GAMBRO LAWSUIT

In a complaint filed in the State of Michigan on August 31, 1999 against Gambro Healthcare Patient Services, Inc. and Gambro Healthcare of Michigan, Inc., the Attorney General alleges that Gambro is attempting to monopolize amid has actually monopolized the provision of ESRD outpatient dialysis services in Kent, Ottawa, and Muskegon counties in Michigan in violation of the Michigan Antitrust Reform Act ("MARA"). The complaint seeks an injunction prohibiting

the defendants from continuing their monopolization and attempted monopolization as well as civil monetary penalties.

The Attorney General alleges that the acts that constitute the antitrust violations are:

1. Gambro's acquisition from Mercy Health Services of six end-stage renal disease (ESRD) outpatient dialysis facilities owned by Mercy in Kent, Ottawa and Muskegon counties, Michigan;

2. The execution, as a result of that acquisition, of mutual non-competition agreements between Gambro and Mercy whereby Mercy agrees not to compete with Gambro for the delivery of ESRD senices on an outpatient basis at the clinics purchased from it, and Gambro agrees not to compete with Mercy in providing inpatient acute dialysis services;

3. The execution of non-competition agreements between Gambro and almost all of the nephrologists in western Michigan with whom Gambro entered into medical director agreements shortly after

Gambro acquired the dialysis facilities from Mercy, which prohibited these physicians from soliciting patients attending Gambro clinics to switch to a competitor's clinic and/or assisting in the establishment of new dialysis clinics for a 12year period, and;

4. After purchasing these dialysis facilities and entering into the non-competition agreements, Gambro increased prices substantially for both dialysis treatments and drugs used in connection with dialysis.

Analysis of the Case

While MARA applies only to activities taking place in the State of Michigan, MARA is very similar in words and intent to the federal anti-monopoly statute, which is Section 2 of The Sherman Act. Michigan courts have held that in interpreting MARA, federal precedents may be utilized since MARA and the federal acts are so similar. Thus for purposes of analyzing this case, both federal and Michigan precedents may be used.

The offense of monopolization under both The Sherman Act and MARA consists of the possession of monopoly power in a relevant market which is willfully acquired or maintained, as opposed to growth or development as a result of a superior product, business acumen, or plain accident. An attempt to monopolize is defined as engaging in predatory or anti competitive conduct with specific intent to monopolize a relevant market and a dangerous probability of achieving that monopoly power unless the putative monopolist is stopped. Monopoly power consists of the ability to raise prices or exclude others from entering the relevant market. The relevant market in a monopolization case is a two dimensional concept consisting of a relevant product market and a relevant geographic market. The relevant product market consists of all products or services that are reasonably interchangeable for end use. The relevant geographic market is the area of effective competition - that is, the geographic area where buyers can obtain alliterative sources of supply.

In all cases of monopolization, the key issue is the exclusionary nature of the conduct and the ability of the putative monopolist to exclude others from entering the market so that the monopolist can charge monopoly prices and obtain supra competitive profits. If the monopolist cannot keep others from entering the market, then any attempt to obtain supra-competitive profits by raising prices will by definition fail since such price increases will attract new competitors to enter the market, thereby eliminating the putative monopolist's ability to charge monopoly prices.

Without knowing all of the facts (Gambro was expected to respond to the charges by Oct. 14), 1999.

Mr. Rappaport and Mr. Pristave are partners in the law firm of Ross & Hardies, based in Chicago, 111., that specializes in health care issues.

16 Nephrology News & Issues o November 1999