United States District Court, E.D. Pennsylvania
EDUARDO C. ROBRENO, J.
an antitrust action alleging a nationwide conspiracy amongst
Blue Cross and Blue Shield Association and the administrators
of several separately owned, locally operated Blue Cross and
Blue Shield Plans to deny insurance coverage for certain
mobile cardiac outpatient telemetry devices produced by
Plaintiff LifeWatch Services, Inc. The defendants have moved
collectively to dismiss the currently operative complaint in
this case. For the reasons that follow, the Court will grant
Mobile Cardiac Outpatient Telemetry
mobile cardiac outpatient telemetry (“MCOT”)
device is one of several types of arrhythmia monitoring
devices that a physician may prescribe to remotely record a
patient's electrocardiograph (“EKG”), which
displays a patient's heartbeat patterns to enable
physician diagnosis. See Third Amended Compl. ¶¶
29, 33, ECF No. 90 (hereinafter “TAC”). In
general, four different types of arrhythmia monitoring
devices may be used for EKG testing: (1) Ambulatory holter
electrocardiography devices (also known as Holter monitors),
(2) ambulatory event monitors, (3) insertable monitors, and
(4) telemetry monitors (also known as MCOT devices). See
to Plaintiff LifeWatch Services, Inc.
(“LifeWatch”), MCOT devices offer several
advantages over other types of arrhythmia monitoring devices,
including an ability to “record both normal and
abnormal heart activity . . . and . . . transmit all of the
data promptly, ” “store all of the cardiac data
during the time when the patient wears the monitor, resulting
in more data collection, ” and “detect certain
arrhythmias based on user-definable input formulae.”
Id. ¶ 33(a)-(c). Additionally, MCOT devices
“do not require a patient's intervention to
either capture or transmit data on an arrhythmia, ” and
thus “the time from recording to transmission and
subsequent physician notification and intervention is
significantly reduced” as compared to other devices.
Id. ¶ 33(d)-(e). These features arguably make
telemetry superior to all other types of monitoring,
particularly for low-risk patients experiencing infrequent
arrhythmias. Id. ¶ 34(c).
a Delaware corporation headquartered in Rosemont, Illinois,
is “one of the two largest sellers of telemetry
monitors.” Id. ¶ 11. Their specific
product at issue in this case, originally marketed as the
“Lifestar Ambulatory Cardiac Telemetry” and later
renamed the “LifeWatch MCT 3-Lead, ” is referred
to by the parties as “ACT.” Id.
LifeWatch has two patient-monitoring facilities for privately
insured patients, one in Philadelphia and the other near
Chicago, from which “LifeWatch personnel analyze data
transmitted from LifeWatch's devices, which are mostly
ACT devices.” Id.
Cross and Blue Shield Association (the
“Association”) is a national federation of
thirty-six health insurance plans (the “Blue
Plans”) that, though each separately owned, are all
licensed by the Association to use the Blue Cross name.
Id. ¶ 1. The Association is the largest
commercial health insurer in the United States. Id.
¶ 3. It provides insurance coverage to approximately 105
million Americans, or roughly fifty percent of all
commercially insured individuals in the United States.
Id. ¶ 12. In addition to the Association,
Defendants in this case include the following parties, all of
which are administrators of various Blue Plans: Blue Cross;
WellPoint, Inc.; Horizon Blue Cross Blue Shield of New
Jersey; Blue Cross Blue Shield of South Carolina; and Blue
Cross Blue Shield of Minnesota (collectively with the
Association, “Defendants”). Id.
thrust of LifeWatch's complaint is that, despite ample
scientific evidence supporting the efficacy of telemetry,
Defendants have continuously conspired for years to deny
insurance coverage for MCOT devices and services. See
Id. ¶¶ 5-8, 46. LifeWatch alleges that
“[t]here is a reason why, for more than a decade,
almost all Blue Plans have uniformly held, year after year,
that for all patients and all conditions, telemetry is never
‘medically necessary, '” despite evidence to
the contrary. Id. ¶ 56. This reason, according
to LifeWatch, is “a horizontal anticompetitive
agreement” they refer to as “the Blue Cross
‘Uniformity Rule.'” Id.
claims that the “Uniformity Rule” is an illegal
agreement amongst Blue Plans to substantially conform to the
terms of a model medical policy providing “directions .
. . on what claims to deny and what to accept.”
Id. ¶ 57. These terms are allegedly set by a
“Medical Policy Panel” that meets several times a
year and considers votes by each Blue Plan “as to
whether a particular service, procedure, or medical device
should be covered.” Id. ¶ 59. LifeWatch
alleges that “all Blue Plans agree to adopt all or
substantially all of the Association's coverage
decisions, as expressed in the model ‘medical policy,
'” and that, “[t]o enforce the Uniformity
Rule, the Association ‘audits' each Blue Plan's
medical policies.” Id. ¶ 58. According to
LifeWatch, “[i]f an audit finds substantial deviations
from the model medical policy, the Blue Plan can be penalized
and risks losing the right to use the Blue Cross name.”
with regard to MCOT devices, LifeWatch alleges that
Defendants “have repeatedly voted on the model medical
policy that requires blanket denial of telemetry
coverage.” Id. ¶ 60. LifeWatch argues
that “this policy is inconsistent with the medical
literature; the opinions of the independent experts who
specifically rejected [Defendants'] position; and the
conclusions of other commercial medical insurers, Medicare,
and Medicaid.” Id. ¶ 61. In light of this
alleged inconsistency, LifeWatch believes that the Blue Plans
have continuously denied coverage for MCOT devices “not
because of an independent evaluation of the evidence, but
pursuant to their horizontal agreement to make consistent
coverage denials and refuse to deal in disfavored products,
such as telemetry.” Id.
claims that, as a direct result of Defendants'
“concerted refusal to deal, ” LifeWatch
“suffers reduced revenue and profits and sees its
incentive to innovate diminished.” Id. ¶
63. LifeWatch alleges further that Defendant has
“distorted the outpatient cardiac-monitoring device
market and substantially reduced the demand for and output of
telemetry.” Id. ¶ 87. This distortion,
LifeWatch argues, causes anticompetitive effects, including
reduction in the quality of patients' cardiac monitoring;
deprivation of the benefit to patients of quality
competition; reduction of the output of MCOT services in the
relevant markets; and inhibition of research and development,
innovation, and future competition to improve the quality of
MCOT services. See Id. ¶¶ 75-80.
on the foregoing facts, LifeWatch brings a single count of
conspiracy to restrain trade in violation of Section 1 of the
Sherman Act, 15 U.S.C. § 1. Id. ¶ 95.
LifeWatch seeks a permanent injunction prohibiting Defendants
from “entering into, or honoring or enforcing, any
agreements that cause them to act in concert in deciding
whether to deny or restrict coverage for telemetry”
along with treble damages, reasonable costs, and
attorneys' fees. Id. ¶ 98.
motion presently before the Court arrived along a circuitous
route. LifeWatch filed its initial complaint in this Court on
September 10, 2012. ECF No. 1. It was not until August 6,
2015, that Defendants filed a motion to dismiss under Federal
Rule of Civil Procedure 12(b)(6). ECF No. 48. After the
parties stipulated to several extensions, LifeWatch filed its
response to the motion to dismiss on September 24, 2015, ECF
No. 61, and Defendants moved for leave to file a reply brief
in further support of their motion to dismiss, ECF No. 64.
late 2015 and early 2016, the Court entertained a series of
motions regarding a request by Plaintiff's former counsel
to withdraw from the case. See ECF Nos. 69-85. These
proceedings, which included a hearing held on November 3,
2015, ECF No. 77, ultimately resulted in the substitution of
new counsel for Plaintiff, who filed an unopposed motion for
leave to file a third amended complaint on February 16, 2016,
ECF No. 87. The Court granted LifeWatch leave to file a third
amended complaint on February 17, 2016. ECF No. 89.
filed its third amended complaint on February 25, 2016, ECF
No. 90, and it is this complaint that Defendants now seek to
dismiss. The Court held a hearing on the motion on
December 19, 2016, ECF No. 110, and grants that motion today.