An Eye on Contact Lens Industry : Antitrust: Allegations that anti-competitive sales practices force millions to pay higher prices are being investigated. The leads were developed during an FBI sting operation at the state Capitol.
Following leads developed in an FBI Capitol sting operation, U.S. Department of Justice antitrust attorneys are looking into allegations that anti-competitive sales practices in the contact lens industry have forced millions of users to pay higher costs for their lenses, The Times has learned.
Investigators have interviewed mail-order lens marketers in California, New Jersey and Ohio, who complain that manufacturers and optometrists have made it difficult for them to fill prescriptions and purchase lenses for sale at cut rates to customers across the country.
Federal antitrust attorneys in San Francisco say that under department policy they can neither confirm nor deny the existence of an investigation.
However, a federal source familiar with the probe confirmed that justice officials began a preliminary inquiry nine months ago and that the investigation is continuing.
Whether the review of industry practices will result in prosecutions is still uncertain.
Optometrists and ophthalmologists have long argued that there should be restrictions on contact lens sales because of the possible risk of eye damage to wearers who receive defective or improperly fitted lenses.
“We are primarily concerned with unmanaged wear for contact lens wearers, because a contact lens can affect the cornea (the transparent membrane covering the eye) and create problems the patient might not be aware of,” said Richard H. Kendall, a doctor of optometry and director of governmental affairs for the California Optometric Assn.
But the mail-order firms counter that they only sell replacement lenses and that the factory-made contacts are identical to those sold by the optometrists, ophthalmologists or opticians who initially prescribed them.
Soft contact lenses are mass-produced and the quality is good enough that some manufacturers now produce disposable lenses that are dispensed to consumers in batches of 24 or 48 at a time, said Dieter Hundt, a California-licensed optician who runs Dial A Contact Lens, a mail-order firm in La Jolla.
It was Hundt’s wife, Jamie, who testified in January at the political trial of then-Sen. Joseph B. Montoya (D-Whittier) about a bill before the Senate Business and Professions Committee, which Montoya chaired. The legislation would have banned the mail-order sale of contact lenses except by the eye-care professional who initially fitted the patient--in effect ending the Hundts’ California business.
Montoya had been caught in an elaborate FBI sting operation in which agents posed as businessmen seeking support for special-interest bills that would supposedly help them establish a shrimp processing plant near Sacramento. Montoya was convicted on seven counts of extortion, racketeering and money laundering and has been sentenced to 6 1/2 years in prison.
The Hundts complained about their treatment by Montoya’s top aide, Amiel A. Jaramillo, who pleaded guilty last month to one felony count of making a false statement on a loan application.
But they also charged that their business was threatened by the anti-competitive practices of optometrists and lens manufacturers. Several manufacturers refuse to sell lenses directly to mail-order houses. Others market special-label lenses that can only be refilled by the prescribing optometrist.
The allegations were forwarded to the Department of Justice’s San Francisco office.
Other mail-order firms agree that consumers ought to be able to buy replacement lenses from any qualified dealer.
“The identical sealed bottle (containing a lens) I get is the same bottle that the optometrist buys,” said Larry Edelson, president of The Ultimate Contact, a New Jersey-based mail-order firm.
In addition to Hundt and Edelson, antitrust attorneys have contacted Norman Ginis, a Cleveland-area optometrist who operates Contact Lens Supply, which sells replacement lenses through pharmacies in a number of states, but not in California. The company also sells lenses by mail through employee benefit programs, some of which operate here.
“In certain states, a program like ours is not allowed because of collusion of manufacturers and the optical community in trying to preserve the right to hold onto the patient and not get lenses replaced (by mail or through pharmacies),” Ginis said.
Existing California law has been used to discourage mail-order sales of eye products by out-of-state firms.
The Medical Board of California has been warning the companies that they must stop selling contact lenses and eyeglasses here or risk “severe penalties” because their professional staffs are not licensed here, said Linda A. McCready, program manager for the medical board’s registered dispensing optician program.
In recent months, the board has sent out warnings to several of the largest mail-order contact lens marketers outside the state, including The Ultimate Contact, Contact Lens Supply, and Florida-based Lens Express.
Representatives of all three firms say that they comply with the laws of their home states by having licensed professionals, either running the companies or on their staffs. All three have ignored the medical board’s warnings.
McCready admits that the warnings have generally had no effect because there is no way to collect fines from out-of-state firms. “We can’t go all the way to New Jersey and ask them to give us $1,000,” she said.
However, a similar warning in 1984 to the nonprofit American Assn. of Retired Persons resulted in the group’s discontinuing its mail-order eyeglass sales operation in California.
John R. McHugh, president of Retired Persons Services Inc., which sells mail-order prescription drugs to association members nationwide, said the group decided to end spectacle sales rather than fight with California and other states that threatened legal action.
