steven-a-mueller-bradley-j-brown-mark-a-kruse-kevin-d-miller-and ( 2015 )


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  •                IN THE SUPREME COURT OF IOWA
    No. 13–1872
    Filed February 27, 2015
    STEVEN A. MUELLER, BRADLEY J. BROWN, MARK A. KRUSE,
    KEVIN D. MILLER, and LARRY E. PHIPPS, on Behalf of Themselves
    and Those Like Situated,
    Appellants,
    vs.
    WELLMARK, INC. d/b/a WELLMARK BLUE CROSS AND BLUE
    SHIELD OF IOWA, an Iowa Corporation, and WELLMARK HEALTH
    PLAN OF IOWA, INC., an Iowa Corporation,
    Appellees.
    Appeal from the Iowa District Court for Polk County, Robert A.
    Hutchison, Judge.
    Plaintiff chiropractors appeal from a summary judgment entered
    by the district court in favor of defendant health insurers on per se
    antitrust claims under the Iowa Competition Law. AFFIRMED.
    Glenn L. Norris of Hawkins & Norris, P.C., Des Moines; Harley C.
    Erbe of Erbe Law Firm, Des Moines; Steven P. Wandro, Michael R. Keller,
    and Shayla L. McCormally of Wandro & Associates, P.C., Des Moines, for
    appellants.
    Hayward L. Draper and Ryan G. Koopmans of Nyemaster Goode,
    P.C., Des Moines, for appellees.
    2
    MANSFIELD, Justice.
    Wellmark, Inc. is an Iowa-based health insurer that belongs to the
    national Blue Cross and Blue Shield (BCBS) network.             Wellmark has
    contracted with health care providers in Iowa to provide services at
    certain reimbursement rates.      By agreement, Wellmark makes those
    rates available both to self-insured Iowa plans that it administers and to
    out-of-state BCBS affiliates when those entities provide coverage for
    services provided in Iowa.
    This   appeal   presents   the       question   whether   the   foregoing
    agreements between Wellmark and self-insuring employers and between
    Wellmark and out-of-state BCBS affiliates amount to per se violations of
    Iowa antitrust law. We conclude they do not. These arrangements are
    not the simple horizontal conspiracies that historically have qualified for
    per se treatment.      Accordingly, and recognizing that the plaintiffs
    stipulated they were proceeding only under a per se theory and not
    under the rule of reason, we affirm the district court’s grant of summary
    judgment to Wellmark.
    I. Background Facts and Proceedings.
    This case comes before us for the second time.            See Mueller v.
    Wellmark, Inc., 
    818 N.W.2d 244
    (Iowa 2012).
    Approximately seven years ago, a number of Iowa chiropractors
    sued Wellmark, the largest health insurer in Iowa, in the Polk County
    District Court. The suit challenged Wellmark’s reimbursement rates and
    practices for chiropractic services and asked for class action certification.
    One count of the plaintiffs’ petition sought relief under a variety of Iowa
    insurance statutes. 
    Mueller, 818 N.W.2d at 249
    (noting plaintiffs sought
    relief based upon allegations Wellmark engaged in discriminatory
    practices in violation of Iowa Code sections 509.3(6), 514.7, 514.23(2),
    3
    514B.1(5)(c), 514F.2 (2007)).     Another count pled that Wellmark had
    entered into a contract, combination, or conspiracy in violation of section
    553.4 of the Iowa Competition Law, the counterpart to section 1 of the
    Federal Sherman Antitrust Act. Id.; see also 15 U.S.C. § 1 (2006). A
    third count alleged that Wellmark had abused monopoly power in
    violation of section 553.5 of the Iowa Competition Law, the counterpart
    to section 2 of the Sherman Act. 
    Mueller, 818 N.W.2d at 249
    ; see also 15
    U.S.C. § 2.
    On Wellmark’s motion, the district court dismissed the claims
    based on the insurance statutes. 
    Mueller, 818 N.W.2d at 250
    . It found
    no private cause of action was available under those laws.        
    Id. The district
    court later granted summary judgment to Wellmark on the
    antitrust claims.   
    Id. at 252.
      This ruling was primarily based on the
    “state action” exemption in the Iowa Competition Law. Id.; see also Iowa
    Code § 553.6(4) (providing that the Iowa Competition Law “shall not be
    construed to prohibit . . . activities or arrangements expressly approved
    or regulated by any regulatory body or officer acting under authority of
    this state”). Plaintiffs appealed. 
    Mueller, 818 N.W.2d at 253
    .
    On appeal, we affirmed the dismissal of the claims under Iowa
    insurance law. As we explained,
    [O]ur legislature chose to provide the Iowa Insurance
    Commissioner with exclusive powers to regulate health
    insurance practices under these statutes. For these reasons,
    we hold Iowa Code sections 509.3(6), 514.7, 514.23(2),
    514B.1(5)(c), and 514F.2, enacted as part of H.F. 2219, do
    not create a private cause of action.
    
    Id. at 258.
    However, we found that the state action exemption did not insulate
    Wellmark’s reimbursement rates from antitrust review. We noted,
    4
    These regulations [cited by Wellmark] are not directed
    to the regulation of rate differentials for particular services.
    Their purpose, rather, is to insure that health insurers do
    not abuse their overall relationship with patients and
    providers through the use of preferred provider plans. Thus,
    if a clinic decided to sue Wellmark under the Iowa
    Competition Law alleging that Wellmark had engaged in
    prohibited section 553.5 monopolization by excluding it from
    a preferred provider arrangement, the section 553.6(4) state
    action exemption might well apply. But, it does not appear
    that the legislature has decided generally to remove the
    setting of reimbursement rates by health insurance
    companies from the operations of the marketplace or from
    claims under the Iowa Competition Law.
    
    Id. at 262
    (footnote omitted). Yet, we affirmed the dismissal of some of
    the chiropractors’ antitrust claims, including the Iowa Code section
    553.5 monopolization claim, on alternate grounds that had been raised
    by Wellmark.    
    Id. at 264–66.
       Still, with respect to the section 553.4
    conspiracy claim, “we reverse[d] the district court’s summary judgment
    granting Wellmark a blanket exemption under section 553.6(4) from
    charges that it engaged in anticompetitive price-fixing or term-fixing
    schemes.” 
    Id. at 264.
    On remand, the plaintiffs stipulated that their only remaining
    antitrust claims—alleging conspiracies between Wellmark and out-of-
    state BCBS affiliates and between Wellmark and self-funding employers
    that hired Wellmark to administer their plans—were being asserted on a
    per se theory. As the plaintiffs stated,
    Plaintiffs hereby agree and stipulate that the only violation of
    Iowa Code § 553.4 alleged in the Fourth Amended and
    Substituted Petition for Damages is for a contract,
    combination or conspiracy between the Defendants and
    (1) out-of-state Blues and (2) in-state self-funded employers
    through administration contracts, to price fix by
    establishment of a maximum price for services of Iowa
    chiropractors in Wellmark’s provider network or through the
    use of a restrictive or capitated payment system in
    Wellmark’s HMO; and those alleged price fixing conspiracies
    are alleged to violate Iowa Code § 553.4 based on Plaintiffs’
    contention that they constitute per se violations of the Iowa
    5
    Competition Act. Plaintiffs’ allegations exclude a contention
    that a rule of reason analysis is applicable to the violation of
    Iowa Code § 553.4 alleged in the Fourth Amended and
    Substituted Petition.
    Thereafter, Wellmark moved for summary judgment again, this
    time on the ground that neither of these alleged conspiracies was subject
    to per se treatment.    As Wellmark put it, “Sharing a provider network
    does not amount to naked price fixing and is not subject to the per se
    rule.” Wellmark urged that plaintiffs’ claims were potentially viable, if at
    all, only under the rule of reason.
    The summary judgment record revealed that employers wanting to
    provide group health insurance to their employees can contract with
    Wellmark in one of two ways. Either way, Wellmark makes its provider
    network available at established reimbursement rates and handles
    claims administration. However, if the employer self-insures, then the
    employer is financially responsible for claims. On the other hand, when
    Wellmark acts as an insurer in addition to a claims administrator, then
    the employer pays premiums to Wellmark, and Wellmark must bear the
    financial risk of the resulting claims.
    The record also disclosed that Wellmark, which is the BCBS
    licensee in Iowa and South Dakota, has a BlueCard® program with
    BCBS licensees in other states. Under this arrangement, those out-of-
    state licensees have access to Wellmark’s provider network in Iowa at the
    rates negotiated by Wellmark whenever they have to pay Iowa claims.
    Likewise, Wellmark has access to the other licensees’ negotiated provider
    networks in their respective states at their rates whenever Wellmark has
    to pay claims in those states. See Steward Health Care Sys., LLC v. Blue
    Cross & Blue Shield of R.I., 
    997 F. Supp. 2d 142
    , 150 n.3 (D.R.I. 2014)
    6
    (describing the BlueCard® program); Solomon v. Blue Cross & Blue Shield
    Ass’n, 
    574 F. Supp. 2d 1288
    , 1289 (S.D. Fla. 2008) (same).
    The plaintiffs maintained that Wellmark had engaged in per se
    price-fixing when it entered into agreements with self-insuring Iowa
    employers to make its network and claims administration available to
    them. Similarly, the plaintiffs urged that Wellmark had engaged in per
    se price-fixing when it participated in the national BlueCard® program
    under which BCBS entities agreed to make their in-state networks
    available to each other when their respective customers needed out-of-
    state services.
    After hearing the parties’ arguments, the district court rejected
    plaintiffs’ per se theories and entered summary judgment for Wellmark.
    This appeal followed.
    II. Standard of Review.
    This court reviews grants of summary judgment for correction of
    errors at law. 
    Mueller, 818 N.W.2d at 253
    . Whether the per se rule or
    the rule of reason applies to a given practice is a question of law. See
    California ex rel. Harris v. Safeway, Inc., 
    651 F.3d 1118
    , 1124 (9th Cir.
    2011) (citing XI Phillip Areeda & Herbert Hovenkamp, Antitrust Law ¶
    1909b, at 279 (2d ed. 2005)); Nat’l Bancard Corp. v. Visa U.S.A., Inc., 
    779 F.2d 592
    , 596 (11th Cir. 1986).
    III. Legal Analysis.
    A. The Iowa Competition Law.           The general assembly has
    directed that the Iowa Competition Law “shall be construed to
    complement and be harmonized with the applied laws of the United
    States which have the same or similar purpose.” Iowa Code § 553.2. As
    the legislature has stated,
    7
    This construction shall not be made in such a way as to
    constitute a delegation of state authority to the federal
    government, but shall be made to achieve uniform
    application of the state and federal laws prohibiting
    restraints of economic activity and monopolistic practices.
    
    Id. Accordingly, in
    the past, when interpreting the Iowa Competition
    Law, we have generally adhered to federal interpretations of federal
    antitrust law. See Next Generation Realty, Inc. v. Iowa Realty Co., 
    686 N.W.2d 206
    , 208 (Iowa 2004) (per curiam); Max 100 L.C. v. Iowa Realty
    Co., 
    621 N.W.2d 178
    , 181–82 (Iowa 2001); Fed. Land Bank of Omaha v.
    Tiffany, 
    529 N.W.2d 294
    , 296–97 (Iowa 1995); Neyens v. Roth, 
    326 N.W.2d 294
    , 297 (Iowa 1982); State v. Cedar Rapids Bd. of Realtors, 
    300 N.W.2d 127
    , 128 (Iowa 1981). In Comes v. Microsoft Corp., we declined to
    follow federal precedent on whether indirect purchasers had standing to
    sue under the Iowa Competition Law.          
    646 N.W.2d 440
    , 445–49 (Iowa
    2002).     We did so because: (1) the language of the relevant provision
    (Iowa    Code   section   553.12   (1997))   supported   indirect   purchaser
    standing; (2) uniformity only requires a uniform standard of conduct
    under state and federal law, not a uniform rule as to who may sue; and
    (3) most federal courts allowed indirect purchasers to sue at the time the
    Iowa Competition Law was enacted in 1976. See 
    id. This case
    involves section 553.4 of the Iowa Competition Law. It
    provides, “A contract, combination, or conspiracy between two or more
    persons shall not restrain or monopolize trade or commerce in a relevant
    market.”     Iowa Code § 553.4 (2007).         This provision of the Iowa
    Competition Law is the counterpart to section 1 of the Sherman Act,
    which states, “Every contract, combination in the form of trust or
    otherwise, or conspiracy, in restraint of trade or commerce among the
    several States, or with foreign nations, is declared to be illegal.”      15
    8
    U.S.C. § 1.   The wording of the two provisions is notably similar.      If
    anything, the Iowa Competition Law tilts more in the direction of an
    economics-based approach to antitrust, since it condemns only those
    contracts, combinations, and conspiracies that restrain trade “in a
    relevant market”—a distinctly economic concept.       Iowa Code § 553.4;
    see, e.g., United States v. Grinnell Corp., 
    384 U.S. 563
    , 587, 
    86 S. Ct. 1698
    , 1712, 
    16 L. Ed. 2d 778
    , 795 (1966) (Fortas, J., dissenting) (noting
    that “the search for ‘the relevant market’ must be undertaken and
    pursued with relentless clarity” and “is, in essence, an economic task put
    to the uses of the law”); United States v. Phila. Nat’l Bank, 
    374 U.S. 321
    ,
    362, 
    83 S. Ct. 1715
    , 1741, 
    10 L. Ed. 2d 915
    , 944 (1963) (noting that a
    prediction of anticompetitive effects “is sound only if it is based upon a
    firm understanding of the structure of the relevant market [and that] the
    relevant economic data are both complex and elusive”).
    B. The Per Se Rule vs. the Rule of Reason. Under the federal
    antitrust laws, challenged agreements or conspiracies are presumptively
    analyzed through the “rule of reason.” Texaco Inc. v. Dagher, 
    547 U.S. 1
    ,
    5, 
    126 S. Ct. 1276
    , 1279, 
    164 L. Ed. 2d 1
    , 7 (2006).         This requires
    plaintiffs to demonstrate that a particular arrangement “is in fact
    unreasonable and anticompetitive before it will be found unlawful.” 
    Id. “Per se
    liability is reserved for only those agreements that are so plainly
    anticompetitive that no elaborate study of the industry is needed to
    establish their illegality.” 
    Id. (internal quotation
    marks omitted). “Some
    types of restraints . . . have such predictable and pernicious
    anticompetitive effect, and such limited potential for procompetitive
    benefit, that they are deemed unlawful per se.” State Oil Co. v. Khan, 
    522 U.S. 3
    , 10, 
    118 S. Ct. 275
    , 279, 
    139 L. Ed. 2d 199
    , 206 (1997).
    9
    In applying the rule of reason, “the factfinder weighs all of the
    circumstances of a case in deciding whether a restrictive practice should
    be prohibited as imposing an unreasonable restraint on competition.”
    Bus. Elecs. Corp. v. Sharp Elecs. Corp., 
    485 U.S. 717
    , 723, 
    108 S. Ct. 1515
    , 1519, 
    99 L. Ed. 2d 808
    , 816 (1988) (internal quotation marks
    omitted). By contrast, when a practice falls under the per se rule, there
    is no need for “case-by-case evaluation.” 
    Id. “The per
    se rule, treating
    categories of restraints as necessarily illegal, eliminates the need to study
    the reasonableness of an individual restraint in light of the real market
    forces at work . . . .” Leegin Creative Leather Prods., Inc. v. PSKS, Inc.,
    
    551 U.S. 877
    , 886, 
    127 S. Ct. 2705
    , 2713, 
    168 L. Ed. 2d 623
    , 634
    (2007).
    Thus, “ ‘[i]t is only after considerable experience with certain
    business relationships that courts classify them as per se violations
    . . . .’ ” Broad. Music, Inc. v. Columbia Broad. Sys., Inc., 
    441 U.S. 1
    , 9, 
    99 S. Ct. 1551
    , 1557, 
    60 L. Ed. 2d 1
    , 10 (1979) [hereinafter BMI] (alteration
    in original) (quoting United States v. Topco Assocs., Inc., 
    405 U.S. 596
    ,
    607–08, 
    92 S. Ct. 1126
    , 1133, 
    31 L. Ed. 2d 515
    , 525 (1972)). Price-fixing
    agreements between competitors have been viewed as per se violations.
    
    Texaco, 547 U.S. at 5
    , 126 S. Ct. at 
    1279, 164 L. Ed. 2d at 7
    .
    But not all agreements on price are governed by the per se rule.
    When Texaco and Shell formed a joint venture known as “Equilon” to
    collaborate in the refining and marketing of gasoline in the western
    United States, the fact that the resulting gas was sold under the Texaco
    and Shell names at a single price did not amount to per se illegal price
    fixing. See 
    id. at 5–8,
    126 S. Ct. at 
    1279–81, 164 L. Ed. 2d at 7
    –9. As
    the United States Supreme Court explained,
    10
    Texaco and Shell Oil did not compete with one another in the
    relevant market—namely, the sale of gasoline to service
    stations in the western United States—but instead
    participated in that market jointly through their investments
    in Equilon. . . . [T]hough Equilon’s pricing policy may be
    price fixing in a literal sense, it is not price fixing in the
    antitrust sense.
    
    Id. at 5–6,
    126 S. Ct. at 
    1279–80, 164 L. Ed. 2d at 7
    –8.
    Similarly, in the BMI case, the Court held that the per se rule did
    not govern agreements among copyright holders to join together and
    issue blanket licenses at fixed rates. 
    BMI, 441 U.S. at 16
    , 99 S. Ct. at
    
    1560, 60 L. Ed. 2d at 14
    . As the Court said,
    [T]his is not a question simply of determining whether two or
    more potential competitors have literally “fixed” a “price.” As
    generally used in the antitrust field, “price fixing” is a
    shorthand way of describing certain categories of business
    behavior to which the per se rule has been held applicable.
    The Court of Appeals’ literal approach does not alone
    establish that this particular practice is one of those types or
    that it is “plainly anticompetitive” and very likely without
    “redeeming virtue.” Literalness is overly simplistic and often
    overbroad. When two partners set the price of their goods or
    services they are literally “price fixing,” but they are not per
    se in violation of the Sherman Act.
    
    Id. at 8–9,
    99 S. Ct. at 
    1556–57, 60 L. Ed. 2d at 9
    –10.          The Court
    emphasized that the blanket license was not a “ ‘naked restrain[t] of
    trade with no purpose except stifling of competition,’ ” but instead
    “accompanies the integration of sales, monitoring, and enforcement
    against unauthorized copyright use.”     
    Id. at 20,
    99 S. Ct. at 
    1562, 60 L. Ed. 2d at 16
    (alteration in original) (quoting White Motor Co. v. United
    States, 
    372 U.S. 253
    , 263, 
    83 S. Ct. 696
    , 702, 
    9 L. Ed. 2d 738
    , 746
    (1963)). The Court noted that the costs of individual sales transactions
    would be “prohibitive” and thus some form of blanket license was a
    necessity. 
    Id. at 20–21,
    99 S. Ct. at 
    1562–63, 60 L. Ed. 2d at 16
    –17.
    11
    C. Monopsony vs. Monopoly.         As the plaintiffs point out, the
    present case does not involve cooperation on sales but rather
    collaboration on purchases—specifically, purchases of health care
    services.   Thus, the concern is about potential monopsony power, not
    monopoly power. See 
    Mueller, 818 N.W.2d at 249
    n.3 (noting that the
    issue in the case is Wellmark is an alleged monopsonist rather than an
    alleged monopolist).
    Still, monopsonistic conduct can create economic dislocation by
    forcing supplier prices down below the competitive level, just as
    monopolistic conduct can lead to dislocation by driving consumer prices
    above a competitive level.   See 
    id. (citing Herbert
    Hovenkamp, Federal
    Antitrust Policy: The Law of Competition and Its Practice § 1.2(b), at 14
    (4th ed. 2011)).   In Mandeville Island Farms, Inc. v. American Crystal
    Sugar Co., the Supreme Court reversed the dismissal of a complaint
    brought by sugar beet growers, alleging that three sugar refiners had
    entered into an agreement to pay uniform prices for beets. 
    334 U.S. 219
    ,
    221, 246, 
    68 S. Ct. 996
    , 999, 1011, 
    92 L. Ed. 1328
    , 1333, 1345 (1948).
    As the Court put it, this arrangement “deprived the beet growers of any
    competitive opportunity for disposing of their crops by the immediate
    operation of the uniform price provision.” 
    Id. at 242,
    68 S. Ct. at 
    1009, 92 L. Ed. at 1343
    ; see also W. Penn Allegheny Health Sys., Inc. v. UPMC,
    
    627 F.3d 85
    , 104 (3d Cir. 2010) (citing Mandeville Island Farms, 
    334 U.S. 219
    , 
    68 S. Ct. 996
    , 
    92 L. Ed. 1328
    ) (noting that a conspiracy to depress
    reimbursement rates to medical providers can “pose[] competitive threats
    similar to those posed by conspiracies among buyers to fix prices and
    other restraints that result in artificially depressed payments to
    suppliers—namely,      suboptimal   output,   reduced   quality,   allocative
    12
    inefficiencies, and (given the reductions in output) higher prices for
    consumers in the long run” (citation omitted)).
    D. Is This a Per Se Case?               Having said this, we nevertheless
    agree with the district court that Wellmark’s arrangements with self-
    insured employers and out-of-state BCBS affiliates are governed by the
    rule of reason, not the per se rule. We reach this conclusion for several
    reasons.
    To begin with, these arrangements are not naked price-fixing
    arrangements but are more akin to joint ventures. The self-insureds are
    not entering into bare agreements to refrain from competing on price
    with Wellmark—they are buying claims-administration service from
    Wellmark. Part of that service consists of Wellmark’s negotiated pricing.
    As in BMI, the record indicates that it would be highly impractical for the
    vast majority of participants in the alleged conspiracy (i.e., the vast
    majority of the self-insured employers) to engage in the numerous
    individual transactions that would be needed if they could not latch on to
    Wellmark’s pricing. 1 Cf. 
    BMI, 441 U.S. at 20
    –21, 99 S. Ct. at 
    1563, 60 L. Ed. 2d at 17
    .
    Wellmark’s health care provider network is analogous to the
    blanket license in BMI. It provides a mechanism by which an otherwise
    unavailable product (self-financed health coverage) can be offered. Cf. 
    id. If the
    only lawful choice for a self-insured employer were the time-
    consuming process of negotiating individual rates with health care
    1The plaintiffs have included numerous pages of Wellmark reimbursement rates
    in the record. For example, for chiropractic services alone, Wellmark has approximately
    forty-eight different reimbursement rates in a given year, including twenty-one different
    rates for examination of X-rays. It seems implausible that a typical employer would
    have enough information about the value of chiropractic services to be able to negotiate
    with chiropractors on appropriate pricing for all these different procedures.
    13
    providers, the record indicates that almost all employers would avoid
    self-insuring. This would eliminate one possible way to render the health
    care market more efficient and reduce the costs of health care coverage—
    by allowing employers to bear the financial risk of health claims
    themselves.
    Insurance involves both claims-handling and risk-spreading.                      A
    large number of Iowa employers, according to the summary judgment
    record, want some of the package but not all of it. That is, they do not
    wish to go into the health insurance business themselves but instead
    desire to purchase typical health insurance services from an outside
    entity like Wellmark. At the same time, those employers apparently have
    enough financial wherewithal to assume the ultimate risk that workforce
    claims will exceed workforce premiums. 2               Why should this additional
    option for employers be a per se violation of the antitrust laws?
    Similar     efficiency-related     observations      can    be    made     about
    Wellmark’s reciprocal arrangements with out-of-state BCBS licensees.
    Iowans insured by Wellmark occasionally need health care services
    outside Iowa. Rather than attempt to negotiate its own rates in all fifty
    states, Wellmark has a reciprocal arrangement with the BCBS affiliates
    in those states. Under that arrangement, Wellmark can utilize the other
    licensees’ negotiated rates in their respective states, and they can use
    Wellmark’s negotiated rates in Iowa (and South Dakota, where Wellmark
    also operates). This enables Wellmark to offer a fifty-state product that
    meets the needs of its customers while saving Wellmark from the
    2Or  they believe they can buy a different, cheaper form of protection against that
    risk, such as a stop-loss.
    14
    expense of having to maintain a network and rate structure in states
    where it has relatively few claims. 3
    In   a   somewhat      different   context,   the   Supreme     Court   has
    recognized that joint buying can “achieve economies of scale . . . that
    would otherwise be unavailable.” Nw. Wholesale Stationers, Inc. v. Pac.
    Stationery & Printing Co., 
    472 U.S. 284
    , 286–87, 
    105 S. Ct. 2613
    , 2615,
    
    86 L. Ed. 2d 202
    , 206 (1985). In Northwest Wholesale Stationers, the
    Court declined to apply a per se analysis to a member’s claim that it had
    been   wrongfully     expelled    from    a    nonprofit   wholesale   purchasing
    cooperative, noting that “such cooperative arrangements would seem to
    be ‘designed to “increase economic efficiency and render markets more,
    rather than less, competitive.” ’ ”       
    Id. at 295,
    105 S. Ct. at 
    2620, 86 L. Ed. 2d at 212
    (quoting BMI, 441 U.S. at 
    20, 99 S. Ct. at 1562
    , 60
    L. Ed. 2d at 16); see also All Care Nursing Serv., Inc. v. High Tech Staffing
    Servs., Inc., 
    135 F.3d 740
    , 744, 747–49 (11th Cir. 1998) (declining to
    apply a per se analysis to an arrangement whereby competing hospitals
    agreed to seek bids as a group for temporary nursing services); Kartell v.
    Blue Shield of Mass., Inc., 
    749 F.2d 922
    , 925 (1st Cir. 1984) (rejecting
    antitrust claims and contrasting a legitimate, independent medical cost
    insurer with a “ ‘sham’ organization seeking only to combine otherwise
    independent buyers in order to suppress their otherwise competitive
    instinct to bid up price”).
    3If the plaintiffs were right, then an Iowa bank and a Florida bank could not
    reach an agreement on what they would charge each other’s customers for use of their
    ATMs, for example, when a customer of the Iowa bank travels to Florida or a Florida
    customer travels to Iowa. See In re ATM Fee Antitrust Litig., 
    554 F. Supp. 2d 1003
    ,
    1007, 1017 (N.D. Cal. 2008) (finding that an agreement among banks concerning an
    ATM interchange fee should be governed by the rule of reason, not the per se rule).
    15
    Furthermore, neither of these types of Wellmark arrangements
    truly represents a horizontal agreement between competitors. Cf. 
    Texaco, 547 U.S. at 5
    , 126 S. Ct. at 
    1279, 164 L. Ed. 2d at 7
    . Wellmark does not
    really compete with its self-insured clients. While a self-insured might
    elect not to use Wellmark’s services, plaintiffs cite no example of a self-
    insured that markets those kinds of services to anyone else in competition
    with Wellmark. Nor does Wellmark compete with the out-of-state BCBS
    licensees.     Its customers are in Iowa and South Dakota; the other
    licensees are licensed to sell health insurance in other states. 4
    Additionally, we agree with Wellmark that a decision of the United
    States District Court for the Northern District of Illinois is helpful and on
    point. See N. Jackson Pharmacy, Inc. v. Caremark Rx, Inc., 
    385 F. Supp. 2d
    740 (N.D. Ill. 2005).         In North Jackson, a retail pharmacy sued a
    pharmacy benefits manager that “administer[ed] prescription drug
    benefit plans on behalf of employers, health insurers and other third-
    party payors of prescription drug costs (‘Plan Sponsors’).” 
    Id. at 744.
    As
    the court stated, “By negotiating prescription drug reimbursement rates
    on behalf of the 1,200 Plan Sponsors it represents, Caremark acts on
    behalf of what is essentially a cooperative purchasing group.” 
    Id. at 746.
    The pharmacy alleged a per se violation of section 1 of the Sherman Act
    on the theory that the plan sponsors were engaged in a horizontal
    conspiracy to fix prescription drug prices. 
    Id. at 744–46.
    The district court rejected the per se categorization. 
    Id. at 747–51.
    The arrangement in question was not a “naked restraint,” but one which
    4The   plaintiffs make a passing assertion that Wellmark and the other out-of-
    state BCBS affiliates have entered into an illegal horizontal market division agreement
    not to sell health insurance in each other’s territories. This theory is not alleged in the
    petition nor supported by evidence in the record, and hence we will not consider it.
    16
    was “ancillary” to a broader venture with procompetitive potential. See
    
    id. at 747–48.
    The court elaborated,
    Any alleged agreement between Plan Sponsors to set the
    price paid for prescription drugs thus cannot be viewed in a
    vacuum, but must instead be looked at as a corollary of the
    cooperative arrangement between Caremark and the Plan
    Sponsors under which Caremark performs a variety of
    functions in the administration of Plan Sponsors’ drug
    benefit plans.     Those functions include not only the
    negotiation of reimbursement rates with retail pharmacies
    but also the processing of reimbursement claims,
    maintenance of patient records, design and management of
    drug formularies, negotiation of manufacturer rebates and
    maintenance of a mail order pharmacy.           According to
    Caremark, those functions contribute to increased efficiency
    and a reduction in the cost of prescription drugs delivered to
    Plan Subscribers.
    ....
    As described by the [complaint] and the parties’
    submissions on the current motion, the arrangement
    between Plan Sponsors and Caremark clearly has efficiency-
    enhancing potential.      Caremark specializes in various
    functions of benefit plan administration and is likely able to
    achieve economies of scale in the performance of those
    functions that would otherwise be unavailable to Plan
    Sponsors. And the creation of retail pharmacy networks,
    which necessarily involves the setting of reimbursement
    rates, undoubtedly contributes to the success of that larger
    endeavor.
    ....
    . . . That is of particular relevance here, where (as
    North Jackson itself alleges) PBMs [Pharmacy Benefits
    Managers] such as Caremark administer the prescription
    drug benefits of “approximately 210 million Americans; 70%
    of the U.S. population”. Any premature ruling that one of
    the primary functions performed by PBMs is per se illegal
    would have particularly far-reaching consequences for the
    delivery of affordable prescription drugs to a large portion of
    the population, a consideration that further supports
    thorough rule of reason analysis.
    What has been said to this point should not be read as
    expressing an ultimate view as to the lawfulness of the
    alleged conspiracy between Plan Sponsors. If the required
    rule of reason inquiry were to reveal that the anticompetitive
    17
    consequences of any such conspiracy sufficiently outweigh
    its procompetitive benefits so that the restraint is ultimately
    judged unreasonable under Section 1, this Court would not
    hesitate to rule accordingly. But because no authority even
    suggests that all cooperative purchasing agreements run
    afoul of Section 1, and because the agreement at issue here
    is part of a larger and potentially procompetitive enterprise,
    the rule of reason must be applied to North Jackson’s Claim
    I.
    
    Id. at 748–51.
    Another and related factor arises from a concern explained by
    Kartell v. Blue Shield of Massachusetts, Inc., 
    749 F.2d 922
    , 931 (1st Cir.
    1984):
    [T]he subject matter of the present agreement—medical
    costs—is an area of great complexity where more than solely
    economic values are at stake. How to provide affordable,
    high quality medical care is much debated. And, many
    different solutions—ranging from stricter regulation to
    greater reliance on competing service organizations—have
    been proposed. This fact, too, warrants judicial hesitancy to
    interfere.
    The conditions that were present in North Jackson Pharmacy
    prevail here as well.     The arrangements here are not bare price-fixing
    agreements; indeed, unlike in North Jackson Pharmacy, there is not even
    an allegation that the various self-insureds have entered into agreements
    with each other.     Rather, the self-insured employers have entered into
    significant relationships with Wellmark under which Wellmark provides
    much more than a price list—i.e., a network of providers; rules for
    eligibility,   limitations,   copays,    and   deductibles;   and    claims
    administration and processing.           From the employee’s standpoint,
    Wellmark appears to be providing traditional health insurance. The only
    difference is that the employer and not Wellmark is the ultimate financial
    backstop.
    18
    Also, similar to the situation in North Jackson Pharmacy, the
    record here indicates that there are potential efficiencies and economies
    of scale when employers rely on Wellmark to perform these functions, in
    which it has experience and expertise. The vast majority of employers
    could not realistically perform these duties on their own. There are also
    potential efficiencies and economies of scale when out-of-state insurers
    collaborate with Wellmark instead of trying to set up their own network
    for a relatively small number of Iowa claims.
    Additionally, as in North Jackson Pharmacy, there are reasons for
    “judicial hesitancy” in classifying the challenged practices as per se
    violations of antitrust law. The plaintiffs themselves admit the practices
    are widespread. A large percentage of Iowans are covered by self-insured
    employer plans administered by Wellmark. The BlueCard® network is a
    national program used by health insurers and clients across the country.
    We should be reluctant to declare these arrangements flatly illegal,
    without considering their relative procompetitive or anticompetitive
    effects.
    Plaintiffs seek to distinguish North Jackson Pharmacy on the
    ground     that   Wellmark     is    not   a    “mere   independent   third-party
    ‘administrator’ ” but a “major competitor in the market for Iowa
    healthcare provider services.”         Yet we fail to see how this distinction
    helps the plaintiffs’ cause.        It is true that Wellmark provides a higher
    level of service than a “mere administrator.”              It is also true that
    Wellmark’s health care provider network was set up at least in part for
    its own purposes, not merely as a device to enable group purchasing of
    health care services. But these factors, if anything, take the challenged
    arrangements even further out of the realm of naked restraints. The self-
    19
    insured employers are purchasing a bundle of preexisting services from
    Wellmark that most of them could not provide themselves.
    Plaintiffs analogize this case to Arizona v. Maricopa County Medical
    Society, but we think the analogy is imperfect. See 
    457 U.S. 332
    , 
    102 S. Ct. 2466
    , 
    73 L. Ed. 2d 48
    (1982).      That case involved naked price-
    fixing: The physician members of a trade association were agreeing to
    abide by fee schedules. 
    Id. at 340–41,
    102 S. Ct. at 
    2471, 73 L. Ed. 2d at 56
    . There was no joint product or service being developed or sold. See
    
    id. at 339–40,
    102 S. Ct. at 
    2470, 73 L. Ed. 2d at 55
    –56.           The two
    wrinkles in the case were that the agreed-upon fees were maximum
    prices and the price-fixers were professionals. 
    Id. at 348–49,
    102 S. Ct.
    at 
    2475, 73 L. Ed. 2d at 61
    –62. Yet the Court found that neither of these
    considerations mattered and that the per se rule still applied. 
    Id. It took
    note of Arizona’s contention that so-called maximum prices can have the
    effect of stabilizing and enhancing the level of actual charges. 
    Id. at 341–
    42, 102 S. Ct. at 2471
    –72, 73 L. Ed. 2d at 57.
    This case might be comparable to Maricopa County Medical Society
    if the plaintiffs were claiming that Wellmark and other Iowa health
    insurers had simply agreed they would pay the same reimbursements to
    health care providers, without exchanging any meaningful services.
    Under Maricopa County Medical Society, it would not be a defense that
    the health insurers had agreed on minimum rather than maximum
    reimbursement rates. 5    457 U.S. at 
    348–49, 102 S. Ct. at 2475
    , 73
    L. Ed 2d at 61–62. But that is not the situation here. We do not have a
    naked price-fixing agreement among competitors.
    5Note  again that the ultimate concern relates to monopsony rather than
    monopoly effects.
    20
    The plaintiffs also argue at some length that Wellmark has market
    power in health insurance in Iowa.      This may be true, but it is not
    relevant to a per se claim.   If plaintiffs’ per se argument were correct,
    then it would be illegal for any insurer to make its insurance network
    pricing available to a self-insured that used the insurer’s administrative
    and claims services even if the insurer had only a miniscule market
    share.
    Additionally, the plaintiffs rely on Department of Justice and
    Federal Trade Commission guidance on health care. However, we believe
    the line that those agencies have drawn between per se and rule of
    reason conduct is consistent with the decision in this case. Consider the
    following passage from the 1996 Statements of Antitrust Enforcement
    Policy in Health Care:
    An agreement among purchasers that simply fixes the price
    that each purchaser will pay or offer to pay for a product or
    service is not a legitimate joint purchasing arrangement and
    is a per se antitrust violation. Legitimate joint purchasing
    arrangements provide some integration of purchasing
    functions to achieve efficiencies.
    U.S. Dep’t of Justice & Fed. Trade Comm’n, Statements of Antitrust
    Enforcement Policy in Health Care 67 n.17 (1996), available at
    http://www.justice.gov/atr/public/guidelines/0000.pdf. The challenged
    arrangements here are not simply agreements among purchasers to fix a
    price, which would be subject to per se treatment. To the contrary, both
    the self-insureds and the out-of-state BCBS licensees are obtaining a
    block of Iowa claims-related services from Wellmark.     In other words,
    there is “integration of purchasing [and other related] functions to
    achieve efficiencies.” 
    Id. We are
    not today foreclosing a rule of reason claim against
    Wellmark if it were shown that the anticompetitive consequences of its
    21
    practices exceeded their procompetitive benefits. 6 We simply uphold the
    district court’s ruling that Wellmark’s arrangements with self-insured
    employers and out-of-state BCBS licensees are not subject to the per se
    rule. Because the plaintiffs by stipulation limited themselves to a per se
    claim, we affirm the district court’s grant of summary judgment.
    IV. Conclusion.
    For the foregoing reasons, the district court’s judgment is affirmed.
    AFFIRMED.
    All justices concur except Hecht and Appel, JJ., who take no part.
    6As   the court put it in North Jackson Pharmacy,
    If the required rule of reason inquiry were to reveal that the
    anticompetitive consequences of any such conspiracy sufficiently
    outweigh its procompetitive benefits so that the restraint is ultimately
    judged unreasonable under Section 1 [of the Sherman Act], this Court
    would not hesitate to rule accordingly. But because no authority even
    suggests that all cooperative purchasing agreements run afoul of Section
    1, and because the agreement at issue here is part of a larger and
    potentially procompetitive enterprise, the rule of reason must be applied
    to North Jackson’s Claim I.
    
    385 F. Supp. 2d
    at 750–51.
    

Document Info

Docket Number: 13–1872

Filed Date: 2/27/2015

Precedential Status: Precedential

Modified Date: 2/1/2016

Authorities (22)

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