B242608
9610005

UNITED STATES OF AMERICA
BEFORE FEDERAL TRADE COMMISSION

COMMISSIONERS:
Robert Pitofsky, Chairman
Sheila F. Anthony
Mozelle W. Thompson
Orson Swindle

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.

Docket C-3822

DECISION AND ORDER

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 the respondents, and the respondents having been furnished thereafter with a copy of a draft of complaint that the Bureau of Competition presented to the Commission for its consideration and which, if issued by the Commission, would charge respondents with a violation of Section 5 of the Federal Trade Commission Act, as amended, 15 U.S.C.  45; and

Respondents, their attorneys, and counsel for the Commission having thereafter executed an agreement containing a consent order, an admission by the respondents of all the jurisdictional facts set forth in the aforesaid draft of complaint, a statement that the signing of said agreement is for settlement purposes only and does not constitute an admission by respondents that the law has been violated as alleged in such complaint, or that the facts as alleged in such complaint, other than jurisdictional facts, are true, and waivers and other provisions as required by the Commission's rules; and

The Commission having thereafter considered the matter and having determined that it had reason to believe that the respondents have violated the said Acts, and that a complaint should issue stating its charges in that respect, and having thereupon accepted the executed consent agreement and placed such agreement on the public record for a period of sixty (60) days, now in further conformity with the procedure described in  2.34 of its Rules, the Commission hereby issues its Complaint, makes the following jurisdictional findings and enters the following Order:

1. 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. 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. 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., Portland Oregon 97211.

4. 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. 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, Wisconsin 53208.

6. 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. The Federal Trade Commission has jurisdiction of the subject matter of this proceeding and of the respondents, and the proceeding is in the public interest.

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; and

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 on August 11, 2018.

By the Commission.

Donald S. Clark
Secretary

SEAL:

ISSUED: August 11, 1998