ANTITRUST ALERT
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
ANTITRUST ALERT
A Global Resource for Compliance Officers & Legal Advisors
Healthcare Antitrust
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THE LATEST: Washington Attorney General Seeks Disgorgement of Profits Resulting from Two Transactions between Health System and Physician Groups

by | Sep 8, 2017 |

On August 31, 2017, the Attorney General of Washington filed a complaint in the United States District Court for the Western District of Washington alleging that two transactions harmed competition for healthcare on the Kitsap Peninsula.

WHAT HAPPENED:
  • In July 2016, CHI Franciscan Health System (Franciscan) acquired WestSound Orthopedics (WestSound), a physician practice of seven orthopedists based in Silverdale, Washington.
  • In September 2016, Franciscan entered into a set of agreements which allowed The Doctors Clinic (TDC), a 54 physician multispecialty practice also based in Silverdale, to use Franciscan’s reimbursement rates with payors in exchange for certain ancillary services.
  • While the publicly stated rationale for the transactions included “enhanced patient access and efficiency,” the Attorney General’s complaint alleged that the “true motivation” for the deals was to “charge higher rates for physician services, and to collectively gain negotiating clout over healthcare payers by removing head-to-head competition.”
  • The complaint also alleges that the TDC agreements would enable Franciscan to effectively shut down TDC’s facilities providing ancillary surgical, imaging, and laboratory services, and shift these outpatient procedures to Franciscan’s nearby inpatient hospital, where it could charge higher, hospital-based rates for the same services.
WHAT THIS MEANS:
  • Even without involvement from the Federal Trade Commission (FTC), state attorneys general can and do independently challenge transactions they consider anticompetitive and continue to be aggressive in pursuing enforcement actions where health systems either acquire physician practices or use other agreements to charge higher rates for physician and ancillary services
  • Health systems should consider that even unreportable transactions may trigger a challenge from either the FTC or state attorneys general to unwind them and, if a transaction has been consummated, any profits resulting from an unlawful transaction may be subject to disgorgement.
  • Since internal emails and documents discussing a transaction, even one that does not meet the Hart-Scott-Rodino Act’s reporting threshold, may eventually surface in an antitrust investigation, this illustrates how “bad documents” can undermine obtaining clearance for a transaction.


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THE LATEST: Rate-for-Volume Payer Contract Provision Should Be Analyzed under Rule of Reason

by | Aug 22, 2017 | ,

District Judge Walter H. Rice of the Southern District of Ohio granted three pretrial motions brought by the Defendants on the eve of trial in The Medical Center at Elizabeth Place, LLC v. Premier Health Partners, et al., Case No. 3:12-cv-26, 2017 WL 3433131 (S.D. Ohio Aug. 9, 2017), and denied as moot eleven remaining pretrial motions. Judge Rice dismissed the entire case with prejudice because he ruled the contracts that Plaintiff, a competitor hospital, challenged should be analyzed under the rule of reason, but Plaintiff had failed to plead a rule of reason case. Plaintiff’s decision not to do so doomed the case to failure.

WHAT HAPPENED:
  • Judge Rice’s key decision related to the Defendants’ pretrial challenge of District Judge Black’s (who was previously assigned to the case) order holding that the per se rule applied.
  • The Defendants include four hospital systems in the Dayton, Ohio area that formed the Premier joint venture. The hospitals “are owned, controlled and operated independently” but “their income streams are consolidated, and Premier manages many of their business functions, including the negotiation of each hospital’s managed care contracts with insurers.” 2017 WL 3433131, at *13.
  • The Plaintiff challenged two types of agreements Premier negotiated on behalf of the hospitals: (1) agreements with insurance companies (payers) that included a “rate-for-volume clause”—that is, a provision wherein payers agreed to give Premier the option to terminate or renegotiate rates should the payers add other hospitals to their network; and (2) non-compete agreements with physicians in which physicians agreed to refer patients internally.

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Antitrust M&A Snapshot: April – June 2017 Update

by , and | Aug 3, 2017 | , , , , , , ,

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process.

Read the full report here.



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THE LATEST: Federal Trade Commission and State Attorney General Seek to Block a Health System’s Physician Group Acquisition

by | Jun 29, 2017 | , ,

With its latest lawsuit to block an acquisition of physicians, the Federal Trade Commission (FTC) confirmed last week that monitoring physician consolidation is a priority. The FTC and North Dakota Attorney General sued to block the proposed acquisition by a health system (Sanford Health) of Mid-Dakota Clinic (MDC), which both serve the areas of Bismarck and Mandan, North Dakota. The deal would allegedly create very high market shares in several physician service markets.

WHAT HAPPENED
  • Sanford Health is a vertically integrated health system, which operates a general acute care hospital in Bismarck and clinics providing primary care and specialty services. Sanford employs approximately 160 physicians who work in Bismarck or Mandan. MDC is a multispecialty medical practice employing 61 physicians who provide services in Bismarck.
  • Concurrent with its sealed federal complaint to preliminarily enjoin the deal, the FTC filed an administrative complaint that alleges that the transaction would create anticompetitive effects in four physician service markets: adult primary care services, pediatric services, Obstetrics and Gynecology (OB/GYN) services, and general surgery services. Sanford and MDC are the area’s two largest providers of each of those services; in general surgery, they are the only providers.
  • The complaint contends that the relevant geographic market is no larger than the four-county Bismarck, ND Metropolitan Statistical Area. The FTC alleges that this area encompasses the locations where, to be marketable to employers, commercial health plan networks must include physicians.
  • The complaint alleges that Sanford and MDC are each other’s closest competitors and that the combination would result in post-transaction market shares of 75 percent for adult primary care services, over 80 percent for pediatric services, over 85 percent for OB/GYN services and 100 percent of general surgery services.
  • The FTC rejects as unsubstantiated and not merger specific the parties’ claims that the transaction would yield significant cost savings and quality improvements. In any event, the FTC alleges that the claimed efficiencies do not outweigh the transaction’s likely competitive harm.

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THE LATEST: Losing Bidder for Pharmaceutical Triggers FTC Investigation, Fix, and $100 Million Fine in Non-HSR-Reportable Transaction

by and | Mar 13, 2017 | , , ,

A private lawsuit filed by Retrophin Inc. (Retrophin), under then-CEO Martin Shkreli, likely triggered an investigation by the FTC into a consummated transaction.  Both the private lawsuit and the FTC complaint resulted in settlement.  In addition, the FTC levied a $100 million penalty.

WHAT HAPPENED:
  • In 2013, Questcor Pharmaceuticals, Inc. (Questcor) acquired the U.S. rights to Synacthen Depot (Synacthen) from Novartis (Mallinckrodt later acquired Questcor).
  • Questcor’s $135 million deal with Novartis out-bid several companies seeking to acquire Synacthen, including biopharmaceutical company Retrophin, who bid $16 million for the Synacthen license.
  • In 2014, Retrophin (under then-CEO Martin Shkreli) filed suit against Questcor, alleging that the purpose of the transaction between Questcor and Novartis was to eliminate competition for Achthar, Novartis’ ACTH drug used to treat infantile spasms and nephrotic syndrome, by shutting down Synacthen.
  • Retrophin’s case was settled in 2015 with Mallinckrodt (who acquired Questcor in the interim) paying Retrophin $15.5 million.
  • There are reports that the FTC challenged the consummated transaction of Questcor/Novartis following Retophin’s lawsuit. The FTC’s challenge recently resulted in a $100 million monetary payment and licensing of Synacthen for treatment of infantile spasms and nephrotic syndrome to an FTC approved licensee.
WHAT THIS MEANS:
  • Even if a transaction is non-reportable under the Hart-Scott-Rodino (HSR) Act, the FTC or DOJ may open an investigation into the transaction. The Questcor/Novartis transaction was not reported under the then-existing HSR rules because Novartis, the licensor, retained some manufacturing rights to Synacthen.
  • The FTC and DOJ may learn about potentially anticompetitive transactions in numerous ways, including HSR filings, news reports, complaints from disgruntled customers or competitors, private litigation involving the transaction, and as shown here, from the losing bidder.
  • HSR clearance or a determination that a transaction is not HSR reportable does not mean that the transaction is free and clear of government antitrust investigations or private litigation.


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THE LATEST: Occupational Licensing—Do We Need to Protect “the Public from Rogue Interior Designers Carpet-Bombing Living Rooms with Ugly Throw Pillows?”

by and | Mar 9, 2017 | ,

The Federal Trade Commission (FTC) has looked at licensing boards many times in the past and advocated for regulations with less restriction that promote competition.  There are numerous examples of antitrust regulators’ interest in occupational licensing and competition concerns, including Advanced Practice Registered Nurses in the VA, non-lawyers in the provision of legal services, and dental regulatory boards.  Acting Chairman Maureen Ohlhausen recently gave a speech at the Antonin Scalia Law School addressing economic liberty, including a critique of occupational licensing where she stated, “I challenge anyone to explain why the state has a legitimate interest in protecting the public from rogue interior designers carpet-bombing living rooms with ugly throw pillows.”

WHAT HAPPENED:
  • Acting Chairman Ohlhausen reiterated her view that occupational licensing inhibits economic liberty. “Market dynamics will naturally weed out those who provide a poor service, without danger to the public.  For many other occupations, the costs of added regulation limit the number of providers and drive up prices.  These costs often dwarf any public health or safety need and may actually harm consumers by limiting their access to beneficial services.”
  • In the 1950s, less than five percent of jobs required a license. Today, approximately 25 to 30 percent of jobs require a license.
  • Different states regulate different occupations, and licensing requirements for the same occupations often vary significantly among states.
  • In her speech, Acting Chairman Ohlhausen said she is creating an Economic Liberty Task Force within the FTC. This task force will focus on occupational licensing regulations.
WHAT THIS MEANS:
  • We will likely see an increase in FTC actions involving licensing boards, such as in North Carolina Dental, where it is not the state itself acting but self-interested active market incumbents who impose occupational licensing requirements that limit competition.
  • The FTC Task Force will seek to “eliminate and narrow overbroad occupational licensing restrictions that are not narrowly tailored to satisfy legitimate health and safety goals.”
  • The FTC will help states identify problematic occupational licensing and reforms that promote reciprocity among states. We could see a roll back of occupational regulations.
  • Licensing boards and those who are involved in licensing regulations should examine the ways in which the regulation affects or could affect competition, whether there is evidence that a regulation is necessary to achieve the targeted policy goal, whether the regulation is narrowly tailored to meet the policy goal, and whether a less restrictive alternative is available to achieve the policy goal and benefit competition.


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Antitrust M&A Snapshot: October – December 2016 Update

by , and | Jan 30, 2017 | , , , , ,

McDermott’s Antitrust M&A Snapshot is a resource for in-house counsel and others who deal with antitrust M&A issues but are not faced with these issues on a daily basis. In each quarterly issue, we will provide concise summaries of Federal Trade Commission (FTC), Department of Justice (DOJ) and European Commission (EC) news and events related to M&A, including significant ongoing investigations, trials and consent orders, as well as analysis on the trends we see developing in the antitrust review process.

Read the full report here.

 



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Seventh Circuit Hands FTC Another Geographic Market Definition Victory in Chicago Hospital Merger Case

by | Nov 9, 2016 | , ,

On October 31, 2016, the US Court of Appeals for the Seventh Circuit handed another important victory to the Federal Trade Commission (FTC) and the State of Illinois in a hospital merger case in Chicago, Illinois. This decision follows closely on the heels of the FTC’s victory earlier this year in FTC v. Penn State Hershey before the US Court of Appeals for the Third Circuit and, like that prior case, is a strong endorsement for the FTC’s analytical approach to hospital mergers. (more…)



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DOJ, FTC Issue Antitrust Guidance to Human Resources Professionals

by , and | Oct 25, 2016 | , , ,

On October 20, 2016, the United States Department of Justice Antitrust Division (DOJ) and Federal Trade Commission (FTC) issued joint Antitrust Guidance to Human Resource (HR) Professionals (the Guidance) involved in hiring and compensation decisions. The agencies issued the guidance to educate HR professionals about how the antitrust laws apply in the employment context. 

Read the full article here.



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FTC’s Largest Pharmaceutical Divestiture Gives Insight into Broader Theories of Harm

by | Oct 12, 2016 | , ,

In pharmaceutical transactions involving generic products, the Federal Trade Commission (FTC) has typically focused on narrow antitrust theories of harm and applied a narrow product market analysis often limited to a treatment for a particular indication (and sometimes to a specific mechanism of action). In these transactions, the FTC has consistently required fixes for generic overlaps when the transaction (1) reduces the number of significant generic competitors in a particular product market to three or fewer or (2) involves the combination of a branded pharmaceutical product with a “first-to-file” generic for the same product for which there are no other generics yet on the market. Using this narrow methodology, pharmaceutical transactions involving generics that required a fix could move through the FTC review process very quickly and generally achieve clearance in approximately six months from filing.

(more…)



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