Antitrust Lawyer Blog Commentary on Current Developments

Alpena, Michigan, Public Schools Planned Pharmaceutical Transfer Falls Within NPIA.

On June 20, the staff of the Bureau of Competition advised Alpena (Michigan) Public Schools that its proposed plan to have pharmaceuticals transferred to it for use by its employees, by the Alpena Regional Medical Center, with actual distribution of the pharmaceuticals being made by certain Alpena-area pharmacies, falls within the Non-Profit Institutions Act “NPIA”.
That statute exempts from the Robinson-Patman Act “purchases of . . . supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit.”

Alpena Public Schools (“APS”) is a non-profit school district currently providing its employees with health insurance, including a prescription-drug benefit. To reduce the cost of continuing to provide this benefit to its employees, APS proposes to have Alpena Regional Medical Center, a non-profit hospital in Alpena, purchase pharmaceuticals for use by APS employees through its existing group-purchasing arrangement with a pharmaceutical wholesaler. Because various federal and state laws prohibit APS from purchasing and handling drugs directly, Alpena Regional Medical Center cannot transfer the pharmaceuticals to APS for distribution to its employees.

Rather, APS will have various Alpena-area pharmacies dispense the pharmaceuticals to APS employees on its behalf. Any fees, other than the actual cost of the pharmaceuticals, charged in connection with this proposed course of action will only cover direct costs incurred as a result of providing the pharmaceuticals to APS employees. APS asked for an opinion on whether this transfer of pharmaceuticals to its employees through the Alpena Regional Medical Center and the Alpena-area pharmacies falls within the NPIA.

The FTC staff opinion letter concluded that pharmaceuticals used in the ways described in the request letter could be transferred by the Alpena Regional Medical Center to APS employees through various Alpena-area pharmacies without violating the NPIA. The NPIA covers transfers from one NPIA-eligible entity to another NPIA-eligible entity, so long as the transferred supplies are for the receiving institution's “own use” within the meaning of the statute. The staff advisory opinion notes that the use of the Alpena-area pharmacies potentially raises concern under the Robinson-Patman Act because of their status as retail pharmacies operating in competition with other retail pharmacies in sales to the general public. It concludes, however, that because: 1) the pharmacies' involvement in the transfer of the pharmaceuticals will be limited, and 2) the pharmacies will establish a separate accounting mechanism to track the APS transactions and avoid any improper sales, the use of the Alpena-area pharmacies does not affect the proposed plan's eligibility for treatment under the NPIA.

Authored by

Robert W. Doyle, Jr.
202-589-1839
rdoyle@dbmlawgroup.com