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Blue Cross and Blue Shield antitrust lawsuits pile up

By Andrew Longstreth

NEW YORK (Reuters) - A litigation onslaught facing the Blue Cross and Blue Shield Association and its 38 member health plans over alleged antitrust violations has snowballed ahead of a legal status conference scheduled for Thursday.

Three more lawsuits were filed last week alleging a conspiracy among the Blue Cross and Blue Shield Association and its member plans to divide the U.S. healthcare market into geographical areas that allowed plans to avoid competing with each other. At least 27 lawsuits have now been filed.

The litigation, which has gained national attention amidst a debate over rising healthcare costs, questions the legality of licensing agreements the Blue Cross and Blue Shield Association has with member plans nationwide.

Plan subscribers and healthcare providers allege that through those agreements, the Blue Cross and Blue Shield member plans have agreed not to compete with one another, in violation of the Sherman Act and other state antitrust laws.

Plaintiffs are seeking an order to prevent the Blue Cross and Blue Shield Association from restricting competition among member plans in certain states. Plaintiffs are also asking for three times the amount of their actual damages.

Tilden Katz, a spokesman for the Blue Cross and Blue Shield Association, said in a statement that the litigation was without merit.

In December, the Judicial Panel on Multidistrict Litigation ordered that the litigation be consolidated into one proceeding in the Northern District of Alabama in Birmingham before Judge R. David Proctor.

A status conference scheduled for Thursday in Birmingham is expected to address how the litigation will proceed. Around 80 lawyers are expected to be in attendance.

Among the issues on the agenda are how to resolve discovery issues; whether plaintiffs' lawyers should file a consolidated complaint on behalf of both subscribers and healthcare providers; and which legal issues need immediate attention.

Some of the lawyers for the plaintiffs want Judge Proctor to establish a procedure that will ultimately address whether the licensing agreements at issue in the case are illegal on their face or whether they should be evaluated under their specific circumstances.

The Blue Cross and Blue Shield Association will likely argue that the terms in its licensing agreements are justified in the maintenance and protection of its trademark, said Barak Richman, a professor at Duke University School of Law who specializes in antitrust.

"That's an argument I find very hard to make convincing," Richman said. "Horizontal territorial divisions are among the most abhorrent antitrust violations."

Katz said in a statement that the Blue Cross and Blue Shield "system provides specific advantages: affordable access to a broad network of doctors and hospitals, serviced by a local company with a deep commitment to the community."

At the status hearing on Thursday, David Zott and Daniel Laytin of Kirkland & Ellis and Craig Hoover of Hogan Lovells are expected to speak for the Blue Cross and Blue Shield entities.

Joe Whatley and Edith Kallas of Whatley Drake & Kallas have been designated to speak for the healthcare provider plaintiffs. David Boies of Boies, Schiller & Flexner and Greg Davis of Davis & Taliaferro are expected to speak for the subscriber plaintiffs

The case is In Re: Blue Cross Blue Shield Antitrust Litigation, U.S. District Court, Northern District of Alabama, 13-20000.

(Reporting by Andrew Longstreth; Editing by Howard Goller and Bob Burgdorfer)

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