Bureau of Competition 

Health Care Division 

November 30, 2012 

Dionne C. Lomax 

Vinson & Elkins LLP 

UNITED STATES OF AMERICA 

FEDERAL TRADE COMMISSION 

WASHTNGTON, D.C. 20580 

2200 Pennsylvania Avenue NW 

Suite 500 West 

Washington, DC 20037 

Re: The Methodist Hospital System Advisory Opinion 

Dear Ms. Lomax: 

This letter responds to your request on behalf of The Methodist Hospital System ("Methodist") 

for an advisory opinion concerning Methodist's proposal to sell certain critical shortage drugs to 

Baytown EMS, a division of the Baytown, Texas, city government, during the pendency of the 

shortage. Baytown EMS serves as the exclusive 9-1-1 emergency transport service for Baytown 

residents. You requested our view on the permissibility of these proposed sales under the 

Robinson-Patman Act.' Specifically, you requested that we opine on the applicability of the 

Non-Profit Institutions Act ("NPIA") to the proposal. The NPIA provides an exemption from 

liability under the Robinson-Patman Act for purchases of supplies by certain non-profit 

organizations for their own use. 2 

We need not reach the NPIA question, however, because Methodist's proposal, as presented, 

appears to be a pennissible emergency humanitarian gesture. As explained below, Methodist 

proposes to sell pharmaceuticals to Baytown EMS for the sole purpose of assisting Baytown 

EMS in the care of patients during a time of nationwide shortages of certain critical drugs. Given 

these facts, it is our view that, pursuant to the Supreme Court's discussion ofa hospital's role in 

an emergency in Abbott Labs. v. Portland Retail Druggists Ass 'n, Inc., 425 U.S. I (1976) and the 

Commission's similar discussion in its St. Peter's Hospital of the City of Albani advisory 

, 15 U.S.C. § 13. 

2 15 U.S.C. § 13c (exempting 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"). 

3 St. Peter's Hospital of the City of Albany, 92 F.T.C. 1037 (1978) (Commission advisory opinion). 
The Methodist Hospital System Advisory Opinion 

November 30, 2012 

Page 2 

opinion, Methodist may resell the needed pharmaceuticals to Baytown EMS as a humanitarian 

gesture during the shortages. 4 

Factual Background 

As we understand the facts based on information you provided, Methodist is a non-profit 

hospital system that provides comprehensive care to its patients. It is based in Houston, Texas, 

and purchases its pharmaceuticals through a group purchasing organization at an NPIAdiscounted price. 5 Methodist is comprised of inpatient facilities, outpatient surgery centers, 

imaging centers, and emergency care centers. CUlTently, its facilities include five hospitals. One 

of Methodist's hospitals is San Jacinto Methodist Hospital, which is a 392-bed general acute care 

inpatient facility located about 30 miles east of downtown Houston, in Baytown, Texas. 6 San 

Jacinto Methodist is the only hospital within Baytown's city limits.' Further, it is the only 

hospital in the Baytown area that provides the full range of acute care inpatient health services.s 

Baytown EMS is the exclusive transport provider for the City of Baytown's 9-1-1 service. It is a 

division of the city of Baytown and was created under the Emergency Healthcare Act for the sole 

purpose of providing critical medical care and emergency medical transportation services to the 

citizens of Baytown. By city ordinance, Baytown EMS is the only emergency medical service 

transport allowed to respond within the city limits. It employs 21 paramedics and has four frontline ambulances. 9 The vast majority of Baytown EMS's emergency transports go to San Jacinto 

4 This advisory opinion should not be construed as taking the position that the Robinson-Patman Act 

necessarily applies to these facts, or that Methodist's proposed sale to Baytown EMS would violate the RobinsonPatman Act absent the shortage situation or other applicable exemption. We provide this opinion, under these unique 

circumstances of critical drug shortages~ in an effort to provide reassurances that may be helpful to entities in their 

efforts to cope with the current drug shortages. 

5 Letter from Dionne C. Lomax, Vinson & Elkins LLP, to Markus H. Meier, FTC (July 25, 2012) 

[hereinafter "July Letter"]; Letter from Dionne C. Lomax, Vinson & Elkins LLP, to Robert S. Canterman, FTC 

(Sept. 6, 2012) [hereinafter "September Letter"]' 

6 See http://www.methodisthealth.com (viewed September 17,2012); July Letter. 

, September Letter. 

8 July Letter. 

9 July Letter; September Letter. 
The Methodist Hospital System Advisory Opinion 

November 30,2012 

Page 3 

Methodist. 10 Though it can collect fees for its services, Baytown EMS does not generate a 

profit." 

As you have explained, during transport of patients to hospitals for care, it may be necessary for 

Baytown EMS to administer certain phannaceuticals prior to arrival at the hospital. Indeed, the 

administration of certain phannaceuticals at the first point of care can be critical to a patient's 

clinical outcome. Recently, however, owing to well-publicized nationwide shortages of certain 

critical drugs, Baytown EMS has been unable to keep its ambulances stocked with safe inventory 

levels of certain of these clitical pharmaceuticals. Efforts to secure supply from other vendors 

have not succeeded, and the problem appears to be prevalent throughout the region.'2 

To assist Baytown EMS in dealing with the drug shortages and to ensure that its patients, which 

comprise tlte vast majority of Baytown EMS's transports, receive the necessary clinical care en 

route to the hospital, Methodist proposes to sell, at cost, critical shortage drugs to Baytown EMS. 

As you explained to us, Methodist would continue this arrangement only for so long as the drugs 

are in shortage.'3 

Analysis 

The Supreme Court's opinion in Abbott Labs. v. Portland Retail Druggists Ass 'n, Inc., 425 U.S. 

1 (1976) guides our analysis of permissible uses of NPIA-discounted phannaceuticals. There, 

in addition to clarifying the applicability of the NPIA exemption to the Robinson-Patman Act, 

the Supreme Court addressed the appropriate role of a hospital in an emergency situation. It 

stated: 

We recognize, however, that there may be an occasion when the hospital 

pham1acy is the only one available in the community to meet a particular 

emergency situation .... So long as the hospital phannacy holds the emergency 

situation within bounds, and entertains it only as a humanitarian gesture, we shall 

not condemn the hospital and its suppliers to a Robinson-Patman violation 

because of the presence of the occasional walk-in dispensation of that type. '4 

10 See id. 

" September Letter. 

'2 July Letter; September Letter. 

13 See id. 

'4 See Abbott at 18. The Court further noted that the occasional emergency would likely be de minimis in 

any event. 
The Methodist Hospital System Advisory Opinion 

November 30,2012 

Page 4 

Applying the Supreme Court's reasoning in Abbott, the Commission previously has determined 

that a hospital could resell pharmaceutieals it purchased pursuant to the NPIA diseount to the 

general public during an emergency caused by a Medicaid strike. In its St. Peter's opinion, the 

Commission concluded that "if needed pharmaceuticals are not available or difficult to obtain, 

[the hospital) may resell the needed pharmaceuticals to the general public as a humanitarian 

gesture during the emergency caused by the [Medicaid) strike.,,15 

Methodist's proposal appears consistent with both the Supreme Court's reasoning in Abbott and 

the Commission's reasoning in St. Peter's. As we understand the facts you have presented, 

Methodist runs the only hospital within Baytown's city limits. To assist Baytown EMS during a 

time of well-publicized nationwide shortages of clitical drugs, Methodist seeks to sell certain 

shortage drugs that it obtains at the NPIA-disconnted price to Baytown EMS. These shortage 

drugs are necessary to the care of Baytown EMS's emergency transport patients, most of whom 

are transported to Methodist and ultimately become patients of Methodist. Despite its efforts to 

do so, Baytown EMS has been nnable to secure adequate supply of these drugs from other 

sources. Methodist only proposes to assist Baytown EMS during the pendency of the shortages. 

Thus, applying Abbott and St. Peter's, it is our opinion that Methodist may resell the needed 

shortage drugs to Baytown EMS to assist Baytown EMS in its efforts to maintain safe inventory 

levels of those products for use in the treatment of its emergency transport patients. 

Conclusion 

As diseussed above, we conclude that Methodist's proposal to resell pharmaceuticals to Baytown 

EMS to assist Baytown EMS in its efforts to cope with shortages of certain critical drugs would 

be a permissible humanitarian gesture and that Methodist may resell the needed pharmaceuticals 

to Baytown EMS during the shortages. 

This letter sets out the views of the staff of the Bureau of Competition, as authorized by the 

Commission's Rules of Practice. Under Commission Rule § 1.3(c), 16 C.P.R. § 1.3(c), the 

Commission is not bound by this staff opinion and reserves the right to rescind it at a later time. 

In addition, this office retains the right to reconsider the questions involved and, with notice to 

the requesting party, to rescind or revoke the opinion if implementation of the proposed program 

results in substantial anticompetitive effects, if the program is used for improper purposes, if 

facts change significantly, or ifit otherwise would be in the public interest to do so. 

Sincerely, 

MPI.L~ Markus H. Meier 

Assistant Director 

IS St. Peter's H05pitai of the City of Albany, 92 F.T.C. 1037 (1978) (Commission advisory opinion).