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B & L Pharmacy v. Metropolitan Life





APPEAL from the circuit court of Peoria County; the Hon. ROBERT E. HUNT, Judge, presiding.


Rehearing denied October 6, 1970.

The plaintiff, B & L Pharmacy, the operator of a drug store in Peoria, Illinois, brought this action on September 26, 1969, to enjoin the defendants, Metropolitan Life Insurance Company, Caterpillar Tractor Company, The Kroger Company (Super-X), Ford-Hopkins Company (S & C Drugs), and Walgreen Company, from putting into effect a prepaid prescription drug service plan, known as the MediMET plan. The plan was negotiated in collective bargaining between Caterpillar and the International Union, United Automobile, Aerospace and Agricultural Implement Workers of America (UAW), and was designed to provide prescription drug services for the employees of Caterpillar. Caterpillar insured its obligations under the plan by amending its existing group medical insurance policy with the defendant Metropolitan Life Insurance Company.

The complaint alleged that the MediMET plan violates the Illinois Antitrust Act. (Ill. Rev. Stat. 1969, ch. 38, pars. 60-1 et seq.) The circuit court of Peoria County denied a motion by the UAW, which was permitted to intervene in the suit as a party defendant, to dismiss the complaint, and allowed the plaintiff's motion for a temporary injunction. The defendants Caterpillar Tractor Company and Metropolitan Life Insurance Company appealed to the Appellate Court, Third District, under Supreme Court Rule 307. (43 Ill.2d R. 307.) Thereafter we granted a direct appeal to this court under Rule 302(d). 43 Ill.2d R. 302(d).

Under the basic MediMET agreement and a separate prescription drug schedule, incorporated in the basic agreement by reference, local pharmacists are invited to sign contracts with Metropolitan as "Participating Providers" of prescription drugs. The Participating Providers are to verify the eligibility of persons applying for benefits, and to provide them with "covered drugs" for a charge equal to the acquisition cost of the drug to the pharmacist plus a dispensing fee of $2.10. The Participating Provider then collects this charge from Metropolitan Insurance Company less a "co-payment" amount of $2 which he collects directly from the beneficiary when the prescription is filled. An employee who does not purchase from a Participating Provider is to be reimbursed for 75% of the usual charge for the prescription if it is provided by a Non-Participating Provider located in the State in which he permanently resides or is employed, or for 100% of the usual charge if it is provided by any other Non-Participating Provider or by a physician.

The agreement provides that Metropolitan has the right to review the business records and prescription files of Participating Providers to assure compliance with the agreement, and that the agreement is terminable by either party upon thirty days written notice or by Metropolitan for violation of the agreement or "for other good cause." The separate prescription drug schedule, in addition to setting the dispensing fee and the co-payment amount, defines what drugs are covered by the plan, and establishes October 1, 1969, as the date the plan is to go into effect.

Pursuant to sections 355 and 367(2) of the Insurance Code (Ill. Rev. Stat. 1969, ch. 73, pars. 967, 979(2)), the insurance contract and related forms were submitted to and approved by the State Director of Insurance. After approval, pharmacists in areas where Caterpillar plants are located were invited to become "Participating Providers" in the plan, and by September 15, 1969, 208 pharmacies had agreed to do so.

The MediMET plan is not unique to the parties in the case before us. The UAW has negotiated similar plans covering more than 1,000,000 union members in other States, including all the bargaining-unit employees of General Motors Corporation, Ford Motor Company, Chrysler Corporation, International Harvester Company, Deere and Company, and Allis Chalmers. More than 80% of the pharmacists in Michigan have agreed to become Participating Providers in the UAW plan, and the record shows that at least 50% of the pharmacists in Illinois have signed up with various insurance companies covering employers who had agreed to the UAW plan in collective bargaining. It has been pointed out that a number of States, including Illinois, use this technique to provide prescription drug service to Medicaid patients, and that the Federal government provides prescription drug benefits to military personnel and their dependents by this method. Moreover, the Pharmaceutical Service Plan Act (Ill. Rev. Stat. 1969, ch. 32, pars. 691.1 et seq.) authorizes certain groups to operate such plans.

The complaint alleged that the defendants contracted, combined and conspired in violation of section 3(2) of the Illinois Antitrust Act, (Ill. Rev. Stat. 1969, ch. 38, par. 60-3(2)) for the purpose of fixing the fee for dispensing pharmaceutical drugs, urging a boycott of the plaintiff and other pharmacies by sending a list of pharmacies participating in the plan to the employees of Caterpillar, soliciting pharmacists to join in the scheme against their desires and best interests, and gaining access to the business records and confidential prescription files of participating pharmacists to assure uniformity of acquisition costs.

The complaint also alleged that the defendants, Super-X, S & C and Walgreen, combined and conspired with each other and with other participating pharmacies in violation of sections 3(1) and 3(2) of the Antitrust Act (Ill. Rev. Stat. 1969, ch. 38, par 60-3(1)(2), for the purpose of fixing, controlling and maintaining the price of, and the fee to be charged for dispensing, prescription drugs covered by the MediMET plan.

Further paragraphs of the complaint alleged that Caterpillar and Metropolitan had illegally contracted to provide a prescription drug service plan without complying with the Pharmaceutical Service Plan Act (Ill. Rev. Stat. 1969, ch. 32, pars. 691.1 et seq.), and that Metropolitan's entry into contracts with participating pharmacies to fix the fee to be charged for dispensing drugs was unlawful under Metropolitan's qualification to do business in Illinois under the Insurance Code. Ill. Rev. Stat. 1969, ch. 73, pars. 964 et seq.

In addition to damages and a permanent injunction, the plaintiff sought a temporary injunction on the ground that it, as a Non-Participating Pharmacy, would lose the trade of Caterpillar employees and thereby suffer irreparable injury.

Caterpillar Tractor Company and Metropolitan Life Insurance Company filed answers in which they denied the substantive allegations of the complaint and alleged as affirmative defenses that the plan was excepted from the reach of the Antitrust Act by exemptions in the Act for "the activities of any labor organization * * * which are directed solely to labor objectives which are legitimate under the laws of either the State of Illinois or the United States", and for "the activities * * * of any insurer * * * to the extent that such activities are subject to regulation by the Director of Insurance of this State under, or are permitted or are authorized by, the Insurance Code or any other law of this State; * * *" (Ill. Rev. Stat. 1969, ch. 38, pars. 60-5(1)(4).) They also affirmatively alleged that the plan did not violate the Pharmaceutical Service Plan Act. (Ill. Rev. Stat. 1969, ch. 32, pars. 691.1 et seq.) In addition the UAW was allowed to intervene as a party defendant, and it filed a motion to dismiss the complaint on the grounds that the labor exemption in the Antitrust Act was applicable, and that the plan was a mandatory subject of collective bargaining under the National Labor Relations Act and therefore that the subject matter was preempted by Federal law. It also filed an affidavit of an employee in opposition to the plaintiff's motion for a temporary injunction.

The court denied the motion to dismiss, and after taking the case under advisement, granted the plaintiff's motion for a temporary injunction. The temporary injunction restrained Metropolitan and Caterpillar "from pursuing the provisions of Paragraph 7(P), Sub 1 of the Group Insurance Program between Caterpillar and Metropolitan and soliciting and honoring the claims of the Participating Providers under the MediMET Prescription Drug Agreement and the MediMET Prescription Drug Schedule insofar as such Agreement and Schedule relate to purchases by employees of the Caterpillar Tractor ...

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