California Attorney General Xavier Becerra (AG Becerra) announced on Friday, December 20, 2019, the terms of a comprehensive settlement agreement reached with Sutter Health (Sutter), the largest hospital system in Northern California.
- Recent developments indicate that pharmaceutical deals are attracting greater scrutiny from the Federal Trade Commission (FTC).
- In September 2019, FTC Chairman Joseph Simons reportedly stated that the FTC will more closely scrutinize deals with overlaps involving products that are still in clinical study or development. Because of the high failure rate of products in early phases of study, the FTC typically has focused on overlaps between marketed products or products near Federal Drug Administration (FDA) approval, g., products in Phase III of the FDA pipeline. Chairman Simons’s statement makes clear that the FTC plans to examine earlier stage products while reviewing deals.
- In 2018, the director of the FTC’s Bureau of Competition announced in a speech that the FTC would favor divestitures of marketed drugs over pipeline drugs in pharmaceutical deals. Traditionally, when the FTC has had a concern about overlapping products, it has allowed the merging parties to decide which of the overlapping products to divest to remedy the concern. The director explained that, unlike marketed products, pipeline products may be costly to transfer or never be brought to market, eliminating a potential source of future competition.
- Legislators on Capitol Hill have placed pressure on the FTC to scrutinize pharmaceutical deals with more vigor. Nine US senators wrote the FTC in September to voice concerns about the effect of pharmaceutical deals on innovation and prices. In their letter, the senators specifically highlighted divestitures of pipeline products, stating that such divestitures may not sufficiently address threats to competition because pipeline products may never make it to market.
- On May 7, 2019, Governor Jay Inslee of Washington State signed House Bill 1607 into law. The law goes into effect for transactions closing after January 1, 2020, and requires advance notice to the Washington Attorney General (AG) of certain transactions 60 days in advance of closing the transaction. The intent of the law is “to ensure that competition beneficial to consumers in health care markets across Washington remains vigorous and robust[.]”
- Parties must file written notice with the AG for any deal that involves two or more hospitals, hospital systems, or other provider organizations that represent seven or more health care providers in contracting with insurance companies or third-party administrators. A “provider” includes a physician, nurse, medical assistant, therapist, midwife, athletic trainer, home care aide, massage therapist, among others.
- The law can apply to transactions involving very small medical groups, as long as there are seven providers who contract with insurance providers. The law can also apply to transactions with non-Washington parties if the out-of-state party generates $10 million or more in revenue from Washington patients.
- Given the relatively low thresholds for an AG filing, this law would require notifications for transactions that are not reportable under the Hart-Scott-Rodino Act (HSR Act), as well as those that are reportable under the HSR Act.
- If a transaction is HSR reportable, the parties must submit their HSR filing to the AG.
- If a transaction is not HSR reportable, parties must submit the following information in writing to the AG:
- The names and addresses of the parties;
- The locations where health care services are provided by each party;
- A brief description of the nature and purpose of the proposed transaction; and
- The anticipated effective date of the transaction.
- The notification requirement applies to mergers, acquisitions and contracting affiliations. A contracting affiliation is a “formation of a relationship between two or more entities that permits the entities to negotiate jointly with carriers or third-party administrators over rates for professional medical services” but does not include arrangements among entities under common ownership.
- The penalty for noncompliance is $200 per day.
- The AG has 30 days from the date of notice to submit a request to the parties for additional information. If the AG has antitrust concerns, it may serve a civil investigative demand to investigate.
At both the state and federal level, antitrust enforcement agencies continue to pursue successful challenges to physician practice transactions. This article summarizes two recent enforcement actions, as well as a new state law that requires prior notice of healthcare provider transactions. We also offer practical takeaways for providers pursuing practice acquisitions.
2018 saw a significant upswing in antitrust litigation against health care providers; 27 cases were filed in 2018 versus 17 in 2017. In the latest Antitrust Update for Health Care Providers, we discuss what caused the notable rise, what kinds of cases were brought over the past two years and how they were decided,…
A recent decision by the US Court of Appeals for the Sixth Circuit is important for competitors involved in joint ventures because it states what mode of antitrust analysis—the per se rule or the rule of reason—applies to the conduct of joint ventures when it is challenged as anticompetitive. The decision is also significant because…
The Attorney General of the State of Washington (the State) scored another victory last week in its federal antitrust challenge to Franciscan Health System’s (Franciscan) affiliations with two competing physician practices, Washington v. Franciscan Health System, Case No. C17-5690 (W.D. Wa.), pending in the United States District Court for the Western District of Washington.…
The Federal Trade Commission (FTC) submitted comments supporting the Food and Drug Administration’s (FDA) guidance for assessing whether a pharmaceutical company petitioner is misusing the citizen petition process to delay approval of a competing drug.
- The FDA released revised draft guidance intended to discourage pharmaceutical companies from gaming the citizen petition process.
The Department of Justice (DOJ) announced last week that it and the State of North Carolina have reached a settlement with Carolinas Healthcare System / Atrium Health relating to provisions in contracts between the health system and commercial insurers that allegedly restrict payors from “steering” their enrollees to lower-cost hospitals. The settlement comes after two…
The Premerger Notification Office (PNO) of the Federal Trade Commission (FTC) recently formalized a new position on Hart-Scott-Rodino Act (HSR Act) reporting obligations for certain not-for-profit, non-stock transactions. The change is currently in effect and applies to transactions that have not yet closed. The change in position will require reporting of many hospital transactions…