Class Action Suit Alleges Quest Diagnostics is a Monopoly

A class action lawsuit filed in the northern district of California on Jan. 29, includes accusations that Quest Diagnostics, Inc. (Quest) colluded with Aetna and Blue Shield of California to exclude competitors and charge above fair market prices, achieving a monopoly in clinical diagnostic testing in northern California.
Alleged Anti-competitive Conduct The class action complaint asserts that Quest dominates two markets—namely, markets for testing billed directly to outpatients and health plans and testing billed directly to medical providers, such as physicians. The complaint alleges that Quest gained control of these markets by providing significant discounts to physicians it billed directly for testing services and to insurance companies to gain exclusive contracts and exclude competitors so they could overcharge patients and obtain more lucrative “pull through” business. Quest also aggressively acquires its competitors, according to the class action lawsuit.
The 36-page complaint lists four counts against Quest and cites what it claims is direct and circumstantial evidence of Quest’s market power and a monopoly. The plaintiffs allege that Quest charged in excess of competitive pricing yet provided “inferior quality service”—and claim Quest’s ability to do this demonstrates market control. Other circumstantial evidence plaintiffs allege includes Quest’s economies of scale that allow it to offer managed care contracts at substantially lower prices than competitors in the northern California market which results in exclusive capitated contracts between Quest and the largest insurance companies in the market.
Various newsletters have reported that a Quest spokesperson has denied the allegations, vowed to vigorously defend itself, and claimed Quest obtained a dismissal recently in a similar antitrust case. In that other case, the judge dismissed claims related to competition but, according to a Feb. 2 article in the Internet publication Top Class Actions, other aspects of the case are still ongoing.
Plaintiffs seek a declaration that Quest violated federal and state laws regarding competition, an injunction prohibiting Quest from engaging in the conduct described in the complaint, and an award of damages, restitution, disgorgement, attorneys fees and costs, and pre- and post-judgment interest.
Analysis and Summary Other lawsuits similar this one have been filed unsuccessfully against the two largest laboratories, Quest Diagnostics and Laboratory Corporation of America. The government has obtained vast numbers of documents through the various court cases and settlements occurring as a result of these lawsuits. Yet, no meaningful government action has been taken in response to the allegations made in these complaints. It remains to be seen whether this lawsuit will suffer the same fate—a slow and costly demise, as all those that went before it.
Takeaway: Even despite a lack of success in these lawsuits, laboratory compliance officers should still be alert for potentially anti-competitive activity and not consider these outcomes as a license to allow their laboratories to engage in anticompetitive practices.