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Antitrust

Connecticut State Medical Society v. Connecticut Department of Insurance

(New Britain, Conn., Super. Ct.)

Outcome:    Very unfavorable

United Health Care purchased Health Net's customer base in Connecticut, as well as in New York and New Jersey.  The Connecticut Department of Insurance approved that acquisition, despite objections from the Connecticut State Medical Society and the AMA.

CSMS appealed the Department of Insurance approval.  The CSMS appeal was dismissed for lack of standing and hence lack of jurisdiction in the court.  The Litigation Center paid part of the CSMS legal expenses.

Davis Transport v. Missoula Radiology (District of Montana)

Outcome:    Somewhat favorable

Issue

The issue in this case was whether a radiology practice and imaging center could properly refuse to enter into a health insurer’s participating provider network without violating the federal antitrust laws.

AMA interest

The AMA supports a level playing field in negotiations between insurers and physicians and believes the federal antitrust laws should not be used to disadvantage physicians.

Case summary

Blue Cross and Blue Shield of Montana, along with several employers and individuals, sued a radiology practice and imaging center in a putative class action, alleging breaches of Sherman Act §1 (prohibiting contracts and conspiracies in restraint of trade), Sherman Act §2 (prohibiting monopolies and attempts to monopolize), and Clayton Act §8 (prohibiting simultaneous service as officers or directors of competing corporations).  Basically, the plaintiffs contended that the twelve radiologists in Missoula, Montana joined together to monopolize the market for radiology services. 

Montana Blue alleged that, as an expression of their economic power, the radiologists refused to sign the Montana Blue participating provider agreement.  Montana Blue averred that the radiologists’ conduct was inherently unreasonable, since 93% of all practicing physicians in Montana were on the Montana Blue provider panel.

In its answer to the complaint, Missoula Radiology admitted having had exclusive hospital contracts in the past, but stated that it did not have such contracts when the suit was filed or at any time since.  Moreover, Missoula Radiology asserted that those contracts were standard for the industry and had pro-competitive effects.

The parties met with a mediator for two days as a result of which they reached a tentative settlement.  The details of that settlement were confidential, but it was believed that the settlement provided that the physicians were not required to pay any money to the plaintiffs, and they would not be required to join the Montana Blue panel network.  A consent decree ultimately was entered in the case.

Litigation Center involvement

The Litigation Center contributed to the physicians’ defense costs.

Federal Trade Commission v. Phoebe Putney Health System, Inc., 133 S.Ct. 1003 (2013)

Outcome:     Very favorable

Issue 

The issue in this case was whether the “state action” doctrine should immunize a state created hospital authority from liability under the federal antitrust laws.

AMA interest

The AMA supports and encourages competition between and among health facilities as a means of promoting the delivery of high-quality, cost-effective care.

Case summary

The Georgia Hospital Authorities Law, O.G.C.A. § 31-7-70, et seq., empowered cities and counties in Georgia to create hospital authorities.  These authorities could take such actions as they deem appropriate to meet the public health needs of their respective communities, including the purchase of real and personal property, execution of contracts, and “exercise [of] any or all powers now or hereafter possessed by private corporations performing similar functions.” O.G.C.A. § 31-7-75(21).

The Hospital Authority of Albany-Daugherty County, Georgia owned Phoebe Putney Memorial Hospital (PPMH) and since 1990 has leased the facility to Phoebe Putney Memorial Hospital, Inc., a private not-for-profit corporation.  Palmyra Park Hospital (Palmyra) was the principal PPMH competitor.  PPMH contracted to purchase Palmyra.

The FTC determined that the proposed acquisition would substantially lessen competition, in violation of Clayton Act § 7, 15 USC § 18, and it sued for an injunction to prevent the merger.  It characterized the purchase as “a transfer engineered by a private party and only rubber-stamped by a governmental entity.”  Notwithstanding the claim of anticompetitiveness, however, the hospitals and the hospital authority moved to dismiss under Fed. Rule Civ. Proc. 12(b)(6), contending that they were entitled to state action immunity, which made the FTC claim invalid on its face.  The federal district court granted the motion and dismissed the case without hearing evidence.

On appeal, the Eleventh Circuit acknowledged that on the facts alleged the challenged transaction would substantially lessen competition or tend to create, if not create a monopoly.  However the court concluded that the transaction was exempted from the antitrust laws by the state action doctrine, and it affirmed the dismissal.  The court reasoned that the Georgia legislature had given hospital authorities the power to acquire and lease out hospitals.  Therefore, according to the court, the legislature “must have anticipated that such acquisitions would produce anticompetitive effects.”

The United States Supreme Court reversed the Eleventh Circuit on February 19, 2013.  It held that the state action doctrine should not apply, because the general grant of power to the hospital authority under the Georgia Hospital Authorities Law was not a clear articulation by the state of an intent to restrict competition.

Litigation Center involvement

The Litigation Center, along with the Georgia Medical Association filed an amicus brief in the Supreme Court in support of neither party.  The brief made two distinct points: first, hospital competition is important to physicians and patients, and second, a caution to the Supreme Court that it should not interpret the state action doctrine so narrowly as to impede the ability of professional licensure boards (particularly state medical boards) to perform their functions.

United States Supreme Court brief

Federal Trade Commission v. Watson Pharmaceuticals, 133 S.Ct. 2223 (2013)

Also under Drug Manufacturers

Outcome:    Very favorable

Issue

The issue in this case was whether payments from holders of patents on branded drugs, made to generic drug manufacturers to induce the generic manufacturers to delay production of the generic drugs, violate the antitrust laws.

AMA interest

The AMA opposes “pay for delay” arrangements, which have the effect of making generic drugs unavailable to patients.

Case summary

Solvay Pharmaceuticals patented a drug, AndroGel, used to treat low testosterone.  Two generic drug manufacturers, one of which was Watson Pharmaceuticals, began producing a generic version of AndroGel before expiration of the patent.  As a result, Solvay sued Watson and the other generic manufacturer for patent infringement.  One of the defenses against the infringement claim was that the AndroGel patent was invalid.

In order to settle the litigation, Solvay paid the generic drug manufacturers to delay their production until after the expiration of the patent.  In exchange, the generic manufacturers agreed they would not challenge the validity of the AndroGel patent.

The Federal Trade Commission then sued Solvay and both generic manufacturers, contending that the AndroGel patent was invalid and that the “pay for delay” arrangement was a violation of the antitrust laws.  The Eleventh Circuit, however, held that such agreements are valid unless they are a sham to perpetuate a patent that has no reasonable claim to validity.  Here, the FTC had alleged that the patent was invalid, but it had not alleged that there was no reasonable claim of validity.

The case was appealed to the Supreme Court, which, by a split decision, reversed on June 17, 2013.  The Court held that the FTC should have the right to prove the reverse payment agreement anticompetitive under a "rule of reason" basis.

AMA involvement

The AMA joined an amicus brief of the American Association of Retired Persons, arguing that the Eleventh Circuit should be reversed, the FTC should be allowed to prove the AndroGel patent invalid, and pay for delay agreements should be deemed presumptively in violation of the antitrust laws.

United States Supreme Court brief

Henstorf v. State Compensation Insurance Fund (Cal. S.Ct.)

2009 Cal.Ap.. Unpub. LEXIS 7200 (Cal. App. 2009)

Outcome:     Very unfavorable

Issue

The issue is this case was whether an arrangement between State Compensation Insurance Fund (SCIF) and WellPoint Health Networks for the provision of worker's compensation payments to participating physicians created a collusive buyer monopsony that violated the California antitrust laws.

AMA interest

The AMA supports a level playing field in negotiations between physicians and insurers.

Case summary

The named plaintiffs in this putative class action were four orthopedic surgeons who practice in a California orthopedic surgery group.  The defendant, SCIF, was the largest provider of workers' compensation insurance coverage in California.  The plaintiffs were part of a network that provided medical care to workers' compensation patients of SCIF's insureds. 

Until 2005, WellPoint also maintained a provider network for its workers' compensation business, but SCIF generally paid more to its workers' compensation providers than did WellPoint.  In mid-2005, however, SCIF dissolved its provider network and required its member physicians to contract with WellPoint in order to furnish medical services to workers' compensation patients of SCIF's insureds.  Thus, the named plaintiffs were compelled to join the WellPoint network if they were to continue servicing the SCIF workers' compensation patients.  This resulted in the plaintiffs' having to accept below-market rate compensation as well as other disadvantages of participation in the WellPoint network.

The arrangements between SCIF and WellPoint were alleged to constitute price fixing, a per se violation of Section 16720 of the California Business & Professions Code, which is part of the California antitrust laws.  SCIF demurred to the First Amended Complaint, arguing that it failed to allege a per se price-fixing violation under California law.  The trial court granted the demurrer, without leave to amend the complaint further.  The plaintiffs appealed, and the California Court of Appeal affirmed the dismissal in an unpublished decision.  The plaintiffs then asked the California Supreme Court to accept discretionary review, but the Supreme Court denied this request.

Litigation Center involvement

The Litigation Center joined the California Medical Association in requesting leave to file an amicus curiae brief in support of the plaintiffs before the Court of Appeal.  Unfortunately, the Court of Appeal denied permission to file the brief.  The Litigation Center and the California Medical Association also submitted a letter brief to the California Supreme Court, urging it to accept jurisdiction.

Court of Appeal of the State of California brief.

California Supreme Court letter brief.

Higgins v. Baptist St. Anthony's (Potter Cty., Tex. Dist. Ct.)

Also under Economic credentialing and Hospitals

Outcome:    Somewhat favorable

Issue

The issue in this case was whether a parent health care organization, its managed care network and its hospital violated a Texas antitrust statute by attempting to terminate ("deselect") from the network two physicians who had invested in a competing surgical hospital.

AMA interest

The AMA opposes discrimination against physicians who have ownership interests in specialty hospitals.

Case summary

The case arose from the attempt by a managed care network to deselect the plaintiff physicians from the network's provider panel, in retaliation for the physicians' investment in a surgical hospital. The surgical hospital competed with a general hospital that was owned by the parent of the managed care network. Furthermore, the parent urged Blue Cross Blue Shield of Texas ("Texas Blue") to deselect the physicians and other investors in the surgical hospital from the Texas Blue provider network.

The two physicians sued the parent organization, its managed care network, and its hospital for violations of the federal and Texas anti-kickback statutes and the Texas antitrust statute. Before the case could be tried, it was settled and dismissed. As part of the settlement, the parent health care organization bought a majority interest in the specialty hospital and agreed that it would not discriminate against physicians who had also invested in the specialty hospital.

Litigation Center involvement

The Litigation Center and the Texas Medical Association contributed toward the physicians' litigation expenses.

International Healthcare Management v. Hawaii Coalition for Health

332 F.3d 600 (9th Cir. 2003)

Also under Medical society advocacy

Outcome:    Very favorable

Issue

The issue in this case was whether advocacy efforts by the Hawaii Medical Association and other organizations constituted an antitrust violation.

AMA interest

The AMA supports vigorous advocacy efforts by medical associations and others directed at improving access to healthcare, the physician-patient relationship and fair compensation to physicians.

Case summary

The Hawaii Medical Association (“HMA”) and one of its former presidents, along with two other organizations and various other individuals, were sued under the Sherman Antitrust Act. The plaintiffs alleged that the defendants had organized a physician boycott of two managed care organizations. HMA contended that it was simply advising its members of certain problems with the proposed provider contracts without an agreement among its members to act in concert. HMA maintained that, if the plaintiffs had been able to establish their business in Hawaii, this would have increased competition among purchasers of physicians’ services. Thus, HMA had no reason to participate in a boycott.

The district court entered summary judgment for defendants on all counts. The plaintiffs appealed. On June 6, 2003, the Ninth Circuit affirmed the decision for the defendants.

Litigation Center involvement

The Litigation Center helped HMA clarify and secure its insurance coverage. The Litigation Center also helped HMA negotiate a fee agreement with its defense attorneys.

Also, the Litigation Center filed an amicus curiae brief in the Ninth Circuit to support HMA. The brief argued that professional associations, such as HMA, have a legitimate right to share information and opinions on matters of common interest, including economic issues. The brief additionally argued that sharing information and opinions furthers, rather than harms, competition. Moreover, the brief said a reversal of the summary judgment would seriously undermine the valuable and sociably desirable advocacy function that associations provide for their members.

United States Court of Appeals for the Ninth Circuit brief.

Kansas City Urology Care v. Blue Cross and Blue Shield of Kansas City (Mo. Ct. App.)

Also under Arbitration, Managed care payments, and Payment issues (for physicians)

Outcome:    Very unfavorable

Issue

The issue in this case is whether insurance companies can compel arbitration of physicians' claims that the insurers violated Missouri antitrust laws by conspiring to pay reduced fees to physicians and physician groups with whom they had entered into provider agreements.

AMA interest

Although the AMA supports arbitration clauses in certain contexts, it believes that the arbitration provisions at issue in this case are inapplicable and unenforceable. Among other things, the parties did not agree to arbitrate the antitrust dispute at issue.

Case summary

The plaintiff physician groups initiated a class action lawsuit against insurance companies alleging an antitrust conspiracy for their reducing payments to the physicians on their provider panels.

The insurance companies moved to compel arbitration, based on arbitration clauses in their provider agreements with plaintiffs. The trial court found the arbitration clauses unenforceable and denied the motions to compel arbitration. It found that the requested arbitration would effectively immunize the insurance companies from the type of claims brought by plaintiffs and prevent the enforcement of plaintiffs' antitrust claims. Defendants appealed.

Litigation Center involvement

The Litigation Center along with the Missouri State Medical Association filed a motion in the Missouri Court of Appeals to submit an amicus curiae brief to support the plaintiffs. The brief argued that the arbitration clauses are unconscionable because they were created and imposed on a take-it-or-leave-it basis, and contain impermissible limitation of damages provisions. The Court of Appeals denied leave to file the amicus brief.

Little Rock Cardiology Clinic v. Baptist Health, 130 S.Ct. 3506 (2010)

591 F.3d 591 (8th Cir. 2009)

Outcome:    Very unfavorable

Issue

The issue in this case was whether a hospital and its insurance carrier had violated the Sherman Antitrust Act by entering into a contract under which a cardiology clinic and its principals would be excluded from the insurance company’s provider network.

AMA interest

The AMA opposes discrimination against physicians who have ownership interest in specialty hospitals.

Case summary

Little Rock Cardiology Clinic (LRCC), whose principals also owned an interest in the Arkansas Heart Hospital, sued Baptist Health for violating the Sherman Antitrust Act.  The plaintiffs alleged that Baptist Health had entered into a contract with Blue Cross Blue Shield of Arkansas, under which the insurance company would not allow LRCC or its principals to participate in its health care provider network.  The complaint asserted that the exclusive contract threatened to monopolize the market for cardiac care services.

The trial court dismissed the case on the pleadings, finding that the complaint failed to allege a cognizable geographic or product/service market.  Such market is a necessary predicate for a finding of monopolization.  The plaintiffs appealed to the Eighth Circuit, which affirmed.

LRCC then petitioned for certiorari in the United States Supreme Court, but the Supreme Court denied the petition.

AMA involvement

The AMA filed an amicus curiae brief to support the certiorari petition.  The brief argued that the broadly worded holding in this case, if allowed to stand, would not only allow hospitals to monopolize markets for medical services but would also lead to insurance company monopolies.

United States Supreme Court brief.

Medical Society of New Jersey v. Bakke

892 A.2d 728 (N.J. Super. Ct., App. Div. 2006)

Outcome:    Very unfavorable

Issue

The issue in this case was whether United Healthcare’s acquisition of Oxford Health Plans was anti-competitive.

AMA interest

The AMA supports healthy competition among companies in the health insurance industry.

Case summary

This lawsuit sought to undo the already consummated acquisition of Oxford Health Plans ("Oxford") by United Healthcare ("United").  United is one of the largest health insurance companies in the United States, and until the acquisition Oxford was a medium sized health insurance company doing business primarily in the New York area.  The acquisition price was just under $5 billion.  The purchase was quickly and routinely approved by the United States Department of Justice, applying federal antitrust guidelines.  The acquisition was also routinely approved by several states, other than New Jersey, in which Oxford did business.

In New Jersey, regulatory oversight for HMOs rests in part with the New Jersey Department of Banking and Insurance ("DOBI").  United therefore asked DOBI to approve the merger, too.  The Medical Society of New Jersey (“MSNJ”) objected to the merger and presented an expert witness report opposing it as being anticompetitive.  Following an evidentiary hearing, the DOBI hearing officer recommended approval, and the DOBI Commissioner then endorsed that recommendation.  On the same day the DOBI Commissioner approved it, United completed the acquisition.  Oxford no longer exists as a separate entity.

MSNJ sued DOBI and United, seeking review by the New Jersey courts of the DOBI Commissioner's order.  MSNJ premised its case on the New Jersey Insurance Holding Company Act.

United moved to dismiss the complaint.  It contended that MSNJ should have sued in the Appellate Division (which generally does not hear new evidence), rather than the Law Division of the Superior Court (i.e., the trial court) and that MSNJ lacked standing under the New Jersey Insurance Holding Company Act to challenge the approval order.

The Law Division judge, while holding that dismissal of the case would be inappropriate, ordered the case transferred to the Appellate Division.  She relied on a New Jersey procedural rule, on the constitutional doctrine of Separation of Powers, and on the apparent completeness of the evidentiary record presented to DOBI.  She acknowledged, though, that her holding would be “despite the specific language set forth in the statute.”  Accordingly, the MSNJ suit was transferred to the Appellate Division. 

MSNJ then asked the Appellate Division to overturn the decision of the Law Division judge and remand the case to the Law Division so it could present further evidence.  For its part, United asked the Appellate Division to dismiss the case for lack of standing. 

The Appellate Division held that, although MSNJ had constitutional standing to bring its lawsuit, it did not have the right to sue under the New Jersey Insurance Holding Company Act.  Consequently, it affirmed the trial court’s transfer of the case, and affirmed the DOBI order approving the merger.

AMA involvement

The AMA, in a letter to DOBI, endorsed the MSNJ concerns.

North Carolina State Board of Dental Examiners v. Federal Trade Commission (S.Ct.)

719 F.3d 359 (4th Cir. 2013)

Also under Scope of Practice

Issue

The issue in this case is whether a scope of practice decision of a state licensure board fell outside the federal antitrust laws under the “state action doctrine.”

AMA interest

The AMA believes that state medical boards should have the authority to regulate the practice of medicine.

Case summary

The North Carolina State Board of Dental Examiners (NCSBDE) was an agency of the State of North Carolina, charged with regulating the practice of dentistry in North Carolina.  Under the North Carolina Dental Practice Act, it was unlawful to practice dentistry in North Carolina without a dental license.  The Dental Practice Act further provided that a person is deemed to be practicing dentistry if that person “[r]emoves stains, accretions or deposits from the human teeth”.

Beginning in approximately 2003, non-dentists began providing teeth whitening services at mall kiosks, spas, retail stores, and salons.  Subsequently, the NCSBDE issued cease and desist letters to non-dentist teeth whitening service providers and distributors of teeth whitening products and equipment.  In addition, the NCSBDE sent letters to mall owners and operators urging them not to lease space to non-dentist teeth whitening providers.

The FTC enforcement staff brought an administrative action against the NCSBDE, claiming that the NCSBDE, through its issuance of the cease and desist letters, was violating Section 5 of the FTC Act, 15 USC §45. Section 5 of the FTC Act directs and empowers the FTC to prevent “unfair methods of competition.” The FTC found that, since a majority of the members of the NCSBDE were practicing dentists and not employees of the state, for purposes of the antitrust laws the NCSBDE should be deemed a private person, rather than part of a state government. Because the State of North Carolina did not actively supervise its actions, the NCSBDE was subject to the federal antitrust laws.

The FTC issued its own cease and desist order against the NCSBDE.  The FTC order prohibited the NCSBDE from directing non-dentists to cease and desist from providing teeth whitening services, unless the NCSBDE communications included language the FTC had pre-approved.  The FTC did not decide whether or under what circumstances teeth whitening may constitute the practice of dentistry under the North Carolina Dental Practice Act.

The NCSBDE has appealed the FTC Order to the United States Court of Appeals for the Fourth Circuit.  However, the Fourth Circuit denied the NCSBDE petition. It held that the NCSBDE cease and desist letters were unauthorized and, since a majority of the members of the NCSBDE were themselves practicing dentists and were elected by other practicing dentists, the NCSBDE should be deemed an organization of private persons. Accordingly, the state action doctrine did not apply, and NCSBDE could not restrain competition through the cease and desist letters.

NCSBDE petitioned the Fourth Circuit for rehearing, but that petition was denied.  NCSBDE has petitioned the Supreme Court for certiorari, and that petition was granted.  Oral argument is anticipated for the fall of 2014.

Litigation Center involvement

The Litigation Center filed an amicus brief in the Fourth Circuit in support of the NCSBDE.  The Litigation Center also filed an amicus brief in support of the NCSBDE petition for certiorari.  In addition, the Litigation Center, along with several other health care organizations, filed an amicus brief in support of the NCSBDE on the merits in the Supreme Court.

United States Court of Appeals for the Fourth Circuit brief

United States Supreme Court brief in support of petition for certiorari

United States Supreme Court brief in support on the merits

North Texas Specialty Physicians v. FTC, 528 F.3d 346 (5th Cir. 2008)

Outcome:    Very unfavorable

Issue
The issue in this case was whether an independent practice association’s (IPA) business should be reviewed by the Federal Trade Commission (FTC) under a full market "rule of reason" antitrust law analysis rather than a more limited, "quick look" or "inherently suspect" analysis.

AMA interest
The AMA supports a level playing field in negotiatins between physicians and insurers.

Case summary
The FTC challenged the refusal of North Texas Specialty Physicians (NTSP), an IPA of approximately 600 physicians, to participate in contracting activities with several health insurance companies. The members of NTSP, however, retained the right to decide for themselves whether they would contract independently with the insurance companies. The FTC ruled, without a complete market analysis, that NTSP’s joint contracting activities with payors would have an anticompetitive effect on the market and amounted to unlawful horizontal price fixing, in violation of Section 5 of the FTC Act. NTSP appealed to the United States Court of Appeals for the Fifth Circuit, which affirmed, finding there was substantial evidence to support the FTC .

Litigation Center involvement
The Litigation Center, together with the Texas Medical Association, filed an amicus curiae brief, arguing that NTSP had not engaged in a price-fixing scheme and that the FTC had used the wrong evidentiary standard (a "quick look" or "inherently suspect" approach, rather than a full market "rule of reason" analysis) to measure the legality of NTSP’s business activities.

United States Court of Appeals for the Fifth Circuit brief.

United States v. United Health Group, 2008 U.S. Dist. LEXIS 83599 (D.D.C. 2008)

Outcome:     Unfavorable

United Health Group, the largest or second largest health insurance company in the United States, purchased Sierra Health Systems, the largest health insurance company in Nevada.  The Nevada Insurance Commissioner approved the merger and, subject to certain conditions, so did the United States Department of Justice (“DOJ”) and the Nevada Attorney General.  However, before the merger could become final it had to be approved by a court.

Pursuant to the Tunney Act, 15 U.S.C. § 16, members of the public may file comments regarding the merger with the DOJ.  The DOJ can then respond to these comments.  The public comments and the DOJ responses are then submitted to the presiding judge and published in the Federal Register.  If, after consideration of the public comments and the DOJ responses, the court determines that the merger is in the public interest, it is to be approved.  The court can also order discovery or other forms of investigation before approving the merger.  If the court is not convinced that the merger is in the public interest, it is to disapprove the merger.

The AMA and the Nevada State Medical Association submitted Tunney Act comments critical of the merger to the DOJ on May 15, 2008.  The DOJ  responded, defending the merger as consistent with the public interest and defending its discretion to enter into an agreement with the insurance companies on such terms as it saw fit.  On September 24, 2008, the Court rejected the medical societies' arguments and approved the merger.