AHLA's Speaking of Health Law

2019's Biggest Antitrust Developments and What to Expect in 2020

February 06, 2020 AHLA Podcasts
AHLA's Speaking of Health Law
2019's Biggest Antitrust Developments and What to Expect in 2020
Show Notes Transcript

In a sequel to their popular podcast last year, John D. Carroll of King & Spalding LLP and Alexis J. Gilman of Crowell and Moring LLP detail 2019's biggest antitrust developments and highlight what attorneys should expect in 2020. From AHLA's Antitrust Practice Group. Sponsored by HealthCare Appraisers Inc.

To learn more about AHLA and the educational resources available to the health law community, visit americanhealthlaw.org.

Speaker 1:

Support for A H L A in the following message comes from healthcare Appraisers. Healthcare Appraisers is a nationally recognized valuation and consulting firm providing services exclusively to the healthcare industry. This includes businesses, capital assets, real estate and provider compensation, valuations for mergers, acquisitions, joint ventures, and other purposes. For more information, visit healthcare appraisers.com.

Speaker 2:

Welcome listeners, to our second annual podcast of the Top 10 Healthcare Antitrust Developments of 2019 and Top developments to watch for in 2020. My name is Alexis Gilman. I'm an antitrust partner in the Washington DC Office of Crow and mooring with me is John Carroll, a partner in the antitrust practice in King and Spalding, DC office. Hey, John.

Speaker 3:

Hey, Alexis. Looking forward to doing this.

Speaker 2:

You too. We're, uh, we're both happy to be back for a second year. Apparently the podcast had, uh, quite a few listeners last year, so at least one or two, uh, crazy folks at the HLA thought they would take the risk of hanging us back again this year. Um, haven't received any royalties from last year, but I, I think, we'll, we'll still excited to do this in any event. Uh, one quick point before we kick off with our top 10 list. Um, any of yous who expressed today are our own and not necessarily those of our firm or firms or our clients. So with that, let me kick it off with what we think are the number 10 healthcare antitrust development of 2019 FTC versus ViaPharma Shire dismissed by the Third Circuit. So in 2019, the third circuit's decision in FTC versus Shire viral pharma Delta, A setback to the FTCs ability to challenge any competitive conduct in federal court. Uh, it's a bit of a technical case, which focused on the Ft. C's authority to sue for injunctive relief in federal court under section 13 B of the FTC Act. And that provision says that whenever the FTC has reason to believe that a company quote is violating or is about to violate end quote, any law enforcement by the ftc, the FTC can go to court and see for an injunction. In the Shire case, the FTC sued Shire, uh, in federal court under 13 B, looking for an injunction and restitution. The FTC claimed that Shire had filed numerous, allegedly sham citizen petitions with the FDA to delayed generic entry, uh, for, uh, products that would've competed with one of Shire's branded products. The key here, though, is that the ftc, uh, sued Shire five years after Shire had sold off the product at issue, and Shire said the FTC didn't have authority to sue under 13 B, because the conduct, uh, the FTC was alleging it was any competitive had already ceased. And again, 13 B only applies when, um, a company is violating or is about to violate the law. The district court and the third circuit on appeal agreed with Shire. So it's a significant case, um, that has implications for the FTCs ability to challenge potentially any competitive conduct in federal court and could have, uh, huge implications for the FTCs antitrust enforcement authority in conduct cases. With that, lemme turn over to John.

Speaker 3:

Thanks, Alexis. Coming in at number nine, uh, a couple of developments in the COPA arena. Copa, as our listeners probably know, are certificates of public advantage. Uh, the first that, uh, we thought was noteworthy and more generally is that in October, um, the FTC issued some orders to health insurance companies and some health systems to provide them with information so that the FTC could study the effects of cos, um, on a number of antitrust grounds, including pricing, quality access, et cetera. Uh, the FTC also separately, uh, announced that they intend to study the impact of hospital consolidation on employee wages. As I said a minute ago, COPA is our certificates of public advantage, uh, and and present in a number of states. Uh, they're intended to in some form or another displaced competition according to the ftc among healthcare providers, most importantly, and, and most significantly to the ftc, COPPA has often immunized mergers and collaborations from federal antitrust scrutiny under the state action doctrine. That's not to say that states, uh, don't have the authority, the ability, uh, to review, uh, healthcare provider transactions that are subject to that state's particular copa, but they do, uh, likely or at least purport to immunize those transactions from FTC review. Without opining too much on what the FTCs opinion should be, I think we would agree that it's not surprising. The FTC is certainly interested in any form or conduct, uh, uh, with respect to regulation that immunizes that conduct or those transactions from their review. So that was something that they announced that we thought was pretty interesting. They also, prior to that, back in June of 2019, had held a public workshop, uh, to present their research on the price effects of three copas in particular, that were approved in the 1990s. And those were benefits health system in Montana, Palmetto Health, and South Carolina and Mission Health in North Carolina. That workshop also, uh, elicited testimony from a number of stakeholders, uh, where they could testify and discuss, uh, about their experiences with respect to cos. Uh, the FTC announced that it tends to collect information over the next several years that will help them conduct retrospective analyses of the ballot health and cable, uh, cobble rather cos. And once that study is complete, uh, the FTC will report publicly on the study's findings, uh, separately, but still related to in, in many ways the FTCs, uh, action or developments with respect to cos um, effective as of September, 2019, uh, the state of Texas immunized certain hospital mergers from the federal antitrust laws if they're approved by the Texas Attorney General. The FTC had articulated its concerns, uh, about the, uh, amendment to the COPA statute in the state of Texas, but Texas went ahead and did it anyway. Uh, a little bit more specificity around, uh, what transactions would be immune from federal, uh, federal antitrust laws. It must be a merger between hospitals and a Texas county that contains at least two hospitals, has a population no greater than a hundred thousand people and is not next to a county with a population greater than 250,000 people, or has a population between a hundred and 150,000 people and not next to a county with a population of a hundred thousand or more. So that was something that was effectuated in again, September of 2019, and sought to immunize certain what we can say are rural hospital transactions from FTC Review. Turning it over to Alexis for number eight,

Speaker 2:

Uh, coincidentally but appropriately, number eight is the early circuit's decision in FTC versus Sanford and Midcon Clinic. Uh, in September, 2019, the eighth circuit handed the FTC yet another victory in the healthcare provider merger Challenge. Uh, this case started back in 2017 when the FTC in state of North Dakota sued to block Stanford Health acquisition of Mid Dakota Clinic. The FTC alleged that the merger was unlawful in four physician service lines. The district court agreed entering a preliminary injunction, the parties then appealed, uh, but the eighth circuit affirmed. Um, the eighth circuit rejected the defendant's argument that the district court had improperly elevated the standard for defendants to rebut the plaintiff's case. Uh, the circuit said that where, as in this case, plaintiffs had, quote, had presented, quote, strong evidence of monopolization or near monopolization in each service line. It was necessary for defendants to make a strong presentation re rebuttal. Uh, the eighth circuit rejected several defendants other arguments, including that the district court had improperly defined the relevant service market by not accounting for the dominant position and leverage of the largest health insurer in the state. That high market concentration was not related to bargaining power in North Dakota, that another health system was poised enter this particular market, that the efficiencies in the case, uh, offset the potential harm to consumers, the FTC in North Dakota alleged. And finally, that mid Dakota's weakened financial condition justify the merger. Um, so with this latest opinion in the eighth circuit, the FTC has now obtained very rule decisions in healthcare provider merger cases in the third, sixth, seventh, eighth, and ninth circuits over the last decade. So, uh, pretty formidable body of case law for the FTC there. Uh, turning it to John for number seven.

Speaker 3:

Thanks Alexis. Coming in at number seven and kind of piggybacking on our theme, uh, a couple, uh, items ago with respect to action by the states, uh, Washington settled its antitrust lawsuit that it had brought against C H I Franciscan back in May of 2019. The Attorney General for the State of Washington, Bob Ferguson, announced that C HHI Franciscan and the state had settled the federal antitrust lawsuit, uh, that the state had filed against that system, which is based in Tacoma and is a nonprofit health system. That lawsuit had been filed in 2017. Uh, among other things, C HHI Franciscan has to pay up to 2.5 million to resolve, uh, the concerns by the state of Washington. That money is to be distributed to health clinics and organizations to increase access to healthcare services in the Kitsap Peninsula in the state of Washington. Uh, WA c HHI Franciscan is also, uh, required to divest its controlling interest in an outpatient surgery center that had acquired, which according to the state of Washington, would restore competition for services in that area. Um, finally, C HHI Franciscan is required to do a number of things as part of the settlement in, uh, including notify, uh, the ags Office of transactions in the future that could affect competition. There are a number of other contract changes and notification requirements in the settlement. Uh, little bit of background, uh, when the lawsuit was filed, again back in 2000, uh, 17, uh, that came on the heels of C hhi Franciscans acquisition of the assets of West Sound Orthopedics and Silverdale Washington. And then it had announced an affiliation with the Doctor's Clinic, which is a, or was a multi-specialist, multi-specialty, uh, practice with, with a little over 50 physicians in a number of locations throughout the Kitsap County. According to the state, uh, those transactions would combine the three largest providers of orthopedic physician services in the region, which would reduce choices for consumers seeking orthopedic services close to home. And so the, the after a few years of litigation, specifically, after a little over two years of litigation, uh, the state and the system settled of note, is that the FTC did not take any enforcement actions with respect to this matter. Uh, the enforcement action was brought only by the state of Washington. With that, I will turn it over to Alexis for number six.

Speaker 2:

Thanks, John. Number six, FTC orders Autobox to unwind. Uh, in November, the FTC ordered aach and Freedom Innovations to unwind their consummated merger. Uh, as background, autobox had acquired freedom in a transaction that was not reportable under the HSR Act. Uh, the companies both manufacture microprocessor prosthetic needs, microprocessor, prosthetic needs, say that sometimes fast are M pks, uh, as well as other prosthetics. They closed their acquisition in September, 2017. Uh, that same month, the FTC opened an investigation of the merger and filed the complaint, challenging that merger, Amir, three months later. Uh, which as John knows, uh, as well from our prior time with the ftc, that is, is quite fast. Uh, the administrative law judge that heard that case ruled in the FTC staff's favor and ordered that the merger, uh, be completely unwound. And then the five FTC commissioners sitting to hear the case on appeal unanimously affirmed. Uh, I'd say the case is notable for in a few respects. First, uh, the case shows once again that the antitrust agencies can and do challenge consummated mergers, including those that aren't reportable under the H S R Act. Uh, second, the case shows that antitrust enforcers, uh, often define relevant markets. Narrowly, in this case, the commission, uh, had rejected the merging party's arguments that the relevant market should include, not just microprocessor prosthetic needs, but also a broader, uh, range of prosthetic needs. And finally, although the alleged any competitive harm was limited to this m PK market, the commission ordered that autobox divest itself of the entirety of freedom's business. So, in other words, don't just divest freedoms mpk products by divest all of the freedom business so that a divesture buyer could offer a bundle of prosthetic products to customers, not just the mpk. So, uh, definitely, uh, offer several lessons, uh, for merging parties. Now, with that, turn it over to Jennifer. Number five.

Speaker 3:

Thanks, Alexis. Coming in at number five, as we get to more and more what we consider to be significant development in 2019 and healthcare antitrust, uh, the FTCs action against Surescripts, uh, the FTC filed a lawsuit against Surescripts in April 20, on April 24th, 2019, right off the bat, what's notable about this enforcement action or this, um, uh, litigation or lawsuit rather, is that it was brought under Section two of the Sherman Act, or the monopolization, uh, part of the Sherman Act. Actions under Section two by the FTC or DOJ are relatively rare. They certainly happen, but, um, they're a little less common than actions, certainly in, uh, the merger arena or even under section one. Arguably, uh, going back to the actual lawsuit that was the FTC filed, uh, the FTC is alleging that Surescripts, uh, is intentionally setting out or has intentionally set out to keep e-prescription routing and eligibility customers on both sides of each of of those markets from using additional platforms. That's a practice called multi-homing, uh, through the use of anti-competitive exclusivity agreements, quote, fret and other exclusionary tactics. Among other things, the FTC is accusing, uh, surescripts of taking steps to increase the cost of routing and eligibility, multi-homing through loyalty and exclusivity contracts. More specifically, according to the FTCs complaint, Surescripts has been successful in using these tactics to stop attempts by other companies to enter and enhance, therefore enhance competition in those markets. Surescripts tactics, uh, again, according to the ftc, have been anti-competitive because they've stopped competitors from gaining share in the routing and eligibility markets, which have resulted in Surescripts maintaining, again, according to the ftc, at least a quote, 95% share in each market over many years. The FTCs complaint also alleges that Surescripts has succeeded in maintaining those monopolies and routing and eligibility, despite the fact that there has been explosive growth in those types of transactions from nearly 70 million routing transactions, for example, in 2008 to more than 1.7 billion in 2017. Now, we're gonna talk a little bit about this, and I hate to spoil what we're looking forward to in 2020, but we're gonna talk a little bit about, uh, what we're looking forward to with respect to, uh, initial decisions in this action. What did just happen though the other day, is that Surescripts request to dismiss the FTCs complaint, uh, was denied by the federal Judge. Surescripts, uh, had requests that the FTCs complaint be dismissed regarding, uh, the monopolization case that it had brought. Um, Surescripts, again, had operates the largest e-prescription network in the us and what they, uh, had requested the federal court do is dismiss, uh, the claim on the grounds that the court lacked the jurisdiction, and that the FTC had failed to state the claim under the Sherman Act. So, uh, things are going forward. Uh, that federal Judge, US District, uh, court judge John Bates, had written that further factual development may, may vindicate Surescripts position, but the FTCs complaint contains sufficient facts to move forward beyond the pleading stage. So we have a little bit of a hybrid here. This was a notable development, um, back in the spring of 2019. We just had a, a recent development already in 2020, but by way of preview again, there will be more, uh, that we will have to look forward to with respect to this case in the coming year, which we will talk about later on this podcast. With that, I'll turn it over to Alexis for number four.

Speaker 2:

All right, thanks, John. Number four, semen versus Duke Settles and DOJ intervenes. So there were a few notable developments last year in the semen versus Duke case as a refresher for folks, uh, Danielle Semen, uh, who was on the medical faculty at Duke, Sue Duke, and U N C for allegedly entering into a no poach agreement. Under that agreement, the university has allegedly agreed not to hire away each other's medical faculty, uh, semen, find out about this, and filed a class action claiming that this was a per se, unlawful restraint of trade. Uh, UNC soon settled after the complaint, uh, but due kept on litigating, uh, the first, so the first development in 2019 was back in March when the antitrust division of the DOJ filed a statement of interest contesting to, uh, Duke's key arguments in the case. Uh, the DOJ argued that Duke was not immune, uh, from, uh, semen antitrust claims under what's called the State Action Doctrine. And the d j also argued that, uh, plaintiff's claim should be evaluated, uh, under the per se rule rather than the rule of reason. Uh, the rule of reason, as Duke argued in an advocated in favor of, would've allowed Duke to point to offsetting benefits, um, the district Court ruled in favor of the plaintiff, uh, on both of those points. The second development in the case came in April when Duke agreed to settle the suit by paying 54.5 million, um, to plaintiffs. So obviously, um, a very expensive tab. And the last big development came a month later when the DOJ in an unprecedented move, uh, moved to intervene in the settlement between semen and Duke. Its, its motion was unopposed, actually. Um, but this was the first time the DOJ had done so in a private action, uh, and the court approved its intervention and, uh, the DOJs motion, which effectively gives the Department of Justice the right to enforce, uh, an injunction in compliance provisions in the settlement between semen and Duke. So the takeaway here, uh, is there are a couple. One is that the DOJ has been very active in no poach cases and is even threatened to bring, uh, criminal cases in the no poach area at some point. And the second is that as part of what it calls the Amicus program, the DOJ has been very active in intervening in cases, uh, and filing statements of interest in cases to which it's not, uh, a litigant. And in fact, I, I happened to attend an event last night in which the head of the NHS division of the DOJ spoke, and he spoke, uh, very highly of this, uh, initiative at the Department of Justice about how effective and efficient it's been. So that's certainly in an area that, um, uh, folks should be, uh, aware of and, and consider, um, that the DOJ may be filing an intervention in your case if it, uh, raises some important antitrust questions, at least in the mind of the doj. And in fact, the head of the DOJ last night invited, uh, litigants to, um, invite the DOJ to, into their case to support their side, uh, if, if appropriate. So certainly, uh, an important development in 2019 and an arguably one note watch going forward as well. Okay, number three, I'm also gonna tackle as well. Um, number three, we have, uh, California at all versus Sutter Health. So a very high profile case that we had put on our, uh, 29 development to watch last year. The California versus Sutter case, uh, settled this year, uh, on the EVA trial. As folks may recall, the California AG sued Sutter in state court in 2018, alleging that Sutter's contracting practices with health plans violated the state's competition law. Uh, specifically the ag alleged that Sutter's contracts required health plans, you contract with all of Sutter providers or none. Uh, they also contained, uh, anti steering or anti tiering terms, and lastly, prevented health plans, uh, from sharing information about Sutter's prices, uh, with their enrollees, uh, after surviving various motions. The case was on track for trial starting in October 20 19th, but on the trial, the parties announced an agreement in principled to fill the case, um, in December, the terms of that settlement were disclosed. So under the settlement, Sutters will pay 575 million to cover plaintiff's litigation costs. It will limit what it charges patients for out-of-network services. It will allow payers to provide their members with price, quality and cost information. It will end all or nothing contracting terms, uh, to allow health points to contract with some, but not necessarily all Sutter providers, uh, and cooperate with, uh, a court approved compliance monitor for 10 years, obviously, lengthy compliance term, and, uh, as well as some additional terms in that settlement agreement. So, um, the Sutter case is, is similar to a case that DOJ brought against Atrium Health, uh, formerly known as Carolina's Healthcare. And that case settled in 2019. So I think combined, uh, the Sutter case and the Atrium case, uh, shows that antitrust enforcers, both federal and state, are closely scrutinizing providers contracting practices, at least in cases where providers who allegedly have, you know, significant market presence, um, are imposing purportedly competition restricting terms in their contracts with health plans. So certainly an area for, um, providers in particular to, um, take note of and perhaps, uh, assess where they sit in their respective markets and, and the terms of their contracts with, with payers and plans. So, um, that is number three. Uh, and I'll turn it over to John for the last two of 2019.

Speaker 3:

Thanks, Alexis. Uh, honored to get the top two<laugh> in terms of the matters that I'm going to be discussing with our audience coming in at number two, it's the approval of the CVS Aetna settlement by a federal judge, uh, US District Court. Judge Leon approved the settlement between the Justice Department and, uh, the merging parties in September of 2019. Normally, a judge's approval of a particular settlement in the antitrust arena would not be especially noteworthy and likely would not be in our top 10 list. However, here, uh, in part because the transaction involved two significant players in the larger healthcare space, CVS and Aetna, but more because of the protracted review of the settlement and its process undertaken by a federal judge, uh, we felt that this was noteworthy and certainly deserving to be at the top or near the top of our list. As our listeners may know, uh, judge Leon did, uh, quite a amount of work in scrutinizing the settlement. Um, there were months of his review. Uh, there were certainly, um, a number of concerns from critics of the settlement that the merger would reduce competition. Um, but having looked at the record and done a careful review of it, uh, judge Leon determined, uh, that the, uh, markets at issue would not only be very competitive and they would likely remain so, uh, well into the future or so post merger. Uh, the settlement, as folks may recall, I included, uh, an agreement by Aetna to divest its standalone Medicare prescription drug business to WellCare. Uh, that was the main, uh, part of that divestiture, and that was something that was scrutinized quite extensively. Now, notwithstanding Judge Leon's review, uh, CVS and Aetna had been operating as a, as a single company, really since the end of, of 2000, uh, and 18. And so not sure what would've happened by way of remedy or action had the settlement not been approved. But again, what's interesting about this is sort of in the larger antitrust world, um, we, I think it's fair to say, often assume that settlement centered into between the Justice Department and private parties when they go through the UHT Act process, tend to get, I don't wanna say a rubber stamp, but tend to get approved fairly easily by federal court judges. And in this instance, we saw a very exacting review, uh, by a US district court judge, which may also signal judicial scrutiny of not just settlements, but of antitrust issues, particularly in that court. Turning to number one, uh, speaking of, of non horizontal mergers, uh, a number of developments in 2019 with respect to vertical mergers. And in particular, we want to talk about too, or at least I want to talk about too. First, that's, it's United DaVita, and then second FIUs next stage, which, uh, split the FTC commission, uh, the, the Federal Trade Commission, the, the five commissioners turning first to United DaVita, uh, back at, toward the end of August of 2019. And following a public comment period, the FTC approved its order settling the charges that United 4.3 billion acquisition of DaVita, uh, would harm competition in certain counties in Nevada. Uh, that order, uh, required united, uh, to divest DaVita medical group's healthcare provider organization in the Vegas area, the Las Vegas area to Intermountain, uh, which is a healthcare based, uh, provider and insurer. According to the FTCs complaint in that area, the Las Vegas area, the transaction would've eliminated competition between United Health Groups, Optum and, uh, OptumCare rather, and DaVita, uh, medical groups, healthcare Partners of Nevada, which would've resulted, quote, in a near monopoly controlling more than 80% of the market for services delivered to Medicare Advantage insurers. The FTCs complaint also alleges that the elimination of that competition would increase cost and decrease competition for quality services and other amenities in that area. So that's the horizontal component. The more interesting component, uh, at least according to Alexis and me, and hopefully to our listeners, is that, um, the FTC alleged that the deal would've resulted in, in anti-competitive effects due to the vertical integration of United Health Groups. UnitedHealthcare, uh, the area's leading Medicare Advantage insurer, according to the ftc, with a larger, uh, combined service provider, the proposed acquisition, um, would if position United Health Group, therefore, to raise costs of its mcpo services to rival MA insurers and or maybe even withhold such services from these rivals. According to the FDCs complaint, therefore, without the remedy, um, the acquisition would've increased the likelihood that CMS would've made higher payments to Medicare Advantage insurers and seniors in the Las Vegas area would incur higher cost sharing payments and receive lower quality healthcare services. So, very interesting settlement chief among them is the fact that there was a remedy for a vertical issue. It's also interesting, um, that the ftc, uh, took the, uh, had the concern, um, with respect to, uh, MA payments by cms. Uh, normally an Alexis COR can correct me if I have this wrong. Normally, you would think that the primary focus, um, and a healthcare, uh, transaction, um, uh, uh, healthcare transaction reviewed by the FTC would be the effect on commercial insurers. So, sort of interesting that that was part of the FTCs complaint and a focus of the remedy. Second Forin is next stage. So in that case, um, the FTCs complaint had alleged that that deal, uh, would harm competition for the market of what are called bloodline tubing sets that are compatible with hemodialysis dialysis machines used in clinics that treat chronic renal failure. So, pretty long product market definition, uh, bloodline tubing sets, they're, they're single use plastic tube sets that are used in those treatments. The CC'S complaint on the horizontal issues, pretty straightforward. They allege the deal would result in substantial, uh, competitive harm, uh, for the US market. For those sets that SIUs and next stage are two of only three significant suppliers of those sets. And that together, they control about 82% of the market. And therefore, um, as a result of that, uh, they entered into a proposed settlement that would involve a divestiture to be Braun of the assets and rights to develop research manufacturer and sell the next stage of blood tubing sets. Again, fairly straightforward, uh, divestiture and horizontal merger. What was interesting is that two of the, uh, commissioners Chopra and Slaughter, uh, dissented of concerns with respect to the harm on vertical competition, without going into a ton of detail, wanted to talk a little bit about, in particular, what chop, uh, commissioner Choppa wrote. Um, what he had to say at, at his dissent is that, quote, entry by new independent businesses is a pillar of the competitive market. When vertical mergers and healthcare markets choke off entry by small startups and other firms, long-term improvements in patient care can suffer. Unlike public investments in healthcare research and development, private investors are focused on financial tar returns, not patient outcomes. By cutting off a large PO partial portion of the market to future competitors, this merger will make it tougher for new entrants to obtain sales needed to attract investment. And given the complexity of this and other transactions, the should provide greater transparency to the public about its reasoning for a remedy or lack thereof. So, Chopra had concerns, slaughter had concerns with respect to the vertical components of that. We're gonna talk a little bit more, not surprisingly, about, um, vertical transactions, uh, and, and things that we're looking forward to in the coming year, but that rounds out, uh, what we believe to be the top 10 healthcare antitrust development in 2019. Alexis, anything to add before we turn to 2020?

Speaker 2:

Yeah, certainly a lot of interesting issues, John, in 2019, maybe, uh, as we go through these issues, we'll see if 2020 can match what, what was in store in 2019 and live up to expectations. So, without further ado, why don't I kick it back over to you to kick us off with a number 10, uh, development to watch for 2020.

Speaker 3:

Thanks, Alexis. So now looking forward into the next year and things that may lie ahead in healthcare antitrust coming in at number 10, uh, efforts or developments with respect to the hundred 16th Congress and drug pricing. You know, in 2019, notwithstanding a lot of rhetoric, uh, during the year and prior to that, I think it's fair to say that Congress did little other than perhaps attach a few not particularly controversial drug pricing platforms, uh, to other bills, including, uh, certain things regarding Medicaid rebates and the creators creates act. Now, they may be controversial or may have issues outside of the antitrust arena, but at least in the antitrust area, uh, not particularly noteworthy, but looking forward, um, in 2021, development to watch is whether, you know, Congress takes another swing at some drug pricing legislation. Uh, there are a number of pieces of legislation that could influence those conversations. There's a, uh, pretty extensive government negotiation Bill, uh, from, uh, speaker of the House, Nancy Pelosi, that had passed the house back in Decen December. Not sure what it's prospects are in the Senate. There's a, uh, bipartisan bill from Grassley, Senator Grassley Rather, uh, that is, uh, bi part has bi bipartisan support in the Senate Finance Committee. And there's also a package of some, uh, more modest proposals that have been engineered by, uh, representative Greg Walman, a Republican out of Oregon. So, uh, we will look forward to 2020 and watch that development and, uh, see if there is any action. Turning it over to Alexis.

Speaker 2:

Thanks, John. Coming in at number nine, we have, uh, agency focused on innovation and killer acquisitions. So another key trend we think, uh, is one to watch in 2020 is antitrust enforcers, uh, seemingly increasing attention on mergers that implicate potential harm to innovation and competition to innovate. So, while a lot of the antitrust conversation and focus has been, um, potential harm to innovation in the tech industry, I, I'd argue that antitrust enforcers are watching very closely for potential harm to innovation in the healthcare space. So, for example, just a few weeks ago, the FTC filed suit to block, uh, Illumina's proposed acquisition of Pacific Biosciences of California. In that case, the FTC alleged that Illumina was a monopolist in what's called short read DNA sequencing technology. While PAC bios long read DNA sequencing technology was becoming, according to the ftc, a more significant competitor to Illumina's short read products. Uh, the FTCs complaint acknowledged that Illumina's and PAC Bio's products were significantly differentiated in many ways, and that PAC bio as the target had a mere 3% market share in the us, but the FTC was concerned that the merger would eliminate competition now and the future, which would ins inflate Illumina from PAC Bio's quote, increasing competitive threat. So I think the takeaway here is that merging parties need to carefully evaluate their deals to consider not just competition in existing mature products, but also pipeline products and products that, um, may constitute kind of nascent or growing competition between the merging parties, products, or services. So this is definitely an area, I'd say to watch in 2020, uh, as antitrust enforcers, uh, seem to focus more and more on innovation and nation competition issues, John?

Speaker 3:

Sure. Thanks, Alexis. Very short number eight, which is, we're looking forward to any developments with respect to FTC actions and provider mergers. Um, FTC has been very active in this area, as we know over the past few years. And given generally the amount of activity we see in healthcare m and a, I think we're looking forward to seeing, uh, some action from the FTC by way of settlement or perhaps litigation with, uh, any type really of provider transactions including hospital mergers, physician groups, et cetera. Alexis, back to you for number seven.

Speaker 2:

Sure. Seven are generic pharma cases. So, um, antitrust cases involving alleged price fixing of generic pharmaceuticals will be another area to watch in 2020. Uh, already the antitrust division at the DOJ in collaboration with, uh, the postal service actually and the FBI have ongoing criminal cases into alleged price fixing in the generic pharma market. And, uh, those investigations have already resulted in criminal charges for two companies and two executives so far. At the same time, you have just about every, uh, state, nearly all 50, uh, states have filed a civil suit against about 20 generic pharma companies for a range of alleged price fixing and market allocation agreements, uh, involving dozens of generic drugs. And of course, now the private class actions have cropped up and continued to spring up. So, uh, these investigations and cases are quite massive and seem to be growing. So this is, uh, an area to watch in the coming year. John, number six.

Speaker 3:

Thanks, Alexis. So we're really looking forward to, um, looking at the DOJs analysis and, uh, its settlement and closing of the investigation into the transaction between Centine and WellCare. Uh, the company's announced the other day, just on January 21st, that they had satisfied all regulatory requirements, including the review by the doj. Uh, they expect to close that transaction and, and do the divestitures of WellCare's, Medicaid and Medicare advantage plans in Missouri WellCare's Medicaid plan in Nebraska and Centine, Medicaid and MA plans in Illinois, um, in the next couple of days. So we're looking forward to, uh, seeing the DOJs analysis and the specific contours with respect to that settlement. Alexis, number five,

Speaker 2:

Number five, info blocking rules. So, um, this one's a bit technical, but one development to watch in 2020 is the office of the National Coordinator for Health Information Technologies. Final rule on interoperability and information blocking. So back in March, 2019, the O c issued a proposed rule, which, uh, is intended to encourage greater interoperability of health IT systems and to set out rules for when information blocking is unlawful. Uh, in June last year, the FTC submitted comments on the oncs proposed rule recommending for changes so that the rule doesn't quote inadvertently distort competition or inhibit conduct conduct that is affirmatively pro-competitive end quote. So the FTCs, uh, comment letter acknowledges that there are benefits to interoperability and sharing healthcare information, uh, including fostering innovation and competition, improving healthcare outcome for patients. But the FTCs common letter says there, uh, are four changes that it, it would recommend. The first is that the O N C more fully, uh, develop examples of permissible conduct so that, um, it's clear where the safe harbors and exceptions to the information blocking Rule R two, adjusting the definition of eh, i, so that, uh, the rule applies more narrowly to the information needed to treat patients and for health IT interoperability. Three, that the o c clarify when market pricing does not constitute information blocking. And four, uh, the O O C narrow the definition of developers or certified H I t, so that the regulations apply, uh, more nearly to only certified h i t and not a broader scope of products and services. So, um, given developments in technology and issues within interoperability, stay tuned for issue in 2020 for, uh, if and when the O N C uh, issues its final rule, uh, and whether that incorporates the FTC comments. John,

Speaker 3:

Thanks, Alexis. Coming in at number four, price transparency, which, uh, I'm sure most of our listeners have some familiarity with. Given that this past June, uh, president Trump had issued an executive order regarding, um, pricing quality transparency in American healthcare that, uh, obligated, uh, providers to, uh, post their prices. That's a short version of what it does. Uh, and I think it's going to be an Alexis agrees interesting to see what developments may ensue, uh, in 2020 as a result of compliance or attempted compliance with the executive order, not just where the FTC is gonna come out on, uh, what particular providers could or could not do or may get in trouble for doing, given that the FTC had concluded that too much transparency can harm competition in any market, including in healthcare markets. Uh, but also just more generally as we follow the industry and follow competition and developments, uh, and then have of course clients and, and, uh, a number of other, uh, folks in the industry who are dealing with attempting to, uh, comply with the executive order. So we look forward to following that development and of course to, uh, paying attention to any antitrust related implications. Alexis?

Speaker 2:

Sure. Thanks John. Number three. Uh, we're looking out for the, uh, decision from the 11th Circuit in Oscar versus BC b s of Florida. Um, as folks may know, Oscar is, uh, technology, uh, app and web-based, uh, provider of health insurance, and, um, they brought suit against BC b s of Florida, um, and in 2018, claiming that BC S'S enforcement exclusive agreements that BC B s, uh, had with insurance brokers in Florida unfairly, uh, impeded Oscar's entry and expansion into the sale of individual ACA plans in Florida. Uh, B C B S moved to dismiss that case, arguing that it was immune from antitrust liability under what's called the McCarran Ferguson Act. Uh, that act exempts the business of insurance from federal antitrust law. And the district court first denied Oscar's motion for preliminary injunction. And then even though the DOJ weighed in with a statement of interest, uh, arguing that B C B S was not immune, uh, from antitrust under the McCarran Ferguson Act, uh, the district court, uh, the district court dismissed the case on this very ground. Uh, since then, Oscar appealed to the 11th circuit, and the DOJ has now filed an amicus brief, uh, just this past January, supporting Oscar's effort, uh, to have the decision reversed. Uh, the EJ saying the antitrust exemptions like McCarran Ferguson should be very narrowly construed. So, uh, keep an eye up for this case as it works its way through the 11th Circuit and see what, uh, the 11th circuit has to say about what constitutes the business of insurance and the scope of this antitrust exemption. John.

Speaker 3:

Thanks, Alexis. So rounding this out and heading toward number one in it. Number two, uh, what's to come with respect to the Surescripts action? A few minutes ago, I described in some detail the FTCs monopolization lawsuit against Surescripts. There's also some related private litigation, um, not withstanding the initial rejection of the motion to dismiss. Um, there are a number of things, uh, that are coming down the pike with respect to that case, and we look forward to watching those closely. Turning to number one, Alexis.

Speaker 2:

All right, number one is gonna bring us right back, uh, to our number one topic in 2019, which is, uh, vertical mergers, in this case, the vertical merger guidelines, uh, and enforcement. So, one, uh, another key development is, uh, obviously anti interest enforcement involving vertical mergers. As John covered earlier, there are several enforcement actions in that area last year, uh, including healthcare space. Uh, we'd expect that to continue in 2020. In fact, just, uh, this past January, the DOJ and FTC issued, uh, for public comment, draft vertical merger guidelines, which lay out how the agencies analyze vertical mergers. Uh, these draft guidelines would replace, uh, obsolete guidelines, uh, that are as old as 1984. Um, I'd say a few points to note about these draft guidelines that were just issued. Um, first, they, they really largely reflect what the DOJ and FTC currently do when analyzing vertical mergers, rather than signal any big change in how they're gonna approach vertical mergers. Second, um, and this is new and, and relatively significant provision in the new guidelines, is a soft, I'd call it safe harbor. So the guidelines say that the antitrust agencies are unlikely to challenge a vertical merger if the merging parties have less than a 20% market share in the relevant product or service market. And the related upstream product or service is used in less than 20% of the relevant market. And I'd say the last, um, notable provision, um, or notable point about these draft guidelines is that they were not issued unanimously. The two democratic commissioners at the ftc, uh, abstain from voting out these draft guidelines, although they agree that the old guidelines should be replaced, they argued that these draft guidelines didn't go far enough to strengthen any trust enforcement against vertical mergers. I think that's pretty consistent with the view that they took in the vertical merger cases that John referenced earlier. Um, the, the two Democrats in particular encouraged public comments on these draft guidelines, uh, which comments are due by February 11th. So, uh, keep an eye, uh, in the coming months for, uh, how the guidelines, uh, take final form and continued enforcement in the vertical merger space. So that completes our, um, 2020 developments to watch, um, and our review of the biggest developments in 2019. Uh, wanna thank John for doing this with me again and, uh, his great recaps and insights into all these cases and developments. It was fun doing again, uh, doing this again with you, John,

Speaker 3:

Absolutely, Alexis, and, and really appreciate your insights as well. Looking forward to, uh, seeing what happens. And perhaps there'll be some other developments we hadn't even flagged, uh, in the coming year, and hope to be talking with you about these, uh, about what happened in 2020 and what may happen in 2021 a year from now.

Speaker 2:

Yeah, never a dull moment in healthcare, any trust. Uh, and I guess maybe the last thing I'd say is, listeners, if, uh, there's anything, uh, that you heard today that you have questions about or, or, uh, wanna hear more about, feel free to contact John or me. Happy to discuss further. Um, so thanks again John and, uh, everybody. Have a great 2020.