A U.S. District Court judge in Rhode Island recently granted CVS Pharmacy, Inc. a preliminary injunction to block an executive who ran its Caremark Retail Network from working for Amazon’s online pharmacy PillPack, finding that the move would likely violate the executive’s non-compete agreement.
John Lavin worked as a senior executive for CVS for 27 years, most recently as senior vice president for provider network services at CVS Caremark, a pharmacy benefits manager (PBM). In this role, Lavin negotiated with retail pharmacies on behalf of CVS Caremark. In May 2017, Lavin entered an agreement which contained a covenant not to compete among other restrictive covenants in exchange for restricted stock units worth $157,000, according to the Court’s opinion. Lavin’s non-compete agreement prohibited him from working for a competitor for 18 months after leaving CVS.
A year after entering the agreement, Lavin allegedly began discussions with PillPack about leaving CVS for a position at Pillpack and even interviewed with executives from both PillPack and Amazon. After interviewing, Lavin was ultimately offered the position of director of third-party networks and contracting, reporting directly to PillPack’s CEO. Shortly thereafter, Lavin resigned from CVS and started employment with PillPack.
When Lavin left for Amazon’s Pillpack in April of this year, CVS filed a lawsuit seeking a temporary restraining order and preliminary injunction, alleging that Lavin’s work at PillPack would compete with CVS and violate his non-compete agreement.
Exactly what Lavin would be doing at PillPack appears to be a moving target, the judge wrote, finding that “His roles and responsibilities at PillPack seem to ebb and flow with this litigation.” Despite this, the judge found that Lavin’s primary responsibilities would be substantially similar at Pillpack. “At CVS, Mr. Lavin’s primary responsibility had been negotiating with pharmacies on behalf of CVS Caremark, the court found. “At PillPack, Mr. Lavin will negotiate with PBMs for PillPack’s participation in Retail Networks.” Thus, Lavin would be involved at both jobs “with negotiations between PBMs and retail pharmacies, just on the opposite side of the table.” The judge went on to note that some of the company’s that Lavin would be negotiating and building relationships with are current CVS clients.
“Lavin has been involved to some degree in almost every negotiation between CVS Caremark and the 70,000 pharmacies in its network,” CVS alleged. This knowledge of CVS Caremark’s business would allow him to negotiate more favorable deals for PillPack with CVS Caremark’s competitors, CVS argued. The judge agreed, finding that “Mr. Lavin knew about CVS Caremark’s contract with the pharmacies in their Retail Network, including pricing.” Even more, the judge noted, Lavin “knows the best and worst terms between PBMs and retailers; he knows what specific concessions CVS Caremark has made; and he knows CVS Caremark’s pricing terms with their clients, the Payers.”
Lavin could use this confidential information to harm CVS retail pharmacies and CVS Caremark, which both offer mail-based services, the judge found because “at PillPack Mr. Lavin could offer PBMs lower rates than other retail pharmacies have agreed to with CVS Caremark in exchange for preferred status as a mail-based pharmacy provider.”
The judge ultimately granted the motion, finding that CVS had shown a sufficient likelihood that Lavin’s move could cause it irreparable harm.
“The Court does not grant a preliminary injunction to enforce a non-compete clause lightly,” the judge wrote, calling such a remedy an “extraordinary and drastic” measure under Rhode Island law. “However here, months after entering an independent stand-alone agreement (limited to only 18 months post-employment) for which he was well-compensated, Mr. Lavin, a high senior official at CVS with access to very confidential information, went to work for a Competitor,” the judge continued. “That is wrong, and CVS is entitled to have the Agreement enforced.”
The Court’s entire opinion is available here.
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