Quest Diagnostics Antitrust Case Survives

     SAN FRANCISCO (CN) – Two companies may proceed with antitrust claims that Quest Diagnostics conspired to monopolize the biological-testing market, a federal judge ruled.
     Lead plaintiff Rheumatology Diagnostics Laboratory sued Quest Diagnostics, Aetna and several Blue Shield affiliates in November 2012.
     They claimed Quest tried to squeeze them out of the market by offering cut-rate deals to physicians groups and through licensing agreements that effectively block independent labs from providing services.
     After several amended complaints and rulings on motions to dismiss, only two claims survive: Hunter Laboratories’ claim that it was harmed by Quest’s below-cost sales of tests to Aetna; and Surgical Pathology Associates’ claim that it was harmed by Quest’s below-cost capitated contract with Partnership Health Plan.
     U.S. District Judge William Orrick granted Quest summary judgment on other claims, on April 15.
     Quest made five main arguments in its Jan. 16 motion to dismiss:
     that the plaintiffs violated a protective order;
     that they cannot establish a connection between their claimed harms and Quest’s alleged below-cost pricing;
     that Quest’s below-cost pricing was done improperly;
     that most of the claims are time-barred by a May 19, 2011 settlement agreement; and that the claims are barred by the statute of limitations.
     Orrick found that “material factual disputes” exist over the two claims he refused to dismiss.
     “The fact that Quest’s contracts with Aetna and Blue Shield were profitable overall does not preclude Hunter’s theory that it was harmed as a result of Quest’s below-cost pricing of individual tests to Aetna and Blue Shield,” Orrick wrote.
     He added: “While Hunter’s claims arising from the Partnership Health Plan contract are barred by the May 19, 2011 settlement agreement, SPA (Surgical Pathology) was not a party to that agreement.”
     Quest claimed the plaintiffs violated a protective order by disclosing its “highly confidential – attorney’s eyes only” information to their expert witness Joseph Plandowski, who Quest claims is a competitor based on his business, In-Office Pathology, and the “physicians’ office laboratories” that his company helps install and operate.
     Orrick disagreed.
     “IOP’s business model is too distinct from Quest’s for the entities to qualify as competitors within the meaning of the protective order,” Orrick found. “IOP helps physicians install and operate their own clinical laboratories. Quest provides physicians with clinical laboratory services. While these endeavors are similar, they are not the same thing.”
     He also rejected Quest’s claim that In-Office’s business model could affect Quest’s bottom line, and so is a competitor.
     “Characterizing every entity whose activities have an economic effect on Quest as a competitor goes far beyond what is necessary to serve the purposes of the protective order,” Orrick wrote.
     Citing Frazier v. Layne Christensen Co. (Wis. Feb. 11, 2005), Orrick said, “such a broad definition of competitor would threaten to capture, at the very least, every entity that participates in some way in the clinical laboratory industry, ensnaring plaintiffs in a Catch-22 wherein anyone ‘qualified to offer an expert opinion [would be] disqualified from reviewing the confidential information necessary to form that opinion.”
     He granted Quest’s motion to file some of its reply brief under seal.

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