Dim Outlook for Class Claims Against Quest

SAN FRANCISCO (CN) - Newly amended antitrust claims against Quest Diagnostics medical testing may not survive a motion to dismiss, a federal judge suggested Wednesday.

Quest Diagnostics asked a judge to throw out an amended class action during a motion to dismiss hearing Wednesday.

Lead plaintiff Colleen Eastman sued Quest on Jan. 29, claiming it monopolizes medical testing in Northern California by paying kickbacks to doctors and insurance companies to stifle competition.

U.S. District Judge William Orrick dismissed Eastman's complaint with leave to amend in June, finding the plaintiffs lacked standing because they failed to show an injury resulting from Quest's conduct.

Orrick also found the plaintiffs failed to allege what prices Quest charged for tests or how they compared to competitive prices.

Eastman's amended complaint, filed July 6, included data on test prices charged in Northern California and other geographic markets.

But Orrick suggested the amended claims and data still lack sufficiency, and fail to show what Quest charges for its tests.

"Knowing how Quest's prices compare to the rest of the market is critical for analysis," Orrick said. "While your evidence shows prices are higher in Northern California, that doesn't show that Quest's prices are higher."

Eastman's attorney, Robert Barry, argued that looking at average pricing in markets where Quest does not hold a dominant market share is relevant.

"The test is, have we plausibly alleged market power, that Quest has used market power to charge supra-competitive pricing?" said Barry. "The answer is yes."

Quest's attorney, Richard Raskin, said the data comes "woefully short" and proves nothing.

Orrick asked Raskin how the plaintiffs might obtain information on Quest's pricing without getting that data from the company itself - through discovery or a court-issued subpoena?

"The information is highly proprietary," Raskin replied. "Sometimes you need a sufficient basis to get into a court to get a subpoena. I don't think that provides a license to guess."

Raskin also argued the plaintiffs failed to present a coherent narrative showing that Quest engaged in a pattern of conduct to stifle competition.

The plaintiffs claimed that Quest's actions, including the FTC-approved acquisition of its competitor Unilab in 2003, allowed it to increase its market share from 7.6 percent to 56.1 percent.

However, Raskin insisted the plaintiffs failed to show how that acquisition or any other actions alleged in the complaint led to an increase in prices.

"Why did this old acquisition approved by the FTC in 2002 lead to price increases in 2013?" Raskin asked. "There's no coherent narrative to connect the dots."

Raskin claimed the plaintiffs still lack standing because there's no evidence they were overcharged for medical tests.

Barry disagreed. "We believe we've shown that each class representative has paid monopoly dollars to Quest under the various permutations of their plans," he said.

Orrick concluded the hearing after about 90 minutes and said he would rule on the motion to dismiss as soon as he can.

Barry is based in Washington, D.C.

Raskin is with Chicago-based Sidley Austin.

Follow @NicholasIovino

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