WASHINGTON, April 20, 2015 /PRNewswire-USNewswire/ -- In
its latest action to ensure competition in the nation's healthcare
markets, the FTC announced that Cardinal Health, Inc. has agreed to
resolve charges that it illegally monopolized 25 local markets for
the sale and distribution of low-energy radiopharmaceuticals and
forced hospitals and clinics to pay inflated prices for these
drugs. The proposed stipulated order requires Cardinal to pay
$26.8 million of ill-gotten gains and
represents the second largest monetary settlement the FTC has
obtained in an antitrust case. The money will be deposited into a
fund for distribution to injured customers. The order also includes
provisions to prevent future violations and restore competition in
six markets where Cardinal remains the dominant radiopharmacy.
"We have reason to believe that Cardinal, by preventing other
radiopharmacies from entering its markets, was able to deny
customers the benefits of competition and reap monopoly profits
from the sale of radiopharmaceuticals for a sustained period of
years," said FTC Chairwoman Edith
Ramirez. "In addition to obtaining important injunctive
relief to restore lost competition and prevent future misconduct,
the settlement ensures that Cardinal disgorges the monopoly profits
it obtained and that affected customers get relief."
Cardinal owns the nation's largest chain of radiopharmacies
which sell and distribute drugs known as low-energy
radiopharmaceuticals. These radiopharmaceuticals are used by
hospitals and clinics to diagnose a range of medical conditions,
including heart disease. Due to the short half-life of the
radioactive isotopes used in these drugs, hospital and clinics rely
on radiopharmacies located nearby, resulting in highly localized
markets.
As alleged in the FTC complaint, between 2003 and 2008,
Bristol-Myers Squibb and General Electric Co. (which acquired
Amersham plc in 2004) were the only U.S. manufacturers of heart
perfusion agents or HPAs. HPAs are radiopharmaceuticals used to
perform heart stress tests, the most common procedure in nuclear
medicine. As such, they are key inputs for a financially viable
radiopharmacy business. During this time, a radiopharmacy could not
profitably enter a new market and compete without obtaining the
right to distribute either Cardiolite (BMS's HPA) or Myoview (GE's
HPA).
According to the FTC's complaint, through separate acquisitions
in 2003 and 2004, Cardinal became the largest operator of
radiopharmacies in the United
States and the sole radiopharmacy operator in 25
metropolitan areas. Between 2003 and 2008, Cardinal employed
various tactics to coerce and induce both BMS and GE to refuse to
grant distribution rights for their respective HPA products to new
competitors in the relevant markets.
As described in the complaint, Cardinal's anticompetitive
tactics included:
- Cancelling, and threatening to cancel, Cardinal's current or
future purchases of the manufacturers' radiopharmaceutical
products;
- Threatening to switch, and actually switching, customers from
BMS's Cardiolite to GE's Myoview in the relevant markets to
pressure BMS to abandon plans to license Cardiolite to new
competitors;
- Threatening to compete, and offering to forego competing,
against BMS as a generic HPA manufacturer; and
- Conditioning Cardinal's future relationship with GE in the
radiopharmaceutical
industry on GE's refusal to grant Myoview distribution rights to
new competitors in the relevant markets.
As a result of these tactics, the complaint alleges that
Cardinal obtained de facto exclusive distribution rights to the
only HPAs available on the market and prevented numerous potential
entrants from gaining access to these
radiopharmaceuticals.
The complaint charges that Cardinal violated the FTC Act by
blocking or delaying competitive entry, and thereby monopolizing
the sale and distribution of radiopharmaceuticals to hospitals and
clinics in the following 25 markets:
1. Albany, New York
2. Birmingham, Alabama
3. Charlotte, North Carolina
4. Chattanooga, Tennessee
5. Columbia, South Carolina
6. Gadsden, Alabama
7. Gainesville, Florida
8. Greensboro, North Carolina
9. Huntington, West Virginia
10. Indianapolis, Indiana
11. Jackson, Mississippi
12. Jacksonville, Florida
13. Knoxville, Tennessee
14. Lexington, Kentucky
15. Little Rock, Arkansas
16. Louisville, Kentucky
17. Nashville, Tennessee
18. Omaha/Lincoln,
Nebraska
19. Orange, Texas
20. Raleigh, North Carolina
21. Richmond, Virginia
22. Spokane, Washington
23. Tulsa, Oklahoma
24. Wichita, Kansas; and
25. Springfield, Missouri
Under the proposed stipulated federal court order, Cardinal is
required to pay $26.8 million as
disgorgement of its ill-gotten gains. In addition, the order bars
Cardinal from entering into simultaneous exclusive deals with
manufacturers of the same radiopharmaceutical product or from using
coercion or retaliation to obtain de facto exclusivity. The order
also requires Cardinal to notify the FTC before entering into new
exclusive distribution agreements or buying radiopharmacy assets
that would not otherwise be subject to the notification
requirements of the Hart-Scott Rodino Act.
The order also includes additional provisions designed to
facilitate entry and restore competition in six of the relevant
markets where Cardinal continues to operate the sole or dominant
radiopharmacy: Little Rock,
Arkansas; Gainesville,
Florida; Lexington,
Kentucky; Omaha-Lincoln,
Nebraska; Knoxville,
Tennessee; and Spokane,
Washington. Cardinal has agreed to give its customers in
these six markets the option to terminate their contracts with
Cardinal for low-energy radiopharmaceuticals. A monitor will
oversee the process of notifying customers and administering any
termination of contracts. Finally, the order also requires Cardinal
to establish and maintain an antitrust compliance program for its
radiopharmacy division.
The Commission vote authorizing staff to file the complaint and
the proposed order in federal court, and to issue a Commission
statement, was 3-2, with Commissioners Maureen K. Ohlhausen and Joshua D. Wright dissenting. Chairwoman
Edith Ramirez and Commissioners
Julie Brill and Terrell McSweeny joined the Commission
statement. Commissioners Ohlhausen and Wright issued separate
dissenting statements.
The FTC's Northeast Region filed the complaint and proposed
order in the U.S. District Court for the Southern District of
New York on April 20, 2015. The proposed order is subject to
court approval.
NOTE: The Commission files a complaint when it has
"reason to believe" that the law has been or is being violated and
it appears to the Commission that a proceeding is in the public
interest. Stipulated orders have the force of law when approved and
signed by the District Court judge.
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SOURCE Federal Trade Commission