A Medical Device Daily

Biomet Orthopedics and Biomet (both, Warsaw, Indiana) recently initiated legal proceedings against Zimmer (Warsaw, Indiana), former Biomet distributors, and former Biomet executive, David Montogomery. Montgomery, who resigned from Biomet in January, now works for Zimmer.

The 13-count lawsuit filed in Marion County, Indiana, alleges, among other things, that Zimmer and Montgomery attempted to create an unfair market advantage by engaging in a campaign to misappropriate Biomet confidential information, interfering with Biomet's contractual relations with distributors and attempting to buy the assets of most of Biomet's distributors (including Biomet surgical instruments) throughout the country. The lawsuit further alleges that the limited number of distributors who accepted Zimmer's offer are in violation of their contractual obligations to Biomet.

According to Jeff Binder, Biomet's president/CEO, "It appears that Zimmer is engaged in a scheme to increase market share by attempting to indirectly buy our business relationships by 'acquiring' our distributors. The company alleges that Zimmer has offered to enter into asset purchase agreements with most of Biomet's distributors. Demonstrating the strength of Biomet's products and relationships, only three Biomet distributors have accepted Zimmer's offers.

"To this point we have: (1) retained a significant majority of our representatives and customers in the affected territories; (2) signed a very high percentage of our distributors across the United States to new agreements; and (3) purchased our instruments back from Zimmer as their company yielded to pressure — all at great cost to our company. Biomet will continue to compete, as we always have, by focusing in areas that are of real value to our customers and their patients — the quality and clinical results of our products, true technological advances, extraordinary service and enduring relationships."

Biomet and its subsidiaries make products used primarily by musculoskeletal medical specialists in both surgical and non-surgical therapy.

Zimmer develops joint replacement solutions for knee pain and hip pain, and provides spine care solutions for acute and chronic back pain.

In other court activity:

A group representing all optometrists in Puerto Rico, along with two of its leaders, has agreed to settle Federal Trade Commission charges that they violated the FTC Act by orchestrating and carrying out agreements among the group's members to refuse, and threaten to refuse, to deal with payors, unless the payors raised the fees paid to the optometrists.

The complaint and consent order was reported yesterday to settle the FTC's charges against the following respondents: Colegio de Optometras de Puerto Rico (San Juan, Puerto Rico), Edgar Dávila Garcia, MD and Carlos Rivera Alonso, MD. The consent order settling the commission's charges bars the group and two of its leaders from engaging in such conduct, while allowing them to participate in legal joint arrangements.

According to the Federal Trade Commission's complaint, Colegio along with Dávila and Rivera violated the FTC Act by facilitating, negotiating, entering into, and implementing express or implied agreements among the Colegio's members to refuse, or threaten to refuse, to accept vision and healthcare contracts except on collectively agreed-upon terms.

Specifically, the FTC alleges the respondents' conduct targeted Ivision International, which has offered vision-care services and products in Puerto Rico since 1997. Ivision contracts with Puerto Rico health plans to administer vision plans and provide vision-care products and services to covered patients. The health plans pay Ivision per individual member. Ivision then contracts with the island's optometrists to provide these services. By August 2004, Ivision had almost 130 optometrists — located all over Puerto Rico — in its network, making it very attractive to health plans and to patients covered by those plans.

The commission's consent order is designed to end the illegal conduct alleged in the complaint. It prohibits the Colegio and Drs. Dávila and Rivera from entering into or facilitating agreements for the provision of optometry services: 1) on behalf of any optometrist with any payor; 2) refusing to deal or threatening to refuse to deal with any payor; 3) designating the terms upon which any optometrist deals, or is willing to deal, with any payor, including price terms; 4) refusing to deal individually with any payor, or refusing to deal with any payor through any arrangement other than one involving the Colegio.

The consent order permits Colegio to undertake certain kinds of joint contracting arrangements — "qualified risk-sharing joint arrangements" and "qualified clinically integrated joint arrangements" — terms that are defined in the order. These are arrangements in which physician participants engage in joint activities to control costs and improve quality by managing the provision of services.

Other provisions of the order reinforce these general provisions by prohibiting the respondents from exchanging information among optometrists concerning their willingness to deal with a payor, or the terms — including price terms — on which they are willing to deal. It also requires the respondents — for three years from the date the order becomes final — to notify the FTC in writing before conducting any joint negotiating activities that could be considered anticompetitive under its terms. The order will expire in 20 years.

The Colegio is a not-for-profit association of professional optometrists practicing in Puerto Rico.