On March 30, 2017, in a closely watched case, a federal district court denied the Motion for Judgment on the Pleadings filed by Carolinas Healthcare against a Complaint filed by the DOJ Antitrust Division and the State of North Carolina. The Complaint alleged that Carolinas Healthcare insisted on contract provisions with payors that limited or prohibited steering to lower-cost providers.  In its motion, Carolinas Healthcare relied heavily on the Second Circuit decision in United States v. American Express Co., 838 F.3d 179 (2d Cir. 2016), where the Second Circuit had reversed a trial verdict condemning steering restrictions in Amex’s contracts with merchants.  This alert reviews the court’s ruling and considers its implications for future health care antitrust cases.

Earlier this week, the U.S. Department of Justice (“DOJ”) and the Federal Trade Commission (“FTC”) filed an amicus brief with the Fifth Circuit stating that the Texas Medical Board’s (the “Board”) appeal was inappropriate and the Court does not have jurisdiction over the appeal. But the government did not stop there. The brief goes on to argue that if the Court does in fact find that it has jurisdiction, it should affirm the district court’s order denying the Board’s motion to dismiss and allow the case to proceed. Continue Reading Teladoc Receives Support from the Feds

Last week, in Deborah Heart & Lung Center v. Virtua Health, Inc., the Third Circuit affirmed a lower court’s dismissal of a suit filed by a hospital alleging an illegal exclusive dealing arrangement by a competing hospital and physician group for referrals made by the defendants to a third hospital rather than to the plaintiff hospital.  In its decision, the court emphasized the importance of market definitions in antitrust cases, and clarified an antitrust plaintiff’s burden when alleging a Sherman Act Section 1 claim with no allegation of market power.  The court held that anticompetitive effects in those cases must then be shown on the relevant market as a whole, not only on a small subset of the market.  In a Health Care Antitrust Alert, our antitrust colleagues Bruce Sokler and Farrah Short analyze the Third Circuit’s decision.

On June 17, the Texas Medical Board (“Board”) filed a brief with the Fifth Circuit Court of Appeals reiterating that the Board’s rulemaking processes are protected under the state action immunity doctrine, noting that the case could significantly impair state agencies in carrying out their governmental functions. The Board’s brief is the most recent action in the Teldoc case that has dragged on for almost two years and left little certainty for those who provide telemedicine services in the State.

As we previously reported, it all began when the Texas Medical Board issued an emergency proposed rule clarifying that physicians must perform a face-to-face or in-person physical examination of a patient prior to issuing a prescription or risk sanctions for unprofessional conduct. Teladoc, whose business model is based on providing health care services via telephone and without a face-to-face or in-person physical examination, sued the Texas Medical Board, alleging that the proposed rule violated antitrust laws. Late last year, a federal district court denied the Texas Medical Board’s motion to dismiss, finding that the Board is not entitled to state action immunity because its actions are not actively supervised by the state. Continue Reading Texas Medical Board Seeks State Action Immunity Protection in Fifth Circuit Brief

Two West Virginia hospital systems settled a lawsuit filed yesterday by the Department of Justice (“DOJ” or “Department”) alleging that they agreed to allocate territories for marketing health care services in violation of Section 1 of the Sherman Act.  The DOJ alleged that Charleston Area Medical Center (“CAMC”) and St. Mary’s Medical Center (“St. Mary’s”) agreed not to advertise in each other’s geographic territories, which the Department said deprived customers of useful information about competing health care providers.  U.S. v. CAMC, Case No. 2:16-cv-03664 (S.D. W.VA. Apr. 14, 2016).

Certain types of agreements between competitors (e.g., market allocation, price fixing) are strictly prohibited under Section 1 of the Sherman Act.  These types of agreements are considered per se illegal and are presumed as harmful because they deprive consumers of the benefits of competition and provide no offsetting benefit to consumers.  This case is a reminder that the antitrust authorities can, and do, challenge market allocation arrangements and other naked restraints of trade that violate Section 1 of the Sherman Act. Continue Reading Hospitals Settle DOJ Suit Alleging Illegal Division of Marketing Territories

The Federal Trade Commission (FTC) submitted written comments last week on the likely competitive impact of a legislative proposal in West Virginia to modify the supervision requirements imposed on Advanced Practice Registered Nurses (APRNs) for certain activities.  The legislative proposal would permit some APRNs, under limited conditions, to write prescriptions without a formal agreement with a particular supervising physician.  It would also place the regulation of certain APRNs under the authority of the West Virginia Board of Medicine or Board of Osteopathic Medicine. In its well-established role of promoting competition in the health care industry through enforcement, study, and advocacy, the FTC has a record of actively urging the opening of health care markets to a broader range of providers.  In 2014, the agency issued a paper titled Policy Perspectives: Competition and the Regulation of Advanced Practice Nurses, in which it advocated for the expansion of APRN scope of practice.

The FTC has repeatedly recognized “the critical importance of patient health and safety, and [ ] defer[s] to state legislators to determine the best balance of policy priorities and to define the appropriate scope of practice for APRNs and other health care providers.”  Nonetheless, the FTC argues that “undue regulatory restrictions on APRN practice can impose significant competitive costs on patients and third-party payors, and may frustrate the development of innovative and effective models of team-based health care.”

The West Virginia proposal would allow an APRN to be licensed by either the Board of Medicine or Osteopathic Medicine to prescribe medicine without the formal collaborative written agreement with a physician as currently required if that APRN: i) [h]as at least five years of clinical prescribing experience in a collaborative arrangement with a physician; ii) is working solely in an area that has been designated … as a Health Professional Shortage Area; and iii) has a recommendation from his or her collaborative physician which recommends that the [APRN] be permitted to prescribe without a collaborative arrangement. Continue Reading FTC Again Urges Consideration of Competitive Impact on State Regulation of APRNs

Last week, the Federal Trade Commission (“FTC” or “Commission”) authorized staff to file an administrative complaint and to seek in federal court a temporary restraining order and a preliminary injunction to block the proposed merger of Advocate Health Care Network (Advocate) and NorthShore University HealthSystem (NorthShore) in the Chicago area.  In the Matter of Advocate Health Care Network, Advocate Health and Hospitals Corporation, and NorthShore University HealthSystem, FTC Docket No. 9369 (December 17, 2015).  The FTC alleged that the combined entity would operate the majority of the hospitals in the North Shore area of Chicago, and control more than 50% of the general acute care inpatient hospital services. Continue Reading A Return to Evanston: FTC Revisits Old Ground in Yet Another Hospital Merger Challenge

Last week the Federal Trade Commission (FTC) authorized an action to block a proposed hospital merger pending an administrative trial. According to the FTC, the merger of Penn State Hershey Medical Center (Hershey) and PinnacleHealth System (Pinnacle) would create a dominant provider of general acute care inpatient hospital services sold to commercial health plans in the Harrisburg, Pennsylvania area.  The FTC filed its administrative complaint on December 7, 2015 (public redacted version posted on December 14, 2015). In the Matter of The Penn State Hershey Medical Center and PinnacleHealth System, FTC Docket No. 9368.  The Commission filed jointly with the Pennsylvania Office of the Attorney General a complaint under seal in federal district court seeking a temporary restraining order and preliminary injunction, which the district court granted. FTC v. Penn State Hershey Medical Center, 1:15-cv-02362 (M.D. Penn Dec. 9, 2015). Continue Reading FTC Alleges “Three-to-Two” Hospital Merger Will Reduce Competition

Last week, pharmacy benefit manager (PBM) and independent pharmacy representatives provided testimony to the House Judiciary Subcommittee on Regulatory Reform, Commercial and Antitrust Law in a congressional hearing examining the state of competition in the pharmacy and PBM marketplace.  You can watch the hearing and read the filed testimony here. This was the third in a series of congressional hearings examining competition in healthcare markets. While the focus was on PBMs and pharmacies, some panelists and committee members recognized that a full discussion of certain issues, like drug pricing, needs to involve other players in the prescription drug supply chain.

The witness panel included 2 PBM industry representatives, an independent pharmacy owner, and an antitrust attorney who represents the interests of independent pharmacies:

  • Amy Bricker, Vice President of Retail Contracting & Strategy, Express Scripts
  • Natalie A. Pons, Senior Vice President and Assistant General Counsel, CVS Health
  • Bradley J. Arthur, Owner, Black Rock Pharmacy
  • David A. Balto, Law Offices of David Balto

Each panelist gave testimony aligned with his or her role in the debate and voiced well entrenched opinions regarding the role PBMs play in the health care industry. Ms. Bricker and Ms. Pons each focused on their PBM’s ability to use scale to keep prescription drug costs down for patients and their clients, and stressed that they rely on independent pharmacies to participate in their networks. Mr. Arthur focused on the scale of the PBMs compared to his independent pharmacy, while Mr. Balto pointed to market trends, like rising profit margins, to claim that the entire PBM marketplace is broken and needs regulation to require more transparency. Continue Reading Congressional Hearing Examines Competition in the PBM Industry

The Federal Trade Commission (“FTC”) and Department of Justice Antitrust Division (“DOJ”) (collectively, “agencies”) issued a joint statement to Virginia’s Certificate of Public Need (“COPN”) Work Group, which was recently charged with reviewing Virginia’s certificate of public need process and its impact on health care services in Virginia, including the development of “specific recommendations for changes to the certificate of public need process to address any problems or challenges identified during [its] review.” The agencies’ statement encourages the Work Group and the General Assembly to reconsider whether “Virginia’s COPN laws best serve its citizens” and suggests that the Work Group consider the repeal or retrenchment of the COPN laws in order to promote the efficient functioning of health care markets. This statement is another example of the agencies’ continued vigilance in their efforts to prevent CON laws from suppressing competition by “limiting the availability of new or expanded health care services.”

Virginia’s CON program requires providers such as hospitals, nursing homes, rehabilitation facilities and other general acute care service providers to obtain a COPN from the State Health Commissioner (“Commissioner”) before initiating certain projects. The Commissioner can only issue a COPN after determining that there is a public need for the project. According to Virginia’s Department of Health, the review process can take six to seven months to complete — applications are examined during 190-day review cycles designated for certain batch groups which occurs just twice a year for most groups. Aggrieved parties, including incumbent providers, can appeal the Commissioner’s decision to the circuit court. From the agencies’ perspective, this time-consuming and costly process may deter beneficial entry “since a potential entrant may decide that the process itself is too costly.” Continue Reading FTC-DOJ Join Forces: Encourage Repeal/Retrenchment of Virginia CON Laws