Healthcare Antitrust Archives - Page 9 of 23

Healthcare Antitrust

LegalZoom and the North Carolina Bar Settle Antitrust Dispute

by Emily Townsend | Nov 10, 2015 | Healthcare Antitrust

In the latest development from a number of antitrust lawsuits filed against state regulatory boards, LegalZoom.com Inc. signed a consent agreement with the North Carolina State Bar (State Bar) to settle a $10.5 million lawsuit. LegalZoom had alleged multiple violations of federal antitrust laws, including a Section 1 claim that the State Bar had collectively refused to deal with the online legal services provider by refusing to register its prepaid legal services.

Under North Carolina law, the State Bar is tasked with registering prepaid legal services plans, which provide plan-holders access to licensed attorneys to provide legal advice and services. A plan that is not registered may not be sold in North Carolina, nor can licensed attorneys in North Carolina provide services under a plan that is not registered. LegalZoom attempted to register its legal services plans with the State Bar, but the State Bar refused, claiming that LegalZoom’s plans did not meet the N.C. State Bar requirements for registration. LegalZoom then filed a lawsuit, and the parties ultimately reached the settlement at present, which will allow LegalZoom to offer its plans in North Carolina.

This case—and others filed against medical boards, veterinary boards, or state bar associations, to name a few examples—follow from the U.S. Supreme Court’s decision earlier this year in North Carolina State Board of Dental Examiners v. Federal Trade Commission, 574 U.S.___ (Feb. 25, 2015). Prior to that decision, state regulatory boards often claimed state-action immunity from antitrust liability. Under the state-action doctrine, the conduct of states acting in their sovereign capacity is shielded from federal antitrust scrutiny. In North Carolina State Board of Dental Examiners, the Supreme Court reasoned that conduct by state regulatory boards that are controlled by active participants in the profession the board regulates does not constitute exercise of the state’s sovereign power, unless the board is subject to active supervision by the state. Therefore, such state agencies do not receive state-action immunity and are subject to the federal antitrust laws. Here, LegalZoom used the Supreme Court’s decision in North Carolina State Board of Dental Examiners to argue that the State Bar was subject to federal antitrust laws, claiming the board was controlled by active market participants and was not actively supervised by the state. While the parties’ settlement meant that this specific question was never resolved, the lawsuit highlights a trend in antitrust claims filed against state regulatory boards.

We previously analyzed North Carolina State Board of Dental Examiners shortly after the decision came down. As this blog has previously pointed out, “many states regulate professions and occupations through boards controlled by experienced, active practitioners in the fields they regulate. Any state or quasi-state entity composed, in whole or in part, of market participants should take careful note of this case and examine the entity’s structure, composition and operations to assess whether its market participants have “control.” If they do, then the entities and their states must consider changes, either to eliminate the market participants’ controlling role [...]

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FTC Comments Discourage Legislation Purporting to Grant Antitrust Immunity for Health Care Providers

by McDermott Will & Emery | Nov 9, 2015 | FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

In late September, the Federal Trade Commission (FTC) submitted comments to the Virginia and Tennessee Departments of Health regarding each state’s proposed rules concerning hospital cooperation agreements. These proposed rules permit two or more hospitals to consolidate by merger or other combination of assets if, in the departments of health’s view, the benefits of the cooperative agreement outweigh any disadvantages caused by a reduction in competition. While the main purpose of the comments was to offer FTC assistance in the states’ evaluation of such agreements, the FTC re-iterated its position that “legislation purporting to grant antitrust immunity is un-necessary to encourage procompetitive collaborations among health care providers.” In fact, according to the FTC, such legislation is more likely to harm consumers.

The FTC believes the “antitrust laws are consistent with the laudable public policy goals of improving quality, reducing costs, and improving patient access for health care services.” With that position in mind, the FTC’s letters to the Virginia and Tennessee Departments of Health suggest that antitrust regulators should be focused on prohibiting agreements among providers that could harm competition rather than encouraging the creation of new agreements. Specifically, the FTC stressed that “efforts to shield such conduct from antitrust enforcement are likely to harm [state] health care consumers, no matter how rigorous or well-intentioned the regulatory scheme may be.”

Under the proposed rules, the states must weigh the benefits resulting from the cooperation agreements against any potential disadvantages likely to result from a reduction in competition. Both states’ rules specifically outline factors to be considered during the process. Potential benefits of cooperation agreements as noted in the FTC comments include the following:

Enhancement in quality of care and population health status
Preservation of hospital facilities to ensure access to care
Gains in cost-efficiency of hospital services provided
Improvements in utilization of hospital resources and equipment
Avoidance of duplication of hospital resources
Increases in access to hospital services for medically underserved populations
Participation in the state Medicaid program
Reductions in the total cost of care

Dis-advantages of such agreements that the states propose to consider include the following:

The adverse impact on the ability of payers to negotiate reasonable payment and service arrangements with providers
A reduction in competition among providers
An adverse impact on patients in the quality, availability and price of health care services
The availability of alternative arrangements that are less restrictive to competition and achieve the same benefits or a more favorable balance of benefits over dis-advantages

While these factors align with those that the FTC considers when reviewing a potential provider transaction, state authorities and the FTC differ on whether it is sound policy to encourage cooperation agreements among providers. The state legislators seek to allow cooperation agreements to move forward without fear of potential antitrust enforcement. Conversely, the FTC thinks legislation protecting provider cooperation agreements is un-necessary to encourage procompetitive collaborations and potentially harmful to the extent it shields anticompetitive collaborations from antitrust enforcement. In any event, providers entering such [...]

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FTC Comment: Minnesota Law Requiring Public Disclosure of Health Care Contract Data Increases Risk of Anticompetitive Behavior

by McDermott Will & Emery | Jul 14, 2015 | DOJ Developments, FTC Developments, Healthcare Antitrust

On June 29, 2015, the Federal Trade Commission (FTC) responded to a request for comment from two Minnesota state legislators concerning recently enacted amendments to the Minnesota Government Data Practices Act (MGDPA). Under the amendments, the MGDPA would be expanded to cover all data collected by health maintenance organizations, health plans, and other health services vendors that contract with the state to provide health care services to Minnesota residents. In practice, this means that the confidential terms and conditions of health plans’ contracts with health care providers could be subject to public disclosure.

While they commended the “laudable goals” of the MGDPA, the FTC ultimately concluded that the amendments could lead to the disclosure of competitively sensitive information and, therefore, increase the likelihood of anticompetitive behavior. Specifically, there were two major concerns raised in the FTC comment.

First, the amendments likely would lead to the exchange of fees, discounts and other pricing terms among providers, which would increase the likelihood of provider collusion. The comment notes that in markets with a relatively small number of competitors and where those competitors have the ability to accurately monitor each other’s transactions, there is increased risk of collusion.

The second concern is that the exchange of information among providers could impede the ability of health plans to selectively contract among providers. In a typical selective contracting environment “where health care providers do not know each other’s prices, providers are more likely to bid aggressively—offering lower prices—to ensure they are not excluded from selective networks.” If providers know the prices, rebates, and discount arrangements offered by their competitors, they possess a new tool in negotiations with health plans and are less likely to bid aggressively.

The FTC argued that a balance is needed between providing consumers with the information they need to make informed decisions concerning their health care and allowing competitors to share information that could facilitate anticompetitive behavior. The FTC encouraged the Minnesota legislature to consider the types of information that would be the most helpful for consumers in selecting their service, such as actual or predicted out-of-pocket expenses, co-pays, and quality comparisons of plans and providers. However, they urged caution in mandating public disclosure of health plan contract details and fee schedules.

While the FTC’s comment was addressed to legislators, it highlights the kinds of information exchanges that the antitrust regulators believe can lead to anticompetitive behavior in the health care industry. In that sense it builds on the joint FTC and U.S. Department of Justice Statements of Enforcement Policy in Health Care, originally published in 1996. Providers should avoid exchange of any information concerning their fees, discounts and other pricing arrangements with their competitors.

To see the full letter from the FTC, please click here.

ABA Antitrust Spring Meeting Highlight: “Antitrust & Health Care: Square Peg in a Round Hole?”

by Michelle Lowery | Apr 30, 2015 | FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

In this month’s American Bar Association (ABA) Section of Antitrust Law Spring Meeting, the program “Antitrust & Health Care: Square Peg in a Round Hole?” featured debate and discussion about antitrust law treatment of health care transactions and how that treatment might (or should) evolve (via regulation, legislation, or some combination of approaches), or conversely, whether the intersection of antitrust law and health care is more akin to a square peg meeting a round hole. Moderated by Jim Donahue (Office of the Pennsylvania Attorney General), the panel’s speakers included Robert Berenson, MD (The Urban Institute), Alexis Gilman (the Federal Trade Commission (FTC)), Melinda Hatton (American Hospital Association (AHA)) and Elinor Hoffmann (Office of the New York Attorney General (AG)).

Horizontal Mergers

The program first considered a hypothetical merger of specialty physician practices, where the acquiring practice has privileges at one of the market’s two hospitals and the merger would consolidate privileges at that hospital.

The FTC said it would likely look at the transaction on a specialty-by-specialty basis; the New York AG agreed, but thought it was worth considering: is multi-specialty a market itself? She referenced ProMedica’s cluster markets as a possible route for analyzing the transaction (e.g., a parent might take two children to a multi-specialty practice at the same time, one to see a pediatrician and the other to see a dermatologist).

The American Hospital Association (AHA) thought that with the Affordable Care Act’s (ACA’s) incentive to keep the population out of the hospital, hospitals are repurposing services toward population health goals, and referenced remote medicine and affiliations.

Remedies

The FTC stated that it continued to prefer structural remedies in the form of injunctions or divestitures for health care transactions, pointing to its rejection of Phoebe Putney’s proposed conduct remedy. The New York AG agreed that while structural remedies are typically best, the states (particularly Pennsylvania and New York) tend to be more willing to consider conduct remedies, often with the goal of marrying regulation with achievement (efficiencies).

Dr. Berenson posited that physician group acquisitions are the wave of the future, because the current regulatory environment makes solo practice difficult. So, he said, where physicians or specialties must be divested, those doctors are now likely to seek hospital employment.

From the hospital perspective, the AHA noted that health care transactions are a peculiar breed— health care cannot be divorced from regulation, acquisition costs are usually very high, and hospitals must pay fair market value under Stark and Anti-Kickback laws—and commented that the peculiarities of such transactions are not always adequately taken into consideration in merger challenges.

Vertical Mergers; Narrow vs. Broad Networks

The panel next considered a hypothetical merger where a health plan with 60 percent market share in a mid-size city purchases one of the two hospitals and changes its network from broad to narrow.

The FTC noted that although they have not challenged this sort of vertical health care transaction, it would do so under the right circumstances (e.g., if the hospital had no excess capacity, [...]

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FTC Clarifies “Failing Firm” Defense

by McDermott Will & Emery | Apr 2, 2015 | FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

Earlier this week, the Federal Trade Commission (FTC) published an article that offers guidance on the “failing firm” or “flailing firm” defense often invoked in the hospital merger context. The article, written by Debbie Feinstein and Alexis Gilman of the Bureau of Competition, clarifies the circumstances under which this defense is and is not available.

At the outset, Feinstein and Gilman point out the basic requirements for establishing a failing firm defense, as set forth in § 11 of the Horizontal Merger guidelines:

the company is unable to meet its obligations as they come due;
the firm would not be able to reorganize successfully in bankruptcy; and
it has made unsuccessful good-faith efforts to elicit reasonable alternative offers that would keep its assets in the relevant market and pose a less severe danger to competition than does the proposed merger.

The article goes on to emphasize an additional nuance required for the defense—that the acquiring company is the only available purchaser. This goes hand-in-hand with requirement three listed above. As an example, the authors describe a recent FTC investigation that involved “a hospital that was clearly failing.” The hospital’s bankrupt status did not calm the FTC’s concerns about the transaction, because the FTC learned that there was an interested alternate purchaser who did not pose the same competitive risks as the chosen acquirer.

Even if the acquisition price of a “failing” or “flailing” firm is below the Hart-Scott-Rodino reporting threshold, potential acquirers should assess the antitrust risk associated with the transaction and be sure to factor any costs associated with that risk into the sticker price. The failing or flailing firm should be prepared to demonstrate the efforts it made to find an acquirer. Non-reportable transactions are within the FTC’s reach and are often on the agency’s radar, particularly in the health care context.

The full text of the article is available here.

FTC and DOJ Host Workshop Examining Health Care Competition

by McDermott Will & Emery, Ashley Fischer, Lisa A. Peterson, Stephen Wu and McDermott Will & Emery | Mar 4, 2015 | DOJ Developments, FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

The Federal Trade Commission (FTC) and the Antitrust Division of the U.S. Department of Justice (DOJ) held a public workshop on February 24–25, 2015, to examine recent trends and developments in health care provider organization and payment models, and their potential effects on competition in the provision of health care services. A main message from FTC and DOJ leadership at the workshop is that the agencies evaluate new provider and payment models for their adherence to competition principles, effect on cost of care, access and quality, and avoidance of market power.

Read the full article.

Supreme Court: State Agencies Controlled by Active Market Participants Must Have Active State Supervision to Qualify for Antitrust Immunity

by Emily Townsend | Mar 3, 2015 | FTC Developments, Healthcare Antitrust

The Supreme Court of the United States’ recent ruling in North Carolina State Board of Dental Examiners v. Federal Trade Commission held that in order for a state agency controlled by active market participants to receive federal antitrust immunity under the state-action doctrine, that agency must be actively supervised by the state. State licensing boards and other agencies that include market participants should take careful note of the decision’s potentially wide-reaching effects.

Read the full article.

Ninth Circuit Affirms Divestiture of Consummated Physician Practice Acquisition

by Ashley Fischer, Daniel Powers and Michelle Lowery | Mar 2, 2015 | FTC Developments, Healthcare Antitrust

The U.S. Court of Appeals for the Ninth Circuit affirmed an Idaho federal district court’s decision ordering the divestiture of a physician practice group that had been acquired by a competing health system. The case, which pitted the health system against private plaintiffs as well as the Federal Trade Commission and the state attorney general, illustrates some of the key issues hospitals and health systems must evaluate as they consider potential acquisitions.

Read the full article.

Out-of-Market Divestiture Required to Resolve Competitive Concerns

by Jon B. Dubrow | Feb 9, 2015 | FTC Developments, Healthcare Antitrust, Mergers & Acquisitions

On January 30, 2015, the Federal Trade Commission (FTC) announced a settlement of its investigation into Sun Pharmaceutical Industries Ltd.’s (Sun) acquisition of Ranbaxy Laboratories Ltd. (Ranbaxy) from Daiichi Sankyo Co., Ltd. Sun and Ranbaxy are both multinational pharmaceutical companies that produce a range of generic and branded drugs.

In its complaint, the FTC alleges the relevant product market to be “the development, license, manufacture, marketing, distribution, and sale of generic minocycline hydrochloride 50 mg, 75 mg, and 100 mg tablets (‘minocycline tablets’).” Ranbaxy is currently one of only three U.S. suppliers of the relevant doses of minocycline tablets, with Sun being one of a limited number of firms likely to enter the alleged market in the near future. The complaint further alleges that the acquisition would eliminate a potential future competitor and therefore tend to substantially lessen competition by foregoing or delaying Sun’s entry into the relevant market and increase the likelihood that the combined entity would reduce price competition.

To resolve the competitive concern, the FTC is requiring divestiture not only of the minocycline tablets but also a product outside of the alleged relevant market—minocycline capsules. In its aid to public comment, the FTC states that this out-of-market divestiture is necessary to ensure that the divestiture buyer “achieves regulatory approval to qualify a new [active pharmaceutical ingredient] supplier for its minocycline tablets as quickly as Ranbaxy would have.”

Once the FTC or U.S. Department of Justice determines that a competitive problem exists, the agency will seek potential remedies, including divestiture. A cornerstone principle the agencies apply in evaluating a proposed remedy is that the remedy must restore competition to the level that would have existed had the underlying merger or acquisition not proceeded. This case illustrates an application of that principle, where the FTC required the divestiture of the out-of-market assets because, in its view, if those assets were not included the remedy would have left the relevant product market less competitive than it would have been if Sun and Ranbaxy remained independent competitors.

Although not a common outcome, firms considering a transaction involving products subject to regulatory approval should take note of the potential for out-of-market divestitures when assessing a potential deal.

The FTC’s complaint and related documents can be found here.

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