Bureau of Competition
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Jeffrey W. Brennan
Assistant Director
Health Care Services & Products |
UNITED
STATES OF AMERICA
FEDERAL TRADE COMMISSION
WASHINGTON, D.C. 20580 |
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March
8, 2002 |
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Stephen D. Kiess
Everett & Hite, LLP
200 South Washington Street
Post Office Box 1220
Greenville, NC 27835-1220
Dear Mr. Kiess:
This letter responds to your request for
any advisory opinion on behalf of Viquest and Pitt County
Memorial Hospital.(1)
According to your letter, Health Access, Inc., d/b/a Viquest,
is a wellness center that provides health care programs, including
disease, weight and stress management, smoking cessation,
and occupational health services, to residents of greater
Pitt County, North Carolina. Health Access is an affiliate
of, and is controlled by, Pitt County Memorial Hospital, Inc.
(PCMH), a 731-bed tertiary care teaching hospital located
in Greenville, North Carolina. Both Health Access and PCMH
are nonprofit corporations exempt from federal income tax
under Section 501(c)(3) of the Internal Revenue Code.(2)
Your inquiry relates to the applicability of the Non-Profit
Institutions Act, 15 U.S.C. § 13(a), to Viquest's proposed
acquisition of certain vaccines and other materials from PCMH's
pharmacy.
One of Viquest's activities is offering
vaccines and tuberculin skin tests to employee groups and
to the general public through its occupational health and
community vaccine programs. Viquest currently purchases the
vaccines(3)
directly from the manufacturers or from wholesalers. In the
future, it would like to obtain these materials from the PCMH
pharmacy at PCMH's cost. The materials would be used only
in Viquest's occupational health or community vaccine programs,
and all materials would be directly administered to patients
by Viquest staff members at the patients' work site or at
another community location. Your inquiry is whether the proposed
arrangement between Viquest and the PCMH pharmacy would be
covered by the Non-Profit Institutions Act (NPIA or the Act).
For the reasons discussed below, we conclude that it would.
The NPIA exempts from the Robinson-Patman
Act "purchases of their supplies for their own use by schools,
colleges, universities, public libraries, churches, hospitals,
and charitable institutions not operated for profit."(4)
Commission and staff advisory opinions have treated nonprofit
nursing homes, home health and occupational health agencies,
hospices, and health systems that operate a variety of health
care providers, in addition to hospitals, as eligible entities.(5)
Moreover, the Commission has found that the Act covers the
transfer of supplies, at cost, among affiliated institutions
that are eligible entities under the Act, so long as the supplies
are purchased for the receiving institution's "own use" within
the meaning of the NPIA. The proposed transactions, therefore,
appear to be covered by the Act, so long as the materials
are purchased for Viquest's own use.
The principal authority on the meaning
and scope of the "own use" test is Abbott Laboratories
v. Portland Retail Druggists Association (Abbott
Labs).(6)
In that case, retail pharmacies sued pharmaceutical manufacturers
under the Robinson-Patman Act, challenging the discounted
sale of drugs to nonprofit hospitals. The hospitals resold
those drugs to patients in a number of different situations.
The Court interpreted the "own use" test to shield only purchases
that "reasonably may be regarded as use by the hospital
in the sense that such use is a part of and promotes
the hospital's intended institutional operation in the care
of persons who are its patients."(7)
The vaccines described in your request
letter appear to be purchased for Viquest's own use for purposes
of the Abbott Labs analysis. A staff opinion letter
issued to William W. Backus Hospital on June 11, 1996, concerned
an occupational health services clinic affiliated with a nonprofit
hospital. The clinic wished to obtain pharmaceuticals and
other supplies from the hospital pharmacy for use in conjunction
with patient treatment at the clinic. The opinion letter noted
that the clinic did not intend to operate its own pharmacy
or to fill prescriptions, and that the pharmaceuticals would
be administered by clinic staff to patients undergoing treatment
on the clinic premises. In those circumstances, the staff
opinion letter concluded, the supplies were purchased for
the clinic's "own use" and were covered by the NPIA.
The facts presented in your letter warrant
a similar conclusion. While the vaccinations will not take
place at Viquest's premises, the vaccines will be directly
administered by Viquest personnel as part of the health care
services that Viquest provides. The vaccines appear to be
an integral element of the health care services provided by
Viquest to its patients and, thus, they are used by Viquest
in furtherance of its "intended institutional operation in
the care of persons who are its patients."(8)
Accordingly, the vaccines are purchased for Viquest's "own
use" within the meaning of the Act.
This letter sets out the views of the staff
of the Bureau of Competition, as authorized by the Commission's
Rules of Practice. Under Commission Rule § 1.3(c), 16
C.F.R. § 1.3(c), the Commission is not bound by this
staff opinion and reserves the right to rescind it at a later
time. In addition, this office retains the right to reconsider
the questions involved and, with notice to the requesting
party, to rescind or revoke the opinion if implementation
of the proposed program results in substantial anticompetitive
effects, if the program is used for improper purposes, if
facts change significantly, or if it otherwise would be in
the public interest to do so.
Sincerely yours,
Jeffrey W. Brennan
Assistant Director
Endnotes:
1. While your letter
is dated November 21, 2001, we did not receive it until December
31. This delay appears to have resulted from the disruptions
in mail service caused by concerns about potential anthrax
contamination. I apologize for any inconvenience this has
caused.
2. Section 501(c)(3)
applies to entities organized and operated "exclusively for
religious, charitable, scientific, testing for public safety,
literary, or education purposes."
3. This request concerns
only the following products: influenza vaccine, pneumococcal
vaccine, tetanus-diphtheria vaccine, hepatitis B vaccine,
measles/mumps/rubella vaccine, measles vaccine, mumps vaccine,
rubella vaccine, varicella vaccine, and tuberculin skin test
solution.
4. 15 U.S.C. § 13c.
5. See, e.g.,
Presentation Health System, 116 F.T.C. 1526 (1993) (hospitals
and affiliated long-term care facilities); St. Peter's Hospital
of the City of Albany, 92 F.T.C. 1037 (1978) (nursing home);
BJC Health System (Nov. 9, 1999) (staff opinion) (integrated
health system and home health care agency); North Ottawa Community
Hospital (Oct. 22, 1996) (staff opinion) (hospice); William
H. Backus Hospital (June 11, 1996) (staff opinion) (occupational
health services clinic). FTC staff opinions can be accessed
online at www.ftc.gov.
6. 425 U.S. 1 (1976).
7. Id. at 14
(emphasis in original). Applying this test, the Court found
that pharmaceuticals were purchased for the hospital's own
use when they were resold to hospital inpatients, emergency
room patients, and registered outpatients for consumption
on the premises; when they were used to fill limited "take-home"
prescriptions given to hospital inpatients, emergency room
patients, and registered outpatients upon discharge as a continuation
of or supplement to the treatment that was administered at
the hospital; and when they were dispensed to a hospital employee,
a student, or a non-employee member of the hospital medical
staff for his or her own use or the use of a dependent. Pharmaceuticals
dispensed to former patients (through refills of take-home
prescriptions), sales to non-hospital patients of staff physicians,
and sales to walk-in customers of the hospital pharmacy were
deemed insufficiently related to the hospital's institutional
function and therefore outside the exemption.
8. See id.
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