CVS’ Conflict of Interest Policy Violated Where Pharmacist Formed a Compounding Pharmacy that Competed with CVS for Patients Even Though the Compounding Pharmacy Sold Pharmaceuticals that CVS Did Not Dispense

A CVS pharmacist founded her own compounding pharmacy that mainly created compounded pharmaceuticals that CVS did not dispense.

However, although the compounding pharmacy’s pharmaceutical products were distinct from CVS products, the pharmaceutical products sold at both pharmacies treated the same or similar conditions.

The pharmacist’s supervisor discovered her side-business and recommended that the pharmacist be terminated because her conduct violated the company’s conflict-of-interest policy. CVS terminated the pharmacist for violation of its conflict-of-interest policy.

The terminated pharmacist unsuccessfully sued her supervisor on a variety of grounds, including defamation.

The pharmacist alleged that her supervisor’s statement that the pharmacist’s business “clearly competes with CVS for Patients” was false.

The pharmacist argued that her compounding pharmacy did not compete with CVS because her compounding pharmacy sold different products than those available at CVS.

However, neither the district court nor the Minnesota Court of Appeals were convinced by the pharmacist’s arguments. The court noted that although the two businesses’ products might be different, they treated the same conditions, which showed that the compounding pharmacy clearly competed with CVS for customers.

The pharmacist asserted two other arguments for why her compounding pharmacy did not compete with CVS, but lost those arguments too.

The pharmacist unsuccessfully argued that pharmacies do not treat patients, doctors treat patients, and pharmacies simply fill prescriptions created by doctors; thus, the compounding pharmacy could not compete with CVS because the doctor decides what prescriptions to prescribe, not the pharmacist. Under this theory, the pharmacist argued that if a doctor prescribes medications that are fillable at the compounding pharmacy and not CVS, the compounding pharmacy has done nothing to detract from CVS’ business, because it was the doctor’s decision to prescribe the medication.

The courts were unconvinced by this argument on the grounds that the compounding pharmacy and CVS offer drugs that treat the same conditions and although a patient cannot receive prescription drugs from either pharmacy without a doctor’s prescription, a patient might ask their doctor to change their prescription such that the prescriptions could be transferred from a conventional pharmacy like CVS to a compounding pharmacy.

The pharmacist also argued that the compounding pharmacy was not competing with CVS because Minnesota law limits the types of products that a compounding pharmacy and CVS can legally sell and CVS is licensed under Minnesota law as a synthetic pharmacy and the pharmacist’s business was licensed as a compounding pharmacy; synthetic pharmacies sell pills that are mass marketed and are legally distinct from customized powders sold by compounding pharmacies. In response, the court found that the sale of compounded pharmaceuticals constitutes competition because those pharmaceuticals serve to treat substantially the same conditions in a pharmaceutical patient as the synthetic pharmaceuticals.

In sum, the court rejected the argument that the compounding pharmacy did not compete with CVS because its products are distinct and concluded that the CVS supervisor made a true statement when she said that the compounding pharmacy clearly competes with CVS Pharmacy for patients.

See Martinsen v. Engleka, 2018 Minn. App. LEXIS 214 (April 30, 2018).


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