Veeva v. Epic: The Talent Battlefield

Epic’s non-compete collides with a well-resourced challenger

A man simply cannot get a break here. We have yet another Epic lawsuit! Nick Frenzer, General Manager of Site Solutions at Veeva, posted this yesterday:

Pharma’s System of Record

I’ve written a little about Veeva previously regarding their antitrust countercomplaint against IQVIA (and Quinn Emanuel, who is everywhere) and subsequent settlement, but have had a longer form post on my backlog for ages. Alas! They are, from a product perspective, the Epic of pharma - a single integrated system of record that started with success on the commercial side (marketing and CRM) and then jumped into the clinical side (trials and electronic data capture).

Veeva and Epic share a strategy of bundled expansion as the key system of record for their clients. Excerpts from Veeva’s session at JPM Healthcare sound identical to how Epic portrays its products - an integrated, mission-critical suite where best-of-breed components become stickier and more defensible precisely because they are bundled together.

First is what we call the suite effect. So I mentioned that across those 4 areas, we have more than 10 suites now. And within each of those suites, we have multiple products. We think about every product in that suite individually being the best product in the market at what it does, and that those products because they’re part of a connected group of offerings, working even better together. And so for those of you that have bought software or bought data, you probably know the trade-off that you normally face. Do I want the very best or do I want a one-stop shop.

And with Veeva, our aspiration is that you don’t have to make that trade-off that you’re getting the best products and they’re even better because they’re in one place. And that means that the suite effect when you buy one product in a suite, in our clinical suite or in our quality suite or in our regulatory suite, it makes even more sense to buy the next one. So there’s some inertia that builds over time as customers get going with Veeva. The second and third here, I’ll cover together. Our products generally are the mission-critical systems of record for our customers. So those are not things that they generally have the option to have or not have and they’re not things that they eliminate once they have them.

In other respects, they are completely different, though. Whereas Epic is private, Veeva is not only a public company, but a Public Benefit Company, with an explicit dual mandate that balances shareholder value against stated social objectives. I’ve also found Veeva to be unusually transparent for a platform company - its Investor Day presentations lay out product strategy, competitive positioning, and long-term incentives with a level of specificity most enterprise vendors avoid.

The Case

We do not yet have the complaint, which will likely take 24-48 hours to process. It’s also filed in state court, which is a real wild card in terms of public access. But the non-compete angle is (somewhat) new! We’ve talked about my perspective on non-competes before in “Don’t Mess With Texas: Epic Edition”:

I’m sympathetic to these arguments, but less because of seeing them as evil functions of monopolies and moreso because I think non-competes in almost all cases are categorically anticompetitive. They are innovation-limiting barriers that distort labor markets, suppress talent mobility, and slow down the natural diffusion of expertise. As a tool, they are blunt objects aiming to achieve policy goals (ostensibly safeguarding trade secrets and recouping human capital investments) that are much more easily obtainable through more surgical tools like trade secret law, NDAs, and confidentiality agreements. The best way to retain talent is to be an employer worth staying at.

Epic’s non-compete has long drawn scrutiny. As reported by the Madison Isthmus a few years ago, it included a laundry list of prohibited employers (reportedly numbering in the thousands) that extended well beyond direct competitors and functioned as a broad restraint on post-employment mobility rather than a targeted protection of trade secrets.

That list was culled from the thousands of organizations to just a handful of more direct competitors recently. Even in its current form, however, the non-compete still reaches well beyond a narrow set of direct rivals, covering major cloud and platform providers (Amazon/AWS, Google, Microsoft, Apple), multiple EHR vendors (Oracle/Cerner, MEDITECH, InterSystems Trakcare, athenahealth), and a wide range of consultancies and services firms (Accenture, Deloitte, PwC, Nordic, Tegria), alongside analytics and infrastructure companies like Salesforce, Palantir, and Redox.

Veeva was added to this list in December alongside end-of-year bonus, stock, and vacation bumps. The reasoning is unclear given Veeva’s lack of direct product overlap with Epic’s core EHR business. But it does appear that Veeva had been building a talent pipeline of Epic alumni, with more than 80 current employees having previously worked at Epic and the company opening a Madison office this past fall.

Non-Competes and Wisconsin Law

Epic may resent Veeva poaching in that way, but unfortunately resentment is not a cognizable justification for a restrictive covenant under Wisconsin law. While Epic significantly curtailed employees’ ability to fight back through collective or class actions in its Supreme Court victory in Epic Systems v. Lewis, Veeva is not similarly constrained in bringing an affirmative challenge to restrictive covenants. Moreover, Wisconsin seems to be a favorable terrain for the challenge, as the state has long been skeptical of overbroad non-competes. The key law at play here is Wisconsin Stat. § 103.465:

The basic requirements for an enforceable restrictive covenant are that the agreement must:

1. be necessary for the protection of the employer;

2. provide a reasonable time period;

3. cover a reasonable territory;

4. not be unreasonable to the employee; and

5. not be unreasonable to the general public.

On that framework, the question is not whether Epic dislikes losing trained employees, but whether the scope of its restrictions is actually necessary to protect legitimate interests like trade secrets or confidential information, rather than serving as a generalized tool of labor control. Against that standard, the inclusion of Veeva raises obvious questions about necessity and tailoring, particularly given the absence of direct competition in Epic’s core product lines.

The CTMS Angle