The opinion of the court was delivered by: Rebecca R. Pallmeyer United States District Judge
MEMORANDUM OPINION AND ORDER
Plaintiff Omnicare Inc. ("Omnicare") filed a five-count complaint against Defendants United-Health Group, Inc. ("UnitedHealth"), PacifiCare Health Systems, Inc.*fn1 ("PacifiCare"), and RxSolutions, Inc. d/b/a Prescription Solutions ("RxSolutions") (collectively, "Defendants"). Omnicare's First Supplemental and Amended Complaint (the "Amended Complaint") alleged that Defendants had violated the Sherman Act's prohibition on contracts or conspiracies in restraint of trade, 15 U.S.C. § 1 (2000) ("Count I"), as well as a parallel prohibition against antitrust conspiracies in the Kentucky Consumer Protection Act, Ky. Rev. Stat. Ann. § 367.175 (West 2006) ("Count II"). Omnicare also charged Defendants with two state-law counts of fraud, and one state-law count of conspiracy to commit fraud. Defendants now move collectively to dismiss Counts I and
II. For the reasons stated below, this motion is denied.*fn2
The following facts are drawn from Omnicare's Amended Complaint, and are recounted in the light most favorable to Omnicare.
Omnicare is an institutional pharmacy; it provides drugs and services to long-term care facilities. (Am. Compl. ¶¶ 2, 21.) Its business includes providing services tailored to the needs of a frail and elderly population, some of whom pay for their care through the Medicare Part D subsidized drug program. (Id. ¶¶ 21-22, 26.) In order to serve Part D enrollees, Omnicare must negotiate deals with Prescription Drug Providers ("PDPs"), who receive premiums from the enrollees as well as federal subsidies, and then reimburse institutional pharmacies such as Omnicare when those pharmacies provide drugs and services to the enrollees. (Id. ¶¶ 22, 26-27.)
Medicare Part D was designed, in part, to incorporate competition among PDPs for enrollees to their plans. (Id. ¶ 28.) PDPs do compete for enrollees through the quality and quantity of the services they include. (Id. ¶ 29.) Thus, in effect, the relationship between PDPs and institutional pharmacies is that of a buyer and seller; PDPs pay firms like Omnicare to provide pharmacy services for their enrollees, with better packages of services being exchanged for higher reimbursement rates. (Id. ¶¶ 27-28.) PDPs also, however, generally have an incentive to provide services to the enrollees at the lowest possible cost, and to avoid any increases in the quantity of services covered by their plans. (Id. ¶ 27.)
The Centers for Medicare and Medicaid Services ("CMMS"), is a component of the United States Department of Health and Human Services responsible for the rollout of Medicare Part D, CMMS evaluated the applications of the prospective PDPs, and certified the successful bidders to become the first PDPs in September of 2005. (Id. ¶¶ 2, 30.) CMMS regulations required PDPs to assemble a network of pharmacies, including institutional pharmacies such as Omnicare that could provide services to long term care facilities. (Id. ¶ 31.) The window in which PDPs could negotiate the provision of such services by pharmacies was only "a few short months," presumably only until the PDPs started functioning as payors on January 1, 2006, although this is unclear from the Amended Complaint. (Id. ¶¶ 30-31.)
In July of 2005, Defendant UnitedHealth was a major managed care and health insurance company. (Id. ¶ 23.) In July of 2005, UnitedHealth entered into an agreement with Omnicare in which UnitedHealth would act as a PDP, with Omnicare agreeing to accept reimbursement from UnitedHealth for providing pharmacy services to UnitedHealth's enrollees. (Id. ¶ 33.) By June of 2006, when the Amended Complaint was filed, UnitedHealth operated in all fifty states, holding a dominant position in many parts of the country. (Id. ¶ 23.) UnitedHealth covered about 27% of all nationwide Part D enrollees, and in some regions, it covered in excess of 40% of all Part D enrollees.*fn3 (Id.)
In July of 2005, Defendant PacifiCare was an independent managed care company, providing health insurance to three million health plan members and ten million prescription drug and other specialty plan members nationwide. (Id. ¶ 24.) In July of 2005, PacifiCare entered into a merger agreement with UnitedHealth. (Id. ¶ 36.) After UnitedHealth and PacifiCare obtained a consent agreement from the Department of Justice's Antitrust Division, which had objected to the combination of the two competitors at a prior unspecified time, this merger was executed, and PacifiCare became a wholly-owned subsidiary of UnitedHealth in December of 2005. (Id. ¶ 24, 39.)
Defendant RxSolutions is a wholly-owned subsidiary of PacifiCare and UnitedHealth. (Id. ¶ 25.) It provides pharmacy benefits management services to PacifiCare and other managed care organizations. (Id.) Its role in this litigation is somewhat unclear, but it has filed no motions separately from the other two Defendants, and indeed, all parties to this litigation refer to it and PacifiCare collectively as a single entity throughout their pleadings. (E.g., id. at 1; Defs.' Mem. 1.)
Until the merger was completed, UnitedHealth and PacifiCare were competitors in the market for purchase of institutional pharmacy services in their role as future PDPs. (Id. ¶¶ 43-44.) During this time, Omnicare was seeking to provide institutional pharmacy services for PacifiCare's enrollees. (Id. ¶ 42.) As part of the merger agreement between UnitedHealth and PacifiCare, PacifiCare was required to obtain UnitedHealth's consent before entering into any Part D agreement with Omnicare. (Am. Compl. ¶ 37.) One provision of the merger agreement prohibited PacifiCare, from the time the merger agreement was executed until the merger was completed, from entering into "any Contract . . . that involves the Company or any of its Subsidiaries incurring a liability in excess of three million dollars ($3,000,000) individually or seven million five hundred thousand dollars ($7,500,000) in the aggregate" without the prior consent of UnitedHealth. (Id.)
On July 14, 2005, one week after accepting UnitedHealth's merger offer, but about five months before the merger was complete, PacifiCare informed Omnicare that it would not be willing to negotiate the terms of a contract with Omnicare. (Id. ¶¶ 24, 42.) Instead, PacifiCare demanded that Omnicare must accept a noncompetitive reimbursement rate and offer no more than the statutory minimum package of services in order to do business with PacifiCare. (Id. ¶¶ 42, 46.) Omnicare alleges that PacifiCare made this demand only after consulting with PacifiCare's competitor, UnitedHealth. (Id. ¶ 43.) PacifiCare and UnitedHealth were allegedly willing to take the risk that Omnicare might refuse this demand because it would be possible, after the merger, to fold PacifiCare's plans into the coverage agreement that UnitedHealth had already obtained from Omnicare. (Id. ¶ 45.) There was thus no risk that, if the hardball tactic fell through, PacifiCare's enrollees would lack access to Omnicare's services.
On or about November 8, 2005, the CMMS advised that "it is imperative that [long-term care] pharmacies not withhold contracts with Part D plans to limit the number of plans to which a facility's beneficiaries have access." (Id. ¶ 53.) On December 6, 2005, Omnicare, at the urging of the CMMS and in order to prevent any disruption of services to its PacifiCare plan enrollees, accepted PacifiCare's offer. (Id. ¶ 54.) Omnicare was thus compelled to accept a below-market reimbursement rate for PacifiCare patients. (Id. ¶ 55.) In February of 2006, UnitedHealth, now the owner of PacifiCare, notified Omnicare that it was withdrawing the UnitedHealth plans from its original agreement with Omnicare, and then switched them to the PacifiCare plan, with its lower reimbursement rate. (Id. ¶ 60.)
In its Amended Complaint, Omnicare claims that the collusion between UnitedHealth and PacifiCare constituted a violation of the Sherman Act, as a per se illegal scheme to fix prices. (Id. ¶¶ 70-72.) Omnicare also claims that the same conduct violated the Kentucky Consumer Protection Act. (Id. ¶¶ 79-83.) Defendants have moved collectively to dismiss both of these ...