It always is interesting to see how two companies can spin the same news so differently. Last week, both Nellcor (Pleasanton, California) and Masimo (Irvine, California) commented on a Los Angeles jury's verdict in the anti-trust case that Masimo brought against Nellcor, a unit of Tyco Healthcare (Mansfield, Massachusetts).
The facts were essentially in agreement in the two companies' statements: the jury sided with Masimo and determined that Nellcor's practices violated antitrust laws, awarding Masimo $140 million in damages, which are automatically tripled to $420 million plus attorneys' fees.
In commenting on the verdict, which Nellcor/Tyco is appealing, Nellcor President David Sell said, "There will be absolutely no impact on Nellcor's ongoing ability to provide products and services to its customers as a result of this verdict."
Joe Kiani, CEO of Masimo, expressed a somewhat different opinion, saying in a statement issued by that company: " . . . this verdict will do more than simply open competition in the pulse oximetry market, but also send a strong message that product sales and purchases should be based on each individual product's ability to help clinicians improve care. We hope this verdict will benefit patients and our nation's healthcare system by fostering vigorous competition, thereby promoting innovative, cost-effective technologies."
The question is not what either David Sell or Joe Kiani think, but rather what U.S. hospitals think – and do.
Faced with a continued shortage of nurses, growth in the number of adverse events, declining quality of care and being compelled to purchase certain selected technologies by group purchasing organizations (GPOs), hospitals might welcome last week's decision, or so one would think.
On its face, it appears to begin to set them free from being forced to purchase technologies under GPO agreements that compel strict purchasing compliance levels that the U.S. District Court jury in L.A. has determined violate antitrust laws.
The GPOs should take note of the damages awarded and take them to heart, because while their "administrative fees" may have been given a safe-harbor pass by Congress thus far, their strict compliance levels might be construed as antitrust violations. That would make GPOs legally vulnerable to every vendor in the U.S. excluded from such contracts.
If such vendors can prove they have been damaged by GPOs' strict compliance enforcement, future damage awards could make those awarded Masimo look like small change. Moreover, since some of these GPOs are collectively owned by hospital groups, who have thereby condoned and participated in such practices, it is not beyond the realm of possibility that in the next round of lawsuits, the GPOs and their owner hospitals might be drawn into the proceedings as antitrust defendants.
Perhaps it is time to rethink the wider issue that this verdict raises. Since two separate Congressional Budget Office reports have shown that GPO contracts do not result in lower prices, what is the real justification of continuing to exclude all but the largest companies from being able to freely sell to U.S. hospitals? Is it worth the liability it exposes them to, when two-thirds of U.S. hospitals are either unprofitable or barely breaking even?
Time will show how this all plays out, but one thing is certain – this is an issue that is not going to go away.
– Arthur Gasch, Contributing Writer