Southeast Mo. Hosp. v. C.R. Bard Inc.

• Citation: 642 F.3d 608
• Decision Date: 08 June 2011
• Docket Number: No. 09–3325.,09–3325.
• Parties: SOUTHEAST MISSOURI HOSPITAL, Plaintiff,Saint Francis Medical Center, Plaintiff–Appellant,v.C.R. BARD, INC., Defendant–Appellee,Tyco International, US, Inc.; Tyco Health Care Group; John Does 1–10, Defendants.Attorney General of the State of Missouri, Amicus on Behalf of Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

642 F.3d 608

2011-1 Trade Cases P 77,488

SOUTHEAST MISSOURI HOSPITAL, Plaintiff,Saint Francis Medical Center, Plaintiff–Appellant,

v.C.R. BARD, INC., Defendant–Appellee,Tyco International, US, Inc.; Tyco Health Care Group; John Does 1–10, Defendants.Attorney General of the State of Missouri, Amicus on Behalf of Appellant.

No. 09–3325.

United States Court of Appeals, Eighth Circuit.

Submitted: June 15, 2010.Filed: June 8, 2011.

David Charles Frederick, argued, Washington, DC (Aaron M. Panner, Washington, DC, David Boies, III, Mark Schirmer, Fairfax, VA, Michael Ponder, Cape Girardeau, MO, Daniel Hume, Roger W. Kirby, David E. Kovel, Kenneth G. Walsh, Christopher S. Studebaker, Karina Kosharskyy, Kirby McInerney, on the brief, New York, NY), for appellant.Bruce Roger Braun, argued, Chicago, IL (Dan K. Webb, Michael P. Roche, David J. Doyle, Andrew M. Johnstone, Chicago, IL, Alan C. Kohn, Kevin A. Sullivan, on the brief, St. Louis, MO), for appellee.Anne E. Schneider, Andrew M. Hartnett, AAG, Jefferson City, MO, for amicus brief for the State of MO.Before MURPHY, BEAM, and BENTON, Circuit Judges.BENTON, Circuit Judge.

Saint Francis Medical Center brought this class action suit against C.R. Bard, Inc., a supplier of medical supplies. According to Saint Francis, Bard's contracts with Group Purchasing Organizations violate sections 1 and 2 of the Sherman Act, section 3 of the Clayton Act, and Missouri antitrust law. See 15 U.S.C. §§ 1, 2; 15 U.S.C. § 14; Mo.Rev.Stat. § 416.031 (2000). Saint Francis seeks relief under sections 4 and 16 of the Clayton Act, and Missouri law. See 15 U.S.C. §§ 15, 26; Mo.Rev.Stat. § 416.121.1 (2000). The district court ¹ granted summary judgment to Bard. Having jurisdiction under 28 U.S.C. § 1291, this court affirms.

I.

Saint Francis Medical Center, a hospital in Cape Girardeau, is a member of Novation, a Group Purchasing Organization. GPOs negotiate standard contracts with suppliers on behalf of member hospitals. According to the parties, 96 to 98 percent of all hospitals in the United States belong to one or more GPOs. GPO membership is voluntary. Hospitals can (and do) switch from one GPO to another, and may belong to multiple GPOs. GPOs do not purchase supplies; member hospitals do, under the terms of GPO-negotiated contracts. GPO contracts with suppliers typically last three to eight years, and may be terminated by either side, with notice. Once a GPO contracts with a supplier, its member hospitals may sign letters of commitment, accepting the terms of the GPO contracts. A member hospital's commitment may be terminated at any time, with notice to the supplier. For the GPO contract between Novation and Bard for 2005 through 2008, the Acute Urologicals Letter of Commitment—covering catheters—states: “Member reserves the right to terminate this letter of commitment at any time upon notice to Bard.”

GPO-member hospitals are not required to purchase through their GPO contracts. GPO-member hospitals can purchase supplies, like catheters, “off-contract,” negotiating their own prices with suppliers. On average, hospitals save between 10 and 15 percent on their medical device purchases by buying under GPO contracts.

Bard sells medical supplies, including catheters. Bard is the leading U.S. supplier of Foley catheters—tubes attached to an inflatable balloon used to drain a patient's bladder over extended periods of time. From 2003 through 2008, Bard made over 80 percent of Foley sales to hospitals. Bard also has a significant share of the U.S. market for intermittent catheters—tubes used to drain a patient's bladder and discarded after each use.²

Saint Francis purchases Bard's catheters through a GPO. According to Saint Francis, Bard abuses its dominant position in the catheter market in contracting with GPOs, inflating prices for hospitals. Specifically, Saint Francis objects to sole-source provisions, share-based discounts, and bundled discounts in Bard's GPO contracts.

Bard prefers sole-source contracts with GPOs. In sole-source contracts, Bard is the only supplier of catheters on the GPO's price list provided to member hospitals, and thus the only seller under the terms in the GPO contract. In addition, according to Saint Francis, Bard's sole-source contracts with one GPO (Novation) from 2001 to 2005 urged participating member hospitals not to solicit proposals from Bard's competitors or conduct product evaluations of competitors' products. As the district court found, “there is ‘fierce competition’ for sole-source contracts.” Hospitals that buy Bard catheters under sole or dual-source contracts generally pay less than hospitals that do not. Even under sole-source agreements, however, member hospitals may purchase off-contract. Member hospitals may terminate an existing contract at will and on short notice.

Several of Bard's GPO contracts include tiered pricing: hospitals get share-based discounts for purchasing higher percentages of supplies from Bard. The largest discounts go to hospitals that buy at least 85 percent of certain listed products from Bard. Lesser discounts are offered to hospitals that buy between 50 and 84 percent, and less than 50 percent, respectively, of their product needs from Bard. None of the GPO contracts give hospitals a discount for buying Bard catheters exclusively.

The GPO contracts also offer discounts to hospitals buying other Bard medical supplies along with catheters. These “bundled discounts” allow hospitals to pay a lower price for several medical products purchased together than when purchased separately. Bundles in the GPO contracts include catheters and related products, like drainage bags and urine meters.

After both Saint Francis and Bard moved for summary judgment, the district court ruled for Bard, finding no antitrust violation. Saint Francis appealed, and this court filed an opinion, 616 F.3d 888 (2010), which this court later vacated.

II.

This court reviews the district court's grant of summary judgment de novo. See, e.g., Amerinet, Inc. v. Xerox Corp., 972 F.2d 1483, 1489–90 (8th Cir.1992), cert. denied, 506 U.S. 1080, 113 S.Ct. 1048, 122 L.Ed.2d 356 (1993). A grant of summary judgment is appropriate only where the record, read most favorably to the non-moving party, indicates that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 321–23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). There is no different or heightened summary judgment standard in complex antitrust cases. See Amerinet, 972 F.2d at 1490.

According to Saint Francis, Bard's sole-source GPO contracts, share-based discounts, and bundled discounts unreasonably restrain trade in violation of sections 1 and 2 of the Sherman Act, section 3 of the Clayton Act, and the Missouri antitrust law.³ See 15 U.S.C. §§ 1, 2; 15 U.S.C. § 14, 15, 26; Mo.Rev.Stat. § 416.031 (2000). Saint Francis's theory is that, while hospitals (even those participating in sole-source GPO contracts) may purchase catheters from other suppliers, Bard's GPO contracts are de facto exclusionary because the discount prices are so attractive that hospitals cannot afford to forgo them. See Concord Boat Corp. v. Brunswick Corp., 207 F.3d 1039, 1058 (8th Cir.2000) (claims under Section 1 of the Sherman Act “that allege only de facto exclusive dealing may be viable.”).

III.

Saint Francis's challenge to the share-based discounts is precluded by this court's decision in Concord Boat. There, boat builders brought antitrust challenges against engine-supplier Brunswick, attacking its market-share-discount program. Brunswick offered market-share discounts to boat builders who agreed to purchase a certain percent of their engines from Brunswick. The boat builders claimed the program placed them in “ ‘golden handcuffs,’ such that boat builders and dealers had no choice but to purchase engines from [Brunswick].” Concord Boat, 207 F.3d at 1060. These agreements—though not contractually exclusive—were so attractive, argued the boat builders, that they became de facto exclusive arrangements.

Under the agreements in Concord Boat, “customers were not required either to purchase 100% from Brunswick or to refrain from purchasing from competitors in order to receive the discount.” Id. at 1063. Any contracts between the boat builders and Brunswick were voluntary. “The programs did not require the boat builders to commit to Brunswick for any specified period of time.” Id. at 1059. The boat builders were “free to walk away from the discounts at any time” and did so when other manufacturers offered superior discounts. Id. Based on the voluntary nature of the agreements between Brunswick and the boat builders, as well as the boat builders' willingness to purchase their engines elsewhere for better discounts, this court reversed a jury verdict for the boat builders, finding that the discount agreements were not de facto exclusionary dealing. Id. at 1060.

Here, as in Concord Boat, Bard offered share-based discounts. Share-based discounts gave hospitals discounts for committing to purchase specified percentages of their catheter needs from Bard. The greater the percentage, the greater the discount. In order to receive these discounts, hospitals were not required to purchase 100 percent of their catheter needs from Bard, or to refrain from purchasing from competitors. Nor did the GPO discount agreements contractually obligate hospitals to purchase anything from Bard. If a hospital purchased less than the agreed upon percent, it simply lost its negotiated discount. Contrary to Saint Francis's position, the share-based discounts here parallel those in Concord Boat.

Saint Francis attempts to distinguish this case from Concord Boat, emphasizing that the sole-source contracts and bundled discounts offered by Bard in this case were not offered by Brunswick in the Concord Boat case. Saint Francis ignores...