LEGAL BACKGROUND

Exposing GPOs

 & PBMs

"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

READ FILING

LEGAL ARTICLES, REPORTS & PRESENTATIONS

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."

Anti-kickback Safe Harbor final rules

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

"Serving Economic Efficiencies or Anticompetitive Purposes: The Future of Group Purchasing Organizations and the Antitrust Safety Zone"

Indiana Health Law Review

2005

READ ARTICLE

MAJOR GPO-RELATED LAWSUITS (Documents & Articles)

Endure Industries Inc. vs. Vizient Inc.

U. S. District Court, Northern District of Texas

October 20, 2020

READ COMPLAINT

READ OPPOSITION TO DISMISS SECOND AMENDED COMPLAINT, May 27, 2022

READ SECOND AMENDED COMPLAINT, Mar. 22, 2022

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