markets in violation of Sections 1 and 2 of the Sherman Act by
discounting the co-payments or deductibles set by the agreements,
resulting "in the sale of pharmaceuticals and pharmacy services
below usual and customary prices charged by these pharmacies to
their non-third party customers" (Paragraph 26, Complaint).
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 discounting the
co-payment or deductible (Count II).
In the alternative, plaintiffs allege that the provider
agreements constitute unreasonable restraints of trade which when
balanced against existing market conditions violate the antitrust
laws (Count I). Plaintiffs conclude that since each theory of
liability raises mixed questions of law and fact which can only
be resolved at trial, the granting of summary judgment would be
To obtain summary judgment the moving party must demonstrate
"that there is no genuine issue as to any material fact and that
the moving party is entitled to a judgment as a matter of law."
Fed.R.Civ.P. 56(c). Furthermore, the material submitted to the
Court "must be viewed in the light most favorable to the opposing
party," Adickes v. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598,
1608, 26 L.Ed.2d 142 (1970); Quality Auto Body v. Allstate
Insurance Co., 660 F.2d 1195, 1200 (7th Cir. 1981), cert. denied,
455 U.S. 1020, 102 S.Ct. 1717, 72 L.Ed.2d 138 (1982).
Fed.R.Civ.P. 56(e) provides that when a motion for summary
judgment is supported by sworn statements, the burden of proof
shifts to the party opposing the motion to show that there are
specific facts giving rise to a genuine issue for trial. Weit v.
Continental Illinois National Bank & Trust Co., 641 F.2d 457, 461
(7th Cir. 1981), cert. denied, 455 U.S. 988, 102 S.Ct. 1610, 71
L.Ed.2d 847 (1982). "If he does not so respond, summary judgment,
if appropriate, shall be entered against him." Fed.R.Civ.P.
As a general rule summary judgment should be used "sparingly in
complex antitrust litigation where motive and intent play leading
roles . . ." Poller v. Columbia Broadcasting System, Inc.,
368 U.S. 464, 473, 82 S.Ct. 486, 491, 7 L.Ed.2d 458 (1962). The
Seventh Circuit, however, has not interpreted Poller to preclude
granting summary judgment in antitrust litigation. For example,
in Quality Auto Body, supra, the court upheld the granting of
summary judgment for the defendants.
The Court has found much case law addressing the issues
presented here, and
therefore finds no need to blaze new trails. Two circuits have
recently addressed virtually the identical legal and factual
issues raised in plaintiffs' Complaint and have granted summary
judgment for the insurers. Medical Arts Pharmacy of Stamford,
Inc. v. Blue Cross and Blue Shield of Connecticut, Inc.,
518 F. Supp. 1100 (D.Conn. 1981), aff'd 675 F.2d 502 (2nd Cir. 1982);
and Sausalito Pharmacy, Inc. v. Blue Shield of California, 1981-1
Trade Cas. ¶ 63,885 (N.D.Cal. 1981), aff'd 677 F.2d 47 (9th Cir.
1982) (per curiam).*fn3
The decisions in the following cases have also been especially
helpful in deciding the issues presented here: Proctor v. State
Farm Mutual Automobile Insurance Co., 675 F.2d 308 (D.C.Cir.
1982); Quality Auto Body, supra; Michigan State Podiatry
Association v. Blue Cross and Blue Shield of Michigan, 1982-2
Trade Cas. ¶ 64,801 (E.D.Mich. 1982); Blue Cross and Blue Shield
of Michigan v. Michigan Association of Psychotherapy Clinics,
1980-2 Trade Cas. ¶ 63,351 (E.D.Mich. 1980).*fn4
Section 1 of the Sherman Act provides in part as follows:
"Every contract, combination in the form of a trust or otherwise,
or conspiracy, in restraint of trade or commerce among the
several states, or with foreign nations is declared to be
illegal." 15 U.S.C. § 1.
Section 2 of the Sherman Act states: "Every person who shall
monopolize, or attempt to monopolize, or combine or conspire with
any other person or persons, to monopolize any part of the trade
or commerce among the several States, or with foreign nations,
shall be deemed guilty of a misdemeanor, and, on conviction
thereof, shall be punished by fine not exceeding fifty thousand
dollars, or by imprisonment not exceeding one year, or by both
said punishments, in the discretion of the Court." 15 U.S.C. § 2.
Section 4 of the Clayton Act in relevant part states: "Any
person who shall be injured in his business or property by
reasons of anything forbidden in the antitrust laws may sue
therefor in any district court of the United States in the
district in which the defendant resides or is found or has an
agent, without respect to the amount in controversy, and shall
recover threefold the damages by him sustained, and the cost of
suit, including a reasonable attorney's fee." 15 U.S.C. § 15.
C. Per Se Theories
Plaintiffs claim that the prepaid insurance plans constitute
per se violations of Section I of the Sherman Act in that they
fix prices. They also claim that the defendants have conspired to
monopolize the relevant market, which they argue is a per se
violation of Sections I and 2 of the Sherman Act.
It is true, of course, that these prepaid plans do "fix" the
price of pharmaceuticals sold by participating pharmacies in two
ways. First, the agreement between the insurer and the insured
fixes the amount of the deductible or co-payment which the
pharmacist receives directly from the insured. Second, the
participating pharmacy agreement fixes the total amount of
reimbursement received by the pharmacy from the insurer.
It is generally recognized, however, that not every agreement
which fixes price gives rise to per se liability under the
antitrust laws. Broadcast Music Inc. v. Columbia Broadcasting
Systems, Inc., 441 U.S. 1, 99 S.Ct. 1551, 60 L.Ed.2d 1 (1979).
Per se rules of illegality apply only to conduct that is
"manifestly anticompetitive." Continental
T.V., Inc. v. GTE Sylvania, Inc., 433 U.S. 36, 49-50, 97 S.Ct.
2549, 2557-2558, 53 L.Ed.2d 568 (1977). For the reasons stated
below, the Court finds that the pharmacy agreements at issue in
this case clearly do not fit into the per se category.*fn5
1. Resale Price Maintenance
Plaintiffs' basic claim is that these agreements, which
establish the maximum price the defendants will pay to
participating pharmacies and the maximum price the pharmacies can
charge the insureds, are the same kind of maximum price
restraints, often referred to as "resale price maintenance"
arrangements, struck down as per se illegal in Albrecht v. Herald
Co., 390 U.S. 145, 88 S.Ct. 869, 19 L.Ed.2d 998 (1968), and
Kiefer-Stewart Co. v. Joseph E. Seagram and Sons, Inc.,
340 U.S. 211, 71 S.Ct. 259, 95 L.Ed. 219 (1951). In Albrecht, a newspaper
publisher set maximum prices for the resale of newspapers by an
independent newspaper distributor who purchased from the
publisher. In Kiefer-Stewart, distillers set maximum prices for
the resale of liquor sold by the distillers to wholesale
distributors. Both cases involved situations where a maximum
price was set for the resale to third parties, and both schemes
were struck down. Thus the question which is determinative in the
instant case is whether the agreements under attack involve third
party purchasers at all.
Each federal court which has examined the question in the
context of the antitrust laws has decided that an insurer paying
out pursuant to its policy of insurance is actually a purchaser
of goods or services, and that the insured is merely the
recipient of the goods or services pursuant to the policy. See,
e.g., Sausalito Pharmacy, supra (insurers of pharmacy plans
identical to the ones at issue in the instant case are
"purchasers" of prescription drugs); Medical Arts, supra (same as
Sausalito); Quality Auto Body, supra (insurers of property damage
to cars are "purchasers" of goods and services); Proctor, supra
(same as Quality Auto Body); Michigan Association of
Psychotherapy Clinics, supra (insurers for psychotherapy services
are "purchasers" of services).
The importance of establishing the identity of the purchaser is
that no per se violation exists under a theory of resale price
maintenance where there are only two parties to the
purchase and sale, because there is no "resale."
A contract . . . between a buyer (the insurance
company) and a seller (the body shop) generally does
not, without more, appear to violate the antitrust
laws at all. Only if such an agreement contains
restrictions on one party's activities other than
those involved in the immediate purchase and sale
does the possibility of a Sherman Act violation
Quality Auto Body, supra, 660 F.2d at 1203 (emphasis in