The Medical Device Muzzle
The Guidant-Aspen lawsuit could answer the question, ‘Is price-sharing OK?’
Hospitals purchasing medical devices and physician preferred items may soon find muzzles in their sales packages from manufacturers. This is what some experts fear as they watch a lawsuit between Guidant Sales Corp. (Indianapolis, Ind.) and Aspen Healthcare Metrics (Englewood, Colo.) proceed to trial in Minnesota. The ruling may set a precedent forcing providers to keep pricing information regarding medical device purchases confidential.
Guidant sells implantable cardiac rhythm management (CRM) devices manufactured by its Cardiac Pacemakers business unit. Aspen, subsidiary of Alpharetta, Ga.-based MedAssets, is a hospital consulting firm that surveys hospitals on pricing issues. Guidant asserts trade secret protection for its strategic pricing process, contracts and each hospital’s price and contract terms. Aspen enters consulting contracts with hospitals in which the hospitals disclose purchasing data for CRM devices and their vendor contracts. Aspen uses this information to advise other hospital clients on what to pay for CRM devices.
In August 2004, Guidant filed a lawsuit against Aspen and another consulting firm (The lawsuit against the second consulting firm was dismissed.) In a motion for partial summary judgment brought to the U.S District Court, District of Minnesota by Guidant, the medical device company asserted interference with confidentiality agreements, contracts, prospective contractual relations and misappropriation of trade secrets. Aspen accused Guidant of interfering with prospective contractual relations, and defamation. The District Court granted Guidant’s motion for partial summary, but denied Aspen’s motion for summary.
Guidant had to show that a contract existed and that Aspen was aware of this contract and intentionally breached it. While Guidant claimed that Aspen had no legal justification for having hospital clients break the confidentiality agreements, Aspen countered that, as a consultant, it is not a third party. Therefore, it did not breach Guidant’s confidentiality agreements.
The court determined that Aspen had not proven legal justification, and that Guidant demonstrated there was no genuine issue of material fact as to whether Guidant had been damaged by Aspen’s procurement of the breach of confidentiality agreements. The court also determined that Aspen was not protected by the consultant and honest-advice privileges. It also found that Aspen was not an agent and that its consulting agreements merely state that Aspen may review and discuss hospitals’ confidential vendor pricing. So, according to the court, Aspen does not have the authority to act on behalf of its hospital clients.
Taking a stance
While the lawsuit itself has been a strong focal point among providers, GPOs, manufacturers and distributors, some organizations are considering its implications for hospitals and healthcare cost containment.
“The lawsuit aside, we are more concerned with the [larger] issue,” says Al LoBiondo, chair of Chicago-based Health Industry Group Purchasing Association (HIGPA). “We are looking at something that is potentially disruptive to providers that use documented data and surveys to help them understand pricing.”
MedAssets says that one or two other organizations may follow HIGPA’s lead voicing concerns over restrictions on hospitals sharing pricing information.
“We applaud HIGPA for taking a leadership position on behalf of providers and the healthcare industry,” says John Bardis, chairman, president and CEO of MedAssets. “We believe that transparency is needed to make effective price comparisons and informed buying decisions. Consumers need to be able to review and compare the costs of these items for the same reasons: to support consumer-managed healthcare initiatives.”
The implications of this lawsuit go beyond healthcare, notes LoBiondo. “I would think other [industries] and organizations besides HIGPA would be concerned as well.”