KEY POINTS:
The provider of community laboratory services in the Auckland region has been accused of refusing to reveal financial information about itself, and making huge profits from its "impregnable" market position.
Presenting submissions from the Auckland, Waitemata and Counties-Manukau district health boards, lawyer Grant Illingworth yesterday told the High Court in Auckland that Diagnostic Medlab - owned by Australian publicly-listed company Sonic - was "very much concerned with earning profits" and thought it had unassailable market domination.
"The evidence shows that when the contract for community laboratory services was subjected to a competitive process, it believed it was in an impregnable position and initially offered [the health boards] little more than a roll-over on existing terms," the submissions say.
"Medlab made the mistake of assuming there was no serious competition as a result of its earlier successful efforts to become the sole supplier of community laboratory services to the regional health boards.
"It now seeks to lay the blame for its failure to win the contract on the district health boards."
The health boards' submission says the boards were suspicious about how much money Medlab was making as early as 2002.
Medlab "refused to provide any meaningful financial information" at the time, and continued not to do so.
The boards had since learned the company made a $16.3 million net operating profit in 2005.
Mr Illingworth described Medlab's case as "deeply flawed", and said the health boards' decision to award the contract to another company could save up to $100 million that was "desperately needed to meet the spiralling cost of healthcare for the people of Auckland".
Medlab's court action showed the company had failed to recognise the health boards' obligations as not-for-profit entities to abide by legislation, and the proper purpose of the court's judicial review process.
The company had accompanied its court challenge with a publicity and lobbying campaign designed to gain support from the public and the medical profession.
Medlabs also claims that a principal in the company which won the contract, Labtests Auckland, used inside knowledge of changes to Auckland board tender requirements to secure the contract.
Dr Tony Bierre was a member of the Auckland board at the time.
Australian-backed Labtests Auckland, will give evidence in its own defence this week, but Mr Illingworth yesterday defended Dr Bierre, saying Medlab had not been able to show a single thing in terms of confidential information he had gained as a board member and used to his advantage.
The hearing, before Justice Raynor Asher, is likely to finish on Friday.
The Case
* Medlab is seeking a judicial review of a July 2006 decision to award Australian-backed Labtests Auckland the contract to supply laboratory testing services in the Auckland region.
* When Labtests takes up the 8-year, $560 million contract - due to begin on July 1 - it will halve the number of sample collection points for the region's 1.4 million people and reduce the number of testing staff.
* Medlab says the boards changed their expectations of a medical testing provider without telling it.
* It also alleges then-Auckland District Health Board member Dr Tony Bierre used his inside knowledge of changing board tender requirements to secure the contract for Labtests.
