FTC Testifies on Importance of Competition and Antitrust Enforcement to Lower-Cost, Higher-Quality Health Care

The Federal Trade Commission today told the Senate Subcommittee on Consumer Protection, Product Safety, and Insurance of the Committee on Commerce, Science & Transportation that competition and the agency’s antitrust enforcement improves health care in the United States in two ways – first, by preventing or stopping anticompetitive agreements to raise prices and second, by helping to spur innovation that improves care and expands consumer access.

The testimony was presented by Richard A. Feinstein, Director of the FTC’s Bureau of Competition, and described the relationship between competition and antitrust enforcement, on one hand, and lower health care costs and increased health care quality on the other. According to Feinstein, the FTC has been the “cop on the beat” for the past 30 years in stopping
practices that are likely either to increase health care costs or to limit competition that could improve the quality of health care.

For example, the FTC has prevented anticompetitive agreements among health care providers to fix the prices they charge to a health insurance plan, conduct likely to raise prices without improving care. The Commission’s efforts also have helped assure that new and potentially more efficient ways of delivering and financing health care services can arise and compete in the marketplace.

The FTC has consistently opposed legislative proposals to exempt certain types of conduct, such as price-fixing, from antitrust scrutiny. At the same time, the agency has provided guidance on how health care providers can collaborate in ways consistent with the antitrust laws, as such collaborations have the potential to reduce cost and improve quality.

“The FTC is a partner in efforts to reduce costs and improve quality in the delivery of health care,” the testimony continued, outlining how the agency’s activities further those goals in three important areas: 1) health care provider clinical integration; 2) health care merger enforcement; and 3) pharmacy benefit management services (PBMs).

First, properly applied, the antitrust standards enforced by the FTC distinguish between price fixing by health care providers that is likely to raise health care costs and effective clinical collaborations among health care providers that have the potential to achieve cost savings and improved health outcomes. According to the testimony, the Commission has challenged price-fixing and boycott agreements among health care providers and has testified before Congress on the “clear consumer harms” that any proposed antitrust exemption for this type of conduct would allow.

Second, the testimony detailed merger enforcement by the Commission involving hospitals, drug manufacturers, and medical device manufacturers. The FTC has challenged hospital mergers that were likely to increase costs to consumers – such as the recently proposed merger of Inova and Prince William County Hospitals in Virginia. The parties chose to abandon the deal after the Commission filed suit in federal district court to block the deal. The FTC also acted to protect competition among kidney dialysis clinics by challenging an agreement between two major clinics with facilities in the northeastern United States pursuant to which one of the clinic operators would close certain clinics near the other company’s competing clinics, and the second company would acquire other clinics from the first company. After the staff objected, the parties terminated their agreement, and the FTC issued an order preventing them from entering into similar future agreements.

Finally, the testimony highlighted the FTC’s work to ensure that competition in the PBM marketplace benefits consumers. PBMs can help health care plans manage the cost and quality of prescription drug benefits they provide to their enrollees. Still, mindful of the potential harm from market power aggregations in the PBM industry, in 2004, for example, the FTC conducted a thorough investigation before clearing Caremark RX’s acquisition of Advance PCS, two large national PBMs. The Commission also acts to protect consumer privacy related to PBMs, with CVS Caremark recently settling FTC charges that it had not taken appropriate security measures to protect consumers’ and its employees’ sensitive financial and medical information.

The Commission vote authorizing the presentation of the testimony and its inclusion in the formal record was 4-0. A copy of the testimony can be found on the FTC’s Web site and as a link to this press release at http://www.ftc.gov/os/2009/07/090716healthcaretestimony.pdf.

The FTC’s Bureau of Competition works with the Bureau of Economics to investigate alleged anticompetitive business practices and, when appropriate, recommends that the Commission take law enforcement action. To inform the Bureau about particular business practices, call 202-326-3300, send an e-mail to antitrust@ftc.gov, or write to the Office of Policy and Coordination, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, DC 20580. To learn more about the Bureau of Competition, read “Competition Counts” at http://www.ftc.gov/bc/edu/pubs/consumer/general/zgen1.shtm.