FTC Chairman Announces Public Hearings on Health Care and Competition Law and Policy to Begin in February 2003

Chairman Timothy J. Muris in a speech today announced that the Federal Trade Commission will hold hearings on health care and competition law and policy commencing in February 2003 and continuing throughout the year. The hearings will be hosted jointly by the FTC and the Antitrust Division of the Department of Justice (DOJ).

Muris said that the hearings will examine the state of the health care marketplace and the role of competition, antitrust, and consumer protection in satisfying citizens' preferences for high-quality, cost-effective health care. Preliminary topics for the hearings include hospital mergers, the significance of non-profit status, vertical integration, quality and efficiencies, the boundaries of the state action and Noerr-Pennington doctrines, monopsony power, the adequacy of existing remedies for anticompetitive conduct, and the implications of the Commission's consumer protection mandate with regard to the performance of the health care financing and delivery markets.

Muris's speech, titled Everything Old is New Again: Health Care and Competition in the 21st Century, was the keynote address for the 7th Annual Competition in Health Care Forum. The Forum was held in Chicago, Illinois, on November 7-8, 2002. In the comprehensive policy speech, Muris discussed the nature of the current health care marketplace, the importance of competition in health care, the kinds of anticompetitive behavior the Commission is seeing, the agency's enforcement and research agenda, its efforts to protect and promote quality and efficiencies, and the Commission's recent initiatives in health care.

Muris noted that the FTC continues to see a wide variety of overt anticompetitive practices in the health care marketplace, along with some new variations. The Commission continues to bring cases against physicians for price-fixing - much like those brought by the FTC throughout the last 20 years. However, Muris pointed out that several of the new cases involve an unprecedented number of doctors and some consultants who allegedly coordinated the price-fixing under the guise of assisting in negotiations with payors.

Conversely, Muris noted, the Commission's pharmaceutical docket is a new variation on an old theme, involving alleged anticompetitive conduct by branded and generic pharmaceutical companies. Pharmaceutical cases account for the majority of the Commission's antitrust resources devoted to health care and a sizeable percentage of the Bureau of Competition's budget.

Muris discussed the difficulties the Commission and the DOJ have had in litigating hospital mergers in the past eight years and described how the Commission is working to address these challenges. In particular, he noted, the Bureau of Economics and the Bureau of Competition are conducting a retrospective review of a number of consummated hospital mergers to determine whether there is evidence of anticompetitive effects. Muris also described how the Bureau of Competition's new Merger Litigation Task Force will enhance the FTC's ability to bring hospital merger cases and reviewed the important role played by the DOJ in implementing competition law and policy, particularly with regard to insurance.

Muris noted that the Commission also has an important consumer protection role in the market for health care goods and services and that deceptive and unfair marketing practices are far too common in health care. Citing an example of the Commission's work, he noted Operation Cure.All, which challenged deceptive and unsubstantiated health claims for serious illnesses. Muris also addressed the implications of the relative scarcity of information about the cost and quality of health care.

Muris emphasized that competition law does not hinder the delivery of high-quality care. He pointed out that the Commission is always willing to consider arguments about how a particular transaction or conduct will lead to efficiencies in the financing or delivery of health care services, and it will pay close attention to such arguments in weighing the competitive implications. Clinical integration that increases quality of care is one example, he said, of permissible collective conduct that may not violate the antitrust laws because there are substantial pro-competitive benefits.

Muris observed that although there is plenty of misinformation and misapprehension about the role of the Commission and the application of the antitrust laws to health care, the FTC's basic task remains the same as it has always been: to ensure that the approximately 15 percent of our nation's gross domestic product devoted to health care, amounting to about $1.3 trillion per year, is spent in robustly competitive markets. Aggressive competition promotes lower prices, higher quality, greater innovation, and enhanced access to care. More concretely, in health care, competition results in new and improved drugs, cheaper generic drugs, treatments with less pain and fewer side effects, and treatments offered in a manner and location consumers desire.

The Commission, he said, does not have a pre-existing preference for any particular model for the financing and delivery of health care. Such matters are best left to the marketplace. What the Commission does have, Muris noted, is a commitment to vigorous competition along both price and non-price parameters. The FTC supports initiatives to enhance quality of care and ensure the free-flow of information because such initiatives are pro-competitive. There is great flexibility for health care providers to develop and implement novel financing and delivery arrangements without running afoul of the antitrust laws, although, not surprisingly, the FTC draws the line at anticompetitive conduct.

Muris continued by stating that there is no inherent inconsistency between vigorous competition and the delivery of high-quality health care, and interference with competition is far more likely to decrease consumer welfare than increase it. As the Supreme Court observed in Indiana Federation of Dentists, he said, such interference necessarily and improperly preempts "the working of the market by deciding . . . that customers do not need that which they demand."(1)

"Health care is the area of the economy where the promise implicit in the creation of the Commission - that there are substantial consumer welfare benefits and synergies from creating an agency combining administrative expertise and enforcement authority, addressing antitrust, consumer protection, and competition advocacy - has been most fully met," Muris concluded. "Since 1975, when the Commission sharpened its focus on this area, through six presidents and eight Chairpersons, the Commission has maintained a leadership role in implementing competition law and policy in health care."

Copies of the Chairman's remarks and the Federal Register notice announcing the hearings are available from the FTC's Web site at http://www.ftc.gov and also from the FTC's Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580. The FTC's Bureau of Competition seeks to prevent business practices that restrain competition. The Bureau carries out its mission by investigating alleged law violations and, when appropriate, recommending that the Commission take formal enforcement action. To notify the Bureau concerning particular business practices, call or write the Office of Policy and Evaluation, Room 394, Bureau of Competition, Federal Trade Commission, 600 Pennsylvania Ave, N.W., Washington, D.C. 20580, Electronic Mail: antitrust@ftc.gov; Telephone (202) 326-3300. For more information on the competition laws that the Commission enforces, the FTC has published "Promoting Competition, Protecting Consumers: A Plain English Guide to Antitrust Laws," which can be accessed at http://www.ftc.gov/bc/compguide/index.htm.

The FTC also works for the consumer to prevent fraudulent, deceptive and unfair business practices in the marketplace and to provide information to help consumers spot, stop and avoid them. To file a complaint, or to get free information on any of 150 consumer topics, call toll-free, 1-877-FTC-HELP (1-877-382-4357), or use the complaint form at http://www.ftc.gov. The FTC enters Internet, telemarketing and other fraud-related complaints into Consumer Sentinel, a secure, online database available to hundreds of civil and criminal law enforcement agencies worldwide.