BRANDYWINE HOSPITAL, LLC v. CVS HEALTH CORPORATION
2:23-cv-01458
| E.D. Pa. | Feb 26, 2025Background
- Brandywine Hospital, a 340B "Covered Entity," filed a putative class action against CVS Health (including subsidiaries) alleging antitrust violations related to the 340B Drug Pricing Program.
- The 340B Program allows certain healthcare providers to buy outpatient drugs at discounted prices, often relying on "Contract Pharmacies" like CVS and third-party administrators (TPAs) for program administration.
- Brandywine alleged that after CVS acquired TPA Wellpartner, CVS forced Covered Entities to use Wellpartner as a condition of accessing 340B savings at CVS pharmacies, supposedly foreclosing other TPAs from competition.
- Plaintiff asserted this conduct constituted an illegal tying arrangement under Sections 1 and 2 of the Sherman Act and Section 3 of the Clayton Act.
- CVS moved to dismiss for failure to state a claim, and Brandywine conceded its Clayton Act claim should be dismissed.
- The Court determined whether Brandywine had plausibly pled a valid tying claim under the Sherman Act, either under per se or rule of reason analysis.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper Market Definition (Per Se Tying) | “CVS Contract Pharmacy Market” is a valid single-brand market due to 340B program structure | Single-brand markets are improper; other pharmacies are interchangeable | Plaintiff failed to define a proper market; per se claim dismissed |
| Interchangeability and Cross-Elasticity | No other pharmacies are interchangeable; no cross-elasticity as Covered Entities can’t steer patients | Entities can and do contract with non-CVS pharmacies; 2010 Guidance does not bar such switches | Court found market incorrectly defined; no non-interchangeability shown |
| Rule of Reason – Anticompetitive Effect | Harm exists via loss of choice and inflated prices for TPA services at CVS | Harm allegations are only for a subset (CVS-linked TPAs), not the TPA market as a whole | Court found no market-wide impact; allegations too narrow |
| Adequacy of Clayton Act Claim | No substantive argument (Plaintiff conceded) | Conceded (should be dismissed) | Dismissed with prejudice |
Key Cases Cited
- Ashcroft v. Iqbal, 556 U.S. 662 (pleading standard for plausibility)
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausible claim of relief required)
- Queen City Pizza, Inc. v. Domino’s Pizza, Inc., 124 F.3d 430 (market definition requires interchangeability)
- Warren Gen. Hosp. v. Amgen Inc., 643 F.3d 77 (criteria for per se tying arrangements)
- Town Sound & Custom Tops, Inc. v. Chrysler Motors Corp., 959 F.2d 468 (single-brand tying markets are disfavored)