Industry Trends: Small Labs Relying on Antitrust Laws to Protect Their Market Position

Frustrated by the consolidation taking place within the medical lab testing market, small and mid-sized labs that have not been swallowed up are fighting back by filing antitrust lawsuits against the giants they believe are squeezing them out.

The St. Joseph Hospital Case
The most recent proponent of this last-ditch legal strategy is Wahidullah Medical Corp., the Eureka, California-based owner of Redwood Urgent Care and its affiliated lab which is asking a federal court to issue an injunction barring St. Joseph Hospital from seeking to monopolize outpatient lab testing within the Eureka market. Redwood claims that St. Joseph tarnished its reputation, misled consumers and implemented an EMR that was incompatible with the lab's systems in a deliberate attempt to stifle competition. The suit contends that St. Joseph charges nearly10 times more than Redwood for outpatient tests, citing the example of a vitamin D test costing $36 at Redwood and $327 at St. Joseph.

LabCorp & Quest Also on the Firing Line
And the St. Joseph case is only the most recent illustration of a larger trend. Two of the lab industry's biggest players have been targeted for civil lawsuits for allegedly crowding smaller labs out of the market in violation of antitrust laws including:

• Laboratory Corporation of America which is being sued by Prescient Medicine for colluding with AmeriHealth on an illegal contract making LabCorp the exclusive provider of Medicaid lab services in the state of Delaware; and

• Quest Diagnostics which is defendant in a lawsuit brought by Texas-based United Allergy Services (UAS) for conspiring with Thermo Fisher Scientific's Phadia business (among others) to squeeze UAS out of the allergy testing market.

Takeaway: Private antitrust litigation is a high-risk strategy typically borne of frustration. While the potential penalties are staggering, including treble damages, antitrust claims are also extremely hard to prove. Quest itself has been down this road before beating back antitrust claims in northern California, the same market at the center of the claims against St. Joseph Hospital.