Opinion
Case No. 5:18-cv-171
2022-03-16
HIGH MOUNTAIN CORPORATION d/b/a Rutland Pharmacy, Plaintiff, v. MVP HEALTH CARE, INC., Defendant.
David R. Cooper, Heather Z. Cooper, Esq., Rodney E. McPhee, Esq., Shannon A. Bertrand, Esq., Facey Goss & McPhee P.C., Rutland, VT, Kenneth D. McArthur, Jr., Esq., Pro Hac Vice, GrayRobinson, P.A., Washington, DC, Michael I. Endler, Esq., Pro Hac Vice, Boies, Schiller & Flexner LLP, Albany, NY, for Plaintiff. Alexandra E. Edelman, Esq., Gary F. Karnedy, Esq., Primmer Piper Eggleston & Cramer PC, Burlington, VT, Cynthia Neidl, Esq., Pro Hac Vice, Henry M. Greenberg, Esq., Pro Hac Vice, Greenberg Traurig, LLP, Albany, NY, Christopher G. Bond, Esq., for Defendant.
David R. Cooper, Heather Z. Cooper, Esq., Rodney E. McPhee, Esq., Shannon A. Bertrand, Esq., Facey Goss & McPhee P.C., Rutland, VT, Kenneth D. McArthur, Jr., Esq., Pro Hac Vice, GrayRobinson, P.A., Washington, DC, Michael I. Endler, Esq., Pro Hac Vice, Boies, Schiller & Flexner LLP, Albany, NY, for Plaintiff.
Alexandra E. Edelman, Esq., Gary F. Karnedy, Esq., Primmer Piper Eggleston & Cramer PC, Burlington, VT, Cynthia Neidl, Esq., Pro Hac Vice, Henry M. Greenberg, Esq., Pro Hac Vice, Greenberg Traurig, LLP, Albany, NY, Christopher G. Bond, Esq., for Defendant.
OPINION AND ORDER
Geoffrey W. Crawford, Chief Judge
This diversity case concerns a dispute between High Mountain Corporation d/b/a Rutland Pharmacy ("Rutland Pharmacy" or "HMC"), an independent Vermont pharmacy, and MVP Health Care, Inc. ("MVP"), a major American health insurance company. Rutland Pharmacy claims that MVP violates Vermont's "Mail and Pharmacy Prescription Drug Purchasing Parity Law," 8 V.S.A. § 4089j, by favoring MVP's pharmacy benefit manager contractor—CaremarkPCS Health, LLC d/b/a CVS Caremark ("Caremark")—in the distribution of certain lines of prescription drugs. (See Doc. 1.) Rutland Pharmacy seeks a declaration that MVP's actions violate § 4089j and a permanent injunction prohibiting MVP from "excluding Plaintiff and other pharmacies employing Vermont-licensed retail pharmacists from filling prescriptions for so-called ‘specialty drugs’ in the same manner and at the same level of reimbursement as they are filled by CVS's captive mail order pharmacies." (Doc. 1 at 20.)
The court previously denied MVP's motion to dismiss. (Doc. 20.) Now pending are the parties’ competing motions for summary judgment (Docs. 86, 91), together with MVP's motion (Doc. 119) to strike Rutland Pharmacy's "Supplemental Statement of Undisputed Material Facts" (Doc. 104-2). The court heard argument on the motions on January 18, 2022.
Background
The following facts are undisputed excepted where noted. They are drawn from both parties’ Rule 56 statements and from the pleadings insofar as MVP has admitted some of the allegations in the Complaint. Additional facts are included as necessary in the discussion below.
I. The Parties
Plaintiff Rutland Pharmacy is an independent Vermont retail pharmacy that, from January 1, 2015 to the present, has continuously held a retail pharmacy license issued by the State of Vermont Board of Pharmacy and employed multiple retail pharmacists licensed under 26 V.S.A. chapter 36. Rutland Pharmacy holds a "Certificate of Accreditation" from a nongovernmental entity called the Accreditation Commission for Health Care that describes Rutland Pharmacy as providing "specialty pharmacy services." (Doc. 1-17.) Jeffrey Hochberg serves as a director and vice president of Rutland Pharmacy. (Doc. 86-6 ¶ 2; Doc. 91-21 ¶ 109; Doc. 117-1 ¶ 2.)
Defendant MVP is a New York not-for-profit corporation with its principal place of business in Schenectady, New York. MVP is the parent company of non-party MVP Health Plan, Inc., a New York State not-for-profit corporation certified as a health maintenance organization ("HMO") to deliver health care services in Vermont and New York. MVP offers Vermont Exchange "qualified health plans" and other HMO plans to individuals, families, and small businesses in Vermont.
The Vermont Exchange—called "Vermont Health Connect"—is Vermont's state-run health insurance marketplace developed under the federal Affordable Care Act. (See Doc. 91-21 ¶ 13.)
II. MVP's Pharmacy Benefit Manager; the PBMSA
Since January 1, 2015, MVP has contracted with Caremark to serve as MVP's pharmacy benefit manager ("PBM"). CVS Health Corporation ("CVS") owns Caremark. Caremark is responsible for adjudicating prescription claims and reimbursing pharmacies for the pharmacy goods and services that they provide to beneficiaries of MVP's Vermont Health Exchange Plans. In particular, Caremark and MVP subsidiary MVP Health Plan, Inc. entered into a "Prescription Benefit Management Services Agreement" on January 1, 2015. (Doc. 86-7.) That agreement, along with Amendments 1–10 thereof (together, the "PBMSA"), covers MVP Vermont Exchange and Vermont fully-insured commercial lines of business.
In a prior order, the court required that the 72-page agreement be sealed, reasoning in part that it plays "no direct role" in the resolution of the summary judgment motions. (Doc. 126 at 2.) That rationale continues to hold true, but the court finds it necessary to briefly review, in general terms, the payment provisions of the agreement.
Amendment Nos. 1 and 5 appear in the record at Docs. 86-9 and 86-20, respectively.
Under the PBMSA, MVP is obligated to pay Caremark for Caremark's "Services" (defined to include prescription drugs provided by Caremark) "in accordance with the terms set forth in Exhibit A-2." (Doc. 86-7 at 5, 13.) Exhibit A-2 states that, in general, "Caremark is compensated by keeping the difference between its drug acquisition cost and the amount charged to Client [MVP] and retaining any difference between Caremark's retail pharmacy reimbursement and the amount charged to Client." (Id. at 33.) The court's review of the PBMSA reveals no provisions stating what Caremark's drug acquisition costs are or the rates at which Caremark reimburses pharmacies.
The amounts charged to MVP are set forth in detail in Exhibit A-2. Exhibit A-2 states that "Specialty Drugs" dispensed "via Caremark Part S Services’ mail order pharmacy will be priced at the rates set forth on Schedule 1 to Exhibit A-2" whereas Specialty drugs dispensed "via retail pharmacies will be priced at the retail rates set forth above." (Id. at 34.) Schedule 1 to Exhibit A-2 is a detailed fee schedule for numerous drugs, with fees for each drug expressed as a percentage discount from the "average wholesale price." (See id. at 42.) The PBMSA notes that "[t]he rates for Specialty medications may vary if filled by a pharmacy other than a specialty pharmacy owned or affiliated with Caremark. At Non-CVS Pharmacies, the retail rates apply, an[d] these claims are included in the retail guarantees." (Id. at 32.)
The PBMSA defines "Specialty Drugs" as "certain pharmaceuticals, biotech or biological drugs as defined by CVS Caremark Specialty Pharmacy, that target chronic, complex or genetic disease, including, but not limited to, injectable, infused, inhaled or oral medications, or products that otherwise require special handling and are listed in Schedule 1 to Exhibit A-2." (Id. at 5.)
III. CVS's Mail-Order Pharmacies
As the PBMSA suggests, CVS's business goes beyond pharmacy benefit management via Caremark. CVS also owns or operates mail order pharmacies ("CVS mail order pharmacies") through its subsidiary Caremark Rx, LLC. Caremark, Rx, LLC is in turn the parent of pharmacy service subsidiaries. In reports to the Securities and Exchange Commission between 2015 and 2020, CVS described its pharmacy services segment as including, among other things, both "specialty mail order pharmacies" and "mail order dispensing pharmacies." (Doc. 86-10.) CVS refers to the segment of its business that focuses on "specialty drugs" as "CVS Specialty." (Id. at 4.)
One CVS mail order pharmacy is a "specialty mail facility" located in Monroeville, Pennsylvania. (See Doc. 86-15.) CVS also owns a mail order pharmacy in Milford, Massachusetts. A document from the Vermont Secretary of State's Office of Professional Regulation indicates that the Massachusetts facility is in a branch called "Caremark Mass. Specialty Pharmacy." (Doc. 86-16 at 3.) Both the Pennsylvania and Massachusetts facilities are licensed in Vermont as non-resident pharmacies. (Id. at 2–3.) MVP admits that both of these facilities likely serve MVP Vermont members. IV. Rutland Pharmacy's 2018 Inquiries About the Vermont "Specialty Network"
Over the course of several months in 2018, Mr. Hochberg corresponded with MVP and Caremark about dispensing "specialty drugs." MVP Senior Government Affairs Strategist Susan Gretkowski advised him in an April 18, 2018 email: "I checked with both MVP and CVS/Caremark and neither entity has received an application from Rutland Pharmacy for inclusion as a specialty pharmacy. I should be getting a link to the Caremark website where the application is located and will forward it when I get it." (Doc. 1-3.) On April 30, 2018, Ms. Gretkowski emailed Mr. Hochberg stating:
CVS Caremark has a standard application process for either mail order or retail pharmacies that wish to be certified as specialty pharmacies. It includes an application process[.] If Rutland Pharmacy is interested in participating in CVS Caremark's and MVP's Vermont[ ] specialty network, it may submit a request to CVS Caremark at this email address: specialtypharmacyapplications@cvscaremark.com.
The application process includes the provision of terms and conditions for participation in the specialty network, including the fee schedule. The terms and conditions for participation reflect the patient-focused pharmacy care management program along with inventory management, and dispensing and distribution functionalities that are unique and necessary for the dispensing of specialty drugs to ensure the appropriate, safe, and cost-effective use of specialty medications.
(Id. )
On May 7, 2018, Mr. Hochberg submitted an application as directed and received an automatic email reply. (Doc. 1-4.) He emailed Ms. Gretkowski again on May 29, 2018 stating that he had not yet received a response to the application other than the automatic reply. (Doc. 1-5.) Ms. Gretkowski advised that she would follow up. (Id. )
On June 29, 2018, CVS Caremark Network Consultant Cynthia O'Brien emailed Mr. Hochberg and advised:
Thank you for your interest in participating in the Specialty Pharmacy Network for the Vermont Health Exchange Plans for MVP.
As part of the specialty network enrollment process, your pharmacy must return a signed letter acknowledgment (see attached) regarding your confidentiality obligations. Attached are confidentiality agreements for each of the four pharmacies.
Please review, sign, and return ... ALL pages .... Specialty pharmacy network applications will be sent to you once we receive the signed confidentiality agreements.
(Doc. 1-6.) Ms. O'Brien’s email included four attached confidentiality agreements. (Docs. 1-7, 1-8, 1-9, 1-10.)
Mr. Hochberg replied to Ms. O'Brien’s email on July 16, 2018. He stated that he was "a little taken [aback] by the need to execute additional confidentiality agreements." (Doc. 1-12.) He posed five questions in a two-page letter dated July 16, 2018 and attached to his email, inquiring: (1) how Caremark defines "specialty pharmacy"; (2) how Caremark defines "specialty pharmacy services"; (3) how Caremark defines "specialty pharmacy benefit"; (4) whether Caremark would detail the "non-financial requirements" for Rutland Pharmacy to be accepted into the "specialty pharmacy network"; and (5) whether Caremark acknowledged the requirements of 8 V.S.A. § 4089j. (Doc. 1-11 at 1–2.) The letter concludes:
For the last 6 months, I have been trying to get CVS Caremark to stop
rejecting prescription claims submitted by Rutland Pharmacy for drugs that CVS Caremark and/or MVP Health Care apparently deem(s) to be "specialty drugs" that Rutland Pharmacy is not eligible to dispense. Consequently, I am eager to resolve this issue as soon as possible.
(Id. at 2.) Ms. O'Brien responded on July 17, 2018 stating: "Your inquiries have been forwarded to the VT Health Exchange-MVP Account Team at CVS Caremark for review." (Doc. 1-14.) She emailed Mr. Hochberg the next stay to advise that "[t]he VT Health Exchange-MVP Account Team at CVS Caremark will be meeting internally to review and discuss your questions. We are targeting to have a response to you by 7/27." (Id. )
On September 17, 2018, CVS Caremark Director of Specialty Network Strategy and Development Michael S. Murphy emailed Mr. Hochberg stating: "As we discussed last week, I consulted with our legal department regarding your request to alter the sequence of steps regarding where an NDA [non-disclosure agreement] is required in the application process, and the request was declined. An NDA will be required before moving forward." (Doc. 1-15.) Rutland Pharmacy has not executed the confidentiality agreements that Ms. O'Brien attached to her June 29, 2018 email.
MVP has supplied a detailed declaration signed by Mr. Murphy on September 24, 2021. (Doc. 91-35.)
V. Rutland Pharmacy's 2018 Correspondence with State Government Officials
Also in 2018, Mr. Hochberg corresponded with certain Vermont state government officials.
A. Vermont Department of Financial Regulation
On May 21, 2018, Mr. Hochberg emailed Phil Keller, Director of Insurance Regulation for the Vermont Department of Financial Regulation. (Doc. 91-13.) He expressed concern that MVP's 2018 Vermont Exchange plans "require[ ] patients to utilize CVS Caremark Specialty Pharmacy for certain medications despite the availability of these products at their local pharmacies." (Id. at 2.) He suggested that this violated 8 V.S.A. § 4089j.
Director Keller emailed a reply on May 24, 2018. He wrote:
The Department recognizes the valuable role that retail pharmacies play in the delivery of health care services to Vermonters, but does not agree that the language in MVP's Exchange plans is a violation of 8 V.S.A. Section 4089j. The statute's goal is to put retail pharmacies on the same level as mail order pharmacies "with respect to the quantity of drugs or days’ supply of drugs" dispensed under a prescription. The statute does not prohibit a health insurer from requiring that certain drugs be ordered through a mail order pharmacy, especially if the mail order pharmacy can leverage its size or purchasing power to obtain drugs at lower prices and passes those savings along to Vermont customers.
(Doc. 91-13 at 2.)
B. Vermont State Senator Brian Collamore
On June 27, 2018, Mr. Hochberg emailed Vermont State Senator Brian Collamore asserting that Vermont pharmacies were facing "a prohibition on filling certain medications for Vermont MVP beneficiaries enrolled in a plan thru Vermont Health Connect." (Doc. 91-14 at 2.) Mr. Hochberg stated that "[t]he medications in question are high cost ‘specialty’ medicines and, according to the plan designs, must be acquired thru CVS Caremark Specialty pharmacy, a licensed non-resident pharmacy, or ‘mail-order’ pharmacy." (Id. ) Mr. Hochberg asked whether Sen. Collamore could request an opinion from the Vermont Attorney General's office as to whether 8 V.S.A. § 4089j was violated by "CVS Caremark's restriction of which pharmaceutical products a Vermont pharmacy can dispense as opposed to [its] mail order subsidiary." (Id. )
Senator Collamore sent an inquiry to the Attorney General's office and received an email reply on July 1, 2018. (Id. at 3.) Deputy Attorney General Joshua Diamond advised that his office had scheduled a meeting with Mr. Hochberg later in the month. Senator Collamore forwarded that message to Mr. Hochberg. (Id. ) The record does not indicate what happened at Mr. Hochberg's scheduled meeting with the Attorney General's office. Rutland Pharmacy filed its Complaint in this case on October 23, 2018. (Doc. 1.)
Analysis
Enacted in 2004, Vermont's Mail and Pharmacy Prescription Drug Purchasing Parity Law states in pertinent part:
A health insurer and pharmacy benefit manager doing business in Vermont shall permit a retail pharmacist licensed under 26 V.S.A. chapter 36 to fill prescriptions in the same manner and at the same level of reimbursement as they are filled by mail order pharmacies with respect to the quantity of drugs or days’ supply of drugs dispensed under each prescription.
8 V.S.A. § 4089j(b). The statute includes definitions for "health insurer," "pharmacy benefit manager," and "health care provider." Id. § 4089j(a). MVP has admitted that it is a health insurer (Doc. 1 ¶ 10, Doc. 22 ¶ 10) and that Caremark is a pharmacy benefit manager (Doc. 1 ¶ 26, Doc. 22 ¶ 26). There is no dispute that MVP and Caremark are doing business in Vermont. There is also no dispute that Rutland Pharmacy is a Vermont licensed retail pharmacy that employs multiple retail pharmacists licensed under 26 V.S.A. chapter 36.
Section 4089j does not include explicit definitions for "prescriptions" or "mail order pharmacies." Those terms are also not defined elsewhere in Title 8 or in 1 V.S.A. §§ 111 – 149. The statute does not mention "specialty drugs" or "specialty pharmacies."
Rutland Pharmacy emphasizes the following passage from guidance issued by the Vermont Department of Banking, Insurance, Securities, and Health Care Administration (now the Vermont Department of Financial Regulation):
Filling a prescription in the same manner as the mail order pharmacy means that prescriptions are filled so that the consumer has the same cost-sharing obligation and is subject to the same formulary pricing. For example, if a beneficiary could obtain a 90 day supply of a prescribed drug through a mail order pharmacy, and would be charged the co-payment applicable for only one prescription filling or refilling, the beneficiary must be able to obtain a 90 day supply from a retail pharmacy while paying the copayment applicable for only one prescription filling or refilling. Likewise, if a prescription is filled at the mail order pharmacy with cost sharing at the third tier of a prescription drug formulary, it must be filled at the retail pharmacy with the cost sharing applicable to the third tier of the formulary.
Vt. Dep't of Banking, Ins., Sec. & Health Care Admin., HCA Bull. 114, Mail and Pharmacy Prescription Drug Purchasing Parity (May 12, 2005) [hereinafter "HCA Bulletin 114"], available at https://dfr.veimont.gov/sites/finreg/files/regbul/dfr-bulletin-health-114.pdf HCA Bulletin 114 further states that 8 V.S.A. § 4089j ’s requirement that the prescription be filled at the same level of reimbursement "concerns the compensation to the pharmacy." HCA Bulletin 114. The bulletin explains:
Both parties have filed copies of HCA Bulletin 114, which appear in the record at numerous locations, including Doc. 1-1, Doc. 86-19, and Doc. 91-12.
Health insurers and pharmacy benefit managers must permit a retail pharmacist to fill a prescription, with the same amount of the prescribed medication, at the total price that would have been paid to the mail order pharmacy. This total price includes payments by an insurer or pharmacy benefit manager and the insured's cost-sharing payment. For example, if a mail order pharmacy is paid $105 total (including any cost-sharing by the health plan beneficiary) for a 90-day supply of a particular medication, the retail pharmacy shall receive the same total compensation of $105.
Id.
In its motion for summary judgment, Rutland Pharmacy argues that MVP prevented it from filling prescriptions "in the same manner" as prescriptions filled by CVS mail-order pharmacies "because MVP rejected Rutland Pharmacy's requests to fill prescriptions for certain drug products that CVS mail order pharmacies were allowed to fill." (Doc. 86-1 at 13.) And Rutland Pharmacy asserts that MVP prevented it from filling prescriptions "at the same level of reimbursement" as CVS mail-order pharmacies "because MVP reimbursed CVS mail order pharmacies at different (higher) rates than it reimbursed Rutland Pharmacy and one of its Vermont retail pharmacy affiliates for prescriptions for the exact same drug products claimed during the same time period." (Id. )
MVP argues that it is entitled to summary judgment on two grounds. First, MVP contends that "[s]pecialty drugs and specialty pharmacies were not a consideration when Section 4089j was enacted, and the clear purpose of the legislation is to level the playing field between retail pharmacies and mail order pharmacies." (Doc. 91-1 at 5.) In MVP's view, § 4089j does not apply to "specialty drugs" and "specialty pharmacy." (Id. at 14.) Second, MVP argues that even if § 4089j does apply to specialty drugs and specialty pharmacy, MVP has done nothing to violate the statute and its "credentialing process" for joining the "Vermont specialty network" is not a pretext for directing pharmacy business to MVP's own mail-order pharmacies. (Id. at 22.)
MVP does not argue that Rutland Pharmacy's requested declaratory judgment is unavailable for lack of a private civil remedy under 8 V.S.A. § 4089j. The Declaratory Judgment Act creates a remedy authorizing federal courts to, with certain exceptions, "declare the rights and other legal relations of any interested party seeking such declaration, whether or not further relief is or could be sought," 28 U.S.C. § 2201(a), and to grant "[f]urther necessary or proper relief" based on a declaratory judgment, id. § 2202. However, federal courts "regularly dismiss claims seeking a declaratory judgment where the underlying statute does not provide for a private right of action." Davella v. Ellis Hosp., Inc. , No. 1:20-cv-00726 (MAD/ATB), 2021 WL 1791889, at *4 (N.D.N.Y. May 5, 2021). In a prior order in this case, the court observed that "the availability of a private civil remedy ... has proven troublesome in other cases enforcing ‘any willing provider’ statutes." (Doc. 20 at 13.) The court concludes that it is unnecessary to decide this potential issue here.
I. Rule 56 Standard
"The summary judgment standards are well established." Lewis v. Siwicki , 944 F.3d 427, 431 (2d Cir. 2019). Summary judgment may be granted only "if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a matter of law." Fed. R. Civ. P. 56(a). When reviewing a motion for summary judgment, a court must "construe the record evidence in the light most favorable to the non-moving party and draw all reasonable inferences in its favor." Torcivia v. Suffolk Cnty., N.Y. , 17 F.4th 342, 354 (2d Cir. 2021). Where, as here, the court is faced with cross-motions for summary judgment, the court is mindful that such motions "are no more than a claim by each side that it alone is entitled to summary judgment." Clear Channel Outdoor, Inc. v. City of N.Y. , 594 F.3d 94, 103 (2d Cir. 2010) (quoting N.Y. State Ass'n of Realtors, Inc. v. Shaffer , 27 F.3d 834, 838 (2d Cir. 1994) ). The court "evaluate[s] each party's motion on its own merits, taking care in each instance to draw all reasonable inferences against the party whose motion is under consideration." Jingrong v. Chinese Anti-Cult World All., Inc. , 16 F.4th 47, 56 (2d Cir. 2021) (quoting Byrne v. Rutledge , 623 F.3d 46, 53 (2d Cir. 2010) ).
II. MVP's Motion to Strike (Doc. 119)
In opposition to MVP's motion for summary judgment, Rutland Pharmacy relies in part on factual assertions appearing in a 54-paragraph "Supplemental Statement of Undisputed Material Facts" (Doc. 104-2), filed concurrently with Rutland Pharmacy's response to MVP's Rule 56(a) statement (Doc. 104-1). MVP has moved to strike the Supplemental Statement as unauthorized under Local Rule 56(b). (Doc. 119.) Rutland Pharmacy opposes MVP's motion to strike, arguing that the motion "fails to take into account the fundamental deficiencies in MVP's Statement of Undisputed Facts and ignores the fact that the verification of the facts in dispute as submitted by Rutland Pharmacy are contained within its Supplement." (Doc. 124 at 1.)
Local Rule 56(b) provides: "Statement of Disputed Facts. A party opposing summary judgment or a motion under Fed. R. Civ. P. 12(b)(6) or 12(c) that has been converted to a summary judgment motion must provide a separate, concise statement of disputed material facts." L.R. 56(b) (emphasis added). The Local Rules therefore "do not provide an opportunity for the nonmoving party to file a statement of undisputed facts at the summary judgment stage." Rotman v. Progressive Ins. Co. , 955 F. Supp. 2d 272, 275 (D. Vt. 2013) (citing Schroeder v. Makita Corp. , No. 2:02-CV-299, 2006 WL 335680, at *3 (D. Vt. Feb. 13, 2006) ). That is because the nonmoving party's ability to withstand summary judgment "depends on the existence of disputed facts, not undisputed ones"; there is no need for the nonmoving party to establish undisputed facts at the summary judgment stage. Chaney v. Stewart , No. 2:13-cv-246, 2015 WL 1538021, at *1 (D. Vt. Apr. 7, 2015) (quoting Schroeder , 2006 WL 335680, at *4 ). Nevertheless, the court may consider the nonmoving party's additional facts where "it is clear from the parties’ briefing that those facts are both material and undisputed." Rotman , 955 F. Supp. 2d at 276 ; see also Post v. Killington, Ltd. , No. 5:07-CV-252, 2010 WL 3323659, at *1 n.1 (D. Vt. May 17, 2010) (considering facts that were "integral" to the plaintiffs’ arguments and undisputed).
The court recognizes that Rutland Pharmacy's response to MVP's statement of undisputed facts cites the Supplemental Statement. (See Doc. 104-1.) The court therefore refers to the Supplemental Statement as necessary to determine which of MVP's factual assertions are disputed. MVP's Motion to Strike (Doc. 119) is DENIED insofar is the court has referred to the Supplemental Statement for that limited purpose.
III. Summary Judgment Motions (Docs. 86, 91)
Both parties assert that this case "begins and ends" with the interpretation of 8 V.S.A. § 4089j (Vermont's "Parity Law"). (Doc 86-1 at 1: Doc. 101 at 4.) Each party asserts that § 4089j is unambiguous and supports its position. (Doc. 91-1 at 5; Doc. 104 at 1.) Rutland Pharmacy argues that it is entitled to summary judgment because, in its view, the Parity Law "prohibits health insurers and PBMs from discriminating against local pharmacies in favor of potentially more lucrative arrangements with mail order pharmacies." (Doc. 86-1 at 1.)
As noted above, MVP argues that it is entitled to summary judgment on two grounds. First, MVP contends that § 4089j does not apply to "specialty drugs" and "specialty pharmacy." (Doc. 91-1 at 14.) Second, MVP argues that even if § 4089j does apply to specialty drugs and specialty pharmacy, MVP's "credentialing process" for joining the "Vermont specialty network" is not a pretext for directing pharmacy business to CVS's mail-order pharmacies. (Id. at 22.) The court begins with MVP's latter argument.
Assuming that § 4089j applies to specialty drugs and specialty pharmacy, a requirement for liability under the statute is that the health insurer and PBM failed to permit the retail pharmacy to fill prescriptions "in the same manner and at the same level of reimbursement" as they are filled by mail-order pharmacies. 8 V.S.A. § 4089j(b). Stated more generally, Rutland Pharmacy must show that MVP and Caremark treated Rutland Pharmacy differently than mail-order pharmacies. Rutland Pharmacy asserts that MVP did so in two ways:
First, MVP prevented Rutland Pharmacy from filling prescriptions for so-called "specialty drugs," that it allowed CVS mail order pharmacies to fill. Second, MVP allowed the CVS PBM to reimburse Vermont retail pharmacies (including Rutland Pharmacy) at lower rates than CVS mail order pharmacies for prescriptions for the same drugs during the same time periods.
(Doc. 86-1 at 4.) The court considers those arguments next.
A. Alleged Disparate Reimbursement Rates
In his February 24, 2021 affidavit, Mr. Hochberg asserts the following based on his "review and personal knowledge of Rutland Pharmacy's business records." (Doc. 86-6 ¶ 15.) On December 8, 2017, the PBM for Rutland Pharmacy's affiliate Springfield Pharmacy reimbursed for the drug Truvada at Average Wholesale Price ("AWP") minus x%. (Id. ) On May 27, 2018, Rutland Pharmacy's reimbursement rate for the drug Neulasta was also AWP minus x%. (Id. ¶ 17.) MVP asserts that it lacks knowledge and information regarding these allegations and that the court should reject the allegations as hearsay. (Doc. 101-1 ¶¶ 35, 37.)
The actual percentage discount may constitute competitive information and there is no need to include it here.
Inadmissible hearsay is not competent evidence on summary judgment. See Fed. R. Civ. P. 56(c)(4) ("An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated."); Sarno v. Douglas Elliman-Gibbons & Ives, Inc. , 183 F.3d 155, 160 (2d Cir. 1999) (hearsay statement was not competent evidence to oppose summary judgment motion). The court has no difficulty concluding that Mr. Hochberg is competent to testify about Rutland Pharmacy's records. See Koon Chun Hing Kee Soy & Sauce Factory, Ltd. v. Star Mark Mgmt., Inc. , No. 04-CV-2293 (JFB)(SMG), 2007 WL 74304, at *2 (E.D.N.Y. Jan. 8, 2007) (corporate officer "may offer evidence in his declaration based on personal knowledge obtained from a review of his company's records"). But since Rutland Pharmacy has not produced the records themselves, Mr. Hochberg's assertions about the statements in those records is hearsay. And the exception for business records in Fed. R. Evid. 803(6) is insufficient to overcome the hearsay problem. See United States v. Cameron , 699 F.3d 621, 648 (1st Cir. 2012) (recognizing "distinction between business records and statements about those records"); see also United States v. Florez , 516 F. App'x 790, 794 (11th Cir. 2013) ("[T]here is no hearsay exception for testimony about [business] records not in evidence.").
Even if Mr. Hochberg's testimony was admissible, it would be insufficient to prove disparate reimbursement rates for Truvada and Neulasta. In comparison to the reimbursement rates that Mr. Hochberg describes (AWP minus x% for both medications), Rutland Pharmacy relies on the rates for those drugs specified in the PBMSA, all of which are higher than AWP minus x%. (See Doc. 86-7 at 45, 48 (January 1, 2015 agreement); Doc. 86-9 at 16, 18, 30, 32 (December 30, 215 amendment); Doc. 86-20 at 29, 31 (December 21, 2017 amendment).) But those rates are the amounts that Caremark charges to MVP under the PBMSA. As noted above, the court's review of the PBMSA reveals no provisions stating what Caremark's drug acquisition costs are or the rates at which Caremark reimburses pharmacies. Those are the figures that would be necessary to compare Rutland Pharmacy's reimbursement rates with the reimbursements rates of other pharmacies.
Rutland Pharmacy also refers to a third drug, Mavyret. It is undisputed that on July 25, 2018, Rutland Pharmacy submitted a claim to the CVS PBM (Caremark) for the prescription drug Mavyret. (Doc. 86-6 ¶ 8.) Caremark rejected the claim on the grounds that Mavyret was "not appropriate for this location; prior authorization required." (Id. ; see also Doc. 86-17.) According to Mr. Hochberg, Rutland Pharmacy had previously filled and been reimbursed for prescriptions for Mavyret and was ready, willing, and able to fill the prescription on July 25, 2018. (Doc. 86-6 ¶¶ 7–9.) MVP disputes that assertion, arguing that the evidence shows that Rutland Pharmacy submitted three prescriptions for Mavyret between January 1, 2017 and April 30, 2019 and that none of those claims were reimbursed. (See Doc. 86-17.)
Rutland Pharmacy has not supplied evidence of the alleged previous reimbursement rate for Mavyret. Mavyret therefore does not constitute evidence of disparate reimbursement rates. Instead, Rutland Pharmacy relies on Mavyret as an example of the second basis for its claim of disparate treatment: that MVP prevented Rutland Pharmacy from filling prescriptions for "specialty drugs" that it allowed CVS mail order pharmacies to fill. The court considers that argument next. B. Pretext
At first glance it might seem difficult to reconcile Rutland Pharmacy's dual positions that it was reimbursed at different rates for prescriptions that it filled and that MVP prevented Rutland Pharmacy from filling prescriptions. However, Caremark is apparently not the only entity that reimburses Rutland Pharmacy for prescriptions that it fills. (See, e.g. , Doc. 104-6 ¶ 24 ("Rutland Pharmacy is able to fill any drug products covered by the Vermont Medicaid Program for Vermont Medicaid program members because Rutland Pharmacy is approved by the DVHA. This is true regardless of whether the drug product would be classified by MVP as a ‘specialty drug.’ ").)
MVP does not dispute that Caremark rejected Rutland Pharmacy's July 25, 2018 claim for Mavyret. More generally, MVP admits that Caremark rejected multiple claims from Rutland Pharmacy for "specialty drugs." (See Doc. 22 ¶ 45.) But according to MVP, Caremark did so only because Rutland Pharmacy did not complete the application procedure that was "required of all pharmacies participating in the CVS Caremark network." (Id. )
Since the outset of this case, Rutland Pharmacy has suggested that "MVP's/CVS's certification and credentialing process is entirely pretextual and employed solely as a means to prevent Rutland Pharmacy from competing with CVS's mail order pharmacies." (Doc. 1 ¶ 75.) MVP has denied that allegation. (Doc. 22 ¶ 75.) At the Rule 12(b) stage of the case, the court declined to grant MVP's motion to dismiss on this issue because the court was required to accept as true Rutland Pharmacy's view that the application process was "a thinly-veiled effort to exclude independent pharmacies from the lucrative specialty drug market." (Doc. 20 at 6.) Now, on summary judgment, MVP argues that the evidence shows that Caremark's credentialing process is not pretextual. (Doc. 91-1 at 22.)
Although 8 V.S.A. § 4089j plainly requires parity between retail and mail-order pharmacies as to the consumer's cost and the pharmacy's reimbursement, the court finds nothing in the Parity Law prohibiting a health insurer or a PBM from creating an application process for pharmacies to be included in a "specialty network." However, if such an application process were a pretext for shutting out competition, then that could conceivably be a violation of the Parity Law. The court evaluates the evidence in the record to determine whether there is a dispute of any material fact and whether either party is entitled to judgment as a matter of law on this issue.
At the January 18, 2022 hearing, the parties agreed that no trial is required to decide the question of "pretext." The court has considered the evidence in the record to arrive at the conclusions below.
In support of its position that Caremark's credentialing process is not pretextual, MVP asserts that Rutland Pharmacy had an opportunity to apply for inclusion in the Vermont specialty network. MVP refers to the September 23, 2021 declaration of MVP Senior Leader of Health and Pharmacy Management James Hopsicker, in which Mr. Hopsicker states: "I believe that, had HMC executed an NDA and completed the application/credentialing process, Caremark would have approved HMC for participation in the Vermont specialty network." (Doc. 91-21 ¶ 120.) Rutland Pharmacy counters by citing Mr. Hochberg's November 1, 2021 affidavit, where he states: "Rutland Pharmacy has not received any communication that it would have been approved by MVP or its PBM contractor, CVS Caremark, for participation in the so-called ‘Vermont specialty network.’ " (Doc. 104-6 ¶ 34.)
Mr. Murphy expressed a similar opinion in his September 24, 2021 declaration. (Doc. 91-35 ¶ 27.)
It is unnecessary to speculate about what might have happened if Rutland Pharmacy had executed the confidentiality agreements that Ms. O'Brien attached to her June 29, 2018 email. The court focuses instead on the evidence in the record regarding what did happen, including copies of the agreements attached to Ms. O'Brien’s June 29, 2018 email (Docs. 1-7, 1-8, 1-9, 1-10) and Mr. Hochberg's July 16, 2018 letter (Doc. 1-11). The facts recited above regarding Mr. Hochberg's communications with Ms. Gretkowski and with Ms. O'Brien confirm that Rutland Pharmacy inquired about the specialty network but did not complete the application. The court considers below each of Rutland Pharmacy's assertions that the application process was a pretext.
1. "Network" of One
MVP admits that CVS's mail-order pharmacies in Massachusetts and Pennsylvania likely serve Vermont MVP Vermont customers. Thus it appears that some CVS mail-order pharmacies are in the "Vermont specialty network." Rutland Pharmacy argues that the absence of any pharmacies other than CVS mail-order pharmacies in the "Vermont specialty network" is evidence of pretext because, in Rutland Pharmacy's view, a "network" of one is not a network at all. (Doc. 104 at 19.)
The court is unpersuaded. Many disciplines—including the law—recognize sets or groups with only a single constituent. See NRP Holdings LLC v. City of Buffalo , 916 F.3d 177, 198 (2d Cir. 2019) (discussing "class-of-one" theory for equal protection claims). Moreover, Rutland Pharmacy does not explain why the "Vermont specialty network" could not be seen as containing two constituents: CVS's separate facilities in Pennsylvania and Massachusetts. Finally, and perhaps most importantly, the court concludes that the formal definition of "network" has relatively little bearing on the question of pretext in this case.
2. No Pre-Existing Application for Admission to the "Network"
In further support of its argument that the "Vermont specialty network" does not actually exist, Rutland Pharmacy asserts that "MVP and Caremark created an application to include pharmacies other than CVS Specialty only after Plaintiff inquired about the so-called ‘specialty network.’ " (Doc. 104-1 ¶ 48.) But the evidence does not remotely support Rutland Pharmacy's suggestion that the "network" was just a ruse.
It is true that Mr. Hopsicker testified at his December 3, 2019 deposition that he had not seen an application for Caremark's "Vermont specialty network" before June 13, 2018. (Doc. 104-8 at 7.) On that date Mr. Hochberg had been in contact with Ms. Gretkowski but had not yet received Ms. O'Brien’s June 29, 2018 response. Mr. Hopsicker testified that he received an email from a CVS account manager on June 13, 2018 stating: "Attached is the application we have put together to share with these pharmacies similar to what we use for New York. Let me know if you are okay with us sharing." (Id. at 6–7.)
Thus the evidence indicates that, after Mr. Hochberg's inquiries about the network, Caremark was preparing an application for use in Vermont that was similar to what Caremark used in New York. Rutland Pharmacy has not identified any evidence in the record contradicting Mr. Murphy's testimony that "[n]on-CVS Health pharmacies are unquestionably part of various Caremark clients’ specialty networks." (Doc. 91-35 ¶ 13.) Mr. Hopsicker may have represented the first independent Vermont pharmacy to consider applying to the Vermont specialty network, and Caremark might not have had a suitable application form prepared at the time, but that does not mean that the network was inaccessible to Rutland Pharmacy. To the contrary, the evidence shows that Caremark was prepared to supply Rutland Pharmacy with an application upon execution of the confidentiality agreements that Ms. O'Brien attached to her June 29, 2018 email to Mr. Hochberg. That leads to Rutland Pharmacy's final "pretext" argument. 3. Allegedly Unreasonable Process and Terms
Rutland Pharmacy asserts that "there is no legitimate need to compel Rutland Pharmacy to undergo another ‘process’ to join a separate network for the same health insurer and the same health plans for which it already is a participating pharmacy provider." (Doc. 104 at 19–20.) But just because Rutland Pharmacy believes the process is unnecessary does not make it so. MVP has supplied the following explanation from Mr. Murphy:
There are many reasons why Caremark needs a separate application and contracting process for a pharmacy that wants to join the specialty pharmacy network. In my experience, those reasons include, but are not limited to: a pharmacy in the specialty network is subject to additional contractual requirements, thereby making a separate application/contracting process appropriate; not many pharmacies in the United States are accredited in specialty pharmacy by the Utilization Review Accreditation Commission and the Accreditation Commission on Health Care, Inc. or accredited in Home Care by the Joint Commission; not many pharmacies can meet (or are interested in meeting) the performance and quality standards required of a specialty pharmacy; and pharmacies may not agree to accept the reimbursement rates applicable for specialty medications.
(Doc. 91-35 ¶ 18.) Even in the light most favorable to it, Rutland Pharmacy's evidence does not prove that these rationales are baseless. Insofar as Rutland Pharmacy believes these are not concerns in its case, it could demonstrate that in a properly submitted application.
Finally, as counsel discussed at the January 18, 2022 hearing, Rutland Pharmacy asserts that the terms of the confidentiality agreements are unreasonable. The court has reviewed the copies of those agreements that are in the record. (Docs. 1-7, 1-8, 1-9, 1-10.) For the reasons stated below, the court concludes that Rutland Pharmacy's arguments on this point are unpersuasive.
Rutland Pharmacy argues that the confidentiality agreements unreasonably seek to bind Rutland Pharmacy under terms that are not defined in those agreements. In particular, Mr. Hochberg's July 16, 2018 letter expressed concern that the confidentiality agreements do not define the terms "specialty pharmacy," "specialty pharmacy services," "specialty pharmacy benefit." (Doc. 1-11.) The agreements use those terms but do not expressly define them. (See Docs. 1-7, 1-8, 1-9, 1-10.) Rutland Pharmacy asserts that Mr. Hochberg never received answers to his questions about those terms.
Rutland Pharmacy has repeatedly objected in this litigation that the term "specialty pharmacy" is a vague term. (See, e.g. , Doc. 104-1 ¶ 31.) MVP offers this definition in its summary judgment motion:
Specialty pharmacies are distinct from both retail and mail order pharmacies in that they focus on specialty drugs, which are high-cost, complex prescription medications that require a high degree of patient management to ensure compliance and safety. Specialty pharmacies are accredited by independent third parties and employ pharmacists and nurses who have specialized training. Specialty pharmacies provide services such as coordination of care, drug affordability support, and patient monitoring, and offer various programs designed to increase adherence, minimize waste, and improve outcomes. Unlike retail and mail order pharmacies, both of which dispense traditional medications, retail and specialty pharmacies generally do
not compete with each other because retail pharmacies rarely stock or dispense specialty medications.
(Doc. 91-1 at 5.) MVP has also supplied a variety of materials purporting to offer definitions. (See, e.g. , Doc. 91-21 ¶ 39 (Hopsicker Decl.); Doc. 91-29 at 4 (PBMSA definition of "specialty" drugs); Doc. 91-35 ¶ 10(c) (Murphy Decl.).)
The court concludes that the absence of an express definition of "specialty" in the confidentiality agreements does not prove that the agreements’ terms are unreasonable or that Rutland Pharmacy cannot ascertain what it would be agreeing to. The term "specialty" is not foreign to Rutland Pharmacy. Since before it filed this suit, Rutland Pharmacy has held a "Certificate of Accreditation" from the Accreditation Commission for Health Care ("ACHC") that describes Rutland Pharmacy as providing "specialty pharmacy services." (Doc. 1-17.) The ACHC, in turn, states that
Specialty Pharmacies dispense medications (injectable, intravenous, or oral) to a client's/patient's home, physician's office, or clinic specializing in certain disease states. Specialty medications target a specific population with a chronic and sometimes life-threatening disease. Specialty Pharmacy services include disease-specific clinical monitoring, as well as patient compliance and adherence programs.
Accreditation Commission for Health Care, Pharmacy Accreditation , https://www.achc.org/pharmacy/ (last visited Feb. 9, 2022). There might not be a single, definitive definition of "specialty" in this context. But Rutland Pharmacy has sufficient information to understand why those terms appear in the confidentiality agreements, and Rutland Pharmacy has identified no operative provision of the agreements that depends on a more precise definition of "specialty."
Rutland Pharmacy also objects to MVP's requirement that Rutland Pharmacy execute the confidentiality agreements before it could review the application itself. Ms. Gretkowski mentioned in her April 30, 2018 email that the application process included "terms and conditions" for participation in the specialty network. (Doc. 1-3.) Since MVP required Rutland Pharmacy execute the confidentiality agreements before it could examine the application form, Rutland Pharmacy did not know what all the "terms and conditions" of participation were. But the confidentiality agreements did not require Rutland Pharmacy to agree to any unknown terms or conditions.
Moreover, Mr. Murphy explained why Caremark does not provide applications until after the prospective network member has executed a confidentiality agreement:
Because Caremark's Application is detailed, a person reading it can discern significant information about how Caremark operates its specialty pharmacy networks and potentially also commitments the company has made to particular clients (e.g., MVP). This collection of terms is confidential, non-public information that Caremark treats as very competitively sensitive, if not wholly proprietary in nature. Caremark thus requires that any pharmacy applying to join the specialty network first execute the Confidentiality Agreement before receiving the Application.
(Doc. 91-35 ¶ 25.) The court has reviewed a copy of the application. (Doc. 91-34.) Rutland Pharmacy has presented no analysis or evidence suggesting that Mr. Murphy's explanation is unfounded. This conclusion is consistent with the court's prior order requiring that the application be sealed. (Doc. 126.) In sum, the court concludes that Rutland Pharmacy has failed to present evidence of an unreasonable application process.
IV. Remaining Issues
As discussed above, the court concludes that MVP is entitled to summary judgment on the basis that Caremark's "credentialing process" is not a pretext for directing pharmacy business to CVS's mail-order pharmacies and away from independent pharmacies like Rutland Pharmacy. That process remains available to Rutland Pharmacy. The evidence—even in the light most favorable to Rutland Pharmacy—does not support the theory that the application process is an excuse for excluding independent pharmacies from the specialty drug market.
This conclusion makes it unnecessary to resolve the parties’ arguments—briefed extensively in the competing Rule 56 motions—about whether 8 V.S.A. § 4089j applies to "specialty pharmacies." Assuming that it does, there is no evidence of any violation here. Rutland Pharmacy can apply to join the Vermont specialty network. If its application is denied without an adequate basis, if its customers face different co-pays for "specialty" medications compared to CVS mail-order pharmacies, or if Rutland Pharmacy's reimbursement for a "specialty" medication differs from that for a CVS mail-order pharmacy, then it might be necessary to determine whether 8 V.S.A. § 4089j applies to "specialty pharmacies." But the evidence presented in this case does not support Rutland Pharmacy's contention that MVP and Caremark treated Rutland Pharmacy differently than mail-order pharmacies in any material respect.
Conclusion
MVP's Motion to Strike (Doc. 119) is DENIED as described above.
Rutland Pharmacy's Motion for Summary Judgment (Doc. 86) is DENIED and MVP Health Care, Inc.’s Motion for Summary Judgment (Doc. 91) is GRANTED.