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Statute or Regulation
Case
Test/Analysis

Antitrust in Health Care Markets

Prof. Liz McCuskey
September 30–October 2, 2022

DAY 1 (Sept. 30, 2022) 1

Class Background 1
Module 1: Statutes, Enforcement, and Competition Law & Policy (review) 2
Module 1 Review 2
Module 2: Applying Antitrust Law to Health Care System Markets 4
The Cost Conundrum & Economics of Health Care 4
Health Care Markets: Providers, Places, Payers, Products 4
Doctors & Antitrust – Cases 5

DAY 2 (Oct. 1, 2022) 8

Module 3: Competition in Healthcare Services 8
The Hospital Wars 8
Health Insurer Conduct: Leverage & Regulatory Defenses 11
Accountable Care Organizations 13

DAY 3 (Oct. 2, 2022) 13

Module 4: Competition in Medical Products & Health Reform 13
Health Care Consolidation & Integration 14
Drug & Device Competition (Prof. Michael Sinha) 15
Antitrust & Health Reform 18

DAY 1 (Sept. 30, 2022)

I. Class Background
A. Day 1: Health care system considerations; Doctors and Providers
B. Day 2: Hospitals; Health Insurers; Collaboration
C. Day 3: Drugs and Devices; Mergers and Integration; Health Reform
D. Final: 4-hour take home exam with two questions:
1. One new fact pattern. Then, what is the next way forward? Litigation?
2. One recycled from a question we’ve already discussed in class.

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Vocabulary word
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Statute or Regulation
Case
Test/Analysis

Module 1: Statutes, Enforcement, and Competition Law & Policy (review)

II. Module 1 Review

A. Purpose: to protect competition (not to protect competitors)
1. Any ambiguity in antitrust law will be interpreted in a way that promotes
competition (not any individual claimant)
2. Why? Consumer welfare principle: environments where firms compete for
the business of consumers benefits the consumer.
a) Consumer benefits: variety/choice, price, quality, innovation
b) Innovation: multiple definitions in academics and regulation; can
mean something different but can also mean something different
and better.
B. Statutes
1. Federal: haven’t changed much in the past 100 years
2. State laws

Law Purpose Criminal Who can Consequences

Penalties? bring suit?

Sherman Act § 1 Bans anti-competitive agreements Can lead to DOJ Private claims
between actors, including: both criminal Private Actors Treble damages
virtually any (1) Horizontal price-fixing consequence Attorney’s fees
concerted action s and
(direct/potential competitors at same
among two or injunctive
more level of market agree on prices to relief
Separate actors charge customers or pay suppliers);
with actual (2) Vertical price-fixing (firms at
or threatened anti- different levels of market–e.g.,
competitive manufacturer
impact. + one of its distributors) fix prices at
one or more market levels);
Specifically,
concerted restraints (3) Horizontal allocations of markets,
that “unreasonably customers or output among actual or
restrictive of potential competitors;
competitive (4) Vertical territorial, customer, or
conditions”. More other non-price restraints b/w firms
than merely parallel at different levels;
behavior.
(5) Competitively motivated group
boycotts & concerted refusals to deal;
(6) Tying agreements, (availability of
product/service is conditioned upon
purchasing
or leasing another product/service);
(7) Exclusive dealing agreements

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Vocabulary word
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Statute or Regulation
Case
Test/Analysis

Sherman Act § 2 Bans unilateral conduct that Can lead to DOJ Private claims
monopolizes or intends to both criminal Private Actors Treble damages
monopolize consequence Attorney’s fees
s and
injunctive
relief

FTC Bans “unfair” methods of competition No FTC only Cease and

Act § 5 and “deceptive” practices desist order
(part of Sherman
Act § 2) Unfair: causes or is likely to cause
substantial injury to consumers which
is not reasonably avoidable by
consumers themselves and not
outweighed by countervailing benefits
to consumers or competition.

Clayton Act More specific than Sherman §§ 1–2 No DOJ

Private actors
Governs:
§ 2: price discrimination
§ 3: commodities sales with
noncompete agreements
§§ 7–8: mergers and interlocking
directorates

C. Standard of Review:
1. Per se (will always have anticompetitive effects); applies to a list of
conduct that experience has demonstrated has an exceedingly high
probability of being anticompetitive.
a) Price fixing: Direct competitors agreeing on (usually) a minimum
price–that is, agreeing not to compete. Statute requires actual
agreement but often requires circumstantial evidence. Generally
applies to horizontal competitors (but BCBS-MI brought vertical
price fixing into question)
b) Market allocation: Instead of agreeing on price, direct competitors
allocate regions/populations
(1) E.g., realtors who don’t agree to a minimum price but do
agree not to sell on each other’s turf.
c) Refusal to deal
2. Rule of Reason (requires more evidence); applies to conduct not yet
conclusively proven to be anticompetitive in all circumstances.
a) Tying: requiring horizontal competitor to buy additional material or
services; if it takes some talking to outline the situation, this
indicates it might be a rule of reason standard!

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Case
Test/Analysis

(1) E.g., a car (which is in itself an end unit) sold with satellite
radio that the consumer is also required to purchase a
subscription for.
(2) Also: large antitrust Microsoft case in the 1990s regarding
selling computers which only ran the Microsoft operating
system and only used MIcrosoft software.
b) Exclusive Dealing
c) All others
d) Also: “quick look” ROR, which we’re ignoring for this class.

Module 2: Applying Antitrust Law to Health Care System Markets

III. The Cost Conundrum & Economics of Health Care

A. How do antitrust issues contribute to the cost of healthcare in the U.S.?
1. E.g., hospital selection in emergency situations: consumers value quality
of care, proximity of care, but also insurance company coverage
2. Cost = price * volume
a) Dictated by insurance and reimbursement, competition,
innovation, specialization, consolidation
b) Anything that influences price or volume will influence cost.

IV. Health Care Markets: Providers, Places, Payers, Products

A. Providers: blanket term for all actors who deliver healthcare; includes individuals
(nurses, doctors, etc.) as well as institutions (i.e., hospitals)
B. Places: facilities of healthcare (EDs, urgent care, specialty clinics)
C. Payers (aka payors): insurers
D. Products: technology, machines, medical devices, pharmaceuticals, services
E. How do we measure “competition”? → begins the question of how to define the
“market”
1. Information asymmetry: when one side of the transaction has all the
information. In healthcare, the end consumer rarely has all the tools or
information necessary to make an “economically rational” choice.
2. Opacity: lack of transparency; such as unclear or surprise billing
3. Learned intermediaries: help consumers to understand complex
transactions; possibly, in healthcare, physicians.
F. Why do we regulate health care through an economic model?
1. It’s a market with consumers, major source of jobs and industry with
massive financial effects

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Test/Analysis

2. Inelastic demand: Someone will always need healthcare and someone

will always pay for it. Necessary interventions, emergency care.
3. Economic models can illustrate consequences of healthcare access,
volume, cost, pricing.
G. Market Considerations
1. Commercial Insurers
a) Competitors: BCBS, Aetna, United Healthcare, Cigna
(1) Often, Americans don’t choose their insurer because they
get it through their employer (who selects the plan) or the
government.
b) Products: different service plan/coverage offerings
(1) Providers offered
(2) Level of risk
(3) Cost for employers, cost for patient: premiums,
deductibles, co-pays, out-of-pocket caps, tiering →
costs are a “crapshoot”
2. Healthcare triangle:
a) Patient
(1) Pays premium to insurer
(2) Pays provider a copay for cost of care
b) Provider
(1) Provides care to patient
(2) Provides access for insurer’s clients (through a K)
c) Insurer (third party payor)
(1) Provides insurance policy to patient (risk, extra costs)
(2) Pays remainder of costs to provider
d) Additional Players
(1) Patient’s employer, who select insurance plans

V. Doctors & Antitrust – Cases

A. Case analysis
1. Facts: Identify:
a) Conduct: what is the activity? There must be an act. (N.B. The
existence of trade organizations are not violative, what they
do can be violative of antitrust.)
b) Actors (groups or individuals acting unilaterally?)
c) Market (who controls it? What share is monopolized?)
2. Issue: does the action in question violate antitrust laws? (that is,
does it decrease competition?) What type of violation of antitrust

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Vocabulary word
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Statute or Regulation
Case
Test/Analysis

laws does the action appear to be? (Monopoly, predatory pricing,

discount bundling, tying, etc.)
3. Rule: Apply Sherman § 1, Sherman § 2, FTC Act § 5, or Clayton Act
4. Analysis:
a) Which standard of review (per se or ROR)?
b) If ROR, can D advance an excuse that the action promotes
competition?
c) If yes,
(1) Is excuse narrowly tailored/the least-restrictive way of
achieving the alleged goal? → probably not violative of
antitrust
(2) Or, is there a less-damaging alternative? → likely violative
B. Goldfarb v. Bar Assoc. (1975)
1. Importance: Application of antitrust laws to the “learned
professions” (here, lawyers).
2. After this, cases concerning engineers, dentists, etc.
3. Having a professional organization does not exempt learned professions
from antitrust laws.
C. Arizona v. Maricopa Co. Medical Society (1982)
1. Facts: Society consisting of 70% of the physicians in the county agreed to
set prices at a certain level (a fee schedule), which its members would not
charge prices above. Insurance companies agreed to pay the prices at
this level.
2. Issue: Is this price fixing? Are price-fixed maximums a per se violation?
3. Rule: Sherman Act § 1 - group of competitors cannot agree to set prices.
4. Application: It’s price fixing. Even though price fixing is per se violative,
the court reviewed because it concerned maximums. The court holds that
in cases of horizontal price fixing, per se rule applies to maximum and
minimum prices, whereas in vertical price fixing cases, per se only
applies to minimum prices. The difference is the harm of reduced
competition on direct competitors: if everyone at this level of care doesn’t
charge more than X, that reduces competition and can hurt availability,
innovation, and other competition-based incentives.
D. Wilk v. American Medical Association (AMA) (1983)
1. Facts: Chiropractors sued, claiming medical doctors had created a
monopoly by preventing referrals and therefore their patient pools had
dried up.
2. Issue: Is the AMA discouraging referrals to chiropractors, set out in an
anti-chiropractic policy, a violation of antitrust laws? The policy called
chiropractic practice a “cult”.

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Statute or Regulation
Case
Test/Analysis

3. Rule: Sherman Act § 1

a) Standard: Rule of Reason
b) Groups of professionals cannot get together and agree to block
others out of the market. However, there must be evidence of
intent.
4. Application: it sounds like a group boycott by doctors of chiropractors as
affiliated medical professionals.
a) But receiving ROR opens the door for AMA to advance a pro-
competitive argument, and they argue (unsuccessfully) that they
have relied upon their licensing and expertise to decide not to trust
chiropractic care in order to protect patients “from quackery”.
b) Court does not accept justification because there are
alternatives that are less-damaging to competition.
E. FTC v. Indiana Federation of Dentists (IFD) (1986)
1. Facts: Dental ins. co. adopted policy of reviewing dental x-rays and
records, in order to pay benefits on the “least costly, but adequate”
treatments. Indiana Dental Ass’n (IDA) consisted of 85% of dentists in this
area and urged its members to not submit x-rays. Fearing antitrust
penalties, it withdrew its effort. 100 dentists formed IFD and required
members to not submit x-rays.
2. Issue: Does the formation of the IFD violate antitrust laws?
3. Analysis: Court applied ROR analysis. IFD is a professional ass’n, which
in and of itself doesn’t necessarily implicate antitrust. However, the act of
attempting to monopolize vertically does. “Quality of care” argument will
fail antitrust analysis if claimant cannot prove it’s the least competition-
restricting option.
F. Koefoot v. Am. College of Surgeons (1987)
1. Facts: rural independent provider challenged the boycott-like policy of the
ACS preventing surgeons from referring to non-surgeons for post-
operative care.
2. Issue: Is this violative of antitrust? Market allocation? Tying?
3. Analysis: This conduct triggers antitrust analysis: policy ties surgical care
to surgical post-op, which bars rural providers from participating/receiving
referrals (which could be a form of market allocation).
a) Does the ACS have a pro-competitive argument? Better, expert
care for patients.
b) Is this argument the solution least-damaging to competition? No.
This ties patients to unnecessarily expensive care.
G. Sugarbaker v. SSM Health (1999)

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Vocabulary word
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Statute or Regulation
Case
Test/Analysis

1. Facts: A hospital terminated the privileges of a surgeon (Dr. Sugarbaker)

on the basis malpractice or incompetence, but this must be submitted to
the licensing board. Sugarbaker claims conspiracy; all the other doctors
banded together to take revenge because he wouldn’t join their Jeff City
practice.
2. Issue: Does multiple other direct competitors making an
agreement/enforceable decision to exclude their market violate Sherman
Act § 1?
3. Analysis: Yes, if the facts are what Sugarbaker represented. Harm to
competition: can exclude any doctors that don’t play along/charge less
money/etc. Quality justification can beat an anti-competition charge when
proved. Sugarbaker was bad at his job and he refused to learn - he’s a
bad doctor! Hospital board MUST be able to terminate his privileges
because he is a liability.

DAY 2 (Oct. 1, 2022)

Module 3: Competition in Healthcare Services

I. The Hospital Wars

A. Market for Hospital Services
1. Hospitals differ by:
a) Internal services: Primary Care, Emergency Care, Specialty Care
b) Services offerred: specialty hospitals, research hospitals, full
service hospitals
c) Consumers: Main source of hospital reimbursement is through 3d
party payer (i.e., insurance companies)
2. Horizontal competition ⇒ other hospitals of a similar size in a similar area
with similar product
3. Vertical competition ⇒ what feeds into and out of the hospital; clinics with
referring providers, etc.
B. Return to the Healthcare Triangle
1. Hospitals are also providers who bargain with insurers for rates.
a) Bargaining power through: volume of patients, array of services
offered (e.g. variety of specialties), quality of hospital
b) Main cash flow in comes from insurers (insurance
reimbursement)
(1) Biggest share : Medicare (65+)
(2) Lowest rates : Medicaid, then Medicare

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Case
Test/Analysis

(3) Highest rates : Private insurance

C. UPMC v. Highmark (Not a case but discussed like one; Wash. Post article)
1. Key question: Why should a hospital (UPMC) have to negotiate for rates
with insurance companies if it can just create its own insurance program?
Alternately (Highmark), what should stop an insurance company from
obtaining its own hospital?
2. Issue 1: Does (vertically) expanding into a different market in order to
acquire more control over the consumer pipeline constitute illegal attempt
at monopolizaiton?
3. Rule 1: Section § 2 - attempted monopolization, illegal creation of
monopolization, and illegal use of validly acquired monopoly.
4. Issue 2: Does Highmark, by not opening its own hospital but rather
merging with a struggling hospital, still violate anti-monopoly laws?
5. Rule 2(a): Sherman § 1 - two party merger/Ks with intent to consolidate
and decrease market competition.
6. Rule 2(b): Clayton Act - merger regulations
D. ProMedica v. FTC (2014)
1. Facts: Government action challenging a merger of one large hospital with
a smaller, struggling one under Clayton Act § 7; using market definition to
decide which transactions should be stopped. Key ideas: conduct, law,
markets, and competitive effects. Also used the failing facility excuse: “St.
Luke’s going bankrupt anyway, so we’ll still be the only hospital left!”
2. Issue: Did the merger create a geographic market share that violates
antitrust laws?
3. Rule: Clayton Act § 7 prohibits mergers “where in any line of commerce ...
the effect of such acquisition may be substantially to lessen competition,
or to tend to create a monopoly.”
4. Analysis: Court says holds it’s violative.
a) Market definition by geography.
(1) ProMedica wanted the broadest view of market, because
the bigger the market is the smaller each individual player
is.
(2) FTC wanted a more restricted definition of the market, to
illustrate how ProMedica is truly the only fish in the pond.
b) Market definition by services offered.
(1) What services are being offered?
(a) Primary services: necessary, immediate.
(b) Secondary services: usually more complicated,
basic surgery and surgery tools

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Case
Test/Analysis

(c) Tertiary services: complex specialty care that

requires highly-specialized tools and equipment;
brain surgery, burn unit
(d) Quarternary services: rare and highly specialized;
organ transplant
(2) ProMedica wants to consider all these options, because
that gives the horizontal market the widest definition
(basically every hospital)
(3) FTC argued no, these two hospitals, while competing for
multiple different service markets, were primarily
competing for primary and secondary service markets.
Additionally, there is another market (OB) that this merger
would reduce by 50%.
c) The failing facility excuse doesn’t work when the larger hospital
has functionally starved the smaller hospital to the point of
desperation.
(1) Court used the HHI index to define access as part of the
geographic market.
(2) Market share basic analysis:
(a) Define the relevant service market
(i) Services:
(a) For hospitals, all four levels of
care
(b) ALSO: submarkets treated
differently, such as OB
(ii) Geography
(a) Where will the merger have direct
and immediate impact?
(b) Describe services offered across this market
and players involved
(c) Describe how the market would change:
(i) Would market share consolidate?
(ii) Would competition decrease? (50/50
should be resolved against the merger)
5. Result: FTC dequired ProMedica to unwind from St. Luke’s because it
would otherwise have an 85% share of the market.
E. FTC v. Advocate Health (2016)
1. Facts: Two hospitals wanted to merge, which would possibly reduce
acute care (primary and secondary) services market.
2. Issue: Would this merger raise prices above competitive values?

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Case
Test/Analysis

3. Rule: Clayton § 7; hypothetical monopolist test: would a single firm

4. controlling all output of a product within a given region would be able to
raise prices profitably a bit above competitive levels?
5. Analysis: Where will the merger have direct and immediate impact?
a) Court had to decide how to draw the geographic market.
Considered patient driving and transportation forces;
b) If the only hospitals in the area were in agreement to accept the
same insurance, that would remove competition and insurance
companies would have to comply with the hospitals’ demands.
F. Disucssion quesiton: Could an academic medical center in either market
(ProMedica or Advocate Health) bring its own antitrust suit challenging the
proposed merger? Yes, through private enforcement where available.

II. Health Insurer Conduct: Leverage & Regulatory Defenses

A. U.S. v. BlueCross BlueShield Michigan (2011)
1. Facts: BCBS-MI has market share of 70%. BCBS-MI has “most favored
nation” (MFN) clauses - that is, most favored pricing, special deals. The
BCBS-MI MFN clauses with hospitals require those hospitals to bill other
insurances more than they bill BCBS-MI (for large hospitals) or at least as
much (for smaller/rural hospitals).
2. Issue: is MFN clause illegal when imposed by an entity with large market
share? Are these contracts reducing competition? Is this price fixing?
3. Rule: Sherman Act § 1: more than one entity agreeing to offer something;
contracts → look to Sherman Act § 1!
4. Rule 2: price fixing occurs when actors are horizontal competitors
(generally).
5. Analysis:
a) Define the market: geographically, the state (employers are the
consumers to purchasing private insurance, and BCBS-MI has a
70% market share across the state); products/services,
commercial insurance services
b) Effect on competition: large market share (~70%) = market
power; forced increase of insurance rates in other insurance
companies; force higher rates for BCBS-MI,
c) Anti-competitive effects: Does this activity increase the cost of
doing business for competitors in this market?
d) Defenses: BCBS-MI argued regulatory defense. State action
immunity: if conduct is required of you by the government by
policy OR heavily supervised by the government, then a

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Statute or Regulation
Case
Test/Analysis

healthcare entity is immune from antitrust claims. Here, neither of

these claims are true for BCBS-MI: just because you’re regulated
at all does not mean you’re regulated in this way.
B. Ocean State Plan v. BCBS-RI (1989)
1. Facts: New insurer Ocean State wanted young healthy people (costs are
lower, prices more predictable). BCBS-RI was not pleased to be “left” with
more expensive, older patients. Ocean State benefitted from adverse
selection, where young healthy people opt out and older/sicker people opt
in. BSBC-RI did three things:
a) HealthMate: Ocean State lookalike, marketed to Ocean State
employer purchases
b) Adverse Selection: pricing that was cheapest for just BCBS and
highest for not including HealthMate
c) Prudent Buyer: BCBS refused to pay providers more than they
were accepting from other insurance companies (i.e. Ocean
State), and implemented a 20% penalty for those that refused to
certify the agreement (leading to a 25% reduction in Ocean State
physicians)
2. Rule 1: The McCarran–-Ferguson Act exempts from (provides
immunity to) the antitrust laws all conduct that is (1) part of the
“business of insurance”; (2) “regulated by State law”; and (3) not in
the form of “boycott, coercion, or intimidation.”
3. Rule 2: Sherman Act § 2 applies with no McCarran–Ferguson immunity
4. Analysis:
a) McCarran-Ferguson immunity defense granted for the first two
elements: HealthMate and Adverse Selection
b) No immunity for Prudent Buyer. BCBS-RI execs “hoped Prudent
Buyer program would crush” Ocean State. This is an element but
not the only one. Sherman Act § 2 applied.

III. Accountable Care Organizations

A. Are there better ways to add incentives and coordinate delivery and payment of
care without anti-competitive/antitrust effects?
B. ACOs are a “patch” to fix century-old antitrust laws in their application to clinical
integration. ACOs (which came out of the ACA) look at:
1. Coordination of care
2. Quality and cost reporting
3. Legal structure
4. Management structure

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Statute or Regulation
Case
Test/Analysis

C. ACOs ask: can we get better quality care and lower costs if doctors can
cooperate more (e.g. reduce siloing, promote data sharing for patient
benefit)? Incentives to promote coordinated care and lower costs; rewards for
those successes (Doctors keep the difference between reimbursements and
costs saved). (Quality-based payment)
D. Antitrust Treatment:
1. Elements:
a) Combination of independent providers =/= merger (so Clayton Act
not invoked)
b) Medicare & Commercial insurance
c) ROR if financial/clinical integration + agreement needed for
benefits
2. Safety Zones
a) ACA MSSP Criteria
b) 30% or less in each segment market (with rural exception)
c) Non-exclusive participation
3. Danger zones?

DAY 3 (Oct. 2, 2022)

Module 4: Competition in Medical Products & Health Reform

Final exam notes:

- Can use the Word template on the course page
- Feel free to cut and paste rules and headings from any case! (no need to
Bluebook cite or cite to the UCC)
- Please use subject headings and subheadings! I.e.:
- Sherman Act § 1
- Type of Conduct: Contract, Combination, Conspiracy/Agreement
(that harms competition)
- Effects on competition/harm to competition
- Description (claims and defenses)
- Per se or Rule of Reason
- Analysis
- Possible Penalties
- Description
- Likely Outcome
- Sherman Act § 2

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Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

- Conduct: Monopolies (creation, abuse of legal monopoly)

- Remember: it’s about issue spotting, implications, and likely outcomes (not just
the absolute outcome; discuss possible alternatives). Greatest number of points
are in the analysis, not the conclusion.

I. Health Care Consolidation & Integration

A. Consolidation: negative connotation. Purpose: to decrease competition
1. Lead to anti competitive outcomes (But are not inherently bad)
2. If payers and hospitals consolidate (integrate the money and the care),
patients are left with barely any market power (imbalance triangle).
3. Benefits & Detriments of Consolidation
a) Larger the firm and smaller the market, the greater the
consolidation of market power
b) Benefits: creates opportunities for co-location and increased access to
specialty services; keep system secrets close; data sharing, economy of
scale (administration, building) → intra-agency conspiracy: you can’t
“conspire” with yourself.
c) Detriments: concentration of market, price increases without
corresponding care quality increase
B. Integration: good connotation; working together with overlapping and efficient
functions to improve care. ACOs. Purpose: better coordination of care
1. Can be a contract between a large and small entity to share patients/data
etc. but they retain their independent decisionmaking power.
2. It sounds like price fixing but isn’t under the regulations from the
FTC. Purpose: better coordination of care.
3. Types: Clinical, Business
4. Benefits & Detriments of Consolidation
a) Benefits: data sharing, efficiency, less likely to break antitrust rules
because entities maintain separate control. Still promotes
diiversity of services and
b) Detriments: who leads it? If it’s led by insurance companies, their
main incentive is to save money (more likely to deny care, esp.
Specialty care). If led by hospitals, they are more likely to want to
provide care and increase reimbursements (more likely to cost
more).
C. Hearing on Aetna-CVS Merger
1. Vertical integration: merger of actors in different levels of
competition (insurance–payment and pharmacy–
treatment).

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Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

2. Agreeing to fix prices = per se (use direct evidence [texts,

emails] or substantial evidence [where, how, when they might
have met ⇒ MORE THAN just lockstep pricing])
3. Pharmacy-benefit managers (PBMs): possibly a fourth
element of the healthcare triangle.
a) Implicates consequences and incentives for vertical
consolidation.

II. Drug & Device Competition (Prof. Michael Sinha)

A. Price Fixing: artificial setting or maintenance of prices at a certain level, contrary
to the workings of the free market; an agreement between producers and sellers
of a product to set prices at a high level.
1. Insulin example: patent sold by developing physician for $1 to U. Toronto.
“Insulin belongs to the world.”
a) BUT the patent was for human insulin. Main insulin consumption
today is analog insulins, which are priced way higher.
b) Insulin prices for consumers have increased 700% in 20 years.
Humalog and Novolog have increased in exact lock step for 20
years.
2. Racketeer Influenced and Corrupt Organizations Act (RICO Act)
a) Definition of racketeering typically thought of as organized
crime/crime syndicates
b) RICO broadened that definition, includes 35 enumerated forms of
racketeering
c) Current case alleges an “organized scheme” between the 3
largest insulin manufacturers (Novo Nordisk, Sanoi, Eli LIlly) and 3
largest pharmacy benefit managers (ExpressScripts, CVS Health,
and OptumRx)
(1) List prices differ from the “lower, real price manufacturers
offer to certain bulk distributors”
(2) Increased list prices → increased costs for consumers (esp.
When paying copays not coinsurance)
(3) Motion to dismiss granted for P lack of standing! Plaintiffs
were not direct competitors nor did they bring a Sherman
Claim
3. Generics Price Fixing Case
a) Involves nearly all states, against numerous generic pharmacy
companies

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Case
Test/Analysis

b) “Horizontal conspiracy to allocate markets and fix prices for

multiple generic drugs”
(1) Market allocation
(2) Price fixing
(3) Conspiracy
(4) “Playing nice in the sandbox”
c) Multiple rounds of motions to dismiss have been denied.
“Overarching conspiracy” to fix prices has been allowed to
proceed. Some companies have started settling.
B. Patent Thickets
1. Patents on certain parts of devices (i.e. insulin pen) that can still
concentrate market exclusivity outside of drug patent, which companies
buy up to get larger market share.
2. Ex.: Humira , #1 grossing drug in the world, has 110 patents on
formulation, methods of mfting, treatment methods, and other related
tech. Even though the patent on the drug expired in 2016, AbbView still
controls the market (“product lifecycle management strategy” led to minor
formulation change and new delivery device, both under new patents and
pushed hard by AbbVie as “superior”)
C. Pay-for-Delay Settlements
1. Pay-for-Delay: payment made by prescription-drug manufacturer to a
generic drug manufacturer for agreeing not to market the generic drug.
2. Settlement: efficient means of settling patent infringement litigation. In lieu
of deciding case on merits, instead the brand and generic manufacturer
agree to a date of generic entry, licensing of patents, royalties, etc.
3. 180-day Generic Exclusivity. As incentive to invalidate patents, first
generic manufacturer to challenge brand manufacturer’s patents as
invalid obtains 180 day “duopoly” (prices remain stable during the first
180 days after beginning to market the generic before others can also join
market)
4. FTC v. Actavis (2013)
a) Pay-for-delay settlement wherein the generic company did not
start marketing, therefore did not trigger the 180 day countdown to
open it up for other companies, because Actavis paid them not to.
FTC prevailed on Sherman Act § 2 claim.
b) After FTC v. Actavis, pay-for-delay settlements decreased. Now,
the form and direction of pay is trickier to get around the Actavis
decision. If it’s not cash, is it a payment? Exclusive licensing,
etc.

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 KEY:
Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

5. FTC has said “pay-for-delay” is “obsolete”. Congress has been trying to

pass Protecting Consumer Access to Generic Drugs Act since 2019
a) Creates framework of illegality when generic receives anything of
value and then delays R&D, manufacturing, marketing, sales, etc.
b) Two amendments:
(1) Generic entry before end of patent term is not
automatically procompetitive. (trying to prevent
undermining Actavis decision)
(2) ??? slides went too fast!
D. Exclusive Dealing & Bundling
1. Exclusive dealing: arrangement agreements requiring a buyer to
purchase all needed goods or services form one seller or manufacturer.
2. Remicade/J&J example
a) J&J developed a “Biosimilar Readiness Plan” to thwart biosimilars
like Inflectra. Plan gave a discount to accounts using Remicade if
they used J&J-approved processes. 90% of remicade users never
used alternative
b) Inflectra never gained more than 4% of market share
3. Bundling: discounts a manufacturer offers to purchasers buying several
products in its portfolio and can result in prices competitors struggle to
match.
4. Restasis example
a) Biosimilar couldn’t even offer its product for free because the
discount for restasis to Medicare Part D was so extreme.
b) Restasis still controls the market
5. Are these automatically violative of antitrust? Not necessarily. Warrant
greater scrutiny if it produces monopoly or monopoly-type effects.
6. Product-hopping: creating spinoffs of a drug; mechanism by which
manufacturers attempt to extend market exclusivity for lucrative drugs for
which market exclusivity is set to expire.
a) E.g., Humira; changing devices (Advair went from disk to inhaler);
timeline (from daily to thrice weekly); shape (capsule to tablet to
scored tablet).
b) Solutions: allow FDA to more closely scrutinize NDAs
E. FDA Citizen Petitions
1. Any person or company can ask the FDA to take a specific action.
2. Most common is brand name petitioning against pending generic
applicants.

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 KEY:
Vocabulary word
Professor callout
Statute or Regulation
Case
Test/Analysis

III. Antitrust & Health Reform

A. ACA Impacts on Antitrust
1. Formal incentives to integrate (i.e. ACOs) - increasing quality and
decreasing cost through nudges.
2. Exchanges require that insurance companies treat each patient as part of
a giant, single risk pool.
a) Incentives: paid by the government for people who can’t afford
your insurance PLUS more people in your customer base
b) Requirements: offer specific services
c) No requirement to sell policies on the exchange, for those
companies that can’t create a good model or who don’t want to
treat patients as part of a single risk pool.
B. Should future reforms address antitrust issues in health care markets?
1. Yes!
a) Protect patient ability to predict costs
b) Prevent creative ways to hog the market (Prof. Sinha’s talk)
c) Covid lessons: require a look at the long-term consequences of possible
mergers; enforcement, data gathering, task forces; price gouging;
increased public stockpile of PPE; more caselaw to interpret statutes OR
clarify statutes and guidance to make the economic guidance extremely
clear → can we change the incentives to make litigation easier for
plaintiffs?
2. The health care market we have today is due to choices. Our stockholder
controlled market is a choice. Our nonprofit hospital model (that still
makes a ton of money) is a choice.

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