On November 6, 2012, the FTC finalized a settlement with a Puerto Rico pharmacy cooperative, resolving allegations that the cooperative had violated the antitrust laws by fixing prices in its negotiations with third-party payers.1 The settlement with Cooperativa de Farmacias Puertorriqueñas (Coopharma) illustrates the FTC's continued antitrust scrutiny of all levels of the health care industry.
According to the FTC, pharmacies negotiate with third-party payers such as health insurers to establish the terms and conditions under which pharmacies provide services to the payers' health plan subscribers.2 Generally speaking, pharmacies negotiate these contracts individually. The government views competition over these contract terms as having the potential to reduce costs for patient subscribers.
The FTC's Complaint alleged that Coopharma's members compete with each other to provide pharmacy services and agreed to fix prices in their negotiations with third-party payers. Coopharma is a Puerto Rican corporation whose approximately 300 pharmacy owner members allegedly account for at least a third of all pharmacies in Puerto Rico.3 The FTC's Complaint alleged that Coopharma coerced pharmacy benefits manager CVS-Caremark (Caremark) into accepting its terms by "demanding to negotiate and contract collectively, threatening that its members would terminate their Caremark contracts, and contacting Caremark's clients."4 As a result of these tactics, Caremark allegedly was forced to make concessions to Coopharma members that were not available to other independent pharmacies in Puerto Rico.5
In settling with the FTC, Coopharma did not admit any antitrust violations. By the terms of the FTC's Decision and Order, however, Coopharma may not enter into agreements between or among pharmacies requiring that individual pharmacies (a) negotiate on behalf of any other pharmacy with any payer; (b) refuse to deal with any payer; (c) mandate certain terms or conditions; or (d) refuse to deal individually with any payer. 6 Notably, the Order does not contain a provision permitting joint conduct that involves legitimate risk sharing or other integrative activities.
The FTC's Order also prohibits information exchanges between pharmacies concerning payer contracts.7 And, significantly, the Order empowers payers to terminate preexisting contracts with Coopharma members without penalty or charge.8
The FTC challenge to the conduct of Coopharma reflects the FTC's ongoing interest in health care markets.
Footnotes
1. In re Cooperative de Farmacias Puertorriqueñas, Decision and Order ("Coopharma Order"), F.T.C. File No. 101-0079 (Nov. 6, 2012), http://www.ftc.gov/os/caselist/1010079/121107coopharmado.pdf .
2. In re Cooperative de Farmacias Puertorriqueñas, Complaint ("Coopharma Complaint") ¶ 7, F.T.C. File No. 101-0079 (Nov. 6, 2012), http://www.ftc.gov/os/caselist/1010079/121107coopharmacmpt.pdf .
3. Id. ¶ 3.
4. Id. ¶ 26.
5. Id. ¶ 30
6. Coopharma Order ¶ IIA; U.S. FED. TRADE COMM'N, Puerto Rican Pharmacy Cooperative Settles Price Fixing Charges: FTC Settlement Stops Group's Alleged Anticompetitive Behavior (Aug. 21, 2012), available at http://www.ftc.gov/opa/2012/08/coopharma.shtm (last visited Nov. 30, 2012).
7. Id. ¶ IIB.
8. Id. ¶ IIIB.
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