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News  :  Syringe Manufacturer Settles Claim of Market Manipulation

By Mary Williams Walsh and Walt Bogdanich
The New York Times - July 3, 2004

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Becton Dickinson & Company, the world's largest manufacturer of medical syringes and needles, said yesterday that it would pay $100 million to settle a competitor's accusations that it had illegally manipulated the hospital supply market for years.

The competitor, Retractable Technologies, a need le maker, had filed an antitrust suit saying it had been largely shut out of the hospital market for its products, which are intended to better protect health care workers from accidental nicks that can transmit blood-borne diseases.

That suit had been scheduled to go to trial next week in a federal court in Texas.

Becton Dickinson's chairman and chief executive, Edward J. Ludwig, said in a conference call with securities analysts that he thought that the company had handled its sales to hospitals "in a most appropriate and legal manner," but that Becton Dickinson had agreed to settle the suit to avoid "protracted trials" and appeals.

"We thought that in light of this cost and distraction, it was in our best interest to arrive at this settlement and move on," Mr. Ludwig said.

But the move does not necessarily resolve all the legal issues for Becton Dickinson, which is based in Franklin Lakes, N.J., and had revenue of $4.5 billion last year.

Its sales practices are also the subject of an investigation by the New York State attorney general, Eliot Spitzer. In February, the company disclosed that it had received a subpoena from Mr. Spitzer's office asking for information about "communications or agreements" it had with other syringe manufacturers. The company said it had complied with the subpoena.

The difficulty that Retractable Technologies had in getting its products into hospitals was highlighted in a series of articles by The New York Times in 2002, examining the relationship of large companies like Becton Dickinson and two little-known private companies that negotiate billions of dollars in supply contracts for about half the nation's nonprofit hospitals.

Retractable Technologies' chief executive, Thomas J. Shaw, said at the time that a safety syringe he had developed _ where the needle instantly retracts into the barrel after use _ could protect hospital workers from accidental needle sticks. But Mr. Shaw said that he was largely prevented from selling the syringe to hospitals, and that many would not even listen to a sales pitch. Lack of access almost drove him out of business, he said.

Mr. Shaw, whose company had sales of $19 million last year, said he thought the problem was rooted in the way hospitals buy their supplies. Most of them work with buying groups, companies that pool the purchasing power of many hospitals to negotiate more effectively with large medical supply manufacturers.

Mr. Shaw has long contended that the two largest of these companies had improper financial relationships with some of the very medical supply companies they were supposed to evaluate and negotiate with. Their activities added up to a conspiracy to restrain trade, he said.

The two companies, Premier Inc. and Novation, have disputed Mr. Shaw's allegations. In 2002, however, they promised to change their business practices.

Retractable Technologies had also named them as defendants in its lawsuit against Becton Dickinson, along with Tyco International, which also makes a hypodermic needle. Tyco and the buying groups settled with Retractable Technologies in 2003, leaving Becton Dickinson the sole defendant.

Mr. Shaw said the large payment to his company, which was announced yesterday, underscored the validity of his claims. The company's shares rose more than 29 percent yesterday, closing at $7.90, up $1.78 for the day.

"Clearly, they had significant concerns about going to court," he said of Becton Dickinson. "We feel vindicated about the fact that we've been saying there was a problem, and clearly this indicates that there was."

The lawsuit was originally filed in a Texas state court in 1998 and subsequently moved to federal court in Texarkana, Tex. It was scheduled to go to trial Tuesday. Becton Dickinson's associate general counsel, Bruce J. Hector, said terms of the settlement did not require Becton Dickinson to give up market share or take any other steps to give Retractable Technologies better access to the hospital market.

He said the settlement released the company from all allegations of anti competitive behavior, but did not preclude possible lawsuits by Retractable Technologies over patent disputes.

"That's something we've looked at," Mr. Hector said. "It may come up, and we will deal with it in the ordinary course of business."

Yesterday's settlement will result in an after tax charge of $63 million, or 24 cents a share, to be taken in Becton Dickinson's third quarter, according to John R. Considine, the executive vice president and chief financial officer. Mr. Considine said the company, which earned $547 million last year, had not set aside any reserves to pay the settlement.

Becton Dickinson's shares ended the day at $49.49, up 24 cents.

Copyright © 2004, by The New York Times Company. Adapted with permission.
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