BARCLAY DAMON LLP Brad M. Gallagher Linda J. Clark (pro hac … · 2020. 5. 6. · diabetic...

BARCLAY DAMON LLP Brad M. Gallagher Linda J. Clark (pro hac vice) Brian M. Culnan (pro hac vice) 80 State Street, 6th Floor Albany, New York 12207 Telephone: (518) 429-4200 Attorneys for Plaintiffs Matrix Distributors, Inc., PriMed Pharmaceuticals, LLC, and Oak Drugs Inc.

UNITED STATES DISTRICT COURT DISTRICT OF NEW JERSEY

Matrix Distributors, Inc., PriMed Pharmaceuticals, LLC, and Oak Drugs, Inc.,

Plaintiffs,

-against-

National Association of Boards of Pharmacy and OptumRx, Inc.,

Defendants.

AMENDED COMPLAINT C.A. No. 2:18-cv-17462-KM-MAH

Plaintiffs Matrix Distributors, Inc., PriMed Pharmaceuticals, LLC, and Oak

Drugs, Inc., by and through their attorneys, Barclay Damon LLP, as and for their

Amended Complaint against Defendants, allege as follows:

INTRODUCTION

1. This action arises from the wrongful acts of Defendants, National

Association of Boards of Pharmacy ("NABP") and OptumRx, Inc. ("OptumRx”).

Acting in concert, Defendants have imposed upon OptumRx’s nationwide network

Case 2:18-cv-17462-KM-MAH Document 158 Filed 02/18/20 of 93 PageID: 7785

2 20022892.1

of pharmacies a requirement that they may only source pharmaceuticals from

wholesale distributors accredited under the Verified-Accredited Wholesale

Distributor (“VAWD”) program administered by NABP. In doing so, Defendants

jointly imposed upon the drug supply chain tracing and licensing requirements that

are more stringent than the carefully-crafted tracing and licensing requirements set

forth in the federal Drug Supply Chain Security Act (“DSCSA”). Because that

federal statute contains an express preemption provision (in order to facilitate the

statute's goal of creating a uniform national policy with respect to tracking and

tracing prescription drugs and the licensure of wholesale distributors), the

requirements imposed by Defendants are preempted under DSCSA and through the

Supremacy Clause of the United States Constitution.

2. Although formally organized as a non-profit corporation, NABP is in

reality a state actor when it purports to regulate the conduct of wholesale distributors

through its VAWD program. NABP’s active membership is composed of solely

government actors, and at the time this action was commenced, its governing body

(Executive Committee) was comprised of nine current members/officers of State

boards of pharmacy, and three former members/officers of State boards of

pharmacy. The vast majority of its revenues are generated as a result of the

“services” NABP administers on behalf of the States and in which participation by

pharmacists and wholesalers is mandated by the States. NABP is financially


3 20022892.1

dependent upon the revenues generated by these State-mandated programs, and the

“resource-strapped” States depend upon NABP to assist them in regulating

pharmacists and wholesalers. As such, NABP is entwined with, and has a symbiotic

relationship with, the States that rely upon NABP to act as a cost-saving regulatory

agent.

3. NABP’s VAWD accreditation process is ill-defined, and its standards

and expectations are likewise opaque. By enforcing VAWD criteria that are more

stringent than the track and trace provisions of the DSCSA, NABP is effectively

disrupting the intended function of the drug supply chain, in violation of DSCSA’s

express preemption provisions. Furthermore, at no point in time have “cancelled”

VAWD applicants been afforded an opportunity to be heard, by way of a hearing, to

challenge either NABP's accreditation findings, or the very criteria upon which its

accreditation decisions are based. By applying impermissible criteria to deny some

of the accreditation applications submitted by Plaintiffs, NABP has acted in an

unlawful, arbitrary and capricious manner, and without any semblance of

meaningful due process.

4. OptumRx is one of the largest pharmacy benefit managers (“PBMs”)

in the nation. It administers the prescription drug benefit portion of the health

insurance provided by private employers, self-insured health plans, federal and state

employee health plans (including the plans for New Jersey state employees),


4 20022892.1

Medicare and Medicaid managed-care. OptumRx maintains a nationwide network

of approximately 67,000 pharmacies to dispense covered prescription services to the

members of those benefit plans for which OptumRx administers the prescription

drug benefit. OptumRx’s relationships with its network pharmacies are governed by,

among other things, provider contracts and manuals. In July 2016, OptumRx

announced to its network pharmacies that they could only source pharmaceuticals

from wholesalers who were VAWD-accredited (“the VAWD Requirement”), and

should they fail to abide by this requirement, they could face the prospect of audits,

recoupment, fines and assessments, and even termination from the OptumRx

network. In announcing and enforcing this requirement, OptumRx is willingly

collaborating with and abetting the improper State action of NABP.

5. Most independent pharmacies (i.e., pharmacies not affiliated with a

major corporation such as CVS or Walgreens) that purchase from Plaintiffs have at

least some patients whose prescription drug plans are administrated by OptumRx.

This poses a real dilemma for Plaintiffs because it is customary for pharmacies to

only order medication from wholesalers whose products can be dispensed to the

beneficiaries of many, if not all, insurance companies. Compounding the problem,

it is neither practical nor cost-effective for independent pharmacies to segregate

inventory from VAWD-accredited wholesalers from inventory purchased from non-

VAWD-accredited wholesalers. When OptumRx’s threats to pharmacies (warning


5 20022892.1

of the business dangers associated with dealing with non-VAWD-accredited

wholesalers) are coupled with the impracticality of segregating inventory from

VAWD-accredited wholesalers from inventories purchased from non-VAWD-

accredited wholesalers, independent pharmacies are effectively being forced to

purchase medications solely from VAWD-accredited wholesalers, even though there

is no State or Federal law requiring them to do so.

PARTIES

6. Plaintiff Matrix Distributors, Inc. (“Matrix”), is a corporation organized

under the laws of the State of New Jersey, with a principal place of business located

at 410-450 North Avenue East, Cranford, New Jersey. Matrix is duly licensed by the

State of New Jersey as a pharmaceutical wholesale distributor.

7. Established in 1999, Matrix is currently licensed in 35 states, selling

prescription drugs to approximately 2,500 independent pharmacies.

8. Matrix has grown over the past two decades from a 2,000 square foot

facility with one employee to a business that, at its peak, employed 78 persons at

three locations in three states.

9. Plaintiff PriMed Pharmaceuticals, LLC ("PriMed"), is a limited liability

company organized under the laws of the State of New Jersey, with a principal place

of business located at 34 Industrial Way East, Suite 1A, Eatontown, New Jersey.


6 20022892.1

PriMed is duly licensed by the State of New Jersey as a pharmaceutical wholesale

distributor.

10. Established in 2013, PriMed is currently licensed as a wholesaler in 39

states. PriMed primarily distributes generic pharmaceuticals and other medical

supplies to approximately 2,000 independent pharmacies.

11. At its inception, PriMed employed three persons. At its peak, PriMed

employed 25 persons. As a result of business lost due to the impact of the VAWD

requirement, it currently employs 20 persons.

12. Plaintiff Oak Drugs Inc. (“Oak”) is a New York corporation authorized

to transact business within the State of New Jersey, with a principal place of business

located at 80 Red Schoolhouse Road, Building 2, Suite 20, Chestnut Ridge, New

York. Oak is duly licensed by the State of New Jersey as a pharmaceutical wholesale

distributor.

13. Oak is also licensed in New York and eighteen other states. Oak

primarily distributes generic pharmaceuticals, as well as some OTC medications and

diabetic supplies, to approximately 145 independent pharmacies in the twenty states

in which it is licensed to operate.

14. Upon information and belief, defendant National Association of Boards

of Pharmacy ("NABP") is a non-profit corporation organized under the laws of the


7 20022892.1

State of Kentucky, with a principal place of business located at 1600 Freehanville

Drive, Mount Prospect, Illinois.

15. Upon information and belief, NABP's stated purpose is defined as

follows:

The purpose of the Association is to provide for interstate transfer in pharmacist licensure, based upon a uniform minimum standard of pharmacist education and uniform legislation; and to improve the standards of pharmacist education, licensure, and practice by cooperating with State, National and International Governmental Agencies and Associations having similar objectives. (NABP Constitution, Article II.)

16. Upon information and belief, defendant OptumRx, Inc. (“OptumRx"),

is a corporation organized under the laws of the State of California, with a principal

place of business located at 2300 Main Street, Irvine, California.

17. Upon information and belief, affiliated with United Healthcare,

OptumRx is one of the largest pharmacy benefit managers (“PBMs”) in the United

States. Like other PBMs, OptumRx contracts with both private and governmental

health plans to administer the prescription drug benefits afforded to participants in

those health plans. The plans administered by OptumRx cover a variety of health

insurance programs, including commercial (private) health plans, self-insured plans,

federal and state government employee health plans (including plans for New Jersey

state employees), Medicare and Medicaid managed-care.


8 20022892.1

18. Upon information and belief, OptumRx maintains a nationwide

network of approximately 67,000 pharmacies, which is about the same as the total

number of pharmacies located in the United States.

19. Upon information and belief, OptumRx contracts with its network

pharmacies to dispense covered prescription services to members of the benefit plans

for which OptumRx administers the prescription drug benefit. OptumRx’s

relationships with its network pharmacies are governed by various contractual

documents, including a Pharmacy Network Agreement, a Provider Manual, and

numerous informal provider communications and Network Updates. Participating

pharmacies must accept these comprehensive terms and conditions to participate in

OptumRx’s network.

PROCEDURAL HISTORY AND JURISDICTION

20. This action was originally commenced on or about December 14, 2018,

when Plaintiffs filed their Verified Complaint in Superior Court of New Jersey,

Middlesex County.

21. Upon information and belief, on or about December 20, 2018,

Defendants removed Plaintiffs’ state court action to this Court, pursuant to 28 U.S.C.

§ 1441, invoking this Court’s diversity of citizenship jurisdiction.

22. Upon information and belief, because no Defendant is a citizen of the

same state as any Plaintiff, and the amount in controversy exceeds $75,000, this


9 20022892.1

Court may exercise subject matter jurisdiction over this action, pursuant to 28 U.S.C.

§ 1332.

23. Upon information and belief, this Court may also exercise subject

matter jurisdiction over this action, pursuant to 28 U.S.C. § 1331, in that Plaintiffs

have asserted claims arising under the laws and Constitution of the United States,

including the Declaratory Judgment Act (28 U.S.C. § 2201), the Drug Supply Chain

Security Act, 42 U.S.C. § 1983, and the Supremacy and Due Process Clauses of the

United States Constitution.

24. Plaintiffs’ claims under New Jersey and New York law, as well as the

common law of those States, arise from the same set of facts and circumstances and

from part of the same case or controversy which give rise to their Federal claims.

Therefore, Plaintiffs invoke this Court’s supplemental jurisdiction pursuant to 28

U.S.C. § 1367.

25. Upon information and belief, because each Defendant transacts

business and has availed themselves of the privilege of conducting activities within

the State of New Jersey, and committed acts and omissions that have principally

caused injury within the State of New Jersey, this Court may exercise personal

jurisdiction over Defendants.


10 20022892.1

FACTS COMMON TO ALL COUNTS

I. Role of the Parties in the Drug Supply Chain

A. Synopsis of the Drug Supply Chain

26. Upon information and belief, a typical drug distribution chain has three

elements: (1) a manufacturer, which creates and sells prescription drugs to (2) a

wholesale distributor, which then sells the drug to (3) a hospital or pharmacy, which

dispenses it to patients.

27. Upon information and belief, wholesale distributors predominantly buy

pharmaceuticals from the manufacturers and distribute them directly to health care

providers such as hospitals and pharmacies.

28. Upon information and belief, the primary wholesale drug market is

dominated by three large players: AmerisourceBergen Corporation, Cardinal Health,

Inc., and McKesson Corporation (collectively “the Big Three”). Together, the Big

Three account for more than 92% of the U.S. drug distribution market.

29. Upon information and belief, in addition to the Big Three, there are

additional, large wholesale distributors such as Morris & Dickson, Smith Drug,

Anda Distribution and several cooperative wholesaler groups. Along with the Big

Three, these wholesalers constitute the “primary” distributors in the drug supply

chain.

30. Upon information and belief, in addition to the primary wholesalers,

the wholesale distribution market also includes smaller wholesalers, such as


11 20022892.1

Plaintiffs, that help service independent pharmacies that are unable to meet the

minimum purchasing requirements of the primary wholesalers to obtain drug

inventory.

31. Upon information and belief, the smaller secondary wholesalers can

also offer pharmacies lower pricing, more attractive purchasing terms, and improved

access to certain specific types of drugs that are in short supply or have shortages in

the distribution chain.

B. The Importance of Secondary Wholesale Distributors to Independent Pharmacies and Their Patients

32. Upon information and belief, secondary wholesale distributors play an

important role by serving as an alternative supply source to pharmacies who may not

use the primary wholesalers for their usual and anticipated day-to-day operations.

33. Upon information and belief, most, if not all, independent retail

pharmacies utilize a single, primary wholesaler. However, most, if not all,

independent retail pharmacies also utilize at least one and, more typically multiple,

secondary wholesale distributors. These secondary distributors play a critical role

for the independent pharmacy.

34. Upon information and belief, and by way of example, the primary

wholesalers utilize large, regional distribution centers to service their customers

within specific geographic regions. These regional distribution centers are often out

of stock in many items, or have a limited supply and, therefore, limit the quantity of


12 20022892.1

certain items that any one customer may purchase. The primary wholesalers also

regularly change which brands of generic drugs they stock, and will typically stock

no more than one or two brands of any particular generic drug. However, patients

are often very hesitant to switch brands; many patients like their medications to have

a consistent appearance (shape, size and color), or prefer one dosage form (pill,

capsule, liquid, etc.) over another. Independent retail pharmacies strive to make sure

they always have the brand and dosage form their patients want. This is one of the

important ways that small, neighborhood pharmacies can distinguish themselves

from the large chains like Walgreens and CVS. While primary wholesalers typically

deliver product to their customers once per week at most, secondary wholesalers

typically deliver products to their customers via next day delivery.

35. Upon information and belief, if the pharmacy’s primary wholesale

distributor’s regional distribution center is out-of-stock of a certain product, has

discontinued the brand or dosage form the pharmacy’s patients want, or is not

scheduled to make a delivery when the pharmacy needs it, the pharmacy must source

the product from a secondary wholesaler.

36. Upon information and belief, secondary wholesalers also support their

customers in many ways that the large, primary wholesalers do not. For example,

secondary wholesalers often provide their customers with extended payment terms

allowing them to pay in 30 or 60 days rather than the 7-day payment terms typically


13 20022892.1

enforced (via weekly automatic bank transfers) by the large primary wholesalers.

This cash flow is essential to many small pharmacies.

37. Upon information and belief, the secondary wholesalers often offer

products at much lower prices than primary wholesalers. Independent pharmacies

do not have the buying power of the large, chain pharmacies and, therefore, rely on

secondary wholesalers to achieve better margins. Because of the low reimbursement

rates provided by insurers (whose plans are administered by PBMs like OptumRx),

many pharmacies receive less in reimbursement than they pay for a product; that is,

they sell products at a negative margin. Independent pharmacies utilize secondary

wholesalers, and their lower prices, to try to avoid negative margins on items they

need to service their customers.

38. Upon information and belief, secondary wholesalers typically use call

centers staffed with telephone sales representatives that are in constant

communication with their customers. Based on these daily communications, the

sales representatives possess a wealth of information that is critical to the drug

supply chain, including knowledge of out-of-stock products, price increases on

drugs, availability of new generics, etc. Pharmacies rely on the information that they

get from their sales representatives to make smart buying decisions. The sales

representatives of the primary wholesalers visit their customers typically no more


14 20022892.1

than once every few months, and they provide none of the market intelligence

provided by the secondary distributor.

39. Upon information and belief, during a shortage for a particular

medication, it is relatively common for independent pharmacies to purchase

necessary life-sustaining prescription drugs from secondary wholesalers such as

Plaintiffs, because larger wholesalers often exhaust their inventory selling to

national, large-scale pharmacies.

40. Upon information and belief, the availability of smaller distributors like

Plaintiffs is critical to the viability of the independent pharmacies, and their

elimination from the marketplace could lead to adverse impacts on patient health,

safety, and welfare.

41. In short, Plaintiffs and other similarly situated secondary wholesalers

perform an important market function by minimizing drug waste, facilitating

discounted consumer prices, improving access to drugs, and ultimately reducing

health care costs.

C. The Role of the Pharmacy Benefit Manager Increases As Consolidation Occurs in That Industry

42. Upon information and belief, the PBM industry has seen dramatic

changes in recent years. More than 80% of the PBM marketplace (or 80% of the

covered lives in the United States) is now administered by one of the following four

PBMs: (1) Express Scripts, (2) CVS/Caremark, (3) OptumRx, and (4) Prime


15 20022892.1

Therapeutics. In December 2019, the market consolidated further, with Express

Scripts and Prime Therapeutics entering into a partnership.

43. Upon information and belief, the consolidation of power in the PBM

sector stems, in large part, from a series of mergers, and integrations. In addition to

these consolidations among PBMs, there has also been integration between

insurance companies and PBMs.

44. Upon information and belief, OptumRx is wholly owned by

UnitedHealth Group, Inc., the parent company of the nation’s largest insurance

company, United HealthCare Services, Inc.

45. As noted previously, as one of the largest PBMs, OptumRx is a major

player in the delivery of health care in the United States, acting as a “gatekeeper” in

administering prescription drug benefits for millions of citizens.

46. Upon information and belief, pharmacies can service a variety of

patients, but the patient benefits are administered and paid predominantly by one of

the four national PBMs previously identified. As such, these four PBMs are

essentially the only “Payors” of pharmacy benefits. Most pharmacies must maintain

agreements with all of the four national PBMs in order to ensure survival of their

business.

47. Upon information and belief, PBMs dictate the terms of participation

in their networks through Pharmacy Network Agreements and Provider Manuals,


16 20022892.1

and set forth the manner in which participating providers can carry out pharmacy

performance.

48. Upon information and belief, a pharmacy that is unwilling to abide by

the terms and conditions established by the PBM for participation in the PBM’s

network would be forced to discontinue servicing patients in the PBM’s network.

II. NABP and the VAWD Accreditation Program

A. NABP Structure

49. Upon information and belief, NABP's membership is comprised of “the

boards of pharmacy (or similar pharmacy licensing agency) of the individual States,

the District of Columbia, the Territories and Commonwealths of the United States,

the individual provinces of the Dominion of Canada, and such other jurisdictions

that apply to join the Association and are approved, from time to time, by the

Executive Committee.” NABP Const., Art. III, § 1(a).

50. Upon information and belief, NABP’s “active” membership consists of

only U.S. State Boards of Pharmacy, which for governance purposes are organized

into eight districts. For example, the member boards grouped into NABP’s District

2 are the pharmacy boards of the District of Columbia, Maryland, New Jersey, New

York, Pennsylvania, Virginia and West Virginia (all active members), as well as the

boards for the Canadian provinces of Ontario and Prince Edward Island (associate

members). See NABP Bylaws, Article IV.


17 20022892.1

51. Upon information and belief, only NABP’s active members have voting

power, and each active State Board of Pharmacy member appoints a voting delegate

who represents that State Board with respect to any matter presented at an Annual

Meeting or a District Meeting.

52. Upon information and belief, the “business, property, and affairs” of

NABP are managed and conducted by NABP’s Executive Committee.

53. Upon information and belief, the Executive Committee also sets the

“terms, conditions, and standards” for NABP’s Executive Director.

54. Upon information and belief, NABP acts principally through its

Executive Director and staff, under the direction of the Executive Committee.

NABP’s day-to-day operations are overseen by the Executive Director.

55. Upon information and belief, NABP’s Executive Committee is

comprised of 12 individuals. Four of the 12 are officers: the immediate Past

President, President, President-elect, and Treasurer. The other eight people are

Executive Committee Members who have been elected by the delegates to represent

each of the eight districts in which NABP groups its member boards. NABP’s

Executive Director serves as the Executive Committee’s Secretary and as an ex

officio member of the committee.


18 20022892.1

56. Upon information and belief, candidates seeking an Executive

Committee officer or member position must serve as a member or executive director

of an active member board of pharmacy at the time of election.

57. Upon information and belief, at the time that this lawsuit was

commenced, the President of NABP was a member of the New York State Board of

Pharmacy.


commenced, the President-Elect of NABP was the Executive Director of the North

Carolina Board of Pharmacy.


commenced, the Treasurer of NABP was a member of the Massachusetts Board of

Pharmacy.


commenced, the Chair of the Executive Committee was a former member of the

Texas State Board of Pharmacy.


commenced, among the eight non-officer members of NABP's Executive Committee

were the Vice President of the Maine Board of Pharmacy, the Executive Director of

the Virginia Board of Pharmacy, the Executive Director of the Tennessee Board of

Pharmacy, a member of the Arkansas State Board of Pharmacy, the chair of the


19 20022892.1

Idaho State Board of Pharmacy, and the Chair of the New Mexico Board of

Pharmacy. The other two non-officer members of NABP's Executive Committee

were a former member of the Illinois State Board of Pharmacy and a former member

of the North Dakota State Board of Pharmacy.

62. By reason of the foregoing, each of the members of NABP is a “State

actor."

63. By reason of the foregoing, each of the members of NABP's governing

body (Executive Committee) is a “State actor."

B. NABP’s Entwinement and Symbiotic Relationship with the States

64. Upon information and belief, NABP provides a number of services to

the States. For instance, all “active” NABP members must participate in the NABP

Clearinghouse, which is a national database of educational, competence, licensure,

and disciplinary information on pharmacists practicing in NABP’s member States

and jurisdictions. NABP members must report all disciplinary actions taken in their

State to the NABP Clearinghouse. States must participate in the NABP

Clearinghouse in order to be considered an “active” member of NABP.

65. Upon information and belief, NABP administers the North American

Pharmacist Licensure Exam (“NAPLEX”), which assesses an individual’s

competence and qualification to become a pharmacist. All 50 United States require


20 20022892.1

individuals seeking licensure as a pharmacist to pass the NAPLEX before they may

obtain a pharmacist license from any State.

66. Upon information and belief, NABP administers the Multi-State

Pharmacy Jurisprudence Exam (“MPJE”), which “tests the applicant’s knowledge

of federal and state pharmacy law” and is used by the States as part of the licensure

process. All States (except Arkansas, California and Idaho) require that prospective

pharmacists pass the MPJE.

67. Upon information and belief, NABP administers the Foreign Pharmacy

Graduate Examination, which most States utilize and require that graduates of

unaccredited pharmacy programs pass before they are eligible to apply for licensure

as a pharmacist.

68. Upon information and belief, NABP maintains a data-sharing platform

that “connects all the prescription monitoring programs in 47 States and the

Department of Defense to share prescription monitoring information.”

69. Upon information and belief, NABP maintains the E-Profile Connect

database, an electronic system where “[p]harmacists can obtain an electronic

profile” which “is used to connect pharmacists to various NABP programs.” All 50

States have personnel or staff authorized to access this system.


21 20022892.1

70. Upon information and belief, sixteen States participate in NABP’s

Multistate Blueprint Pharmacy Program, through which NABP inspects sterile

pharmacies for the participating States.

71. Upon information and belief, NABP serves for 32 States as the agent to

report disciplinary action to the National Practitioner Data Bank (“NPDB”). The

NPDB is a federal program that requires all providers, including pharmacists,

dentists, doctors, and nurses, as well as individual State licensing agencies, to supply

to NPDB information pertaining to any discipline to which the provider was

subjected.

72. Upon information and belief, NABP administers the Verified Pharmacy

Program (“VPP”), through which NABP inspects pharmacies for States, in some

cases to help the States make licensure determinations. Forty-nine States and the

District of Columbia have requested that NABP provide access to VPP to their staff

and personnel.

73. Upon information and belief, NABP produces a state newsletter for 35

States, for which NABP’s Executive Director also serves as the National News

Editor.

74. Upon information and belief, NABP has developed the Model State

Pharmacy Act and Model Rules of the National Association of Boards of Pharmacy

(“the Model Act”). The Model Act, updated every August and supplemented as


22 20022892.1

necessary, provides NABP’s member State boards with model language that can be

used when developing State laws or board rules. As relevant to this action, the Model

Act contains Model Rules for the licensure of, among others, wholesale distributors

(“the Model Rules”).

75. Upon information and belief, among the Model Rules for wholesale

distributors, NABP recommends:

The State Board shall have the authority to recognize a third party to inspect and accredit wholesale distributors;

The State Board may license by reciprocity a wholesale distributor that is licensed by the laws of another state, if the applicant is accredited by a third party recognized by the State Board; and

The State Board may waive requirements pertaining to the licensure of wholesale distributors for wholesalers that have obtained and maintained a Board-approved accreditation.

Model Rules, § 14. NABP’s VAWD program has been the only third-party

accreditation program of wholesale distributors that has been sanctioned/recognized

by any State.


commenced (and now), Carmen Catizone served as NABP’s Executive Director. Mr.

Catizone has held that position for the past thirty (30) years.

77. Upon information and belief, when Mr. Catizone joined NABP in 1985,

it employed seven persons and administered three programs. NABP now employs


23 20022892.1

150 persons, administers over a dozen programs, and generates over $35 million in

annual revenues.

78. Upon information and belief, NABP derives substantial revenue from

the examinations and accreditations that are required by the States and

provided/administered by NABP.

79. Upon information and belief, NABP generates approximately $22

million in fees from the examinations and assessments it administers, accounting for

66% of NABP’s annual revenues.

80. Upon information and belief, NABP generates another $5.9 million in

annual revenues through the accreditation programs that it provides, which amounts

to another 17% of NABP’s annual revenues. NABP further generates $4.3 million

annually, through the licensure-transfer fees that NABP receives, accounting for

12% of NABP’s revenues.

81. By reason of the foregoing, NABP is financially dependent upon the

revenues generated by its State-mandated programs, and the States are dependent

upon NABP to assist them in regulating pharmacists and wholesalers.

82. By reason of the foregoing, NABP is entwined with the State’s policies.

83. By reason of the foregoing, the States are entwined in NABP’s

management and control.


24 20022892.1

84. By reason of the foregoing, the public might reasonably conclude from

NABP’s relationships with its member State Boards that the government has lent its

support to NABP’s actions.

85. By reason of the foregoing, NABP has a “symbiotic relationship” with

the States.

86. By reason of the foregoing, NABP is a “State actor.”

C. NABP’s VAWD Accreditation Program

1. NABP Created the VAWD Program Under the Direction of the State Boards of Pharmacy

87. Upon information and belief, NABP established the VAWD

accreditation program for wholesale distributors in 2004.

88. Upon information and belief, in a white paper that he authorized, Mr.

Catizone wrote in 2006 that NABP developed the VAWD program “under the

direction of the state boards of pharmacy,” and that the VAWD program gives States

“a mechanism for inspecting and regulating wholesale distributors.” Carmen

Catizone, Counterfeit Drugs and States’ Efforts to Combat the Problem, Journal of

Pharmacy Practice (2006).

89. Upon information and belief, in a 2011 article, Mr. Catizone described

NABP’s relationship to the States through its programs, including the VAWD

program, as follows: “we [i.e., NABP] accredit internet pharmacies and wholesalers

on behalf of the states. . . . We also manage the Association of State Boards and as


25 20022892.1

well as accreditation programs for the states.” Carmen Catizone, Pharmacy Security

Breach, Federation of State Boards of Physical Therapy (2011 Spring Forum)

(emphasis added).

2. States’ Use of the VAWD Program

90. Upon information and belief, four States (Indiana, Iowa, Wyoming, and

North Dakota) require VAWD accreditation as a condition to obtaining a license for

wholesale distribution within those States.

91. Upon information and belief, twenty-two States “recognize” VAWD

accreditation, meaning that those States provide regulatory relief (for example,

waiving State licensing bonds) or otherwise waive duplicative licensing processes

for VAWD-accredited facilities.

92. Upon information and belief, while 26 States formally utilize the

VAWD program in some fashion, NABP provides all State Boards of Pharmacy with

information concerning wholesalers and the status of their VAWD applications,

including whether an application has been cancelled or whether a facility withdrew

its accreditation. NABP provided information to the States regarding the VAWD

application status of Matrix and PriMed.

93. Upon information and belief, a single state that requires VAWD

accreditation has a tremendous impact on the drug supply claim. During


26 20022892.1

congressional testimony in 2006, Mr. Catizone commented “from the State

perspective” as follows:

NABP will accredit all wholesale distributors, licensed or seeking licensure in the State of Indiana. And since an overwhelming majority of wholesale distributors conduct business in multiple States, that accreditation system required by Indiana [i.e., the VAWD program] is fast becoming a uniform and national standard.

Statement of Carmen Catizone, July 11, 2006, U.S. House of Representatives

hearing on “Pharmaceutical Supply Chain Security.”

3. The VAWD Accreditation Process

94. To obtain VAWD-accreditation, a wholesaler undergoes a compliance

review, which includes an assessment of the wholesaler’s operating policies and

procedures, licensure verification, survey of its facility and operations, background

checks and personnel reviews, and recordkeeping and screening procedures for

authentication and verification of drug sources. VAWD-accredited facilities are

reviewed annually and undergo a site survey every three years.

95. Upon information and belief, VAWD is a facility-specific

accreditation, meaning that VAWD accreditation cannot be transferred if an

applicant changes locations.

96. Upon information and belief, the VAWD application process begins

with the applicant’s completion of a pre-application questionnaire. The VAWD pre-


27 20022892.1

application questionnaire requires an applicant to agree with various statements,

including the following:

The facility must meet Section 582 of the Food, Drug and Cosmetic Act, as amended by the DSCSA; and

The facility is prohibited from distributing drugs that were at any time purchased by or from a pharmacy or practitioner. 97. Upon information and belief, after an applicant completes the pre-

application questionnaire, it can begin to submit a VAWD application for each

specific location for which the applicant seeks accreditation.

98. Upon information and belief, the application process requires the

applicant to submit various documents related to the operation of the facility. These

documents include the facility’s policies and procedures (“P&Ps”), documents

evidencing the applicant’s business organization, ownership and officers, the types

of products distributed, customers, and drug sources (vendors).

99. Upon information and belief, after a facility submits a VAWD

application containing the requisite documentation, NABP personnel review the

application and supporting documentation. If NABP personnel have questions about

an application or require additional information from the applicant, NABP will

submit these requests to the applicant in the form of “Application Review Reports.”

100. Upon information and belief, during this process, if NABP identifies

supply chain issues that it views as being inconsistent with the VAWD criteria,


28 20022892.1

NABP will not identify for the applicant the specific problematic transactions that

led NABP to that conclusion.

101. Upon information and belief, if the questions and requests posed of the

applicant in the Application Review Reports are answered to the satisfaction of

NABP’s accreditation personnel, then the facility’s P&Ps will be substantively

reviewed.

102. Upon information and belief, once an applicant adequately

demonstrates that its documentation, including its P&Ps, meets or substantially

meets the VAWD criteria, NABP conducts an on-site survey of the facility.

103. Upon information and belief, decisions to approve or deny an

application for VAWD accreditation are made by NABP’s Accreditation

Committee, which is comprised of the NABP accreditation team and Mr. Catizone.

Decisions to cancel a VAWD application are made by members of the Accreditation

Committee.

104. Upon information and belief, the ultimate reason(s) for cancellation of

a VAWD application are stated in the cancellation notice.

105. Upon information and belief, if a VAWD application is “cancelled,”

NABP does not afford the applicant the right to a hearing or an opportunity to

otherwise “appeal” the NABP decision or to challenge the criteria upon which

NABP’s decision may have been based.


29 20022892.1

106. Upon information and belief, the only recourse available to a facility

whose VAWD application was “cancelled” is to re-apply for accreditation.

Depending upon the reasons for cancellation, the facility may be required to wait

180 days before it can reapply for accreditation.

107. Upon information and belief, only when the Accreditation Committee

“denies” a facility’s application does the facility have a right to appeal the denial.

108. Upon information and belief, from January 2013 through January 2019,

the average time in process for the application of an accredited facility was 274 days,

while the average time in process for the application of a cancelled facility was 247

days.

4. The Relevant VAWD Criteria

109. Upon information and belief, to obtain VAWD accreditation,

wholesale distributors must satisfy the various VAWD criteria established by

NABP.

110. Upon information and belief, and as relevant to this action, the VAWD

criteria contain a Licensure Criterion No. 7 (“Criterion No. 7”) that provides:

The wholesale distributor does not engage in the wholesale distribution of prescription drugs that are purchased or received from pharmacies or practitioners, or from wholesale distributors that obtained them from pharmacies or practitioners. The wholesale distributor may receive prescription drugs returned from pharmacies or practitioners that were distributed by the wholesale distributor. A wholesale distributor that operates solely as


30 20022892.1

a reverse distributor may receive drugs from pharmacies and practitioners regardless of where they were obtained for destruction in accordance with applicable laws and regulations. Or, the drugs may be returned to the manufacturer or agent authorized by the manufacturer to accept returns on the manufacturer’s behalf. (emphasis added.)

111. Upon information and belief, although NABP refers to Criterion No. 7

as a licensing requirement, it is related to the sourcing and tracing of prescription

drugs in the supply chain, not licensing of wholesale distributors.

112. Upon information and belief, NABP interprets and applies Criterion

No. 7 to prohibit a wholesaler from distributing drugs that were ever purchased by

or from a pharmacy.

113. Upon information and belief, NABP’s prohibition against having a

pharmacy in the supply chain is an extension of its preference for so-called “one

step” supply chains, where purchases are made directly from manufacturers.

114. Upon information and belief, the VAWD criteria also contain a Facility

Criterion No. 5 (“Criterion No. 5”) that addresses co-located facilities. These

facilities can be described as two facilities, where one is a wholesale distributor and

the other a pharmacy, under common ownership but with separate licenses and

separate businesses.

115. Upon information and belief, Criterion No. 5 provides in pertinent part:

Wholesale distributor facilities co-located with another business shall maintain processes and systems for


31 20022892.1

separating and securing all aspects of the operation. Co-location with another business authorized to purchase prescription drugs shall comply with Federal and State licensing requirements, and the records of wholesale distribution must provide a clear audit trail that distinguishes all purchases and distributions of the wholesale distributor from any other entity.

116. Upon information and belief, NABP interprets and applies Criterion

No. 7 to create a structural impediment to wholesalers that buy prescription drugs

that have, at any time, been owned by “co-located facilities.”

117. Upon information and belief, the VAWD criteria utilized by NABP can

be unilaterally changed by NABP.

118. Upon information and belief, NABP has not revised Criterion No. 7

since 2013.

119. Upon information and belief, NABP revised the VAWD criteria in 2015

to purportedly make them consistent with the DSCSA.

120. Upon information and belief, when NABP revised the VAWD criteria

in 2015, the criteria were revised to remove various pedigree requirements from the

criteria.


in 2015, it did not revise or remove Criterion No. 7 from the VAWD criteria.


in 2015, it did not revise NABP’s requirement that prohibited wholesalers from


32 20022892.1

engaging in transactions involving drugs that had been purchased by or obtained

from a pharmacy.

III. Interplay Between the VAWD-Accreditation Program and Federal Law

A. The DSCSA Established a Uniform National Policy For Drug Tracing and Wholesale Distributor Licensing

123. Upon information and belief, wholesale distributors are regulated by a

myriad of Federal and State laws and regulations that govern their licensing and

conduct.

124. Upon information and belief, these laws are designed to ensure legal

safeguards for prescription drug distribution and protect the market from the sale of

counterfeit, adulterated, misbranded, subpotent, and expired prescription drugs.

125. Upon information and belief, and by way of example, the Prescription

Drug Marketing Act of 1987 (“PDMA”), amended by the Prescription Drug

Amendments of 1992 (“PDA”), sets the baseline for wholesale distribution

regulations. It requires that every wholesale distributor who engages in wholesale

distribution of prescription drugs in interstate commerce must be licensed by the

State licensing authority before engaging in the wholesale distribution of

prescription drugs. It also required that certain wholesalers provide a statement

(known as a pedigree) prior to the wholesaler’s distribution of prescription drugs.


33 20022892.1

126. Upon information and belief, there are no prohibitions in the PDMA

against a wholesale distributor purchasing from a pharmacy, a dual-licensed

wholesale distributor or a non-VAWD wholesaler.

127. Upon information and belief, additional Federal action regarding the

drug supply chain was taken in 2013 when Congress passed the Drug Quality and

Security Act (“DQSA”), which amended the Federal Food Drug, and Cosmetic Act

(“FDCA”), and outlined new requirements that would enhance drug supply chain

security by 2023.

128. Upon information and belief, the DQSA included the Drug Supply

Chain Security Act (“DSCSA”), which was intended to create a uniform national

policy with respect to drug tracing requirements and the licensure of wholesale

distributors. DSCSA was a carefully-crafted compromise between a variety of

competing interests. Ultimately, it sought to strengthen patient protections while

encouraging competition and recognizing and preserving the roles played by smaller

participants in the drug supply chain.

129. Upon information and belief, in support of the DSCSA’s goal to create

a uniform national system for the sourcing and tracking of prescription drugs from

manufacturers to dispensers, the DSCSA contains an express preemption provision

that prohibits all States from establishing or continuing to enforce any standards,

requirements or regulations with respect to drug tracing or wholesale distributor


34 20022892.1

licensure that are more stringent than, inconsistent with, directly related to, or

covered by the tracing and licensing standards and requirements of the DSCSA.

130. Upon information and belief, upon enactment, the DSCSA preempted

State product tracing requirements. Federal pedigree requirements remained in effect

until January 1, 2015. During that time period, States were prohibited from

regulating tracing in any way that was inconsistent with, more stringent than, or in

addition to the now-defunct pedigree requirements of the FDCA.

131. Upon information and belief, after January 1, 2015, the federal tracing

requirements established under the DSCSA took effect. States were thereafter

prohibited from regulating product tracing in any way that was inconsistent with,

more stringent than, or in addition to the new requirements established under the

DSCSA. The DSCSA’s requirements for wholesale distributors and other applicable

trading partners to provide and receive the transaction information, transaction

history, and a transaction statement for each transaction involving a pharmaceutical

supplanted the pedigree requirements that had existed since 1988 under the PDMA.

132. Upon information and belief, to enhance uniformity and eliminate

confusing and conflicting State laws, the DSCSA created new, nationally-

recognized standards for the documentation that must accompany nearly all drug

transactions. This “T3” documentation (which stands for Transaction Information,

Transaction History and Transaction Statement) replaced a patchwork of State rules


35 20022892.1

that required different “pedigrees” to accompany prescription drug transactions

depending on where the parties to the transaction were located. Although some

States were slow to recognize that their pedigree rules were preempted by the

DSCSA, the new uniform standard eventually supplanted the patchwork of pre-

existing State laws.

133. Upon information and belief, another key aspect of the DSCSA’s goal

of creating a national uniform system and policy for the sourcing and tracking of

prescription drugs is the law’s requirement that market participants deal only with

authorized trading partners. To be deemed an “authorized” trading partner under the

DSCSA and, thus, eligible to buy and sell prescription drugs, a wholesale distributor

must meet certain criteria.

134. Upon information and belief, a wholesale distributor that is properly

licensed as such and is registered with the FDA meets the DSCSA’s definition of an

“authorized” trading partner, even if it also holds a pharmacy license. Therefore, the

DSCSA allows “co-located facilities” to lawfully engage in prescription drug

transactions.

135. Upon information and belief, the DSCSA explicitly recognizes that

transfers of prescription drugs among affiliated entities or entities under common

control are permitted and are not considered a “transaction” that must be documented

on the T3 paperwork.


36 20022892.1

B. The Interplay Between the VAWD Program and the DSCSA

136. Upon information and belief, it is quite common for a single entity, or

for entities under common ownership, to hold both pharmacy and wholesale

distribution licenses. These business models have existed and been an important part

of the drug supply chain for decades.

137. Upon information and belief, despite the fact that the DSCSA clearly

allows wholesale distributors to engage in prescription drug transactions with “co-

located” facilities, NABP requires the dual-licensed facilities to erect “firewalls”

when such transactions occur. In doing so, NABP effectively prevents (or at least

discourages) VAWD-accredited facilities from engaging in these legal transactions.

NABP’s objection to these sources is inconsistent with, and more restrictive than,

Federal law.

138. Upon information and belief, NABP subjects applications from, and

transactions with, wholesale distributors that are “co-located” with pharmacies to

“additional scrutiny.” For the wholesaler selling to such a facility, this additional

scrutiny means additional due diligence and the need to produce a litany of backup

paperwork not otherwise required under Federal or State laws. For the “co-located”

wholesale distributor, it must demonstrate, according to NABP’s website, that it

employs “separate account numbers to distinguish prescription drug purchases made

by” the pharmacy and the wholesaler. NABP’s website also provides that wholesale


37 20022892.1

distributors that “have a license issued in the same name and address as a pharmacy

cannot sell drugs purchased under the pharmacy account.” Finally, if the co-located

pharmacy is part of a group purchasing organization, it must “demonstrate that they

are not limited in the use of drugs purchased under these contracts.”

139. Upon information and belief, since the passage of the DSCSA, the Food

and Drug Administration (“FDA”) has issued guidance to supply chain participants

to help them identify “suspect” or “illegitimate” prescription drugs that must be

removed from the supply chain. Although the FDA identified many characteristics

and scenarios that could increase the risk of a suspect or illegitimate products

entering the supply chain, it did not identify the drug’s ownership by a “co-located”

facility as one such scenario. In other words, neither Congress nor the FDA has

deemed transactions involving co-located facilities as problematic or potentially

harmful to the supply chain or the public. Only NABP has sought to eliminate these

types of transactions from the industry and create barriers to the flow of products

between authorized trading partners.

140. Upon information and belief, the DSCSA neither considers drugs that

have at any time been owned by a co-located facility to be “suspect” nor does it

require that transactions involving them be “verified” any differently than any other

transaction with a trading partner.


38 20022892.1

141. Upon information and belief, the VAWD criteria that subject

transactions involving co-located facilities to heightened scrutiny exceed the clear

requirements of the DSCSA in a way that is exclusionary to wholesalers who

properly purchase from wholesalers that also have a pharmacy license.

142. Upon information and belief, State and Federal laws do not subject “co-

located” facilities to “additional scrutiny.”

143. Upon information and belief, none of the additional conditions imposed

by NABP in its VAWD criteria are recognized in any law or regulation.

144. By reason of the foregoing, the VAWD criteria, as interpreted by

NABP, are inconsistent with, and more stringent than, the DSCSA in that they

prevent VAWD-accredited wholesalers engaging in legal transactions with certain

authorized trading partners, specifically those wholesalers that are also licensed as,

or “co-located” with, pharmacies. This inconsistency significantly undermines the

DSCSA’s goal of creating a uniform national policy relating to the source and

tracking of prescription drugs in the supply chain.

IV. OptumRx Announces That Its Network Pharmacies May Only Source Pharmaceuticals From VAWD-Accredited Wholesalers

A. The VAWD Accreditation Requirement

145. Upon information and belief, as early as April 2016, OptumRx explored

ways to utilize more restrictive contractual requirements to address concerns about

its network pharmacies’ sourcing of medications.


39 20022892.1

146. Upon information and belief, one of the methods explored by OptumRx

personnel to address concerns about its network pharmacies’ sourcing of

medications was “partnering with an accreditation” provider to have wholesale

distributors meet OptumRx guidelines and the standards of the accrediting agency.

147. Upon information and belief, at the time that OptumRx was considering

the adoption of a requirement requiring its network pharmacies to source

medications from an accredited wholesaler, only one such third-party accreditation

program for wholesalers was identified – the VAWD Program administered by

NABP.

148. Upon information and belief, OptumRx decided during the second

quarter of 2016 that OptumRx would require its network pharmacies to source

medications dispensed to OptumRx members from only VAWD-accredited

wholesalers.

149. Upon information and belief, OptumRx first announced the VAWD

Requirement in a July 2016 announcement sent to its network pharmacies.

150. Upon information and belief, in the announcement sent to its 67,000

network pharmacies, OptumRx notified the pharmacies that the terms and conditions

of their agreements with OptumRx were being amended:

Effective October 1, 2016, changes will be made to the provider manual stating that your pharmacy MUST purchase ALL medications dispensed for claims being dispensed to OptumRx


40 20022892.1

participants from a Verified-Accredited-Wholesale Distributor (VAWD).

151. Upon information and belief, on or about October 1, 2016, OptumRx

implemented the VAWD Requirement through an update to its pharmacy network’s

Provider Manual.

152. Upon information and belief, OptumRx has advised its network

pharmacies that failure to comply with the VAWD Requirement could result in

penalties and fines and potentially termination from the OptumRx pharmacy

network. For example, OptumRx’s 2018 Provider Manual stated:

If Network Pharmacy Provider fails to promptly provide such requested documents or the wholesaler is not NABP, VAWD (Verified-Accredited Wholesaler Distributor), Administrator may immediately offset 100% of the amount for any of the paid claims in question and impose additional fines or penalties.

153. Upon information and belief, the potential consequences of failing to

comply with the VAWD Requirement are well known to pharmacies that participate

in OptumRx’s network. For example, OptumRx distributed a Provider Manual

update to its network pharmacies that stated:

Failure to comply with the Agreement and manual may result in disciplinary action, up to and including termination from all pharmacy networks. Network Pharmacy Providers should routinely consult the Manual to ensure compliance.


41 20022892.1

154. Upon information and belief, prior to implementing the VAWD

Requirement, OptumRx personnel knew that forcing pharmacies to only purchase

products from VAWD-accredited wholesalers could result in higher costs.

155. Upon information and belief, because the VAWD Requirement makes

it operationally and financially impractical and extraordinarily risky for pharmacies

to purchase product from non-VAWD wholesalers, the VAWD Requirement is a de

facto prohibition against a network pharmacy exercising its otherwise legal right to

purchase from any non-VAWD wholesale distributor.

156. Upon information and belief, beginning on or around the initial October

1, 2016 implementation date and continuing through the summer of 2018, OptumRx

provided a series of extension letters to those wholesalers who were actively in the

VAWD accreditation process that they could share with their pharmacy customers

in the OptumRx network.

157. Upon information and belief, as a result of OptumRx’s decision to

implement the VAWD Requirement, NABP experienced a temporary increase or

“surge” in VAWD applications. NABP’s average of about 36 applications per year

rose to about 100 applications right after OptumRx’s announcement of the VAWD

Requirement.


42 20022892.1

158. Upon information and belief, in July 2018, OptumRx decided that it

would no longer provide additional extensions to wholesalers whose VAWD

applications had not been approved by NABP.

159. Upon information and belief, OptumRx notified its pharmacy network

via an announcement that effective July 1, 2018, OptumRx would not grant any

additional extensions for those wholesalers who had applied for VAWD

accreditation prior to July 1, 2017. For those wholesalers who applied for VAWD

accreditation after July 1, 2017, OptumRx would provide an extension to provide

the wholesalers with one full year from the date of application to obtain VAWD

accreditation.

160. Upon information and belief, in late August 2018, in connection with

the resolution of a lawsuit challenging the VAWD Requirement, OptumRx extended

one final time the VAWD accredited wholesaler deadline to December 31, 2018.

161. Upon information and belief, in or about November 2018, OptumRx

announced that the VAWD Requirement was going to be fully implemented as of

January 1, 2019.

B. OptumRx Provided Exemptions to the VAWD Requirement that Favored Large Wholesalers

162. Upon information and belief, following OptumRx’s announcement of

the VAWD Requirement, a number of large wholesale distributors contacted


43 20022892.1

OptumRx to raise concerns about the effect that the VAWD Requirement would

have on their respective businesses.

163. Upon information and belief, these large wholesalers were concerned

about the impact of the VAWD Requirement because not all of their distribution

facilities were VAWD-accredited, and VAWD is a facility-specific accreditation.

164. Upon information and belief, because VAWD is a facility-specific

accreditation, if a wholesaler (regardless of size) has more than one distribution

facility, each facility is subject to separate compliance and policy review, inspection,

and accreditation.

165. Upon information and belief, even though VAWD is a facility-specific

accreditation, OptumRx applied a “common ownership” exemption to the VAWD

Requirement for the large wholesalers. Under this exemption, if the parent company

was a primary wholesaler and at least one of its distribution centers was VAWD-

accredited, then all of its distribution centers would be deemed compliant with the

VAWD Requirement “as long as they are working towards VAWD accreditation.”

166. Upon information and belief, and by way of example,

AmerisourceBergen had three separate facilities that had pending applications for

VAWD accreditation. As of January 23, 2019, these applications had been pending

for 1048, 1048, and 1050 days, respectively. Because these applications were


44 20022892.1

“pending,” these AmerisourceBergen facilities were not subject to the VAWD

Requirement—even though the VAWD program is facility specific.

C. OptumRx’s Enforcement of the VAWD Requirement

167. Upon information and belief, between July 2016 and December 31,

2018, OptumRx routinely sent notices to its network pharmacies that purchasing

products from non-VAWD accredited wholesalers was prohibited.

168. Upon information and belief, OptumRx conducts both routine and

exhaustive in-depth audits of its network pharmacies. The OptumRx Provider

Agreement sets forth comprehensive information and document expectations that a

pharmacy is required to provide to OptumRx when it is being audited.

169. Upon information and belief, the VAWD Requirement is enforced by

OptumRx’s audit team.

170. Upon information and belief, OptumRx performs four types of audits

of its network pharmacies. Those audits are: real-time; desktop; on-site; and

investigative.

171. Upon information and belief, OptumRx only audits its network

pharmacies for compliance with the VAWD Requirement as part of an investigative

audit. An investigative audit is triggered by tips, referrals or internal analytics that

show “suspicious activity” by the pharmacy. During an investigative audit,


45 20022892.1

OptumRx reviews the claims submitted by the pharmacy, as well as the pharmacy’s

product purchases.

172. Upon information and belief, OptumRx performs between 500 to 600

investigative audits annually. All of these audits are of independent pharmacies.

173. Upon information and belief, as part of the investigative audit,

OptumRx requests that the pharmacy have its wholesalers directly send to OptumRx

invoices or an Excel spreadsheet supporting the purchases by the network pharmacy.

174. Upon information and belief, the VAWD Requirement requires

OptumRx to make assumptions about dispensed products. Indeed, OptumRx

personnel have testified that there is no way for OptumRx to definitely determine

whether the pharmaceuticals that a pharmacy dispenses to its members were sourced

from a VAWD-accredited wholesaler.

175. Upon information and belief, notwithstanding the foregoing,

OptumRx’s Provider Manual states that OptumRx will require its network

pharmacies to prove that they have dispensed a product purchased from a VAWD-

accredited wholesaler to the OptumRx member.

176. Upon information and belief, prior to January 1, 2019, if OptumRx

auditors determined that a pharmacy was not purchasing from VAWD-accredited

wholesalers, the pharmacy received a warning letter reminding the pharmacy of the

VAWD Requirement and that it needed to comply.


46 20022892.1

177. Upon information and belief, after January 1, 2019, OptumRx began

issuing cease and desist letters (rather than warning letters) to pharmacies that were

in violation of the VAWD Requirement, and threatened termination and penalties.

178. Upon information and belief, as of May 22, 2019, OptumRx had not

recouped any payments made to a pharmacy solely due to non-compliance with the

VAWD Requirement.


assessed any fines or penalties against a pharmacy solely due to non-compliance

with the VAWD Requirement.


terminated the provider contract of a pharmacy solely due to non-compliance with

the VAWD Requirement.

V. Plaintiffs’ Efforts to Obtain VAWD-Accreditation

181. Upon information and belief, prior to October 1, 2016, participation in

the VAWD program was voluntary, and there was no perceived economic benefit to

wholesalers in obtaining VAWD accreditation.

182. Upon information and belief, prior to October 1, 2016, no pharmacies

or vendor suppliers required wholesalers to be VAWD-accredited to conduct

business.


47 20022892.1

183. Upon information and belief, once OptumRx implemented the VAWD

Requirement, participation in the VAWD program effectively became mandatory.

184. But for OptumRx’s implementation of the VAWD Requirement in

2016, none of the Plaintiffs would have sought VAWD accreditation.

A. Matrix’s Efforts to Obtain VAWD-Accreditation

185. Since September 2016, Matrix has attempted to obtain VAWD

accreditation from NABP. However, despite being fully compliant with Federal and

State law, and using its best efforts to comply with NABP’s more stringent tracing

requirements, NABP has not granted accreditation to Matrix.

186. On September 20, 2016, Matrix submitted to NABP a completed

application for VAWD accreditation, along with the payment of fees totaling

$5,675.00.

187. Upon information and belief, on or about April 24, 2017, Matrix

received an e-mail from NABP that its VAWD Application had been “cancelled”

because, among other reasons, Matrix “is the participant in a supply chain which

includes the sale and distribution of prescription product by a pharmacy.”

188. After receiving the Cancellation Notice from NABP, Matrix’s Chief

Compliance Officer asked NABP to identify what NABP perceived to be

problematic sources. NABP refused to do so, believing that providing the requested


48 20022892.1

information would effectively help Matrix “write itself into compliance” with the

VAWD criteria.

189. On April 28, 2017, through its counsel, Matrix advised NABP that it

“is committed to obtaining VAWD accreditation and seeks a stay of the

‘cancellation’ while it is in the process of providing the additional information and

documents that NABP has requested of it and the parties work in good faith to correct

any perceived or actual issues with [the VAWD Application].” Matrix also requested

a consultation with NABP to discuss the cancellation and the specific instances of

alleged non-compliance identified by NABP.

190. Upon information and belief, on May 10, 2017, NABP issued the

following ultimatum to Matrix:

Matrix needs to make a choice: change its business model and operations to comply with VAWD accreditation criteria, or continue to conduct business as is without accreditation. If Matrix is willing to modify its business model and is committed to complying with VAWD accreditation criteria, the NABP accreditation team is willing to work directly with Matrix throughout the accreditation process.

191. Upon information and belief, also on May 10, 2017, a conference call

between Matrix and NABP’s Co-Executive Director and Senior Managing Director

was held. NABP advised Matrix to submit a root-cause analysis and revised P&Ps

relating to Matrix’s supply chain sources.


49 20022892.1

192. In order to satisfy NABP’s request, Matrix retained a law firm well-

versed in pharmacy law to perform the requested root-cause analysis and assist

Matrix in revising its P&Ps.

193. On June 9, 2017, Matrix’s attorneys transmitted to NABP the root-

cause analysis and revised P&Ps. The root-cause analysis continued a Corrective

Action Plan to address concerns regarding products that may have been purchased

by or obtained from a pharmacy. Matrix advised NABP that it would no longer

purchase inventory directly from any pharmacies, and it further stated that it was

willing to make any reasonable modifications to its procedures to ensure VAWD

accreditation.

194. Although there are no State or Federal laws or regulations prohibiting

transactions with a pharmacy in the supply chain, or with co-located facilities,

Matrix offered to modify its business practices and cease engaging in transactions

with such facilities.

195. Upon information and belief, on August 23, 2017, without any notice,

NABP cancelled Matrix’s renewed VAWD application, claiming Matrix was not

compliant with the VAWD criteria. NABP advised Matrix that it had to wait a

period of six months before it reapply for VAWD accreditation.

196. Upon information and belief, NABP did not afford Matrix with a

hearing or an opportunity to otherwise “appeal” the NABP decision to “cancel” the


50 20022892.1

Matrix VAWD Application or challenge the criteria upon which NABP’s decision

was based.

197. On March 30, 2018, Matrix reapplied for VAWD accreditation.

198. As noted previously, VAWD accreditation is location specific. In

September 2018, Matrix withdrew its application for VAWD accreditation because

Matrix had to move to a different facility location for reasons unrelated to this action.

199. Upon information and belief, on or about December 13, 2018, Matrix

submitted another application for VAWD accreditation.

200. Upon information and belief, through its counsel, Matrix requested that

NABP provide Matrix with provisional or conditional accreditation or an expedited

review of its application in light of the January 1, 2019 implementation date set by

OptumRx for the VAWD Requirement. NABP refused that request.

201. Upon information and belief, the VAWD application that Matrix

submitted to NABP on or about December 13, 2018, remains pending at this time.

B. PriMed’s Efforts to Obtain VAWD-Accreditation

202. Since September 2016, PriMed has attempted to obtain VAWD

accreditation from NABP. However, despite being fully compliant with Federal and

State law, and using its best efforts to comply with NABP’s more stringent tracing

requirements, it was not until November 20, 2019, that PriMed achieved


51 20022892.1

accreditation. NABP’s “cancellations” of PriMed’s first two VAWD applications

were arbitrary and without meaningful due process.

203. Upon information and belief, PriMed first applied for VAWD

accreditation on or about September 8, 2016.

204. Upon information and belief, on or about April 26, 2017, NABP

“cancelled” PriMed’s VAWD application, among other reasons, because NABP

determined that PriMed had pharmacies in its supply chain.

205. Thereafter, PriMed made the business decision, to its financial

detriment, to stop making pharmaceutical purchases from both pharmacies and co-

located facilities, because obtaining VAWD accreditation was necessary for PriMed

to maintain its business of selling to pharmacies in the OptumRx network.

206. Upon information and belief, after cancelling PriMed’s first VAWD

application, NABP did not afford PriMed with a hearing or an opportunity to

otherwise “appeal” NABP’s decision to “cancel” the VAWD application or

challenge the criteria upon which NABP’s decision was based.

207. On or about March 2, 2018, PriMed submitted to NABP a second

application for VAWD accreditation.

208. Upon information and belief, on or about May 31, 2018, NABP

requested additional documentation from PriMed. Among other things, NABP


52 20022892.1

requested that PriMed produce wholly revised P&Ps within 90 days (i.e., August 29,

2018).

209. Upon information and belief, NABP also requested certain transaction

histories. However, of the 30 vendors for whom transaction histories were requested,

the vast majority were pharmacy vendors that were cited in PriMed’s application

source list as vendors from whom PriMed had ceased purchasing.

210. On or about June 29, 2018, PriMed submitted all of the transaction

documents requested, and provided clarification on certain questions raised by

NABP. PriMed continued to revise its P&Ps, which were not due to NABP until

August 29, 2018.

211. On or about August 23, 2018, NABP advised PriMed that it was

“cancelling” its VAWD application (ahead of the August 29, 2018 deadline for

PriMed to submit revised P&Ps) because, among other reasons, PriMed had “sources

that are dually-licensed as a wholesale distributor and a pharmacy and/or co-located

with a pharmacy.”

212. Upon information and belief, when PriMed asked NABP to identify

what NABP perceived to be problematic sources, NABP refused to identify those

sources for PriMed.

213. Notwithstanding the “early” cancellation of its VAWD application,

PriMed submitted its revised P&Ps to NABP on August 27, 2018, via email and by


53 20022892.1

sending a flash drive via overnight mail. Due to purported technical issues, PriMed

again submitted its P&Ps by email at 2:00 p.m. on August 29, 2018.

214. Upon information and belief, on August 29, 2018, at 5:51 p.m, only a

few hours after PriMed submitted its P&Ps by email, NABP advised PriMed that its

P&Ps were not compliant with the VAWD criteria. NABP provided PriMed an

opportunity to reapply for VAWD accreditation before the expiration of the 180-day

waiting period by submitting additional documents and information.

215. Upon information and belief, NABP cancelled PriMed’s second

VAWD application based on sourcing practices that PriMed had discontinued prior

to submitting its second VAWD application and which were addressed in its revised

P&Ps.

216. On September 28, 2018, PriMed submitted to NABP the additional

information that NABP had requested of PriMed. In the materials, PriMed stated

that, over the past year, PriMed had adjusted its business practices and drafted

policies to protect against suspect products being introduced into its inventory (to

ensure full compliance with FDA’s March 2018 Draft Guidance on the topic). With

respect to NABP’s concern about sourcing from dual-licensed wholesale distributors

or pharmacies, PriMed provided NABP with the specific procedures that PriMed

already employed to eliminate such transactions from its business model. PriMed


54 20022892.1

further advised, “If additional steps are required by NABP, we are more than willing

to revise our procedures to satisfy any deficiency.”

217. Upon information and belief, on or about October 22, 2018, NABP

again rejected PriMed’s submission as being not VAWD-compliant. NABP

prohibited PriMed from reapplying for accreditation for 180 days (i.e., until April

20, 2019).

218. PriMed believed that, rather than judging PriMed based on its current

business practices, NABP arbitrarily denied PriMed’s VAWD application, relying

on past business practices that are legal but which NABP does not approve.

219. At no point during the process associated with PriMed’s second VAWD

application did NABP afford PriMed with a hearing or an opportunity to otherwise

“appeal” NABP’s decision to “cancel” the VAWD application or challenge the

criteria upon which NABP’s decision was based.

220. Because of OptumRx’s announcement that, as of January 1, 2019, the

VAWD Requirement was going to be fully implemented, on November 29, 2018,

PriMed requested that NABP waive the 180-day waiting period for resubmitting a

VAWD application and that NABP permit PriMed to re-apply immediately. NABP

denied PriMed’s request on December 3, 2018.

221. Upon information and belief, through its counsel, PriMed requested

that NABP provide PriMed with provisional or conditional accreditation or an


55 20022892.1

expedited review of PriMed’s accreditation status in light of the January 1, 2019

implementation date for the VAWD Requirement. NABP also refused that request.

222. Upon information and belief, on or about April 1, 2019, PriMed

submitted a third application for VAWD accreditation.

223. From PriMed’s perspective, NABP’s processing of its third VAWD

application (while this action was pending) was markedly different; that is, NABP

was far more collaborative and cooperative than during the processing of its first two

(pre-litigation) applications.

224. Upon information and belief, on or about November 20, 2019, NABP

granted PriMed’s third application for VAWD accreditation.

C. Oak’s Efforts to Obtain VAWD-Accreditation

225. Despite Oak being fully compliant with Federal and State law, and

using its best efforts to comply with NABP’s more stringent tracing requirements,

NABP did not accredit Oak until NABP granted Oak’s second application for

VAWD accreditation on or about October 22, 2019. NABP’s “cancellation” of

Oak’s first VAWD application was arbitrary and without meaningful due process.

226. Oak began operations as a wholesale distributor in February 2018, and

obtained its first wholesale distributor license, from the State of New York, in May

2018.


56 20022892.1

227. Upon information and belief, on or about May 21, 2018, Oak submitted

to NABP a completed application for VAWD accreditation, along with the payment

of fees totaling $5,500.00.

228. Upon information and belief, on or about June 26, 2018, NABP

requested additional information from Oak. Among other things, NABP required

that Oak produce P&Ps within 90 days.

229. Upon information and belief, on or about July 16, 2018, Oak submitted

all of the documents requested, and provided clarification on certain questions raised

by NABP. In addition, Oak advised NABP that it was modifying its business model

and going forward would only purchase from VAWD-accredited wholesalers and

drug manufacturers. This change was not required of Oak, but it thought that the

change would illustrate to NABP Oak’s commitment to the VAWD process. Since

July 2018, Oak has only sourced pharmaceuticals from VAWD-accredited

wholesalers, and has not purchased pharmaceuticals from any non-VAWD

accredited sources.

230. Upon information and belief, on multiple occasions, NABP sought

information concerning the relationship between Oak’s equity owners and certain

independent pharmacies. For example, NABP once requested information

concerning all of Oak’s “affiliates involved in the sale, distribution, or dispensing of

prescription drugs and/or prescription devices.”


57 20022892.1

231. Oak provided to NABP the requested information and identified fifteen

(15) different pharmacies in which Oak’s owners also had an ownership interest.

Oak also identified each of those pharmacies’ equity holders by name and

percentage.

232. Upon information and belief, none of the 15 pharmacies identified by

Oak fell within the definition of an “affiliate,” as set forth in the DSCSA. See 21

U.S.C. § 360eee(1).

233. Oak is a completely separate entity from the 15 pharmacies identified

by NABP, and they do not share any warehousing or other facilities with Oak. The

only relationship between Oak and these pharmacies are that they are Oak

customers. Oak does not purchase any pharmaceuticals from these or any other

pharmacy.

234. Upon information and belief, and notwithstanding the foregoing, on

or about December 6, 2018, NABP “cancelled” Oak’s VAWD application. In

the vague words of NABP, Oak’s application had been “cancelled” because its

P&Ps were “inconsistent and, as written, will not secure the drug supply chain.”

No further detail for the reasons why Oak’s application was cancelled were

provided.


58 20022892.1

235. Upon information and belief, the real reason that NABP cancelled

Oak’s VAWD application was its equity holders’ separate and distinct

ownership interests in independent pharmacies.

236. At no point in the process in connection with Oak’s first VAWD

Application was Oak afforded a hearing or an opportunity to “appeal” NABP’s

decision to “cancel” its VAWD application or challenge the basis for NABP’s

decision.

237. Upon information and belief, NABP’s adverse decision on Oak’s first

VAWD application prevented Oak from securing wholesale distributor licenses in

those States where VAWD accreditation is a condition to licensure.

238. On or about February 4, 2019, Oak submitted its second application for

VAWD accreditation.

239. From Oak’s perspective, NABP’s processing of Oak’s second VAWD

application (while this action was pending), was markedly different; that is, NABP

was far more collaborative and cooperative than during the processing of its first

(pre-litigation) application.

240. Upon information and belief, on or about October 22, 2019, NABP

granted Oak’s second application for VAWD accreditation.


59 20022892.1

VI. OptumRx’s Willing Partnership and Collaboration with NABP Makes It a “State Actor”

241. Upon information and belief, in various internal announcements about

the VAWD Requirement, OptumRx characterized its relationship with NABP as a

“partnership.”

242. Upon information and belief, in an internal email with a member of

OptumRx’s communications team, the OptumRx Vice President who decided to

adopt the VAWD Requirement explained that OptumRx laid “the groundwork to

establish requirements on purchasing from VAWD distributors only through

partnership with the National Association of Boards of Pharmacy.”

243. Upon information and belief, when the VAWD Requirement was

announced to the OptumRx executive leadership team, the OptumRx Vice President

who decided to adopt the VAWD Requirement wrote: “Optum partnered with NABP

to ensure the accreditation program would ensure a review of the wholesalers to meet

and exceed the federal DQSA (Drug Quality and Security Act) / DSCSA (Drug

Supply Chain Security Act).”

244. Upon information and belief, in response to questions posed by

OptumRx’s executive leadership team concerning the VAWD Requirement, the

OptumRx Vice President who decided to adopt the VAWD Requirement wrote:

“The National Association of Boards of Pharmacy has been a key partner in the

development of this approach.”


60 20022892.1

245. Upon information and belief, after OptumRx announced the VAWD

Requirement, OptumRx and NABP leadership worked closely together with respect

to implementation of the VAWD Requirement.

246. Upon information and belief, and by way of example, shortly after the

VAWD Requirement was announced, NABP’s Associate Executive Director

provided OptumRx with an “interim communications plan.”

247. Upon information and belief, OptumRx also communicated with

NABP with respect to specific wholesalers and their progress in the VAWD

accreditation process for the specific purpose of determining whether to grant the

wholesaler an extension of the VAWD Requirement.

248. Upon information and belief, OptumRx also coordinated with NABP

when responding to certain industry stakeholders who were concerned about the

impact the VAWD Requirement would have on the wholesale distribution industry

and its pharmacy customers.

249. Upon information and belief, and by way of example, on or about

September 21, 2016, OptumRx received a letter from the American Pharmacists

Association (“APhA”) and the National Alliance of State Pharmacy Associations

(“NASPA”), in which those organizations raised concerns about the VAWD

Requirement. APhA and NASPA further explained to OptumRx that the VAWD

Requirement “is in conflict with the intent of DSCSA’s uniform licensure standards,


61 20022892.1

as OptumRx wholesalers will be required to adhere to VAWD standards and

requirements, which are more stringent than most state laws.”

250. Upon information and belief, as a result of the concerns raised by

various industry stakeholders, OptumRx held a meeting with those stakeholders on

October 4, 2016, to discuss the VAWD Requirement. To prepare for this meeting,

NABP provided OptumRx with background information and materials to defend the

VAWD program and Optum’s decision to implement the VAWD Requirement.

Specifically, on September 26, 2016—approximately one week before OptumRx’s

meeting with industry stakeholders—NABP’s Senior Compliance Manager sent 11

documents to OptumRx, including documents titled “talking points” and “Diversion

case summaries for Optum” to use at the meeting.

251. Upon information and belief, NABP viewed OptumRx’s adoption of

the VAWD Requirement as the vehicle by which the national standards that NABP

sought to have imposed on the drug supply chain could be achieved.

252. Upon information and belief, NABP has viewed secondary wholesale

distributors as supply chain “menaces” who exploit gaps in Federal and State laws

and regulation to their benefit. NABP has targeted some of their otherwise legal

practices of which NABP does not approve.


62 20022892.1

253. Upon information and belief, OptumRx has sought to shrink the

number of independent pharmacies in its network, to benefit other United Healthcare

affiliates.

254. Upon information and belief, as a way to shrink the number of

independent pharmacies with whom it contracts, OptumRx is considering ways to

require additional accreditations in order for pharmacies to participate in the

OptumRx networks, including working with NABP to develop such accreditation

programs.

255. Upon information and belief, while their goals may be different, the

willing collaboration and partnership between NABP and OptumRx with respect to

the VAWD Requirement has the collective impact of harming the intended targets

of NABP and OptumRx; that is, secondary wholesalers and independent pharmacies.

256. Upon information and belief, as a willing partner and collaborator with

NABP in implementing the VAWD Requirement, OptumRx is a “State actor” for

the purposes of this action.

VII. Injury to the Plaintiffs Caused By the VAWD Requirement

257. Upon information and belief, most of the independent pharmacies that

have been customers of Plaintiffs have some patients whose prescription drug

benefits are managed by OptumRx.


63 20022892.1

258. Upon information and belief, approximately 90% of each Plaintiff’s

customer base consists of pharmacies in the OptumRx pharmacy network.

259. Upon information and belief, it is customary for pharmacies to only

order medications from wholesalers that can be dispensed to beneficiaries of

healthcare plans.

260. Plaintiffs have been informed by pharmacy customers that the

pharmacies have ceased ordering medications and supplies from Plaintiffs due to the

VAWD Requirement. This is because OptumRx has threatened pharmacies in its

network with audits, recoupment, fines and assessments, and possible termination

from OptumRx’s network if they fail to abide by the VAWD-accreditation

requirement. Given OptumRx’s status as one of the nation’s largest PBMs, most

pharmacies are not willing to risk the consequences of dealing with a non-VAWD-

accredited wholesale distributor, especially given the impracticality of segregating

inventory as having been purchased from VAWD and non-VAWD-accredited

sources.

261. Upon information and belief, many pharmacy customers of Plaintiffs

have discontinued doing business with Plaintiffs and have advised them that they

will only recommence doing business with Plaintiffs if they can provide proof of

VAWD-accreditation.


64 20022892.1

262. Upon information and belief, as of March 11, 2019, Matrix identified

more than 200 lost customers that expressly indicated to Matrix that they will no

longer source pharmaceuticals from Matrix due to the VAWD Requirement.

263. Upon information and belief, as of March 11, 2019, PriMed identified

81 lost customers that expressly indicated to PriMed that they will no longer source

pharmaceuticals from PriMed due to the VAWD Requirement.

264. Upon information and belief, as of March 11, 2019, Oak identified at

least 22 lost customers as a result of the VAWD Requirement.

265. Upon information and belief, the relatively few pharmacies that are not

in the OptumRx pharmacy network are insufficient to make up for the volume of

customers and sales lost by Plaintiffs as a result of the VAWD Requirement.

266. Upon information and belief, the impact of these lost customer

relationships upon each of the Plaintiffs’ respective businesses is substantial. For

example, Matrix’s business was steadily growing during the four years prior to the

August 2016 announcement of the VAWD Requirement. After the VAWD

Requirement was announced in 2016, Matrix experienced a substantial reversal in

its business trajectory. Matrix saw a decrease in sales in 2017, and its losses escalated

in 2018. Matrix serviced roughly 600 less pharmacies in 2018 compared to 2017,

and its sales decreased significantly. These losses have continued into 2019 and

2020.


65 20022892.1

267. Upon information and belief, the VAWD Requirement has prevented

Plaintiffs from developing relationships with new customers.

268. Upon information and belief, the VAWD Requirement has adversely

impacted Plaintiffs’ relationships with certain drug manufacturers and prevented

them from cultivating new relationships with manufacturers.

269. Upon information and belief, the VAWD Requirement has adversely

impacted Plaintiffs’ relationships with certain wholesale distributor customers who

have stopped purchasing from non-VAWD accredited wholesalers such as Plaintiffs,

in support of those wholesalers’ own attempts to achieve VAWD accreditation.

270. As a result of the adverse impact to their respective businesses, Matrix

and PriMed have both reduced their workforce, and a number of key employees have

departed because of the difficulty in selling drugs to independent pharmacies in the

face of the VAWD Requirement. The loss of key sales personnel is significant for

sales-based companies like Plaintiffs. Secondary wholesalers’ business relationships

with independent pharmacies are marked by developing personal relationships and

trust.

VIII. Nature of Harm to Pharmacies and Patients

271. Upon information and belief, not only have Plaintiffs been harmed by

the VAWD Requirement, but independent pharmacies and patients are also

adversely impacted.


66 20022892.1

272. Upon information and belief, when pharmacies’ access to secondary

wholesalers are diminished as a result of the VAWD Requirement, there are adverse

consequences for patients, providers, and the drug marketplace in general. This

includes, but is not limited to: increased waste of drug inventory, including short-

dated supplies, and increased average wholesale pricing and/or wholesale

acquisition costs.

273. Upon information and belief, there are numerous independent

pharmacies that rely on Plaintiffs (and similarly situated secondary wholesalers) to

obtain life-saving medications for their patients.

274. Upon information and belief, these independent pharmacies are often

unable to obtain these medications from the primary wholesalers because they fail

to meet the larger wholesalers’ minimum purchasing requirements or the larger

wholesalers cannot provide the medications as quickly as needed by the patient.

275. Upon information and belief, without the ability to purchase

medications from Plaintiffs (and other similarly situated secondary wholesalers),

many independent pharmacies have encountered difficulty obtaining the

medications necessary to service their patients.


67 20022892.1

AS AND FOR A FIRST CAUSE OF ACTION Declaratory Judgment and Injunction for Violation of Federal Law and

United States Constitution (Against NABP)

276. Plaintiffs repeat the allegations of paragraphs 1 through 275 of this

Amended Complaint with the same force and effect as if fully set forth herein.

277. Upon information and belief, in the interest of establishing a national

uniform policy for drug tracing and licensing requirements for pharmaceutical

wholesale distributors, Congress expressly preempted in the DSCSA attempts by

State actors to regulate in this area of law.

278. Upon information and belief, NABP's VAWD-accreditation program,

created and administered by a State actor, imposes standards for drug tracing and

licensing wholesale distributors that are more stringent than, or directly related to,

the standards established by Congress in the DSCSA.

279. Upon information and belief, the VAWD criteria, as written and applied

by NABP, prohibit wholesale distributors from distributing drugs that were at any

time purchased by or from a pharmacy or practitioners. As such, they impose

standards for drug tracing that are more stringent than, or directly related to, the

standards established by Congress in the DSCSA.


by NABP, require the erection of “firewalls” when wholesale distributors engage in

prescription drug transactions with dual-licensed facilities. As such, they impose


68 20022892.1

standards for drug tracing that are more stringent than, or directly related to, the

standards established by Congress in the DSCSA.


by NABP, subject applications from, and transactions with, wholesale distributors

that are co-located with pharmacies to “additional scrutiny.” As such, they impose

standards for drug tracing and wholesaler licensure that are more stringent than, or

directly related to, the standards established by Congress in the DSCSA.


by NABP, treat drugs that had been purchased by or obtained from a pharmacy, or

a co-located facility, as “suspect” prescription drugs. As such, they impose standards

for drug tracing that are more stringent than, or directly related to, the standards

established by Congress in the DSCSA.

283. Upon information and belief, because the VAWD criteria that prohibit

wholesale distributors from distributing drugs that were at any time purchased by or

from a pharmacy or practitioners are more stringent than, or directly related to, the

tracing standards established by Congress in the DSCSA, they are preempted under

the DSCSA and through the Supremacy Clause of the United States Constitution.

284. Upon information and belief, because the VAWD criteria that require

the erection of “firewalls” when wholesale distributors engage in prescription drug

transactions with dual-licensed facilities are more stringent than, or directly related


69 20022892.1

to, the tracing standards established by Congress in the DSCSA, they are preempted

under the DSCSA and through the Supremacy Clause of the United States

Constitution.

285. Upon information and belief, because the VAWD criteria that subject

applications from, and transactions with, wholesale distributors that are co-located

with pharmacies to “additional scrutiny” are more stringent than, or directly related

to, the tracing and wholesaler licensure standards established by Congress in the

DSCSA, they are preempted under the DSCSA and through the Supremacy Clause

of the United States Constitution.

286. Upon information and belief, because the VAWD criteria that treat

drugs purchased by or obtained from by a pharmacy, or a co-located facility, as

“suspect” prescription drugs are more stringent than, or directly related to, the

tracing standards established by Congress in the DSCSA, they are preempted under

the DSCSA and through the Supremacy Clause of the United States Constitution.

287. By reason of the foregoing, the aforementioned VAWD criteria are

preempted under the DSCSA and through the Supremacy Clause of the United States

Constitution and should be declared null and void by this Court.

288. Upon information and belief, the VAWD applications of Matrix have

been cancelled/delayed, in part, for alleged failure to satisfy VAWD criteria that are

preempted under the DSCSA.


70 20022892.1

289. By reason of the foregoing, this Court should issue an Order, pursuant

to 28 U.S.C. § 2201, declaring that the aforementioned VAWD criteria are


Constitution and are null and void.

290. Upon information and belief, the OptumRx official who adopted and

implemented the VAWD Requirement knew that the VAWD criteria “exceeded” the

tracing and licensing standards established in the DSCSA.

291. By reason of the foregoing, this Court should issue an Order, pursuant

to 28 U.S.C. § 2201, declaring that, because the VAWD applications of Matrix have

been cancelled/delayed, in part, for alleged failure to satisfy VAWD criteria that are

preempted under the DSCSA, those cancellations/delays have been arbitrary,

capricious and based on an error of law, and that OptumRx may not prohibit Matrix

from selling pharmaceuticals to its network pharmacies.

292. By reason of the foregoing, this Court should issue a permanent

injunction prohibiting NABP from enforcing the aforementioned VAWD criteria

that are preempted under the DSCSA and through the Supremacy Clause of the

United States Constitution.

293. By reason of the foregoing, this Court should issue a permanent

injunction prohibiting OptumRx from excluding Matrix from selling

pharmaceuticals to OptumRx network pharmacies.


71 20022892.1

AS AND FOR A SECOND CAUSE OF ACTION Declaratory Judgment and Injunction For Violation of

New York Public Health Law § 280-c (Against OptumRx)

294. Plaintiffs repeat the allegations of paragraphs 1 through 293 of this

Amended Complaint with the same force and effect as if fully set forth herein.

295. Upon information and belief, sales to pharmacy customers within the

State of New York account for approximately 33%, 30%, and 67% of the overall

sales of Matrix, PriMed, and Oak, respectively.

296. Upon information and belief, New York Public Health Law § 280-c

provides that, when conducting an audit of a pharmacy’s records, a PBM such as

OptumRx shall “accept as validation invoices from any wholesaler registered with

the department of education from which the pharmacy has purchased prescription

drugs.” See N.Y. Pub. Health Law § 280-c(2)(i).

297. Upon information and belief, Public Health Law § 280-c permits all

New York pharmacies to utilize products from any wholesaler distributor, so long

as that wholesaler is licensed by the State of New York. The law prohibits PBMs,

including OptumRx, from taking adverse action against pharmacies that source

inventory from wholesale distributors that are duly licensed as such by the State of

New York, including Plaintiffs.

298. Each of the Plaintiffs are duly licensed as wholesale distributors by the

State of New York.


72 20022892.1

299. There is no requirement in the State of New York that a wholesale

distributor must obtain VAWD-accreditation.

300. By reason of the foregoing, the VAWD Requirement violates New

York Public Health Law § 280-c by requiring OptumRx network pharmacies in New

York to only source products from VAWD-accredited wholesaler distributors.

301. By reason of the foregoing, this Court should issue an Order declaring

that the VAWD Requirement violates New York Public Health Law § 280-c and

that, as a result thereof, the VAWD Requirement may not be enforced by OptumRx

within the State of New York.

302. By reason of the foregoing, this Court should also issue a permanent

injunction removing any restriction on Plaintiff Matrix from selling pharmaceuticals

to OptumRx pharmacies located within the State of New York.

AS AND FOR A THIRD CAUSE OF ACTION Violation of Rights Under 42 U.S.C. § 1983

(Against Defendants)

303. Plaintiffs repeat and reiterate the allegations of paragraphs 1 through

302 of this Amended Complaint with the same force and effect as if fully set forth

herein.

304. Upon information and belief, at the time that OptumRx adopted the

VAWD Requirement, the VAWD program was the only available accreditation

program for wholesale distributors.


73 20022892.1

305. Upon information and belief, in or about September 2019, the National

Coalition for Drug Quality and Security launched the Quality and Security (“QAS”)

Accreditation program for wholesale distributors.

306. Upon information and belief, one or more QAS-accredited wholesalers

have requested that OptumRx waive the VAWD Requirement as to them, in light of

their status as a QAS-accredited wholesale distributor.

307. Upon information and belief, OptumRx denied the request that the

VAWD Requirement be waived as to QAS-accredited wholesale distributors.

308. Upon information and belief, OptumRx is a “willing participant” in

NABP’s administration of the VAWD program, which is “State action.” OptumRx

has not simply adopted NABP’s VAWD program as a preferred accreditation with

which its pharmacies should do business. To the contrary, OptumRx has mandated

that its pharmacies source pharmaceuticals only through VAWD-accredited

wholesalers.

309. Upon information and belief, OptumRx’s decision to partner,

coordinate, and collaborate with NABP in connection with its implementation and

application of the VAWD Requirement makes OptumRx a “willing participant” in

NABP’s conduct.

310. By reason of the foregoing, OptumRx is a “State actor” with regard to

the implementation and application of the VAWD Requirement.


74 20022892.1

311. Upon information and belief, the VAWD applications of Matrix have

been cancelled or held up as a result of NABP’s application of VAWD criteria


Constitution.

312. Upon information and belief, the first two VAWD applications of

PriMed were cancelled as a result of NABP’s application of VAWD criteria


Constitution.

313. Upon information and belief, the first VAWD application of Oak was

cancelled as a result of NABP’s application of VAWD criteria preempted under the

DSCSA and through the Supremacy Clause of the United States Constitution.

314. By reason of the foregoing, Defendants have jointly engaged in action

under color of State law that is preempted under the DSCSA and through the

Supremacy Clause of the United States Constitution.

315. By reason of the foregoing, Plaintiffs’ rights have been violated under

42 U.S.C. § 1983, and Plaintiffs have suffered damages as a result thereof.

316. Upon information and belief, Defendants are liable to Plaintiffs,

pursuant to 42 U.S.C. § 1983, for the damages that Plaintiffs have suffered as a result

of Defendants’ impermissible State action, in an amount to be determined by the

trier of fact.


75 20022892.1

317. Because of Defendants’ liability to Plaintiffs under 42 U.S.C. § 1983,

Defendants are also liable to Plaintiffs for their reasonable attorneys’ fees and costs,

pursuant to 42 U.S.C. § 1988.

AS AND FOR A FOURTHCAUSE OF ACTION Violation of Constitutional And Statutory Due Process Rights

(Against Defendants)



herein.

319. As “State actors” with respect to the VAWD Program and the VAWD

Requirement, Defendants must comply with the procedural due process

requirements of the Fifth and Fourteenth Amendments to the United States

Constitution.

320. As “State actors” with respect to the VAWD Program and the VAWD

Requirement, Defendants must comply with the procedural due process

requirements established under the laws of the State of New Jersey.

321. Upon information and belief, Matrix is licensed as a pharmaceutical

wholesale distributor in the State of New Jersey, and holds licenses in 34 other

States.


76 20022892.1

322. Upon information and belief, PriMed is licensed as a pharmaceutical


States.

323. Upon information and belief, Oak is licensed as a pharmaceutical


States.

324. Upon information and belief, Plaintiffs have a protectable property

interest in their State licenses to conduct business as pharmaceutical wholesale

distributors.

325. Upon information and belief, Defendants have engaged, and are

engaging in, impermissible State action that will significantly diminish, and has

diminished, the value of the State licenses in which Plaintiffs have a protectable

interest.

326. Upon information and belief, Defendants have not adequately detailed

the reasons for the cancellation of Plaintiffs’ VAWD applications and/or cancelled

their applications based upon VAWD criteria that are preempted under the DSCSA

and through the Supremacy Clause of the United States Constitution.

327. Upon information and belief, NABP has not afforded Plaintiffs with a

hearing before a neutral decision-maker or an opportunity to “appeal” the

cancellations of the Plaintiffs’ respective VAWD applications or to challenge the


77 20022892.1

criteria upon which NABP’s decisions were based, prior to Defendants engaging in

State action that will significantly diminish the value of the State licenses in which

Plaintiffs have a protectable interest.

328. Upon information and belief, OptumRx has not afforded Plaintiffs with

a hearing before a neutral decision-maker, in order that they could “appeal”

OptumRx’s refusal to permit them to sell to pharmacies within the OptumRx

network, prior to Defendants engaging in State action that would significantly

diminish the value of the State licenses in which Plaintiffs have a protectable interest.

329. Upon information and belief, Defendants have jointly engaged in action

under color of State law that has violated Plaintiffs’ right to procedural due process

under the Fifth and Fourteenth Amendments to the United States Constitution.

330. Upon information and belief, Defendants have jointly engaged in action

under color of State law that has violated Plaintiffs’ rights to procedural due process

under the laws of the State of New Jersey.

331. By reason of the foregoing, Plaintiffs rights have been violated under

42 U.S.C. § 1983, and Plaintiffs have suffered damages as a result thereof.

332. Upon information and belief, Defendants are liable to Plaintiffs,

pursuant to 42 U.S.C. § 1983, for the damages that Plaintiffs have suffered as a result

of Defendants’ impermissible State action, in an amount to be determined by the

trier of fact.


78 20022892.1

333. Because of Defendants’ liability to Plaintiffs under 42 U.S.C. § 1983,

Defendants are also liable to Plaintiffs for their reasonable attorneys’ fees and costs,

pursuant to 42 U.S.C. § 1988.

AS AND FOR A FIFTH CAUSE OF ACTION In The Alternative, For Violation Of Common Law

Right To Due Process (Against NABP)



herein.

335. This cause of action is pled in the alternative.

336. Even if NABP is not a “State actor” for Constitutional purposes, it is a

quasi-public accrediting agency that must employ fair procedures when making its

accreditation decisions.

337. Upon information and belief, until September 2019, when the QAS

accreditation program was established, NABP had enjoyed monopoly power with

respect to pharmaceutical wholesale distributor accreditation.

338. By reason of the foregoing, NABP's conduct with respect to its

wholesale distributor accreditation decisions is subject to heightened scrutiny.

339. Upon information and belief, NABP has not afforded any Plaintiff, as

to any of their “cancelled” VAWD applications, with a hearing or an opportunity to


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otherwise “appeal” NABP’s decisions to “cancel” their respective applications or

challenge the criteria upon which NABP’s respective decisions were based.

340. Upon information and belief, NABP's handling of Plaintiffs’

“cancelled” VAWD-accreditation applications has been arbitrary and capricious,

based on legally invalid criteria, and lacking in any meaningful due process.

341. By reason of the foregoing, NABP has violated Plaintiffs’ common-law

right to due process, and Plaintiffs have suffered damages as a result thereof.

342. By reason of the foregoing, NABP is liable to Plaintiffs for the damages

that they have suffered as a result of NABP’s breach of Plaintiffs’ common-law right

to due process, in an amount to be determined by the trier of fact.

AS AND FOR A SIXTH CAUSE OF ACTION Tortious Interference With Contract

(Against OptumRx)



herein.

344. Plaintiffs have existing business relations with independent and

community pharmacy customers, who purchase pharmaceuticals from Plaintiffs in

order to fill prescriptions for their patients.

345. Upon information and belief, Plaintiffs had a valid and reasonable

business expectancy in their relationships with their pharmacy customers.


80 20022892.1

346. Upon information and belief, the economic relationships with their

pharmacy customers were of substantial benefit to Plaintiffs.

347. Plaintiffs have received millions of dollars in revenues from sales of

pharmaceuticals to their customers, many of which are members of the OptumRx

pharmacy network. Plaintiffs have an expectation of economic advantage arising

from these relationships, which constitute a protectable interest under New Jersey

law.

348. Upon information and belief, as one of the largest PBM in the United

States, OptumRx either knew or should have known of the relationships between its

network pharmacies and the wholesale distributors with whom those pharmacies

engaged in business, including Plaintiffs.

349. Upon information and belief, as a result of its product validation and

audit processes, OptumRx either knew or should have known of the relationships

between its network pharmacies and the wholesale distributors with whom those

pharmacies engaged in business, including Plaintiffs.

350. Upon information and belief, when it decided to adopt and implement

the VAWD Requirement, OptumRx either knew or should have known that the

VAWD Requirement was likely to interfere with the relationships between its

network pharmacies and the wholesale distributors with whom those pharmacies

engaged in business, including Plaintiffs.


81 20022892.1

351. Upon information and belief, OptumRx knew or should have known

that its actions would disrupt the relationships between its network pharmacies and

the wholesale distributors with whom those pharmacies engaged in business, if

OptumRx failed to act with reasonable care in the adoption and implementation of

the VAWD Requirement.

352. Upon information and belief, the harm that OptumRx has caused to

Plaintiffs’ relationships with their pharmacy customers has been caused by wrongful

means and with reckless disregard and indifference to Plaintiffs’ valid and

protectable business relationships.

Intimidation of OptumRx Network Pharmacies

353. Plaintiffs’ customers must follow the terms and conditions imposed by

OptumRx in their agreements, including the VAWD Requirement that prohibits

network pharmacies from sourcing pharmaceuticals from wholesaler distributors

such as Plaintiffs that are licensed, but not VAWD-accredited. If Plaintiffs’

customers do not agree with or follow OptumRx’s terms and conditions, OptumRx

has threatened these customers that they will face 100% recoupment, fines,

administrative fees and termination from the OptumRx network. Should that happen,

these pharmacies stand to lose a substantial portion of their business and revenue, as

they will no longer be able to provide prescription medications to OptumRx patients.


82 20022892.1

354. As a result of the VAWD Requirement, and threats made by OptumRx

should pharmacies fail to comply with the VAWD Requirement, many of Plaintiffs’

customers ceased doing business with Plaintiffs.


2018, OptumRx routinely sent notices to its network pharmacies that purchasing

products from non-VAWD accredited wholesalers was prohibited.


2018, OptumRx routinely sent notices to its network pharmacies warning of severe

penalties, including recoupment, audits, fines and penalties, and even termination

from the OptumRx network, if a pharmacy sourced pharmaceuticals from a non-

VAWD accredited wholesaler.

357. Upon information and belief, OptumRx’s threats of severe

consequences should a pharmacy fail to comply with the VAWD Requirement were

misleading and intimidated its network pharmacies into complying with the VAWD

Requirement.

358. Upon information and belief, OptumRx conveyed these threats of

severe consequences to its network pharmacies, even though compliance with the

VAWD Requirement was only audited when its audit team was conducting an

investigative audit.


83 20022892.1


severe consequences should a pharmacy fail to comply with the VAWD

Requirement, even though OptumRx has not recouped any payments made to a

pharmacy solely due to non-compliance with the VAWD Requirement.


severe consequences should a pharmacy fail to comply with the VAWD

Requirement, even though OptumRx has not assessed any fines against a pharmacy

solely due to non-compliance with the VAWD Requirement.

361. Upon information and belief, OptumRx has conveyed threats of severe

consequences should a pharmacy fail to comply with the VAWD Requirement, even

though OptumRx has not terminated the provider contract of any pharmacy solely

due to non-compliance with the VAWD Requirement.


severe consequences to its network pharmacies, even though OptumRx had only

issued warning letters or cease and desist letters to pharmacies that had failed to

comply with the VAWD Requirement.

Anti-Competitive Impacts

363. Upon information and belief, when OptumRx officials were

considering the adoption of the VAWD Requirement, they expressed concerns about


84 20022892.1

the anti-competitive effects of requiring OptumRx network pharmacies to only

source prescriptions from VAWD-accredited wholesalers.

364. Upon information and belief, OptumRx nevertheless chose to adopt the

VAWD Requirement.

365. Upon information and belief, the VAWD requirement does not function

to increase competition or yield lower prices. To the contrary, the VAWD

requirement’s immediate effect is to eliminate competition in the wholesale

pharmaceutical distribution market. By eliminating smaller wholesalers, such as

Plaintiffs, pharmacy customers will have fewer choices from which to purchase

pharmaceuticals.

366. Upon information and belief, while OptumRx is foreclosing smaller

wholesalers from the wholesale market for pharmaceuticals and reducing

competition, OptumRx is doing so to benefit from the anticompetitive effect that its

VAWD requirement will have on the supply chain. Specifically, OptumRx obtains

rebates from drug manufacturers, which increase based on the volume billed by

OptumRx’s clients directly to drug manufacturers (i.e., a pharmacy fills a member’s

prescription, and then the drug manufacturer is charged). Accordingly, the more

pharmacies that bill directly to the manufacturer, the higher the rebate that OptumRx

will earn.


85 20022892.1

367. Upon information and belief, by eliminating secondary wholesalers

through the VAWD Requirement, OptumRx is seeking to force its network

pharmacies to increase their purchasing from the primary wholesalers. OptumRx is

doing so for the sole purpose of maximizing its own profit margins in negotiating

rebates with the primary wholesalers.

368. Upon information and belief, with fewer secondary wholesalers

available, independent pharmacies are, in turn, harmed by the impacts of the VAWD

Requirement. A decrease in the number of independent pharmacies decreases

competition, to the benefit of other United Healthcare affiliates.

Violation of Public Health Law § 280-c

369. OptumRx admits that it must comply with all Federal and State laws,

including those that relate to pharmacy audits.

370. Upon information and belief, neither in its Provider Manual nor its

notices to its pharmacy network has OptumRx advised its network pharmacies that

the VAWD Requirement is subject to State pharmacy audit laws.

371. Upon information and belief, OptumRx does not notify its network

pharmacies that certain provisions in their agreements or Provider Manual are not

applicable to them based on applicable Federal or State laws.


86 20022892.1

372. Upon information and belief OptumRx enforces its VAWD

Requirement in New York.

373. Upon information and belief, OptumRx is aware that New York has a

pharmacy audit law (Public Health Law § 280-c) that limits the scope of pharmacy

audits conducted by PBMs such as OptumRx.

374. Upon information and belief, notwithstanding the existence of New

York Public Health Law § 280-c, OptumRx continues to enforce the VAWD

Requirement against its network pharmacies in New York.

375. By reason of the foregoing, OptumRx has intentionally and willfully

misled its New York network pharmacies about the (non-)applicability of the

VAWD Requirement within that State.

376. Upon information and belief, in light of its scant enforcement of the

VAWD Requirement, OptumRx cannot offer a reasonable purpose to justify its

otherwise intentionally intimidating, misleading and/or illegal conduct.

377. By reason of the foregoing, OptumRx has wrongfully and intentionally

interfered with the business relationships between its network pharmacies and

Plaintiffs.

378. By reason of the foregoing, Plaintiffs have suffered economic harm.

379. By reason of the foregoing, OptumRx is liable to Plaintiffs in an amount

to be determined by the trier of fact.


87 20022892.1

AS AND FOR A SEVENTH CAUSE OF ACTION Tortious Interference with

Prospective Economic Advantage (Against OptumRx)



herein.

381. Upon information and belief, NABP and OptumRx knew that

Plaintiffs’ operation of their businesses was compliant with State and Federal law

governing pharmaceutical wholesale distributors.

382. As described at length herein, OptumRx’s implementation of its

VAWD Requirement, accomplished in concert with NABP, has disrupted the

Plaintiffs’ ability to engage in economic relationships with prospective pharmacy

customers who, because of the VAWD Requirement, have declined to enter into

economic relationships with Plaintiffs.

383. OptumRx’s implementation of the VAWD Requirement constitutes an

unfair trade practice within the meaning of New Jersey Business and Professional

Code § 17200.

384. As a proximate result of OptumRx’s conduct, Plaintiffs have suffered,

and will continue to suffer, significant damages, including, but not limited to, lost

revenue and lost profits caused by the substantial disruption in the Plaintiffs’ ability

to engage in economic relationships with prospective pharmacy customers.


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385. By reason of the foregoing, OptumRx is liable to Plaintiffs for the harm

to Plaintiffs’ prospective economic relationships that has been caused by the VAWD

Requirement, in an amount to be determined by the trier of fact.

AS AND FOR A EIGHTH CAUSE OF ACTION Tortious Interference With Plaintiffs’ Wholesale Licenses

(Against OptumRx)



herein.

387. Plaintiffs are licensed wholesale distributors and are fully compliant

with all State and Federal laws, rules and regulations.

388. As a result thereof, Plaintiffs are lawfully permitted to transact business

and provide services to pharmacies, including the distribution of pharmaceuticals.

389. Plaintiffs have incurred significant capital expenditures in order to

establish their businesses, obtain licenses, develop customer lists and incur other

costs associated with their operation as licensed wholesaler distributors.

390. Upon information and belief, Plaintiffs not only have a protectable

interest in maintaining their wholesaler licenses, but also have a reasonable

expectation of protecting their economic interests in enjoying the use of those

licenses.


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391. Upon information and belief, OptumRx has actual knowledge that

Plaintiffs are licensed wholesale distributors that have business relationships with

pharmacies throughout the United States.

392. Upon information and belief, OptumRx has actual knowledge that its

actions in relation to the administration and implementation of the VAWD

Requirement have prevented certain licensed wholesalers, including Plaintiffs, from

conducting otherwise lawful business with pharmacies.

393. Upon information and belief, OptumRx has acted maliciously and/or

unjustifiably, using illegitimate and/or inappropriate means, to interfere with

Plaintiffs’ wholesale distributor licenses.

394. Upon information and belief, OptumRx knew that, through the

administration and implementation of the VAWD Requirement, that it would cause

damage to Plaintiffs’ wholesale distributor licenses.

395. Upon information and belief, through OptumRx’s actions, it has caused

Plaintiffs’ wholesale distributor licenses to be significantly diminished in value.

396. By reason of the foregoing, OptumRx is liable to Plaintiffs for the

damages that they have suffered as a result of OptumRx’s interference with

Plaintiffs’ use of their wholesale distributor licenses, in an amount to be determined

by the trier of fact.


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AS AND FOR A NINTH CAUSE OF ACTION In the Alternative, New Jersey Consumer Fraud Act, N.J.S.A. § 56:8-2.1

Operating In A Manner Simulating Government Agency (Against Defendant NABP)

397. Plaintiffs repeat and reiterate the allegations in paragraphs 1 through

396 above as if more fully set forth herein.

398. This cause of action is pled in the alternative.

399. In the event that this Court does not conclude that NABP is a State

actor, as alleged previously in this Amended Complaint, NABP’s representations

wrongfully implied a capacity to Plaintiffs and other wholesale distributors that it is

a governmental agency, acting with the sanction of, among others, the U.S. Food

and Drug Administration, U.S. Department of Health and Human Services, the

Centers for Medicare and Medicaid Services, U.S. Drug Enforcement Agency, and

State Boards of Pharmacy, in violation of N.J.S.A. § 56:8-2.1.

400. N.J.S.A. § 56:8-2.1 provides:

It to be an unlawful practice for any person to operate … in a manner which wrongfully implies that the person is … associated with any department or agency of the Federal Government or of this State or any of its political subdivisions ….

401. Upon information and belief, NABP’s membership consists of entirely

governmental agencies. These governmental actors have become entwined and

engrained in NABP’s operation, management and control.


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402. Upon information and belief, NABP has made representations to the

consumers, including Plaintiffs, that:

The VAWD program is a necessary component of regulating the nation’s wholesale drug and device distribution system and . . . .

403. Upon information and belief, NABP’s governing body and its

representation that it “regulates” the nation’s wholesale drug and device distribution

system had the capacity to and did cause Plaintiffs to reasonably believe that NABP

is authorized by a government agency to oversee the enforcement of the drug supply

chain, including licensing and distribution.

404. By reason of the foregoing, Plaintiffs suffered significant and

ascertainable losses as a result of NABP’s wrongful acts and/or omissions.

405. By reason of the foregoing, NABP is liable to Plaintiffs, in an amount

to be determined by the trier of fact.

WHEREFORE, Plaintiffs Matrix Distributors, Inc., PriMed

Pharmaceuticals, LLC, and Oak Drugs Inc., demand judgment against defendants as

follows:

a. on the first cause of action, declaring and nullifying those VAWD criteria that are preempted under § 585 of DSCSA and through the Supremacy Clause of the United States Constitution, and enjoining defendant NABP from enforcing those impermissible VAWD criteria;


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b. on the first cause of action, declaring that, because the VAWD applications of Matrix have been cancelled/delayed for impermissible reasons, OptumRx may not prohibit Matrix from selling pharmaceuticals to OptumRx network pharmacies, and enjoining OptumRx from excluding Matrix from selling to its network pharmacies;

c. on the second cause of action, declaring that the VAWD Requirement violates New York Public Health Law § 280-c and requiring OptumRx to permit Plaintiff Matrix to sell pharmaceuticals to its network pharmacies within the State of New York;

d. on the third cause of action, awarding to Plaintiffs such damages as the trier of fact may deem just and proper;

e. on the fourth cause of action, awarding to Plaintiffs such damages as the trier of fact may deem just and proper;

f. on the fifth cause of action, awarding to Plaintiffs such damages as the trier of fact may deem just and proper;

g. on the sixth cause of action, awarding to Plaintiffs such damages as the finder of fact may deem just and proper;

h. on the seventh cause of action, awarding to Plaintiffs such damages as the finder of fact may deem just and proper;

i. on the eighth cause of action, awarding to plaintiffs such damages as the trier of fact may deem just and proper;

j. on the ninth cause of action, awarding to Plaintiffs such damages as the trier of fact may deem just and proper;


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k. awarding to Plaintiffs their reasonable attorneys’ fees and costs, as permitted by 42 U.S.C. § 1988;

l. awarding to Plaintiffs interest as permitted by law; and

m. awarding to Plaintiffs such other relief as the Court may deem just and proper.

Plaintiffs demand a trial by jury on all issues so triable.

Dated: February 18, 2020 BARCLAY DAMON LLP

s/ Brad M. GallagherBrad M. Gallagher, Esq. 80 State Street, 6th Floor Albany, New York 12207 Telephone: (518) 429-4200 Facsimile: (518) 429-4201 [email protected]@[email protected]

CERTIFICATION OF NO OTHER ACTIONS

I certify that the dispute about which I am suing is not the subject of any other action pending in any other court or a pending arbitration proceeding to the best of my knowledge and belief. Also, to the best of my knowledge and belief, no other action or arbitration proceeding is contemplated. Further, other than the parties set forth in this Complaint, I know of no other parties that should be made a part of this lawsuit. In addition, I recognize my continuing obligation to file and serve on all parties and the court an amended certification if there is a change in the facts stated in this original certification.

Dated: February 18, 2020 s/ Brad M. Gallagher Brad M. Gallagher


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