2 drug distributors cannot sue Optum over alleged unconstitutional conduct, federal court rules

Two drug distributors cannot sue Optum under federal civil rights claims for allegedly losing them customers by denying accreditation from state pharmacy boards, a federal appeals court ruled May 19.

The U.S. Circuit Court of Appeals mostly upheld a district court's dismissal of a civil rights lawsuit by Eatontown, N.J.-based PriMed Pharmaceuticals and Chestnut Ridge, N.Y.-based Oak Drugs against OptumRx and the National Association of Boards of Pharmacy.

The appeals court did revive a due process claim against NABP under New Jersey common law, where the 2018 lawsuit was originally filed.

PriMed and Oak Drugs first sued Optum and the NABP in 2018 for alleged violations of constitutional and New Jersey common law. 

In the lawsuit, PriMed and Oak Drugs claimed they lost business and customers because Optum requires pharmacies it works with to only buy from drug distributors accredited by the NABP.

The plaintiffs applied for accreditation with the NABP, but were both initially rejected because they did not meet the criteria. The plaintiffs said their due process rights were violated because there was no explanation for the denials and no opportunity to appeal. The two did eventually receive accreditation, but claimed the delay had already damaged their business.

The distributors sued under New Jersey common law and under a federal civil rights law that allows civil rights lawsuits against states or entities acting on states' behalf.

A federal judge dismissed the case in December 2020 because the defendants were not state actors, a requirement to prove a constitutional violation took place. The judge also said no New Jersey court had ever recognized any comparable due process claims previously.

The appeals court ruled that because of the lack of standing, the plaintiffs cannot sue Optum or NABP under federal civil rights claims, and the district court was correct to dismiss. The appeals court revived the claims made under New Jersey common law against NABP, however, because the court found that the New Jersey Supreme Court had recognized a comparable due process claim in 1961.

"Because we believe that PriMed and Oak Drugs plausibly allege NABP violated their due process right under New Jersey common law, we will affirm the District Court's judgment in part and reverse in part," the appeals court wrote.

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