The FTC has announced that Cardinal Health, Inc. has agreed to resolve charges that it monopolized 25 local markets for the sale and distribution of low-energy radiopharmaceuticals forcing hospitals and clinics to pay inflated prices.1
The FTC alleged that Bristol-Myers Squibb (BMS) and General Electric Company (GE) were the only U.S. manufacturers of heart stress test radiopharmaceuticals. Through separate acquisitions in 2003 and 2004, the FTC alleged that Cardinal became the largest operator of radiopharmacies and the only operator in 25 metropolitan areas. The FTC alleged that Cardinal forced BMS and GE to refuse distribution rights for their radiopharmaceuticals to new competitors of Cardinal by, among other things: canceling and threatening to cancel Cardinal's orders with BMS and GE; switching Cardinal's customers from BMS product to GE unless BMS abandoned its plans to license its product to competitors; and conditioning Cardinal's future relationship with GE on GE's refusal to grant distribution rights to competitors of Cardinal.
The $26.8 million payment by Cardinal is the second largest monetary settlement obtained by the FTC in an antitrust case and is also significant because the $26.8 million amount is a disgorgement of the alleged ill-gotten profits earned by Cardinal. In addition, the settlement (1) bars Cardinal from entering into certain exclusive deals with manufacturers, (2) requires notice to the FTC before entering into exclusive distribution agreements or purchasing radiopharmacy assets, (3) requires Cardinal's customers in certain areas to be given the right to terminate their contracts with a monitor to oversee the process, and (4) requires Cardinal to establish an antitrust compliance program for its radiopharmacy division.
This case confirms that the federal enforcement agencies continue to view healthcare antitrust matters as a high priority. Further, it is worth noting that (1) the multiple acquisitions that led to Cardinal's alleged market power occurred in 2003-2004 - more than 10 years ago and (2) the conduct by GE that allegedly forced BMS and GE not to do business with competitors of Cardinal occurred from 2003 to 2008 – more than seven years ago.
1 A copy of the FTC press release with links to the proposed settlement and complaint may be found here.