Commission Approves Staff Comments on Attorney Advertising to New York Unified Court System; FTC Staff Issues Advisory Opinion Concerning the NPIA to St. Johns Health System

Commission approval of staff comments on attorney advertising:

– The Commission has approved comments by the staffs of the Office of Policy Planning, the Bureau of Consumer Protection, and the Bureau of Economics to the New York State Unified Court System regarding proposed amendments to its rules governing attorney advertising. According to the comments, which can be found on the FTC’s Web site as a link to this press release, while deceptive and misleading advertising by lawyers should be prohibited, rules that unnecessarily restrict the dissemination of truthful and non-misleading information are likely to limit competition and harm consumers of legal services in New York State.

Specifically, the comments state that: 1) some of the Proposed Amendments related to the style and content of media advertising do not necessarily target deception and will prevent non-misleading advertisements that may otherwise convey useful information to consumers and spur competition; 2) advertising should be prohibited only if deception would not be cured by a clear and conspicuous disclosure; 3) a proposed requirement that copies of all advertisements and solicitations be placed on file publicly with the Bar's Attorney Disciplinary Committee will likely raise prices for consumers, and any potential benefits from such an extensive requirement might be outweighed by its detrimental effects upon competition; and 4) to the extent that the Proposed Amendments may deter attorneys from participating in attorney online legal matching services, they are likely to harm consumers. The Staff stated that, overall, consumers are better off if concerns about potentially misleading advertising are addressed through advertising restrictions that are narrowly tailored to prevent deceptive claims.

The Commission vote approving the issuance of the staff comments was 5-0. (FTC File No. V060020; the staff contact is Gus Chiarello, Office of Policy Planning, 202-326-2633.)

Issuance of staff advisory opinion concerning the Non-Profit Institutions Act:

– The staff of the Bureau of Competition has advised St. John’s Health System in Missouri that its proposed plan to provide pharmaceuticals to patients of both its affiliated hospital and its affiliated clinic, through three hospital-owned pharmacies, falls within the Non-Profit Institutions Act (NPIA). That statute exempts from the Robinson-Patman Act “purchases of . . . supplies for their own use by schools, colleges, universities, public libraries, churches, hospitals, and charitable institutions not operated for profit.”

St. John’s Health System is a non-profit corporation, operating an integrated health services delivery system. It provides medical services through two wholly owned subsidiaries: St. John’s Regional Health Center (Hospital) and St. John’s Clinic (Clinic). The Hospital and Clinic also are non-profit Missouri corporations. St. John’s Health System currently receives preferential price treatment in its purchase of pharmaceuticals used to treat Hospital inpatients, as permitted under the NPIA. It would like to provide the preferentially priced pharmaceuticals to Clinic patients and Hospital outpatients, as well.

These pharmaceuticals would be provided to Clinic patients and to Hospital outpatients through three Hospital-owned pharmacies. St. John’s Health System will institute the appropriate safeguards to ensure that the preferentially priced pharmaceuticals are not dispensed to the pharmacies’ walk-in customers, who are not current Hospital or Clinic patients, and it will establish a separate accounting system to track non-exempt transactions and avoid improper sales. St. John’s Health System asked for an opinion regarding whether this distribution of pharmaceuticals to Hospital outpatients and Clinic patients falls within the NPIA.

The staff opinion letter, signed by Markus H. Meier, Assistant Director of the Health Care Services and Products Division of the FTC’s Bureau of Competition, concluded that pharmaceuticals used in the ways described in the request letter could be distributed by St. John’s Health System to Hospital outpatients and to Clinic patients through the Hospital-owned pharmacies without violating the NPIA. Though not explicitly covered as eligible institutions by the NPIA’s statutory language, St. John’s Health System appears to be the type of non-profit charitable institution that Congress intended to, and courts have held to, be exempt under that statute.

Additionally, the use of the preferentially priced pharmaceuticals as contemplated by St. John’s Health System in its request letter is for its “own use,” because the treatment of its patients through the Hospital and the Clinic is clearly part of its institutional mission as a provider of integrated health services. Provided that St. John’s Health System takes the appropriate safeguards to ensure that the preferentially priced pharmaceuticals are not dispensed to individuals who are not patients of the greater St. John’s Health System, the use of the pharmacies does not change the analysis.

NOTE: This letter sets out the views of the staff of the FTC’s Bureau of Competition, as authorized by the Commission’s Rules of Practice. It has not been reviewed or approved by the Commission. As the Commission’s Rules explain, the staff’s advice is rendered “without prejudice to the right of the Commission later to rescind the advice and, where appropriate, to commence an enforcement proceeding.” (The staff contact is Ellen Connelly, Bureau of Competition, 202-326-2532.)

Copies of the documents mentioned in this release are available from the FTC’s Web site at http://www.ftc.gov and from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, DC 20580. Call toll-free: 1-877-FTC-HELP.