• DOJ's Antitrust Division OKs Medical Supply Joint Purchasing Agreement between the Only Acute Tertiary Care Facilities in Southeast Georgia
  • September 23, 2009 | Author: Daniel J. Hettich
  • Law Firm: King & Spalding LLP - Washington Office
  • On September 4, 2009, the Antitrust division of the Department of Justice (DOJ) issued a “business review letter” stating that it “has no present intention to challenge the entering into or operation” of a joint purchasing agreement between “the only acute tertiary care hospitals in southeast Georgia.” The hospitals, Memorial Health, Inc. and St. Joseph's/Candler Health System (the Hospitals), requested DOJ review of their proposed exclusive joint purchasing agreement in which the Hospitals would agree to purchase certain medical and surgical supplies only from vendors designated by a purchasing committee comprised of members from each hospital. The purchasing committee would “jointly evaluate certain medical and surgical supplies, implants and devices to determine which of those items will be covered by the Agreement.”

    To meet the “safety zone,” or safe harbor, established by agency policy, the Hospitals represented that they had information systems capable of conducting real time revenue calculations to ensure that the cost of all covered products accounts for less than 20 percent of the total revenue of all products sold by each hospital, and that they would “ensure that their purchases will account for less than 35 percent of such vendors' regional sales in the relevant market.” The Hospitals also stated that they would “not discuss or agree upon the price or other terms which either party intends to charge or collect for Covered Products or the allocation of payors and patients to whom either party intends to market Covered product.”

    The DOJ acknowledged the possibility that “the parties may use the Agreement to act jointly with respect to matters beyond the scope of the Agreement,” specifically noting the fact that the hospitals were the only acute tertiary care hospitals in southeast Georgia. Ultimately, however, the DOJ found that the agreement met the requirements of the antitrust safety zone and was “unlikely to produce anticompetitive effects.” In fact, to the extent that “medical and surgical supplies, implants and services are especially susceptible to scale economies,” the DOJ found that “the Agreement could have the pro-competitive effect of increasing output and lowering costs for consumers.”