By Tim Wu, New York Times
The United States’ flawed approach to consolidation in the health care industry can endanger public health.
On April 24, 2012, the Federal Trade Commission, the nation’s principal gatekeeper for health care mergers, published an innocuous-seeming notice granting a request for “early termination” of its review of a $108 million health care acquisition. Newport Medical Instruments, a small developer of cheap, portable ventilators, was being acquired by Covidien, a much larger American company headquartered in Ireland for tax purposes. Covidien makes, among other things, larger and more expensive ventilators.
The government’s review was not extensive. One of the lawyers involved, a former F.T.C. staff member, notes that he successfully steered the merger through the F.T.C. “without second request” — without extensive review.
We now know that approving that merger without conditions had severe costs. It would cripple what had been a prescient federal program, begun in 2007, to build an emergency stockpile of up to 40,000 portable ventilators with the eventual help of Newport Medical Instruments. But Covidien terminated the project, apparently in large part because it was insufficiently profitable.
That cancellation set back the federal ventilator program by at least seven years. In fact, 13 years later, in the midst of the coronavirus crisis, and despite a new contract with another company, not a single ventilator has been delivered.
It is easy to criticize the F.T.C. for missing the dangers to public health in the Newport merger. But it’s a mistake to see the episode as an isolated blown call or a case of insufficient diligence. The real problem is that United States’ approach to corporate consolidation is broken, and nowhere is this more clear than when it comes to health care. As it stands, the F.T.C.’s power to review mergers takes little account of what makes health care different from other industries. And tragically, the Newport merger is only one in a long line of disasters.
