Judge tosses antitrust complaints vs. radiological drug company, others accused of rigging Cook County hospital bids

Nuclear pharmaceuticals company Triad Isotopes and a group of related defendants, who are being sued in federal court over claims they rigged bids to secure Cook County drug contracts, have succeeded in persuading a judge to dismiss three of seven counts against them.

Matthew Blaum and the radiopharmaceutical provider for whom he worked, Hot Shots, brought a suit in November 2011 in U.S. District Court for the Northern District of Illinois against defendants Triad Isotopes Inc., Covidien Inc., Todd Giba, Dr. Donald Trepashko and Sami Distributors Inc.

Giba has been a sales representative for healthcare products provider Covidien and Trepashko serves as head of nuclear medicine for the Cook County Health and Hospitals System.

In July 2014, Blaum and Hot Shots amended their complaint, alleging two violations each of the federal and state False Claims Acts, one violation each of federal and state antitrust acts, and one allegation of tortious interference with a prospective business opportunity.

In September 2014, the defendants filed a motion to dismiss all counts. U.S. District Judge Robert M. Dow recently issued a ruling, in which he tossed the federal and state antitrust counts, as well as the tortious interference count.

In the antitrust counts, Blaum and Hot Shots claimed Triad Isotopes, Giba and Trepashko conspired to rig bids for the drug contracts awarded by CCHHS. The system includes John H. Stroger Jr. Hospital, Provident Hospital, Oak Forest Hospital, and a number of community health clinics, among other facilities in the county.

CCHHS spends about $2 million per year on radiopharmaceutical drugs, which are used to treat cancer and other diseases, and are used in MRIs, CT scans and other radiological procedures.

According to the Hot Shots complaint, the defendants allegedly concocted a scheme under which Trepashko would pass insider information to Giba, with whom he enjoyed a “close relationship,” to ensure Giba’s then-employer Covidien would effectively land the CCHHS radiopharmaceutical drug contract by fulfilling a bid purportedly submitted by Sami, a minority-owned company alleged in the complaint to have had no prior experience with such work. Under this scheme, Sami would act as a “pass-through entity” for Covidien.

Giba later went to work for Triad, when it acquired Covidien, and Cook County changed its bidding processes. To keep the bid, Blaum and Hot Shots said the alleged conspirators worked to alter the bid forms, significantly increasing the expected doses for rarely used, expensive drugs, allowing Triad to drastically undercut bids put forth by competitors, including Hot Shots.

Blaum alleges the rigged bids cost the county about $300,000 per year.

While acknowledging the claims, Judge Dow said Blaum and Hot Shots’ assertions can only be construed to allege the defendants’ conduct affected one contract, and did not show “how defendants’ conduct impacted the relevant market.”

To illustrate this point, Dow drew attention to a 1996 federal appellate court ruling that antitrust laws are “designed to protect consumers from producers, not to protect producers from each other . . .”

However, Dow encouraged the plaintiffs, adding, “. . . were Hot Shots able to remedy its pleading deficiency as to the market impact of defendants’ anticompetitive conduct, its complaint would not fail due to a lack of antitrust injury.”

Regarding the tortious interference claim, Dow said Blaum and Hot Shots needed to convince him that in the bidding process, they had a reasonable expectancy of winning the contract – an expectancy allegedly derailed by the defendants’ efforts – and not merely a “hope” of winning. Dow described Blaum and Hot Shots’ allegations on this count as “threadbare.”

With the dismissal of the three counts, the next move is up to Blaum and Hot Shots. The judge told them they should inform him if they plan to file another amended complaint, in which they replead the dismissed counts.

Blaum and Hot Shots are represented by the Chicago firm of Loevy & Loevy. The various defendants are represented by various Chicago firms, including Grady Bell; Ropes & Gray; Rock, Fusco &Connelly; Greensfelder, Hemker & Gale; Morgan & Bley; and Reed Smith.