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Central District Of California Dismisses Putative Securities Class Action Against Healthcare Technology Company For Failure To Plead Actionable Misstatements
04/29/2025On April 18, 2025, Judge André Birotte Jr. of the Central District of California granted a motion to dismiss a putative class action asserting claims under Sections 10(b) and 20(a) of the Securities Exchange Act of 1934 (the “Exchange Act”) and Rule 10b-5 thereunder, against a healthcare technology company (the “Company”) and certain of its officers (the “Individual Defendants”). Barsuli v. GoodRx Holdings, Inc., No. 2:24-cv-3282-AB (C.D. Cal. Apr. 18, 2025). Plaintiffs alleged that defendants made material misstatements and omissions regarding the Company’s business practices and relationships with pharmacies, which allegedly came to light when defendants disclosed the financial impact of a large grocery chain’s pricing agreements with the Company’s customers. The Court granted defendants’ motion to dismiss without prejudice, holding that plaintiffs failed to adequately plead any false or misleading statements or omissions.
Plaintiffs alleged that defendants made fourteen misleading statements regarding the success of the Company’s prescription discount pricing tool, which allows consumers to compare prices negotiated by the Company’s customers, Pharmacy Benefit Managers (“PBMs”), at various retail pharmacies. Specifically, plaintiffs alleged that defendants misled investors by stating that the Company’s discount codes could be used at “70,000 pharmacies” while allegedly omitting that the Company “lacked direct contracts with pharmacies mandating the acceptance” of prescription discount codes. According to plaintiffs, this gave an “impression of a state of affairs that differs in a material way from one that actually exist[ed].” Plaintiffs further alleged that defendants failed to disclose that 25% of the Company’s pharmacy transaction revenue came from a single grocery store chain that had been in contract disputes with certain PBMs.
The Court grouped the alleged misrepresentations into four categories, concerning: (1) the number of pharmacies that accept the Company’s discount codes; (2) the Company’s relationships with pharmacies; (3) the single grocery chain that accounts for 25% of the Company’s revenue accepting the Company’s discount codes; and (4) statements made by the Individual Defendants.
With respect to the first category, the Court held that because the Company disclosed throughout its IPO offering documents that its business model relied on contracts with PBMs and that it did not have control over contracts between pharmacies and PBMs, plaintiffs failed to plead a material misrepresentation because the allegedly omitted information “already entered the market.”
For the same reasons, the Court rejected plaintiffs’ allegations that the second category of statements concerning the Company’s relationships with retail pharmacies were false or misleading, emphasizing that the Company “repeatedly disclosed” that its contracts were with PBMs, not with retail pharmacies.
As to the third category, the Court held that none of the statements allegedly identifying a certain grocery chain pharmacy as accepting the Company’s discount codes were false or misleading, because the Company had publicly disclosed its revenue concentration and dependence on a limited number of pharmacy chains. In so holding, the Court found that plaintiff failed to adequately plead that defendants had “inside information” on the grocery chain’s contract renegotiations with the PBMs and that the challenged statements actually warned that PBM contracts might decrease.
As to the final category, the Court held that none of the statements allegedly made by the Individual Defendants were false or misleading, finding that statements that the Company had “fruitful,” “strong,” and “incredible” relationships with PBMs and retail pharmacies were goodwill valuations that constituted nonactionable corporate puffery and opinions. The Court further held that plaintiffs failed to allege that, at the time the alleged statements were made, the statements were objectively untrue, or that any of the Individual Defendants did not genuinely hold those beliefs.
Having found that plaintiffs failed to adequately plead a Section 10(b) claim, the Court dismissed the derivative control person claims against the Individual Defendants under Section 20(a). The Court granted plaintiffs leave to further amend their complaint.
