Antitrust

In 2020, the Sherman Act – the oldest of America’s antitrust laws – celebrates its 130th anniversary.  Yet, never before has the concept of maintaining a competitive environment in the various sectors of the ever-consolidating health-care industry been more important than today.  The key principle is that competition ensures better results in the market – be it oversight of merging insurers, unilateral actions taken by giant PBMs that remain unchecked by effective competition, possibly collusive behavior with respect to pricing, or abuse of intellectual-property protections by some pharmaceutical companies, to name only a few relevant examples.

Antitrust enforcement is, notably, not only the domain of the government (the FTC and the DOJ, primarily, as well as State Attorneys General) – private parties, individuals, corporations, and even trade associations also have standing to bring lawsuits based on injury to competition.

The Frier Levitt team has extensive experience in this regard, both on the plaintiff and defense side of antitrust actions and investigations.  Below, we outline a few common types of antitrust-based claims and issues that may arise in the physician and health-care space.

Advising Physician Groups on Practice Integration Required for Joint Conduct

Undertaking concerted action (such as agreeing on parameters for value-based contracting, implementing or enhancing existing quality metrics and outcome-measuring tools, or simply collaborating to purchase supplies) can bring with it significant antitrust risk exposure.  After all, separate physician groups remain precisely that: separate competitors.

Barring a full-blown group merger, for your group to engage in any collaborative arrangement with competing practices, a certain level of clinical and/or financial integration must occur to eliminate the antitrust hurdles to joint contracting and the like.  Over the past three decades, the federal agencies have provided detailed – and often complex – guidance on what constitutes a sufficient level of clinically-integrated behavior, which would place previously wholly independent practices on solid ground when it comes to networked action.

The precise parameters of what counts as sufficient integration are highly fact-dependent, specific to your proposed network, as well as practice specialty area and possibly even geographic location.  We have experience analyzing all relevant factors and advising on the safest, most efficient path forward to ensure creation of a compliant CIN.  Among these elements are usually (1) joint integration-dependent cost savings and quality improvements, (2) shared capital investments for labs, IT improvements, staff training and the like, (3) standardized quality monitoring and cost and utilization control (UM/QA) activities, as well as many others depending on your circumstances.

Trade Association & Information Exchange Counseling

We frequently receive questions surrounding the permissible degree of collaborative actions among health-care providers: “Can our doctors and those of another practice group collaborate on implementing a custom software package and other best practices?” or “Can our members leverage their combined purchasing power and jointly buy from suppliers at a better price?”…These are mere examples of common issues faced by providers wishing to cooperate with competitors in an antitrust-compliant manner that does not cross into prohibited Sherman Act territory.

Luckily, there is significant guidance by the federal agencies on what is legally feasible, what constitutes the requisite level of “clinical integration” among providers to negotiate jointly, and so on.  However, the line between the permissible and the risky are often narrow and always highly fact-dependent.  A recent record $100 million criminal antitrust fine imposed on a large Florida oncology practice for violating the Sherman Act by agreeing to allocate patients amongst itself and its competitors is a stark example of the risk that medical providers face if they forego regular antitrust training programs and fail to secure legal counsel’s advice on their business practices.  Frier Levitt can advise your practice group or trade association as to minimizing antitrust risk exposure and ensuring compliance.  We also offer antitrust training sessions for your executives and sales personnel, which further reduces legal risks to your business and is actively encouraged by the government enforcement agencies. 

Price-Fixing Cartels and Market-Allocation Collusion

Aside from monopolization (the unilateral anti-competitive conduct by dominant players with high market shares), the antitrust laws prohibit “contracts, combinations, or conspiracies” that restrain trade.  In plain language, this means price-fixing ‘cartels’ and market- or customer-allocation conspiracies among horizontal competitors are per se unlawful: They are illegal as a matter of law, with the statute prohibiting them without allowing the defense to offer any pro-competitive excuse or other exculpatory rationale for such an agreement.  A successful antitrust plaintiff is entitled, by statute, to treble damages (meaning: damages equivalent to triple the actual amount of financial harm caused by the cartel).  In addition, this type of “hard-core” antitrust offense also brings with it criminal liability – up to 10 years in prison for individuals who participate in a cartel, bid-rigging or the like – and is enforced by the DOJ’s Antitrust Division.

Amnesty (Corporate Leniency) Applications

Related to the previous discussion of cartels, the regulations implementing U.S. antitrust law allow for the “whistleblower” in an illegal cartel to obtain full immunity from criminal prosecution.  This requires extensive and forthcoming cooperation by the whistleblower (which can be an individual or a corporation or both), who is invariably represented by counsel, vis-à-vis lawyers from the Department of Justice.  The DOJ will determine the validity of the statements and the suitability of such an amnesty applicant, and if granted, the whistleblower is protected from criminal liability, serves no prison time and pays no criminal fine.  In addition, while the whistleblowing entity still remains liable for damages in privately-brought “follow-on antitrust litigation,” it is protected from the danger of paying treble damages as well as joint-and-several liability, under the statutory ACPERA amendment, which exempts a successful amnesty whistleblower from these burdens – the quintessential “carrot and stick” approach to governmental cartel enforcement, encouraging remorseful cartelists to come forward and report illicit price-fixing arrangements in their industry.

We have experience both representing individuals and corporations in seeking amnesty in cartel cases, as well as pursuing and defending follow-on antitrust claims in civil lawsuits that almost invariably follow the DOJ’s revelation of a cartel exposed by an amnesty applicant.

Mergers and Acquisitions that Lead to Monopoly Positions

The American antitrust laws (and indeed analogous world-wide competition statutes) prohibit mergers or joint ventures by competitors that would lead to a dominant position in the marketplace, or to use the language of the Clayton Act statute, “lead to a substantial lessening of competition or tend to create a monopoly.”  Mergers above a certain financial deal threshold must be reported in detail under the Hart-Scott-Rodino Act, for antitrust review by the federal agencies.  Frier Levitt attorneys have long-standing experience representing various stakeholders in such merger reviews, including third-party witnesses, third-party entities actively opposing the deal from being allowed, as well as advising merging entities through the HSR process.

Horizontal mergers (where two direct competitors seek to combine into one corporate entity) are naturally more frequently challenged as anti-competitive, because by definition, the transaction will cause the relevant market to experience a reduction in the number of competitors by one.  If there are only 3 competitors before the deal, post-merger this would dwindle to 2, a natural duopoly and potentially prohibited by the Clayton Act.

There are also “vertical” mergers, which have recently played a more frequent role in the health-care deal space.  These occur when firms or assets operate at different stages of the same supply chain – for example, if a large hospital system were to acquire both an (upstream) insurer as well as a (downstream) physician group, it would become “vertically integrated” across at least three relevant levels of the supply chain.

Coincidentally, the two federal antitrust enforcement agencies (DOJ and FTC) recently released draft “Vertical Merger Guidelines,” outlining the principal analytical techniques, practices and enforcement policy of the Agencies with respect to vertical mergers and acquisitions under the federal antitrust laws.  The proposed Guidelines will, among other things, define “market” and “related products” with respect to the Agencies’ antitrust analysis. It is imperative that the Guidelines supply a definition that will include the kinds of relationships between these large healthcare actors, as understood by the pharmacy stakeholders in competition with these giants.  They will also address the evidence of adverse competitive effects (and the Agencies must be made aware of the range of adverse effects inherent in the pharmacy industry) and will address “coordinated effects” (as vertical mergers may diminish competition by enabling or encouraging post-merger coordinated interaction among firms in the relevant market that harms customers).

Frier Levitt can bring your organization’s concerns to light before the Agencies with the most power to influence the healthcare entities in question, and proscribe the abuses they continue to perpetrate against independent pharmacies and the American healthcare consumer.