Owner of Pottsville hospitals sues medical supply firms
Dec 25, 2012 (Menafn - Republican & Herald - McClatchy-Tribune Information Services via COMTEX) --Schuylkill Health System, which operates Pottsville's two hospitals, has sued two manufacturers of hospital supplies, charging that they engaged in monopolistic practices that drove up the costs of their products.
In a 21-page antitrust complaint filed Dec. 18 in U.S. District Court in Philadelphia, the system alleged that Cardinal Health Inc., Dublin, Ohio, and Owens & Minor Inc., Mechanicsville, Va., conspired to maintain artificially high prices for medical and surgical items, most notably sutures and endomechanical products.
"Through the exclusionary and anticompetitive conduct ... (Cardinal and O&M) have unlawfully maintained dominance in the U.S. markets for sutures and endo(mechanical) products, and thereby artificially inflated prices to (Schuylkill Health System)," the complaint reads in part.
Schuylkill Health System demanded a jury trial in the case and asked the court to allow the lawsuit to become a class action, declare the defendants' conduct unlawful, and that it be awarded costs, attorney fees and, as authorized under federal antitrust law, triple the money it lost from the alleged overcharging.
The system operates Schuylkill Medical Center-East Norwegian Street, the former Good Samaritan Regional Medical Center, and Schuylkill Medical Center-South Jackson Street, the former Pottsville Hospital and Warne Clinic.
In its complaint, the system alleged that O&M and Cardinal have a combined share of 72 percent of the U.S. market for medical and surgical products and have similar dominance of the distribution of those products throughout the country.
That is especially true for sutures, which are devices used to hold body tissues together after surgeries or injuries, and endo products, which are devices used in laparascopic and other minimally invasive surgeries, the complaint reads in part.
Cardinal and O&M violated antitrust law by conspiring to dominate the market at the expense of Suture Express, Overland Park, Kan., which sought to compete with them, according to the complaint.
The two companies did so by forcing hospitals to sign exclusionary contracts that require them to buy sutures and endo products, along with other supplies, from Cardinal and O&M, the complaint reads in part. Hospitals that do not want to buy sutures and endo products must, under the terms of those contracts, pay a distribution fee for the items they do buy from the two companies, according to the complaint.
"(Cardinal and O&M) unlawfully bundle the sale of sutures and endo products to the sale of other (medical and surgical) products," the complaint reads in part.
The distribution fee, which ranges from 1 percent to 5 percent of the total purchase price, is actually a penalty that hurts hospitals, according to the complaint.
"The penalty is economically prohibitive because the savings an acute care provider (hospital) realizes by purchasing sutures and endo products from (Suture Express) are overwhelmed by the penalty the acute care provider must pay an all other (medical and surgical) products," the complaint reads in part.
In the complaint, the system alleged the penalty is anticompetitive, and the fact that Cardinal and O&M each impose it shows that they are acting in concert in violation of antitrust law. The effect has been to foreclose competition and allow both companies to charge higher prices, according to the complaint.
"Absent (the scheme), barriers to entry to the sutures and endo products markets would have been lower, which would have made it easier for existing or new competitors to enter or expand their positions in the markets," the complaint reads in part.
U.S. District Judge Juan R. Sanchez is presiding over the case.
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