Dear Readers,
More than any sector, healthcare has come under particular scrutiny in recent years. The reasons are almost too obvious to state. The pandemic; soaring costs; difficulties in the supply chain for key medicines – all have propelled healthcare to the headlines on both sides of the Atlantic, and beyond.
The vagaries of medical research; the difficulties inherent to insurance; and the intrinsic risks based on investment into medical research all feed into this concern.
As Andrew Stivers, Emily Walden & Subramaniam Ramanarayanan illustrate, healthcare antitrust practitioners are grappling with the increasingly prominent value of patient data in competition. This data can be examined using traditional antitrust concepts. However, other stakeholders have raised more skeptical questions about consumers’ interests in mergers, particularly from a privacy perspective. Specifically, these relate to four key concerns: price discrimination, data security, intrinsic value and autonomy.
Amanda Wait & Antonia Mordinodraw out the conclusions deriving from Alvaro Bedoya’s confirmation; and how this has restored a Democratic majority on the Federal Trade Commission. Under a Democratic majority, FTC Chair Khan would have the ability to continue to test novel theories of harm in various antitrust matters. Interestingly, Commissioner Bedoya’s background in privacy and technology could potentially broaden the scope of both merger and non-merger investigations.
Michael Carrier addresses how the intersection of patent law and antitrust presents several challenges for courts, particularly in the pharmaceutical industry. What should courts do when drug companies engage in conduct that may be allowed under patent law but threatens significant anticompetitive effects? The article focuses on patent settlements, analyzing four mistakes U.S. courts have made: 1) resurrecting the “scope of the patent” test, 2) bestowing immunity on patent licenses, 3) imposing high causation standards for patent invalidity, and 4) resuscitating a “risk aversion” defense.
Ken Field & Steven Tenn address the issue of hospital merger cases. Typically, such cases are won or lost on geographic market definition. The U.S. Third Circuit’s recent finding that it is appropriate to define geographic markets based on patient location will likely incentivize the FTC to define such geographic markets more frequently in future hospital merger litigations.The article considers the implications of defining a geographic market based on patient location and highlights a key shortcoming of this approach. Virtually any candidate geographic market based on patient location likely passes the Merger Guidelines’ Hypothetical Monopolist Test, and any such conclusion is possibly meaningless from the point of view of antitrust analysis. As a result, the FTC’s reliance on patient-based markets could erode courts’ willingness to endorse the Merger Guidelines’ approach to such issue.
Peter Herrick, Lisl Dunlop & Matthew Hayden address the consequences of AAG Jonathan Kanter’s recent pronouncement that the Government will “fight for American workers including in connection with illegal mergers that substantially lessen competition for laborers.” This formulation, which once may have been outside the mainstream, is now widely shared among enforcers and policymakers alike. The U.S. antitrust agencies have now stated their intent to focus on labor markets, including in merger reviews. However, courts’ limited past consideration of labor market issues results in there being no clear guidance. Some economic studies purport to link concentration in labor markets with lower wages. However, these studies are not without flaws. The piece provides valuable insight in how such inquiries might continue into the future.
David A. Balto examines the U.S. FTC’s allegedly lax approach to Pharmacy Benefit Managers (“PBMs”), the middlemen in prescription drug markets. This has allegedly led to significant concentration, higher prices, and other potentially abusive practices. As the article outlines, the FTC is considering conducting a study of PBM practices under Section 6(b) of the FTC Act. This study could provide the public with greater insight into PBMs’ drug pricing practices, contracts with drug manufacturers, and contracts with independent pharmacies.
Finally, Dina Older Aguilar, Andrew Sfekas, Arthur Corea-Smith & Shannon Wu note that mergers that expand healthcare systems are increasingly under scrutiny. Academic studies have found evidence of price increases following mergers combining hospitals that are too distant to serve as close substitutes for most patients — so called “cross-market” mergers. The models used in such studies note mechanisms under which a cross-market merger could potentially affect the set of options available to insurers in constructing provider networks. As a result, in order to assess the likely impact of an individual merger, the specific features of the proposed merger and competitive environment should be compared to the proposed theoretical mechanisms under which cross-market mergers may impact prices.
In sum, the set of articles in this Chronicle set out a broad cross-section of the issues that will arise (and have already arisen) in the interaction between healthcare and antitrust in the foreseeable future.
As always, many thanks to our great panel of authors.
Sincerely,
CPI Team
