Puerto Rican Pharmacy Cooperative Settles Price-Fixing Charges

A Puerto Rican cooperative of pharmacy owners, Cooperativa de Farmacias Puertorriquenas, known as "Coopharma," has agreed to settle Federal Trade Commission charges that it harmed competition by negotiating, entering into, and implementing agreements among its member pharmacies to fix prices on which they contract with insurers and pharmacy benefit managers.

According to the FTC, Coopharma's actions over the past five years have led to higher prices for Puerto Rico's health care consumers. In settling the charges, Coopharma has agreed not to engage in such conduct in the future. The case is the latest example of the FTC's work to protect consumers from higher costs and decreased innovation in the health care sector.

Coopharma consists of approximately 300 pharmacy-owner members who own more than 350 pharmacies in Puerto Rico. Its members represent at least one-third of all pharmacies in Puerto Rico, and have a particularly strong presence on the western side of the island.

The FTC charges that since at least 2007, Coopharma has violated federal antitrust laws by collectively negotiating with more than 10 payers over reimbursement rates, and signing seven single-signature "master contracts" on behalf of its member pharmacies. In addition, the FTC alleges that the threat of collective action by Coopharma members led two payers to pay higher rates to the group's members through their individual pharmacy contracts. Coopharma's actions caused substantial harm to Puerto Rican health care consumers, the FTC charges, without any offsetting efficiencies.

The proposed consent order resolves the FTC's concerns relating to Coopharma's conduct and is designed to prevent its recurrence. It prohibits Coopharma from entering into or facilitating agreements between or among any pharmacies:

• to negotiate on behalf of any pharmacy with any payer;
• to refuse to deal or threaten to refuse to deal with any payer;
• to include any term, condition, or requirement upon which any pharmacy deals, or is willing to deal, with any payer, including, but not limited, price terms; or
• not to deal individually with any payer or not to deal with any payer other than through Coopharma.

The proposed order also prohibits Coopharma from facilitating information exchanges between pharmacies regarding whether, or on what terms to contract with a payer, and it bars attempts to engage in any of the conduct prohibited by the order. It also bars Coopharma from encouraging, suggesting, advising, pressuring, inducing, or trying to induce anyone to engage in the prohibited conduct.

Finally, the proposed order allows payers to terminate their contracts with Coopharma without penalty, and requires Coopharma to notify each pharmacy that provides services through that contract of the termination. It also subjects Coopharma to provisions designed to ensure its compliance with the proposed order, which will expire in 20 years.

The Commission vote to accept the consent agreement and proposed consent order for public comment was 5-0. The FTC will publish a description of the consent agreement package in the Federal Register shortly. The agreement will be subject to public comment for 30 days, beginning today and continuing through September 20, 2012, after which the Commission will decide whether to make the proposed consent order final.

Interested parties can submit written comments electronically or in paper form by following the instructions in the "Invitation To Comment" part of the "Supplementary Information" section. Comments can be submitted electronically. Comments in paper form should be mailed or delivered to: Federal Trade Commission, Office of the Secretary, Room H-113 (Annex D), 600 Pennsylvania Avenue, N.W., Washington, DC 20580. The FTC is requesting that any comment filed in paper form near the end of the public comment period be sent by courier or overnight service, if possible, because U.S. postal mail in the Washington area and at the Commission is subject to delay due to heightened security precautions.

NOTE: The Commission issues an administrative complaint when it has "reason to believe" that the law has been or is being violated, and it appears to the Commission that a proceeding is in the public interest. The complaint is not a finding or ruling that the respondent has actually violated the law. A consent order is for settlement purposes only and does not constitute an admission by the respondent that the law has been violated. When the Commission issues a consent order on a final basis, it carries the force of law with respect to future actions. Each violation of such an order may result in a civil penalty of up to $16,000.

The FTC's Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Bureau of Competition, Federal Trade Commission, 601 New Jersey Ave., Room 7117, Washington, DC 20580. To learn more about the Bureau of Competition, read Competition Counts. Like the FTC on Facebook, follow us on Twitter, and subscribe to press releases for the latest FTC news and resources.