An­titrust laws ex­ist to pro­tect con­sumers, not providers

Modern Healthcare - - Q & A -

“I’m not sure I en­tirely agree that merg­ers are of­ten formed in re­sponse to mar­ket un­cer­tainty.”

Markus Meier is the as­sis­tant di­rec­tor for health­care en­force­ment in the Federal Trade Com­mis­sion’s Bureau of Com­pe­ti­tion.

Meier, an at­tor­ney and for­mer U.S. Army of­fi­cer who joined the FTC in 1990, leads a di­vi­sion of about 35 at­tor­neys con­duct­ing in­ves­ti­ga­tions and en­force­ment di­rected at phar­ma­ceu­ti­cal com­pa­nies, health sys­tems and physi­cians. Mod­ern Health­care re­porter Joe Carl­son spoke with Meier re­cently about his agency’s view of ac­count­able care or­ga­ni­za­tions, hospi­tal merg­ers and ac­qui­si­tions ac­tiv­ity, and drug­mak­ers’ pay-for-de­lay agree­ments. This is an edited ex­cerpt.

Mod­ern Health­care: What do you think of the crit­i­cism from hospi­tal lead­ers that the FTC is dis­cour­ag­ing them from en­ter­ing merg­ers and part­ner­ships, which con­flicts with re­form’s goal to cre­ate net­works that co­or­di­nate care?

Markus Meier: That con­tention is wrong. It re­flects mis­un­der­stand­ings about the Af­ford­able Care Act, ac­count­able care or­ga­ni­za­tions and the an­titrust laws. The goals of the ACA and the an­titrust laws are ac­tu­ally very wellaligned in pro­mot­ing the de­vel­op­ment of pro­com­pet­i­tive ac­count­able care or­ga­ni­za­tions. ACOs are in­tended to pro­mote greater ef­fi­ciency for pa­tients by co­or­di­nat­ing care to achieve higher qual­ity at lower cost. An­titrust has the same goal, pro­tect­ing com­pe­ti­tion that ben­e­fits con­sumers and pro­motes ef­fi­cien­cies. Some­times people like to sug­gest that federal agencies are not suf­fi­ciently co­or­di­nat­ing with each other on these poli­cies. But that’s very wrong. There was ac­tu­ally a very high level of co­or­di­na­tion in putting to­gether the reg­u­la­tions that im­ple­mented the ACO por­tions of the ACA and the an­titrust laws. We worked very closely with the CMS, the White House, the Depart­ment of Jus­tice, HHS, the In­ter­nal Rev­enue Ser­vice and the Of­fice of Man­age­ment and Budget. We made sure that we co­or­di­nated the guid­ance that we put out with the CMS. An­titrust is not a bar­rier to the for­ma­tion of pro­com­pet­i­tive ACOs. We of­fer vol­un­tary re­view for any ACO that seeks additional guid­ance. But just be­cause you la­bel your con­sol­i­da­tion or col­lab­o­ra­tion as an ACO, it’s not a free pass from the an­titrust laws.

MH: How can some­one tell the dif­fer­ence be­tween a pro-com­pet­i­tive ACO and an anti-com­pet­i­tive ACO?

Meier: Any­one look­ing to form an ACO for the Medi­care Shared Sav­ings Pro­gram should look at the 2011 joint FTC-Jus­tice Depart­ment pol­icy state­ment on ACOs. If an ACO meets the CMS’ el­i­gi­bil­ity cri­te­ria, and it par­tic­i­pates in the Shared Sav­ings Pro­gram, and it uses the same gov­er­nance struc­ture and the same clin­i­cal and ad­min­is­tra­tive pro­cesses in the Medi­care area and the commercial mar­kets, the FTC and the Jus­tice Depart­ment will give what’s known as a “rule of rea­son” treat­ment to the ACO’s op­er­a­tions in the commercial mar­ket. In other words, we’re not go­ing to find the ACO guilty of be­com­ing an il­le­gal price-fix­ing car­tel.

There are a lot of ACOs look­ing to par­tic­i­pate solely in the commercial mar­ket. Both the FTC and Jus­tice have tried to pro­vide the in­dus­try with use­ful guid­ance that it can fol­low in form­ing these or­ga­ni­za­tions in a way that is pro-com­pet­i­tive. We’re wor­ried about or­ga­ni­za­tions that are not much more than a price-fix­ing car­tel, or or­ga­ni­za­tions that are fairly in­te­grated but are so large that they dom­i­nate their mar­ket­place and have the abil­ity to ex­er­cise sig­nif­i­cant mar­ket power. Both of those types of be­hav­ior have a very high like­li­hood of harm­ing con­sumers, rais­ing prices and not im­prov­ing qual­ity at all.

MH: Hospi­tal CEOs are ask­ing whether it’s fair for the FTC to step up en­force­ment of M&A ac­tiv­ity when the federal govern­ment is in­ject­ing more fi­nan­cial un­cer­tainty into the sys­tem. What do you think?

Meier: I’m not sure I en­tirely agree that merg­ers are of­ten formed in re­sponse to mar­ket un­cer­tainty. Just be­cause providers face some un­cer­tainty about the fu­ture, that’s not a jus­ti­fi­ca­tion to form what would other­wise be an il­le­gal price-fix­ing car­tel or cre­at­ing what might other­wise be an il­le­gal mo­nop­oly.

On the fair­ness ques­tion, part of my re­sponse is, fair to whom? The an­titrust laws aim to pre­vent busi­ness

prac­tices that un­rea­son­ably res­train com­pe­ti­tion, which can lead to higher prices and lower qual­ity. I some­times have to re­mind physi­cians and hos­pi­tals that the an­titrust laws aren’t there to pro­tect their in­ter­ests as pro­duc­ers of health­care ser­vices, they’re in­tended to pro­tect con­sumers, in­clud­ing pa­tients, health plans and self-in­sured em­ploy­ers. By pro­mot­ing com­pe­ti­tion, we hope that leads to lower prices, bet­ter qual­ity, more choice and in­no­va­tion.

MH: The FTC re­cently won a federal court case in Idaho when a judge or­dered St. Luke’s Health Sys­tem to sell a large physi­cian prac­tice it re­cently had ac­quired. The judge said that while the ac­qui­si­tion likely would have im­proved pa­tient out­comes, the tie-up was il­le­gal be­cause it likely would lead to higher prices. Why would the FTC dis­cour­age a deal that was likely to im­prove pa­tient care?

Meier: I have to be some­what care­ful be­cause this case is still in ac­tive lit­i­ga­tion. But I would en­cour­age people to take a look at what the judge ac­tu­ally said. You’re right that the judge said he be­lieved the ac­qui­si­tion was likely to im­prove the de­liv­ery of health­care over the long run. But in the very next sen­tence, he said there are other ways to achieve the same ef­fect that do not run afoul of an­titrust laws and do not run such a risk of in­creased costs. He was ap­ply­ing well-es­tab­lished an­titrust law prin­ci­ples, weigh­ing the pos­si­ble ben­e­fits against the pos­si­ble harms, say­ing that while this trans­ac­tion may have the abil­ity to im­prove pa­tient out­comes in the long run, that end could be ac­com­plished with­out the harm of higher prices and mar­ket power.

MH: The FTC has taken a hard line against “pay-for-de­lay” agree­ments be­tween branded drug­mak­ers and generic drug­mak­ers, in which generic drug­mak­ers agree not to re­lease com­pet­ing gener­ics against branded drugs. Why is this such a big is­sue now, es­pe­cially in light of the Supreme Court case on this sub­ject last year?

Meier: Our con­cern is that branded com­pa­nies are pay­ing off their generic com­peti­tors not to en­ter the mar­ket­place with a generic, and in re­turn, they are re­ceiv­ing a pay­off that makes it worth their while to do that. The branded com­pany gets to main­tain a mo­nop­oly on the high-priced brand prod­uct, and it shares some of those prof­its with the generic com­peti­tor. Had the generic come into the mar­ket, con­sumers would get the ben­e­fit of a lower price. The FTC found that this prac­tice costs con­sumers about $3.5 bil­lion a year. The Supreme Court’s de­ci­sion in FTC v. Ac­tavis last June makes clear that pay-for-de­lay can have gen­uine ad­verse ef­fects on com­pe­ti­tion. The court re­jected a le­gal stan­dard that was very per­mis­sive of these agree­ments. But there’s un­cer­tainty as to what district courts will do with this de­ci­sion. At the FTC, we think the Supreme Court’s guid­ance is quite clear. But the jus­tices left a lot to the district courts’ dis­cre­tion to de­cide how to struc­ture fu­ture cases. So we re­ally don’t know what im­pact this de­ci­sion is go­ing to have on com­pa­nies go­ing for­ward, when they set­tle their cases and en­gage in this be­hav­ior. So we’re still very in­tent on mak­ing sure that the law continues to move in the right di­rec­tion.

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