Antitrust Law Daily Wrap Up, ANTITRUST NEWS: Hospital’s Sale of Drugs at Cost to Emergency Transport Service Permissible As Emergency Humanitarian Gesture, (Nov 30, 2012)
Organizations Mentioned:Methodist Hospital System
By Jeffrey May, J.D.
Methodist Hospital System would not be prohibited under the Robinson-Patman Act from reselling pharmaceuticals it purchased at a discount to Baytown EMS to cope with drug shortages, because the resale would constitute a permissible emergency humanitarian gesture, according to an FTC staff letter dated November 30, 2012.
Because Methodist's proposal appeared to be a permissible emergency humanitarian gesture, the staff letter did not reach the issue of whether the Non-Profit Institutions Act (NPIA) provided an exemption from liability under the Robinson-Patman Act, as Methodist had requested. The NPIA exempts purchases of supplies by certain non-profit organizations for their own use.
Methodist, a non-profit hospital based in Houston, purchases its pharmaceuticals through a group purchasing organization at a discounted NPIA price available to certain non-profit entities. Baytown EMS is an emergency transport service that services Methodist and other neighboring hospitals. Baytown EMS has been unable to keep its ambulances stocked with safe inventory levels of certain critical pharmaceuticals. Efforts to secure supply from other vendors have not succeeded.
To assist Baytown EMS during a time of well-publicized nationwide shortages of critical drugs, Methodist seeks to sell certain shortage drugs that it obtains at the NPIA-discounted price to Baytown EMS. The drugs are necessary to the care of Baytown EMS patients, most of whom are being transported to Methodist.
According to the staff letter, the Supreme Court in Abbott Labs. v. Portland Retail Druggists Assn., Inc., 425 U.S. 1, 1976-1 Trade Cases ¶60,781 (1976), recognized that a hospital pharmacy should not be condemned for a Robinston-Patman Act violation when it “holds the emergency situation within bounds, and entertains it only as a humanitarian gesture.” Applying the reasoning in Abbott Labs., the FTC had previously determined that a hospital could resell pharmaceuticals it purchased pursuant to the NPIA discount to the general public during an emergency caused by a Medicaid strike.
News: Antitrust FederalTradeCommissionNews