Court Dismisses Antitrust Claims Against Quest—Again

Afederal district court Feb. 6 again dismissed all state and federal antitrust law claims asserted by specialty laboratories that alleged a conspiracy between Quest Diagnostics and several large health insurers designed to drive them out of business in California (Rheumatology Diagnostics Lab., Inc. v. Aetna, Inc., 2014 BL 32470, N.D. Cal., No. 3:12-cv-5847). The U.S. District Court for the Northern District of California ruled that the independent labs could pursue certain claims under California’s Unfair Practices Act and Unfair Competition Law but that all remaining antitrust law claims had to be dismissed. Those claims were subject to dismissal because the laboratories failed to allege adequately either an agreement between Quest and the insurance defendants or specific facts showing that Quest’s network agreements with insurers foreclosed competition in a substantial share of the relevant markets. The decision largely tracked an October 2013 ruling in which the court reached the same conclusions with respect to the antitrust law claims asserted in the independent laboratories’ first amended complaint. The second amended complaint didn’t cure the defects identified in the earlier decision, so the antitrust claims were subject to dismissal with prejudice, the court said. Violations Alleged The court addressed claims brought by Rheumatology Diagnostics Laboratory Inc., Pacific Breast Pathology Medical Corp., Hunter Laboratories LLC, and Surgical Pathology Associates against Blue Shield of California Life and Health Insurance Co. (BSC), Blue Cross and Blue Shield Association (BCBSA), Aetna Inc., and Quest Diagnostics Inc. for allegedly conspiring to restrain trade and monopolize the markets for certain laboratory testing procedures, in violation of Sherman Act §1 and §2. Specifically, they contended that the insurers and Quest violated the Sherman Act, California’s Cartwright Act, California’s Unfair Competition Law (UCL), and California’s Unfair Practices Act through predatory pricing with health insurers and agreements with doctors that ran afoul of anti-kickback statutes. The district court, in July 2013, dismissed the labs’ initial complaint, concluding that they hadn’t adequately pleaded the existence of any horizontal or vertical agreements in violation of any statute, that any relevant market was foreclosed, or that competition was adversely affected by any of the alleged misconduct. It further held that in the absence of any allegations of price or cost, the labs couldn’t state a claim for intentional interference or a violation of the UCL. The plaintiffs responded by filing a first amended complaint, which the defendants again sought to dismiss. When Judge William H. Orrick of the U.S. District Court for the Northern District of California found the amended complaint to be insufficient to resolve the court’s previously identified concerns regarding the labs’ antitrust law claims, the labs sought to amend their complaint a second time. Pleading Inadequacies Remain With respect to the antitrust law claims in the second amended complaint, the court found the pleading inadequacies remained. The court began by holding that claims against BCBSA failed to allege that there was any agreement between Quest and the association concerning policy changes BCBSA initiated with respect to billing and payment under its Blue Card program. Although that program allows BCBS members served by an affiliated plan in one state to receive services while traveling in states served by other BCBS plans, the labs claimed a policy change made it more difficult for them to bill and get paid by out-of-state BCBS affiliates. With respect to the renewed antitrust law claims asserted against BSC and Aetna, there was simply too little factual information in the second amended complaint to support the antitrust law allegations against them. Addressing the claims against Aetna, the court noted that because the independent labs did “not plead sufficient facts about the markets and their participants, or how the markets have changed due to the agreement,” the court couldn’t determine what effect the agreement had on competition. Takeaway: Allegations of antitrust activity between Quest Diagnostics and insurers have been thrown out by a federal court, which says there are not enough facts to support the charges.