UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

In the Matter of

Institutional Pharmacy Network, a corporation; Evergreen Pharmaceutical, Inc., a corporation; NCS Healthcare of Oregon, Inc., a corporation; NCS Healthcare of Washington, Inc., a corporation; United Professional Companies, Inc., a corporation; and White, Mack and Wart, Inc., a corporation.

FILE NO. 961-0005

AGREEMENT CONTAINING CONSENT ORDER TO CEASE AND DESIST

The Federal Trade Commission ("Commission") having initiated an investigation of certain acts and practices of Institutional Pharmacy Network; Evergreen Pharmaceutical, Inc.; NCS Healthcare of Oregon, Inc.; NCS Healthcare of Washington, Inc.; United Professional Companies, Inc.; and White, Mack and Wart, Inc., hereinafter sometimes referred to as proposed respondents, and it now appearing that proposed respondents are willing to enter into an agreement containing an order to cease and desist from the use of the acts and practices being investigated,

IT IS HEREBY AGREED by and between the proposed respondents, by their duly authorized officers and their attorneys, and counsel for the Commission that:

1. Proposed respondent Institutional Pharmacy Network is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Oregon with its office and principal place of business located at 1300 SW 5th Avenue, Suite 2300, Portland, Oregon 97201.

2. Proposed respondent Evergreen Pharmaceutical, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Washington with its office and principal place of business located at 12220 113th Avenue, NE, Kirkland, Washington 98034.

3. Proposed respondent NCS Healthcare of Oregon, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Ohio with its office and principal place of business located at 2725 Columbia Blvd., Oregon 97211.

4. Proposed respondent NCS Healthcare of Washington, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the state of Ohio with its office and principal place of business located at 13035 Gateway Drive, Seattle, Washington 98168.

5. Proposed respondent United Professional Companies, Inc., is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Delaware with its office and principal place of business located at 3724 West Wisconsin Avenue, Milwaukee, WI 53208.

6. Proposed respondent White, Mack and Wart, Inc. (doing business as Propac Pharmacy), is a corporation organized, existing, and doing business under and by virtue of the laws of the State of Oregon with its office and principal place of business located at 11620 NE Ainsworth Circle, Portland, Oregon 97220.

7. Proposed respondents admit all the jurisdictional facts set forth in the draft of complaint here attached.

8. Proposed respondents waive:

(a) Any further procedural steps;

(b) The requirement that the Commission's decision contain a statement of findings of fact and conclusions of law;

(c) All rights to seek judicial review or otherwise to challenge or contest the validity of the order entered pursuant to this agreement; and

(d) Any claim under the Equal Access to Justice Act.

9. This agreement shall not become part of the public record of the proceeding unless and until it is accepted by the Commission. If this agreement is accepted by the Commission it, together with the draft of complaint contemplated thereby, will be placed on the public record for a period of sixty (60) days and information with respect thereto publicly released. The Commission thereafter may either withdraw its acceptance of this agreement and so notify the proposed respondents, in which event it will take such action as it may consider appropriate, or issue and serve its complaint (in such form as the circumstances may require) and decision, in disposition of the proceeding.

10. This agreement is for settlement purposes only and does not constitute an admission by proposed respondents that the law has been violated as alleged in the draft of complaint here attached, or that the facts as alleged in the draft complaint, other than jurisdictional facts, are true.

11. This agreement contemplates that, if it is accepted by the Commission, and if such acceptance is not subsequently withdrawn by the Commission pursuant to the provisions of 2.34 of the Commission's Rules, the Commission may, without further notice to proposed respondents, (1) issue its complaint corresponding in form and substance with the draft of complaint here attached and its decision containing the following order to cease and desist in disposition of the proceeding and (2) make information public in respect thereto. When so entered, the order shall have the same force and effect and may be altered, modified, or set aside in the same manner and within the same time provided by statute for other orders. The order shall become final upon service. Delivery by the U.S. Postal Service of the complaint and decision containing the agreed-to order to proposed respondents' addresses as stated in this agreement shall constitute service. Proposed respondents waive any right they may have to any other manner of service. The complaint may be used in construing the terms of the order, and no agreement, understanding, represen tation, or interpretation not contained in the order or the agreement may be used to vary or contradict the terms of the order.

12. Proposed respondents have read the proposed complaint and order contemplated hereby. Proposed respondents understand that once the order has been issued, they will be required to file one or more compliance reports showing that they have fully complied with the order. Proposed respondents further understand that they may be liable for civil penalties in the amount provided by law for each violation of the order after it becomes final.

ORDER

I.

IT IS ORDERED that, as used in this order, the following definitions shall apply:

A. Respondent Institutional Pharmacy Network (“IPN") means Institutional Pharmacy Network; its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, and groups and affiliates controlled by IPN; and the respective directors, officers, employees, agents and representatives, successors, and assigns of each.

B. Respondent Evergreen Pharmaceutical, Inc., means Evergreen Pharmaceutical, Inc.; its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, and groups and affiliates controlled by Evergreen Pharmaceutical, Inc.; and the respective directors, officers, employees, agents and representatives, successors, and assigns of each.

C. Respondent NCS Healthcare of Oregon, Inc., means NCS Healthcare of Oregon, Inc.; its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, and groups and affiliates controlled by NCS Healthcare of Oregon; and the respective directors, officers, employees, agents and representatives, successors, and assigns of each.

D. Respondent NCS Healthcare of Washington, Inc., means NCS Healthcare of Washington, Inc.; its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, and groups and affiliates controlled by NCS Healthcare of Washington; and the respective directors, officers, employees, agents and representatives, successors, and assigns of each.

E. Respondent United Professional Companies, Inc., means United Professional Companies, Inc.; its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, and groups and affiliates controlled by United Professional Companies, Inc.; and the respective directors, officers, employees, agents, and representatives, successors, and assigns of each.

F. Respondent White, Mack and Wart, Inc., means White, Mack and Wart, Inc.; its directors, officers, employees, agents and representatives, predecessors, successors, and assigns; its subsidiaries, divisions, and groups and affiliates controlled by White, Mack and Wart, Inc.; and the respective directors, officers, employees, agents and representatives, successors, and assigns of each.

G. "Third-party payer" means any person or entity that reimburses for, purchases, or pays for all or any part of the health care services provided to any other person, and includes, but is not limited to: health insurance companies; managed care organizations; Fully Capitated Health Care Plans under the Oregon Health Program; pharmacy benefit managers; prepaid hospital, medical, or other health service plans; health maintenance organizations; preferred provider organizations; government health benefits programs; administrators of self-insured health benefits programs; and employers or other entities providing self-insured health benefits programs.

H. Oregon Health Plan means the plan created by the State of Oregon in 1994 to provide health care to Medicaid recipients and other needy Oregonians.

I. "Qualified risk-sharing joint arrangement" means an arrangement to provide services in which (1) the arrangement does not restrict the ability, or facilitate the refusal, of pharmacy providers participating in the arrangement to deal with payers individually or through any other arrangement, and (2) all pharmacy providers participating in the arrangement share substantial financial risk from their participation in the arrangement through: (a) the provision of services to payers at a capitated rate; (b) the provision of services for a predetermined percentage of premium or revenue from payers; (c) the use of significant financial incentives (e.g., substantial withholds) for its participating providers, as a group, to achieve specified cost-containment goals; or (d) the provision of a complex or extended course of treatment that requires the substantial coordination of care by different types of providers offering a complementary mix of services, for a fixed, predetermined payment, where the costs of that course of treatment for any individual patient can vary greatly due to the individual patient’s condition, the choice, complexity, or length of treatment, or other factors.

J. "Qualified clinically-integrated joint arrangement" means an arrangement to provide services in which (1) the arrangement does not restrict the ability, or facilitate the refusal, of pharmacy providers participating in the arrangement to deal with payers individually or through any other arrangement, and (2) all pharmacy providers participating in the arrangement participate in active and ongoing programs of the arrangement to evaluate and modify the practice patterns of, and create a high degree of interdependence and cooperation among, the providers participating in the arrangement, in order to control costs and ensure quality of the services provided through the arrangement.

K. "Subcontract" means an agreement between two pharmacies that one will fulfill the contractual obligations of the other to provide pharmacy goods and services to the patients of an institutional care facility or third-party payer at a particular facility, when (1) the contracting pharmacy cannot reasonably fulfill its contract obligations at that facility or (2) a Respondent is operating in its capacity as a network including that facility if, at the time of the agreement, that facility had a pre-existing contract with another pharmacy.

II.

IT IS FURTHER ORDERED that each Respondent, in connection with the provision of institutional pharmacy goods and services in or affecting commerce, as "commerce" is defined in the Federal Trade Commission Act, cease and desist, directly or indirectly, or through any corporate or other device, from entering into, attempting to enter into, organizing, attempting to organize, implementing, attempting to implement, continuing, attempting to continue, facilitating, attempting to facilitate, ratifying, or attempting to ratify any agreement with any pharmacy either (1) concerning fees or (2) setting, fixing, raising, stabilizing, establishing, maintaining, adjusting, or tampering with any fees.

PROVIDED that nothing in this order shall be construed to prohibit any Respondent from:

(1) Entering into any agreement or engaging in conduct that is reasonably necessary to form, facilitate, manage, operate, or participate in:

(a) A qualified risk-sharing joint arrangement; or

(b) A qualified clinically integrated joint arrangement, if the Respondent has provided the prior notification(s) as required by this paragraph (b). Such prior notification must be filed with the Secretary of the Commission at least thirty (30) days prior to forming, facilitating, managing, operating, participating in, or taking any action, other than planning, in furtherance of any joint arrangement requiring such notice ("first waiting period"), and shall include for such arrangement the identity of each participant; the location or area of operation; a copy of the agreement and any supporting organizational documents; a description of its purpose or function; a description of the nature and extent of the integration expected to be achieved, and the anticipated resulting efficiencies; an explanation of the relationship of any agreement on reimbursement to furthering the integration and achieving the expected efficiencies; and a description of any procedures proposed to be implemented to limit possible anticompetitive effects resulting from such agreement(s). If, within the first waiting period, a representative of the Commission makes a written request for additional information, Respondent shall not form, facilitate, manage, operate, participate in, or take any action, other than planning, in furtherance of such joint arrangement until thirty (30) days after substantially complying with such request for additional information ("second waiting period") or such shorter waiting period as may be granted by letter from the Bureau of Competition.

(2) Agreeing on the terms by which that Respondent will provide pharmacy goods or services:

(a) With a prescription benefit manager or other third-party payer that is acting on behalf of an employer or other purchaser of pharmacy goods and services and (i) that is neither owned by nor operates any pharmacies providing institutional pharmacy services, or (ii) that owns or operates a pharmacy providing institutional pharmacy services as long as Respondent notifies the Commission in writing at least forty-five (45) days prior to such agreement.

(b) To an institutional care facility that is acting as a purchaser of pharmacy goods or services, even if the facility also owns a pharmacy.

(c) With another pharmacy pursuant to a subcontract.

(3) Agreeing on the terms by which Respondent will purchase pharmacy goods or services in its capacity as an institutional care facility.

(4) Contracting to operate or manage a pharmacy.

III.

IT IS FURTHER ORDERED that each Respondent shall:

A. Within thirty (30) days after the date on which this order becomes final, cause the distribution by first-class mail of this order and the complaint to (1) each of its corporate officers, directors, and managers, and the officers, directors, and managers with responsibility for operating pharmacies in the states of Oregon and Washington, and (2) each Fully Capitated Health Plan under the Oregon Health Plan.

B. For a period of two (2) years after the date this order becomes final, distribute by first-class mail a copy of this order and the complaint to each new member of IPN and each of Respondent's corporate officers, directors, and managers, and officers, directors, and managers with responsibility for operating pharmacies in the states of Oregon and Washington, within (30) days of the member's admission or the election, appointment, or employment of the officer, director, or manager;

C. File a verified written report within sixty (60) days after the date this order becomes final setting forth in detail the manner and form in which it intends to comply, is complying, and has complied with Paragraphs II and III of this order, and annually thereafter for five (5) years on the anniversary of the date this order becomes final, and at such other times as the Commission may require, setting forth in detail the manner and form in which it has complied and is complying with Paragraphs II and III of this order;

D. Notify the Commission at least thirty (30) days prior to (1) the Respondent's dissolution, assignment, or sale resulting in the emergence of a successor corporation, or (2) the creation or dissolution of subsidiaries that may affect compliance obligations arising out of the order or any other change that may affect compliance obligations arising out of the order;

E. For the purpose of determining or securing compliance with this order, permit any duly authorized representative of the Commission: (1) access, during office hours and in the presence of counsel, to inspect and copy all books, ledgers, accounts, correspondence, memoranda, calendars, and other records and documents in the possession or under the control of a respondent relating to any matters contained in this order; and (2) upon five days' notice to the respondent, and without restraint or interference from it, to interview its officers, directors, or employees.

IV.

IT IS FURTHER ORDERED that this order will terminate twenty years from the date this order becomes final.

Signed this ______ day of ________________, 1997.

INSTITUTIONAL PHARMACY NETWORK

By _______________________________
Charles Maples, President

_______________________________
Douglas Ross, Attorney, Institutional Pharmacy Network

EVERGREEN PHARMACEUTICAL, INC.

By_____________________________
Rick Doane, President

_______________________________
Charles Freed, Attorney, Evergreen Pharmaceutical, Inc.

FEDERAL TRADE COMMISSION

_______________________________
Randall David Marks
Attorney

 

APPROVED:

_______________________________
Michael D. McNeely
Assistant Director

 

NCS HEALTHCARE OF OREGON, INC.

By_____________________________
Michael Mascali, Vice President

________________________________
Pat Morris, Attorney, NCS Healthcare of Oregon, Inc.

NCS HEALTHCARE OF WASHINGTON, INC.

By_____________________________
Michael Mascali, Vice President

________________________________
Pat Morris, Attorney, NCS Healthcare of Washington, Inc.

UNITED PROFESSIONAL COMPANIES, INC.

By_____________________________
J. Wesley Carter, CEO

________________________________
Lisa Danielson, Attorney, United Professional Companies, Inc.

WHITE, MACK AND WART, INC.

By_____________________________
Donna DeNardo, President

________________________________
Arthur Lerner, Attorney, White, Mack and Wart, Inc.

_______________________________
William J. Baer
Director
Bureau of Competition