ISOs Win $131M Antitrust Decision Against GE in Texas Court

GE Healthcare Logo

In a landmark decision for the medical equipment industry, an Eastern District Texas jury ruled unanimously in favor of 17 independent service organizations (ISOs) that sued device manufacturer GE for engaging in anti-competitive business practices.

The case, Red Lion Medical Safety, Inc. et al, versus General Electric Company et al, resulted in a $43.8 million award that was tripled to $131.4 million under federal antitrust statutes. After a seven-day trial before Judge Robert W. Schroeder III, the eight-member jury took two-and-a-half hours to come to a consensus verdict on more than 100 questions related to the case.

At the root of the issue is GE’s 2011 parts sourcing agreement with Alpha Source, Inc. of Milwaukee, Wisconsin. The deal named Alpha Source the exclusive supplier of replacement parts for GE anesthesia machines to “non-device-owning (NDO)” clients. Alpha Source was permitted to buy those parts from GE at a 1-percent list price discount, but then marked up prices to 25 percent above list when selling to competing ISOs. Alpha Source didn’t offer after-hours and weekend shipments as a mechanism to delay ISO access to those replacement parts, and the trial revealed that GE also delayed its shipments to Alpha Source in order to subsequently stall shipments to ISO clients.

GE Sam Baxter

GE also came under fire for establishing internal policies that excluded ISO technicians from accessing GE service training and software, thereby preventing them from learning how to maintain newer equipment. GE equipment service manuals mandate that GE factory-trained technicians alone are permitted to maintain GE equipment without voiding the warranty.

“GE had figured out how to finally put these people out of business,” said attorney Sam Baxter of the firm McKool Smith of Marshall, Texas, which represented the plaintiffs.

“In order to come to a training class, an ISO had to get an endorsement letter from a hospital that said they’d only work at their hospital and nowhere else,” Baxter said. “Our guys couldn’t sign it, and the hospitals wouldn’t sign it.”

Baxter said that by cutting off training to service schools, ISOs would have been out of business within five years, as the equipment in question aged out of its OEM-supported life cycles. He said the verdict affirms the value of antitrust legislation and the general belief of jurors in the necessity of free-market competition.

“The little guy still has a place in the [medical equipment service] industry, primarily because they are so much better and so much cheaper than the big guys are,” Baxter said. “I think it’s highly significant that this jury said that the big corporations can’t drive the little guys out, driving up the costs for hospitals.”

Holly Roloff, Communications Leader of Global Services for GE Healthcare, said in a statement that the company would appeal the verdict, which also mandated that GE pay attorney and trial fees for the plaintiffs.

“GE values appropriate market access to our life-saving technologies,” Roloff said. “Although we are disappointed by the verdict, we stand by our values and plan to appeal the decision.”

In addition to Red Lion Medical Safety, Inc., the 17 plaintiffs in the suit included refurbishers Universal Medical Services, Inc.; Metropolitan Medical Services of NC, Inc.; Biomedical Concepts; Anesthesia Services, Inc.; Diversified Anesthesia; Paragon Service; Bay State Anesthesia, Inc.; POPN, Inc.; Gasmedix, LLC; West Coast Anesthesia Specialists, Inc.; Gulfstream Anesthesia Service Inc. (Doctor’s Depot); Palo Verde Biomedical Consultants, LLC; Medical Application Repair and Sales, LLC; Heartland Medical Sales & Services, LLC; SAS Acquisitions, Inc.; and Trinity Biomedical Solutions, Inc.