The opinion of the court was delivered by: William T. Hart, District Judge.
MEMORANDUM OPINION AND ORDER
Plaintiffs Paul Feldman (d/b/a Norwood Pharmacy), Doretti
Pharmacy, Inc., and Talcott Pharmacy, Inc. ("plaintiffs"), are
owners and operators of retail pharmacies in Illinois. Each has
participated in the prepaid prescription drug programs which are
the focus of this lawsuit. The Fourth Amended Complaint names as
defendants Health Care Service Corp., Aetna Life Insurance,
Metropolitan Life Insurance, Paid Prescriptions Corp., and
Pharmaceutical Card Systems, Inc. ("defendants"), individually as
issuers, underwriters or administrators of prescription drug
insurance programs in Illinois. (For convenience, the defendants
are hereinafter sometimes referred to as the "insurer(s)").
The action has been brought under 15 U.S.C. § 1, 2, 15, and
28 U.S.C. § 2201, and the Court has jurisdiction pursuant to
28 U.S.C. § 1337(a). Plaintiffs brought suit as a class action,
naming a defendant and plaintiff class, and demanded a jury
trial. A motion for class certification as to both the plaintiff
and defendant class was denied on November 23, 1981. The action
is now before the Court on the motion of defendants for summary
The prepaid prescription drug programs*fn2 (often called
"provider agreements") at issue in this case consist of two
separate agreements. The first agreement is between the insurer
and the insured. This agreement allows an insured to obtain
prescription drugs from either a "participating" or
"nonparticipating" pharmacy (these terms are defined below). If
the insured obtains the drug from a participating pharmacy, he
pays to the pharmacy a co-payment or deductible (if one exists),
and after being billed by the pharmacy, the insurer pays the
balance of the cost of the prescription. If, on the other hand,
an insured chooses a nonparticipating pharmacy, he must pay the
full retail price of the drug "up front" and must file a claim
with the insurer for reimbursement. The reimbursement formula
varies, but does not exceed the amount that would be reimbursed
to a participating pharmacy. In general, it is more convenient
and less expensive for the insured to obtain the drug from a
participating pharmacy than from a nonparticipating pharmacy.
The second agreement is between the insurer and the individual
pharmacy. Each agreement contains three price components: (1) the
deductible or co-payment, which is collected by the pharmacy from
the insured; (2) the ingredient cost, which equals or exceeds the
pharmacy acquisition cost of the drug and is paid directly to the
pharmacy by the insurer; and (3) the dispensing fee. This latter
amount, which is intended to reflect a reasonable profit for the
pharmacy, varies and is intended to reflect market prices. It too
is paid directly to the pharmacy by the insurer.
The terms of the plan and the amounts of the three price
components are set by the insurer. The agreement is submitted by
the insurer to the pharmacy on a "take it or leave it" basis: the
pharmacy may "take it" and become a "participating" pharmacy; or
it may "leave it" and remain a "nonparticipating" pharmacy. While
the agreement allows the participating pharmacy to discount the
co-payment or deductible collected from the insured, it prohibits
the pharmacy from charging the insured more than the fixed
co-payment or deductible. A pharmacy is free to sign multiple
agreements with several insurers.
Plaintiffs filed their original complaint on June 30, 1978. The
first of their several claims alleged an agreement, combination
or conspiracy among the defendants to "fix, lower, stabilize and
maintain the retail prices of prescription drugs and professional
pharmaceutical services," in violation of Section 1 of the
Sherman Act, 15 U.S.C. § 1. Plaintiffs also alleged a combination
or conspiracy between the defendants and "large retail pharmacy
chains in the state of Illinois" to monopolize by setting prices
and fees below the level "at which small independent pharmacies
can profitably conduct business," allegedly in violation of
Sections 1 and 2 of the Sherman Act. This complaint did not
identify any of the "large retail chains" referred to, nor did it
name any "large retail pharmacy chains" as defendants.
On March 20, 1980, plaintiffs were granted leave to file an
amended complaint so as to allow them to delete the allegations
of a horizontal conspiracy in the original complaint and to
allege the theory of a per se violation of Section 1 of the
Sherman Act. The amended complaint as filed on March 31, 1980
added Osco Drugs and Walgreen Drugs as new defendants, added
claims under the Robinson Patman Act, and contained a new
plaintiff class definition.
On October 6, 1980, this Court granted defendants' motion to
strike the amended complaint, holding that the leave granted to
file an amended complaint was not intended to allow the type of
amendments that were made by plaintiffs.
Thereafter, on October 16, 1980, plaintiffs moved for leave to
file their second amended complaint. On October 23, 1980,
plaintiffs moved for leave to file their third amended complaint.
On November 4, 1980, plaintiffs' motions for leave to file their
second, third, and fourth amended complaints were entered and
continued to November 12, 1980.
Finally, on November 12, 1980, plaintiffs were given leave to
file instanter a two count Fourth Amended Complaint ("the
Complaint"). Count I of the Complaint alleges that defendants'
prepaid prescription programs constitute per se illegal
price-fixing, or alternatively are unreasonable restraints of
trade, injuring plaintiffs and their class of participating
pharmacies in violation of Section I of the Sherman Act. The
gravamen of Count I is that defendants' alleged "practices have
set pharmacy prices and fees at a level below the usual and
customary fees and prices charged by small, independent
pharmacies" (Paragraph 19, Complaint), and that as a result
plaintiffs have been "forced to sell their professional services
and goods at artificially low prices" (Paragraph 22(c),
Defendants now move for summary judgment, contending that the
pleadings filed and the ample discovery taken to date, combined
with recent legal developments, establish that there are no
genuine issues as to any material facts, and that as a matter of
law they are entitled to summary judgment on both counts.
Plaintiffs oppose the summary judgment motion, arguing that
there do exist genuine issues of fact and law to be resolved at
trial. Plaintiffs allege that the Complaint and record establish
a prima facie case of a per se violation under the Sherman Act.
In support of their position, plaintiffs allege three alternative
theories of per se liability.
First, they claim that the agreements between the pharmacies
and the insurers constitute a form of resale price maintenance.
Under this theory, plaintiffs contend that the actual drug
purchaser is the consumer, that the seller is the pharmacy, and
that the defendants have fixed the price of the pharmacy —
consumer transaction (Count I).
Second, plaintiffs claim that the provider agreements are
illegal group buying or group agency agreements to fix the sale
price of pharmaceuticals. Under this theory, plaintiffs contend
that defendants, their policyholders and the consumers have
agreed to purchase prescription drugs at a uniform price (Count
Under a third theory of per se liability, plaintiffs allege
that defendants conspired with large chain store pharmacies to
monopolize the relevant retail market by ...