GPOs tout win

HIGPA chief calls pur­chas­ing rul­ing vin­di­ca­tion

Modern Healthcare - - The Week In Healthcare - Shawn Rhea

roup pur­chas­ing or­ga­ni­za­tions were pro­vided an in­di­rect le­gal vic­tory this month when a fed­eral ap­peals court ruled against a plain­tiff hos­pi­tal and in fa­vor of a catheter sup­plier that had sole-source and bun­dled-pro­duct­dis­count con­tracts with sev­eral GPOs.

The case concerned a class-ac­tion law­suit that orig­i­nated in Fe­bru­ary 2007 when 221-bed South­east Mis­souri Hos­pi­tal, Cape Gi­rardeau, sued med­i­cal-de­vice mak­ers C.R. Bard and Tyco Health­care Group in U.S. District Court in St. Louis. The com­plaint, which sought to re­cover un­spec­i­fied dam­ages, claimed that con­tracts that both com­pa­nies had with GPOs for the sale of uro­log­i­cal catheters to hos­pi­tals vi­o­lated an­titrust laws. St. Francis Med­i­cal Cen­ter, a 258-bed hos­pi­tal also in Cape Gi­rardeau, joined the case as a plain­tiff in Fe­bru­ary 2008, and the case ul­ti­mately was whit­tled down to St. Francis Med­i­cal Cen­ter v. C.R. Bard af­ter sev­eral clas­s­ac­tion-party de­ci­sions is­sued by U.S. District Court Mag­is­trate Judge Thomas Mum­mert.

In its com­plaint, St. Francis al­leged that Bard, which be­tween 2003 and 2008 claimed roughly 87% of Fo­ley uro­log­i­cal catheters sales made to U.S. hos­pi­tals, en­gaged in mul­ti­ple GPO con­tract­ing schemes in an ef­fort to weed out its com­pe­ti­tion. Those schemes, ac­cord­ing to the com­plaint, in­cluded sole­source con­tracts that pre­vented com­pet­ing uro­log­i­cal catheter sup­pli­ers from con­tract­ing with some GPOs; tiered pric­ing that of­fered lower rates to hos­pi­tals that bought a high per­cent­age of prod­ucts from Bard; and bun­dled dis­counts that of­fered cheaper pric­ing when sev­eral re­lated med­i­cal prod­ucts were pur­chased to­gether in­stead of sep­a­rately. As a re­sult of those prac­tices, Bard “de­prived” hos­pi­tals “of the ben­e­fit of com­pet­i­tive pric­ing for uro­log­i­cal catheters” and blocked them from “the op­por­tu­nity to pur­chase more ef­fec­tive and in­no­va­tively ad­vanced uro­log­i­cal catheters,” ac­cord­ing to the com­plaint.

Mum­mert, in a Septem­ber 2009 de­ci­sion, said St. Francis failed to prove that the con­tract­ing prac­tices caused the hos­pi­tal or other po­ten­tial plain­tiffs’ fi­nan­cial dam­ages, and he ruled in fa­vor of Bard. On Aug. 17, three fed-

Geral ap­peals court judges in the 8th U.S. Cir­cuit Court of Ap­peals up­held the de­ci­sion, say­ing that Bard’s GPO con­tracts did not pro­hibit mem­ber hos­pi­tals from pur­chas­ing out­side of their GPOs and strik­ing their own deals to pur­chase from com­pet­ing sup­pli­ers.

While No­va­tion—the GPO in which St. Francis is a part­ner—was not a party to the case, the cir­cum­stances seemed to have pit a provider mem­ber in di­rect op­po­si­tion to its GPO’s con­tract­ing prac­tices. No­va­tion was one of two GPOs that at the time of the law­suit had sole-source con­tracts with Bard to pro­vide uro­log­i­cal catheters, ac­cord­ing to the law­suit. Court doc­u­ments do not name the other sole-source con­trac­tor.

No­va­tion of­fi­cials said be­cause they were not a party to the law­suit, they were un­able to com­ment di­rectly on the case. Rep­re­sen­ta­tives at St. Francis and Bard de­clined to com­ment on the case.

But Cur­tis Rooney, pres­i­dent of the Health In­dus­try Group Pur­chas­ing As­so­ci­a­tion, a GPO trade group, said the de­ci­sion vin­di­cates GPOs’ pur­chas­ing prac­tices, which have long been a tar­get of scru­tiny. “I think this is very solid law and that it sends a sig­nal to the mar­ket that GPOs are very se­ri­ous about cost con­tain­ment and have the tools to do it,” Rooney said. HIGPA, he added, has sent a copy of the case and the court rul­ings to Sen. Chuck Grass­ley (R-Iowa) and sev­eral other leg­is­la­tors who have been look­ing into GPO con­tract­ing prac­tices and are ex­pected to soon re­view a Govern­ment Ac­count­abil­ity Of­fice re­port on GPO prac­tices (See re­lated story, p. 24).

Thomas Crane, a health­care prac­tice lawyer with Mintz, Levin, Cohn, Fer­ris, Glovsky and Popeo, said that al­though he wasn’t sur­prised by the case’s out­come, he’s not cer­tain how much in­flu­ence the out­come will have on the sen­a­tors’ in­quiry into GPO prac­tices.

“There are im­por­tant pro­vi­sions in these agree­ments that pro­tect providers from sole-source con­tracts,” Crane said. “The hos­pi­tals are free to buy out­side the con­tracts,” he added. “I would guess that this de­ci­sion will have no im­pact on how the sen­a­tors re­view the in­for­ma­tion gath­ered in the GAO re­port.”

Rooney: “GPOs are very se­ri­ous about cost con­tain­ment.”

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