Emerging Issues in Antitrust:
Healthcare Watchouts
Tammy L. Imhoff, Esq.
Dinsmore & Shohl LLP
Cincinnati, OH
513-977-8534
Tammy.imhoff@dinslaw.com
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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Antitrust Basics


Antitrust laws are:
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Aimed at assuring that the benefits of free and open markets are
available to consumers
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By providing for fair prices and broad choices in products and
services
Antitrust laws protect:
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Competition, NOT competitors
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
The Antitrust Laws and their Enforcers


Federal Antitrust Laws:
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Sherman Act § 1&2
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Clayton Act § 7
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FTC Act § 5
–
Robinson-Patman Act

–
In Ohio, the Valentine Act – O.R.C. § §
1331.01-14
Department of Justice

–

Both civil and criminal enforcement
authority
Federal Trade Commission

State Antitrust Laws:
–
Federal Enforcers:
Civil enforcement only
State Attorneys General:
–
Ohio has been active
–
Often mirror major sections of federal
acts

Current AG is chair of AG’s Antitrust
Committee
–
Tend to be interpreted in light of caselaw
developed for federal antitrust laws

Not sure what election means for
antitrust enforcement

Private Plaintiffs:
–
Have right of action under all but FTC Act
–
Treble Damages
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Sherman Act

Section 1: prohibits contracts, combinations or
conspiracies in restraint of trade
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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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
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
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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
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Meeting Competition
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Cost Justification
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Changing Conditions
–
Availability
–
Non-profit Institutions – “own use”
purchases
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Defenses to Antitrust Allegations (Maybe) Available to
Health Care Professionals


Substantive Arguments
Health Care Quality Improvement Act
–

Peer review immunity
Insurance
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McCarran-Ferguson “business of insurance” exemption


State Action
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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
–

Only exempt to the extent activity is regulated by state law
Based in First Amendment’s right to petition government
Local Government Antitrust Act
Organized Labor
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
DOJ/FTC Horizontal Merger Guidelines Update
Main 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
–
–

Change in Entry analysis
–

Dropped 35% presumption
Increased focus on economic tests
Instead of “two year” analysis, more fluid approach of entry that is timely
enough to make anticompetitive activity unprofitable
HHI Concentration thresholds revised upwards
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
DOJ/FTC Horizontal Merger Guidelines Update
What 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
–
–
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
DOJ/FTC Horizontal Merger Guidelines Update
What does it mean for Healthcare?


Insurers
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Increased information about bargaining models
–
Change in entry analysis
–
Discussion of “power buyers”
Pharmaceuticals/Medical Devices
–

Specific discussion of innovation markets
In general
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Sources of evidence
–
Increase in emphasis of non-price effects
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Patient Protection and Affordable Care Act
Accountable 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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
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:
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If an ACO meets the statutory requirements for an ACO;
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Is approved by CMS;
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Agrees to participate in a shared savings program; and
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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
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Debate over the fact-specific nature of competitive analysis v. the benefits of bright-line safe
harbors
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
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
–

Significant emphasis was placed on the clinical data/outcomes
sharing and what form that would take
–

This was generally led by the payer representatives
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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Evidence Based Clinical Guidelines

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


The main issue is the ability to create/exercise market power, allowing those with market power to:
–
–
–
–
–

Even though standards can be efficient
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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Evidence Based Clinical Guidelines

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:

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Try to get a diverse group involved in the discussion of the standard
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Minimize and/or publicize financial conflicts of interest of those involved in the
standard-setting
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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?
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Governmental Enforcement Highlights
US v. Blue Cross Blue Shield of Michigan
Most 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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Governmental Enforcement Highlights
US v. Blue Cross Blue Shield of Michigan


Procompetitive arguments in support of MFNs:
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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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Governmental Enforcement Highlights
US v. Blue Cross Blue Shield of Michigan

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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Governmental Enforcement Highlights
US v. Blue Cross Blue Shield of Michigan

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
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The Shane Group, Inc. v. Blue Cross Blue Shield of Michigan,
E.D. Mich. No. 2:10-cv14360, filed October 29, 2010
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
US v. Blue Cross Blue Shield of Michigan
The 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:
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(1) reduce the ability of other health insurers to compete with BCBSM, or
exclude competitors in certain markets, and
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(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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
US v. Blue Cross Blue Shield of Michigan
The Government’s Complaint

Types of MFNs BCBSM sought
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“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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
US v. Blue Cross Blue Shield of Michigan
The Government’s Complaint - effects


Complaint alleges that the MFNs have caused many hospitals to:
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Raise prices to BCBSM’s competitors by substantial amounts
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Or demand prices that are too high to allow competitors to compete,
effectively excluding competitors from the market
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Deny BCBSM competitors access to competitive contracts
Complaint alleges that the result of the MFNs has been:
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Increased healthcare costs for Michigan residents

By increasing premiums for BCBSM and its competitors
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Decreased entry and expansion in healthcare insurance markets in Michigan
–
Establishment of price floors below which hospitals are unwilling to sell
hospital services
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
US v. Blue Cross Blue Shield of Michigan
The Government’s Complaint

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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
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
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Claims BCBSM has monopoly power in each relevant market
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Claims MFNs helped create and maintain this monopoly power
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Also pleads attempt to monopolize in alternative to monopolization claim
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Governmental Enforcement Highlights
US v. Blue Cross Blue Shield of Michigan

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
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Governmental Enforcement Highlights


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Changes at the top for both agencies
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DOJ: Assistant Attorney General Christine Varney
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FTC: New Chairman Jon Leibowitz, new head of Bureau of Competition Rich
Feinstein
Branded/Generic Pharmaceutical Patent Settlements
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In re Androgel Antitrust Litigation
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In re Provigil Antitrust Litigation
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Potential circuit split
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New DOJ support
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Proposed Congressional Legislation
FTC Consent Order – Roaring Fork Valley Physicians I.P.A.
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Interesting Private Sector Cases

Nurse Wage Cases
–
Ex. Johnson v. Arizona Hospital & Healthcare Association, D. Ariz., No. 071292


Preliminary approval of settlement on 9/27/2010
Hospital Exclusive Dealing Cases
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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)
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Franco et al v. Memorial Hermann Healthcare System, No. 2006-79945 (Tex.
Dist. Ct., March 11, 2010)
© 2010 Dinsmore & Shohl LLP | www.dinslaw.com
Tammy L. Imhoff, Esq.
513-977-8534 | tammy.imhoff@dinslaw.com
www.dinslaw.com