www.dinslaw.com emerging issues in antitrust: healthcare watchouts tammy l. imhoff, esq. dinsmore...

www.dinslaw.com

Emerging Issues in Antitrust:Healthcare Watchouts

Tammy L. Imhoff, Esq.Dinsmore & Shohl LLP

Cincinnati, OH513-977-8534

[email protected]

© 2010 Dinsmore & Shohl LLP | www.dinslaw.com

Overview of Today’s Discussion

Antitrust Basics

DOJ/FTC Horizontal Merger Guidelines Reform

Patient Protection and Affordable Care Act

Evidence Based Clinical Guidelines

Governmental Enforcement Highlights

Interesting Private Sector Cases


Antitrust Basics

Antitrust laws are:

– Aimed at assuring that the benefits of free and open markets are available to consumers

– By providing for fair prices and broad choices in products and services

Antitrust laws protect:

– Competition, NOT competitors


The Antitrust Laws and their Enforcers

Federal Antitrust Laws: – Sherman Act § 1&2– Clayton Act § 7– FTC Act § 5– Robinson-Patman Act

State Antitrust Laws:– In Ohio, the Valentine Act – O.R.C. § §

1331.01-14– Often mirror major sections of federal

acts – Tend to be interpreted in light of caselaw

developed for federal antitrust laws

Federal Enforcers:– Department of Justice

Both civil and criminal enforcement authority

– Federal Trade Commission Civil enforcement only

State Attorneys General: – Ohio has been active

Current AG is chair of AG’s Antitrust Committee

Not sure what election means for antitrust enforcement

Private Plaintiffs: – Have right of action under all but FTC Act– Treble Damages


Sherman Act

Section 1: prohibits contracts, combinations or conspiracies in restraint of trade

– Requires agreement between two or more actors/entities Must be independent actors/entities

Section 2: prohibits monopolization or attempted monopolization

– Unilateral conduct; no second party required

– Does not prohibit legally/naturally acquired monopolies


Rule of Reason v. Per Se Analysis

Rule of reason: looks at whether there are pro-competitive justifications that outweigh anticompetitive impact of action

Per Se: recognizes that some conduct is so inherently anticompetitive that no valid, procompetitive justification can exist or outweigh the anticompetitive effects

– Plaintiff does not have to prove effects, merely that conduct occurred – Price fixing by competitors (including bid rigging)– Market divisions/allocations by competitors – Concerted refusals to deal/boycotts – Tying arrangements

Continuum between Rule of Reason and Per Se Analysis – Quick-look


Robinson-Patman Act

Meant to protect small buyers

Prohibits discrimination in price between different purchasers of commodities of like grade and quality, reasonably contemporaneously, in any line of commerce, if effect of such discrimination may be substantially to lessen competition

Applies to goods only, not services

Rarely enforced at Federal level; more commonly asserted by private plaintiffs

Defenses– Meeting Competition – Cost Justification– Changing Conditions– Availability – Non-profit Institutions – “own use”

purchases


Defenses to Antitrust Allegations (Maybe) Available to Health Care Professionals

Substantive Arguments Health Care Quality Improvement Act

– Peer review immunity Insurance

– McCarran-Ferguson “business of insurance” exemption Only exempt to the extent activity is regulated by state law

State Action – Exempts from federal law any action that:

Complies with a clearly articulated and affirmatively expressed state policy; and Is actively supervised by state authorities

Noerr-Pennington – Based in First Amendment’s right to petition government

Local Government Antitrust Act Organized Labor


DOJ/FTC Horizontal Merger Guidelines Update

Horizontal Merger Guidelines provide insight into how agencies analyze horizontal mergers for competitive concerns

Updated this spring – the first major revision to the guidelines since 1992

– Amended in 1997

– Commentary released in 2006

DOJ and FTC stated that purpose was to bring Guidelines more in line with current agency practice


DOJ/FTC Horizontal Merger Guidelines UpdateMain Changes

Moves away from a lock-step analysis to a more flexible analysis Places more emphasis on economic analysis and models beyond the

“hypothetical monopolist” test De-emphasis of importance of market definition Change in unilateral effects analysis

– Dropped 35% presumption – Increased focus on economic tests

Change in Entry analysis – Instead of “two year” analysis, more fluid approach of entry that is timely

enough to make anticompetitive activity unprofitable HHI Concentration thresholds revised upwards


DOJ/FTC Horizontal Merger Guidelines UpdateWhat does it mean for Healthcare?

Hospital Merger Review – Importance of economic analysis and different economic tests of likely competitive

effects emphasized in hospital merger review– De-emphasis of primacy of market definition

Can “back into” market definition based on evidence of competitive effects– Explicit emphasis that geographic market can be based on geographic location of

suppliers or customers– Discussion of closeness of substitutes

Service Providers – Revisions of market definition and de-emphasis of importance of market definition – Expansion of role of competitive effects and list of types of effects considered – Upward Pricing Pressure Tests – Merger Simulations


DOJ/FTC Horizontal Merger Guidelines UpdateWhat does it mean for Healthcare?

Insurers

– Increased information about bargaining models

– Change in entry analysis

– Discussion of “power buyers”

Pharmaceuticals/Medical Devices

– Specific discussion of innovation markets

In general

– Sources of evidence

– Increase in emphasis of non-price effects


Patient Protection and Affordable Care ActAccountable Care Organizations

The Patient Protection and Affordable Care Act, Public Law No. 111-148, calls for the creation of “Accountable Care Organizations”

– ACOs “seek to deliver high-quality and efficient healthcare services to consumers” and “agree to be accountable for the quality, cost, and overall care of Medicare beneficiaries who are enrolled in the traditional fee for service programs who are assigned to it.”

Antitrust issues are similar to those with IPAs and PHOs – the risks of allegations of price fixing and other collusive activities


Joint CMS/FTC Workshop on ACOs

Held in October of this year

Transcripts available online at FTC website

Morning session was dedicated to antitrust discussions

FTC has said they hope to work with CMS and have guidance available soon

– Debate as to whether guidance would be similar to the 1996 clinical integration statements

– General view was that most ACOs would be viewed under a rule of reason analysis


Joint CMS/FTC Workshop on ACOs: Safe Harbors

The FTC did not commit to providing safe harbor provisions– Some commentators questioned whether safe harbors, such as those listed in the 1996 guides,

would be useful– Many commentators suggested that there needs to be flexibility to determine what model(s) of

ACOs are most effective One potential safe harbor – an ACO would be evaluated under the Rule of Reason if it met

the statutory requirements for integrated activities:– If an ACO meets the statutory requirements for an ACO;– Is approved by CMS;– Agrees to participate in a shared savings program; and– Uses the same organizational structure & care processes as it does in dealing with private payers

A safe harbor based on the size/scope of the ACO was also discussed – More debate over this potential safe harbor – Debate over the fact-specific nature of competitive analysis v. the benefits of bright-line safe

harbors


Joint CMS/FTC Workshop on ACOs – Key Take Aways

FTC appeared to be in “listening mode”

But did commit to put out some type of guidance

Significant emphasis was placed on the need to have consequences for the ACOs, not just upside

– This was generally led by the payer representatives Significant emphasis was placed on the clinical data/outcomes

sharing and what form that would take – Whether electronic records sharing was needed

General outcome – like with current IPAs and PHOs, need to show that ACOs are actually integrated, share risk, are more than merely a means to collude and wield market power



Have been touted as an important part of healthcare reform BUT such guidelines can be seen as a form of standard-setting

– Basically, a group of specialists making decisions for the market – Can create issues because they preempt market choice

Even though standards can be efficient The main issue is the ability to create/exercise market power, allowing those with market power to:

– Raise prices– Exclude competitors– Raise rivals’ costs – Suppress innovation – Create Entry Barriers

Nonetheless, clinical guidelines are important– They are a factor that the FTC looks at in reviewing clinical integrations – They are likely to be an important part of any ACO program



Because of the potential pro-competitive benefits, standard setting is evaluated under rule of reason analysis

Key factors to consider when looking at creating evidence-based guidelines: – Try to get a diverse group involved in the discussion of the standard – Minimize and/or publicize financial conflicts of interest of those involved in the

standard-setting – Have policies in place for oversight and to ensure that a fair system is used in

establishing the guideline

Remember – the antitrust analysis related to standard setting shifts the focus from competition for the underlying product/service to the competition to set the standard

– The question often is: was the standard-setting process fair and balanced and based on medical evidence and best practices, not self-interest or bias?


Governmental Enforcement Highlights US v. Blue Cross Blue Shield of MichiganMost Favored Nation Clauses in General Background:

– MFN clauses in agreements between providers and third party payors seek to ensure that the payor receives the best rate the provider charges

Generally either require that the provider agrees to charge the payor the lowest price that it charges any other comparable payor

Or require the provider to aver that it is not charging lower rates to any other comparable payor

MFNs are generally reviewed under a rule of reason analysis


Governmental Enforcement Highlights US v. Blue Cross Blue Shield of Michigan

Procompetitive arguments in support of MFNs:

– Lower prices payor pays, which allows them to charge consumers less for their insurance products.

– Can facilitate bargaining by reducing/eliminating risk that 3rd party payor will be paying more than its competitors

Anticompetitive arguments against MFNs:

– Discourages entry of new competitors to payor; competitor cannot effectively compete on price

– Causes providers to limit payor mix; providers may choose not to contract with a provider whose rates would trigger the MFN

– Sets artificial price floor



Cases have alleged both Sherman Act §1 and §2 claims

Decisions have generally focused on the market share/market power of the payor in the given market

MFNs demanded by payors with significant market shares that would potentially allow them to exercise market power are more likely to be found problematic

Goes to “likelihood of success” of monpolization/attempted monopolization claims

Decisions and consent orders have often looked at evidence of actual effects – the loss of providers from competing payors who had negotiated lower rates



Investigation announced in March 2010 – joint investigation by DOJ and Michigan AG

Complaint filed October 18, 2010

– E.D. Mich., No. 2:10-cv-14155

At least one follow-on private class action has already been filed

– The Shane Group, Inc. v. Blue Cross Blue Shield of Michigan, E.D. Mich. No. 2:10-cv14360, filed October 29, 2010


US v. Blue Cross Blue Shield of MichiganThe Government’s Complaint

Alleges violations of Sherman Act § 1 and Michigan Antitrust Reform Act § 2

– Alleges that each agreement between BCBSM and a hospital violates Sherman Act § 1

Alleges the MFNs:– (1) reduce the ability of other health insurers to compete with BCBSM, or

exclude competitors in certain markets, and – (2) raise prices paid by BCBSM’s competitors and by self-insured employers

Argues BCBSM’s policies cover over 60% of all commercially insured Michigan residents and is the largest non-governmental purchaser of healthcare services in Michigan

– Alleges BCBSM has market power in 8 relevant geographic markets



Types of MFNs BCBSM sought

– “MFN-plus”: require hospitals to charge some or all other commercial insurers more than the hospital charges BCBSM

Allege some hospitals are required to charge BCBSM competitors as much as 40% more than BCBSM is charged

– “Equal-to MFNs”: require hospitals to charge other commercial health care insurers at least as much as they charge BCBSM


US v. Blue Cross Blue Shield of MichiganThe Government’s Complaint - effects

Complaint alleges that the MFNs have caused many hospitals to:– Raise prices to BCBSM’s competitors by substantial amounts – Or demand prices that are too high to allow competitors to compete,

effectively excluding competitors from the market– Deny BCBSM competitors access to competitive contracts

Complaint alleges that the result of the MFNs has been: – Increased healthcare costs for Michigan residents

By increasing premiums for BCBSM and its competitors– Decreased entry and expansion in healthcare insurance markets in Michigan – Establishment of price floors below which hospitals are unwilling to sell

hospital services



The complaint alleges a substantial likelihood of success because of BCBSM’s market power

– Hospitals that wouldn’t go along with the MFNs face substantial financial penalities by being excluded from BCBSM’s network

The government alleges that BCBSM agreed to accept price increases from the hospitals in exchange for the MFNs to entice agreement

The complaint alleges that prior to institution of the MFNs, some insurers were able to negotiate better prices than BCBSM that disappeared after the MFNs were put in place

Concedes rule of reason analysis by stating that any procompetitive benefits do not outweigh the anticompetitive effects


The Shane Group Complaint

Defines class as “all individuals and entities who purchased healthcare services at a rate contracted for by BCBSM or one of its competitors directly from a hospital with which BCBSM entered into an agreement that included an (sic) MFN clause or its equivalent…”

Generally tracks DOJ complaint but adds Sherman Act § 2 claims

– Claims BCBSM has monopoly power in each relevant market

– Claims MFNs helped create and maintain this monopoly power

– Also pleads attempt to monopolize in alternative to monopolization claim



Another 2010 case: Connecticut AG Richard Blumenthal investigation of MFN clause in Anthem Blue Cross Blue Shield of Connecticut contracts

– Concern that clause dissuaded providers from taking part in Charter Oak Health Plan, the state’s plan for the uninsured, because doing so would invoke the MFN clause

– Resolved without litigation when Anthem agreed to publicly affirm the MFN clause did not apply to the Charter Oak plan


Governmental Enforcement Highlights

Changes at the top for both agencies – DOJ: Assistant Attorney General Christine Varney – FTC: New Chairman Jon Leibowitz, new head of Bureau of Competition Rich

Feinstein Branded/Generic Pharmaceutical Patent Settlements

– In re Androgel Antitrust Litigation

– In re Provigil Antitrust Litigation

– Potential circuit split– New DOJ support – Proposed Congressional Legislation

FTC Consent Order – Roaring Fork Valley Physicians I.P.A.


Interesting Private Sector Cases

Nurse Wage Cases– Ex. Johnson v. Arizona Hospital & Healthcare Association, D. Ariz., No. 07-

1292

Preliminary approval of settlement on 9/27/2010

Hospital Exclusive Dealing Cases– Little Rock Cardiology Clinic PA v. Baptist Health, 591 F. 3d 591 (8th Cir. 2009)

– Palmyra Park Hospital, Inc. v. Phoebe Putney Memorial Hospital, et al., 2010 WL 1726653 (11th Cir. 2010)

– Franco et al v. Memorial Hermann Healthcare System, No. 2006-79945 (Tex. Dist. Ct., March 11, 2010)

www.dinslaw.com

Tammy L. Imhoff, Esq.513-977-8534 | [email protected]

www.dinslaw.com emerging issues in antitrust: healthcare watchouts tammy l. imhoff, esq. dinsmore...

Documents