Remarks as Prepared for Delivery
Thank you for that warm introduction, Teddy. Thanks to the Capitol Forum for organizing this important conference in this iconic location. It is an honor to speak with you all today.
In U.S. antitrust enforcement and competition policy, there is no more important question than what can we do to safeguard competition in the healthcare industry. A lot of our tremendous people at the Antitrust Division, and no doubt the FTC and other agencies, eat their cereal in the morning thinking about that issue and go to sleep thinking about it too.
Health care represents almost 20% of our GDP, and there are, unfortunately, too many competition questions that warrant scrutiny and discussion. Because time is limited, I want to focus on two topics: (1) some key questions and concerns around healthcare competition in the U.S. and how the Antitrust Division is trying to address them and (2) some perspectives on the intersection between antitrust and the real world, including around healthcare.
As you might expect, neither topic is completely cheerful. But I nevertheless wanted to start on a positive note.
I, like I hope many of you, have tremendous respect for the people who make up our healthcare system and am grateful for the important work they do. Friends and family members are therapists, nurses and doctors. Loved ones have received life-saving care and medicines. I still can play basketball, a sport I love even if I don’t play it terribly well, because of an ACL reconstruction I had several years ago. A neighbor works to secure clearance for new drugs. Others I know have joined healthcare startups seeking to make improvements across the system. I worked with healthcare companies in my former life and respect a lot of the people with whom I worked and appreciate the issues they face.
All of this creates a paradox for many of us. On the one hand, healthcare is very personal and important to our everyday lives and well-being. In the U.S., we have tremendous healthcare workers and resources. Those of us lucky enough to afford access to those resources, can cite to examples where those workers and resources throughout the healthcare ecosystem have helped us or our loved ones.
On the other hand, there is little doubt that key aspects of competition in the healthcare industry are broken. The system has real competitive problems, and these problems impact real people in real ways. But don’t take my word for it. Take the word of others.
First, consider the high-level data. According to the OECD, the United States is not spending healthcare dollars efficiently. The United States spends much more on health than other high-income countries – both on a per capita basis and as a share of GDP. But, importantly, greater spending is not yielding better outcomes based on some metrics. For example, our life expectancy is the lowest of the developed world. There may be several reasons this is occurring, but I submit that competition problems likely are among them.
Second, if you don’t find the high-level data persuasive, consider what healthcare companies and their interest groups are saying themselves. Companies in the ecosystem do not appear to dispute there are competitive problems in the industry – rather they appear to be focusing on blaming each other for the competitive ills. If you have been paying attention to the ad and lobbying campaigns, you know that, for example, drug companies blame PBMs for the increasing cost of drugs and access problems, and PBMs blame drug companies for the same issues. Similarly, providers continue to blame insurance companies (unless the insurance company owns them) for the ever-increasing cost of care, and insurance companies blame providers for the same issues.
Third, if you still need some persuading, listen to the words of everyday Americans. We are grateful to have received over 3,000 comments to our draft Merger Guidelines, which is far greater than the few dozen received in 2010. We appreciate all the comments, whether supportive or critical or neutral, and recognize the comment process will make the final guidelines better. But one of the things that was particularly striking were the personal comments around healthcare. Those comments included expressions of real concern by healthcare workers, patients and companies, including about the high costs and restrictions around care delivery, high drug pricing and access to medicines, the negative impact of consolidation on wages, time with patients and worker mobility. Empirical analysis, legal briefs and company documents obviously are very important in the antitrust world, but antitrust also should be about more. We must hear from, consider and, if possible, present credible stories from real people and industry participants about how competition is functioning and real-world impacts.
Finally, if you need even more, several empirical studies from leading economists strongly suggest that health care competition is unhealthy. Whenever one references empirical studies, it can be tricky as it can invite a “battle of experts” response. I am not intending to be that granular today. But what I do think is important is that several well-respected economists have published papers discussing competition problems involving a variety of areas of the healthcare ecosystem. Those analyses discuss a wide-range of issues, including (1) that increasing prices are a key driver of higher private healthcare spending, (2) that quality of care suffers from lack of competition, (3) that healthcare workers’ wages are depressed by lack of competition, (4) that employers are shifting more healthcare costs to workers and (5) that provider consolidation in the same markets and even adjacent markets can lead to higher pricing.
So, the fact that competition in the U.S. health care industry is not healthy is largely undisputed and not very controversial. Rather, the dispute is more about the root causes of the competition problems and how best to try to fix them.
Let me be clear on one point however: antitrust enforcement should be part of the solution, but it is not a magic potion to cure all the competitive ills of the healthcare industry. There are other parts of the toolkit that can, and should be, used to try to address the problems we have in the space. Consistent with the President’s whole-of-government approach to competition problems, we support other federal agencies using all of their competition-related powers to tackle key issues, whether that be via enforcement, approval rights, or regulation. We look forward to continuing to work closely with other federal agencies, as well as state partners, in all appropriate ways to try to address competition concerns for Americans.
Focusing in on the Antitrust Division, a big question for us is how to use our limited civil enforcement resources to investigate and, if necessary, take antitrust actions to protect healthcare competition.
First, we are increasingly focused on non-merger, conduct-related matters. At the Antitrust Division, we are deliberately allocating a larger amount of our civil resources to conduct cases than we have in recent history. Unfortunately, the Antitrust Division today has over 200 fewer staff than it did in 1979, and we often are investigating or litigating against companies with almost limitless resources. But we are using all of the tools at our disposal to enforce the antitrust laws as the facts and law dictate.
In healthcare and several other industries, we are focused on worthy conduct investigations of all shapes and sizes. As always, we will follow the facts and law where they take us. We will not hesitate to investigate and, as appropriate, bring enforcement actions involving big issues that can have big impacts. But we also need to let individuals, companies and those who report concerns know that the “cops are on the beat” for more narrow, discrete competition problems as well.
Second, on the merger front, we remain active in reviewing health care transactions as appropriate. In health care, the web of relationships and money flows are complex, and the analysis often does not fit neatly into historical boxes like horizontal or vertical. Companies inking healthcare deals with potential antitrust issues should continue to expect close scrutiny and, when the facts and law warrant, we will not hesitate to act. We also continue to believe that a high bar for merger remedies helps safeguard competition for American businesses and consumers. We will always listen and carefully consider any remedial proposals. But a high bar is necessary because there are many historical examples of problematic remedies, including some recent ones. Remember, if a remedy fails, the competition problem is cemented and the cost of that failure is borne by the American people, so a high-level of certainty in a remedy’s success is critical.
Before moving to a final topic, I did want to briefly highlight a few areas of particular focus for the Antitrust Division in connection with healthcare competition.
We are thinking about provider and payer consolidation. We wonder whether the key justification for much of this consolidation, so-called value-based care, is delivering on the promise of lower prices and improving outcomes. Value-based care is a compelling label, and dare I say everyone here agrees with the conceptual goal of lowering prices and proving outcomes. But there are real questions whether provider/payer consolidation has delivered on this conceptual goal, as well as related questions whether the compelling label actually may be masking increased power and conduct that increases barriers and otherwise harms competition.
We also remain vigilant about roll-ups and transparency in ownership of healthcare entities. We commend the FTC for bringing its recent case involving the roll-up of anesthesia markets in Texas. We join them in a shared commitment to enforcement against roll-up strategies and Section 8 interlocking directorate enforcement in healthcare.
Another area we are noticing is the trend toward a more concentrated market structure with a few massive healthcare companies with robust stacks of insurance companies, providers, PBMs, pharmacies and/or other services under the same roof. We wonder how this trend has impacted, or will impact, competition and power across the complex web of relationships in the healthcare ecosystem. Is the integration, as the companies argue, a good thing? If done properly, it might be. Or has the consolidation led to more power, increased entry barriers by requiring multi-level entry or otherwise, higher prices, less innovation and deeper moats defending sources of power? Similarly, has this trend increased bare-knuckled competition, or, on the other hand, might it increase potential coordination due to the fact that the stacks also partner with each other and, thus, have relationships and entanglements with each other across the ecosystem?
We also see healthcare companies becoming more focused on accumulating data and wonder whether it is good for competition when a few players control massive data reservoirs. Does this lead to benefits, or do these information asymmetries enable these companies to dictate the terms of future innovation, determine who gets care at what price, competitively surveil their rivals or otherwise game the system?
Finally, we also remain very focused on labor-related issues in this space, whether around wages, non-competes, no-poach agreements, requirements to see more patients over less time or other workplace restrictions or conditions. In many communities across America, especially in rural America, healthcare systems are the largest employers. We must continue to be vigilant in investigating and, as appropriate, enforcing the antitrust laws around labor-related competition issues.
With that said, I want to transition and close on a few important topics that I am sure all of us think about in some form or fashion. The intersection of antitrust enforcement and the “real world.” The importance of this issue is perhaps at its apex in the healthcare context, but it is extremely important across all our efforts.
Sometimes antitrust, as a broad discipline, gets criticized as being divorced from the real world and too theoretical and technocratic. But I want to try to examine, address and push back a bit on that critique.
First, I think I speak for all the Antitrust Division when I say we believe with every fiber that our actions impact real people in real ways. At the end of the day, that is our lodestar and our guiding purpose. We think of these issues often: whether it be the appreciation from book authors after stopping a merger that likely would’ve led to lower payments for them and their families, or causing a foreign state-owned enterprise to abandon a merger that would’ve allowed the merged firm to control shipments of life-saving drugs to Americans or stopping agreements that suppressed the wages of some of the hardest-working and most-vulnerable workers in the economy. I could go on. The truly fantastic legal, economic and support staff at the Antitrust Division should be proud of being on the front lines of creating these real-world benefits for real people, and it is an honor and inspiration to work alongside of them.
Second, I want to make an even more direct call to action to participate in antitrust enforcement actions in health care. As I alluded to earlier, we are glad that more Americans are expressing their views on how competition impacts their everyday lives, including in health care. But we need even more engagement to increase the chances of making a difference. Part of our “real world” at the Antitrust Division is that we rely on third parties for important aspects of our investigation (in some cases even starting them) and, as necessary, litigation. So, health care customers, competitors, workers and other parties, please make your voices heard directly to us at the Antitrust Division, the Federal Trade Commission and any others you see fit, if you have competition concerns in the health care space. Whatever shape or size of those problems, please engage with us and provide your detailed views and evidence. Health care competition is too important to sit on the sidelines.
We understand that the cost-benefit analysis for third parties to participate actively in the antitrust review process can be complex. We know that many third parties are reluctant to participate fully in our process for fear of retaliation or other considerations. That reluctance, to be frank, can have a negative impact on our antitrust enforcement efforts as it may not allow us to understand the full story about competitive issues or allow them to be presented to a court. Rest assured we will do whatever we can, consistent with the law, to make sure everyone can voice their concerns and provide evidence free from retaliation or the other issues that may be holding companies or individuals back from engagement.
Third, and on a more negative tone, one aspect of our “real-world” at the Antitrust Division is that we continue to face problems obtaining information to which we are legally entitled. In addition to the traditional concerns around document collection and questionable privilege claims, the advent of ephemeral messaging and attempts to move communications to protocols that are not effectively preserved is a real problem for us. It should be no excuse if companies provided a lot of other information to us: if potentially important information for our efforts is being improperly withheld or destroyed, that is existential to our mission as a law enforcement agency. In our effort to safeguard competition and vindicate the interests of the American people, we are obligated to evaluate all tools at our disposal, both procedural and substantive, to ensure compliance with the law.
Finally, I want to address what appears to be a trend in litigation arguments in merger defenses, including in healthcare, that often is described by proponents as a “real-world” argument. Increasingly, companies are arguing that they will not have the incentive to increase price, foreclose rivals or act to harm competition because of the importance of a company’s overall reputation. Some version of this argument has arisen in several recent merger cases.
To be sure, one may be able to come up with outlier scenarios where generalized company reputation matters to a degree and obviously courts have (and should have) discretion in credibility and other matters. But in our view and experience, this new wave of reputation arguments is divorced from antitrust doctrine as well as the real-world.
Let’s begin with the antitrust doctrine aspect. First, antitrust merger law has always recognized the importance and benefits of safeguarding a more competitive market structure and competitive process. This is a bedrock principle of antitrust merger enforcement, and one of the reasons why the favored remedy to an anticompetitive merger under longstanding law is to block it and not rely on things like reputational promises.
Second, merging parties appear to be advancing these generalized reputation arguments to suggest that companies that have the chance to exercise economic power — to increase prices, thwart rivals, or dig deeper moats — will not do so in the real-world. But, of course, this exercise of power is exactly what we should expect in the real-world as part of capitalism. The Supreme Court itself has been clear that companies and their executives are expected to behave in a way to maximize their profits (or increasingly in today’s world, to maximize their equity valuation). So, if it were otherwise profitable for a company to engage in the problematic conduct at issue, such as raising pricing on certain products by 10% or foreclosing or degrading access to rivals, that a company should not be able to survive a merger challenge based on arguments that its overall reputation will constrain its profit-maximizing conduct.
Third, to the extent the generalized reputation arguments relate to preserving profits on products other than those involved in the merger challenge, it is also inconsistent with the antitrust laws in another dimension. Congress enacted law indicating that mergers are illegal where they “may result” in a substantial lessening of competition “in any line of commerce,” so out of market impacts, reputation or otherwise, should not be able to save a deal that is illegal in a particular line of commerce.
Finally, a recent, real-world example illustrates the flaws in this kind of advocacy and potential issues for antitrust enforcement. Last year, a company successfully defended an antitrust merger challenge against the Antitrust Division relying in part on a reputational argument. The company convinced the court that it had strong reputational incentives to maintain a competitive bid in the overlapping area due to the fact that it needed to maintain a good reputation in order to secure other, lucrative U.S. government contracts in the future. Just a few months later, that very same company agreed to pay $377 million to the United States in one of the largest procurement fraud settlements in history. According to the allegations, the company had improperly overcharged the U.S. government for costs associated with its commercial and international businesses. Overcharging the U.S. government, of course, was exactly the sort of concern that animated our merger challenge in the first place.
At the Antitrust Division, we need to do a better job explaining that a company’s generalized reputational promises and considerations should not overcome the need to preserve a competitive market structure and other evidence of an antitrust violation. Similarly, if companies plan to make use of this kind of argument in the future, we need to be prepared to expand the scope of our discovery to collect information on all aspects of the company’s reputation to address these kinds of arguments.
In closing, I just want to remind people one last time that if we are to maximize progress in addressing the critically important competition issues in the healthcare industry, we really need your help. Please reach out to the antitrust agencies and other agencies to try to be a part of the solution.
 OECD, Understanding differences in health expenditure between the United States and OECD countries (Sept. 2022), https://www.oecd.org/health/Health-expenditure-differences-USA-OECD-countries-Brief-July-2022.pdf
 David C. Radley et al., Americans, No Matter the State They Live In, Die Younger Than People in Many Other Countries, Commonwealth Fund (Aug. 11, 2022) https://www.commonwealthfund.org/blog/2022/americans-no-matter-state-they-live-die-younger-people-many-other-countries.
 See, e.g., Improving Care, Lowering Costs: Achieving Health Care Efficiency, 118 Cong. (1-7) (testimony of Leemore Dafney) https://www.budget.senate.gov/imo/media/doc/101823_drdafnytestimony.pdf
 Copperweld Corp. v. Indep. Tube Corp., 467 U.S. 752, 770–72 (1984).