Pharmacy startup Blink Health just filed a $250 million lawsuit against a company it claims is an 'unlawful copycat scheme'

• Blink Health, a pharmacy startup that provides discounts to prescription drugs and has raised $165 million in funding, is suing a competitor it claims is an "unlawful copycat scheme."
• The lawsuit alleges Hippo, a new startup founded by former Blink Health executives, got ahold of Blink Health's trade secrets and unfairly uses them to compete with Blink Health.
• Blink Health is seeking $50 million in damages already caused, along with $200 million in punitive damages for a total of $250 million.

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Blink Health is suing a pharmacy startup it claims is an "unlawful copycat scheme."

Blink Health, a startup that helps negotiate lower drug prices, was founded by 35-year-old Geoffrey Chaiken and 32-year-old Matthew Chaiken. The company is now suing Hippo, a company founded by former Blink Health executives that operates under a similar format to deliver prescription drug discounts.

In its complaint, Blink Health claims violations of the Defend Trade Secrets Act, alleging that Hippo got ahold of Blink Health's trade secrets and has and continues to use "stolen property for its own benefit and in unfair competition with Blink at thousands of 'pharmacies nationwide.'"

The company is seeking $50 million in damages, along with $200 million in punitive damages, for a total of $250 million.

"No company should be allowed to cheat and steal its way into existence, as Hippo is trying to do," Blink Health's attorney Orin Synder said in a statement sent to Business Insider.

8VC, which led Blink's Series A and B rounds, said in a statement, "We are fully supportive of Blink Health and its actions."

Hippo was not immediately available to comment.

Here's how Blink Health's prescription discounting

When it comes to lowering prescription costs, there are a number of different approaches startups are taking, from comparing the price at one pharmacy to another nearby so consumers shopping around for a lower price can get a sense of where they might go. Others have delivery components as well as discounts.

Blink Health operates a little differently. Instead of having people go from one pharmacy to another, Blink Health negotiates to get the same price at different pharmacies for generic medications and some branded diabetes medications. Blink Health works at Rite Aid, Walmart, Kroger and K-Mart, but it doesn't currently work at Walgreens or CVS Health.

Say you need to pick up a prescription for your medication, but you have a high deductible plan that requires you to pay $3,000 out of your own pocket before your insurance starts picking up the rest of the tab. Instead of going to the pharmacy and accepting whatever price they offer (which can vary from pharmacy to pharmacy), you could download the Blink Health app, or go to the company's website.

In the app, you can find your prescription and purchase it directly through the app. Then, when you get to the pharmacy counter, you show your phone to the pharmacist who rings it up instead. In return, Blink gets a cut of the transaction.

Where Hippo and Blink Health have similarities

The system of having the same price at any pharmacy and presenting a virtual card is the same model Hippo is using, according to its website.

For example, here's how Blink Health describes the process:

And here's how Hippo's site describes it:

Hippo was started by two former Blink Health executives: former chief financial officer Eugene Kakaulin and former general counsel Charles Jacoby. In 2016, Kakaulin sued Blink Health claiming breach of contract and violations of federal whistleblower law when Kakaulin came to the founders with information about securities violations. The case was later settled.

Blink Health's complaint alleges that Hippo got confidential marketing plans, such as strategies and slogans, information about how Blink Health set up relationships and contracts with pharmacy benefit managers, as well as some of the back-end coding that helps fill the prescription when someone using the app/website uses their card, and that these are trade secrets belonging to Blink Health.