Mintz’s Antitrust Group Covers Third Circuit Reinstatement of $67 Million Antitrust “Refusal to Deal” Suit Against Blues

Last week, Bruce Sokler and Farrah Short from Mintz’s Antitrust practice group published a detailed alert regarding the Third Circuit’s reinstatement of an antitrust suit brought by medical device manufacturer LifeWatch Services, Inc. (“LifeWatch”) against the Blue Cross Blue Shield Association and five of its member insurance plan administrators: LifeWatch Services Inc. v. Highmark Inc. et al., Case No. 17-1990 (3rd Cir. Aug. 28, 2018).

LifeWatch sells telemetry monitors, a type of outpatient cardiac monitoring device, which several medical studies have found to be effective, and in some circumstances, medically necessary and superior to other treatments. Some large private insurers, as well as the Medicare and Medicaid programs, provide coverage for telemetry monitors, but the Blue Cross Blue Shield Association (which owns the right to the Blue Cross Blue Shield trademarks and tradenames and licenses them to insurers nationwide, including several defendants in this case), maintains a model medical policy that recommends not covering telemetry monitors, characterizing them as not medically necessary and/or investigational.

LifeWatch filed suit in federal court in 2012, suing the Blue Plans and the Association for $67 million and alleging that they conspired to deny coverage of its telemetry device despite scientific evidence supporting the benefits of the device. The district court dismissed the case for failing for allege anticompetitive effects. In particular, the district court found that LifeWatch failed to allege “competition-reducing” conduct on the grounds that each Blue Plan treats all telemetry providers equally and that Blue Cross’s actions were a legal exercise of its substantial buying power and ability to bargain aggressively.

On appeal, the Third Circuit Court of Appeals found that LifeWatch plausibly stated a claim and has antitrust standing. In particular, the court found that: (1) LifeWatch sufficiently relied on circumstantial evidence of an agreement by alleging both parallel conduct among the Blue Plans and “something more” (or a “plus factor”); (2) LifeWatch’s complaint alleged a national market for the purchase of outpatient cardiac monitors (rather than a market limited to telemetry monitors); (3) LifeWatch sufficiently pled anticompetitive effects; and (4) LifeWatch sufficiently alleged antitrust injury to have antitrust standing.

Ultimately, the Third Circuit found that LifeWatch had plausibly pled a Sherman Act Section 1 claim and remanded the case back to the district court. The Third Circuit also left open for the district court to consider whether Blue Cross is exempt from liability under the McCarran-Ferguson Act.

This decision is important because, while there are other antitrust challenges pending against the Association and its members, this case appears to be the first appellate “green light” to proceed on a challenge to the Association’s model medical policy and its implementation. For more detail and an in-depth analysis, you can read the full Alert HERE.