LEGAL BACKGROUND

Exposing GPOs

"My experience has taught me that the elimination of impediments to competition will bring the greatest long term benefits. When these side payments or other types of anticompetitive practices are eliminated, you will see competition flourish and innovation and lower prices come about."

David A. Balto Esq., former antitrust enforcement attorney, Federal Trade Commission


Testimony before Senate Antitrust Subcommittee, September 14, 2004.


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This page  includes  the key legal documents that created the perverse group purchasing business model that in turn gave rise to the drug shortages. First and foremost is the 1987 anti-kickback safe harbor provision, which exempted GPOs from criminal prosecution for taking kickbacks from suppliers. That prohibition had been in force since the passage of Medicare anti-kickback statutes in 1972. 


The rules implementing the safe harbor legislation were issued in 1991 by the Inspector General of the Department of Health and Human Services, which has responsibility for overseeing compliance with these rules. Buried in the rules is a critical point: that the federal statute is completely independent of state law, and vice versa. In other words, what may be legal under federal law may in fact be illegal under one or more state laws. 


Beginning in the mid-1990s, the size and power of the GPOs was further expanded when the Department of Justice and the Federal Trade Commission relaxed antitrust rules governing GPOs. 


Importantly, however,  Healthcare Statement #7 makes it clear that DOJ and FTC are still empowered to take enforcement action against GPOs for "anticompetitive contracting practices." For reasons that remain unclear, both agencies have failed to do so


In March 2013,  HSCA, the GPO trade association, filed an Amicus brief with the Supreme Court  asking the high court to review and overturn an appeals court decision affirming that a company could incur antitrust liability for providing incentives that did not involve selling a product below cost. HSCA stated that if the Court did not overturn the lower court decision, the GPO business model could be subject to antitrust challenges. The Court chose not to review the case.


Notwithstanding the safe harbor, a number of medical device companies have filed antitrust lawsuits against larger competitors, and in some instances against their competitors' GPO partners as well. Several have won significant settlements or jury awards against  dominant suppliers and  GPOs. 


  • LEGAL DOCUMENTS



Anti-kickback Safe Harbor Exemption

Medicare and Medicaid Patient and Program Protection Act of 1987

READ DOCUMENT


Anti-kickback Safe Harbor final rules

Office of the Inspector General, Dept. of Health & Human Services 

July 29,1991

READ DOCUMENT


"Statements of Antitrust Enforcement Policy in Health Care"

Federal Trade Commission and Department of Justice

Aug. 1996

READ DOCUMENT


'Advisory Opinion: "Up-front Rebates, "Prebates," and "Signing Bonus" Payments'

Office of the Inspector General, Department of Health and Human Services

July 17, 2000

READ DOCUMENT


LePage's Inc.; LePage's Management Company LLC  vs. 3M (Minnesota Mining & Manufacturing Co.); Kroll Associates

U. S. Court of Appeals Third Circuit

Filed Mar. 25, 2003

READ DECISION


"Improving Health Care: A Dose of Competition"

A Report by the Federal Trade Commission and Department of Justice

July 2004

READ REPORT


"Brief of the Healthcare Supply Chain Association as Amicus Curiae in Support of Petitioner"
Supreme Court of the United States
Eaton Corp., Petitioner, vs. Meritor LLC and Meritor Transmission Corp., Respondents
Mar. 28, 2013

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  • LEGAL ARTICLES, REPORTS & PRESENTATIONS


"The Drug Shortage Crisis: When Generic Manufacturers "Just Say No"
Oregon Law Review, 2014
READ ARTICLE

"Pay-to-Play: The Impact of Group Purchasing Organizations on Drug Shortages"
American University Law School Business Law Review, Spring 2014
READ ARTICLE 


"Application of Health Care Fraud and Abuse Laws to the Marketing of Pharmaceuticals and Medical Devices"
Hyman, Phelps & McNamara, P.C.,  January 2014
READ ARTICLE


"Healthcare Intermediaries: Competition and Healthcare Policy at Loggerheads?"
Diana Moss PhD, American Antitrust Institute, 
May 7, 2012
READ REPORT


"An Empirical Analysis of Aftermarket Transactions by Hospitals"

Journal of Contemporary Health Law and Policy, Fall 2011

READ ARTICLE


Interview with Sen. Herb Kohl (D-WI), chairman, Senate Antitrust Subcommittee

Antitrust Magazine, Spring 2007

READ ARTICLE


"2005 Fraud Issues in GPOs and Medical Devices"

Presentation by Associate U. S. Attorney James Sheehan

READ PRESENTATION


"Beyond the Anti-Kickback Statute: New Entities, New Theories in Healthcare Law Prosecutions"

Journal of Health Law, Vol. 40, No. 2

February 2007

READ ARTICLE


"The Exclusion of Competition for Hospital Sales Through Group Purchasing Organizations"

Prof. Einer Elhauge, Harvard Law School

June 25, 2002

READ REPORT

  • MAJOR GPO-RELATED LAWSUITS (Documents & Articles)



Glynn-Brunswick Hospital Authority vs. Becton, Dickinson & Co.

U. S. District Court, Southern District of Georgia

July 17, 2015

READ COMPLAINT


Ameridose, LLC vs. Novation, LLC
U. S. District Court, Massachusetts
Aug. 8, 2012
READ COMPLAINT


"Eighth Circuit Again Affirms Dismissal of Hospital's Class Action Against Catheter Supplier" [Southeast Missouri Hospital vs. C. R. Bard, Inc.]

Law Firm of Faegre Baker Daniels

June 10, 2011

READ ARTICLE


"Recent Medical Device Antitrust Cases" 

David Balto Esq., Washington, D. C.

Updated 2009

READ CASE ANALYSIS


Freedom Medical Inc. vs Premier Purchasing Partners L.P., Novation LLC et al

U. S. District Court, Eastern District of Texas, Texarkana

2009

READ COMPLAINT


United States of America EX REL and State of Texas EX REL Cynthia Fitzgerald vs. Novation, Becton Dickinson et al

U. S. District Court Northern District of Texas

First Amended Complaint

Feb. 20, 2007

READ COMPLAINT


"Blowing the Whistle, Many Times"

New York Times, Nov. 18, 2007

READ ARTICLE


"Battle Scarred" [Rochester Medical vs. CR Bard, Tyco, Premier & Novation]

Forbes, Mar. 26, 2007

READ ARTICLE


"First, Do No Harm"

Forbes, June 6, 2005

READ ARTICLE


United States of America Ex Rel Richard G. Schmidt MD vs. Zimmer, Inc. Mercy Hospital System et al

Third Circuit Court of Appeals 

Oct. 6, 2004

READ DECISION


Masimo Corp. vs. Tyco Healthcare Group L.P. and Mallinckrodt Inc.

May 2002

READ COMPLAINT


Retractable Technologies, Inc. vs. Becton Dickinson, Tyco Healthcare, Premier Inc. and Novation LLC

​Jan. 29, 2001

READ COMPLAINT



"Big Suits: Retractable vs. Becton, Dickinson et al"
American Lawyer, July 2003

"Two Big Hospital Buying Groups Settle Lawsuit with Needle Maker"

The New York Times,  May 8, 2003

READ ARTICLE


"Outbundled KCI Wins Big Court Case" [KCI vs. Hill-Rom]

Repertoire, Dec. 2002

READ ARTICLE


"Kinetic Concepts Sues Hillenbrand Industries"

Bloomberg Business News, Aug. 18, 1995

READ ARTICLE