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Lawsuit accusing Oregon firm of pharmacy conspiracy appealed

Federal judges disagree over a lawsuit alleging Portland-based LegitScript worked with regulators and the pharmaceutical industry to keep drug prices high and hurt a New York company's business
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The Mark O. Hatfield United States Courthouse in downtown Portland, Oregon. | COURTESY/WIKIMEDIA COMMONS
May 28, 2024

An unusual federal lawsuit accusing a Portland company of working with the pharmaceutical industry to keep drug prices high is headed to the 9th U.S. Circuit Court of Appeals.

The case filed against LegitScript by the New York-based firm PharmacyChecker sheds light on efforts by the industry and state regulators to discourage consumers from going online to buy less-expensive drugs imported from other countries — a practice that remains illegal, if rarely enforced.

In March, Portland federal Judge Michael Simon sent the case to federal appeals judges to verify whether it can go forward. His ruling putting the case on pause came as PharmacyChecker — which has positioned itself as an ally of online pharmacy consumers — was demanding internal documents from LegitScript that could show the extent to which the Portland company, government regulators and the industry are working together.

The ruling also came as the lower drug prices in other countries have been getting more attention, highlighted by Pres. Joe Biden. Further fueling debate is that Florida recently won federal approval to ship drugs from Canada — and Colorado seeks to follow in Florida’s wake.

In contrast, buying drugs from overseas is illegal for individuals, but rarely prosecuted. People in Oregon have organized trips to Canada to buy cheaper pharmaceuticals, and state lawmakers have proposed Oregon purchase from there as well.

Richard Sybert, an attorney for LegitScript, declined to comment on the ongoing litigation. Evan Smith, LegitScript's executive vice president and general counsel, told Oggys Online in an email that, "LegitScript does not comment on ongoing litigation." 

“Here, it is clear that PCC ‘makes easier’ the illegal conduct at issue: PCC directs U.S. consumers to foreign pharmacies where they can purchase prescription medication in violation of federal law. In fact, PCC has described this facilitation as its mission ‘to help consumers afford medication they need.’”

Different companies cite similar goals

In 2007, LegitScript launched in Oregon while highlighting the risks of buying from online pharmacies, some of which have been linked to organized crime or sell counterfeit medications. The firm certifies some companies. It also sells high-tech research services to Google and other internet companies to avoid costly lawsuits by preventing online pharmacies from using their services. 

Founded in 2003, PharmacyChecker operates a price-comparison website that lists and offers “accreditation” to online pharmacies that pay a monthly fee. Canadian pharmacies can be listed on the website, if they sign an agreement to require verified prescriptions from customers before selling them drugs.

Both companies style themselves as promoting transparency and safety, while helping consumers. But they soon clashed.

Five years ago, in a New York federal court, PharmacyChecker sued LegitScript along with the National Association of Boards of Pharmacy and the industry-backed Alliance for Safe Online Pharmacies.

PharmacyChecker’s lawsuit accused LegitScript of breaking antitrust law with anticompetitive behavior. Specifically, it cited emails and other evidence suggesting the Portland firm worked with state regulators and the industry in a coordinated effort to steer customers away from PharmacyChecker’s website.

Two years ago, the judge there transferred the portion of the case against LegitScript to Oregon.

“LegitScript has identified no federal or state law that PharmacyChecker has violated. Nor has LegitScript pointed to any instance of a federal or state law enforcement agency prosecuting or even threatening to prosecute PharmacyChecker, or any instance of a federal or state regulatory body taking or even threatening to take any action against PharmacyChecker (e.g., by issuing a cease-and-desist order).”

Different judges, different answers

PharmacyChecker company filed its initial lawsuit in New York against LegitScript as well as the National Association of Boards of Pharmacy and three other groups. The lawsuit noted that the U.S. has the highest cost of prescription drugs in the world and that patients often become sicker or die because they can’t afford medicine. 

At the center of the lawsuit is the allegation the groups worked in concert to keep drug prices high in the U.S. while quashing competition from international online pharmacies.

Framing LegitScript as a competitor, the suit by PharmacyChecker claimed that the Portland company, state regulators and the pharmaceutical industry have engaged in a conspiracy of misinformation to both pressure internet companies and scare consumers away from online pharmacies and PharmacyChecker’s website.

The suit claims LegitScript and its allies put PharmacyChecker on a “blacklist” that blotted out its presence from internet search providers Google and Bing. PharmacyChecker.com generates revenue from internet traffic, which plummeted as a result of the conspiracy, according to the lawsuit. 

Attorneys for LegitScript and the other groups, meanwhile, argued that PharmacyChecker isn’t protected by federal antitrust law because its business is centered on helping consumers illegally import prescription drugs. 

That argument found traction in federal court in New York. After splitting off LegitScript from the New York case in 2022, U.S. District Judge Kenneth Karas ruled against PharmacyChecker the following year, partially dismissing the lawsuit. He agreed in his opinion that PharmacyChecker was facilitating illegal activities and was not protected by antitrust law. 

His opinion referenced emails from frustrated customers who received unmarked or incorrect medications. PharmacyChecker’s then-president wrote that one order of pills could be “non-compliant,”  wrote. 

“Here, it is clear that PCC ‘makes easier’ the illegal conduct at issue: PCC directs U.S. consumers to foreign pharmacies where they can purchase prescription medication in violation of federal law,” Karas wrote. “In fact, PCC has described this facilitation as its mission ‘to help consumers afford medication they need.’”

But Simon, the Oregon judge, last year disagreed and denied LegitScript’s motion to throw out the case, allowing the case to proceed. 

He wrote in his January 2024 opinion that  while PharmacyChecker’s website “facilitates illegal activity by others,” its revenue is  “an indirect result” and is not based solely on overseas pharmacies.

About 57% of PharmacyChecker.com’s total revenue generated by clicks from U.S. consumers comes from foreign pharmacies, according to Simon’s opinion

But in his opinion, Simon, a noted First-Amendment specialist, described  PharmacyChecker.com’s website as “a comparative-price reference, for research, for use in policy advocacy, or as an educational tool.” He wrote that the website has been referenced by multiple national media outlets, advocacy groups, academic researchers and even the U.S. FDA and a U.S. Senate committee. 

“LegitScript has identified no federal or state law that PharmacyChecker has violated,” he wrote. “Nor has LegitScript pointed to any instance of a federal or state law enforcement agency prosecuting or even threatening to prosecute PharmacyChecker, or any instance of a federal or state regulatory body taking or even threatening to take any action against PharmacyChecker (e.g., by issuing a cease-and-desist order).”

Higher court ahead

Two months ago, Simon granted LegitScript’s motion to file an “interlocutory appeal” to the 9th Circuit, noting the disagreement between two federal judges on the key issue.  

He paused proceedings until the Ninth Circuit Court of Appeals made a decision. 

Lucia Mueller, president of PharmacyChecker, told Oggys Online in an email the company believes the appeals court will agree with Simon. She also provided a statement indicating the company will continue litigating the case and will appeal the New York judge’s ruling as well.

“PharmacyChecker looks forward to continuing its fight for competition and transparency in prescription drug pricing,” reads the statement. 

According to appeals court records, the two sides were required to meet to discuss a potential settlement, but the discussions did not bear fruit.


You can reach Jake Thomas at [email protected] or via Twitter @jthomasreports

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