FTC Settles Radioactive Allegations Against Cardinal Health With A Near Record-Breaking Disgorgement Agreement

In a 3-2 decision, as part of its aggressive antitrust enforcement in health care industries, the Federal Trade Commission (FTC or the Commission) announced that Cardinal Health, Inc. (Cardinal) agreed to pay $26.8 million to resolve the FTC's allegations that Cardinal illegally monopolized the sale of low-energy radiopharmaceutical drugs in 25 geographic markets and inflated prices charged to hospitals and clinics for the drugs. The figure represents the second highest disgorgement settlement for the agency and the FTC's first disgorgement victory in over a decade. This case is an important reminder that the FTC can and will seek to use disgorgement as an equitable remedy when challenging certain conduct.

Cardinal, the country's largest owner and operator of radiopharmacies, sells and distributes low-energy radiopharmaceuticals, which are used by hospitals and clinics to perform diagnostic imaging procedures. Low-energy radiopharmaceuticals contain a radioactive isotope combined with a chemical agent; the ingredients, particularly the short half-life of the radioactive isotopes, require providers to use closely geographically located radiopharmacies, resulting in highly localized markets.

The FTC alleged that Cardinal began its scheme in 2003 by obtaining the de facto exclusive right to distribute radiopharmaceuticals containing heart perfusion agents (HPAs) from Bristol-Myers Squibb Co. (BMS) and General Electric Co. (GE), who were at the time the sole U.S. producers of HPAs. HPAs, used to perform heart stress tests, can represent up to 60% of a radiopharmacy's revenue. Around the same time, in 2003 and 2004, Cardinal acquired a dominant position in the marketplace by acquiring rival radiopharmacies Syncor International (Syncor) and Geodax Technology, Inc. (Geodax). The FTC claimed that these actions were designed to prevent competitors from entering the market, noting that the Syncor and Geodax acquisitions made Cardinal the only radiopharmacy in 24 markets.

According to the FTC, Cardinal continued to use anticompetitive tactics to maintain its distribution exclusivity by using its leverage as the largest (and in some markets, only) radiopharmacy to coerce BMS and GE. In some instances, Cardinal:

used the companies against each other to pressure BMS to abandon plans to license products to new competitors; threatened to compete against BMS as a generic HPA manufacturer; threatened to withhold business if the companies granted distribution...