Source: https://m.openjurist.org/425/us/1
Timestamp: 2020-02-20 12:26:59
Document Index: 254726202

Matched Legal Cases: ['§ 322', '§ 13', '§ 13', '§ 13', '§ 13', '§ 13', '§ 13', '§ 13', '§ 13', '§ 13', '§ 13']

425 U.S. 1 - Abbott Laboratories v. Portland Retail Druggists Association Inc
425 US 1 Abbott Laboratories v. Portland Retail Druggists Association Inc
47 L.Ed.2d 537
PORTLAND RETAIL DRUGGISTS ASSOCIATION, INC., etc.
7. To the hospital's employee or student for personal use or for the use of his dependent.7
10. To the walk-in customer who is not a patient of the hospital.8
This division into categories reveals, of course, that we are concerned with linedrawing. The demarcation is somewhat simplified,on this record, by a concession on the part of the respondent. The respondent agrees with the Court of Appeals that the dispensing of drugs " 'in the course of treatment in the hospital is the hospitals' (Sic ) own use,' " regardless of whether the patient is technically described as an outpatient or as an inpatient. It does not matter, the respondent says, "whether the patient is occupying a bed or not"; thus, a "day surgery patient receiving medication while being treated in the hospital would be covered (that is, the sale to him would be exempt) whether in bed or not, as would one receiving a shot or pill while standing upright or otherwise in the outpatient clinic." Brief for Respondent 11. See also Tr. of Oral Arg. 29.
Before we turn to the remaining categories, we should state that we recognize, as the parties do, that the concept of the nonprofit hospital and its appropriate and necessary activity has vastly changed and developed since the enactment of the Nonprofit Institutions Act in 1938. The intervening decades have seen the hospital assume a larger community character. Some hospitals, indeed, truly have become centers for the "delivery" of health care. The nonprofit hospital no longer is a receiving facility only for the bedridden, the surgical patient, and the critical emergency. It has become a place where the community is readily inclined to turn, and because of increasing costs, physician specialization, shortage of general practitioners, and other factors is often compelled to turn, whenever a medical problem of import presents itself. The emergency room has become a facility for all who need it and it no longer is restricted to cases previously authorized by members of the staff. And patients that not long ago required bed care are often now treated on an ambulatory and outpatient basis. See Eastern Kentucky Welfare Rights Organization v. Simon, 165 U.S.App.D.C. 239, 249, 506 F.2d 1278, 1288 (1974), cert. granted, 421 U.S. 975, 95 S.Ct. 1974, 44 L.Ed.2d 466 (1975); Brodie & Graber, Institutional Pharmacy Practice in the 1970's, 28 Am.J.Hosp.Pharm. 240, 241 (1971).
It has been said, of course, that the antitrust laws, and Robinson-Patman in particular, are to be construed liberally, and that the exceptions from their application are to be construed strictly. United States v. McKesson & Robbins, 351 U.S. 305, 316, 76 S.Ct. 937, 943, 100 L.Ed. 1209, 1218 (1956); FMC v. Seatrain Lines, Inc., 411 U.S. 726, 733, 93 S.Ct. 1773, 1778, 36 L.Ed.2d 620, 626 (1973); Perkins v. Standard Oil Co., 395 U.S. 642, 646-647, 89 S.Ct. 1871, 1873-1874, 23 L.Ed.2d 599, 605-606 (1969). The Court has recognized, also, that Robinson-Patman "was enacted in 1936 to curb and prohibit all devices by which large buyers gained discriminatory preferences over smaller ones by virtue of their greater purchasing power." FTC v. Broch & Co., 363 U.S. 166, 168, 80 S.Ct. 1158, 1160, 4 L.Ed.2d 1124, 1127 (1960); FTC v. Fred Meyer, Inc., 390 U.S. 341, 349, 88 S.Ct. 904, 908, 19 L.Ed.2d 1222, 1228 (1968). Because the Act is remedial, it is to be construed broadly to effectuate its purposes. See Tcherepnin v. Knight, 389 U.S. 332, 336, 88 S.Ct. 548, 553, 19 L.Ed.2d 564, 569 (1967); Peyton v. Rowe, 391 U.S. 54, 65, 88 S.Ct. 1549, 1555, 20 L.Ed.2d 426, 433 (1968). Implied antitrust immunity is not favored. United States v. National Assn. Securities Dealers, 422 U.S. 694, 719, 95 S.Ct. 2427, 2443, 45 L.Ed.2d 486, 505 (1975). "(O)ur cases have repeatedly established that there is a heavy presumption against implicit (antitrust) exemptions." Goldfarb v. Virginia State Bar, 421 U.S. 773, 787, 95 S.Ct. 2004, 2013, 44 L.Ed.2d 572, 585 (1975); United States v. Philadelphia Nat. Bank, 374 U.S. 321, 350-351, 83 S.Ct. 1715, 1734-1735, 10 L.Ed.2d 915, 937-938 (1963). And the focus of Robinson-Patman is on competition "at the same functional level." FTC v. Sun Oil Co., 371 U.S. 505, 520, 83 S.Ct. 358, 367, 9 L.Ed.2d 466, 479 (1963).
But the legislative history of the Nonprofit Institutions Act indicates clearly that that Act was concerned with the suspicion that Robinson-Patman, at the time just recently enacted, actually might operate to outlaw price favors that sellers would wish to grant to eleemosynary institutions. S.Rep. No. 1769, 75th Cong., 3d Sess., 1 (1938); H.R.Rep. No. 2161, 75th Cong., 3d Sess., 1 (1938). The parties here seek to utilize this legislative history in opposite ways. The respondent asserts that the statutory assurance of exemption "was never intended to countenance a mass invasion of the retail drug sale market by hospitals," Brief for Respondent 34, and that what Congress had in mind was "the role traditionally occupied by hospitals," Id., at 35. The petitioners assert that the 1938 statute "was written to assist a wide range of nonprofit institutions to operate at the lowest possible cost in the public interest," Brief for Petitioners 17, and that the focus was on the character of the institution, not on the particular features of its program, and not only on those institutions that operated at a loss, Id., at 17-18.
We are not fully persuaded by either view. The modern American hospital developed from an institution originally intended for the sick poor. See Eastern Kentucky Welfare Rights Organization v. Simon, 165 U.S.App.D.C., at 249, 506 F.2d, at 1288; E. Fisch, D. Freed, & E. Schachter, Charities and Charitable Foundations § 322 (1974); Bromberg, The Charitable Hospital, 20 Cath.U.L.Rev. 237, 238-240 (1970). Language in the bill which became the 1938 Act, that would have exempted only sales to nonprofit institutions "supported in whole or in part by public subscriptions," was deleted, 83 Cong.Rec. 6065 (1938), and the Act's exemption provision was not so restricted and confined. We thus do not relate the exemption to what might be described as the nonprofit hospital's original or "traditional" status. On the other hand, there is nothing in the Act that indicates that its exemption provision is to be applied and expanded automatically to whatever new venture the nonprofit hospital finds attractive in these changing days. The Congress surely did not intend to give the hospital a blank check. Had it so intended, it would not have qualified purchases by nonprofit institutions in the way it did in § 13c. See H.R.Rep. No. 1983, 90th Cong., 2d Sess., 78-79 (1968). We are concerned, after all, with an exemption from an antitrust statute, and the accepted general principles, hereinabove set forth, do have application even in the nonprofit hospital context.
7. Dispensation to the hospital's employee or to its student for the purchaser's personal use or for the use of his dependent poses a somewhat different problem. A hospital is an organization populated by persons rendering essential services of various kinds. The hospital's employees enable it to function. The hospital pharmacy is but a part of the whole; the employee and his services are other parts. And to the extent the institution has students on the medical and hospital scene interns, persons in the hospital's nursing, practical nursing, and nurse's aide programs, those in paramedical, chaplaincy, and administrative fields, and the like the connection with the hospital's purposes and its activities is obvious and institutionally intimate. We conclude, therefore, that dispensation by the pharmacy to the hospital's employee or student, each of whom, literally, is a member of the hospital family, for his own use or for the use of his dependent, enhances the hospital function and qualifies as being in the hospital's "own use," within the meaning of § 13c.9 But we draw the line between dispensation for the employee's or the student's personal use, or for the use of his dependent, on the one hand, and that for the use of another, even a nondependent family member, on the other.
8 and 9. What we have said in the preceding paragraph applies with equal force to dispensation to a physician member of the staff for his personal use or for the personal use of his dependent. The physician staff member, though not an employee in the technical sense of being full time in the hospital's service and on its payroll, nevertheless is vital to its existence. It is he who supplies the patient and who engages, perhaps directly and at least to some extent through the staff organization, in the formulation of the hospital's professional and operative policies. His activity at the hospital is in the hospital's use its very purpose for existence and dispensation to the physician and his dependent, we think, is for the hospital's "own use," within § 13c.
We again draw the line, however, when the physician's acquisition from the hospital pharmacy is not for his personal use or that of his dependent, or is not for the hospital. To the extent that the physician utilizes his proximity to the hospital pharmacy, and it permits him so to do, for other persons or other uses even, as this record occasionally intimates, for dispensation in that portion of his private practice unconnected with the hospital the requirement of the hospital's "own use" is not fulfilled. Here again the relationship is too attenuated for the statutory benefit, and we hold that § 13c definitely is not satisfied.
We therefore hold that the walk-in buyer generally is not within the statute's exemption. We recognize, however, that there may be an occasion when the hospital pharmacy is the only one available in the community to meet a particular emergency situation. The respondent seeks to counter this possibility with a telephone book yellow-page reference to the providing of 24-hour service, and of some emergency or delivery service, by certain metropolitan Portland retail pharmacies. Brief for Respondent 56. That may be. We are content, however, to conclude that the occasional emergency is De minimis, in any event, and that its presence solitarily would not trigger litigation of the present kind. So long as the hospital pharmacy 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.10
The petitioners suggest that a decision holding some dispensations by the nonprofit hospital not to be exempt establishes an objectionable and unworkable standard for hospitals and their suppliers because it "requires a segregation of drugs or accounting of their use that can be achieved only through the institution of clumsy and expensive dual supply or tracing systems to regulate and account for the use of drugs." Brief for Petitioners 28. They suggest the undesirability of a supplier's "controlling the disposition of merchandise the hands of a purchaser," citing United States v. Arnold, Schwinn & Co., 388 U.S. 365, 379, 87 S.Ct. 1856, 1865, 18 L.Ed.2d 1249, 1260 (1967), and they speak of the supplier's "retroactive exposure to claims." Brief for Petitioners 29.
Petitioners' concern is understandable, but we feel that it is overstated. Looking at the problem from the point of view of the purchasing hospital, two alternatives, and perhaps more,11 are presented. The first, and easier, is for the hospital pharmacy Not to dispense in any way hereinabove held to be outside the exemption of § 13c. The second is for the pharmacy to do exactly what the petitioners deplore, namely to establish a recordkeeping procedure that segregates the nonexempt use from the exempt use. This would be supplemented by the hospital's submission to its supplier of an appropriate accounting followed by the price adjustment that is indicated. This, to be sure, is cumbersome, but it obviously is the price the Congress has exacted for the benefits bestowed by the controlling legislation, and it should be no more cumbersome than the accounting demands that are made on commercial enterprises of all kinds in our complex society of today.
While I join the Court's opinion, I wish to add a word about the applicability of the exemption provided by the Nonprofit Institutions Act. To my mind, the key to the Act is that it exempts from the Robinson-Patman Act not only an itemized list of institutions, but also all "charitable institutions not operated for profit." 15 U.S.C. § 13c. This suggests to me that the named institutions schools, colleges, universities, public libraries, churches, and hospitals were not intended to be limited to their traditional activities in qualifying for the exemption, but may expand those activities and still qualify so long as any new activities for which exempted supplies are purchased are charitable and not operated for profit.
I agree with the Court that the exemption is not "to be applied and expanded automatically to whatever new venture the nonprofit hospital finds attractive in these changing days." Ante, at 13. But I believe the exemption is applicable to any new venture the hospital finds attractive and that is both charitable and not operated for profit. There is no suggestion nor could one be made that the activities the Court today finds outside the exemption fall within this category,* so there is no need to address this problem here. But I write to emphasize that I do not read the Court's opinion as foreclosing hospitals or other exempted institutions from expanding their charitable activities in highly untraditional ways and still qualifying for the exemption.
Since all charitable institutions are covered by the Act, the purpose quite obviously is not to freeze a particular charitable institution into a particular kind of charity. Rather, as I understand it, the purpose of the limitation is generally to preclude the institution from taking advantage of its antitrust exemption by buying low-cost supplies solely for the purpose of reselling them at a profit. That is, Congress was primarily interested in directly aiding nonprofit institutions by lowering their operating expenses, but not interested in indirectly aiding such institutions by providing them with the means of raising additional money particularly when such resales of supplies would put the institution in competition with retail businesses not eligible for the exemption. While I do not believe Congress meant to preclude profit-making sales in the course of the institution's charitable activities and so I agree that the Court's inquiry is the correct one I suggest that the nexus between particular sales and those activities should be particularly closely scrutinized when a profit is made to assure that the sales are not made primarily for moneymaking purposes. Thus, sales only arguably within the scope of the institution's charitable activities might be exempted when made on a nonprofit basis and not exempted when made for profit. After analysis with this balancing factor in mind, I agree with the lines drawn by the Court and concur in its opinion.
"We may concede that in these respects distribution by the hospitals can be justified as a proper and useful community service and thus can be regarded as a proper hospital function. It is not, however, the hospitals' 'own use.' . . . The purpose for which these supplies are purchased the use to which they are to be put is their consumption. Section 13c can apply here only to cases in which a hospital can be said to be the consumer. It cannot apply to cases of resale by the hospital to a private consumer.
The sole exception was Bess Kaiser Hospital. As to this institution, the Court of Appeals concluded that certain factors "appear to present disputed issues of fact," and that the "proper legal standard" for determining whether that hospital was " 'not operated for profit' " could not be developed "on the limited record" before the court. The issue, therefore, was to be resolved on remand. 510 F.2d 486, 488 (1974). No review of this aspect of the Court of Appeals' judgment has been sought, and that detail is not before us. Neither are we confronted here with an issue as to the nonprofit status, within § 13c, of the other 13 hospitals.
See the same Court of Appeals' decision in Logan Lanes Inc. v. Brunswick Corp., 378 F.2d 212, cert. denied, 389 U.S. 898, 83 S.Ct. 219, 19 L.Ed.2d 216 (1967).
We referred above, in n. 4 to Logan Lanes, Inc. v. Brunswick Corp. The parties, in their respective ways, seek to make as much as possible of that decision. Logan Lanes was a treble-damages suit centering in the sale by Brunswick, to a Utah State Board, of bowling lanes and related equipment at prices lower than Brunswick charged Logan for similar equipment. The items purchased by the board were installed in a state university's student union building, and, while they were "primarily for the use of students, faculty and staff of the University," were also used by members of the public. 378 F.2d, at 214. The public use during the 20 months following installation, according to affidavits presented by Brunswick, amounted to 2,934 lines bowled out of a total of 128,349. The trial court
granted Brunswick's motion for summary judgment. One ground for this ruling was that the purchase was exempt under § 13c. The Ninth Circuit affirmed. It refused to restrict the statute's use of the term "supplies" to consumables and noncapital items and, instead, held that the term embraced anything required to meet the qualified institution's needs. It concluded that the exact amount of public use was immaterial and that, even assuming "the public made substantial use of the University bowling facilities," 378 F.2d, at 217, the purchases in question were made by the nonprofit university for its own use. The situation presented by Students Book Co. v. Washington Law Book Co., 98 U.S.App.D.C. 49, 232 F.2d 49 (1955), cert. denied, 350 U.S. 988, 76 S.Ct. 474, 100 L.Ed. 854 (1956), also cited by the parties here, was distinguished.
The latter case concerned sales of lawbooks to self-sustaining campus bookstores for resale at a profit. The Court of Appeals held, 98 U.S.App.D.C., at 50-51, n. 5, 232 F.2d, at 50-51, n. 5, that these were not sales to universities "for their own use," within the meaning of § 13c. The defendant, however, prevailed on another ground.
We agree with the court in the Students Book Co. case that the purchases challenged there were not purchases by a nonprofit institution of the type to which § 13c relates. Those in Logan Lanes, in contrast, were. The Ninth Circuit apparently would distinguish Logan Lanes from the present case on the ground that "(p)lant equipment acquired for a university's own use cannot be segregated from that acquired for use by others, since the same equipment serves both uses." 510 F.2d, at 490. It went on to say that the situation "of supplies acquired for consumption . . . is otherwise." Ibid. The court regarded the present case as factually similar to Students Book Co. As we have just stated, however, we are in accord with the District of Columbia Circuit's characterization of the bookstore purchases as not being transactions with the universities at all, but with the campus bookstores for resale at the latter's profit.
This case would be much more difficult for me if the hospitals involved did not make profits on the sale of drugs to outsiders. Ante, at 7. If they did not, we would have to determine in each case whether such sales, even if not within the hospital's institutional function, nonetheless constituted a "charitable" venture of their own.