Antitrust Law Daily Wrap Up, ANTITRUST—DNJ: Healthcare Providers Lack Standing To Oppose Settlement Agreement , (Nov 19, 2012)

By Jody Coultas, J.D.

The federal district court in Newark granted a number of wholesale drug companies’ motion for preliminary approval of a proposed class settlement (In re Hypodermic Products Antitrust Litigation, November 15, 2012, Linares, J.). The parties opposing the motions lacked standing.

The case at issue concerned a hypodermic needle manufacturer’s alleged monopoly in the disposable hypodermic products market. The manufacturer allegedly bundled products to reduce or eliminate competition in one of the bundled product markets. As a result, healthcare providers and others paid more for these products than they should have paid for the anti-competitive monopoly. Two sets of plaintiffs, one consisting of drug wholesalers and the other consisting of hospitals and other healthcare providers, moved for partial summary judgment asking the court to declare them “direct purchasers” able to recover treble damages under the Clayton Act.

Prior to the court ruling on the healthcare providers’ right to bring the suit, the wholesalers and the manufacturer announced a settlement conditioned on the court granting direct purchaser status to the wholesalers. However, the healthcare providers were held to be the direct purchasers.

However, the Third Circuit Court of Appeals held that for the purposes of standing under the Clayton Act, the wholesalers were direct purchasers and the healthcare providers were indirect purchasers for contract sales.

The healthcare providers argued that the settlement motion should be denied because it undervalued the direct purchasers’ claims and was not the product of collusive negotiations, the settlement favored the wholesalers over the healthcare providers and other non-distributors, and the proposed class notice did not advise the healthcare providers of the settlement deficiencies.

Because the healthcare providers lacked standing as indirect purchasers, the court granted the wholesalers’ motion for preliminary approval of the proposed settlement. Indirect purchasers were not a party to the settlement, as it was limited to claims based on the direct purchase of the manufacturer’s hypodermic products. The healthcare providers use of an absent class member that did make direct purchasers was denied as a way to bootstrap all of the healthcare providers into the proceedings concerning preliminary approval of the settlement. The healthcare providers had no interest in, and faced on prejudice from, the settlement.

The case is No. 05-1602 (JLL).

Peter S. Pearlman (Cohn Lifland Pearlman Herrmann & Knopf LLP) for Louisiana Wholesale Drug Company, Inc. Ellen Blanche Unger (Lowenstein Sandler PC) for Becton Dickinson & Company.

Cases: Antitrust NewJerseyNews