By Nicole D. Prysby, J.D.
A Pennsylvania district court misidentified the relevant market in an antitrust case against Blue Cross and Blue Shield and the claims regarding coverage of a heart monitor device should go forward, held the U.S. Court of Appeals in Philadelphia. The maker of the device had alleged that Blue Cross and its licensed entities conspired to deny coverage for the device, which is one of four different types of devices used for outpatient cardiac monitoring. The district dismissed the claims, reasoning that there was no antitrust violation because all makers of the device were treated equally. On appeal, the Third Circuit held that the relevant market is competition among all outpatient cardiac monitors, not merely one specific type. Considering the issue in that light demonstrated that the device manufacturer adequately pleaded actual anticompetitive effects, because it alleged that the concerted denial of coverage for the device harmed consumers by reducing demand for and output of more effective devices, interfered with a patient’s choice of medical treatment, and reduced the quality of cardiac monitors in general. The court also held that the manufacturer had standing to pursue the antitrust claims because it alleged that near universal decision to deny coverage for the devices would not have occurred without the alleged conspiracy (LifeWatch Services Inc. v. Highmark Inc., August 28, 2018, Ambro, T.).
LifeWatch Services, Inc., a maker of mobile cardiac outpatient telemetry (MCOT) devices, sued Blue Cross and Blue Shield Association (Association) and five of its licensed but separately owned health insurance plans (Blue Plans) for conspiring to deny coverage for MCOT devices in violation of Section 1 of the Sherman Act. MCOTs are one of four types of heart monitoring devices for remotely recording a patient’s EKG. LifeWatch alleged that the entities conspired in a horizontal agreement to deny coverage for MCOT devices despite medical evidence that such devices were superior to the other device choices.
The district court dismissed the claims, holding that the Association’s decision that a particular heart monitoring device was never medically necessary and, thus, the cost of the device was never reimbursable, did not violate antitrust law because all makers of the device were treated equally. LifeWatch appealed.
Agreement. The Third Circuit held that LifeWatch had adequately pleaded the existence of an agreement. The Association created a model policy that recommended denying coverage for MCOT devices, but the Blue Plans were not required to follow the policy. LifeWatch alleged that the Blue Plans agreed with each other and with the Association to substantially comply with the policy and that the Association enforced the policy by threatening plans with loss of the Blue Cross name. In addition, other large insurers cover MCOT devices and patients appealing non-coverage of the devices have overwhelmingly won their cases in front of review boards. This evidence undercut the argument that the Blue Plans all independently decided that MCOT devices were not medical necessary.
Unreasonable restraint. The court also held that LifeWatch adequately pleaded that the agreement was an unreasonable restraint on trade. The district court considered the market issue incorrectly when it reasoned that the Blue Plans’ alleged refusal to purchase telemetry monitors had no anticompetitive effects among MCOT device providers because it treated them all equally. LifeWatch actually alleged that the market was competition among all outpatient cardiac monitors. Because patients generally do not pay for medical devices out of pocket, it is insurers that control purchases of outpatient cardiac monitors. Therefore the focus should be on the Blue Plans’ competition with other insurers in a national market for the purchase of outpatient cardiac monitors. Considering the issue in that light demonstrates that LifeWatch adequately pleaded actual anticompetitive effects: Blue Cross’s concerted denial of telemetry monitor coverage has harmed consumers by reducing demand for and output of more effective devices, by interfering with a patient’s choice of medical treatment, and by reducing the quality of cardiac monitors in general. LifeWatch claims that the Blue Plans induce doctors and insureds to use other outpatient cardiac monitors instead of telemetry monitors by refusing to fund telemetry monitor prescriptions while funding comparable treatment with other monitors. Because LifeWatch has alleged actual anticompetitive effects in the relevant market, the unreasonable restraint element of the Section 1 claim is satisfied directly.
Standing. The Association argued that LifeWatch had no standing to allege antitrust injury because any causal connection between the alleged unlawful conduct and injury was destroyed by intervening factors, such as the Blue Plan’s independent ability to decline coverage of telemetry monitors, a doctor’s choice not to prescribe telemetry monitors, and a patient’s desire for alternative treatments. The court disagreed, finding that LifeWatch sufficiently alleged that the Blue Plans’ near universal decision to deny coverage for MCOT devices would not have occurred without the alleged conspiracy. Denying coverage for the devices is the means by which the Blue Plans and the Association depressed demand for MCOT devices in the outpatient cardiac monitor market.
Other issues. The court noted that LifeWatch’s claim can only survive the Association’s motion to dismiss if the McCarran-Ferguson Act does not exempt the Association from antitrust liability. This issue should be considered by the court on remand.
This case is No. 17-1990.
Attorneys: Gary M. Elden (Shook, Hardy & Bacon) and Michael J. McCarrie (Artz McCarrie Health Law) for LifeWatch Services Inc. Stephen A. Loney, Jr. (Hogan Lovells US LLP) for Highmark Inc. Sheryl L. Axelrod (The Axelrod Firm) and Sarah J. Donnell (Kirkland & Ellis LLP) for Blue Cross & Blue Shield Association. Justin W. Bernick (Hogan Lovells US LLP) for WellPoint Inc. and Horizon Blue Cross Blue Shield of New Jersey.
Companies: LifeWatch Services Inc.; Highmark Inc.; Blue Cross & Blue Shield Association; WellPoint Inc.; Horizon Blue Cross Blue Shield of New Jersey
MainStory: TopStory Antitrust DelawareNews NewJerseyNews PennsylvaniaNews
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