AHF asks FTC and DOJ to strengthen Draft 2020 Vertical Merger Guidelines. “While the Draft Guidelines are a step forward,” AHF urges the Agencies “to issue more robust and nuanced Guidelines that expressly take into account the impacts on the health of vulnerable people living with complex conditions when evaluating a potential vertical merger.”
AHF says increasing consolidation and vertical integration of the health care industry—particularly when payor (insurer), pharmacy benefits manager (PBM) and provider are all under the same corporate roof—leads to higher prices, reduced access and less choice for consumers and patients
WASHINGTON (February 26, 2020) AIDS Healthcare Foundation (AHF) is urging the United States Department of Justice (DOJ) and the Federal Trade Commission (FTC) to strengthen the 2020 Draft Vertical Merger Guidelines. The guidelines cover many industries, including health care, and offer guidance to agency officials charged with evaluating proposed mergers of two or more companies that operate at different levels in the same supply chain, such as the recent merger of pharmacy and health insurance giants CVS and Aetna–a merger that AHF strongly opposed.
In a letter sent to the DOJ and FTC earlier today, AHF points out that, “[d]espite the increasing number of vertical mergers in the healthcare industry and the risks they pose to millions of people’s health, the Guidelines are silent on the topic of healthcare and do not provide healthcare-related examples. The final Guidelines should speak to this.”
History shows that when PBMs, insurers, and pharmacy chains merge, the combined Mega Firms are rife with conflicts of interest and opportunities for self-dealing. In part because of lack of regulation and transparency in the PBM industry, these Firms can operate secretly, which allows them to take outsized profits from rebates, spread-pricing and oppressive reimbursement practices. Because they control sensitive competitive information, customers’ access to providers, and critical inputs, PBMs can foreclose markets from competing providers, pharmacies, and insurers. All this bad behavior is deadly for competition and dangerous for consumer health.
“Health is not a one-size-fits-all business and focusing solely on financial efficiencies misses the fact that different people with different health conditions need different models of care. With mega mergers, healthcare is rapidly becoming homogenized (minute clinics), fractured (narrow networks), and automated (mail order), and some consumers—especially the most vulnerable—are at risk. These consumers are essentially trapped—captured in a firm that limits their health benefits, their provider and pharmacy choices to those of the firm’s own brand,” said Laura Boudreau, Chief of Operations/Risk Management and Quality Improvement for AHF.
In its letter, AHF urges the FTC and DOJ, as the public’s antitrust guardians, to
- Publish stronger Guidelines that provide for heightened scrutiny of proposed mergers in the healthcare industry—especially in concentrated markets like the PBM and health insurance markets—and not apply any presumption that a proposed merger is procompetitive, regardless of the entities’ market share. If anything, given the stakes (human health), there should be a presumption of harm if the percent of market share is over a certain amount, such as 20%
- Encourage thorough investigation and public disclosure of the Agencies’ analyses and findings when the Agencies approve a merger
- Sanction investigation and enforcement when there is some likelihood of harm to vulnerable populations, even if the harm is not certain
- Endorse the use of behavioral remedies.
- Include healthcare-specific illustrations of the kinds of harms that result from vertical integration
- Regularly review approved mergers to assess whether unanticipated harms actually occurred, and take corrective action
AHF urges the Agencies to protect patient health and access and decrease healthcare costs by strengthening the Draft Guidelines.