2018.06.20 Doc 1 Complaint

Case: 4:18-cv-01005 Doc.
#: 1 Filed: 06/20/18 Page: 1 of 33 PageID #: 1
IN THE UNITED STATES DISTRICT COURT

FOR THE EASTERN DISTRICT OF MISSOURI
EASTERN DIVISION
CZ SERVICES, INC.,
Plaintiff,
Case No.
v.
JURY TRIAL DEMANDED
EXPRESS SCRIPTS, INC.

Defendant.
COMPLAINT
Plaintiff CZ Services, Inc., d/b/a CareZone Pharmacy, LLC (“CZ Services”), through its
undersigned attorneys, alleges for its Complaint against Defendant Express Scripts, Inc., (“ESI”)
as follows:
NATURE OF THE ACTION
1. This is an action under Sections 1 and 2 of the Sherman Act and various state
laws to restrain anticompetitive conduct by Express Scripts (“ESI”)—the largest Pharmacy
Benefit Manager (“PBM”) in the country and also the largest pharmacy that delivers prescription
drugs directly to patients—for its unlawful business tactics, including (1) tying the provision of
its PBM services sold to insurance plans to an agreement that insurance plans will not use
competing delivery services, and (2) terminating CZ Services because CZ Services did business
with another entity, CareZone, Inc. (“CareZone”), that competed with ESI in the delivery of
prescription drugs.
Case: 4:18-cv-01005 Doc. #: 1 Filed: 06/20/18 Page: 2 of 33 PageID #: 2
2. CZ Services is an independent, retail pharmacy that dispenses prescriptions to
walk-in patients, or to a walk-in agent of the patient, as allowed under state and federal laws.
CZ Services is licensed, and in good standing, in all 50 states and the District of Columbia.
3. CZ Services’ patients are mostly polychronic, highly vulnerable individuals who
treat their medical conditions with numerous prescription drug regimens. To better serve these
patients, CZ Services combines user-friendly packaging, new compliance mechanisms, timely
dispensing, and personal consultations to improve its patients’ adherence to prescription
regimens. With these efforts, CZ Services has created a pharmacy that results in significantly
greater medication adherence, which in turn results in healthier patients and overall cost savings
for insurance companies.
4. CZ services has a partnership with CareZone, a separate company that acts as an
agent for patients and assists patients and their family members in managing the patient’s
medications. One service that CareZone provides to some of its members is to arrange for the
delivery of medications to the patient.
5. ESI is a pharmacy benefit manager (“PBM”) that manages pharmacy benefits of
approximately 83 million Americans. ESI is the 22nd largest company in the United States,
with 2016 revenue of approximately $101 billion; in the same year, it processed more than 1.4
billion claims for prescription benefits. PBMs, such as ESI, are intermediaries between
insurance company plans and pharmacies. In addition to providing PBM services, ESI directly
or through subsidiaries that include ESI Mail Order Processing, Inc. and ESI Mail Pharmacy
Service, Inc. also sells prescription drugs by mail order. ESI is the largest mail order pharmacy
company in the United States with approximately $100 billion in annual revenue.
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6. The PBM industry has dramatically consolidated in recent years, with three PBMs
now controlling 80%–85% of the market. ESI is the largest PBM, controlling close to 50% of
the PBM market. If patients want their drug purchases covered by their health insurance and
that carrier uses ESI as its PBM, they have no choice but to use either an “in-network” pharmacy
or ESI’s proprietary mail order pharmacy. Independent pharmacies similarly have no choice but
to participate in the ESI network: if a pharmacy is not “in-network” with ESI, patients whose
plans ESI administers will not receive insurance benefits if they fill their prescriptions at that
pharmacy. Given the large number of patients enrolled in the ESI network, it is not financially
feasible for a pharmacy to operate without being “in-network” with ESI. Without a contract with
ESI, retail pharmacies like CZ Services cannot maintain the revenue to survive. Simply put, a
contract with ESI is necessary to serve the majority of patients in the United States who fill their
prescriptions with health insurance plans.
7. In its role as a PBM, ESI provides a bundle of pharmacy network services to
insurance carriers, known as its Pharmacy Services Network (“PSN” or “ESI PSN”) and through
which all sales of prescription drugs must be made to the consumers whose drug benefits are
managed by ESI. Insurance companies that offer prescription drug benefits contract with ESI to
manage their insureds’ claims paperwork, negotiate with drug companies, create formularies
identifying the list of drugs that are and are not covered, and administer reimbursements to
pharmacies that fill their insureds’ prescriptions (on behalf of the insurance company). In order
to participate in ESI’s PSN, insurance companies must agree that ESI has discretion to set the
terms and provisions for administering the PSN.
8. When a patient member of ESI’s PSN goes to a drugstore, she pays the pharmacy
a copayment, and ESI reimburses the pharmacy for the remainder of the price it determines it
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will pay the pharmacy for the prescribed medication. Thus, in order to process prescriptions
covered by an insurance company that uses ESI’s PSN, pharmacies must agree to ESI’s terms.
Approximately 67,000 pharmacies in the United States have become providers. To become a
provider, ESI requires that pharmacies enter into its form Pharmacy Provider Agreement, a non-
negotiable contract with terms unilaterally determined by ESI. ESI’s Pharmacy Provider
Agreement, as well as an extensive Network Provider Manual that the Agreement incorporates
by reference, allows pharmacies to sell prescription drugs to consumers through the “retail,
storefront” channel only, and expressly prohibits pharmacies from making sales to consumers
through “mail order[.]”
9. ESI has aggressively acted to enforce the mail order prohibition. ESI has done so
for a single reason: to steer as many patients as it can to its own mail order pharmacy, in order to
thwart competition from innovative market entrants, and thereby increase ESI’s profits.
10. In recent months, ESI has communicated to all provider pharmacies that they “are
prohibited from acting as mail order pharmacies.” In fact, when CZ Services inquired whether
ESI would work with mail order pharmacies, ESI wrote that it “is a mail order pharmacy that
doesn’t accept another mail order pharmacy service.” See Exhibits A, B, attached hereto. ESI
has launched a campaign, including onerous investigations and audits, to identify provider
pharmacies that ESI believes might compete with ESI’s mail order business. ESI has threatened
to punish provider pharmacies that engage in activities that ESI perceives as a threat to its mail
order business. And to enforce these threats, ESI has terminated numerous pharmacies for
allegedly engaging in activities that ESI characterizes as mail order.
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11. ESI has announced its plan to terminate its contract with CZ Services because CZ
Services and CareZone have emerged as an innovative competitor to ESI’s mail order pharmacy
business. See Exhibits C-O, attached hereto.
12. Initially, ESI accused CZ Services of operating as a mail order pharmacy service,
in violation of ESI’s Pharmacy Network Agreement, despite the fact that CZ Services has not
mailed or sent any prescriptions to customers. See Exhs. C, D. In reality, CZ Services fills
prescriptions both for patients who walk into CZ Services’ pharmacies and for those who are
unable or unwilling to walk in themselves, and thus wish to have their prescriptions picked up
and delivered to them by their agents, like CareZone.
13. Over a ten-month period, ESI offered shifting and inconsistent pretextual
rationales for terminating its network contract with CZ Services. See Exhs. C-L. Over several
months CZ Services attempted to work in good-faith with ESI and repeatedly asked to discuss its
innovative model with ESI. Instead of working with CZ Services, ESI ultimately sent CZ
Services a notice of termination that reiterates many of its false, pretextual allegations and also
terminates the agreement under the contract’s “termination at will” provision. See Exhs. M-O.
14. ESI’s real reason for terminating CZ Services is that CZ Services’ innovative
services designed to better assist patients, combined with the services provided by CareZone,
threatens ESI’s dominant position in the market for direct delivery of prescription drugs to
patients. This threatened termination, coupled with ESI’s efforts to stifle all competitors who
engage in activity that ESI believes competes with its mail order business, has caused substantial
anticompetitive effects in the market for delivery of prescription medicine. ESI’s unlawful
actions were intended to, and will, reduce competition among pharmacies throughout the United
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States. ESI’s unlawful conduct also threatens new competition from other innovative start-up
pharmacies like CZ Services.
15. ESI’s conduct—culminating with its improper termination of CZ Services—will
cause substantial and irreparable harm to CZ Services. It is not feasible for any pharmacy to
survive if it is unable to serve customers in all of the big three PBM networks—ESI, Optum and
CVS Caremark. If excluded from any one of these three networks, a pharmacy is unable to
sustain itself financially or competitively in the market. As a result, CZ Services’ loss of patients
in the ESI network will force CZ Services out of business. Such harm is per se irreparable. If
not immediately enjoined, ESI’s impending termination of CZ Services will harm CZ Services’
reputation and goodwill with its patients and deprive numerous ESI network patients of the many
services that CZ Services provides.
16. As one of CZ Service’s customers recently said:
I DO NOT want to lose [CZ Services]! Since I started using [CZ Services] and getting
my meds in a strip of dose packs, I've been continuously medication compliant for the
first time in my 40 adult years. My mental health cannot be maintained/remain stable
without the strips [that CZ Services provides]. I've tried daily, weekly, multi
compartment pill boxed and STILL forgot my medication, sometimes for several days. I
am ADHD to the Nth degree which contributes to my forgetfulness. PLEASE do
whatever you need to do to remain “in Network” [for my health insurance through ESI].
17. By reducing competition, ESI will not only cause irreparable harm to CZ
Services, it will cause irreparable harm to the pharmacy’s most vulnerable patients. ESI’s
conduct is designed to limit, and does limit, ESI provider pharmacies from offering a competitive
alternative—such as the provision of medications in synchronized pill packets or the use of an
agent like CareZone—to ESI’s mail order pharmacy. As a result, patients who can no longer use
CZ Services will be required to obtain medications without obtaining the benefit of the
innovative improvements that CZ Services provides. Through its unlawful conduct, ESI has
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insulated its mail order business from losing business to pharmacies and agents that provide
better quality service and improved medical outcomes.
18. As a result of ESI’s decision to terminate CZ Services, those patients will lose the
innovative user-friendly packaging, new compliance mechanisms, timely dispensation, personal
consultations, and other adherence support services that CZ Services provides. For example, CZ
Services provides patients with synchronized prescriptions—when medications are refilled on
the same day, for the same length of time, so that patients need only one pick-up per month. CZ
Services also provides its polychronic patients with single pre-sorted packages containing the
correct dose of each of the multiple medications they may require for each time during the day
when they must take their medication (“compliance packaging”), resulting in increased
adherence. Compliance packaging also improves patient safety, since a pharmacist sorts and
packages the pills, rather than a chronically ill patient trying to do it herself. If ESI successfully
terminates CZ Services, thousands of vulnerable patients will lose these beneficial services.
19. ESI’s conduct violates federal antitrust statutes. ESI’s conduct also violates the
laws of at least 26 states, which likewise require PBMs like ESI to permit any pharmacy licensed
within those states to fill prescriptions for patients on the terms and conditions offered to any
other pharmacy.
THE PARTIES
20. Plaintiff CZ Services, Inc. dba CareZone Pharmacy, LLC (“CZ Services”) is a
corporation organized and existing under the laws of the state of Delaware, with its principal
place of business located at 860 Harbor Way South, Richmond, California 94804. CZ Services
is a retail walk-in pharmacy that has been in operation since June 2015 and is currently licensed
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to fill prescriptions for the residents of all 50 states and the District of Columbia. CZ Services is
wholly owned by Jonathan Schwartz, the former CEO of Sun Microsystems.
21. Defendant ESI, Inc., (“ESI”) is a corporation organized and existing under the
laws of the State of Delaware with its principal place of business located at One Express Way,
St. Louis, Missouri. ESI is the largest PBM in the United States, with more than 1.4 billion
prescription drugs dispensed to consumers through its PSN each year. ESI manages the
pharmacy benefits for more than one-half of all individuals with commercial health insurance
benefits in the United States. ESI conducts business throughout the United States and manages
pharmacy benefits for tens of millions of patients, including in this District. ESI also operates
as a pharmacy, directly or through subsidiaries that include ESI Mail Order Processing, Inc. and
ESI Mail Pharmacy Service, Inc. ESI, directly or through its subsidiaries, has sold prescription
drugs to consumers by mail order delivery during all times relevant to this Complaint. In 2017,
ESI’s annual operating revenue from its operations exceeded $100 billion.
JURISDICTION AND VENUE
22. CZ Services brings this action pursuant to Sections 4 and 16 of the Clayton Act,
15 U.S.C. §§ 15 and 26, 28 U.S.C. § 2201(a), and Federal Rule of Civil Procedure 57. Plaintiff
brings this action for declaratory judgment, injunctive relief, treble damages, and an award of the
costs of this suit, including reasonable attorneys’ fees, for ESI’s violation of Sections 1 and 2 of
the Sherman Act, 15 U.S.C. §§ 1-2.
23. This Court has subject matter jurisdiction over this action under 28 U.S.C.
§ 1331 and 28 U.S.C. § 1337 because Plaintiff asserts claims arising under Sections 1 and 2 of
the Sherman Act, 15 U.S.C. §§ 1-2.
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24. An actual and present controversy exists between the parties within the meaning
of 28 U.S.C. § 2201.
25. This Court has personal jurisdiction over ESI and venue is proper in the Eastern
District of Missouri pursuant to Section 12 of the Clayton Act, 15 U.S.C. § 22, and under 28
U.S.C. § 1391, because ESI resides in this District and/or maintains facilities in this District and
thus is subject to personal jurisdiction here. Venue is also proper in this District because the
Pharmacy Network Agreement that ESI required CZ Services to sign contains a clause
designating this Court as the form for the adjudication of any disputes arising between the
parties related to that agreement.
FACTUAL ALLEGATIONS
Industry Background
26. PBMs are third-party administrators of prescription drug programs. PBMs
contract with insurance companies and self-insured entities to process and pay prescription drug
claims made by patients whose insurance covers prescriptions. PBMs essentially take over the
pharmacy benefits aspect of a health plan, deriving revenues from their PBM contracts and from
rebates that pharmaceutical suppliers pay to be included in the plans’ “formularies” of
pharmaceuticals approved for reimbursement. PBMs like ESI decide on the formularies for the
patients covered by the health plans in the PBM’s network. PBMs contract with pharmacies
through which covered patients can receive their prescription medications for the co-pay amount,
or for cash at the market rate. According to the Pharmaceutical Care Management Association
(“PCMA”), the principal trade association for PBMs, PBMs manage and administer pharmacy
benefits and reimbursement payments for hundreds of millions of Americans.
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27. Patients are unable to, and do not, choose the PBM that covers their drug-related
expenses. In the vast majority of cases, patients are not even free to choose among competing
insurance providers, but must accept the insurance provider chosen by the patient’s employer
(particularly if they want their health insurance premium costs to be partially or wholly
subsidized). Consequently, once an insurance provider is chosen, that provider dictates which
PBM the patient must use. Many patients do not even know which PBM administers their health
insurer’s prescription drug benefit (or even that the drug benefit is managed by the PBM and not
by the insurer itself).
28. As a result of industry consolidation, three PBMs—ESI, CVS Caremark (owned
by CVS) and OptumRx—manage 85 percent of the prescriptions filled in this country. Upon
information and belief, the vast majority of insured individuals in the United States are part of an
insurance plan that contracts with one of those three PBMs. Consequently, PBMs have
enormous market power in pharmacy benefit management. Independent pharmacies, like CZ
Services, have little choice but to do business with those PBMs in order to service insured
patients. For an independent pharmacy to compete successfully with other pharmacies and
remain financially viable, it is essential for the pharmacy to participate in each of the three
largest PBM networks run by ESI, CVS/Caremark and OptumRx. Exclusion by one of these
PBMs alone can force a pharmacy out of business.
Relevant Antitrust Markets
29. There are two antitrust product markets relevant to Express Scripts’ conduct in
this matter: (a) the sale of prescription drugs delivered directly to patients covered by
commercial health insurance plans and (b) the provision and sales of pharmacy network services.
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30. The first relevant product market (“prescription delivery services”) is the sales of
prescription drugs delivered directly to patients who use their commercial health insurance
benefit coverage to acquire such products. This market includes “mail order” pharmacies like
ESI’s that deliver medications directly to the patient by the postal service or other equivalent
delivery system. Other similar pharmacies are operated by other PBMs, including
CVS/Caremark and Optum. The market also includes pharmacies like CZ Services that sell
medications directly to a patient, which are retrieved by a patient’s agent through a storefront
channel, and the agent then delivers the medication directly to the patient. The pharmacies that
engage in such sales are much smaller as a result of ESI’s policy of preventing competition from
any entity that ESI perceives as competing with its own mail order business.
31. Patients that utilize prescription delivery services do not regard purchasing from a
brick-and-mortar pharmacy as a reasonable substitute. These patients are often not mobile or
otherwise value the convenience of having their medications retrieved by an agent and delivered
by that agent to their home. For this reason, if all such patients experienced a small, but
significant nontransitory increase in price (or decrease in quality that is equivalent to such a price
increase), an insufficient number of patients would switch to purchasing from a brick-and-mortar
pharmacy to make such a price increase unprofitable to a “hypothetical monopolist.”
32. Similarly, for patients whose prescriptions are covered by their healthcare plan,
purchasing medication directly, rather than through their healthcare plan, is not a viable option.
There are no viable economic substitutes for the covered prescription drugs dispensed to insured
patients within the healthcare plan network. Prescription drugs dispensed by pharmacies that are
not part of the healthcare plan network are not covered by those patients’ health insurance,
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making the patient’s own out-of-pocket costs significantly greater. Accordingly, the market is
limited to pharmacies that participate in the healthcare plan network.
33. The business operations of industry participants confirm that prescription drugs
delivered directly to a patient are not reasonably interchangeable with prescription drugs sold
through other channels.
34. The commercial realities further confirm that storefront and mail order sales
channels are not reasonably interchangeable substitutes. While insured consumers can and do
acquire prescription drugs through both storefront and direct delivery channels, consumers do
not switch for price reasons, i.e. a consumer will not switch to the other channel on the basis of a
small but significant difference in price or quality.
35. The relevant geographic market for prescription delivery services is the United
States. Numerous federal laws restrict United States residents from obtaining prescription drugs
by mail from outside the United States, and doing so illegally would pose a serious safety risk,
because the U.S. Food and Drug Administration is unable to regulate pharmaceuticals
manufactured and/or shipped beyond United States borders. Dispensaries outside the United
States may distribute expired, non-potent, sub-potent, adulterated, or counterfeit medication, or
may (by mistake or otherwise) dispense the wrong medication, a contraindicated medication, an
incorrect dose, or the correct medication unaccompanied by adequate instructions for safe and
effective use. Moreover, instructions dispensed along with medicine imported from outside the
United States may not be in English and may not be intelligible to a U.S. consumer, threatening
to deprive that consumer of essential information, including regarding dosage and side effects.
In short, imported medication may fall short of the standards for design, manufacture,
transportation, and storage taken for granted by United States consumers. Because of these risks
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and uncertainties, few insured patients within the ESI network would choose to obtain pharmacy
services from non-PBM contracted pharmacies outside the United States, even if accompanied
by a price decrease.
36. The second relevant product market is the market for the provision and sale of
pharmacy network services by PBMs to insurance plans. The services comprising this relevant
product market typically consists of: (a) organizing groups of consumers for each commercial
healthcare plan for which pharmaceutical benefits are being managed; (b) facilitating pharmacy
access to each such group of consumers; (c) conveying the prices, co-payments, reimbursement
rates, and other transaction information to the pharmacies selling prescription drugs to
consumers; (d) transmitting payments, reimbursements, and dispensing fees among the
pharmacies, commercial healthcare plans, and/or drug providers; and (e) collecting payments
from insurance companies for the provision of the pharmacy network services.
37. Insurance companies would be unable to render unprofitable an attempted small,
but significant, non-transitory increase in price (“SSNIP”) charged by a hypothetical monopolist
PBM providing pharmacy network services, by substituting alternative services because most
commercial health insurers or plan sponsors could not easily develop the pharmacy networks that
PBMs like ESI have created to manage pharmaceutical benefits.
38. The operations of the industry participants demonstrate there is an antitrust
market for the provision and sale of pharmacy network services. ESI purports to compete with
other PBMs, notably the other members of the Big Three (CVS Caremark and Optum RX), in the
provision and sale of pharmacy network services. Each of these PBMs has formed its own
bundle of pharmacy network services and, on information and belief, each charges direct or
indirect fees for the provision of these services.
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39. The relevant geographic market is an area no larger than the United States.
Commercial realities confirm this area is a geographic market. Extensive federal health related
regulations, including those concerning commercial health insurance and Medicare and
Medicaid, prohibit or limit competition between areas inside and outside of the United States.
Similarly, federal and state licensing requirements applicable to the operations of PBMs and
pharmacies prohibit or limit competition between areas inside and outside of the United States.
Market Power
40. As described previously, ESI possesses substantial market power in the sale of
pharmacy network services. ESI currently maintains an estimated 50% of the market in the PBM
network.
41. ESI also has market power in the prescription delivery services market. On
information and belief, ESI’s mail order business has approximately a 40% share of sales in the
mail order channel that includes mail order delivery by the other large PBMs, CVS/Caremark
and Optum. ESI’s policy of prohibiting member pharmacies from prescription delivery services
means that only a small percentage of pharmacies that are not mail order pharmacies—like ESI,
CVS/Caremark and Optum—are able to provide prescription delivery services beyond the
neighborhood or town where the pharmacy is located.
42. ESI has the ability to exclude competition in the market for prescription delivery
services by virtue of its substantial market power over participating pharmacies. Without ESI’s
approval, pharmacies are unable to serve the millions of patients in the ESI network, patients that
almost always represent a significant share of the pharmacy’s business. Independent retail
pharmacies have no choice but to enter into agreements with ESI that prohibit them from
engaging prescription delivery services themselves and—as ESI’s conduct with CZ Services
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illustrates—ESI is also able to prevent pharmacies from doing business with patients’ agents.
ESI falsely characterizes the sale of prescription drugs to an agent as engaging in “mail order,”
which ESI’s network agreement prohibits. In actuality, there is no legal definition of the term
“mail order,” it is a term ESI created to describe its own delivery business and justify ESI’s
efforts to prevent perceived competition from entities like CZ Services.
Barriers to Entry
43. As a result of ESI’s ongoing practice of tying the provision of PBM services to a
requirement that insurance plans only use ESI’s prescription delivery service combined with
ESI’s ability to require pharmacies to agree to that provision in order to participate in its
network, independent pharmacies face significant barriers to entry in the market for the sale of
prescription drugs delivered directly to patients. Furthermore, because ESI owns and operates
the largest mail order pharmacy in the country and also dictates the reimbursement terms for
patients that use ESI’s network, ESI is able to create less favorable terms for independent
pharmacies. For example, ESI’s mail order pharmacy offers patient benefits that ESI does not
allow independent pharmacies to offer such as lower co-pays, 90-day instead of 30-day
prescriptions, and, of course, home delivery.
44. An independent retail pharmacy that is not a part of ESI’s network is foreclosed
from competing with retail pharmacies enrolled in ESI’s network for the sale of prescriptions to
patients whose prescription benefits are managed by ESI. As a result, a pharmacy that is
precluded from providing services to patients whose benefits are managed by ESI cannot provide
services to non-ESI-managed patients as well. Without being able to serve ESI-managed
patients, a pharmacy simply cannot exist. To drive network patients towards its captive mail
order pharmacy, ESI imposes adhesion contracts onto the participating pharmacies. To be
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admitted to the ESI network, a pharmacy must submit an online application and then accept a
non-negotiable contract. Only after being approved does the pharmacy receive a copy of the
226-page Provider Manual, which contains the terms to which the pharmacy will be bound.
Section 1.2 of ESI’s contract bars participating pharmacies from mail delivery services. ESI
does not allow any pharmacy besides its own captive mail order pharmacy to engage in those
activities. Numerous independent pharmacies in the ESI network would provide prescription
drugs to their patients by means other than requiring the patient to pick up the prescription in
person, if given a real option to do so.
45. ESI’s network structure contains an inherent conflict of interest. ESI has the
incentive and the ability to eliminate and foreclose competition from any pharmacy that, in ESI’s
sole opinion, poses a competitive threat to ESI’s own mail order businesses—even if that threat
is merely a perceived threat. ESI has acted upon this conflict of interest by terminating hundreds
of pharmacies from ESI’s network, including the impending termination of CZ Services.
Anticompetitive Conduct
ESI Has Illegally Tied the Sale of Prescription Drugs Delivered Directly To Patients
To PBM Network Services
46. ESI provides two distinct services, prescription delivery services and PBM
Network Services. These services are distinct and separate products. There is no business
justification for conditioning the sale of one on the sale of the other.
47. ESI has conditioned the provision of its PBM networks services to insurance
plans on insurance plans agreeing to its network terms and conditions, which include a ban on
pharmacies in ESI’s network—other than ESI’s mail order business—from engaging in
prescription delivery services. The effect of this ban is that it conditions access to ESI’s PBM
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Network Services on an agreement that the insurance plans members will use only ESI’s
prescription delivery service.
48. ESI has market power in the market for PBM Network Services and as a result of
its unlawful tying, it also has obtained (or has a dangerous probability of obtaining) market
power in the market for prescription delivery services.
ESI Acted with Specific Intent to Monopolize the Prescription Delivery Services Market
49. By terminating its contract with CZ Services, ESI seeks to thwart competition
from an innovative new market threat. CZ Services serves thousands of patients, many of whom
are polychronic and have serious health conditions that require a significant and complex
medication regimen. Approximately 40 percent of CZ Services’ patients are polychronic
Medicare recipients.
50. CZ Services attracted this large and needy patient population because of the
integrated services that it provides: including synchronized prescriptions, packaging that contains
the correct dose of each of the multiple prescriptions they may require at a given time of day, and
dispensation to the patient’s designated agent for delivery to the patient. Because patients who
attentively adhere to their medication regimen are healthier and less likely to experience costly
medical emergencies or hospital stays, CZ Services’ practices reduce healthcare costs for both
patients and the healthcare plans, including government plans, for which ESI administers drug
benefits.
51. Patients come to CZ Services through a variety of channels. Some are walk-in
patients, some come via federal programs like PACE, and many come through a web-based,
mobile application (“CareZone App” or “App”). The CareZone App was created in 2010 by
CareZone Inc., a company managed and owned separately from CZ Services. The CareZone
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App is used by almost three million people, including healthcare providers and organizations like
the American Association of Retired Persons (the AARP) and the Alzheimer’s Foundation. The
CareZone App allows users: to organize and share their healthcare providers’ contact
information, insurance information, advance healthcare directives, medical appointments and
doctor’s instructions; to maintain a list of their prescriptions, dosages, and schedules; to record
the doses they take; to track adherence to their prescription regime; and to secure the medications
that they need in a timely manner. A special feature of the App allows users to photograph their
prescription bottles using a cell phone and upload the images to the App, after which the App
will alert the user when it is time to take each medication and solicit a user response in order to
track adherence. Users of the CareZone App also have the option to appoint CareZone as their
agent to select a pharmacy to fill their prescriptions and to arrange for those prescriptions to be
picked up and delivered when they are ready.
52. Federal law, and all states’ laws, recognizes that a patient may designate an agent
for pick-up and delivery of their medication. Whether it be a parent picking up a child’s
medications or a caregiver picking up an elder’s medications, agents pick up medications for
others at every pharmacy, every day. Nothing in ESI’s Pharmacy Network Agreement or its
network guidelines prohibits CZ Services from contracting with CareZone Inc., or any other
individual or entity, to act as the patient’s authorized agent for pick-up and delivery of the
patient’s prescription drugs. Nothing in ESI’s Pharmacy Network Agreement or its network
guidelines prohibits CZ Services from dispensing drugs for use by its patients to CareZone, or to
any other agent designated by a patient, with knowledge that the agent will deliver the drugs to
the patient.
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53. CZ Services does not mail or ship medications to anyone, including to ESI
members. All prescriptions filled by CZ Services are physically dispensed at a CZ Services
retail pharmacy to a walk-in patient or to the patient’s walk-in agent, who physically signs a
signature log in-person for the prescriptions that are picked up. CZ Services maintains non-
resident licenses in all other states, as well as the District of Columbia, so that it can provide
telephone counseling to both local and out-of-state patients who have designated an agent to pick
up and deliver their medications. CZ Services’ licenses are all in good standing.
54. By terminating CZ Services, ESI will deprive patients from accessing the unique
and substantial health benefits offered to them by CZ Services and the CareZone App.
The correspondence between ESI and CZ Services demonstrates

ESI’s specific intent to monopolize.
55. On May 13, 2015, CZ Services applied online for admission to ESI’s network and
signed a non-negotiable contract on June 11, 2015. On July 2, 2015, ESI sent an acceptance
letter to CZ Services, along with a copy of the Provider Manual that contains the terms
governing the relationship. CZ Services did not receive a copy of the Provider Manual before
signing the non-negotiable contract.
56. The Provider Manual applies to Retail Providers, which are defined in Section 1.8
as “a pharmacy that primarily fills and sells prescriptions via a retail, storefront location, is
determined by ESI to fulfill an ESI business need with respect to participation in its retail
networks(s), and meets such other criteria established by ESI from time to time . . . as
determined by ESI in its sole discretion. ‘Retail Provider’ shall not include mail order. . .”
57. CZ Services does not engage in any delivery of pharmaceuticals using mail order
or other shipment channels. Nevertheless, ESI perceives CZ Services’ model as a sufficient
threat to ESI’s own mail order pharmacy, as evidenced by ESI’s action to terminate CZ Services
19
after a ten-month process of mischaracterizing CZ Services’ business model as a mail order
pharmacy model, despite CZ Services repeatedly providing evidence to the contrary.
58. ESI’s scheme to terminate CZ Services from the ESI network began in
April 2017, when it sent the first of a series of letters designed to terminate CZ Services from the
ESI network. ESI sent multiple letters over the next ten months proffering a variety of
arguments to justify termination. After each piece of correspondence from ESI, CZ Services
acted in good faith and responded transparently—explaining its model, submitting requested
documentation, and providing legal authority—all to no avail. From the outset, ESI has been
determined to terminate a pharmacy it perceives a potential competitor to its captive mail order
pharmacy.
59. Initially, ESI threatened to terminate CZ Services because ESI stated that it had
concluded that CZ Services was a mail order business. The letter also alleged that CZ Services
was not properly licensed in five states (licenses that are readily verifiable online). ESI
demanded that CZ Services cease mailing, provide evidence of state licensure, and provide a
written correction action plan.
60. On May 17, 2017, CZ Services sent a response letter to ESI in which it detailed
the incorrect and misleading assumptions and conclusions contained within ESI’s cease and
desist letter. CZ Services laid out its business structure in detail. CZ Services explained that it is
a retail pharmacy, licensed in all 50 states, and does not mail any prescriptions. The letter
outlined the ways patients come to the pharmacy: “Some are walk in patients, some come via
Federal programs like Pace and some come through a health management service they utilize to
help them manage their complicated health needs. The patients who use the health management
service appoint that service as their agent to do many things on their behalf, including arranging
20
for the filling of their prescriptions. As the patients’ agent, the health management service may
select a pharmacy, such as [CZ Services], on the patient’s behalf and pick up medications on
behalf of the patient when they are ready.” In addition to explaining the model, CZ Services
provided copies of the five licenses questioned by ESI.
61. On June 30, 2017, ESI sent a second letter. In this letter, ESI ignored the
explanation of CZ Services’ model, and reiterated its conclusion that the pharmacy must be
mailing prescriptions. In addition, ESI questioned whether there is legal authority for agents to
pick up prescriptions from a pharmacy, despite the fact that parents, children, friends, neighbors,
caregivers and others pick up prescriptions for others regularly in pharmacies. Trying a new
tactic, ESI demanded that CZ Services provide signature logs for every prescription filled
between May 1, 2017 and June 15, 2017 “in order to address those concerns.”
62. As requested, on July 27, 2017, CZ Services sent the requested signature logs to
ESI. In addition, CZ Services provided ESI with numerous sections from the California Code of
Regulations supporting the concept that a prescription may be picked up by a patient’s agent.
CZ Services also volunteered that it is regularly inspected by the California Board of Pharmacy,
which is aware of CZ Services’ business model and has taken no issue with that model.
63. Nevertheless, ESI persisted in its plan to terminate CZ Services, sending a letter
dated September 20, 2017, saying “Notwithstanding the additional explanation set forth in your
letter, ESI maintains its position that provider is engaged in mail order …” In this letter ESI
changed its tactic again. This time, ESI revealed it had been searching California records
attempting to make connections between the pharmacy and a delivery company that picks up
prescriptions from CZ Services. ESI incorrectly concluded that the pharmacy and that delivery
company shared common ownership and that CZ Services was attempting to use another entity
21
under common ownership to circumvent the provisions in the contract that prohibit activities that
ESI characterized as mail order.
64. On October 5, 2017, CZ Services provided yet another response correcting ESI’s
assertions. In that letter, CZ Services provided ownership details for both the pharmacy and the
delivery company, demonstrating that the two entities are not commonly owned. CZ Services
sought a meeting with ESI to discuss the matter in person.
65. On October 25, 2017, representatives from CZ Services and ESI had a telephonic
meeting. CZ Services again explained its model and answered all of ESI’s questions. In
addition to going over subjects already addressed in the written correspondence, ESI introduced
two new arguments: that patients cannot designate an agent to pick up prescriptions on their
behalf and that patients cannot walk into CZ Services to pick up a prescription. In addition to
rebutting both of these points on the phone, CZ Services followed up in writing after the meeting
and included a photo of the pharmacy’s counter where prescriptions can be picked up (which ESI
auditors have seen themselves during on-site pharmacy audits). CZ Services was transparent
with ESI and sought to work with ESI so that CZ Services could continue dispensing
prescriptions to ESI patients and their agents.
66. ESI’s response was to send yet another cease and desist letter on
January 29, 2018. The letter notified CZ Services that it would be terminated from the ESI
network because of four incorrect ESI conclusions, three of which had not been raised before:
(1) CZ Services is a mail order pharmacy (despite numerous explanations that the pharmacy does
not mail anything); (2) CZ Services and the delivery company have a shared services
arrangement prohibited by CZ Services’ contract with ESI; (3) patient safety is at risk because
the mail is being used (even though ESI itself mails tens of millions of prescriptions across the
22
country every month); and (4) CZ Services’ model violates various state and federal laws, in part
because individuals who are not members of a patient’s household pick-up prescriptions on their
behalf (even though prescriptions are picked up by non-family members every day in every
pharmacy). These contentions—again, the majority of which were raised for the first time in this
“final” cease and desist—are wrong as a matter of fact, law, and contract, but ESI made it clear
that it would not consider any rebuttal and would terminate CZ Services’ contract.
67. ESI’s rationales for seeking to terminate CZ Services—primarily that it has
violated ESI’s no “mail order” rule—are pretextual excuses that have shifted as ESI struggles to
find a plausible reason to terminate what it plainly views as a competitive threat to its own mail
order business.
ESI Engaged in Anticompetitive Conduct by Terminating CZ Services’ Contract and has

No Legitimate Business Justification for Doing So.
68. ESI’s anticompetitive conduct toward CZ Services—including its impending
wrongful termination of CZ Services from its network—has harmed and will continue to harm
pharmacy competition by significantly reducing the quality of pharmacy services on which
patients can rely, ultimately harming patients and their health.
69. ESI has no legitimate business justification for terminating its contract with
CZ Services. ESI is acting in bad faith by threatening to terminate CZ Services’ contract if it did
not cease its innovative model and services. By doing so, ESI cannot rely on any business
justification other than deterring innovation by competing pharmacies.
Anticompetitive Effect
ESI has a dangerous probability of success in achieving monopoly power
70. ESI already possesses the market power to exclude any competition from the
prescription delivery services market. By using its no “mail order” rule and pretext as a basis to
23
terminate an emerging competitor, ESI is seeking to thwart competition in the market for
prescription delivery services. ESI is not only preventing its members from participating in this
market, but also agents that deal with its members. The ability to use membership in its provider
network to prevent third parties who have not contracted with ESI from serving this market
demonstrates the extent of ESI’s market power.
71. ESI’s anticompetitive conduct has prevented innovative new entrants, like CZ
Services, from being able to compete in the prescription delivery services market by offering
better quality services that meet the needs of its customers. As a result, ESI has successfully
prevented and will continue to prevent consumers from obtaining the benefit of competitive
prescription services and delivery options, especially services such as allowing prescriptions to
be picked up other than by the patients in person.
Antitrust Injury
ESI’s Conduct Will Cause CZ Services Irreparable Harm
72. With respect to CZ Services specifically, ESI’s threatened termination will
deprive patients of CZ Services’ patient-management services offered with their prescriptions,
services that significantly increase patient compliance and lead to better health outcomes.
CZ Services has developed an innovative model to increase patient adherence of their
prescription drug regimen. For example, CZ Services provides patients with synchronized
prescriptions that does away with the need to make multiple trips to the pharmacy throughout the
month. CZ Services also provides its polychronic patients with compliance packaging, which
involves single pre-sorted packages containing the correct dose of each of the medications for
each time during the day when they must take their medication. Because of these innovations,
CZ Services has cultivated a loyal customer base of highly vulnerable patients who have
24
benefitted from the ease by which they can follow their complicated prescription drug regimen.
If ESI successfully terminates CZ Services, thousands of vulnerable patients will have to forgo
the adherence mechanisms that led both to better patient outcomes and to CZ Services’ success.
73. ESI’s conduct is intended to and will have the effect of forcing patients within
ESI’s network to transfer their prescriptions to ESI’s own mail order pharmacy, which has
received low customer satisfaction ratings, and does not provide the ancillary benefits available
through CZ Services and the CareZone App.
74. If CZ Services is terminated from the ESI network, CZ Services will lose all of its
ESI network patient customers, as they will no longer be able to obtain coverage for their
prescriptions filled by CZ Services.
75. ESI’s conduct has harmed the goodwill and reputation of CZ Services with
numerous of its patient customers. These patients expect that CZ Services will be a participating
provider in large PBM networks, such as the network operated by ESI, so that they will have
their prescription drug purchases covered by their healthcare plan.
76. Virtually all of CZ Services customer’s prescriptions are maintenance
medications that patients request be provided on auto-fill. When CZ Services’ patients transfer
their prescriptions to other pharmacies, it is unlikely that these patients will again frequent CZ
Services in the future, even were it to be readmitted as a pharmacy in ESI’s PBM network.
77. The impact of ESI’s conduct will be devastating to CZ Services if ESI’s conduct
is not immediately halted and corrected. ESI members currently account for a significant portion
of CZ Services’ sales. If ESI’s termination decision is not halted, CZ Services will likely be
unable to continue as a going concern, reducing competition in the marketplace.
25
CLAIMS FOR RELIEF
FIRST CAUSE OF ACTION:

PER SE OR RULE OF REASON TYING
IN VIOLATION OF THE SHERMAN ACT
15 U.S.C. § 1, ET. SEQ.
78. CZ Services incorporates by reference the allegations of the preceding paragraphs
as though fully set forth herein.
79. ESI has engaged in contracts, agreements, and/or arrangements whereby ESI has
limited the sale of a distinct “tying” product—namely, prescription delivery services—to the
provision of PBM network services provided to insurance plans.
80. At all relevant times, ESI has had market power in the national markets for the
sale of prescription drugs by direct delivery and for PBM network services. ESI has exercised its
market power to force its retail pharmacy network members to refrain from engaging in
prescription delivery services.
81. This tying arrangement has had and will have substantial anticompetitive impact
in the market for prescription delivery services. Specifically, it has prevented and will continue
to prevent patients from enjoying the benefit of CZ Services offering innovative and better
management of patients’ medications. It also has resulted and will result in either price increases
or quality decreases to CZ Services customers and potential customers.
82. CZ Services has suffered and will continue to suffer injury as a direct and
proximate result of ESI’s exclusionary conduct. CZ Services will suffer antitrust injury from the
illegal and unreasonable tying arrangement.
83. The tying arrangement constitutes a contract, combination, and/or conspiracy
violation of Section 1 of the Sherman Act, 15 U.S.C. § 1.
26
SECOND CAUSE OF ACTION:

ATTEMPTED MONOPOLIZATION
IN VIOLATION OF THE SHERMAN ACT
15 U.S.C. § 2, ET. SEQ.
85. ESI has willfully and wrongfully attempted to obtain and maintain monopoly
power in the prescription delivery services market.
86. ESI acted with specific intent to monopolize the relevant market.
87. ESI’s exclusionary and anticompetitive conduct has given ESI the dangerous
probability of successfully attaining monopoly power. In fact, ESI already has a dominant
position as maintaining 50 percent of the PBM market, thereby controlling the future and
viability of potentially competing pharmacies.
88. ESI’s anticompetitive and exclusionary conduct has injured competition in the
market for prescription delivery services and has deprived or will deprive customers of the
innovation and quality improvements resulting from that competition.
89. The anticompetitive effects of ESI’s conduct far outweigh any purported
procompetitive justifications.
90. Substantial barriers to entry exist in the relevant market for prescription delivery
services.
91. As a direct result of ESI’s exclusionary and anticompetitive conduct, CZ Services
will suffer injury to their business and property, including but not limited to lost sales and profits.
27
THIRD CAUSE OF ACTION:

UNLAWFUL MONOPOLIZATION
IN VIOLATION OF THE CARTWRIGHT ACT
CA BUS. & PROF. CODE § 16720, ET SEQ.
93. ESI has unlawfully acquired monopoly power in the relevant market by: (i)
threatening termination of its contract with CZ Services and (ii) restricting pharmacies from
distributing drugs to patients who designate an agent to pick up their drugs.
94. These actions were taken with the purpose of obtaining a monopoly power over
that market and had no appropriate or legitimate business justification.
95. ESI’s unlawful acquisition of monopoly power has excluded competition and
denied consumers their right to choose the means through which they will receive their
medications.
96. CZ Services has been injured in fact by ESI’s unlawful monopolization because it
has faced threatened termination of the contract that will render it unable to continued operating
and as a result, suffered injury as a direct and proximate result of Defendant’s unlawful
monopolization.
97. ESI is therefore liable for all remedies provided under the Cartwright Act, CA
Business and Professions Code Section 16720, et seq., including treble damages, interest,
injunctive relief, disgorgement, costs and attorney’s fees in amounts to be proved at trial.
98. ESI’s unlawful monopolization practices will continue unless ESI is permanently
enjoined.
28
FOURTH CAUSE OF ACTION:

ATTEMPTED MONOPOLIZATION
IN VIOLATION OF THE CARTWRIGHT ACT
CA BUS. & PROF. CODE § 16720, ET SEQ.
100. ESI’s acts and conduct alleged above have taken place, at least in part, in
California, and these acts have targeted CZ Services’ retail pharmacy in Richmond, California.
101. ESI has engaged in anticompetitive conduct with specific intent to obtain and
maintain monopoly power in the prescription delivery services market.
102. Specifically, ESI unlawfully attempted to acquire monopoly power by threatening
to terminate CZ Services for operating a “mail order” pharmacy business despite evidence to the
contrary that CZ Services does not oversee the delivery of prescription medications through the
mail or common carrier.
103. ESI’s attempted acquisition of monopoly power has reduced and will continue to
reduce the number of competitors in the relevant market.
104. CZ Services has suffered economic injury as a proximate and direct result of
ESI’s attempts to monopolize the relevant market.
105. CZ Services lacks an adequate remedy at law.
106. By its conduct, ESI has violated the Cartwright Act, CA Bus. & Prof. Code §
16720, et seq., and unless the Court permanently enjoins ESI’s attempts to engage in the
monopolization and attempted monopolization activities alleged herein, ESI’s activities will
continue to cause irreparable harm to CZ Services and to interstate trade and commerce in
general.
29
FIFTH CAUSE OF ACTION:

VIOLATIONS OF THE UNFAIR COMPETITION LAW
CA BUS. & PROF. CODE § 17200, ET. SEQ.
107. Plaintiff incorporates and realleges all paragraphs in this Complaint, as though
fully set forth below.
108. Plaintiff brings this action for injunctive relief and restitution for violation of the
Unfair Competition Law, CA Business and Professions Code § 17200, et seq.
109. During the period covered by this Complaint, ESI committed acts of unfair
competition and will continue to commit acts of unfair competition, as defined by Sections
17200, et seq., of the California Business and Professions Code, by engaging in the acts and
practices specified in the paragraphs above.
110. Said unfair competition threatens to and will cause great and irreparable injury to
CZ Services and its patients in that such conduct will result in the inability of CZ Services to
continue to operate as a pharmacy due to the loss of revenue that would result from the
threatened termination of contract.
111. The damages that have been and will be sustained by CZ Services by reason
thereof cannot readily be ascertained or calculated, and unless immediate injunctive relief as
prayed for herein is granted, the unfair competition will have been completed, rendering
ineffective a final judgment. By reason thereof, Plaintiff has no adequate remedy at law for such
acts and threatened acts. As such, CZ Services is entitled to preliminary injunctive relief as
prayed for herein.
SIXTH CAUSE OF ACTION:

UNFAIR COMPETITION UNDER MISSOURI LAW
112. CZ Services incorporates by reference the preceding paragraphs as if set forth
fully herein.
30
113. ESI and CZ Services are direct competitors and vie against one another for market
share in the relevant market.
114. ESI has built a substantial commercial advantage through the PBM market.
115. ESI has wrongfully and intentionally injured and attempted to injure CZ Services’
business by among other things:
 threatening to terminate CZ Services’ contract, knowing the pharmacy will not
have the economic means to survive such termination;
 alleging that CZ Services is a mail order pharmacy, when in fact it is a retail
pharmacy that dispenses medication directly to the patient or to her designated
agent;
 refusing to acknowledge CZ Services’ business model and taking action to
exclude CZ Services from the relevant market; and
 tortiously interfering with CZ Services’ customer relationships on the CareZone
app.
116. ESI’s improper business practices have harmed CZ Services by stifling
competition and interfering with CZ Services’ actual and prospective business relationships and
goodwill.
117. ESI’s actions have been willful and wanton and have been carried out with a
specific intent to injure CZ Services in the conduct of its business, and to gain an unfair
competitive advantage over CZ Services.
118. The acts and conduct of ESI, as alleged above in this Complaint, constitute unfair
competition pursuant to the common law of the State of Missouri.
31
119. The acts and conduct of ESI, as alleged above in this Complaint, are contrary to
honest commercial business practices.
120. As a direct result of ESI’s unlawful conduct, Services has suffered and continues
to suffer injury to its business and property, including but not limited to lost sales and profits.
PRAYER FOR RELIEF
WHEREFORE, CZ Services respectfully demands:
a. that the Court provide injunctive relief prohibiting ESI from terminating its
contract with CZ Services or undertaking any other act in violation of the law;
b. that the Court declare, adjudge, and decree that ESI has committed the violations
of law alleged herein;
c. that the Court award damages sustained by CZ Services because of ESI’s
misconduct, in an amount to be proved at trial, to be trebled in accordance with
antitrust law, plus interest, including prejudgment interest, attorneys’ fees, and
costs of suit;
d. that the Court grant such other and further relief as it may deem just and proper.
DEMAND FOR JURY TRIAL
Plaintiff demands a jury trial on all issues so triable.
32
Dated: June 20, 2018. Respectfully submitted,
DOWD BENNETT LLP
By /s/ James G. Martin

James G. Martin #33586MO
7733 Forsyth Blvd., Suite 1900
St. Louis, MO 63105
314/889-7300 (Telephone)
314/863-2111 (Facsimile)
jmartin@dowdbennett.com
BOIES SCHILLER FLEXNER LLP

William Isaacson
William Jackson
Richard Feinstein
Nicholas Widnell
wisaacson@bsfllp.com
wjackson@bsfllp.com
rfeinstein@bsfllp.com
nwidnell@bsfllp.com
1401 New York Ave NW
Washington, DC 20005
Tel: (202) 237-2727
Fax: (202) 237-6131
Attorneys for Plaintiff CZ Services, Inc.
33

2018.06.20 Doc 1 Complaint

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Case: 4:18-cv-01005 Doc.

#: 1 Filed: 06/20/18 Page: 1 of 33 PageID #: 1

IN THE UNITED STATES DISTRICT COURT

EXPRESS SCRIPTS, INC.

NATURE OF THE ACTION

laws to restrain anticompetitive conduct by Express Scripts (“ESI”)—the largest Pharmacy

2. CZ Services is an independent, retail pharmacy that dispenses prescriptions to

3. CZ Services’ patients are mostly polychronic, highly vulnerable individuals who

patients, CZ Services combines user-friendly packaging, new compliance mechanisms, timely

dispensing, and personal consultations to improve its patients’ adherence to prescription

for insurance companies.

4. CZ services has a partnership with CareZone, a separate company that acts as an

delivery of medications to the patient.

5. ESI is a pharmacy benefit manager (“PBM”) that manages pharmacy benefits of

prescriptions with health insurance plans.

7. In its role as a PBM, ESI provides a bundle of pharmacy network services to

terms and provisions for administering the PSN.

through “mail order[.]”

allegedly engaging in activities that ESI characterizes as mail order.

business. See Exhibits C-O, attached hereto.

and delivered to them by their agents, like CareZone.

pharmacies like CZ Services.

15. ESI’s conduct—culminating with its improper termination of CZ Services—will

services that CZ Services provides.

16. As one of CZ Service’s customers recently said:

alternative—such as the provision of medications in synchronized pill packets or the use of an

better quality service and improved medical outcomes.

innovative user-friendly packaging, new compliance mechanisms, timely dispensation, personal

Services provides patients with synchronized prescriptions—when medications are refilled on

wholly owned by Jonathan Schwartz, the former CEO of Sun Microsystems.

JURISDICTION AND VENUE

the Sherman Act, 15 U.S.C. §§ 1-2.

the Sherman Act, 15 U.S.C. §§ 1-2.

parties related to that agreement.

26. PBMs are third-party administrators of prescription drug programs. PBMs

rebates that pharmaceutical suppliers pay to be included in the plans’ “formularies” of

benefits and reimbursement payments for hundreds of millions of Americans.

by the insurer itself).

28. As a result of industry consolidation, three PBMs—ESI, CVS Caremark (owned

enormous market power in pharmacy benefit management. Independent pharmacies, like CZ

PBMs alone can force a pharmacy out of business.

Relevant Antitrust Markets

increase), an insufficient number of patients would switch to purchasing from a brick-and-mortar

pharmacy to make such a price increase unprofitable to a “hypothetical monopolist.”

limited to pharmacies that participate in the healthcare plan network.

through other channels.

small but significant difference in price or quality.

States may distribute expired, non-potent, sub-potent, adulterated, or counterfeit medication, or

37. Insurance companies would be unable to render unprofitable an attempted small,

but significant, non-transitory increase in price (“SSNIP”) charged by a hypothetical monopolist

PBMs like ESI have created to manage pharmaceutical benefits.

38. The operations of the industry participants demonstrate there is an antitrust

indirect fees for the provision of these services.

neighborhood or town where the pharmacy is located.

efforts to prevent perceived competition from entities like CZ Services.

prescriptions, and, of course, home delivery.

services to non-ESI-managed patients as well. Without being able to serve ESI-managed

person, if given a real option to do so.

of pharmacies from ESI’s network, including the impending termination of CZ Services.

pharmacies in ESI’s network—other than ESI’s mail order business—from engaging in

prescription delivery service.

power in the market for prescription delivery services.

medication regimen. Approximately 40 percent of CZ Services’ patients are polychronic