A New Government Initiative Aims to Root Out Anticompetitive Practices in Health Care

There is an old idiom in American English, “he shut the barn door after the horse has bolted.” The saying refers to someone who initiates preventive measures after it is too late. This is another way of saying an action was too little, too late. This analogy applies to a new initiative of the federal government to root out anticompetitive behavior in the health care industry. According to an article from Modern Healthcare:

The portal, HealthyCompetition.gov, is the latest effort from government agencies and the Biden administration to bolster competition in healthcare markets with the hope of lowering care and prescription drug costs…

The following is from the Justice Department website:

The Justice Department, Federal Trade Commission (FTC) and the Department of Health and Human Services (HHS) today launched an easily accessible online portal for the public to report health care practices that may harm competition.

The online portal, HealthyCompetition.gov, allows the public to report potentially unfair and anticompetitive health care practices to the Justice Department’s Antitrust Division and FTC. The launch of the new portal advances the Biden-Harris Administration’s efforts to lower health care and prescription drug costs and help create more competitive health care markets that are fairer to patients, providers, payers and workers.

The Federal Trade Commission has been taking more notice of anticompetitive business practices lately. It is unfortunate the agency did not take notice years ago. Hospitals have consolidated to the point that two or three major firms tend to dominate the market in all major metropolitan areas. Few people want to go to a hospital far away from family so two or three major firms buying up smaller competitor easily creates a cartel. Many hospitals systems require payers to sign so-called, “all or nothing contracts,” making it impossible to negotiate with individual hospitals in an area of town or decline to work with hospitals with lower quality metrics if they are part of a major hospital system. In 2023 Texas and Connecticut passed legislation reining-in some of the more abusive practices but a lot more needs to be done. The Justice Department explained how the portal will work:

Complaints will undergo preliminary review by staff at the Justice Department’s Antitrust Division and FTC. If a complaint raises sufficient concern under the antitrust laws or is related to HHS authorities, it will be selected for further investigation by the appropriate agency. This action may lead to the opening of a formal investigation.

According to the Justice Department existing federal laws designed to limit anticompetitive business practices include the following:

• The Sherman Act prohibits certain agreements between companies that harm competition. It also prohibits companies from unlawfully gaining or maintaining monopoly power.
• The Clayton Act prohibits companies from merging when the merger may substantially lessen competition.
• The Federal Trade Commission Act prohibits unfair methods of competition. It also prohibits companies from acting in unfair or deceptive ways.
• The Robinson-Patman Act prohibits, among other things, a seller from charging competing buyers different prices for the same commodity or discriminating in the provision of allowances or services furnished or paid to customers.

One area of concern mentioned on the government website is price transparency. Another is collusion and price fixing. It makes me wonder why federal agencies have not mentioned the more egregious examples designed to thwart price competition: kickbacks and rebates. Drug copay debit cards, drug rebates to PBMs and sole source hospital supply contracts (again, involving rebates) are examples of this.

Last year the expensive blockbuster drug Humira lost patent protection. Experts expected cheaper versions to flood the market and take away market share. It did not happen. Purportedly, Humira’s maker told PBMs they could lose rebates on the company’s other drugs if employers and members were not steered to the more expensive brand drug. Doctors could prescribe the cheaper versions of Adalimumab (generic Humira), except they were not cheaper on the PBM’s formulary. PBMs can ignore what’s best for their clients and pursue their own agenda because the top three PBMs control 79% of the drug market. The top six control 96%. That is another example of the FTC being asleep at the wheel.

Sole source hospital supply contracts make it impossible for small suppliers to undercut large hospital suppliers and get their products in hospital supply rooms even if their products are cheaper. I met with a CEO for a safety syringe manufacturer a few years ago. His products were better and cheaper, but they could not break through the group purchasing organizations (GPOs) that only worked with large suppliers. GPOs also pay rebates based on the total volume of business, something hospitals stand to lose if they buy from a non-affiliated competitor.

Large consolidation of physician specialties in major cities and hospital’s employing physicians, who are required to refer all patients internally is another way to prevent patients shopping around for cheaper options.

The website HealthyCompetition.gov invites the public to help make the federal agencies aware of anticompetitive business practices in health care. It remains to be seen how the government will use the information. Perhaps the initiative itself is an indicator that the agencies will take greater measures to reduce practices designed to limit competition. Health care is unlike other areas of our economy. More than 90% of expenditures are paid by someone other than the patient. Patients have little monetary skin in the game and providers seemingly do everything in their power to prevent patients from having the tools to make better decisions.

More information is available here.