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From Antitrust Law Daily, February 1, 2016

Indirect purchaser hospitals failed to allege syringe, catheter monopolization claims

By Greg Hammond, J.D.

Two hospitals that indirectly purchased hypodermic syringes and IV catheters from a medical supplies manufacturer failed to state a claim for monopolization, the federal district court in Brunswick, Georgia, has decided. In granting the manufacturer’s motion to dismiss, the court determined that the hospitals were barred under the direct purchaser rule from seeking damages under Section 4 of the Clayton Act and failed to properly define a relevant product market to support their monopoly maintenance claims (Glynn-Brunswick Hospital Authority v. Becton, Dickinson and Co., January 29, 2016, Wood, L.).

Glynn-Brunswick Hospital Authority and Southeast Georgia Health Systems, Inc. brought a class action suit against medical supplies manufacturer Becton, Dickinson and Co., alleging that Becton engaged in at least six exclusionary schemes to maintain market power in the relevant hypodermic syringes market and engaged in at least four exclusionary schemes to obtain and maintain market power in the relevant market for IV catheters. The alleged schemes included rebate-bundling contracts, penalty contracts, sole-source contracts, theft of innovative technology, deception and false advertising, and acquisition of a significant rival. Becton moved to dismiss.

Standing. The court first determined that the hospitals are barred from pursuing their damages claims against Becton because they are not direct purchasers of the relevant products and failed to plausibly demonstrate that any exception to the direct purchaser rule applies. In particular, the cost-plus exception to the direct purchaser rule was inapplicable because: (1) the hospitals failed to allege that the cost-plus agreements preexisted the alleged overcharge; and (2) allegations that the plaintiffs agreed to purchase a minimum dollar amount of assorted health care supplies from a distributor did not suggest that the hospitals gave the distributor any guarantee that they would purchase any of Becton’s hypodermic syringes and IV catheters at all, much less a fixed quantity thereof.

In addition, the vertical-conspiracy doctrine was inapplicable in this case because there was no evidence that the distributors unlawfully combined with Becton at any time to fix the resale price charged to the providers, or to otherwise construct the allegedly exclusionary schemes. Rather, the plaintiffs repeatedly claimed that Becton—and Becton alone—implemented the exclusionary schemes and contracts as part of its own strategy to maintain and abuse its market power.

Monopoly maintenance. With regard to the remaining claims for injunctive relief, the court concluded that the hospitals failed to allege monopoly maintenance because they erred in narrowly defining the relevant product markets. The court noted that the hospitals’ relevant product markets included only syringes and IV catheters sold to hospital systems and related facilities providing inpatient treatment—acute care providers—but excluded syringes and IV catheters sold to other health care providers. The hospitals, however, failed to identify any difference in the syringes and IV catheters used by acute care providers from those used by other health care providers.

The case is No. 2:15-cv-00091-LGW-RSB.

Attorneys: Mark David Johnson (Gilbert, Harrell, Sumerford & Martin, PC) and R. Stephen Berry (Berry Law, PLLC) for Glynn-Brunswick Hospital Authority and Southeast Georgia Health Systems, Inc. Jacqueline P. Rubin (Paul, Weiss, Rifkind, Wharton & Garrison, LLP) and James A. Bishop, Sr. (The Bishop Law Firm) for Becton, Dickinson and Co.

Companies: Glynn-Brunswick Hospital Authority; Southeast Georgia Health Systems, Inc.; Becton, Dickinson and Co.

MainStory: TopStory Antitrust GeorgiaNews

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