Trone Health Services, Inc. v. Express Scripts Holding Co.
974 F.3d 845
| 8th Cir. | 2020Background:
- Express Scripts, Inc. (ESI) is a large pharmacy benefit manager (PBM); five locally‑owned retail pharmacies (the Pharmacies) contracted with ESI to fill prescriptions and submit claims containing protected health information (PHI).
- The Pharmacies allege ESI collects PHI (including refill authorizations) beyond what is needed for reimbursement and uses it to steer customers to ESI’s mail‑order pharmacies without customers’ or pharmacies’ authorization.
- The Pharmacies sued ESI on multiple theories: breach of contract (PPA §5.3 incorporates HIPAA/HITECH), breach of the implied covenant of good faith and fair dealing, unfair competition, trade‑secret misappropriation, tortious interference, and attempted monopolization; the district court dismissed all claims with prejudice.
- The parties’ written agreement comprises the PPAs and ESI’s Provider Manual; key provisions (recital, PPA §2.8, Provider Manual §2.4) describe ESI’s role administering benefits, mail‑service dispensing, and ownership of information obtained through claim processing.
- On appeal the Eighth Circuit affirmed: it held that (1) incorporation of HIPAA/HITECH into the contract does not automatically furnish a viable breach claim where plaintiffs fail to plausibly allege an unauthorized use of PHI; (2) the contracts unambiguously authorize mail‑order refills and ESI’s use of claim data; and (3) antitrust and trade‑secret/tort claims fail for lack of a properly defined relevant market or because the alleged conduct is permitted by the agreements.
Issues:
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Pharmacies may sue for breach of contract based on PPA’s incorporation of HIPAA/HITECH | Pharmacies: federal privacy rules incorporated into §5.3 supply contractual standards of conduct and can be enforced by them even though HIPAA has no private right of action | ESI: HIPAA gives no private enforcement rights; Pharmacies failed to plead an actual unauthorized PHI use; ESI’s compliance duties preexist and are separate legal duties | Court: Incorporation is legally permissible, but Pharmacies failed to plead facts showing an actual or plausible unauthorized HIPAA violation, so breach claim dismissed |
| Whether ESI breached the implied covenant by using claim data to refill via its mail order pharmacy | Pharmacies: PPAs do not expressly authorize ESI to transfer/refill customers via ESI mail order and Provider Manual §2.4 does not give ESI ownership of submitted PHI | ESI: Agreements (recitals, PPA §2.8, Provider Manual §2.4) expressly authorize administration of benefits and mail‑service dispensing and permit use/ownership of information obtained through processing | Court: Contracts unambiguously permit ESI to administer mail‑order refills and to use information obtained processing claims; implied‑covenant claim fails |
| Whether ESI misappropriated trade secrets / engaged in unfair competition by using customer data to redirect business | Pharmacies: compiled customer data is a protectable trade secret and ESI used/shared it to steal customers | ESI: Use of the data is consistent with contract terms; access and use were authorized | Court: Agreements grant ESI access/use; Pharmacies did not plausibly allege misappropriation or unfair competition beyond contractually permitted conduct |
| Whether Pharmacies adequately pleaded attempted monopolization (antitrust) | Pharmacies: relevant market is maintenance medications paid by ESI’s plan sponsors — a narrow aftermarket in which ESI can monopolize | ESI: market definition too narrow; other interchangeable payment options exist (uninsured, other PBMs) | Court: Product market definition was legally insufficient; claim dismissed for failure to plead a relevant market |
Key Cases Cited
- Dodd v. Jones, 623 F.3d 563 (8th Cir. 2010) (HIPAA does not create a private right of action)
- Park Irmat Drug Corp. v. Express Scripts Holding Co., 911 F.3d 505 (8th Cir. 2018) (rejecting overly narrow product market and similar PBM antitrust theory)
- Hofbauer v. Nw. Nat. Bank of Rochester, 700 F.2d 1197 (8th Cir. 1983) (federal statute can supply a standard of conduct for state common‑law claims even absent a federal private right)
- Iconco v. Jensen Constr. Co., 622 F.2d 1291 (8th Cir. 1980) (federal statute without private remedy may still underlie state claims)
- Ashcroft v. Iqbal, 556 U.S. 662 (2009) (pleading standard: facts must plausibly show entitlement to relief)
- Little Rock Cardiology Clinic PA v. Baptist Health, 591 F.3d 591 (8th Cir. 2009) (seller cannot limit product market to one payment method when other acceptable methods exist)
- HDC Med., Inc. v. Minntech Corp., 474 F.3d 543 (8th Cir. 2007) (elements of attempted monopolization claim)
- Eastman Kodak Co. v. Image Tech. Servs., 504 U.S. 451 (1992) (aftermarket doctrine and market‑definition principles)
- Kmak v. Am. Century Cos., Inc., 754 F.3d 513 (8th Cir. 2014) (Missouri law implies covenant of good faith and fair dealing)