Unfair Practices Claim Against Quest May Stick
(CN) - A group of labs can advance a class action accusing Quest Diagnostics of conspiring to monopolize the biological-testing market, a federal judge ruled.
Rheumatology Diagnostics Laboratory (RDL), Pacific Breast Pathology Medical Corporation (PBP), Hunter Laboratories and Surgical Pathology Associates (SPA) first filed the antitrust complaint in November 2012 against Aetna, Blue Shield of California Life & Health Insurance, Blue Cross and Blue Shield Association, and Quest Diagnostics.
They accused the defendants of conspiring to corner the market on diagnostic testing in five major markets: routine clinical lab testing, anatomic pathology testing, specialty rheumatologic testing, advanced lipid testing and specialty breast pathology testing. Licensing agreements between the groups effectively block independent labs from providing services, they say.
Quest alone has an estimated $562 million annual revenue and a 76 percent share of physicians offices, according to a Feb. 6 order dismissing some claims from the second amended complaint (SAC).
U.S. District Judge William Orrick said Quest CEO Steve Rusckowski all but admitted his company's intention of squeezing out other service providers.
"In a June 2012 investor presentation ... Rusckowski stated that health insurers 'want to narrow their networks' and 'there should be more consolidation in the volumes around fewer suppliers of laboratory testing services and that plays nicely into what we are all about and what this industry is all about,'" the ruling states. "He further states 'we do have an opportunity with some of our health plan partners to help them narrow the network. We're working together with the health plans to get more volume and they see an opportunity in their cost structure, and we see an opportunity with our volumes to do that with them.'"
U.S. District Judge Jon Tigar in San Francisco dismissed the plaintiff's original complaint with leave to amend in July 2013. He refused to stay discovery before the filing of the first amended complaint (FAC) on Aug. 9.
In that order, the court dismissed with prejudice Hunter's causes of action against Quest for all claims prior to the effective date of a settlement agreement between them. The court, according to Orrick, denied Quest's motion to dismiss Hunter, (PBP) and (SPA's) claims under California's Unfair Practice Act (UPA) and the unlawful and unfair prongs of California's Unfair Competition Law (UCL). The remaining causes of action were dismissed with leave to amend.
Orrick had said o Oct. 18 that it would be "fair and just to allow them to amend their allegations one more time."
The SAC against all defendants, filed in August 2013, asserted violations of California's Cartwright Act and Unfair Competition Law, as well as intentional interference with prospective economic advantage, and bilaterial conspiracies to restrain trade and monopolize in violation of the Sherman Antitrust Act. They also bring a claim for violation of California's Unfair Practices Act against Quest.
"Quest's motion to dismiss Hunter, PBP, and SPA's second cause of action under the 'unlawful' and 'unfair' prongs of the UCL and third cause of action is denied," Orrick concluded. "Having reviewed the SAC's new allegations concerning RDL related to the plaintiff's UPA cause of action, and finding the claims plausible, Quest's motion to dismiss RDL's second cause of action under the 'unlawful' and 'unfair' prongs of the UCL and third cause of action is also denied. Because plaintiffs have had three opportunities to plead, and the court concludes that further pleading would be futile, the defendants' motions to dismiss all other causes of action are granted with prejudice."