A Medical Device Daily

The Department of Justice (DoJ) reported that it will not challenge a proposal by Memorial Health (Savannah, Georgia), and St. Joseph's/Candler Health System (Savannah, Georgia) to enter an exclusive joint purchasing agreement with respect to the purchase of certain medical and surgical supplies. The DoJ said that the proposed joint purchasing agreement may yield volume discounts and reduced transaction costs for the hospitals and ultimately could result in lower costs and increased hospital services for consumers.

Under the proposed agreement, Memorial and St. Joseph's/Candler would jointly evaluate medical and surgical products, designate suppliers and negotiate prices and other terms with them.

Memorial and St. Joseph's/Candler are 501(c)(3) non-profit organizations that own acute tertiary care hospitals in Savannah, Georgia, that serve Southeast Georgia and the low-country area of South Carolina. Memorial owns and operates the Memorial Health University Medical Center. St. Joseph's/Candler owns and operates St. Joseph's Hospital and Candler Hospital.

The DoJ said it determined that the proposal meets the requirements of the antitrust safety zone set forth in Statement 7 of the Department's and FTC's Statements of Antitrust Enforcement Policy in Health Care. The safety zone requires that the cost of all products purchased through the joint purchasing agreement account for less than 20% of the total revenue of all products and services sold by each participant in the agreement. It also requires that products purchased through the joint purchasing agreement from a given supplier account for less than 35% of that suppliers' sale of those products in the relevant market. Memorial and St. Joseph's/Candler represented that they will abide by these limitations.

In other court-related news, the law firm of Coughlin Stoia Geller Rudman & Robbins reported that a class action has been commenced on behalf of an institutional investor in the U.S. District Court for the District of Maryland on behalf of purchasers of the common stock of Coventry Health Care (Bethesda, Maryland) between Feb. 9, 2007 and Oct. 22, 2008, inclusive, seeking to pursue remedies under the Securities Exchange Act of 1934.

The complaint charges Coventry and certain of its executives with violations of the Exchange Act. Coventry operates as a managed healthcare company in the U.S. The company operates health plans, insurance companies, and network rental and workers compensation services companies.

The complaint alleges that, throughout the class period, defendants made numerous positive statements regarding the company's financial condition, business and prospects. The complaint further alleges that these statements were materially false and misleading because defendants failed to disclose several adverse facts, including that it used under-pricing strategies to create the appearance that its new Medicare Private-Fee-For-Service (PFFS) initiative was capable of driving the high growth necessary to offset Coventry's contracting Commercial business. The lawsuit also alleges that the company failed to disclose the true risks associated with its under-pricing strategies, including the fact that Coventry was generating new Medicare PFFS membership at the expense of profit margins and profitability.

On Oct. 21, 2008, Coventry issued a press release reporting its financial results for 3Q08, the period ended Sept. 30, 2008. In response to this announcement, the price of Coventry common stock declined from $28.49 per share to $13.93 per share, or more than 51%, on very heavy trading volume.