In 2018, U.S. healthcare spending grew to over $3 trillion; it is expected to reach 20 percent of gross domestic product by 2025. The Antitrust Division has remained vigilant this year to protect the competition among healthcare companies vying for a piece of that pie. Through merger review and conduct cases, the Division has worked to ensure that competitive healthcare markets will work to bring American patients higher quality and lower priced products and services.
In December 2017, CVS Health Corporation, the nation’s largest retail pharmacy chain, agreed to acquire Aetna Inc., the nation’s third-largest health insurance company, for approximately $69 billion. Prior to the agreement, the two companies competed vigorously in the sale of individual prescription drug plans under Medicare’s Part D program. Individual prescription drug plans offer coverage for a set of prescriptions to beneficiaries enrolled in Original Medicare. On October 10, 2018, the Department filed suit to block the merger in the U.S. District Court for the District of Columbia.
Simultaneously with its complaint, the Division filed a proposed settlement that will preserve competition for individual prescription drug plans throughout the United States. The settlement requires Aetna to divest assets comprising its nationwide individual prescription drug plan business to WellCare and allow WellCare the opportunity to hire key employees who currently operate the business. Aetna must also provide transition services to WellCare, including transferring the affected customers through a process regulated by the Centers for Medicare and Medicaid Services, an agency within the U.S. Department of Health and Human Services. On October 25, 2018, the district court entered an order allowing the transaction to close and the settlement provisions to take effect during the pendency of the Tunney Act review process.
United States v. Carolinas Healthcare System
The Antitrust Division has also been active in conduct cases in healthcare markets in the past year. By challenging conduct with enforcement actions and filing statements of interest in cases brought by private plaintiffs, the Division seeks both to redress harms to consumers and to educate the healthcare industry about the application of the antitrust laws to their business models.
On November 15, 2018, the Antitrust Division announced that it reached a settlement with Atrium Health, formerly known as Carolinas HealthCare System. The settlement resolved over two years of civil antitrust litigation. With approximately 50 percent share in the sale of acute inpatient hospital services to health insurers in the Charlotte area, Atrium is the largest healthcare system in North Carolina and one of the largest not-for-profit healthcare systems in the United States.
In June 2016, the Division filed a civil antitrust lawsuit against Atrium. According to the complaint, Atrium, the dominant hospital system in the Charlotte area, used its market power to restrict health insurers from encouraging consumers to choose healthcare providers that offer better overall value. The restrictions also constrained insurers from providing consumers and employers with information regarding the cost and quality of alternative health benefit plans. As alleged in the complaint, insurers are increasingly designing health benefit plans that give patients financial incentives to choose more cost-effective hospitals and physicians. Increased consumer access to these health benefit plans invigorates competition between providers to offer lower premiums and better overall healthcare services.
The settlement, in which the Division was joined by the North Carolina Attorney General’s Office, prevents Atrium from enforcing steering restrictions in its contracts with health insurers or seeking contract terms or taking actions that would prohibit, prevent, or penalize steering by insurers in the future in contracts between commercial health insurers and its providers in the Charlotte, North Carolina metropolitan area.
Seaman v. Duke University
The Division also recently submitted a Statement of Interest in Seaman v. Duke University, in which a plaintiff radiology professor alleges an agreement between Duke University and the University of North Carolina at Chapel Hill not to poach each other’s medical school faculty. On March 7, 2019, the Division filed a Statement of Interest to express its view that courts should apply to the per se rule to “naked” no-poach agreements like the one alleged in the case. The Division also argued that Duke University should not be ipso facto immune from antitrust liability under Section 1 of the Sherman Act for the alleged activity.
Photo credit: Manuel-F-O/iStock/Getty Images Plus