A federal judge in southern Illinois has dismissed a lawsuit that a small health provider filed against BD (NYSE:BDX), claiming that the medtech giant engaged in antitrust behavior with distributors Cardinal Health (NYSE: CAH) and McKesson (NYSE: MCK).
Judge Nancy J. Rosenstengel had previously dismissed Marion Diagnostic Center and Marion HealthCare’s lawsuit, but the U.S. Court of Appeals for the Seventh Circuit vacated the judgment because it found that Rosenstengel had erred in finding that the lawsuit needed to involve accusations of vertical price-fixing in the markets for conventional syringes, safety syringes and safety IV catheters.
The amended complaint, according to the appeals court, still failed to adequately allege an anti-competitive conspiracy. But the appeals court gave the Marion, Ill. health providers a chance to file another amended complaint.
Rosenstengel in an order to dismiss, dated March 12, found that the amended complaint still failed to adequately allege a conspiracy.
The Marion health providers, according to Rosenstengel, failed to adequately make a case that there was a quid pro quo going on between BD and the distributors when it came to keeping BD competitors from the market. They pointed to bonuses and incentive programs for sales staff and higher distribution fees and guaranteed purchasing volume from long-term contracts, but Rosenstengel saw nothing out of the ordinary.
“It is hardly remarkable that a manufacturer would create bonus programs to encourage salespeople working for distributors to sell more of their products. Similarly, it seems commonplace for a manufacturer to encourage a distributor to enter a longer contract by offering higher fees and guaranteed volume, as both parties benefit from the security that a longer contract provides,” Rosenstengel said.
When it came to the distributors being consciously committed to perpetuating BD’s dominance of the market, Rosenstengel found the health providers undercut their own argument by noting BD’s significant market share and barriers to entry for competitors. With so little upstream competition, it was logical that distributors would cultivate a close relationship with BD, according to Rosenstengel.
“Indeed, had any single distributor chosen to reject BD’s terms, it seems likely that BD could easily have found another distributor, while distributors would have been hard-pressed to find another manufacturer with similar volume,” Rosenstengel said.