United States: Antitrust Agencies Focus On The Health Care Industry

The FTC has increased its interest in health care. First, the Commission announced the formation of a Merger Litigation Task Force to focus on turning around the FTC’s to date unsuccessful challenges to hospital mergers. The Task Force will review past mergers to determine whether price increases occurred and a new challenge to a merger is warranted, as well as new mergers. The Task Force has already begun its task, recently issuing subpoenas to Tenet HealthCare Corp. in order to reexamine a 1999 merger of two Missouri hospitals now owned by Tenet, and to health plans that do business with Evanston Northwestern Healthcare, a Chicago facility that merged in 2000. According to Michael Cowie, head of the Merger Task Force, "We are analyzing several consummated hospital mergers to assess both potential anticompetitive effects and synopsis and efficiencies that hospital systems have realized."

Second, on September 9th and 10th, 2002, the Federal Trade Commission held a "Health Care and Competition Law and Policy Workshop" to consider the impact of competition law and policy on the cost, quality, and availability of health care and incentives for innovation in health care. The FTC’s primary goals in holding the Workshop was to increase awareness of competition and consumer protection issues among health care policymakers and in the health care industry, and to obtain information on the current state of the coverage and delivery markets in health care and on consumer/patient welfare. By gathering such information, the FTC hoped to ascertain how to better apply competition and consumer protection law to the health care industry.

A variety of topics were addressed, including recent trends in health care marketplace, hospital mergers, provider integration, issues related to payors and providers, hospital group purchasing organizations, generic and branded pharmaceuticals, and direct-to-consumer advertising and promotion. In each area, historical information and/or analyses conducted were presented. Representatives of various health care organizations and entities also offered testimony on their experiences in these areas during several panel discussions.

In addition to gathering information on these topics, the FTC also discussed future government involvement in the area of health care competition. For example, Bureau of Competition Director Joe Simons discussed the Commission’s focus on physician price fixing, noting that while enforcement in this area remained a priority, the Commission would not ignore efficiency and quality concerns. Mr. Simons also discussed competition in the pharmaceutical industry, stating that the FTC planned to devote more than twenty percent of its competition resources to ensuring that anticompetitive practices do not delay entry of generic drugs and to preventing firms from engaging in anticompetitive practices that result in increased drug prices.

Deborah Majoras, Deputy Assistant Attorney General of the DOJ’s Antitrust Division, also spoke at the Workshop. She noted that the DOJ’s recent decision to relocate the responsibilities and most of the resources of the Health Care Task Force into the newly created Litigation I section did not signal the Division’s exit from a significant role in the health care arena. Rather, the Division remained committed to investigating health care matters. Litigation I will be focusing on the following in the future: (1) mergers of and unilateral conduct by health insurers, and (2) the use of most-favored nations clauses (which generally protect insurers against other insurers from getting better reimbursement rates from providers) and all products clauses (which gives providers more favorable reimbursement rates if they agree to participate in all of the insurer’s plan offerings).

Finally, on November 7, FTC Chairman Muris announced another set of hearings on health care competition beginning in February 2003, and continuing through the year, which will take an even more comprehensive look at issues in the industry. Chairman Muris’ speech is available at the FTC’s Web Site: www.ftc.gov/speeches.

Health care will receive increased antitrust attention in the coming months. In analyzing this merger, the FTC plans to assess both the potential anti-competitive effects and synergies and efficiencies that the hospital system have realized. Also in connection with the review of past mergers, there are likely to be efforts at creating a new analytical framework for challenging hospital mergers and an effort to make other parts of the health delivery system more antitrust-sensitive. Antirust is about to become an even greater issue for health care than it has been in the past.