GPOs tout win
HIGPA chief calls purchasing ruling vindication
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.”