American Intra-Ocular Implant Society

Bureau of Competition
FEDERAL PRABE COMMlSSiON
WASHINGTON, D.G. 20580
October 	11, 	1985
Jerald 	Jacobs
Jenner 	& 	B l o c k
21 Dupont 	Circle, N,W,
Washingtonr D.C, 	2 8 0 3 6
Dear 	Mr 	Jacobs:
This 	Petten responds to y s u e 	request for an 	informal staff
opinion concerning the legality of 	the merican 	Iwtra-Ocular
Implant Society" 	( ( " A I O P S " 	or 	"the Societym) proposed 	conduet as
outlined 	in y o u r 	letter sf September 	19, 1 9 8 5 , 	According 	to that
Letter, the WfOIS 	proposes 	to develop a standard disclosure
protocol 	for 	use by 	intraocular lens manuf aeturems who offer
valuable 	inducements to physicians to promote 	the sale sf 	their
8 Lenses, 	The Society proposes 	to encourage manufacturers to 	use
the protocol by 	one ar 	b a t k 	of 	t h e 	following methods: 	urging
m a n u f a c t u r e r s Q t t i l i z a t i o w 	of 	the protocol 	in 	official A I O P S
correspondence and publishing 	in A l O I S 	publications the n m e s sf
those manufacturers who decide 	to 	use 	the protocol, 	After
careful review of 	the 	information you submitted, it appears that
t h e 	proposed 	conduct would 	not, under 	the circmstawces described
in your 	better, constitute 	a 	violation 	of 	%be antitrust Laws,
According 	to your 	letter, the A I Q I S , 	a professional society
of eye surgeons, has develsped 	this proposal 	in an 	e f f o e t 	to help
curb certain industry marketing and 	sales practices that recently
have been 	cr iticized as contr ibuting 	ts excessive Medicare
expenditures, 	~ceordingto a recently released 	congressional
repart entitled 	"Cataract Surgery: 	F r a u d s 	Waste and Abuse," 	many
eye surgeons are failing 	to disclose and pass on the value of
sales inducements paid 	by 	intraoeular lens manufacturers,
Apparently, many 	intraocular lens sellers offer 	discounts,
rebates or 	bonuses to eye 	surgeons who 	purchase large nlnnbers 	of
intraoculae lenses for 	their own 	inventory, to eye surgeons who
reeomend 	that a hospital pharmacy purchase a 	certain manufac-
turer's 	lenses for 	its 	inventory, or 	to hospital pharmacies pur-
chasing sn their 	own behalf, 	in 	some circmstances, 	these
payments can violate 	federal law. 	Section 1877 of 	the Social
Security Act makes 	it a 	felony to offer or 	solicit bribes,
rebates or 	kickbacks, in cask or 	in kind, in return for
purchasing 	an 	item 	for which payment 	under 	the Medicare Program
may 	be made. 	However, the Act 	specifically excludes from 	its
prohibitions such reductions in 	price obtained by 	a provider 	if

"the reduction in price 	is properly disclosed and 	appropriately
reflected 	in 	the costs elaimed or 	charges made by 	the provider, 	, . .n
The subcornittee report cited evidence of widespread 	"corruption"
in the 	intrascular 	lens industry, describing many 	alleged
instances sf eye su~geons' failure to earnply 	with Section 1877,
The A I O I S 	proposes to undertake a course sf conduet designed
to increase compliance with 	Section 1877, at Least with 	regard 	to
its members, 	It appears that the Society's 	past efforts --
apprising 	its members of 	the legal implications of accepting
discounts, rebates, or 	bonuses -- 	have not 	been completely
effective, 	Now, 	the AIOIS wants manufacturers to provide A I O X S
members who 	choose to accept sales inducements with 	specified
information concerning 	their 	value 	to facilitate the eye
surgeons' compliance with 	the disclosure requirements of Section
1877, 	Specifically, A I B I S 	has developed a standard disclosure
protocol by 	wbieh 	the manufacturers would 	provide 	information,
both 	prior 	to the sales of 	the lenses and 	with 	the invoicing, as
to the actual reasonable market 	value of 	the sales inducement and
the value af 	t h e 	inducement related 	to each %ens purchasedr as
well as a reminder of 	the purchaser" 	obligation under Section
1877 to report and 	reflect the "per lens" value of 	any 	inducement
when 	filing a claim for Medicare reimbursement, 	Then, to
encourage manufacturers to use 	the protocol, AIOIS 	proposes 	to
8 urge manufacturer 	utilization in official correspondence from the
Society and/or 	to publish 	in the Society" 	various communications
to 	its members 	the names of 	those manufacturers who decide 	to use
of 	the protocol, 	According 	to your 	letter, the publication would
not contain any 	"express or 	implied exhortation to action by
WIOIS 	members or 	other 	recipients of 	the eomunications,"
The 	lawfulness sf the Society's proposed 	aetion would 	depend
upon whether 	it constitutes an agreement that restgains trade and
if 	so, whether 	that restraint is unreasonable, 	Clearly, any
action by 	an association of 	individual practitioners, many of
whom 	compete with 	owe 	another, reflects an 	agreement to take 	t h a t
action. 	However, s u c k 	an agreement i s 	in restraint of 	trade only
if 	it constitutes or 	facilitates marketplace conduct on the part
sf 	its members 	or 	others 	that restrains trade, 	For 	example,
association action that advises or 	suggests or 	is taken with 	the
intent, or 	likely consequence of, association members concertedly
or 	interdependently modifying 	their market 	behavior 	to restrain
nt 	in restraint of 	trade. 	See
v P 	, 3 0 6 	U , S ,
2 0 8 , 	2 2 6 - 2 7 	(1939),
The AfOIS 	proposal 	to develop the protocol, send 	it to
manufacturers, and 	urge 	them 	to adopt 	it, does not appear, under
the circumstances operating 	here, to give 	rise to an agreement 	in
0 restraint of 	trade, 	It contains no 	express or 	implicit

suggestion to 	its members 	to follow a course of conduct in the
marketplace. 	The Society will have merely provided 	its members
and 	their 	suppliers with 	information that they are free to
incorporate in their dealings w i t h 	one 	another and 	tkat 	may make
the market work 	better,
For 	the same reason. 	I do not believe 	the AIOIf proposal 	to
publish 	the names of 	those manufacturers who c o m i t 	to use the
protocol, s"cadcaig 	allane, would make 	the Society and- its members
parties to an agreement in restraint sf trade. 	Merely 	listing
the rimes of cooperating manufacturers would 	not appear 	to serve
as 	an invitation, implicit or explicit, to engage in concerted
boycott action, particularly 	in view of 	the Society" 	stated
intention to a v o i d 	many express or 	implied exhortation to
action," 	Nor 	is there any 	indication that a likely response to
the list 	w i l l 	be 	a boycott of uncooperative manufacturers,
I wish 	to caution, however, that under 	somewhat different
eircmstanees, 	this aspect sf 	the proposal could give rise to a
hariaontal agreement in restraint sf t
(19141 	(trade association% 	~Rublicationof 	the names of
wholesalers who 	were competing with 	the association" 	smember
retailers condemned as manifesting a 	illegal agreement to
boycott). 	Thus, if 	there were 	indic 	despite the Society8s
8 stated objectives, that publishing 	the list would 	serve as a call
to the members 	to boycott 	those manufacturers who choose not 	to
use the protocol, the proposed 	conduct might well be 	treated 	as
an agreement in restraint of 	trade, 	Or, if 	the Society has
previously 	used 	this technique as a signal to its members that
they should engage 	in joint conduct, publishing 	suck a 	list could
be 	interpreted as a call to boycott, 	Such 'an agreement to
boycott 	uncooperative manufacturers could 	be 	se-unreasonable, 	See 	F	P
1 hope 	this analysis will be 	helpful 	to your client, 	As 	you
know, under Section S 	1,3(e) 	of 	the Commission's Rules of
Practice and Procedure, 	informal staff opinions do not bind 	the
Comission, 	If I can be of 	further assistance or 	if you have any
further 	questions, do not hesitate to call me,
Very 	truly yours,
Arthur 	N, 	Lerner
Assistant Director
8 While a manufacturer's commitment to use 	the protocol could
reflect an agreement with AIOIS, 	it would 	not appear 	likely
to restrain competition unreasonably, unless 	it were 	the
product of coercion,