A Medical Device Daily
Conmed (Utica, New York) reported it has agreed to drop an antitrust lawsuit against rival Johnson & Johnson (J&J; New Brunswick, New Jersey) in return for an $11 million settlement.
Conmed sued J&J and several of its subsidiaries, including Ethicon (Somerville, New Jersey), in federal court in 2003, claiming it could not sell its surgical instruments to hospitals that were being "bullied" into purchasing products from J&J (Medical Device Daily, Nov. 11, 2003).
The lawsuit claims that J&J engaged in "illegal and anticompetitive conduct" with respect to sales of products used in endoscopic surgery, resulting in higher prices to consumers and the exclusion of competition.
Conmed makes devices used in a range of surgical procedures, including endoscopic procedures such as laparoscopy. After deducting legal expenses and other related costs, the company said it will record a pretax gain of $6.3 million-$6.8 million from the deal.
The lawsuit alleged that Conmed's ability to sell endoscopic surgical products was stymied by J&J's anti-competitive practices, which include entering into exclusive contracts with hospitals requiring them to purchase endoscopy products only from J&J and tying and bundling the price of sutures to a hospital's agreement to buy a high percentage of its endoscopy products from J&J; threatening and imposing financial penalties on hospitals if they purchase competitive endoscopy products; and giving hospitals inaccurate and misleading information as to their ability to deal with Conmed.
The company contended that J&J's tactics allowed it to unfairly corner 60% of the $1 billion market for endoscopy devices used by doctors in minimally invasive surgery.
At the time of the filing, Conmed's share of that market was less than 5% and would probably have been more than 20% were it not for J&J's anticompetitive tactics, the company said. In 2003, Conmed's endoscopy product sales totaled $37 million.
"We would like to think that our sales would have been significantly higher," said Conmed's general counsel, Dan Jonas. "But to the extent that the market is now open and we are free to compete on a level playing field, that's what we really wanted."
Conmed had sought an injunction restraining J&J from continuing its anticompetitive practices.
Jonas said J&J has changed the marketing practices that gave rise to the lawsuit.
In a statement, J&J spokesman Jeffrey Leebaw said the $11 million agreement represented significantly less than the damages originally sought by Conmed. He said J&J "expressly denies" any anti-competitive conduct.
The settlement, reached Saturday, was disclosed in a U.S. Securities and Exchange Commission report filed yesterday by Conmed.
In other legalitites:
• WayPoint Biomedical Holdings (Huntington Beach, California) reported receiving a subpoena from the Securities and Exchange Commission requesting documents concerning its financial affairs. The company said the subpoena is "almost" identical to a subpoena that it received last April investigating certain trading activities in the company's stock.
WayPoint said it will "comply fully with the subpoena, just as it complied fully with the subpoena issued last year."
The company said it has received no further communication from the SEC with respect to the earlier subpoena. The company did say it was pleased that the SEC appears to be making inquiry into possible "spamming" activities involving the company's stock and denies that it has directly engaged in any such activities. It said it has already initiated, and is "vigorously prosecuting," litigation against persons and entities who the company suspects have engaged in such activities.
The company's litigation efforts were initiated last year it said, long before trading in the company's share were temporarily suspended and before the issuance of the subpoena on March 8.
WayPoint develops tests designed to offer both a preliminary diagnostic screen to specific conditions, along with a future path for consumers, medical providers and first responders to follow regarding their health status or environmental condition.
• Ventas (Louisville, Kentucky), a healthcare real estate investment trust, reported that it has initiated an action in the Ontario Superior Court of Justice to recover from Sunrise Senior Living Real Estate Investment Trust (Toronto) damages resulting from, among other things, Sunrise's breaches of its standstill enforcement obligations in the purchase agreement in place between the two companies. In January, Ventas agreed to buy Sunrise for about $1.8 billion in cash and debt.
Health Care Property Investors (HCP; Long Beach, California) proposed to buy Sunrise in a transaction that valued each Sunrise unit at C$18 ($15.45), representing a 20% premium over the C$15-per-unit price on offer in Sunrise's proposed sale to Ventas, proposed Jan. 15. At the conclusion of Sunrise's process, Ventas noted that HCP withdrew from the process and did not make a final proposal "apparently because it was unable to reach the necessary agreements with the various parties.