Cardinal Health has agreed to settle allegations that the manufacturer illegally monopolized 25 local markets for the sale and distribution of low-energy radiopharmaceuticals through anti-competitive tactics. Under the terms of the proposed final order with the Federal Trade Commission (FTC), Cardinal Health will pay $26.8 million into a fund that will be used to compensate customers injured by the manufacturer’s anti-competitive conduct.
Radiopharmaceuticals are used by providers to diagnose a variety of medical conditions, including heart disease. As a result of the short half-life of the radioactive isotopes used in the drugs, “hospitals and clinics rely on radiopharmacies located nearby, resulting in highly localized markets.” According to the FTC complaint, following 2003 and 2004 acquisitions, “Cardinal became the largest operator of radiopharmacies in the United States and the sole radiopharmacy operator in 25 metropolitan areas.” With its market power, the complaint alleged that Cardinal targeted Bristol-Myers Squibb (BMS) and General Electric (GE)—the only U.S. manufacturers of the radiopharmaceuticals known as heart perfusion agents (HPAs) between 2003 and 2008. Cardinal Health allegedly coerced BMS and GE to refuse to grant distribution rights for their HPA products to new competitors in the markets where Cardinal Health had taken hold.
According to FTC Chairwomen Edith Ramirez, “Cardinal, by preventing other radiopharmacies from entering its markets, was able to deny customers the benefits of competition and reap monopoly profits from the sale of radiopharmaceuticals for a sustained period of years.” The FTC alleges that through its exercise of illegal market power, Cardinal Health “obtained de facto exclusive distribution rights” for HPAs in the relevant markets. As a result, the complaint alleged that Cardinal Health violated the FTC Act by blocking or delaying competitive entry into 25 local HPA markets across the country.
In addition to the $26.8 million disgorgement, Cardinal Health is also barred under the proposed final order from “entering into simultaneous exclusive deals with manufacturers of the same radiopharmaceutical product or from using coercion or retaliation to obtain de facto exclusivity.” Additionally, Cardinal Health is required to notify the FTC before entering into any further exclusivity distribution agreements or buying any radiopharmacy assets. Finally, the agreement allows for enhanced entry into some of the radiopharmaceutical markets by requiring Cardinal Health to give its customers the option to terminate their contracts with Cardinal Health for low energy radiopharmaceuticals.