On June 8, 2011, the Eighth Circuit Court of Appeals (the Eighth Circuit) affirmed the U. S. District Court for the Eastern District of Missouri’s decision that the contracting practices of C.R. Bard, Inc. (Bard), a leading supplier of Foley catheters, did not violate antitrust laws. See Southeast Missouri Hosp. v. C.R. Bard, Inc., 2011 WL 2201067 (8th Cir. 2011). Saint Francis Medical Center (Cape Girardeau, Missouri) (Saint Francis), brought antitrust claims against Bard, alleging that Bard “abuses its dominant position in the catheter market in contracting with [group purchasing organizations], inflating prices for hospitals,” and more specifically, that the sole-source provisions, share-based discounts, and bundled discounts in Bard’s contracts with group purchasing organizations (GPOs) are impermissible.
GPOs are organizations formed by a group of hospitals in order to negotiate more favorable contracts with suppliers on behalf of member hospitals. Hospital participation in GPOs is voluntary, and member hospitals are permitted to negotiate their own prices and purchase supplies “off-contract” if they wish.
At the heart of Saint Francis’s arguments was the notion that Bard’s GPO contracts are “de facto exclusionary because the discount prices are so attractive that hospitals cannot afford to forgo them.” Relying upon Eighth Circuit precedent and its determination that Saint Francis had failed to identify a relevant submarket (a necessary element of claims under sections 1 and 2 of the Sherman Act and section 3 of the Clayton Act), the Eighth Circuit upheld the lower court’s decision that bundled discounts did not unreasonably restrain trade and reminded the parties that “cutting prices in order to increase business often is the very essence of competition.”
A copy of the decision is available here.