Class Calls Quest Diagnostics a Monopolist

SAN FRANCISCO (CN) - Quest Diagnostics monopolizes medical testing in Northern California by paying kickbacks to doctors and paying insurers to get rid of competition, a class action claims in Federal Court.

Lead plaintiff Colleen Eastman sued Quest Diagnostics on Jan. 29, claiming it overcharges patients for inferior service.

Eastman claims Quest dominates two markets: medical testing billed directly to health insurance plans and patients, and testing billed directly to medical providers. It controls at least 70 percent of both markets in Northern California, according to the complaint.

Quest built the monopoly by discounting the price of tests billed to medical providers by 50 percent or more, in exchange for commitments by physicians to exclusively refer patients to Quest, Eastman says.

She claims Quest also paid major insurers Blue Shield of California and Aetna to exclude competitors.

"Quest induced Aetna to kick 400 of Quest's competitors out of the Aetna network nationwide," the complaint states. "In 2008, Quest gave California Blue Shield a 10 percent discount on test pricing in exchange for its agreement to kick two of Quest's competitors out of the California Blue Shield Network."

Quest also acquires its competitors "aggressively," Eastman says.

Quest's 2003 buyout of Unilab Corp., its main competitor in Northern California, led the Federal Trade Commission to intervene and force Quest to make "substantial divestitures," the complaint states. But even this did not preserve competition, as the Unilab acquisition tripled Quest's market power, according to the complaint.

What's more, Eastman claims, Quest's test results often are flawed.

"For example, in April 2009, Quest pled guilty to a criminal felony for incorrect parathyroid test results and paid a criminal fine of $40 million and civil fines of $262 million to the federal government," the complaint states. "For many patients these faulty test results led to unnecessary and life-changing surgeries to remove their parathyroid glands. Further, in January 2009, regulatory agencies forced Quest to issue the largest recall in industry history because of inaccurate Vitamin D test results."

Eastman seeks class certification, an injunction, restitution and disgorgement and treble damages for unfair competition, unfair business practices and state and federal antitrust violations.

She is represented by Colleen Duffy-Smith of Morgan Duffy-Smith & Tidalgo of San Jose.

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