Dept. of Justice forces Medical Waste leader to open up playing field Print E-mail
By Staff and Wire Reports   
Wednesday, 02 December 2009 06:57
In breaking news that will likely impact the stock price of smaller medical waste companies, medical waste sector leader Stericycle, Inc. (NASDAQ:SRCL) says it has agreed to a Department of Justice demand to sell off some of its medical waste collection businesses in four states to settle an antitrust lawsuit and finalize its $182.5 million acquisition of MedServe Inc.

The Department of Justice's has been actively investigating what some medical waste industry insiders have called "bullying designed to keep smaller competitors out of the marketplace" and the DOJ's Antitrust Division said in a media release that a proposed acquisition by Stericycle "as originally proposed, would substantially lessen competition in infectious waste collection and treatment services to hospitals and other critical healthcare facilities in Kansas, Missouri, Nebraska and Oklahoma, resulting in higher prices and reduced service."

Stericycle, Inc. has entered into an agreement with the Department of Justice and the States of Missouri and Nebraska providing clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976 that will allow Stericycle to complete its pending acquisition of MedServe, Inc. Stericycle expects to complete this acquisition during the fourth quarter of 2009, as previously announced. MedServe provides regulated medical waste management solutions, including on-site sharps management and on-site medical waste treatment via MedShred patented technology. They also provide waste management solutions for hazardous materials generated by the healthcare industry, including chemical, pharmaceutical and radioactive waste.

Investors of Stericycle, which trades at over $55 per share are reacting positively to the news, but the unexpected development will likely impact the financial outlook and prices of other smaller companies which have been fighting to compete for a bigger share of the multi-billion dollar medical waste sector.

BioMedReports readers were introduced this week to one such company, MedClean Technologies (OTC:MCLN). MCLN shares currently trade at undervalued penny levels- mostly due to their only recent arrival into the market. That company, in particular, appears poised to continue it's own growth within the sector because it appears very well equipped, managed and organized to do so.

In an interview with BioMedReports earlier in the week, company officials had indicated that sales, leases and rentals of their MedClean® Series Systems- which enable hospitals and other medical facilities to treat and dispose of their regulated medical waste stream and provide HIPAA compliant destruction of confidential documents in an efficient, compliant, safe and cost-effective manner- have been well received by the medical community. The company's production and installation bandwith is reportedly running at near full capacity. Unlike it's competitors, MedClean provides on-site treatment solutions and fixed installations that fit within healthcare institutions’ physical facilities whereas Stericycle, Medserve and others offer hospitals their service via a network of processing and collection sites.

Recently, President Barack Obama made it clear that he would like to see hospitals and healthcare facilities in the U.S. become more "self-sufficient." He urged health industry leaders to find more ways for these facilities to function efficiently for prolonged periods without the need for outside services in the event of a national disaster or emergency situation.

Another undervalued company which may benefit from the news is Biomedical Technology Solutions (OTC:BMTL) that company's products provide biomedical waste treatment solutions for the over 1,000,000 low to medium volume medical waste generators in the US and a global market five times larger than the US. That company's Demolizer(R) II units offer a safe and simple biomedical waste treatment system ideally suited to meet the unique needs of clinics in rural areas where the cost, both financial and environmental, of traditional transport and offsite disposal can be prohibitive.

The Antitrust Division and attorneys general in Missouri and Nebraska had filed a civil antitrust lawsuit Monday in U.S. District Court in Washington, DC, to block the Stericycle transaction. At the same time, DoJ and the two attorneys general filed a proposed settlement with Stericycle. If the settlement is approved by the court, it would resolve the competitive concerns alleged in the lawsuit. The agreement opens up the market to more competitors and requires Stericycle to divest certain assets that it will acquire from MedServe (consisting of an autoclave treatment facility in Newton, Kansas, four transfer stations in Kansas, Oklahoma, Nebraska and Missouri and certain large customer accounts and associated assets related to these facilities) to approved "viable purchaser(s)." In addition, the agreement requires Stericycle for a period of 10 years to notify the United States Department of Justice and the States of Missouri and Nebraska before acquiring any business that is engaged in both the collection and treatment of infectious waste in Kansas, Missouri, Nebraska and Oklahoma.

"Without the divestitures required by the department, critical healthcare facilities in Kansas, Missouri, Nebraska, and Oklahoma would have faced higher prices," said Christine A. Varney, assistant attorney general in charge of the DoJ's Antitrust Division.

Officials at MedClean were not available for comment at the time this story was released, but a transcript of the interview with their CEO and Chairman of the Board will be released in this space on Friday.

According to published reports, Stericycle is the nation's largest provider of infectious waste collection and treatment services, with operations in nearly all of the contiguous 48 states. In 2008, its U.S. sales were $858 million. Bellaire, TX-based MedServe is the nation's second-largest provider of infectious waste collection and treatment services and operates in 25 states, with total revenues of $35.6 million in 2008.

This is not the first time Stericycle has had to settle an antitrust investigation. In 2002, the company agreed to pay $320,000 in civil penalties and costs to the state of Arizona to settle an antitrust investigation, but it denied that it did anything wrong.

That agreement stemed from allegations that Stericycle used its market power to exclude competitors from the medical waste transportation market, according to the Arizona attorney general's office. The state accused Stericycle and the former medical waste business of Browning-Ferris Industries Inc. of illegally dividing their customer bases in Arizona, Colorado and Utah. The two agreed to stop competing with each other in those markets, according to the state. The state also accused Stericycle, which operated a medical waste incinerator in Chandler, Ariz., of denying waste transportation competitors access to the incinerator.

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