1

 15 U.S.C. § 13c. 

2 Abbot Laboratories v. Portland Retail Druggists Ass’n, 425 U.S. 1, 14 (1976). 

UNITED STATES OF AMERICA

FEDERAL TRADE COMMISSION

WASHINGTON, D.C. 20580

Bureau of Competition 

David Pender

Acting Assistant Director

(202) 326-2549

Bruce J. Toppin, Esq.

Vice President/General Counsel

North Mississippi Health Services

830 South Gloster Street

Tupelo, Mississippi 38801

August 16, 2005

Dear Mr. Toppin:

This letter responds to your request on behalf of North Mississippi Health Services (NMHS) for

an advisory opinion on whether NMHS may provide pharmaceuticals, at cost, to both the Good

Samaritan Clinic and the Sanctuary Hospice House under the Non-Profit Institutions Act

(NPIA). The NPIA exempts from the Robinson-Patman Act “purchases of their supplies for

their own use by schools, colleges, universities, public libraries, churches, hospitals, and

charitable institutions not operated for profit.”1

 For the reasons explained below, we have

concluded that the NPIA would apply to pharmaceuticals transferred by NMHS to both the Good

Samaritan Clinic and the Sanctuary Hospice House.

Based on the facts you provided, the staff understands that NMHS is a non-profit corporation

currently receiving preferential price treatment in its purchase of pharmaceuticals as permitted

by the NPIA exception to the Robinson-Patman Act. NMHS purchases pharmaceuticals from a

pharmaceutical wholesaler. The Good Samaritan Clinic is a non-profit institution funded entirely

by donations, grants, and unpaid services by volunteer physicians, nurses and others, that

provides free care to the working poor and their families in and around Lee County, Mississippi. 

The Sanctuary Hospice House is a non-profit corporation formed to establish a Medicarecertified inpatient hospice facility in Tupelo, Mississippi. The Sanctuary Hospice House is set to

open shortly. NMHS pays a lower price for its pharmaceuticals than is currently available to the

Good Samaritan Clinic and the Sanctuary Hospice House.

The NPIA applies only to pharmaceuticals purchased by a hospital for its “own use” – that is, for

use in the care the hospital renders to its patients.2

 Since the patients of the Good Samaritan

Clinic and the Sanctuary Hospice House are not NMHS’s patients, the NPIA would not apply to

pharmaceuticals dispensed directly by the hospital to those individuals. The Commission,
3 St. Peter’s Hospital of the City of Albany, 92 F.T.C. 1037 (1978) (Commission advisory opinion).

4

 FTC Staff Advisory Opinion, Letter from Michael D. McNeely to Sheldon Klein (North Ottawa

Community Hospital) (October 22, 1996). 

2

however, has concluded that the NPIA does cover the transfer of supplies, at cost, from a nonprofit hospital to another organization that is entitled to NPIA protection for its own purchases,

so long as those supplies are for the receiving institution’s “own use” within the meaning of the

NPIA.3

 

Based on the information you have provided, both the Good Samaritan Clinic and the Sanctuary

Hospice House appear to be non-profit charitable institutions entitled to purchase supplies under

the NPIA, and it appears that they will use the pharmaceuticals they receive from NMHS for

their “own use.” Accordingly, NMHS’s transfer of its discounted pharmaceuticals to the Good

Samaritan Clinic and Sanctuary Hospice House at its cost would be covered by the NPIA. This

reasoning would not apply, however, if the Good Samaritan Clinic or Sanctuary Hospice House in

turn dispensed the pharmaceuticals in a manner that did not qualify as for their “own use,” such as if

the Good Samaritan Clinic filled prescriptions for walk-in customers. 

Additionally, the exemption would be lost if NMHS sold pharmaceuticals to the Good Samaritan

Clinic or Sanctuary Hospice House at a profit. As we concluded in North Ottawa, an institution

making a transfer to another NPIA eligible institution may charge the receiving institution only its

acquisition cost for the materials plus a fee sufficient to cover any additional costs it incurs as a

direct result of making the transfer (but not overhead expenses that the institution would incur

without regard to the transfer).4

 NMHS will retain the protection of the NPIA, therefore, if it

transfers pharmaceuticals to the Good Samaritan Clinic and to the Sanctuary Hospice House at a

price that does not exceed its direct costs in purchasing and transferring the materials.

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.F.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 if it would be in the public interest to do so.

Sincerely yours,

David R. Pender

Acting Assistant Director