Park Irmat Drug Corp. v. Express Scripts Holding Co.
911 F.3d 505
| 8th Cir. | 2018Background
- Irmat, an independent New York pharmacy, expanded from retail to nationwide mail-order services after joining Express Scripts’s PBM network (via a PSAO) and investing in facilities and staff.
- In 2014 Irmat signed Express Scripts’s Network Provider Agreement, which defined a "retail provider" to exclude mail-order pharmacies and gave Express Scripts unilateral 30-day no-cause termination and recredentialing rights.
- Irmat disclosed in 2015 that ~65% of its business was mail-order; Express Scripts sent an "credentials approved" e-mail in August 2015 but later demanded Irmat cease mail-order operations and terminated Irmat in Sept. 2016 (citing both cause and no-cause bases).
- Irmat sued for unconscionability, breach of implied covenant of good faith, novation/promissory estoppel, multiple antitrust theories (Sherman Act §§1 & 2: group boycott, monopolization, tying), and violations of several states’ Any Willing Provider statutes.
- The district court dismissed for failure to state a claim; the Eighth Circuit affirmed, holding Irmat’s pleadings insufficient on each theory and declining to extend state Any Willing Provider laws to PBMs.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Unconscionability / adhesion contract | Agreement was a nonnegotiable adhesion contract and unconscionable because Express Scripts had superior bargaining power and threatened termination if unsigned | Form contract with cancellation clause alone does not render contract unenforceable; Irmat was sophisticated and had other PBM access | Dismissed — Irmat failed to plausibly plead unconscionability |
| Implied covenant of good faith & fair dealing | Express Scripts exercised termination rights in bad faith to further anticompetitive aims | Contract expressly permitted no-cause termination; acting under express terms is not bad faith | Dismissed — termination pursuant to contract’s notice provision not bad faith |
| Novation / Promissory estoppel | August 2015 e-mail constituted a new contract or promise allowing mail-order operations, on which Irmat relied to its detriment | E-mail lacked essential contract terms and was part of recredentialing; contract’s no-waiver clause preserved rights | Dismissed — no novation; promissory estoppel not plausible because contract permitted at-will termination |
| Antitrust (§1 group boycott / §2 monopolization / tying) | Express Scripts conspired with other PBM-owned mail-order pharmacies, leveraged PBM power to exclude competitors, and tied network participation to refraining from mail-order | Pleadings show no parallel/ concerted action; market definition too narrow (Express Scripts-only submarket); refusal-to-deal ordinarily allowed; tying claim repackages monopoly theory | Dismissed — failed to plead parallel conduct, valid relevant market, or anticompetitive conduct |
| State Any Willing Provider statutes | Denial of opportunity to mail to members of GA, MS, NC violated state statutes | No authority that those statutes apply to PBMs; court should not extend state law as a matter of first impression | Dismissed — court declines to extend statutes to PBMs |
Key Cases Cited
- Bell Atl. Corp. v. Twombly, 550 U.S. 544 (plausibility standard for pleadings in antitrust cases)
- Verizon Commc’ns Inc. v. Law Offices of Curtis V. Trinko, 540 U.S. 398 (limits on antitrust liability for unilateral refusal to deal)
- Aspen Skiing Co. v. Aspen Highlands Skiing Corp., 472 U.S. 585 (limited exception to refusal-to-deal doctrine where prior cooperation was terminated to exclude rival)
- Bishop & Assocs. v. Ameren Corp., 520 S.W.3d 463 (Missouri law: exercising explicit contractual termination right is not bad faith)
- Laclede Gas Co. v. Amoco Oil Co., 522 F.2d 33 (unilateral cancellation clause does not automatically render contract unconscionable)
- Martin v. Am. Family Mut. Ins. Co., 157 F.3d 580 (promissory estoppel cannot create rights that contract unambiguously permits a party to terminate)
- Eastman Kodak Co. v. Image Tech. Servs., Inc., 504 U.S. 451 (market-definition principles; relevant product market scope)