Pharmacists Challenge Third Party Prescription Programs: A Legal Analysis

Fink J.L. Siecker B. , Manager's Guide to Third Party Programs (Pharmacy Management Institute, Washington, D.C.) (1982) at xi.

One of the major problems with TPPPs is that many program administrators are not insurance companies. Thus, these program administrators are not regulated by the state and escape having to post performance bonds, establish escrow accounts, etc.

15 U.S.C. §1 (1976).

See, e.g., Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975); Albrecht v. Herald Co., 390 U.S. 145 (1968); United States v. Socony-Vacuum Oil Co., 310 U.S. 150 (1940); Chicago Board of Trade v. United States, 246 U.S. 231 (1917).

Address by Bernstein Lewis , Chief of the Special Litigation Section of the Justice Department, National Association of Retail Druggists Annual Convention, in Las Vegas, Nevada, October 15, 1969. See also Arizona v. Maricopa County Medical Society, 102 S. Ct. 2466 (1982).

556 F.2d 1375 (5th Cir. 1977), aff'd, 440 U.S. 205 (1979) [hereinafter referred to as Royal Drug].

440 U.S. at 216.

Medical Arts Pharmacy v. Blue Cross and Blue Shield, 518 F. Supp. 1100 (D. Conn. 1981) [hereinafter referred to as Medical Arts].

Id. at 1106–08. The pharmacist/plaintiffs also contended that the insurer was party to a horizontal conspiracy to fix prices with other insurers, but introduced no evidence to prove this claim.

Id. Courts have found resale price maintenance schemes to be illegal per se. Accord Albrecht v. Herald Co., 390 U.S. 145 (1968); United States v. Parke, Davis & Co., 362 U.S. 29 (1960); Kiefer-Stewart Co. v. Joseph E. Seagram & Sons, Inc., 340 U.S. 211 (1951).

Although the district court considered the purchaser issue to be critical, 518 F. Supp. at 1109, the appellate court, 675 F.2d 502, 505–06 (2d Cir. 1982). held that the distinction between Blue Shield as purchaser and as indemnitor was irrelevant. Blue Shield is the ultimate payor, and thus the drug plan differs significantly from invalidated vertical arrangements.

Medical Arts, supra note 8, at 1106–07. See Broadcast Music, Inc. v. CBS, Inc., 441 U.S. 1 (1979); National Soc'y of Professional Engineers v. United States, 435 U.S. 679 (1978). See also United States v. Topco Associates, Inc., 405 U.S. 596 (1972); Allison , Ambiguous Price Fixing and the Sherman Act: Simplistic Labels or Unavoidable Analysis? Houston Law Review 16:761 (1979).

Medical Arts, supra note 8, at 1109. Several authorities believe that novel or unique agreements, especially in the health care field or involving the professions require a rule of reason analysis. See Kallstrom , Health Care Costs by Third Party Payors: Fee Schedules and the Sherman Act , Duke Law Journal 1978:645; Leibenluft Pollard , Antitrust Scrutiny of the Health Professions: Developing a Framework for Assessing Private Restraints , Vanderbilt Law Review 34:927 (1981); Prepaid Prescription Plans Under Antitrust Scrutiny: A Stern Challenge to Health Care Cost Containment, Northwestern University Law Review 75:506 (1980). But see Arizona v. Maricopa County Medical Society, supra note 5.

675 F.2d 502 (2d Cir. 1982).

Sausalito Pharmacy, Inc. v. Blue Shield of California, [1981-1] Trade Cas. (CCH) para. 63.885 (N.D. Cal. March 16, 1981), aff'd, 677 F.2d 47 (9th Cir. 1982).

National Soc'y of Professional Engineers v. United States, 435 U.S. 679, 696 (1978).

As of Autumn 1982, five states have passed legislation regulating third party prescription plans. These include: Georgia, Alabama, Tennessee, Illinois, and Connecticut. Similar bills have been introduced in at least 12 other states, including: Arizona, Colorado, Idaho, Kentucky, Maryland, New Jersey, New York, Ohio, Pennsylvania, Texas, Virginia, and West Virginia, Pharmacists in several other states are also considering the introduction of bills in future state legislative sessions.

See, e.g., Ga. Code Ann. §1208 (1979).

Blue Cross and Blue Shield of Alabama v. Alabama Pharmaceutical Association, No. CV-81-PT10125 (N.D. Ala. July 1981) (case was dismissed).

Pub. L. No. 93-406, Title 1, §2, 88 Stat. 832 (codified at 29 U.S.C. §§1001-1381 (1976)).

15 U.S.C. §1 (1976).

U.S. Conts. art. 1, §10.

29 U.S.C. §§1001-1381 (1976).

29 U.S.C. §1144(a) (1976) (emphasis added).

29 U.S.C. §1144(b)(2)(A) (1976).

29 U.S.C. §1144(b)(2)(B) (1976).

29 U.S.C. §1002(1) (1976).

Royal Drug, 404 U.S. at 216–17.

29 U.S.C. §1144 (1976).

See Royal Drug, 404 U.S. at 215.

But see Wadsworth v. Whaland, 562 F.2d 70 (1st Cir. 1977) (New Hampshire law requiring group insurance policies to include emotional disorders was upheld under the “savings clause” even though the law indirectly affected employee benefit plans). See also Insurers' Action Council, Inc. v. Heaton, 423 F. Supp. 921 (D. Minn. 1976). For analysis of Wadsworth v. Whaland, see ERISA Preemption and Indirect Regulation of Employee Benefit Welfare Plans through State Insurance Laws, Columbia Law Review 78:1536 (1978); ERISA Preemption of State Law: The Meaning of “Relate To” in Section 514, Washington University Law Quarterly 58:143 (1980). For cases contrary to Wadsworth, see Hewlett-Packard Co. v. Barnes, 571 F.2d 502 (9th Cir.), cert. denied, 439 U.S. 831 (1978); Standard Oil Co. v. Agsalud, 442 F. Supp. 695 (N.D. Cal. 1977).

451 U.S. 504 (1981) [hereinafter referred to as Alessi]. See also Hewlett-Packard Co. v. Barnes, supra note 31; Standard Oil Co. v. Agsalud, supra note 31.

In Royal Drug, supra note 6, the court of appeals stated: “[P]olicyholders are basically unconcerned with the contract between the insurer and the Participating Pharmacy… .” 556 F.2d at 1381.

585 P.2d 12 (Or. App. 1978).

Alessi , supra note 32, at 525 n.21. See also American Telephone and Telegraph Co. v. Merry, 592 F.2d 118 (2d Cir. 1979); Stone v. Stone, 450 F. Supp. 919 (N.D. Cal. 1978).

The argument that third party legislation has competitive effects could be greatly strengthened by the showing of specific claims that third party agreements have anticompetitive effects.

National Soc'y of Professional Engineers v. United States, 435 U.S. 679, 790 (1976).

“The powers not delegated to the United States … or prohibited to the states are reserved to the states… .” U.S. Const. amend. X. See Blumstein Calvani , State Action as a Shield and a Sword in a Medical Services Antitrust Context: Parker v. Brown in Constitutional Perspective, Duke Law Journal 1978:389 (extensive examination of the state action exemption applying the perspectives of the tenth and eleventh amendments).

445 U.S. 97 (1980) [hereinafter referred to as Midcal].

317 U.S. 341 (1943).

See New Motor Vehicle Bd. v. Orrin W. Fox Co., 439 U.S. 96 (1978); Lafayette v. Louisiana Power & Light Co., 435 U.S. 389 (1978); Bates v. State Bar of Arizona, 433 U.S. 350 (1977); Cantor v. Detroit Edison Co., 428 U.S. 579 (1976); Goldfarb v. Virginia State Bar, 421 U.S. 773 (1975).

Midcal , supra note 39, at 97.

Id. In Midcal, the Supreme Court invalidated a California statute requiring wine producers and wholesalers to set retail prices. State immunity was denied under the second policy because no “active supervision by the state” existed. California simply authorized price-setting by private parties. The state did not establish the prices nor review the reasonableness of the price schedules.

U.S. Const. art. 1, §10.

Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398 (1934).

Allied Structural Steel Co. v. Spannus, 438 U.S. 234 (1978) [hereinafter referred to as Spannus]. See also United States Trust Co. v. New Jersey, 431 U.S. 1 (1977).

Spannus , supra note 46.

Linkletter v. Walker, 381 U.S. 618, 627 (1965); El Paso v. Simmons, 379 U.S. 497 (1965).

See Spannus , supra note 46, at 250.