Advisory Opinion to Ruffo (04-29-99)

David A. Ruffo
Tobin and Dempf
33 Elk Street
Albany, New York 12207

Dear Mr. Ruffo:

This letter responds to your request on behalf of Wesley Health Care Center, Inc. ("Wesley") for an advisory opinion concerning the applicability of the Non-Profit Institutions Act ("NPIA"), 15 U.S.C. § 13c. According to your letter dated March 3, 1999, Wesley is a not-for-profit corporation, exempt from federal income taxation as a charitable organization under Section 501(c)(3) of the Internal Revenue Code, that is licensed by the New York State Department of Health as a residential health care facility. New York law defines a nursing home such as that operated by Wesley as a hospital.

Wesley operates an in-house pharmacy that purchases pharmaceuticals at preferential prices. It wishes to be able to fill, at cost, prescriptions for volunteers who work at the nursing home, and has asked whether doing so would be protected by the NPIA, which exempts from the Robinson-Patman Act "purchases of their supplies for their own use by . . . hospitals, and charitable institutions not operated for profit."

The Supreme Court considered the scope of the "own use" language in Abbott Laboratories v. Portland Retail Druggists Association, Inc, 425 U.S. 1 (1976). With respect to hospitals, it held that use that reasonably "is a part of and promotes the hospital's intended operation in the care of persons who are its patients" was covered by the statute. Specifically, it held that sales of pharmaceuticals to hospital inpatients, outpatients, and emergency room patients, either for use on the premises or for home use for a limited and reasonable time after release from the hospital, and to the hospital's employees and physician medical staff members, was within the hospital's "own use" for purposes of the NPIA. With respect to employees and medical staff members, the court noted that those persons' activities were necessary for the hospital to carry out its basic institutional functions, and that dispensing pharmaceuticals to them enhanced the hospital function and thus was in the hospital's "own use."

Wesley states that 225 volunteers provide a number of services that are vital to operation of the nursing home, including transporting residents to activities and therapy sessions, visiting with residents, particularly those who do not receive visits from family members, and assisting in the facility's beauty shop and activities programs. The volunteer program is overseen by a full-time staff volunteer coordinator, and your letter asserts that the services performed by the volunteers are essential to the function of the home.

Based on the facts stated in your letter, I conclude that volunteers who participate in Wesley's programs and activities to a significant extent on an ongoing basis contribute to the nursing home's institutional functions in the treatment of its patients in a way that is analogous to the contributions made by the hospital employees and medical staff members considered by the Supreme Court in Abbott Labs, so that dispensing of prescription drugs to those individuals by its in-house pharmacy would be considered for Wesley's "own use" for purposes of the NPIA.

This letter sets out the views of the staff of the Bureau of Competition, as authorized by the Commission's Rules of Practice. Under Commission Rule § 1.3(c), 16 C.F.R. § 1.3(c) (1994), the Commission is not bound by this staff opinion and reserves the right to rescind it at a later time. In addition, this office retains the right to reconsider the questions involved and, with notice to the requesting party, to rescind or revoke the opinion if implementation of the proposed program results in substantial anticompetitive effects, if the program is used for improper purposes, if facts change significantly, or if it would be in the public interest to do so.

Sincerely yours,

Richard A. Feinstein
Assistant Director