902 F.3d 323 (3rd Cir. 2018), 17-1990, Lifewatch Services Inc. v. Highmark Inc.

Docket Nº:17-1990
Citation:902 F.3d 323
Opinion Judge:AMBRO, Circuit Judge
Party Name:LIFEWATCH SERVICES INC., Appellant, v. HIGHMARK INC.; Blue Cross & Blue Shield Association; Wellpoint Inc.; Horizon Blue Cross Blue Shield of New Jersey; Blue Cross & Blue Shield of South Carolina; Blue Cross & Blue Shield of Minnesota.
Attorney:Gary M. Elden, Esquire (Argued), Anna S. Knight, Esquire, Shook, Hardy & Bacon, Michael J. McCarrie, Esquire, Artz McCarrie Health Law, Counsel for Appellant Sheryl L. Axelrod, Esquire, The Axelrod Firm, The Beasley Building, Sarah J. Donnell, Esquire, Daniel E. Laytin, Esquire (Argued), David J....
Judge Panel:Before: AMBRO, RESTREPO, and FUENTES, Circuit Judges
Case Date:August 28, 2018
Court:United States Courts of Appeals, Court of Appeals for the Third Circuit
 
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902 F.3d 323 (3rd Cir. 2018)

LIFEWATCH SERVICES INC., Appellant,

v.

HIGHMARK INC.; Blue Cross & Blue Shield Association; Wellpoint Inc.; Horizon Blue Cross Blue Shield of New Jersey; Blue Cross & Blue Shield of South Carolina; Blue Cross & Blue Shield of Minnesota.

No. 17-1990

United States Court of Appeals, Third Circuit

August 28, 2018

Argued January 16, 2018

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Appeal from the United States District Court for the Eastern District of Pennsylvania, District Judge: Honorable Eduardo C. Robreno (D.C. Civil Action No. 2-12-cv-05146)

Gary M. Elden, Esquire (Argued), Anna S. Knight, Esquire, Shook, Hardy & Bacon, Michael J. McCarrie, Esquire, Artz McCarrie Health Law, Counsel for Appellant

Sheryl L. Axelrod, Esquire, The Axelrod Firm, The Beasley Building, Sarah J. Donnell, Esquire, Daniel E. Laytin, Esquire (Argued), David J. Zott, Esquire, Kirkland & Ellis, Counsel for Appellee Blue Cross & Blue Shield Association

Justin W. Bernick, Esquire, John R. Robertson, Esquire, Hogan Lovells U.S. LLP, Stephen A. Loney, Jr., Esquire, Hogan Lovells U.S. LLP, Counsel for Appellees Wellpoint Inc.; Horizon Blue Cross Blue Shield of New Jersey, Blue Cross & Blue Shield of South Carolina; Blue Cross & Blue Shield of Minnesota

Before: AMBRO, RESTREPO, and FUENTES, Circuit Judges

OPINION

AMBRO, Circuit Judge

The seller of a medical device, believing it was shut out of the market for it, brought suit on federal antitrust grounds against associated health insurance companies. The claim was that they shielded themselves from patient demand for the seller’s device by agreeing to deny coverage

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as "not medically necessary" or "investigational," even while the medical community, other insurers, and independent arbiters viewed it as befitting the standard of care. The District Court dismissed the claim. For the reasons that follow, we reverse its judgment and remand the case for further consideration.

I. Factual Background

We base our analysis, as we must on review of a Rule 12(b)(6) dismissal, on the allegations in the operative complaint— here the Third Amended Complaint (for convenience, the "Complaint"). According to it, cardiovascular disease and disorders are the leading cause of death in the United States. Plaintiff LifeWatch Services, Inc. ("LifeWatch") is one of the two largest sellers of telemetry monitors. They are one of several types of outpatient cardiac monitoring devices used to diagnose and treat arrhythmias, or changes in heart rate or rhythm, which may signal or lead to more serious medical complications. An arrhythmia can be without noticeable symptoms; hence the patient may not know it is occurring.

Other outpatient cardiac monitors include Holter monitors, various forms of event monitors, and insertable monitors. All record the electrical activity of a patient’s heart to catch any instance of an arrhythmia. But they vary in price, method of data capture, and mechanism by which the data are transmitted to an analyst or physician for diagnosis. For example, telemetry monitors are about three times as expensive as event monitors. They record up to 30 days of a patient’s cardiac activity and automatically transmit the data to an analyst center. Event monitors, by contrast, record short windows of data (in some cases no more than a minute), which the patient must then take some action to transmit. Many event monitors also require the patient to trigger the data capture, creating a risk that asymptomatic arrhythmias go undetected. Insertable monitors, which are surgically implanted and less frequently used, are the most expensive; they cost eight to ten times more than event monitors. While the Complaint quotes from medical studies that recommend only telemetry monitors to treat some patients with certain conditions, in other cases telemetry and other monitors are all appropriate treatments.

LifeWatch brought suit against the Blue Cross Blue Shield Association (the "Association") and five of its member insurance plan administrators1 (the "Blue Plans"; together with the Association, "Blue Cross") for violating Section 1 of the Sherman Act, 15 U.S.C. § 1. It claims the Blue Plans have impermissibly conspired with each other and the Association to deny coverage of telemetry monitors.

The Association, which is not an insurer itself, owns the rights to the Blue Cross and Blue Shield trademarks and trade names. It licenses the right to the Blue Cross brand to 36 insurers nationwide.

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These Blue Plans are allegedly the largest commercial health insurance group in the country, collectively insuring 105 million Americans, with a national network that covers 96% of hospitals and 92% of doctors. As a group, they are a major purchaser of medical devices and services nationwide.

The Association maintains a model medical policy that recommends to the Blue Plans which treatments, devices, or services to cover. Each Blue Plan participates in the development of these recommendations by voting on them. A panel of some kind— the Complaint is vague— then meets several times a year to finalize the model policy.[2]

For more than a decade the model policy has recommended against covering prescriptions for telemetry monitors, explaining that in some cases they are not "medically necessary" and in the rest they are "investigational." This provision of the model policy has been adopted in near lockstep3 by the Association’s member Blue Plans. Though the Plans’ language denying coverage is not always identical, the reasoning is the same.

Meanwhile, Medicare, Medicaid, and other private insurers, including Aetna, cover telemetry monitor prescriptions. Multiple medical studies— the Complaint references 10— have reviewed telemetry monitors and found them to be effective, superior to other treatments in some cases, or medically necessary. In at least 20 cases brought between 2010 and 2012 by patients appealing a denial of telemetry monitor coverage, independent, expert review boards overturned the insurers’ denials; the review board frequently determined that telemetry monitors were a standard of care or clinically necessary. Blue Plans were parties to several, if not all, of those appeals.

Nonetheless, with near uniformity, and for a decade, the Blue Plans have declined to cover telemetry monitors. As a result, LifeWatch claims both its sales and cardiac monitoring treatment in general have suffered. It seeks treble damages for its losses and an injunction under Sections 4 and 16 of the Clayton Act, 15 U.S.C. § § 15 and 26, which authorize private plaintiffs to sue for Sherman Act violations.

II. Analysis

Section 1 of the Sherman Act makes illegal "[e]very contract, combination in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations ...." 15 U.S.C. § 1. To state a Section 1 claim, then, a plaintiff must allege (1) an agreement (2) to restrain trade unreasonably. In re Ins. Brokerage Antitrust Litig., 618 F.3d 300, 315 (3d Cir. 2010). A private plaintiff suing under the Clayton Act must also allege antitrust standing, including that its "injury [is] of the type the antitrust laws were intended to prevent and ... flows from that which makes defendants’ acts unlawful." Id. n.9. (quoting (A.D. Bedell Wholesale Co. v. Philip Morris Inc., 263 F.3d 239, 247 (3d Cir. 2001) ). Finally, the claim

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in this case could still fail under the McCarran-Ferguson Act, 15 U.S.C. § § 1011-1015, which exempts insurance providers from federal antitrust liability in certain instances.

The District Court had subject matter jurisdiction under 28 U.S.C. § § 1331 and 1337. Blue Cross moved the Court to dismiss LifeWatch’s Sherman Act Section 1 claim under Rule 12(b)(6) of the Federal Rules of Civil Procedure. It argued that the Complaint fails to allege either agreement or anticompetitive effects in the relevant product market, that LifeWatch lacks antitrust standing because it could not show antitrust injury, and that Blue Cross’s telemetry monitor coverage decisions are immune from antitrust challenge under the McCarran-Ferguson Act.

The District Court dismissed for failing to allege anticompetitive effects, and therefore failing to establish the restraint was unreasonable. LifeWatch Servs., Inc. v. Highmark, Inc., 248 F.Supp.3d 641, 648-49 (E.D. Pa. 2017). The Court emphasized that, because "each Blue [P]lan treats all telemetry providers equally ," LifeWatch failed to allege "competition-reducing" conduct. Id. at 649 (alteration and emphasis in original) (internal quotation marks omitted). It concluded...

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