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From Antitrust Law Daily, October 5, 2017

Allergy support services companies advance Sherman Act claims

By Cynthia L. Hackerott, J.D.

Two allergy support services companies could bring their claims Sherman Act claims against board certified allergists groups, asserting that these groups conspired to limit competition for allergy testing and treatment services, to trial, a federal district court in Texas ruled. Although the court rejected the plaintiffs’ arguments that the group boycott they alleged that the defendants engaged in should be conclusively presumed to be unreasonable under the per se rule, and therefore illegal without resort to the "rule of reason," it denied summary judgment motions by two defendants, which were brought on multiple grounds (Academy of Allergy & Asthma in Primary Care v Allergy & Asthma Network/Mothers of Asthmatics, Inc., September 28, 2017, Garcia, O.).

Plaintiffs United Biologics, LLC, d/b/a United Allergy Services (UAS), and Academy of Allergy & Asthma in Primary Care (AAAPC) are allergy support services companies that supply treating physicians who are not board certified allergists with allergy diagnostic equipment, antigens, and trained technicians to provide allergy testing and allergen immunotherapy to patients. UAS, which began operating in 2009, contends that its business model posed a competitive threat to board-certified allergists, their trade associations, and manufacturers of blood testing equipment, including the defendants here, Allergy & Asthma Network/Mothers of Asthmatics, Inc. (AANMA), Tonya Winders, Phadia US, Inc, and Thermo Fisher Scientific, Inc (TFS). According to the plaintiffs, the defendants reacted to that threat by engaging in coordinated, unlawful anticompetitive conduct designed to stifle competition in the local markets for allergy testing and allergen immunotherapy in 23 states.

The plaintiffs alleged that the American Academy of Allergy, Asthma & Immunology (AAAAI); American College of Allergy, Asthma & Immunology (ACAAI) and the Joint Council of Allergy, Asthma & Immunology (JCAAI) formed a joint enterprise, the Regional Advocacy Discussion and Response Initiative (RADAR), with the goals of recruiting allergists and discouraging third party payors from reimbursing for allergy testing and immunotherapy services provided by primary care physicians (PCPs). They further alleged that AANMA and Phadia joined in these efforts, entering into agreements, through AANMA’s director, defendant Tonya Winders, to target both UAS and UAS contracted physicians. The plaintiffs claimed that, under Winders' leadership, this group developed a strategy of coordinating to drive UAS out of business, primarily by discouraging third-party payors from reimbursing physicians for services provided in coordination with UAS and discouraging PCPs from initiating or continuing contractual relationships with UAS. According to the plaintiffs, the defendants pursued this goal of discouraging reimbursement by publicizing groundless concerns about the safety and efficacy of the treatment provided under the UAS model and the legality of UAS's reimbursement-sharing arrangement with physicians.

Applicability of ‘rule of reason’ versus per se rule. The plaintiffs asserted claims under Section 1 of the Sherman Act, which prohibits restrictive practices that impose an unreasonable restraint on competition. They moved for partial summary judgment, seeking a determination that the group boycott they allege defendants engaged in should be conclusively presumed to be unreasonable and therefore illegal without resort to the "rule of reason." The court explained that, under the "rule of reason," the reasonableness of a restraint on competition is assessed by considering specific information about the relevant business, its condition before and after the restraint was imposed, and the restraint's history, nature, and effect. However, this wide-ranging and fact-intensive inquiry may be unnecessary, in cases where the likelihood of an agreement's anticompetitive effects is clear and the possibility of countervailing procompetitive effects is remote.

Asserting that the facts not in dispute established that the defendants are competitors of each other and entered into an agreement to encourage a group boycott of plaintiffs, with the objectives of fixing prices, allocating markets, and, ultimately, driving plaintiffs from the marketplace, the plaintiffs’ argued that this arrangement constituted a per se horizontal restraint on competition, and therefore, there was no need for the court to resort to the "rule of reason" in assessing their Sherman Act claims. Siding with the defendants, the court pointed out that the form taken by an allegedly anticompetitive combination is only determinative of the applicability of the per seanalysis to the extent that that form is indicative of anticompetitive effects and a lack of redeeming competitive virtues.

After noting that, at an earlier stage in this litigation, it declined to apply a per se analysis because it found the plaintiffs had not raised horizontal price-fixing allegations and because the professional associations who were then defendants asserted procompetitive and competition-neutral justifications for their challenged conduct, the court pointed out that at this stage, although the plaintiffs had amended their complaint, and a wholly different group of defendants were now before the court, the same reasoning precluded application of the per se analysis. At both stages, the plaintiffs’ claims of price fixing were either better classified as boycott claims or they alleged a vertical conspiracy between the defendants and third-party payors that would not in any event be suitable for per sereview. Further, the defendants had now supplemented their pleadings of procompetitive and competition-neutral justifications for the challenged conduct with evidentiary support. The concerns voiced by the former defendants about the emergence of UAS were twofold—they both feared infringement to their business and questioned the safety and efficacy of the testing and treatment provided by UAS, as well as the potential for reimbursement fraud. The evidence in the record also indicated that some payors shared these concerns, without influence from the defendants, adjusted their reimbursement standards in ways adverse to UAS.

While the evidence in the record was sufficient to support the plaintiffs assertions that these concerns were merely pretexts intended to conceal the defendants’ true goal of eliminating a competitive threat using improper means, this evidence could also support a finding that the defendants' activities advanced procompetitive and competition-neutral objectives, such as increasing patient safety and discouraging a treatment model that, the defendants contended is wasteful, costly, and of questionable safety and effectiveness. As such, the evidence permitted a conclusion that the defendants' challenged conduct had procompetitive or competition neutral motivations and effects.

Therefore, summary judgment was not appropriate stage for determining the issue of whether to apply the per se analysis, for two reasons. First, the challenged conduct was carried out by in part by professional associations and a patient advocacy organization, a context in which the Supreme Court, in its 1986 ruling in FTC v Indiana Fed'n of Dentists, has expressed hesitation about applying the per se rule. Second, in light of the conflicting evidence, the economic impact of the challenged practices was not immediately obvious. A more detailed inquiry into the circumstances, details, and logic of the restraints at issue will allow a jury to determine whether the restraints are medically justified, or are merely a pretext to eliminate a competitive threat.

Motion to dismiss plaintiffs’ Sherman Act claims. Defendant AANMA moved to dismiss the plaintiff’s Sherman Act claims on for summary judgment for multiple reasons. They asserted that: the plaintiffs lacked standing, their claims were barred by the Noerr-Pennington doctrine, the plaintiffs failed to properly define the relevant market, and the plaintiffs lacked evidence of either a restraint of trade or a conspiracy to monopolize.

Rejecting AANMA’s arguments, the court first found that the plaintiffs made a sufficient showing of anti-trust injury to establish standing because exclusion from the market is an injury that the antitrust laws were intended to prevent and the plaintiffs produced evidence to show that that the defendants' allegedly unlawful conduct was directed against UAS and AAAPC-member physicians.

Second, the court found that the Noerr-Pennington doctrine, which immunizes from liability conduct designed to influence government action, was not a basis to dismiss the plaintiff’s claims at the summary judgment stage because there was evidence showing that the defendants' conduct was beyond the reach of the Noerr-Pennington exemption in that the restraint on trade alleged here was far from being an incidental effect of an effort to influence government action, but rather was the defendants' intended goal, which they pursued through the development and advocacy of anti-competitive private standards, and advocacy directed at private payors, patients, and PCPs.

Third, in regard to the relevant market, the court agreed with the plaintiffs that their analysis of the relevant market sufficiently considered the "reasonable substitute" products identified by AANMA, and that they have presented sufficient evidence regarding the reasonable interchangeability and cross-elasticity of demand to permit a finding that the relevant product market does not include over-the-counter and prescription allergy medications. Also, the court rejected AANMA’s argument that the plaintiff’s definition of the product market failed for insufficient consideration of the role of Ear, Nose, and Throat doctors within the product market, finding that the claimed deficiency did not go to the interchangeability between allergen testing and immunotherapy with some other product, but instead went to the respective market shares of the parties as providers of those products. For similar reasons, the court found that the plaintiffs' geographic market definition was grounded in the analysis of their expert and supported by sufficient evidence to withstand summary judgment.

AANMA also argued that it lacked sufficient market power to either Section 1 or 2 of the Sherman Act. Disagreeing, the court found that the plaintiffs produced sufficient evidence that AANMA, in coordination with its alleged co-conspirators, exerted sufficient market power. Most important to the court was the plaintiffs had produced evidence that would enable a finding that AANMA and its alleged co-conspirators collaborated to drive UAS from the market and erect barriers to entry against other UAS-like firms, such as by coercing third-party payors into boycotting UAS and UAS- and AAAPC-affiliated physicians, and by advocating medically unjustified practice standards that excluded UAS and would have precluded the entry of other similar firms into the market.

Turning to the restraint of trade issue, the court observed that the record here could support a finding either of pro-competitive effects of the defendants' conduct or of anticompetitive intent and effect. Further, the plaintiffs produced evidence that tends to exclude the possibility of independent action and provides a context sufficient to show the existence of a Section 1 conspiracy by showing that payors' reimbursement changes were preceded by the coordinated effort of the defendants to drive UAS from the market, in part by soliciting those very reimbursement changes. The court also pointed out that it had already found that the record allows for a finding that AANMA engaged in anticompetitive practices, which permits an inference of the specific intent required under Section 2 of the Sherman Act.

The plaintiffs also produced evidence of price-fixing in that they demonstrated that the defendants carried out a coordinated effort to lobby payors to change their reimbursement policies, and that evidence would permit a finding that, notwithstanding their subsequent claims to the contrary, the payors acted at the behest of defendants. Thus, summary judgment was precluded on the issue of price-fixing.

Given that the court rejected AANMA’s motion for summary judgment on the plaintiff’s Sherman Act claims, it also ruled that summary judgment is not warranted as to the plaintiffs' state-law civil conspiracy claims. Further, because the plaintiffs’ tortious interference claims were premised on the alleged conduct of AANMA's alleged co-conspirator Phadia, the court declined to grant summary judgment to AANMA on those claims. Finally, the court rejected Phadia’s motion for summary judgment in large part for the reasons it rejected AANMA’s motion, and because the plaintiffs produced evidence showing that Phadia undertook a coordinated effort to disseminate damaging information to PCPs and payors regarding the patient safety, fraudulent billing, and liability risks supposedly linked with UAS's business model. In the court’s view, ultimately, factual questions were presented as to whether the efforts of Phadia and its alleged co-conspirators raised genuine concerns about the safety, efficacy, and legality of UAS's business model, or had recourse to methods beyond competition on the merits.

The case is No. 5:14-C V-35-OLG.

Attorneys: Donato D. Ramos, Sr. (Law Offices of Donato D. Ramos, PLLC) and Matthew K. Gates (Pillsbury Winthrop Shaw Pittman LLP) for United Biologies, LLC d/b/a United Allergy Services and Academy of Allergy & Asthma in Primary Care. Amy K. Bock (Carter Scholer Arnett Hamada & Mockler, PLLC) and David McDonald Prichard (Prichard Young, LLP) for Allergy and Asthma Network/Mothers of Asthmatics, Inc. Anne M. Rodgers (Norton Rose Fulbright US LLP) and Liane Ngin Noble (Vinson & Elkins, LLP) for Phadia US Inc. and Thermo Fisher Scientific Inc.

Companies: United Biologies, LLC d/b/a United Allergy Services; Academy of Allergy & Asthma in Primary Care; Allergy and Asthma Network/Mothers of Asthmatics, Inc.; Phadia US Inc.; Thermo Fisher Scientific Inc.

MainStory: TopStory Antitrust TexasNews

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