[00:00:07] Speaker 01: We'll move to the second argument set for this morning, Kelly Ross and Associates versus Express Scripps, case number 23-3634. [00:01:19] Speaker 02: Go ahead. [00:01:21] Speaker 02: Good morning, Your Honors. [00:01:22] Speaker 02: Is the microphone working OK, Audible? [00:01:27] Speaker 03: Yes. [00:01:27] Speaker 03: Yes, OK. [00:01:29] Speaker 03: My name is Gary Menke from the law firm in Talmadge Fitzpatrick. [00:01:31] Speaker 03: I represent Appellant Kelly Ross and Associates. [00:01:35] Speaker 03: So I'd like to reserve five minutes for a bottle, by the way, if I may. [00:01:41] Speaker 03: Under Washington law, the touchstone principle that guides the court's analysis [00:01:49] Speaker 03: of all three contract related claims that are before the court in this appeal is reasonableness. [00:01:55] Speaker 03: And that manifests itself a little bit different ways when looking at each claim. [00:02:00] Speaker 03: But reasonableness is kind of a touchstone, a north star. [00:02:04] Speaker 03: And so we start first with the claim of breach of the express contract terms. [00:02:10] Speaker 03: You know, Washington law teaches that summary judgment is appropriate only if there's a single reasonable interpretation of a contract's expressed terms. [00:02:20] Speaker 03: And in Berg, the Washington Supreme Court reiterated a longstanding principle that the courts will prefer an interpretation that is reasonable and prudent and will reject interpretations that are unreasonable and imprudent. [00:02:36] Speaker 03: And Washington courts have also reiterated when looking at a commercial contract, which this one indisputably is, that the interpretation must be commercially reasonable. [00:02:51] Speaker 03: So with each of the three layers of analysis here, first, looking at the specific words in a contract, second, looking at the surrounding provisions around those express words, [00:03:06] Speaker 03: And then third, looking at all of the contextual extrinsic evidence that sheds light on the meaning of the specific words that are in dispute. [00:03:15] Speaker 03: Their reasonableness undergirds each one. [00:03:18] Speaker 03: So what are the express words that support my client's breach of contract claim? [00:03:26] Speaker 03: So we look at the reimbursement table covered specialty medications. [00:03:35] Speaker 03: And the contract defines covered specialty medications by referring to the definition for covered medications. [00:03:44] Speaker 03: And that definition, in turn, tells us that we're talking about prescription drugs. [00:03:51] Speaker 03: And so that particular definition leads us to conclude when there is something listed in that table, we're talking about a prescription drug. [00:04:02] Speaker 03: We're not talking about the trademark itself. [00:04:04] Speaker 03: We're talking about the prescription drug that the trademark refers to and names it. [00:04:11] Speaker 03: And then. [00:04:12] Speaker 04: OK, so to cut to that is effectively your argument that [00:04:18] Speaker 04: EDTF, or generic Truvada, is Truvada. [00:04:24] Speaker 04: Isn't that the crux of it? [00:04:26] Speaker 04: Because if it isn't, it's simply not in the table. [00:04:30] Speaker 04: And I take it your argument would be that everything in that table, which uses a name that has a legal significance, and I guess a pharmacological significance, also includes one or more generics of it. [00:04:45] Speaker 04: Is that correct? [00:04:46] Speaker 03: Correct. [00:04:47] Speaker 04: And therefore, your argument would apply to everybody who's supplying any generic for any of these 40 or 50 drugs. [00:04:55] Speaker 04: Correct. [00:04:56] Speaker 04: And nobody's tried to do that before you guys are just the best lawyers? [00:05:01] Speaker 03: Well, Your Honor, the Express Scripts has said, look, we haven't read this contract for anyone. [00:05:11] Speaker 03: We don't think that disposes of the issue. [00:05:14] Speaker 04: It doesn't dispose of it, but at least there's a lot of money involved, and a lot of other people have good lawyers. [00:05:20] Speaker 04: And I'm willing to concede that you may be the best of all of them, but it's at least a little interesting that there's not a whole gang that are trying to make this case for every one of these drugs. [00:05:32] Speaker 03: Yeah, and I think there's a lot of reasons that that can happen. [00:05:34] Speaker 03: I mean, look at class action lawsuits where consumers band together to seek redress for a breach of a consumer contract where the individual damages might not be substantial enough to sort of go it alone. [00:05:49] Speaker 03: So I think the explanation more is, my client is a plucky, independent company that has been the first that is willing to stand up and say that this is an incorrect interpretation of the contract. [00:06:01] Speaker 04: You might have other- Is Trivada the only drug that they supply, or generic Trivada the only [00:06:08] Speaker 04: drug of this sort that they supply? [00:06:11] Speaker 03: I don't know the full list of specialty medications and other non-specialty medications that are provided, but it is a full-service pharmacy. [00:06:20] Speaker 03: But I think it's fair to say that it's a flagship service that this pharmacy provides. [00:06:26] Speaker 03: My client operates a long-term care pharmacy at Harborview Hospital here on First Hill, which is a public hospital that serves [00:06:35] Speaker 03: vulnerable populations, a clinic here locally that serves a lot of populations that are particularly vulnerable to contracting HIV AIDS. [00:06:46] Speaker 03: And so I think one explanation to your honor's question is why is your client the first is because this particular drug features so prominently in its business and the services that it provides. [00:07:00] Speaker 04: Let me take you one other question then, because I think part of your argument is if you look at that table [00:07:06] Speaker 04: currently the generics a which is single source generics B which is multi-source they're not paying on any of those but am I correct that under the contract they could add it as by negotiation or mercy say okay EDTF is now a covered specialty medication and it would go into generics a or some other generic [00:07:35] Speaker 04: which is the equivalent that comes from two sources, there would be a place for it to be billed. [00:07:41] Speaker 04: Is that correct? [00:07:44] Speaker 03: Yes, with one tweak. [00:07:47] Speaker 03: Uh, so yes. [00:07:49] Speaker 03: Um, but it wasn't necessary here, but if the court holds that it was necessary and that the word Truvada, um, encapsulates only the brand version and that, you know, there needed to be some description of the generic needed to be in there. [00:08:05] Speaker 03: Then we're saying, um, that express scripts had the ability to amend that table and [00:08:14] Speaker 03: acted in bad faith and unfairly when it did not, and also violated. [00:08:18] Speaker 05: So stop there. [00:08:18] Speaker 05: They had the ability, but that suggests there's no obligation as written under the contract. [00:08:29] Speaker 03: While there isn't an absolute obligation, Your Honor, we think that the duty of good faith and fair dealing is overlaid on that. [00:08:37] Speaker 03: And Washington law teaches that's a contextual analysis. [00:08:40] Speaker 03: So based on the circumstances presented here, we would say that the duty of faith and fair dealing require the inclusion of the generic under this case's circumstances. [00:08:55] Speaker 05: And you've argued that they're essentially bioequivalence. [00:08:59] Speaker 05: But in looking at which box they fall under, you do put the generic in a different box than the brand name Truvada, correct? [00:09:11] Speaker 03: Under a different box? [00:09:13] Speaker 05: Well, as to where they go into, you put them in the generic box, the generic. [00:09:18] Speaker 05: You don't actually suggest that it belongs in the same box as the brand, correct? [00:09:25] Speaker 03: Under the same box, you mean like a literal retail package or are you talking about the table? [00:09:28] Speaker 05: No, I mean that you have these charts that you've presented under the same table. [00:09:32] Speaker 05: We'll call them tables. [00:09:34] Speaker 05: Charts, tables, whatever you want to call it. [00:09:36] Speaker 04: But also in a literal box, you can't put the generic in a box that says Truvada. [00:09:42] Speaker 03: That's true. [00:09:42] Speaker 05: Even though it's bioequivalent. [00:09:44] Speaker 03: Maybe it'd be useful for a second just to direct the court. [00:09:47] Speaker 03: So Express Scripts asked both the district court and the district court did in this court to take judicial notice of the public records in the US Trademark and Patent Office's files for the registration of the trademark Truvada. [00:10:02] Speaker 03: So last night, I actually spent more time looking through it, and there's a specimen that [00:10:08] Speaker 03: the maker of Truvada, the holder of the trademark, has to have. [00:10:14] Speaker 03: The court can go look there. [00:10:19] Speaker 05: What excerpt of record are you looking at? [00:10:22] Speaker 05: Are you looking at a public record? [00:10:24] Speaker 03: This is a public record, and I believe it's properly before the court because the district court was asked to take judicial notice of these records and did so. [00:10:33] Speaker 03: And this court likewise has been asked to take judicial notice of them by express scripts. [00:10:38] Speaker 03: And so this is in the public record on the... But is it in the record before this court? [00:10:45] Speaker 03: It's not actually in the excerpts. [00:10:47] Speaker 05: It's in the public... It just seems like it would be helpful if you thought it should be in the excerpts because they did take judicial notice. [00:10:53] Speaker 05: that you had provided to us and opposing counsel before the argument, because you're holding up a piece of paper that we can barely read. [00:11:00] Speaker 03: Yeah. [00:11:03] Speaker 03: So I brought copies and informed opposing counsel, and he may object. [00:11:07] Speaker 03: I'm not sure. [00:11:08] Speaker 03: But I don't think it's strictly necessary to look at this document to support our claim, but I do think it provides some help. [00:11:15] Speaker 03: So I can provide it with a letter later or leave copies. [00:11:20] Speaker 03: with with with the clerk but the the brand label says appropriate in a 28 J letter will do your honor perhaps with the motion to take judicial notice if that's what you want us to do [00:11:32] Speaker 03: OK, it certainly can do that. [00:11:35] Speaker 03: So what I think you'll see, and we'll speak about more in such materials, is that when the word Truvada is used, it's referring to that underlying biochemical drug, right there on the label that the maker itself has presented to the United States government. [00:11:54] Speaker 03: And then we have other evidence of trade uses that confirms that that's how that drug is spoken about. [00:11:59] Speaker 03: Dr. Peterson, [00:12:01] Speaker 03: High-ranking employee of express scripts, you know in his deposition said well It's not even quite accurate just to refer to those chemical components alone To refer to this drug because there are other drugs that also use those same chemicals. [00:12:17] Speaker 01: So for example [00:12:21] Speaker 01: like standard drug versus, I mean, generic drugs, it's, there's a whole market for generic drugs. [00:12:26] Speaker 01: And though when you go get, a lot of times the physician or the, when you get your prescription filled, they'll say, do you want the original or do you want, you know, you want the specialty or do you want the generic because the generic might cost less. [00:12:42] Speaker 01: So I mean, how does that play? [00:12:44] Speaker 01: Does that have any bearing on this or not really because we're just looking at a specific [00:12:51] Speaker 03: I think the answer is both, Your Honor. [00:12:54] Speaker 03: And to use an example, let's say we have these same tables and that they were aligned in this way that they're presented, where right beneath a rate for brand and generics is a list of tables. [00:13:07] Speaker 03: Let's say it was Tylenol, Anvil. [00:13:11] Speaker 03: Well, if you came and say, well, we filled a prescription for acetaminophen, [00:13:18] Speaker 03: we expect to be reimbursed for the generic rate for Tylenol, because that's the generic of Tylenol. [00:13:24] Speaker 03: Likewise for Advil. [00:13:25] Speaker 03: If we got a prescription for Advil and we filled it with ibuprofen, we would expect to be reimbursed at the rate that's right above that table, and not sort of caught by surprise. [00:13:40] Speaker 03: acetaminophen is something entirely different from Tylenol. [00:13:43] Speaker 03: It's not the brand Tylenol. [00:13:45] Speaker 03: And we're going to refer to this completely different reimbursement chart that doesn't appear right above the list. [00:13:53] Speaker 03: So I think, Your Honor, the answer to your question is it's both. [00:13:58] Speaker 03: You can use your common sense, because that dictates what's reasonable. [00:14:02] Speaker 03: What's the objective manifestation of the party's agreement? [00:14:08] Speaker 05: Is the Truvada formula, was it a patented formula, or has the patent expired? [00:14:16] Speaker 03: It was patented and it was expired. [00:14:18] Speaker 03: It was heavily litigated. [00:14:19] Speaker 03: It was supported by research from the US government. [00:14:22] Speaker 03: The first Trump administration sued the manufacturer, in fact, for violating a patent that it believed was held by the United States government. [00:14:34] Speaker 03: I have just two minutes left. [00:14:35] Speaker 03: If I may, I'd like to reserve the remainder for my air bottle. [00:14:45] Speaker 00: Good morning. [00:14:46] Speaker 00: May it please the court, Danny Solomon for Express Scripts. [00:14:49] Speaker 00: This is a breach of contract case between two sophisticated parties. [00:14:53] Speaker 00: Kelly Ross is unhappy with its reimbursement rate for one drug over a seventh month period under a contract that it agreed to. [00:14:59] Speaker 00: That's it. [00:15:00] Speaker 00: This case is not about the duty of good faith and protecting consumers. [00:15:03] Speaker 00: It's a contract dispute. [00:15:04] Speaker 00: Because Express Scripts reimbursed Kelly Ross according to the contract's terms, this court should affirm. [00:15:09] Speaker 00: I'd like to start with the contract. [00:15:11] Speaker 00: As Judge Boggs, [00:15:13] Speaker 00: It depends on the meaning of the word Truvada. [00:15:17] Speaker 00: And the word Truvada is a name which designates the drug sold and manufactured by Gilead Sciences. [00:15:24] Speaker 00: And when this contract came out in 2018, there were no generics on the market. [00:15:27] Speaker 00: And so by including Truvada in the table, it by law referred only to the brand version of that medication. [00:15:35] Speaker 00: And so when the contract doesn't say that the contract, by listing a brand medication in the table, it includes all generics that will subsequently come to the market. [00:15:46] Speaker 00: And therefore, even when a generic enters the market, the contract doesn't require Express Scripts to reimburse pharmacies for the generic versions that come out. [00:15:57] Speaker 04: you could add to the table, is that correct? [00:16:00] Speaker 04: That's right. [00:16:01] Speaker 04: For any of them, I presume some of these have generic, some of them don't, some of them have multi-source. [00:16:07] Speaker 04: Some of them have single source. [00:16:08] Speaker 00: That's right. [00:16:09] Speaker 00: The contract gives Express Scripts sole discretion to add medications to the table at any time without notice to Kelly Ross, without formal amendment. [00:16:17] Speaker 00: So if tomorrow it decided to add a generic drug, it could do so. [00:16:20] Speaker 00: And if it did that, then that generic drug would be reimbursed under the generics A rate that is there. [00:16:25] Speaker 04: Presumably, if they have some kind of in with you or market power or something, they could go negotiate that with you. [00:16:35] Speaker 04: As could everyone else. [00:16:37] Speaker 00: So the drugs that are in the covered special medications table, those are not necessarily negotiated. [00:16:42] Speaker 00: The rates are negotiated. [00:16:43] Speaker 00: But because the covered special medications table applies to all similarly situated providers, those aren't necessarily could be negotiated. [00:16:52] Speaker 05: You mean the list isn't negotiated? [00:16:54] Speaker 00: The list is not negotiated because it's a contract that when changes are made to the table, it will apply, as the contract says, to all similarly situated providers, which is essentially Express Scripts, the unaffiliated specialty credentialed pharmacies and Express Scripts network. [00:17:08] Speaker 05: Well, has your client ever in this contract time period added generics to any of these [00:17:19] Speaker 00: No, a generic has not been added to the table. [00:17:24] Speaker 00: It has been changed, and drugs have been replaced, and other drugs have been added. [00:17:28] Speaker 00: A generic drug has not been added, but it could. [00:17:33] Speaker 00: It has the discretion to do that. [00:17:35] Speaker 04: When this contract was written, you would think that somebody at least thought about the possibility. [00:17:45] Speaker 04: Otherwise, there would be no reason [00:17:47] Speaker 04: to have generics A and generics B listed there? [00:17:50] Speaker 00: Sure. [00:17:51] Speaker 00: Sure. [00:17:52] Speaker 00: And that's because it could, for example, if a brand medication for whatever reason was stopped being manufactured, and Express Scripts thought that the generic version should be covered under the special medications table, then it could exercise its discretion to add the generic version. [00:18:08] Speaker 04: Let me ask you this. [00:18:10] Speaker 04: You know, we say it's biochemically equivalent. [00:18:13] Speaker 04: Is it physically marked in a way that is, if I took a Truvada pill and an EDTF pill that was not Truvada, could I tell the difference by any means whatsoever? [00:18:25] Speaker 04: I don't know the answer to that, Your Honor. [00:18:27] Speaker 04: A lot of pills are, you know, [00:18:29] Speaker 04: You say, well, it has a 234 on the bottom, or it has an L in the corner. [00:18:33] Speaker 04: Sure. [00:18:34] Speaker 00: Yeah, I don't know the answer to that. [00:18:35] Speaker 00: I will say that Teva cannot put on their bottles Truvada, because it's not. [00:18:40] Speaker 00: It's going to say, emtricitavin, tenofovir, disaproxyl fumarate tablets. [00:18:44] Speaker 00: And that's how Teva refers to the drug on their website. [00:18:46] Speaker 00: They say that their drug. [00:18:47] Speaker 01: But I don't know why that's determinative, because that's true of a lot of generics. [00:18:52] Speaker 01: I mean, you can't say that it is [00:18:57] Speaker 01: you know, the original, but the blue pill or whatever, I mean, whatever the generic is. [00:19:04] Speaker 00: Well, the contract doesn't say generic Truvada and it doesn't say ETDF either. [00:19:08] Speaker 00: And so if the word Truvada only has one meaning by law, because it refers to the drug that Gilead Sciences sold and manufactured, then it doesn't include... What is the generic table for then? [00:19:23] Speaker 00: Above that? [00:19:24] Speaker ?: Yeah. [00:19:24] Speaker 00: That if Express Scripts were to exercise its discretion to add a generic rate to the... But it never has. [00:19:30] Speaker 00: It never has. [00:19:30] Speaker 00: But if it wasn't there, then what would... Because Express Scripts cannot unilaterally add rate tables to the contract, those would need to be formally negotiated and the contract would need to be formally amended. [00:19:41] Speaker 00: If that rate table wasn't there and Express Scripts wanted to exercise discretion, [00:19:46] Speaker 00: it wouldn't be able to exercise its discretion and to add the drug without notice and formal amendment, because it would need to go to every single pharmacy and formally negotiate what the generic A rate would be. [00:19:57] Speaker 00: So by including that from the beginning, it essentially gives express groups the ability and the flexibility to exercise a discretion under the contract. [00:20:05] Speaker 00: Otherwise, they would have to formally amend it. [00:20:10] Speaker 01: Pharmacies who operate under your contract, they basically are disincentivized from [00:20:16] Speaker 00: prescribing generics. [00:20:31] Speaker 00: and made by different manufacturers and sold by different wholesalers and Kelly Ross's contract provides five different reimbursement rates and they get the lowest of five different ones. [00:20:40] Speaker 00: Now one of these reimbursement rates the one we're dealing with is average wholesale price and this is an independent third-party metric which is used in the pharmaceutical industry for reimbursement. [00:20:48] Speaker 00: And the contract doesn't set an AWP discount rate for every single one of the thousands and thousands of drugs. [00:20:54] Speaker 00: It sets one AWP discount rate for brands and one AWP discount rate for generics. [00:21:00] Speaker 00: And what this means is that Kelly Ross's profit margin on a particular drug is going to depend [00:21:06] Speaker 00: on their acquisition costs, which Express Scripts does not control. [00:21:09] Speaker 00: So like any business, sometimes Kelly Ross's profit margin is high on a particular drug, and other times it might be low. [00:21:15] Speaker 00: This is normal in business. [00:21:17] Speaker 00: And Kelly Ross knows this. [00:21:18] Speaker 00: They're a sophisticated pharmacy group. [00:21:21] Speaker 00: They have four locations. [00:21:22] Speaker 00: They have a full C-suite of executives. [00:21:24] Speaker 01: You're saying there's other market forces that would encourage them to use generics because the profit margin might be greater, even though there's no reimbursement. [00:21:31] Speaker 00: Right. [00:21:32] Speaker 00: And the bottom line is, we're only talking about the first seven months when Generic Truvada came out. [00:21:38] Speaker 00: And Kelly Ross knew their acquisition costs, they knew the reimbursement rate, and they kept on buying it anyway. [00:21:43] Speaker 00: I mean, they submitted a notice of dispute to Express Scripts in the middle of October, because claims adjudication basically happens immediately, and they were aware of exactly what the reimbursement [00:21:54] Speaker 00: And they kept on buying ETDF anyway throughout the entire seventh month period, even after we told them in December that this is what the contract says, this is the rate you're getting. [00:22:03] Speaker 00: They produced an invoice from Amerisource Bergen a week later where they kept on buying ETDF. [00:22:09] Speaker 00: And the reason why they [00:22:11] Speaker 00: The reason why they kept on buying ETDF is because dispensing medication as part of this one-step prep clinic was just a small part of their business. [00:22:20] Speaker 00: I mean, they essentially pioneered this HIV prevention program where they're not only dispensing medication, but their pharmacists are operating as providers in this clinic where they're essentially functioning as doctors. [00:22:34] Speaker 00: prescribing medication, they're meeting with patients, they're monitoring lab tests, ordering lab tests, and they're billing health insurance companies for this. [00:22:42] Speaker 00: And their owner testified, this is a highly profitable clinic. [00:22:47] Speaker 00: And so they continued to buy ETDF even though they knew exactly what their reimbursement rate was. [00:22:54] Speaker 00: And so there's a much broader context here than, oh, yes, they were losing money on every single prescription. [00:23:02] Speaker 00: If it's true what they say, yes, they were losing money, but you have to look at it in the broader market. [00:23:11] Speaker 05: Let me ask about the state law claim on good faith and fair dealing, because you have emphasized before that the ability to [00:23:22] Speaker 05: add generics or to even add drugs to this specialty list is solely within the power of your client, is that right? [00:23:32] Speaker 05: So it's basically a lopsided deal, you take it or leave it? [00:23:39] Speaker 00: Not necessarily. [00:23:42] Speaker 00: The starting point for their breach of good faith claim in their complaint is that to the extent it's determined that ETDF is not a covered special medications table, which means the starting point for the breach of good faith claim is that Express Scripts paid them exactly what they were entitled to under the agreement. [00:23:58] Speaker 00: And nevertheless, when Kelly Ross came to Express Scripts and said, hey, we're losing money. [00:24:02] Speaker 00: You should pay us more. [00:24:03] Speaker 00: You should add ETDF to the covered special medications table. [00:24:07] Speaker 00: that they were required to use their discretion under the contract to pay Kelly Ross more than what the contract requires. [00:24:15] Speaker 00: As a matter of law, that doesn't state a good faith claim under Washington law, because a party cannot breach its duty of good faith by simply standing on its rights to require performance of the contract according to its terms. [00:24:26] Speaker 00: The contract says what it says. [00:24:27] Speaker 00: Express scripts, there's no obligation, there's no term requiring express scripts to use its discretion, and therefore, [00:24:36] Speaker 00: Express Scripts wasn't required to essentially pay Kelly Ross more than what the contract requires. [00:24:43] Speaker 00: I mean, if this court were to endorse their theory of good faith, and any time pharmacy was losing money under a contract, they could come to Express Scripts and say, hey, you have to pay us more because you have the discretion under the contract to do so. [00:24:56] Speaker 04: And just so I can be clear, because there are these complicated tables, they do get paid for EDTF. [00:25:04] Speaker 04: It's just it's paid. [00:25:06] Speaker 04: under the original table, generics A. Is that correct? [00:25:11] Speaker 00: That's correct, Your Honor. [00:25:13] Speaker 00: In ES1000, their reimbursement rate is for when it's when it's the AWP discount is section 2.4A. [00:25:21] Speaker 00: And that section also has a table for brand rates and generic rates. [00:25:25] Speaker 04: So effectively, they want to move out of that table [00:25:29] Speaker 04: and move into this table by a definition? [00:25:32] Speaker 00: Only for seven months, because the problem resolved on its own when additional generics enter the market in May 2021. [00:25:38] Speaker 00: I mean, we're not talking about some perpetual under reimbursement. [00:25:41] Speaker 00: So when additional generics, then how did that resolve it? [00:25:44] Speaker 00: Because their acquisition price changed. [00:25:46] Speaker 00: Essentially, the pricing under the contract. [00:25:48] Speaker 00: The market changed. [00:25:49] Speaker 00: The market changed. [00:25:50] Speaker 04: The law didn't change. [00:25:51] Speaker 00: Exactly. [00:25:51] Speaker 00: The contract didn't change. [00:25:52] Speaker 00: Got it. [00:25:53] Speaker 00: OK, sorry. [00:25:54] Speaker 00: Express Scripts didn't change anything under the contract. [00:25:56] Speaker 05: The problem. [00:25:58] Speaker 05: 2.4a. [00:26:02] Speaker 05: Truvada is not listed under a brand there, but there's just a generic box, and that's where they would fall. [00:26:09] Speaker 00: Is that right? [00:26:10] Speaker 00: That's right. [00:26:10] Speaker 00: So essentially, section 1.3 in attachment 1 says, for any drug that's not a covered special medication, the applicable rate table will apply, and that's section 2.4A. [00:26:21] Speaker 00: So essentially, again, when the AWP discount rate provides the lowest rate under the contract, for any drug that's not a covered special medication, the 2.4A rates would apply. [00:26:32] Speaker 04: Okay, and so the thing about others entering the market, did that move it from generics A to generics B because it became a multi-source? [00:26:42] Speaker 00: Yes, and also the pricing itself. [00:26:46] Speaker 04: The market changed, but it did change. [00:26:48] Speaker 04: The additional manufacturers did move it to Generics B. Right. [00:26:53] Speaker 00: And when it becomes a Generics B, it's actually not even reimbursed under the AWP discount rate. [00:26:58] Speaker 00: It says that the- Yeah, I mean, I read it. [00:26:59] Speaker 00: It has a different rate listed here. [00:27:01] Speaker 00: There's a MAC list, which is another price, the maximum allowable cost, which is another metric used for pharmacy reimbursement. [00:27:11] Speaker 00: So just to work back to the breach of good faith claim, I mean, under Washington law, a party is not required to accept material changes to the contract. [00:27:22] Speaker 00: And essentially, Kelly Ross wants Express Scripts to say, OK, we'll pay you more than the contract requires, even though you agree that the contract says what it says. [00:27:34] Speaker 00: And they say no case under Washington law, [00:27:37] Speaker 00: which shows that a party needs to accept changing the contract just because it's given a discretionary term, and it would eviscerate the discretion that Express Scripts has under the contract if they're required to essentially make their contractual parties whole every time a party complains that the contract's not working out as well in their favor. [00:27:54] Speaker 00: I mean, Kelly Ross isn't returning profit to Express Scripts when Express Scripts reimbursement rates work out really well in their favor. [00:28:00] Speaker 00: They're not saying, hey, we did really well on this drug, so we're going to give you back a little bit. [00:28:05] Speaker 00: gladly taking the profit margins when it works out well in their favor. [00:28:08] Speaker 00: And unfortunately, sometimes it doesn't, even if it's just for a seventh-month period. [00:28:15] Speaker 00: If there's no further questions on the breach of good faith claim, I would like to just make one point on the Consumer Protection Act claim. [00:28:22] Speaker 00: this court has held since Lacey and we cited several cases in our brief that when a claim is voluntarily dismissed which means it's not repeated after it's dismissed without prejudice and leave to amend it's waived and this is this is panel precedent we cited several cases in our brief and there's many others out there where panels have refused to consider claims this is [00:28:47] Speaker 00: This is the law, and this court should not adopt Kelly Ross's proposed reformulation of the rule. [00:28:54] Speaker 00: I mean, essentially, they want courts to evaluate the plaintiff's subjective belief as to whether they could state additional facts under the district court's view of the law. [00:29:03] Speaker 00: I mean, that is completely unworkable. [00:29:06] Speaker 00: You essentially tell courts that they have to think what the plaintiff thinks that they could. [00:29:12] Speaker 01: But would they get a right to amend so they could go back and replete it? [00:29:16] Speaker 00: I'm not sure procedurally how that would work. [00:29:19] Speaker 00: I mean, they definitely had the opportunity to amend this. [00:29:21] Speaker 00: This case has been going on for, it'll be three years in January. [00:29:24] Speaker 00: I mean, they cite a bunch of additional facts in their brief, which they think helped them state a claim. [00:29:29] Speaker 00: At no point below did they say, you know what, wow, these facts actually help us state a claim. [00:29:34] Speaker 00: Let's replete it. [00:29:35] Speaker 00: I mean, this claim was dismissed without prejudice. [00:29:38] Speaker 00: And to be fundamentally unfair. [00:29:40] Speaker 00: Never sought leave. [00:29:41] Speaker 00: Never sought leave would be fundamentally unfair to now send this back to square one, [00:29:46] Speaker 00: when the case sat for three years and they had the opportunity to replete that. [00:29:52] Speaker 00: Under prior panel precedent, this court is obligated to find it was voluntarily dismissed, and we would ask the court to do so. [00:30:01] Speaker 01: Okay, thank you. [00:30:02] Speaker 01: Thank you. [00:30:03] Speaker 01: We've got a couple minutes for rebuttal. [00:30:10] Speaker 03: Your Honor, the reason that my client continued to fill prescriptions with generics was that it was legally required to do so. [00:30:17] Speaker 03: Washington law specifies that if a doctor writes a prescription that says the brand, so it says Truvada, then checks a box, [00:30:25] Speaker 03: um, generics permitted, the pharmacy must fill the prescription with the generic unless the plaintiff, or excuse me, the patient expressly requests, um, not to get the generic. [00:30:38] Speaker 03: So they, they were legally required to, and that's why they did so. [00:30:41] Speaker 01: Wait, wait. [00:30:42] Speaker 01: I thought you were the, well, at least what I heard was you were the physician, your client was the physician and the pharmacy here, basically. [00:30:50] Speaker 03: Is that not true? [00:30:54] Speaker 03: Doctors can write the prescriptions, but the client provides some other wraparound services that are necessary to ensure these vulnerable populations continue to have access to these kinds of medications and are undergoing a holistic program to prevent HIV infections and passing those along, for example, periodic lab testing. [00:31:18] Speaker 03: So there are some wraparound. [00:31:20] Speaker 03: services. [00:31:21] Speaker 01: But for every- Was your client also writing the prescriptions? [00:31:28] Speaker 03: I don't know. [00:31:29] Speaker 03: Okay. [00:31:29] Speaker 03: I don't know. [00:31:30] Speaker 05: One other point I want to make, in many cases- Let me just add, the way you phrased that suggested that any pharmacy they went to would be required to provide a generic. [00:31:43] Speaker 03: That's correct. [00:31:44] Speaker 05: So if they went to CVS, [00:31:47] Speaker 05: But CVS doesn't have the generic. [00:31:52] Speaker 05: What's the answer there? [00:31:56] Speaker 03: So in your scenario, CVS just doesn't stock it? [00:31:59] Speaker 03: Correct. [00:32:01] Speaker 03: My understanding of Washington law is it can't fill that prescription unless they have the generic. [00:32:06] Speaker 03: They're required to provide the generic, because the legislature wanted there to be access to lower cost generic drugs. [00:32:14] Speaker 05: So I'm just trying to understand that [00:32:17] Speaker 05: Every single pharmacy in Washington state must supply this generic if asked. [00:32:24] Speaker 05: Is that your position under Washington law? [00:32:27] Speaker 03: If they're going to fill that prescription, then yes. [00:32:29] Speaker 05: Well, no, they would say, I'm sorry, I can't fill this prescription. [00:32:34] Speaker 04: They can just turn them away. [00:32:35] Speaker 04: They say, we don't have this. [00:32:37] Speaker 05: Do you see? [00:32:39] Speaker 04: But your client decided to have it. [00:32:41] Speaker 05: So I mean, that's why it was, I was a little bit feeling like there was something not the complete story when you made your statement because they go to Rite Aid, they go to CVS, they say, look, we don't, we don't supply this. [00:32:53] Speaker 05: We don't stock it. [00:32:54] Speaker 05: We can't fill it. [00:32:55] Speaker 05: Why don't you try? [00:32:57] Speaker 03: Right. [00:32:58] Speaker 03: Well, I think that brings us back to the reasonableness inquiry because one of the things that we're supposed to look at is the objectives of the contract and cases teach us that we need to adopt a commercially reasonable interpretation that allows both parties to fulfill their functions. [00:33:12] Speaker 03: So my client is a specialty pharmacy. [00:33:14] Speaker 03: Their entire purpose, or a central purpose, I should say, is to serve these vulnerable populations and to avoid the spreading of HIV AIDS infections, which have absolutely decimated people. [00:33:27] Speaker 03: So have they made money along the way? [00:33:29] Speaker 03: Yes. [00:33:30] Speaker 03: But turning those people away is completely contrary to the central purpose of this pharmacy. [00:33:39] Speaker 03: And the specialty amendment [00:33:41] Speaker 03: that the parties agreed to, the central purpose was to make sure that there was a specialty pharmacy that followed high levels of standards of care. [00:33:51] Speaker 03: That can't happen if express scripts can just go around and say, well, too bad, so sorry that you're losing money when you're actually filling these prescriptions for specialty medications. [00:34:02] Speaker 05: So if there's no pharmacy in Washington, if your pharmacy individuals, if Kelly Ross decided not to have generics, [00:34:11] Speaker 05: then Kelly Ross could provide the brand name, correct? [00:34:16] Speaker 05: If the generic is unavailable, then you have to buy the brand name, right? [00:34:23] Speaker 03: I don't know what happens at the market. [00:34:25] Speaker 05: I think that's the way the law works. [00:34:28] Speaker 05: If the generic is unavailable, then you supply the brand name. [00:34:35] Speaker 05: Was your pharmacy in a position to supply the brand name? [00:34:40] Speaker 03: It was, but here the generic was available. [00:34:43] Speaker 03: It was manufactured, and there were wholesaler sources to provide it. [00:34:48] Speaker 03: So in those circumstances, yeah, it had to. [00:34:52] Speaker 04: Does that statement work the other way around? [00:34:54] Speaker 04: If the pharmacy only has the generic, it's fine. [00:34:59] Speaker 04: So if the patient wants the brand name, he just says, sorry. [00:35:06] Speaker 04: Go to CVS. [00:35:08] Speaker 03: I don't know how that works in practice under the law when those are the circumstances presented. [00:35:16] Speaker 03: Excuse me. [00:35:19] Speaker 03: I see my time is over. [00:35:21] Speaker 03: Your Honor, we ask that the court reverse the district court summary judgment orders and its orders dismissing on the pleadings my client's other claims. [00:35:31] Speaker 01: Thank you so much. [00:35:32] Speaker 01: Thank you. [00:35:32] Speaker 01: Thank you to both counsel for your arguments in the case. [00:35:35] Speaker 01: The case is now submitted.