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Marion Diagnostic Ctr., LLC v. Becton, Dickinson, & Co.

United States District Court for the Southern District of Illinois

November 30, 2018, Decided; November 30, 2018, Filed

Case No. 18-CV-01059-NJR-RJD

Opinion

MEMORANDUM AND ORDER

ROSENSTENGEL, [*3]  District Judge:

Pending before the Court are three motions to dismiss (Docs. 83, 84, & 85) filed by Defendants Becton, Dickinson, and Company ("Becton"); Premier, Inc. ("Premier"); Vizient, Inc. ("Vizient"); Cardinal Health, Inc. ("Cardinal"); Owens & Minor Distribution, Inc. ("Owens"); McKesson Medical-Surgical, Inc., ("McKesson"); and Henry Schein, Inc. ("Schein") (collectively "Defendants"). The Court heard arguments from counsel on October 17, 2018, and took the motions under advisement (see Docs. 112, 116). For the reasons set forth below, the Court now grants the motions to dismiss and dismisses the Amended Complaint (Doc. 52) with prejudice.

Factual & Procedural Background

Plaintiffs Marion Diagnostic Center, LLC; Marion Healthcare, LLC; and Andron Medical Associates (collectively "Plaintiffs") are healthcare providers who assert that Defendants are part of a conspiracy to charge inflated prices for medical supplies, in violation of Section 1 of the Sherman Act, 15 U.S.C. § 1 (see Doc. 52).1

Generally, when a healthcare provider wants to purchase medical supplies, it becomes a member of a group purchasing organization ("GPO") (Doc. 52, p. 2). GPOs aggregate the purchasing power of healthcare providers [*4]  and, ideally, negotiate significant discounts with medical supply manufacturers on behalf of its members.2 Once the GPO and the manufacturer agree on the terms of a sale, the GPO notifies the healthcare provider of the proposed contract (Doc. 52, p. 2). The contract, referred to as a "net dealer contract," is not binding on the provider (Id. at p. 11). But if the provider decides to move forward with the net dealer contract, it enters into a "distributor agreement" with a medical supply distributor (Id. at p. 12). In that agreement, the distributor agrees to purchase the medical supplies from the manufacturer and resell them to the provider according to the terms of the net dealer contract, plus an additional cost (Id.). The distributor also enters into a "dealer notification agreement" with the manufacturer to sell the supplies under the terms of the net dealer contract (Id.).

According to the Amended Complaint, Plaintiffs have purchased hypodermic products3 from Becton, a medical supply manufacturer, through the process described above (Id. at pp. 3-4). Premier and Vizient are GPOs involved in those transactions, and Cardinal, Owens, Schein, and McKesson are Becton distributors [*5]  (Id. at p. 4). Plaintiffs allege Defendants are engaged in a conspiracy to prevent competition and restrain trade by negotiating and enforcing net dealer contracts that employ penalty pricing rebate provisions and sole or dual source provisions (Id. at pp. 11-13).4 Plaintiffs also assert Becton has engaged in other anticompetitive acts in aid of the conspiracy, including deception, disparagement, patent infringement, and false advertising against one of its competitors (Id. at pp. 13-15).

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2018 U.S. Dist. LEXIS 203407 *; 2018-2 Trade Cas. (CCH) P80,594; 2018 WL 6266751

MARION DIAGNOSTIC CENTER, LLC; MARION HEALTHCARE, LLC; and ANDRON MEDICAL ASSOCIATES, individually and on behalf of all others similarly situated, Plaintiffs, vs. BECTON, DICKINSON, AND COMPANY; PREMIER, INC.; VIZIENT, INC.; CARDINAL HEALTH, INC.; OWENS & MINOR DISTRIBUTION, INC.; MCKESSON MEDICAL-SURGICAL INC.; HENRY SCHEIN, INC.; and UNNAMED BECTON DISTRIBUTOR CO-CONSPIRATORS, Defendants.

Subsequent History: Vacated by, Remanded by Marion Healthcare, LLC v. Becton Dickinson & Co., 2020 U.S. App. LEXIS 6938 (7th Cir. Ill., Mar. 5, 2020)

CORE TERMS

conspiracy, distributors, manufacturer, purchaser, overcharges, antitrust, dealer, motion to dismiss, provider, medical supply, price-fixing, Sherman Act, healthcare, prices, chain