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ACOs and Antitrust Are Aligned and Compatible, Says Commissioner Brill

by Carrie G. Amezcua

FTC Commissioner Julie Brill addressed attendees at the 2013 National Summit on Provider Market Power on June 11.  The focus of her remarks were on the intersection of antitrust, the Affordable Care Act (ACA) and Accountable Care Organizations (ACOs).  She first touched on the ACA.  Noting the empirical evidence shows that high concentration among health care providers has harmful competitive effects, she was optimistic that the exchanges that will be established as a result of the ACA will offer consumers a range of competing, affordable health care products and will encourage greater competition in local insurance markets. 

Turning to ACOs and antitrust, she stated that the FTC is starting to hear providers contend that the ACO program is a justification for their (alleged) anticompetitive activity.  Providers complain that the government is "talking out of both sides of their mouth" with Centers for Medicare & Medicaid Services (CMS) encouraging coordination via the ACO program and the antitrust agencies challenging coordination.  Commissioner Brill disagreed stating that "the goals of the ACA and antitrust enforcement are aligned and compatible."  She noted the extensive cooperation between CMS and the antitrust agencies.  She explained that the ACA requires coordination of care but that it "neither requires nor encourages to merger or otherwise consolidate," but like any collaboration short of a merger, they must do so in a way that does not violate antitrust laws.  Commissioner Brill also stated that ACOs are flourishing and only two provider groups have thus far sought antitrust guidance as permitted under the ACO Policy Statement from the agencies before forming the ACOs. 

Finally, Commissioner Brill emphasized that the FTC will continue to investigate provider collaborations or mergers where there may be competitive harm.  She made a point to clarify that the FTC evaluates all assertions of efficiencies and quality improvements but that parties must provide "good documentary evidence" to support these assertions.

Commissioner Brill’s speech is consistent with the posture and approach the agencies have been taking with regard to provider consolidations in the relatively new landscape being built by the ACA and formation of ACOs.  There is not yet enough data to see exactly how the ACA will affect providers from an antitrust perspective.  But providers can be certain that the agencies will continue to look closely at any consolidation or collaboration that may violate the antitrust laws, regardless of whether the activity was taken to try to comply with the ACA. 

The full speech can be found here.




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District Court Grants Temporary Restraining Order in Phoebe Putney Litigation

by Carrie Amezcua

The next step of the on-going Phoebe Putney litigation is completed.  On Wednesday, April 15, the district court for the Middle District of Georgia granted the Federal Trade Commission’s (FTC) motion for a Temporary Restraining Order (TRO) in Federal Trade Commission v. Phoebe Putney Health System, Inc., No. 1:11-cv-58 (M.D. Ga.).  In its order, the court stated that the FTC "carried its burden of persuasion to establish the need for the imposition of the ‘extraordinary and drastic remedy’ of a TRO pending the outcome of the court’s decision on the [Preliminary Injunction] Motion."  The TRO prohibits Phoebe Putney Memorial Inc. from taking further steps to consolidate with Palmyra Park Hospital.  Further, the court stated "In response to Plaintiff’s request that the Court order Defendants to refrain from instituting any price changes, the Court ordered that Defendants are prohibited from making any price changes to existing contracts; however, said prohibition does not extend to the formation of any new contracts."  Richard A. Feinstein, Director of the FTC’s Bureau of Competition issued a brief statement on the district court’s ruling saying "We are pleased that the Court has issued a Temporary Restraining Order prohibiting any further steps to consolidate the two hospitals in Albany, and prohibiting any price changes to existing health-plan contracts, pending our Motion for Preliminary Injunction." 

The district court had granted a TRO the FTC filed in 2011 to stop the acquisition, but dissolved that TRO upon the district court’s finding that the transaction was exempt under the state action immunity doctrine.  The 11th Circuit affirmed, but in February of this year, the Supreme Court reversed holding that Georgia’s enabling statute did not clearly articulate an affirmatively expressed policy for displacing competition.    

The district court’s grant of the TRO is another victory for the FTC in this long litigation.  Now that the Supreme Court ruled the transaction is not exempt from the antitrust laws, the hospitals will have to defend what the FTC calls a merger to monopoly.  The TRO will stay in place until a hearing on the motion for Preliminary Injunction, which is scheduled for June 14, 2013.  The FTC has a successful track record in getting preliminary injunctions granted in hospital mergers, so it would not be surprising if the district court also granted the Motion for Preliminary Injunction.  This case is further evidence of the high priority the FTC places on challenging health care mergers it views as anticompetitive and shows the FTC is willing to commit resources over an extended period of time to challenge such mergers.

The administrative hearing is scheduled to begin July 15, 2013.  More information on the district court and adjudicative proceedings can be found at https://www.ftc.gov/os/caselist/1110067/index.shtm and https://www.ftc.gov/os/adjpro/d9348/index.shtm.




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FTC Issues Fiscal Year 2012 HSR Report

by Carla A. R. Hine

Earlier this week, the Federal Trade Commission (FTC) issued its Hart-Scott-Rodino (HSR) report for fiscal year 2012 (FY2012), which summarizes enforcement actions and key statistics regarding number of filings, second requests and challenges.  The press release and a link to the report can be found here.

Filings were relatively flat from 2011 to 2012.  There were fewer second requests and there wasn’t a remarkable difference in the overall percentage of filings resulting in second requests (3.9 percent in 2011; 3.5 percent in 2012).  In 2012, the FTC issued more second requests than the U.S. Department of Justice (DOJ).  However, when looking at the number of second requests each agency issued as a percentage of the filings each agency was "cleared" to investigate, the FTC only issued second requests in 14.8 percent of the filings it was cleared to investigate, whereas the DOJ issued second requests in 40.8 percent of filings the agency was cleared to investigate.  Overall, it is hard to read too much into these statistics other than reportable transactions remain steady and there do not seem to be any wild swings in enforcement trends.

The report also notes that of 60 corrective filings (i.e., filings where the parties closed the transaction and later realized they should have filed), two resulted in enforcement actions with civil penalties ($500,000 and $850,000).




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FTC’s New Chairwoman Ramirez Says Health Care Continues To Be Top Priority

by Hillary Webber

In remarks made this week at the International Competition Network annual conference, Federal Trade Commission (FTC) Chairwoman Edith Ramirez stated that health care will continue to be a top priority for the FTC.   Referring to health care and hospital mergers in particular, she said that the Commission will "guard[] against what we consider to be consolidation that may end up having adverse consequences for consumers."  The Chairwoman’s comments indicate that the recent leadership change at the FTC from former Chairman Jon Leibowitz to Chairwoman Ramirez has not altered the Commission’s priorities.

Recent months have seen a flurry of FTC activity in the courts related to health care.  For example, two FTC cases came before the U.S. Supreme Court this term — the FTC’s challenge to Phoebe Putney’s acquisition of Palmyra Park Hospital in Georgia and the FTC’s challenge to "pay-for-delay" patent infringement litigation settlements between branded and generic pharmaceutical manufacturers. 

In February, the Supreme Court ruled that the state action doctrine did not immunize Phoebe Putney’s hospital transaction from federal antitrust scrutiny, and the FTC has subsequently filed renewed motions in federal district court to stop further integration of the two hospitals even as it prepares for a full administrative hearing on the merits that will begin in August. 

A decision on the "pay-for-delay" case is expected in June.  The Supreme Court’s ruling may have a large impact on further FTC efforts against what it perceives as anticompetitive efforts to delay generic drug entry.

Health care clients considering acquisitions are advised to consult antitrust counsel early in the transaction process.  Given the FTC and DOJ’s close scrutiny of health care transactions, early advocacy before the antitrust agencies is often critical to a deal closing on schedule.  




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China’s Merger Control Rules Changing: MOFCOM Publishes New Draft Regulations on Remedies and Simple Cases

by Henry Chen, Frank Schoneveld and Alex An

China’s Ministry of Commerce recently issued two new draft regulations.  The first provides a wider range of potential remedies to obtain the clearance of a concentration (e.g., a merger, acquisition, joint venture, etc.); the other defines the standards for “simple” merger cases that are eligible for a “fast-track” clearance procedure.

To read the full article, click here.




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German Federal Cartel Office Levies Administrative Fine Due to Incomplete Merger Notification

by Martina Maier, Philipp Werner and Robert Bäuerle

The German Federal Cartel Office (FCO) has imposed an administrative fine for the submission of incomplete information in a merger notification.  The missing information concerned details about shareholdings essential for the competitive assessment analysis.  The shareholdings belong to a private individual who controlled the notifying party.  Companies and their shareholders required to submit notifications should be aware that the omission of information in merger notifications before the FCO can result in fines not only for the notifying company but also for the company(ies) and individual(s) controlling it.

To read the full article, click here.




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China’s Ministry of Commerce Announces Investigations into Failures to Notify a Concentration, Introduces New Transparency Measures

by Henry L.T. Chen, Frank Schoneveld, Jared Nelson and Sean Pan

China’s Ministry of Commerce recently announced that it opened four investigations during 2012 into suspected non-compliance with China’s merger control notification procedures.  The outcomes of the investigations are still uncertain, but the actions clearly show increased efforts to ensure compliance through enforcement of the law.  Although the number of investigations was fairly low in 2012, the four cases are part of a new, larger trend of enforcement that began with a 2011 announcement to prioritize these investigations and was reinforced by new interim measures aimed at specifying compliance obligations and enforcement procedures.  Multinational companies with operations in China are encouraged to increase compliance efforts in this area in order to avoid becoming targets of this new enforcement priority.

To read the full article, click here.




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Poland in the Spotlight: Extensive Changes to Polish Competition Law

by Philip Bentley, QC and Philipp Werner

Polish legislators have confirmed their commitment to change significantly the provisions of the Polish Competition Act.  The proposed amendments will undoubtedly change Polish competition law substantially, by improving and strengthening the position of enterprises and enhancing legal certainty.  Furthermore, the intended increase in procedural efficiency will likely translate into a faster and more effective system that will not only speed up the relevant processes, but will also allow the stakeholders to obtain the necessary knowledge about their legal situation, enabling them to adjust their market strategies accordingly.

To read the full article, click here.




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

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.




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