Healthcare Antitrust Archives - Page 13 of 23

Healthcare Antitrust

DOJ Issues Business Review Letter Regarding Hospital-Physician Gainsharing Program

by Emily Townsend | Jan 22, 2013 | DOJ Developments, Healthcare Antitrust

On January 16, the U.S. Department of Justice Antitrust Division issued a Business Review Letter in which it disclosed its intention not to challenge the Greater New York Hospital Association’s (GNYHA) voluntary "gainsharing" program for its hospital members and the physicians who practice at their hospitals.

GNYHA’s program is designed to encourage physicians to become more cost-conscious in their treatment decision-making and reward them for greater efficiency. Important aspects of the program include:

that it is non-exclusive and voluntary;
each participating hospital will have its own quality-standards;
it will apply to commercial health insurance and Medicaid and Medicare managed care products;
each hospital will choose how much savings to share with its physicians (or none at all) subject to other regulatory requirements; and
the information that will be shared among GNYHA members is already publicly available.

The Antitrust Division concluded that the program was neither an agreement among competitors to set physician compensation levels nor an anticompetitive information exchange.

The Antitrust Division’s business review letter should provide guidance to hospitals and physicians looking to reduce costs of care. Importantly, however, the program and the Antitrust Division’s business review letter only addressed gainsharing between hospitals and their physicians and not joint contracting or "clinical integration" arrangements among competing providers, for example.

To read the Antitrust Division’s press release, click here.

U.S. Supreme Court to Rule on “Pay-for-Delay” Antitrust Issue

by Emily Townsend | Dec 10, 2012 | FTC Developments, Healthcare Antitrust, IP Antitrust

by Jeffrey W. Brennan and Wilko van Weert

The Supreme Court of the United States has granted the government’s petition for a writ of certiorari in FTC v. Watson Pharmaceuticals, agreeing for the first time to address the antitrust and patent law implications of so-called “pay-for-delay” or “reverse payment” patent settlement agreements between branded and generic pharmaceutical manufacturers. The Court’s ruling will likely resolve this contentious issue, which has divided the federal courts and which the Federal Trade Commission has pursued for more than a decade.

To read the full article, click here.

U.S. Supreme Court Hears Oral Argument in Phoebe Putney Hospital Merger Challenge

by Emily Townsend | Nov 27, 2012 | FTC Developments, Healthcare Antitrust, Mergers & Acquisitions, Monopolization/Abuse of Dominance

by Jeffrey Brennan, Ashley Fischer, David Marx and Carrie Amezcua

In oral argument in FTC v. Phoebe Putney Health System, Supreme Court Justices focused on whether the state legislature clearly articulated a state policy to displace competition with regulation, in a case challenging the application of the state action doctrine to a hospital merger to monopoly.

To read the full article, click here.

Deputy Director Dafny: FTC focuses on Diversion Ratios, Not Geographic Markets for Hospital Mergers

by McDermott Will & Emery | Oct 4, 2012 | FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

by Stephen Wu

During an American Bar Association (ABA) program on antitrust and health care issues on October 1, 2012, U.S. Federal Trade Commission (FTC) Deputy Director for Health Care and Antitrust, Leemore Dafny, said that the FTC will focus on how patients purportedly react to price increases, as measured by "diversion ratios," when deciding which hospital mergers to investigate further for potential anticompetitive effects.

Dafny stated that the FTC will focus on diversion ratios rather than geographic markets because relying on geographic market overlaps in hospital mergers may do a poor job of identifying the true source of potential competition problems. Instead, the FTC has and will continue to evaluate hospital mergers to look at whether patients would be willing and able to substitute one hospital for the other if one hospital decided to raise prices for services, using the diversion ratio or the proportion of patients who would switch between them in response to a change in prices. Importantly, the diversion ratio does not rely on any one particular geographic market definition to give the FTC what it believes to be an accurate idea of how a hospital merger might affect competition.

To the extent the FTC considers geography, its staff begins by examining the primary service area of the hospitals – the area from which the hospitals draw about 75 percent of their patients – when conducting a preliminary evaluation of a merger to determine whether overlaps exist. According to Dafny, the more significant the overlaps, the higher the likelihood of a potential competition problem.

FTC Names Dafny Deputy Director of the Agency’s Bureau of Economics

by McDermott Will & Emery | Jun 14, 2012 | FTC Developments, Healthcare Antitrust

by Stephen Wu

On June 12, 2012, the Federal Trade Commission (FTC) announced the appointment of Leemore Dafny to assume the newly created position of Deputy Director for Health Care and Antitrust, effective August 1, 2012.

Dafny is an Associate Professor of Management and Strategy at the Kellogg School of Management of Northwestern University, where she has served on the faculty since 2002. She is a microeconomist whose research focuses on competition in health care markets.

Her appointment to a newly created position signals the FTC’s continuing focus on the U.S. health care industry for antitrust scrutiny and, if anything, an effort to increase its expertise/jurisdiction over health care in relation to the U.S. Department of Justice. According to economists with whom McDermott regularly works, clients should not expect a change in the FTC’s enforcement posture as a result of her appointment, but Dafny should bring a broader perspective given her work with health insurance markets, experience the FTC is currently lacking.

The FTC’s press release announcing Dafny’s appointment can be found here.

PA Hospital Merger May Proceed With Restrictions on Rate Negotiations and Other Conduct in Settlement with AG

by Emily Townsend | Jun 8, 2012 | Healthcare Antitrust, Mergers & Acquisitions

by Jeff Brennan

On June 7, 2012, Pennsylvania, through its Attorney General (AG), filed an antitrust complaint and consent order in U.S. District Court (M.D. Pa.), settling charges that Geisinger Health System’s acquisition of Bloomsburg Hospital violated section 7 of the Clayton Act and the state common law prohibition on suppression of competition. The core allegation is that the merging of Geisinger and Bloomsburg — two of three principal rival hospitals in the Columbia County area and employers of physicians — would lead to higher prices for (i) primary and secondary inpatient acute care services and (ii) primary and non-tertiary specialist physician services. Notably, the AG did not seek to enjoin the deal but elected to accept a multi-faceted "conduct" remedy.

Probably the most significant of the many conduct restrictions is the enablement of health plans to trigger (with AG involvement) independent third party review of Geisinger’s price proposals. Geisinger’s prices must be based on Bloomsburg Hospital costs, not System costs, to obtain "a reasonable profit margin for similarly sized and well run community hospitals." In other words, Geisinger may not readily apply System prices to Bloomsburg. The settlement also prohibits Geisinger from requiring payors to contract with the whole System in order to contract with Bloomsburg, and from requiring a payor to exclude a competitor hospital from the network in order to obtain a contract with Geisinger. A few observations:

PA implied that it accepted a conduct remedy over an injunction in light of Bloomsburg’s dire financial condition. Bloomsburg said that by October 2012 it would have insufficient cash to meet its obligations and could not continue operations. The AG said it consented to the order "[g]iven the Acquired Parties’ financial condition and the potential for the loss of 900 jobs."
The Federal Trade Commission (FTC) was not a party to this action, for reasons we do not know. The FTC has traditionally been unwilling to accept conduct restrictions in lieu of divestitures to resolve concerns that a prospective hospital merger is anticompetitive. An exception was in the unusual case of a merger that had been consummated for seven years prior to the FTC’s finding of antitrust liability, at which point the FTC concluded that divestiture would do more harm than good and instead required separate contracting between the merged hospitals. (This was 2007’s decision in Evanston Northwestern/Highland Park.)
The Geisinger case is one of "good news/bad news" for hospitals. The good news is that, at least at the state level, it shows a potential path forward for deals that raise antitrust concerns. The bad news is that consummation came with the cost of an extensive set of restrictions on contracting and other activities that require rigorous monitoring for compliance. Especially for hospitals facing difficult financial challenges, moreover, there is — again, from the limited perspective of state enforcement — the good news that alliances with a large and financially sound competitor may be obtainable, but also the bad news that the rival’s more favorable rate structure [...]

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Essential Health Transaction Planning for Providers in Today’s Antitrust Enforcement Climate

by Jackie Sinn | May 8, 2012 | Healthcare Antitrust

by Ashley McKinney Fischer and Stephen Wu

Federal antitrust enforcement agencies continue to challenge transactions in the health industry that they view as anticompetitive. This newsletter provides an update on recent public comments by government officials overseeing antitrust enforcement in the health industry and outlines some of the key steps that parties to certain types of transactions with potential competitive implications in the health industry should take to position themselves for defending against a government review.

Acting Assistant Attorney General Sees Increasing Barriers to Entry in Health Insurance

by Emily Townsend | Mar 26, 2012 | DOJ Developments, Healthcare Antitrust, Mergers & Acquisitions

by Hillary Webber

Last week, Sharis Pozen, Acting Assistant Attorney General for the Antitrust Division of the U.S. Department of Justice, spoke at the World Annual Leadership Summit on Mergers and Acquisitions in Health Care, where she affirmed that protection of competition in the health care industry is a top priority of the Division. Pozen highlighted the Division’s recent enforcement activities in insurance and provider markets, including challenges to insurance company mergers and contracting practices used by dominant insurers or providers such as Most Favored Nation (MFN) provisions and exclusivity agreements.

Of note, Pozen remarked that the Division undertook a comprehensive evaluation of health insurance markets, the results of which have caused the Division to regard with increasing skepticism the ability of new entry to constrain a merged health insurance firm. Pozen explained that new entrants face obstacles because they need provider discounts to attract enrollees but have difficulty obtaining them without a large number of enrollees. Pozen stated that the Division will focus more attention on entry analysis to protect markets from harmful consolidation, especially markets dominated by one or two plans. Regarding provider markets, Pozen described the Division as "on the lookout for agreements or arrangements purported to improve quality but where the real goal is simply to raise prices." This is especially relevant given the Affordable Care Act’s encouragement of provider collaboration in the form of Accountable Care Organizations (ACOs).

Pozen’s remarks are available at: https://www.justice.gov/atr/public/speeches/281236.pdf.

Pozen’s comments highlight the need for health care companies considering collaborative arrangements with competitors or contracting arrangements such as MFNs or exclusivity agreements to consult counsel and articulate a clear pro-competitive basis for such conduct.

FTC/DOJ Remove Mandatory Antitrust Review for MSSP-Participating ACOs in Final Policy Statement

by Emily Townsend | Nov 9, 2011 | DOJ Developments, FTC Developments, Healthcare Antitrust

by Jeffrey W. Brennan, Ashley McKinney Fischer, David Marx, Jr. and Hillary A. Webber

On October 20, 2011, the Federal Trade Commission and Department of Justice issued a final policy statement on accountable care organizations (ACOs) participating in the Medicare Shared Savings Program (MSSP). Significantly, the Agencies eliminated mandatory antitrust review of certain ACOs seeking to participate in the MSSP, but declined to adopt other stakeholder recommendations.

To read the full article, please visit: https://www.mwe.com/info/news/ots1111c.htm.

Update on Reverse Payment Settlements

by McDermott Will & Emery | Nov 7, 2011 | FTC Developments, Healthcare Antitrust, IP Antitrust

by William Diaz, Raymond A. Jacobsen, Joseph F. Winterscheid and Jeffrey W. Brennan

On October 31, 2011, a California state court of appeal affirmed a lower court’s ruling upholding a "reverse payment" (pay-for-delay) settlement between Bayer (Bayer) AG and Barr Pharmaceuticals (Barr). Bayer had sued Barr for patent infringement pertaining to the latter’s planned production of a generic form of Bayer’s Cipro. The case was settled with Bayer paying Barr to delay entry until the expiration of Bayer’s patent in 2004. Thereafter, consumers filed a class action lawsuit challenging the settlement agreement under California’s state antitrust laws. The appellate court upheld the settlement agreement because it concluded that the agreement did not restrain competition beyond the scope of the Bayer patents. This court’s ruling is consistent with the predominant view among the courts that these agreements do not violate the antitrust laws when the period of the delay and products at issue are within the scope of the relevant patents.

For years the Federal Trade Commission (FTC) has expressed serious concerns about reverse payment settlements. Most recently, on October 25, 2011, the FTC released the findings of its study into the prevalence of these agreements and their effects on consumers. The FTC noted that "pharmaceutical companies continued a recent anticompetitive trend of paying potential generic rivals to delay the introduction of lower-cost prescription drug alternatives for American consumers …drug companies entered into 28 potential pay-for-delay deals in FY 2011 (October 1, 2010 through September 30, 2011). The figure nearly matches last year’s record of 31 deals and is higher than any other previous year since the FTC began collecting data in 2003. Overall, the agreements reached in the latest fiscal year involved 25 different brand-name pharmaceutical products with combined annual U.S. sales of more than $9 billion." This latest report demonstrates the FTC’s continued commitment to enforcement in this area. Further, the FTC’s Chairman has continued to urge Congress to pass legislation that restricts reverse payment settlements.

These recent events highlight the need to work closely with antitrust counsel to ensure that any settlement agreements are properly vetted and take into account the latest antitrust developments.

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