Guidant sued Aspen two years ago, alleging that Aspen induced hospitals to breach their confidentiality agreements with Guidant, when hospitals that engaged Aspen for business advice provided their Guidant contract information and pricing to Aspen for confidential analysis and recommendations. Some Guidant contracts contain clauses prohibiting the hospital from sharing the contract information, including pricing and terms, with any "third party" without Guidant’s consent. The case was settled in May 2006. Papers filed in the case under seal were previously unavailable for public review.

The motion to unseal the documents was filed by a third party, Public Citizen, a not-for-profit consumer advocacy organization that raises consumer issues in Congress and the courts. In its motion, Public Citizen maintained that "Guidant’s efforts to suppress publication of its products’ prices hinders efforts at maintaining price transparency and threatens to foster the artificial elevation of prices, possibly limiting public access to affordable health care."¹

According to the Court’s October 24 order, "Public Citizen alleges that Guidant is threatening third parties in the healthcare industry…and that these companies need guidance with respect to acceptable price comparisons and disclosure activities…Public Citizen seeks the information contained in [Guidant’s and Aspen’s] summary judgment briefs and related documents so that it can more thoroughly investigate and report about this matter of public interest and so that it can effectively assist targets of Guidant’s alleged threats of liability"²

The Court determined that Guidant had not adequately demonstrated a need for continued secrecy of certain court documents, and ordered certain document unsealed.

Who’s inducing whom?

Of special interest in the unsealed court papers is information regarding Guidant’s own efforts to induce hospitals to share their "confidential" product pricing with a third party – hired by Guidant.

According to the summary judgment brief filed by Aspen, "Discovery revealed (that) Guidant hired a market research firm, Millenium Research Group ("MRG"), to survey hundreds of hospitals across the nation to collect the same pricing information" that was the subject of Guidant’s lawsuit against Aspen.³

"At Guidant’s direction, MRG systematically requested that hospitals divulge the prices they paid for CRM devices made by Guidant and its competitors, St. Jude and Medtronic."⁴ In exchange for talking to MRG and providing information, MRG paid the hospitals a $150 honorarium. The surveys were "blind," meaning that MRG did not disclose that Guidant commissioned the survey.⁵

In Aspen’s view, hospitals "comfortably disclose Guidant’s supposedly secret pricing to firms like MRG because the hospitals do not believe the prices are a trade secret, and the industry thrives on the exchange of prices among hospitals, the physicians that practice at hospitals, group purchasing organizations ("GPOs"), benchmarking firms and consultants."⁶

So, let’s pause here to summarize: On the one hand, Guidant has bound its client hospitals by confidentiality clauses, requiring the hospital to keep their prices confidential and not share them with any "third party" such as other hospitals, physicians, or patients.

On the other hand, Guidant can engage a third party of its own – MRG of Toronto, Ontario, Canada – to call more than 300 of Guidant’s own client hospitals each month, speak to the cath lab and EP lab managers, and get the hospitals’ pricing for Guidant products, as well as those of Guidant’s competitors. "It is simply incredible that Guidant has asked the Court to prevent hospitals from providing pricing information to consultants, while simultaneously taking full advantage of hospitals’ willingness to freely provide this information…"⁷

The hypocrisy
of confidential pricing

But then, maybe protecting "confidential information" from the eyes of third parties was beside the point. In Aspen’s view, "This lawsuit is an outgrowth of Guidant’s hypocrisy…this is not a legal dispute, but a business one. Guidant’s real objective is to eradicate consulting firms – which it labels "leeches" – because Guidant sees them as an ally to hospitals in their cost reduction efforts."⁸

Public Citizen declared the unsealing "a partial win for health care consumers over corporate secrecy." But this battle rages on in every Materials Management department every day of the year. Medical device manufacturers demand confidentiality clauses that severely limit (or completely prevent) hospitals from benchmarking their prices or otherwise ensuring that their pricing is reasonable in the marketplace.

Secrecy keeps prices high, and hospitals that sign agreements with restrictive language are a big part of the problem. By signing away control of their own information, hospitals give medical device manufacturers a legal leg to stand on in enforcing pricing secrecy.

The solution? Follow one simple rule: Do not agree to any confidentiality clause that limits the hospital’s rights to reasonably share its purchasing data – including device pricing –
with "any third party." Be part of the solution, not part of the problem. HPN

References:

1 Court Orders Guidant To Release Documents, http://www.consumeraffairs.com/
news04/2006/10/pubcit_guidant.html.

2 Cardiac Pacemakers, Inc. v. Aspen Healthcare Metrics, LLC, No. 04-CV-4048 (D. Minn. October 24, 2006), document 420, page 6.

3 Aspen’s Memorandum in Support of its Motion for Summary Judgment, filed in Cardiac Pacemakers, Inc. v. Aspen Healthcare Metrics, LLC, No. 04-CV-4048 (D. Minn.) document 421-1, page 1.

4 Id.

5 Guidant’s only defense to its commission of MRG to obtain the pricing of Guidant and its competitors’ products was that after MRG obtained this pricing information from hospitals, the information was de-identified and provided only to certain individuals within Guidant. See Guidant’s Response to Aspen’s Motion for Summary Judgment, filed in Cardiac Pacemakers, Inc. v. Aspen Healthcare Metrics, LLC, No. 04-CV-4048 (D. Minn.) document 425, pages 14-16.

6 Aspen’s Memorandum in Support of its Motion for Summary Judgment, filed in Cardiac Pacemakers, Inc. v. Aspen Healthcare Metrics, LLC, No. 04-CV-4048 (D. Minn.) document 421-1, page 1.

7 Id. at 24.

8 Id. at 2.