St. Peter’s Hospital of the City of Albany

When needed pharmaceuticals are unavailable or difficult to obtain, non-profit hospital may resell the needed pharmaceuticals to the general public as humanitarian gesture during emergency caused by medicaid strike. [File No. 772 7009, St. Peter’s Hospital of the City of Albany, September 27, 1978]

Revised Opinion Letter*
September 27, 1978
Dear Mr. Iseman:

This is in response to your letter of December 20, 1976, requesting advice concerning the exemption to the Robinson-Patman Act found in the Non-Profit Institutions Act, 52 Stat. 446, 15 U.S.C. Sec. 138c. '. The Commission understands that your client, St. Peter’s Hospital of the City of Albany, is a not-for-profit corporation currently receiving preferential price treatment in its purchase of pharmaceuticals as permitted by the above-cited exemption of the RobinsonPatman Act; that your client would like to resell pharmaceuticals, at the same reduced price it pays its supplier, to a neighboring, not-forprofit nursing home which currently purchases its drug needs at retail from local druggists; and that your client would like to resell pharmaceuticals to the general public during the medicaid strike, should pharmaceuticals become otherwise difficult or impossible to obtain. You seek advice on whether such resales are permissible under the Robinson-Patman Act.

The Non-Profit Institutions Act exempts from the RobinsonPatman Act “purchases of their supplies for their own use by * * * hospitals, and charitable institutions not operated for profit.” The Supreme Court in Abbott Laboratories v. Portland Retail Druggists Ass’n, Inc., 426 U.S. 1 (1976), held that the phrase “for their own use” limited the classes of individuals to whom the supplies could be resold. However, the Commission does not believe these limitations were intended to-apply to resales of supplies, at cost, by one charitable institution to another that are limited, in turn, to the latter charitable institution’s own use. A resale of this nature would constitute a not-for-profit transfer of supplies from one institution, eligible under the exemption, to another such institution, also eligible under the exemption. In the Commission’s view, the exemption was intended to insulate from Robinson-Patman applica* For the original Advisory Opinion Letter and the Letter of Request, see 89 F.T.C. 689.

tion all purchases of supplies (for their own use) by the designated classes of institutions not operated for profit. The transactions, as above described, would not appear in conflict with such a purpose. The Commission, accordingly, would regard the resale, of pharmaceuticals by your client to the nursing home at the same reduced price that it paid its supplier as not altering its exempt status under the Non-Profit Institutions Act. Such pharmaceuticals must be acquired for the nursing home’s “own use” as that language was interpreted in Abbott Laboratories, supra, for the exemption to apply.

The question of whether a non-profit hospital such as your client may open its pharmacy to the general public in an emergency situation was addressed specifically by the Supreme Court in the Abbott Laboratories case. We direct your attention to that portion of the decision which states that:

[W }hen the hospital pharmacy is the only one available in the community to meet a particular emergency situation[,] * * * [s]o long as the hospital pharmacy holds {that] 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 * Ke * [Id. at 18] Accordingly, the Commission is of the opinion that if needed pharmaceuticals are not available or difficult to obtain, your client may resell the needed pharmaceuticals to the general public as a humanitarian gesture during the emergency caused by the medicaid strike.

By direction of the Commission. Commissioner Pitofsky did not participate.