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.
Anti-kickback Safe Harbor Exemption
Medicare and Medicaid Patient and Program Protection Act of 1987
Office of the Inspector General, Dept. of Health & Human Services
"Statements of Antitrust Enforcement Policy in Health Care"
Federal Trade Commission and Department of Justice
'Advisory Opinion: "Up-front Rebates, "Prebates," and "Signing Bonus" Payments'
July 17, 2000
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
"Improving Health Care: A Dose of Competition"
A Report by the Federal Trade Commission and Department of Justice
"An Empirical Analysis of Aftermarket Transactions by Hospitals"
Journal of Contemporary Health Law and Policy, Fall 2011
Interview with Sen. Herb Kohl (D-WI), chairman, Senate Antitrust Subcommittee
Antitrust Magazine, Spring 2007
"2005 Fraud Issues in GPOs and Medical Devices"
Presentation by Associate U. S. Attorney James Sheehan
"Beyond the Anti-Kickback Statute: New Entities, New Theories in Healthcare Law Prosecutions"
Journal of Health Law, Vol. 40, No. 2
"The Exclusion of Competition for Hospital Sales Through Group Purchasing Organizations"
Prof. Einer Elhauge, Harvard Law School
June 25, 2002
Marion Healthcare LLC et al vs. BD, Premier Inc. Vizient, McKesson et al
U. S. District Court, Southern District of Illinois
May 3, 2018
READ SECOND AMENDED COMPLAINT, Aug. 21, 2020
READ FEDERAL DISTRICT COURT POSTPONEMENT ORDER, FILING OF AMENDED COMPLAINT, May 19, 2020
READ VACATE ORDER OF DISTRICT CT. DISMISSAL, 7th Circuit Court of Appeals, March 5, 2020
READ APPEAL & AMENDED COMPLAINT, April 19, 2019
April 25, 2019
Glynn-Brunswick Hospital Authority vs. Becton, Dickinson & Co.
U. S. District Court, Southern District of Georgia
July 17, 2015
Ameridose, LLC vs. Novation, LLC
U. S. District Court, Massachusetts
Aug. 8, 2012
SE Missouri Hospital vs. C.R.Bard
U. S. 8th Circuit Court of Appeals
June 8, 2011
"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
"Recent Medical Device Antitrust Cases"
David Balto Esq., Washington, D. C.
Freedom Medical Inc. vs Premier Purchasing Partners L.P., Novation LLC et al
U. S. District Court, Eastern District of Texas, Texarkana
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
"Blowing the Whistle, Many Times"
New York Times, Nov. 18, 2007
"Battle Scarred" [Rochester Medical vs. CR Bard, Tyco, Premier & Novation]
Forbes, Mar. 26, 2007
"First, Do No Harm"
Forbes, June 6, 2005
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
Masimo Corp. vs. Tyco Healthcare Group L.P. and Mallinckrodt Inc.
Retractable Technologies, Inc. vs. Becton Dickinson, Tyco Healthcare, Premier Inc. and Novation LLC
Jan. 29, 2001
The New York Times, May 8, 2003