Amrut Jal, L.L.C., Plaintiffs - Appellants v. EXPRESS SCRIPTS HOLDING COMPANY; Express Scripts, Inc.; Express Scripts Mail Order, Inc.; Express Scripts Mail Pharmacy Service, Inc.; Does 1-20, Defendants - Appellees
• Court: U.S. Court of Appeals — Eighth Circuit

974 F.3d 845

TRONE HEALTH SERVICES, INC. ; Reddish Pharmacy, Inc. ; Jobos Pharmacy, Inc.; Oak Tree Pharmacy ; Apex Pharmacy; Amrut Jal, L.L.C., Plaintiffs - Appellants

v.EXPRESS SCRIPTS HOLDING COMPANY; Express Scripts, Inc.; Express Scripts Mail Order, Inc.; Express Scripts Mail Pharmacy Service, Inc.; Does 1-20, Defendants - Appellees

No. 19-1774

United States Court of Appeals, Eighth Circuit.

Submitted: January 16, 2020

Filed: September 4, 2020

Michael Andrew Bowse, BOWSE LAW GROUP, P.C., Los Angeles, CA, Michael J. Flannery, CUNEO & GILBERT, Saint Louis, MO, for Plaintiffs - Appellants.

Dan Howe Ball, James Patrick Emanuel, Jr., BRYAN & CAVE, Saint Louis, MO, Jonathan R. Chally, Philip Edward Holladay, Jr., KING & SPALDING, Atlanta, GA, for Defendants - Appellees.

Before SMITH, Chief Judge, LOKEN and GRUENDER, Circuit Judges.

SMITH, Chief Judge.

Pharmacy Benefit Managers (PBM) serve as third-party administrators of prescription drug programs sponsored by employers, governmental entities, and health plans (collectively, "plan sponsors"). They operate as middlemen between pharmaceutical manufacturers, plan sponsors, pharmacies, and consumers—thereby negotiating drug discounts, setting drug prices, and reimbursing pharmacies. Ultimately, PBMs’ decisions influence the prescription drug market.

As the nation's largest PBM, Express Scripts, Inc. (ESI) has a broad pharmacy network, including retail pharmacies and its own pharmacy service. Appellants (collectively, "the Pharmacies") are five locally-owned retail pharmacies that participate in ESI's pharmacy network. The Pharmacies filed a lawsuit—alleging breach of contract, attempted monopolization, and other claims—against ESI and its affiliates (collectively, "ESI"). ESI then filed a motion to dismiss, and the district court¹ dismissed each claim with prejudice. On appeal, the Pharmacies challenge each dismissal except for their fraud claim. For the reasons discussed herein, we affirm.

I. Background

ESI administers prescription drug coverage benefits for healthcare plan sponsors. It also contracts with the Pharmacies to fill and dispense various beneficiaries’ drug prescriptions. Once the Pharmacies dispense drugs to these beneficiaries, i.e., their customers, ESI reimburses the Pharmacies for dispensing the prescriptions. Before actually filling and dispensing the prescriptions, the Pharmacies are required to submit detailed claims to ESI for processing and reimbursement. These submissions include sensitive customer and prescription information. That information consists of "the customer's identity, address, and insurer, the medication prescribed, the prescribing doctor, the quantity ... and the dosage prescribed[,] .... the patient's mailing address[,] and the number of refills authorized by the prescription." J.A., Vol. I, at A-15.

The Pharmacies claim that ESI does not need all of the information it requires them to supply for confirmation of their customers’ coverage and for reimbursement. They contend that ESI, instead, requests certain information, such as the number of authorized refills, and uses that information for its own commercial benefit. Specifically, the Pharmacies argue that ESI seeks the information to monopolize the market by "forcibly switch[ing] customers from [the Pharmacies’] ... to [ESI's] own mail-based pharmacies without [the Pharmacies’] or their customers’ authorization." Trone Health Servs., Inc. v. Express Scripts Holding Co. , No. 4:18-CV-467 RLW, 2019 WL 1207866, at *1 (E.D. Mo. Mar. 14, 2019).

Against this backdrop, the Pharmacies initiated the instant lawsuit against ESI. They alleged six causes of action that are relevant to this appeal: (1) breach of contract, (2) breach of the implied covenant of good faith and fair dealing, (3) unfair competition, (4) trade secret misappropriation, (5) tortious interference with a prospective economic advantage, and (6) attempted monopolization. The district court granted ESI's motion to dismiss and dismissed the entire complaint with prejudice.

In dismissing the complaint, the district court held that the Pharmacies did not state a claim for breach of contract because their claim was based on the Health Insurance Portability and Accountability Act of 1996 (HIPAA) and the Health Information Technology for Economic and Clinical Health (HITECH) Act. The parties had incorporated HIPAA and the HITECH Act into § 5.3 of their pharmacy provider agreements (PPA). The court stated that, even under a contract-related claim, HIPAA does not provide a private cause of action and that only the customers, and not the Pharmacies, can authorize the use of their information. See id. at *3 (stating that "a valid authorization under HIPAA must contain the ‘signature of the individual and date’ " (quoting 45 C.F.R. § 164.508(c)(1)(vi) )).

Based on the pleadings and exhibits, the district court also held that ESI's provider manual and the parties’ PPAs constitute the full agreements between the parties and that these agreements allow ESI to refill mail-order pharmacy prescriptions for the Pharmacies’ customers. Because the agreements permit ESI to refill prescriptions through mail order, the court concluded that the Pharmacies did not state a claim for breach of the implied covenant of good faith and fair dealing.

Consistent with its analysis for the contract-related claims, the district court held that the Pharmacies failed to allege claims for unfair competition, trade secret misappropriation, and tortious interference. The court also dismissed the Pharmacies’ attempted-monopolization claim: it determined that the Pharmacies did not plead the required element of a relevant market. In addition, the court concluded that the Pharmacies did not assert "anticompetitive or predatory conduct from which a specific intent to achieve monopoly power can be inferred, or a requisite antitrust injury from said conduct." Id. at *6.

In its dismissal motion, ESI also argued that the Pharmacies did not specifically allege any claim against ESI's affiliates: (1) Express Scripts Holding Co.; (2) Express Scripts Mail Order, Inc.; and (3) Express Scripts Mail Pharmacy Service, Inc. The Pharmacies asserted, in response, that group pleading is appropriate for this case. In concluding its judgment, the district court dismissed the claims against ESI's affiliates because it had dismissed all other claims in the case. Afterward, the Pharmacies filed this timely appeal.

II. Discussion

A. Standard of Review

"We review de novo the district court's grant of a Rule 12(b)(6) motion to dismiss, accepting the facts alleged in the complaint as true." Pharm. Care Mgmt. Ass'n v. Gerhart , 852 F.3d 722, 726 (8th Cir. 2017). Here, we also draw all reasonable inferences in favor of the Pharmacies. See Park Irmat Drug Corp. v. Express Scripts Holding Co. , 911 F.3d 505, 512 (8th Cir. 2018). "Dismissal is proper where the [Pharmacies’] complaint fails ‘to state a claim upon which relief can be granted.’ " Bell v. Pfizer, Inc. , 716 F.3d 1087, 1091 (8th Cir. 2013) (quoting Fed. R. Civ. P. 12(b)(6) ). Additionally, "[w]e assess [the] plausibility [of the Pharmacies’ complaint by] considering only the materials that are necessarily embraced by the pleadings and exhibits attached to the complaint." Park Irmat , 911 F.3d at 512 (internal quotations omitted).

B. Contract-Related Claims

1. Breach of Contract

The Pharmacies allege that ESI breached § 5.3 of their PPAs. That section states:

ESI shall and Provider shall, and shall cause its Pharmacies to, comply with all federal and state laws, rules and regulations regarding the confidentiality of patient information, including, but not limited to, compliance with ... HIPAA and the ... HITECH Act, including all applicable rules, regulations and official guidance promulgated, in connection with HIPAA and the HITECH Act ....

J.A., Vol. II, at A-68. The Pharmacies contend that the district court dismissed their claim on the "erroneous ground that, because HIPAA and the HI-TECH Act do not provide [them] with private rights of action, [the Pharmacies] have no standing to sue ESI for breaching contractual provisions that prohibit it from violating those and other laws." Appellants’ Br. at 11.

The Pharmacies also ask us to reverse the district court because they "are not suing under HIPAA^{[2 ]} ... and are not asserting private rights of action under th[at] law[ ]." Id. They insist that they have standing to sue and enforce their contractual rights, or legally protected interests, which flow from § 5.3 of their PPAs. The Pharmacies maintain that ESI is using their confidential customer information without authorization to switch their customers to ESI's own mail-order service when ESI should only use the information to confirm customers’ coverage and to reimburse the Pharmacies.³ Finally, they urge us to disregard the court's alternative reasoning: that HIPAA only allows the Pharmacies’ customers, not the Pharmacies, to authorize the use of their confidential health information.

ESI counters that even assuming the Pharmacies could state a claim under HIPAA, the Pharmacies failed to plead sufficient facts demonstrating a past or an ongoing HIPAA violation. It maintains, however, that the Pharmacies do not have rights to enforce HIPAA. Furthermore, ESI contends that its HIPAA compliance is statutorily mandated and is a legal duty that preexists the parties’ contractual agreements.

Under Missouri law, "the complaining party must establish the existence of a valid contract, ... a breach by defendant, and damages resulting from the breach." Lucero v. Curators of Univ. of Mo. , 400 S.W.3d 1, 5 (Mo. Ct. App. 2013) (internal quotation omitted). Here, the parties dispute only the breach element.

As the district court stated, we have recognized that "HIPAA does not create a private right of action" as an underlying basis for a civil suit. Dodd v. Jones , 623 F.3d 563, 569 (8th Cir. 2010). But we have yet to address whether HIPAA's lack of a...