Local health care technology company CaptureRx is suing pharmacy giant CVS Health in connection with alleged anticompetitive practices the San Antonio-based company claims has cost it millions of dollars in business.
The antitrust lawsuit, filed last week in U.S. District Court, charges CVS with forcing health care providers who purchase drugs via a federal drug pricing program to contract with CVS subsidiary Wellpartner, CaptureRx’s competitor.
CaptureRx, located downtown on East Houston Street, has lost 40 customers who have told the company they cannot afford to lose access to one of the country’s largest retail pharmacy chains, the lawsuit claims. About 70 percent of U.S. residents live within three miles of a CVS pharmacy. The lost customers represent $3 million in annual agreements, according to the suit.
“It will hurt,” said Chris Hotchkiss, president, CEO, and co-founder of CaptureRx. “It’s a significant amount of our earnings, but we will endure just as we have other problems.”
The homegrown company is headquartered in the heart of San Antonio’s still-young tech district, where it stands as one of the more established companies in a field of mostly startups. Founded in 2000, CaptureRx employs about 180 workers, Hotchkiss said.
Its proprietary software is used to administer a federal drug pricing program known as 340B, which serves safety-net health care providers, including hospitals and clinics, for underinsured and uninsured patients. The federal government provides deeply discounted drugs, in some cases up to 50 percent off the wholesale price, to the safety-net care providers. Those health care facilities then use those savings to provide free or low-cost medicine to uninsured and indigent patients.
CaptureRx claims CVS’ alleged practices will sink revenues for hospitals that treat the low-income beneficiaries of the 340B program. Wellpartner charges above-market fees, and CaptureRx’s customers have “grave concerns” about the 340B administrator’s service quality, according to the suit.
Hotchkiss said Wellpartner’s exorbitant subscription rates are “pillaging safety-net providers of money,” affecting the care of the most at-risk patients. And although CVS is well positioned and financed to fight legal challenges tooth and nail, he said, “I have to fight – even if it means losing my company.”
CVS called the suit baseless.
“CVS Health is committed to the highest standards of ethics and business practices and we believe this complaint has no merit,” company spokesman Mike DeAngelis said in an email. “Rather, it appears that CaptureRx is threatened by new competition and is trying to use unfounded antitrust allegations to stall the growth of an emerging competitor, Wellpartner.”
CaptureRx’s lawsuit isn’t the only legal challenge CVS faces in response to making Wellpartner its exclusive 340B program administrator. Florida-based Sentry Data System, also a Wellpartner competitor, filed suit against CVS Health last February claiming violations of antitrust law. In a June news release, Sentry celebrated “major concessions” CVS made to allow Sentry to retain customers for services other than 340B administration for CVS pharmacies. A Florida judge in August dismissed Sentry’s antitrust claim. The parties went into mediation in the fall but failed to reach a settlement last week.
CVS’ $69 billion merger with Aetna in November brought more cries of antitrust violations against the company. A federal court in Washington, D.C., ordered a review of the federal government’s agreement with CVS to ensure it does not run afoul of antitrust law.
Earlier this year, Walgreens attempted to merge with pharmacy chain Rite Aid, one of CaptureRx’s largest pharmacy partners. The deal ultimately fell through as the Federal Trade Commission was expected to block it, but Walgreens is still set to take over nearly 2,000 Rite Aid locations. For CaptureRx, that meant a significant revenue and earnings dip – double the impact on business that Hotchkiss expects from the CVS-Wellpartner merger. Over the past 15 months, those two events have had a $15 million impact on his company’s bottom line, he said.
But Hotchkiss maintains that CaptureRx is still growing – not quite, however, to the extent it had planned during negotiations with the City of San Antonio and Bexar County over an economic development agreement. In 2017, CaptureRx declined an overall $1 million package – including property tax abatement, cash incentives, and a waiver from San Antonio Water System fees – from the County and City that would have helped the company grow its staff by 200 and move into a new corporate office at the former San Antonio Light building on Broadway Street.
“We were discussing incentives a couple of years ago,” said David Marquez, Bexar County Economic and Community Development executive director. “They made a request; we proposed some incentives; we made a presentation to Commissioners Court, and even began negotiations. At the last minute, CaptureRx opted not to pursue the incentives. That’s a bit unusual, but not unprecedented.”
“We had to call that off because of a number of things,” Hotchkiss said, adding the company would have had to borrow an impractical amount of money from the bank.
When its lease is up at its East Houston Street building, the company still might move into the Light building or one of developer GrayStreet Partners’ properties just north of the building, Hotchkiss said.
CVS’ entry into the 340B administrator sphere poses an existential threat to those who compete with Wellpartner, Hotchkiss said. As for CaptureRx, closing shop is a possibility only if the company gets “arrogant” or makes mistakes, he said. But he has confidence in his employees to persevere through challenges.
“No,” he said, “CaptureRx is not at risk of going under.”