Last Thursday, Judge David O. Carter granted GoodRx Holdings, Inc.’s motion to dismiss a class action suit filed against in the Central District of California. The complaint for violations of federal securities laws alleged that GoodRx filed a misleading registration statement and prospectus, and made misleading statements to their investors.
GoodRx is a “healthcare technology platform that provides consumers with a free prescription discount card to get discounted pricing on prescription drugs.” The defendant contracts with pharmacy benefit managers to gain drug discounts for the discount card.
In late September of 2020, the defendant’s initial public offering (IPO) raised over $1 billion in gross proceeds. The plaintiffs asserted in the complaint that the defendant’s IPO was based on a materially misleading registration statement and prospectus. The registration statement and prospectus explained GoodRx’s competitive advantage, stating that the company was a “market leader with significant scale and brand advantage over our competitors.”
Despite these claims, the plaintiffs explained that GoodRx knew but did not disclose that Amazon was preparing a competing product to enter the market. After Amazon announced their new prescription drug savings program, GoodRx’s stock price plummeted 23%.
Following the Amazon announcement, the plaintiffs contended that GoodRx continued to make “materially misleading statements in conference calls with investors by failing to disclose that Amazon was continuing to expand its PrimeRx product and would soon introduce a drug price comparison tool identical to GoodRx’s and add thousands of additional participant pharmacies to its network.”
The competitive risk from Amazon led to GoodRx losing over $600 million of the company’s market capitalization. The complaint cited two counts of violations of the Securities Act and two counts of violations of the Exchange Act. The plaintiffs were seeking damages, a trial by jury, litigation fees, and any other relief that the Court had deemed equitable.
The defendant’s motion to dismiss was granted last Thursday by Judge David O. Carter, who vacated the hearing scheduled for June 10, 2022.GoodRx had argued in their motion to dismiss that there was a “lack of damages; that Plaintiffs have not sufficiently pled facts establishing the falsity of the challenged statements; and that Plaintiffs have not sufficiently pled facts evidencing scienter.”
The plaintiff’s false and misleading claim was dismissed due to the “lack of facts supporting the allegation that Defendants had concrete knowledge about the risk of Amazon’s plans to launch Amazon Pharmacy.” Also dismissed were the plaintiff’s securities act claims. In addition to dismissing each claim with prejudice, Judge Carter’s decision also noted that it would be futile to give the plaintiff the chance to amend their complaint. The hearing, which was scheduled to take place on June 10, 2022, was vacated by the Court.
The plaintiffs were represented in this litigation by Robbins Geller Rudman & Dowd, Pomerantz, and Johnson Fistel. The defendants are represented by Latham & Watkins.
