Delaware District Court Dismisses Antitrust Suit Against Lab Testing Company Alleging Conspiracy To Exclude Smaller Lab From Market
On February 14, 2019, Judge Maryellen Noreika of the United States District Court for the District of Delaware dismissed a complaint alleging violations of Sections 1 and 2 of the Sherman Act. Prescient Medicine Holdings, LLC v. Laboratory Corporation of America Holdings et al, No. 1:18-cv-00600 (D. Del. Feb 14. 2019). The complaint was filed by Prescient Medicine Holdings, LLC, a provider of laboratory testing services. Plaintiff alleged that an agreement between a competitor laboratory testing service—Laboratory Corporation of America and Laboratory Corporation of America Holdings (“LabCorp”)—and a managed care organization—AmeriHealth, Inc. and AmeriHealth Caritas Delaware Inc. (“AmeriHealth”) was a collusive scheme to monopolize the in-network Medicaid market and exclude plaintiff from that market. Judge Noreika held that plaintiff failed to adequately plead antitrust standing and failed to define a relevant market.
Plaintiff alleged that AmeriHealth was one of two managed care organizations in Delaware authorized under the Social Security Act to provide management and administration of Medicaid healthcare programs for low-income populations. Accordingly, AmeriHealth had the power to choose which health care service providers were allowed to participate in its network and to thereby determine which providers could receive reimbursement from Medicaid. Plaintiff applied to be included as an “in-network” provider but LabCorp was selected instead. Plaintiff later entered into a laboratory services agreement to provide services to a Delaware non-profit named Connections Community Support Programs, Inc. (“Connections”) which previously employed LabCorp in that role. Plaintiff alleged that LabCorp informed Connections that plaintiff was not in-network and would not be reimbursed by Medicaid for plaintiff’s laboratory services. Connections then cancelled the contract and decided to keep LabCorp as its exclusive provider of laboratory services. Plaintiff alleged that LabCorp’s agreement with AmeriHealth, and subsequent interference with its contract with Connections, allowed LabCorp to monopolize the in-network Medicaid market in Delaware and anti-competitively exclude plaintiff from that market.
Judge Noreika agreed with defendants that plaintiff lacked standing to bring the lawsuit because plaintiff did not allege an antitrust injury and plaintiff failed to define a relevant product and geographic market. With respect to standing, Judge Noreika found that the allegations in the complaint constituted only individual harm, rather than harm to the market as a whole. Judge Noreika also disagreed that plaintiff’s alleged “loss of its contract with the non-profit and other loss of income” constituted an antitrust injury. Instead, Judge Noreika found that this alleged injury was injury to plaintiff’s own business interests, and was not enough by itself to establish antitrust injury. Plaintiff also alleged that Medicaid patients in Delaware were receiving lower quality care at higher costs, because LabCorp was the exclusive in-network provider. However, the Court determined that these allegations were conclusory and unsupported by any facts in the record.
With respect to market definition, Judge Noreika found that the complaint failed to define a relevant geographic market and instead focused solely on the geographic area that plaintiff desired to offer services. Judge Noreika explained that a geographic market that made no reference to the preference of consumers was not sufficiently pled. Similarly, Judge Noreika found that the product market allegations were deficient because the complaint merely stated “laboratory services” without describing interchangeable products or services that compete in the market. Accordingly, Judge Noreika granted the motion to dismiss for failure to state a claim.