From hospital and health insurance mergers to pay-for-delay agreements, the US healthcare industry is undergoing a rapid-fire transformation.
From analyzing the impact of key court decisions,
covering mergers as they go to trial, to proprietary intelligence on the biggest deals, From hospital and health insurance mergers to pay-for-delay agreements, the US
healthcare industry is undergoing a rapid-fire transformation. PaRR is the best guide
to understanding the risks and opportunities as companies and their counsel navigate
this ever-changing landscape. From analyzing the impact of key court decisions,
covering mergers as they to go trial, to proprietary intelligence on the biggest deals, PaRR is an indispensable tool for attorneys to stay one step ahead of the competition.
2. Table of
Contents:
4 Hospital Merger Challenges
• Penn State-Hershey/Pinnacle hearing: Judge shows impatience with FTC’s argumentative tactics
• April 18 - NorthShore/Adovocate hearing: Merger would reduce costs - insurance exec
• May 23 - Regional hospital victory over FTC has thin read-through to manage care deals - analysis
• May 9 - US judge greenlights Penn State-Hershey/Pinnacle merger
15 Health Insurance Mergers
• February 26 - Humana/Aetna: DoJ clearance not tied to state reviews - independent attorneys
• May 10 - Emboldened DoJ may take holistic view on managed care deals – analysis
• May 13 - DoJ official raises doubts about health insurance mergers -Antitrust in Healthcare conference
• June 8th - Cigna/Anthem facing national ASO question
• June 27th - Cigna/Anthem, Humana/Aetna tied to same July fate, source says
• June 28th - Humana/Aetna waiting on Georgia, Texas, New York
29 Drug pricing, Pay for delay, and Pharma
• US drug prices face long-term risks
• April 1 - FTC bolsters pay-for-delay suit before commissioner departs
3. From analyzing the impact of key court decisions,
covering mergers as they to go trial, to proprietary
intelligence on the biggest deals, PaRR is an
indispensable tool for attorneys to stay one step
ahead of the competition.
PaRR: Healthcare Coverage
From hospital and health insurance mergers to pay-for-delay agreements, the US
healthcare industry is undergoing a rapid-fire transformation. PaRR is the best guide
to understanding the risks and opportunities as companies and their counsel navigate
this ever-changing landscape. From analyzing the impact of key court decisions,
covering mergers as they to go trial, to proprietary intelligence on the biggest deals,
PaRR is an indispensable tool for attorneys to stay one step ahead of the competition.
Healthcare is just one of the many sectors and industries we cover globally. All things
antitrust and M&A has been our specialty since 2012.
With journalists in the courtroom, we cover important litigation from start to finish,
as well as breaking news. Our analysts generate statistic-based articles assessing
trends in enforcement, merger review and criminal and civil fines. We consistently
provide forward-looking analysis from a global perspective that brings clarity to
uncertain situations.
Connect for more information and a complimentary trial by contacting Sean Lanzner
at sean.lanzner@parr-global.com or 1.646.412.5322.
4. Hospital Merger
Challenges:
Penn State-Hershey/Pinnacle hearing: Judge shows
impatience with FTC’s argumentative tactics
PaRR Confirmed
· Hershey and Pinnacle execs tell their side of the story on their first day of testimony
· Both organizations ‘outflanked strategically by the competition’ - Cain Brothers report
· Systems prepared to consolidate ‘as soon as we get a positive decision’ - Hershey COO
The US district judge hearing the Federal Trade Commission’s (FTC) action challenging a
proposed Pennsylvania hospital merger told FTC lawyers on 13 April that the tactics they
were using to impeach defense witness were not helping him understand the case.
The proposed merger partners, Penn State-Hershey Medical Center and Pinnacle Health
System, opened their case on 13 April, with live testimony from Hershey CEO Craig
Hillemeier, Pinnacle CFO William Pugh,and Hershey COO Robin Wittgenstein. In their
testimony, each of the executives explained to the court their rationales for and roles
in helping to bring the consolidation about.
Pugh, whose answers on cross-examination questioning by FTC staff attorney Ryan
Harsch were consistent with his replies during his direct questioning, was challenged
by Harsch over a detail relating to an earlier statement in the record that he had made.
When Pugh replied that he was not sure about the detail, Harsch offered to provide it
for Pugh and the court from the record.
US District Judge John Jones said to Harsch: “I really do not think this is helping me,
so let us move on.”
The FTC and the Commonwealth of Pennsylvania have asked Jones temporarily to enjoin
the announced merger. This would keep Hershey and Pinnacle in their premerger status,
pending the conclusion of a full administrative review of the transaction by the FTC
scheduled to begin on 17 May.
4
5. The executives for the two health systems described a process that had been under
consideration for several years before it began to become a reality - from the points of
view of medical services, administration and economics. In essence, both the academic
and research-oriented Hershey and the primary care-focused Pinnacle have felt pressure
in what they describe as a changing environment for delivering health-care services.
Wittgenstein told the court that the effort thus far to consolidate the two systems represents
“a very significant commitment on the part of both organizations.” She added: “We are
prepared to get started on the work as soon as we get a positive decision.”
Exhibits from a study prepared by Cain Brothers, an investment bank which focuses on
healthcare, was shown during Pugh’s testimony. In that exhibit, Hershey and Pinnacle’s
“perceived organizational weaknesses” are identified: “Both organizations are being
outflanked strategically by the competition.”
Hershey, which is the medical school for Pennsylvania State University and emphasizes
specialist medical practices and research, has felt competitive pressure from its academic
medical system peers. Pinnacle, which operates a general practice-oriented medical
system, has felt the heat as many formerly independent hospitals in the region have been
acquired by or become affiliated with larger regional and national players.
Another critical impetus for finding new ways to deliver - and to get reimbursed for -
medical services arises from the climate change created by the Affordable Care Act,
including diminishing Medicare payments. Such reimbursements historically have been
vitally important to health-care providers.
However, Wittgenstein was challenged in cross-examination by Jared Nagley, an FTC
staff attorney who questioned the wording of an email she received from a subordinate.
That message relates to a study being prepared by PriceWaterhouseCoopers and documents
they were preparing “that will form the backbone of the FTC narrative” - in other words,
how to present the deal to regulators.
“We wanted to make sure we were putting together our story of what we were doing,
how we were doing it,and why we were doing it,” Wittgenstein told the court.
Testimony is schedule to resume at 9am on Thursday 14 April.
5
6. PinnacleHealth System and Penn State are represented by Jones Day and McNees
Wallace & Nurick.
The case is Federal Trade Commission et al. v. Penn State Hershey Medical Center and
PinnacleHealth System, no. 15cv2362, in the US District Court for the Middle District of
Pennsylvania (Harrisburg).
by Peter Geier in Harrisburg
• Companies
• Cain Brothers
• PinnacleHealth Hospitals Jones Day (Lawyer) Mcnees, Wallace & Nurick Llc (Lawyer)
• Penn State Milton S. Hershey Medical Center Jones Day (Lawyer) Mcnees, Wallace & Nurick Llc (Lawyer)
• PricewaterhouseCoopers (Corporate Value Consulting)
• Pennsylvania State University
• Agencies
• US Federal Trade Commission (FTC)
• CASE Files
• US Federal Government investigation into Penn State Hershey Medical Center’s proposed merger
with PinnacleHealth System (2015)
6
7. April 18 - NorthShore/Adovocate hearing:
Merger would reduce costs - insurance exec
PaRR Confirmed
· UnitedHealth supports merger but has no specific info about integration
· Findings of fact and conclusions of law expected to be due 10 May
UnitedHealth Group (NYSE: UNH) supports the merger of health systems Advocate and
NorthShorebecause the deal would lower the total cost of care, an executive for the
insurance company said today (18 April) in federal district court.
The company’s members would be harmed if the transaction is blocked, added Joanne
Beck, vice president ofnetwork management at UnitedHealth.
Beck testified during the sixth day of the preliminary injunction hearing in the US District
Court for the Northern District of Illinois. Judge Jorge Alonso is presiding over the case
and will decide whether to grant the Federal Trade Commission (FTC) an injunction to stop
the deal.
Although United supports the merger, Beck acknowledged that she had no specific
information about the integration plans of Advocate and NorthShore.
Further, NorthShore would be independently capable of pursuing population health
management and quality improvement initiatives, and thus combining with Advocate
would not be necessary, she said.
In December, the FTC challenged the merger between Advocate and NorthShore on
the basis that the two health systems are the leading providers of general acute care
(GAC) inpatient hospital services in the North Shore area of Chicagoland. Consummation
of the merger would lead to increased prices and reduced incentives to improve quality,
according to the FTC.
In addition to the federal district court hearing, the FTC has initiated an administrative
proceeding to block the transaction. The trial is scheduled to begin 24 May.
7
8. Advocate is represented by Drinker Biddle & Reath and Hogan Lovells. NorthShore is
represented by Winston & Strawn.
The case is Federal Trade Commission et al v. Advocate Health Care Network et al,
docket number 1:15cv11473 in the US District Court for the Northern District of Illinois
(Chicago).
by Ryan Lynch in Chicago
• Companies
• UnitedHealth Group, Inc.
• NorthShore University HealthSystem
• Advocate Health Care Network
• Advocate Health Care Inc
• Agencies
• US Federal Trade Commission (FTC)
• CASE Files
• US Federal Government investigation
8
9. May 23 - Regional hospital victory over FTC has thin
read-through to manage care deals - analysis
PaRR Rumored
· Judge’s comments buffer healthcare industry consolidation
· Marks clear judicial recognition of impact of ACA
· May not stand on appeal
Though a judge’s decision to bless a hospital merger may lend some credence to the idea
that the evolvinghealthcare market necessitates consolidation, that decision could be
reversed and should therefore be interpreted lightly, according to antitrust practitioners.
On 9 May, Harrisburg, Pennsylvania-based federal Judge John E. Jones III denied the Federal
TradeCommission’s (FTC) bid for a preliminary injunction to block the merger of PinnacleHealth
System and Penn State Milton S. Hershey Medical Center. The deal allows the hospitals to stay
competitive in a climate where others are teaming up to achieve dominance, the judge wrote.
The decision also reflects the increasing need to adapt to a market that includes the Affordable
Care Act (ACA), he wrote.
The FTC is now pursuing an appeal of the judge’s decision. There is a good chance that it will be
reversed,according to two antitrust attorneys with experience in the industry and Tim Greaney,
law professor and co-director of the Center for Health Law Studies at Saint Louis University
School of Law.
Even so, the judge’s decision lends some credence to insurers seeking to argue that the ACA
has created a landscape that has compelled them to merge so that they can better compete
and keep costs down, the first attorney and Greaney said. Anthem (NYSE:ANTM) is currently
seeking to acquire Cigna (NYSE:CI) for USD 54bn, and Aetna (NYSE:AET) is merging with
Humana (NYSE:HUM) for USD 37bn. Announced in July 2015, both deals are now undergoing
second requests by the Department of Justice (DoJ).
“We find it no small irony that the same federal government under which the FTC operates
has created aclimate that virtually compels institutions to seek alliances such as the hospitals
intend here,” Judge Jones wrote. It is best that the hospitals “unite and survive” rather than
“remain divided and wither,” he wrote.
9
10. In the time since the ACA’s enactment, hospital networks have grown in size and scale,
and therefore have gained leverage to squeeze insurers for more favorable reimbursement
rates, this news service previously reported. From the perspective of the DoJ, consolidation
among hospital networks will likely not justify consolidation among insurers, this news service
has also reported.
Regarding horizontal combinations, policy concerns around the ACA will not save otherwise
anticompetitive transactions, said Anthony Swisher, partner at Squire Patton Boggs. He spoke
12 May on a panel at the American Bar Association’s “Antitrust in Healthcare” conference.
The FTC does not think much of the judge’s opinion, according to the second antitrust attorney
with experience in healthcare. “I would be hesitant to put a whole lot of weight into what this
opinion is going to mean and how it might influence the DoJ’s Antitrust Division, because I don’t
think the Division will think much of this opinion either,” that attorney said.
Pointing to the judge’s decision in the hospital merger as support for why insurers should be
allowed tocombine in a market influenced by the ACA would not be a winning strategy, a third
antitrust attorney said. The idea that the ACA has created an environment that requires
mergers is a distortion of the policy, Greaney said, also speaking at the conference. The ACA
is premised on a foundation of competition among insurers and providers, he said.
Even so, the argument that antitrust should be given a timeout found a receptive audience in the
PinnacleHealth case, Greaney said. Judge Jones’ decision lends some credibility, in that at least
one federal judge has been persuaded that the healthcare market is changing so rapidly that
enforcers should be more sympathetic to mergers, he said.
The PinnacleHealth case is “really the only one” that has lent this perspective any legitimacy,
the first antitrust attorney said. The parties in the insurance mergers can point to it, but the
question is whether the judge’s decision will stay on the books when the appeal is decided,
that attorney said.
“I don’t think it will,” that attorney said.
Simply saying that the ACA has altered the healthcare market will not be enough for the DoJ,
according to the second attorney.
10
11. Additionally, though both part of the healthcare industry, hospitals and insurers are dramatically
different, said Cory Capps, partner at economic consulting firm Bates White. “I don’t see a big
implication of hospital cases for health insurer cases, or vice versa,” Capps said. Capps
previously worked as staff economist at the DoJ’s Antitrust Division.
In his memorandum opinion, the judge specifically referenced the shift towards risk-based
contracting and the burden it places on providers such as the merging hospitals. Risk-based
payments are based on the estimated costs of treating a specific condition or patient population
as a whole, as opposed to fee-for-service payments, in which costs are based on individual
services.
Risk-based contracting transfers risk and therefore cost from the individual to the provider,
and for that reasonthe merged hospitals would benefit from additional size and scale in terms
of spreading costs, the judge found. The government and private payers like insurance
companies are also shifting towards risk-based forms of contracting, the judge wrote.
Most of what the judge wrote with respect to the ACA and the shifts in the industry was rhetoric,
the first and second attorneys said. His actual basis for the ruling stemmed in large part from
his belief that the FTC had not met its burden of proving the relevant geographic market,
said Capps and the second antitrust attorney. The judge believed that the market was broader
and therefore included more competition. The FTC will have to squarely fight that argument in
the appeal process, the second attorney said.
The judge also ruled that the hospitals had demonstrated that the merger would create
meaningful efficiencies. It is not clear in the judge’s ruling whether the merger was the only
option for achieving those efficiencies and the ACA’s place in that, the second attorney said.
“Do they need to merge to provide some kind of service that’s not being provided in the market
today, or in order to take risk, or in order to do some things that they are pressured to do by the
ACA? The judge left that very vague, and the parties were vague,” that attorney said.
“What is it that they are going to be able to do together that furthers the goals of the ACA that
they weren’t able to do before?” the attorney asked. “It’s not clear at all.”
11
12. by Madeline O’Leary in New York and Ryan Lynch in Washington DC
• Companies
• Cigna Corporation Cravath, Swaine & Moore LLP (Lawyer) Morgan Stanley (Financial advisor)
• Anthem Inc. Credit Suisse (Financial advisor) White & Case LLP (Lawyer) UBS Investment Bank
(Financial advisor)
• Aetna Inc Davis Polk & Wardwell LLP (Lawyer) Lazard (Financial advisor) Citi (Financial advisor)
• Humana Inc Goldman Sachs (Financial advisor) Fried Frank Harris Shriver & Jacobson LLP (Lawyer)
• Agencies
• US Department of Justice (DoJ)
• M&A
• Humana Inc / Aetna Inc
• Cigna Corporation / Anthem Inc.
12
13. May 9 - US judge greenlights Penn State-Hershey/
Pinnacle merger
PaRR Rumored
· The FTC too narrowly defined the relevant geographic market—judge
· Penn State Hershey and Pinnacle move ahead with merger plans
· FTC administrative hearing could begin within a week
A federal district judge ruled on 9 May (today) that the Federal Trade Commission’s (FTC)
relevant geographic market was too narrow to support its case against the proposed merger
of Penn State-Hershey Medical Center and PinnacleHealth System.
Dr. Craig Hillemeier, Penn State Hershey’s current CEO and the proposed CEO of the new
organization, welcomed the court’s decision in a news release. The release said that the two
healthcare organizations will continue laying the groundwork for their integration under the
new name, Penn State Health.
Hillemeier said the decision by US District Judge John Jones “reinforces our long-stated
position that the proposed integration of PinnacleHealth and the Milton S. Hershey Medical
Center is to the benefit of patients, families, employers and our broader community.”
The FTC told PaRR: “We are disappointed in the ruling and will be considering our options.”
The FTC and the Commonwealth of Pennsylvania had sought to convince Jones to issue an
order preliminarily enjoining the merger as anticompetitive. The judge’s decision puts the
following steps in motion.
Penn State-Hershey and PinnacleHealth earlier said that they had agreed to wait until three
business days after a court ruling in their favor before consummating the merger. An FTC
administrative trial currently is scheduled to begin on 17 May.
If the FTC does not appeal the decision within seven days following the ruling, the hospitals
may file a motion either to withdraw the case from the agency’s internal adjudication process
or to dismiss the complaint. The administrative law proceeding then would be automatically
stayed while the commission decides how to respond.
13
14. The last time the FTC’s preliminary injunction request was denied in a merger case was FTC v.
Steris, a healthcare-related transaction, which was decided in September 2015. The agency did
not appeal the ruling and subsequently dismissed the complaint.
In the Penn State case, the FTC had defined the relevant geographic market of “the Harrisburg
area” as the four counties contiguous to the city of Harrisburg. But the merger partners claimed,
among other things, that the majority of Penn State Hershey’s revenue comes from outside that
area. They argued that the FTC deliberately limited the size and scope of its geographic market to
fit the agency’s theory of the case.
The judge said that the hours of testimony and thousands of pages of exhibits presented by both
sides convinced him that the FTC’s relevant geographic market was unrealistically narrow and
did not take into consideration the commercial realities faced by consumers in the region.
“Because the government has failed to set forth a relevant geographic market, it cannot
establish a prima facie case under the Clayton Act. Therefore, the FTC’s request for injunctive
relief must be denied because it has not demonstrated a likelihood of ultimate success on the
merits,” Jones wrote.
Penn State-Hershey and PinnacleHealth are represented by Jones Day and McNees Wallace
& Nurick.
The case is Federal Trade Commission et al. v. Penn State Hershey Medical Center and
PinnacleHealth System, no. 15cv2362, in the US District Court for the Middle District of
Pennsylvania (Harrisburg).
by Peter Geier and Susan Mandel in Washington DC
• Companies
• PinnacleHealth Hospitals Jones Day (Lawyer) Mcnees, Wallace & Nurick Llc (Lawyer)
• Penn State Milton S. Hershey Medical Center Jones Day (Lawyer) Mcnees, Wallace & Nurick Llc (Lawyer)
• Agencies
• US Federal Trade Commission (FTC)
• CASE Files
• US Federal Government investigation into Penn State Hershey Medical Center’s proposed merger with
Pinnacle Health System (2015)
14
15. Health Insurance
Mergers:
February 26 - Humana/Aetna: DoJ clearance not tied to state
reviews - independent attorneys
PaRR Strong Evidence
· State approvals a net positive, but do not indicate DoJ timing
· Medicare Advantage overlaps to be addressed at federal level
State approvals of the Aetna (NYSE:AET) proposed acquisition of Humana (NYSE:HUM) are
a positive indication for the deal, but they reveal little about the status of the Department of
Justice (DoJ) clearance process, according to independent antitrust attorneys.
The USD 37bn purchase, announced in July 2015, is currently under a second request at the DoJ.
“We remain on track with DoJ approval processes and expect to close the transaction in the
second half of 2016,” said a spokesperson for Humana.
For the deal to proceed, the companies need to obtain state change-of-control approvals besides
DoJ clearance. Conversations with the DoJ about divestitures have not yet begun, as parties are
still sharing data and working on the framework of the discussions, Aetna CEO Mark Bertolini
said on a 4Q15 earnings call with analysts early this month.
Aetna disclosed in a US Securities and Exchange Commission filing on 19 February that the
companies had obtained 10 of the necessary 20 state approvals. That number was unchanged
as of 25 February, the spokesperson said. She declined to provide a list of states that still need
to approve the deal.
Bertolini also declined to name the states on his call with analysts, but said that “none of them
have been contentious.” Public documents indicate that the merger has been approved by
insurance regulators in such states as Kentucky, Utah and Arkansas.
State approvals can be idiosyncratic, according to a source familiar with the deal. For instance,
the relationship between state insurance regulators and the state attorney general can vary, the
source said. Nonetheless, it is positive that 10 states have approved the deal, the source added.
15
16. An independent antitrust attorney agreed, saying the state approvals are a “step in the right
direction.” However, state review is not indicative of DoJ clearance timing, the attorney said,
noting that federal review takes place on its own track and is probably separate from state
issues.
Though certain state-level issues – concerns about barriers to entry, for example, or the ability
to exclude a competitor – could have implications at the federal level, they are unlikely to
influence the substance of the DoJ’s analysis, the attorney said.
There are other reasons that state reviews do not provide clarity on the long-term regulatory
picture for Humana/Aetna.
For example, state approvals thus far “may not include the more contentious states, and as such
would not provide much of a proxy,” said Greg Neppl, an antitrust partner with Foley & Lardner
and former trial attorney with the DoJ Antitrust Division.
Further, the Humana/Aetna deal focuses largely on the federal Medicare Advantage program.
State approvals indicate “little, if anything, about what relief DoJ will require to address the
Medicare Advantage overlaps,” Neppl said.
by Ryan Lynch in Washington DC and Madeline O’Leary in New York
• Companies
• Aetna Inc Davis Polk & Wardwell LLP (Lawyer) Lazard (Financial advisor) Citi (Financial advisor)
• Humana Inc Goldman Sachs (Financial advisor) Fried Frank Harris Shriver & Jacobson LLP (Lawyer)
• Agencies
• US Department of Justice (DoJ)
• M&A
• Humana Inc / Aetna Inc
16
17. May 10 - Emboldened DoJ may take holistic view on
managed care deals – analysis
PaRR Rumored
· DoJ jaded to complex remedies
· “Commonsense approach” cited
· Past reviews not necessarily prologue
Recent enforcement actions and statements by the Department of Justice (DoJ) indicate the
agency’s willingness to consider mergers based on big-picture issues. That has heightened
concern that the regulator will look to hobble major pending US health insurance deals,
antitrust practitioners said.
Anthem’s (NYSE:ANTM) proposed acquisition of Cigna (NYSE:CI) and Aetna’s (NYSE:AET)
pending purchase of Humana (NYSE:HUM), both announced in July 2015, are currently under
a second request at the DoJ. Cigna warned earlier this month that it may not receive regulatory
approvals by the end of 2016 due to “the complexity of the regulatory process.” Anthem declined
requests for comment.
An Aetna spokesperson said the company is still expecting the Humana deal to close in the
second half of this year. Cigna and Humana’s shares have been trading at significant discounts
to the implied offer prices of the deals, suggesting market concern about the regulatory reviews.
An antitrust consultant said a major concern is that both mergers could require a large number
of complex divestitures to resolve antitrust issues. The DoJ recently highlighted this issue in its
complaint against the Baker Hughes/Halliburton oilfield services merger.
Deals that the DoJ agrees to resolve with remedies “typically involve limited, discrete and clean
divestitures,”but that does not mean that every merger can be fixed and many cannot, the DoJ’s
assistant attorney general Bill Baer has said.
Regarding lessons learned from Baker Hughes/Halliburton, the DoJ will be skeptical of
divestiture proposals when the evidence points to problems in effectuating those divestitures or
ensuring that the divestiture buyer will effectively preserve competition, said Tim Greaney, law
professor and co-director of the Center forHealth Law Studies at Saint Louis University School
of Law.
17
18. “That is certainly an issue with respect to the health insurance mergers,” he said. “It’s not like
divesting a cement factory.” Greaney also formerly supervised healthcare antitrust litigation as
assistant chief of the DoJ’s antitrust division.
The viability of a health plan divestiture relies on the ability of the buyer to maintain the previous
owner’s provider network, which includes the physician and hospital networks, Greaney said.
This includes maintaining the various discounts and specific characteristics that contribute to
the cost-effectiveness of the plan being divested, he said. “The concern is that it’s not so easy to
simply substitute in a new body to take over those contracts and hope that they get renewed,”
he said.
Antitrust attorneys often point to Humana’s 2012 purchase of Arcadian as a blueprint for the
DoJ’s traditional approach to insurance mergers. In that deal, the DoJ required divestitures
of health plans in “five additional counties and one additional parish to facilitate the divesture
of the plans in the other 45 counties and parishes and make those plans more administrable.”
The settlement contained provisions to ensure the divestiture buyers would have contracts with
“substantially all of the health care providers included in the Humana and Arcadian plans at
substantially the same rates.”
Only two of the 15 divested plans are still offered today, according to research conducted and
published in March by the Center for American Progress (CAP). The canceled plans were only
offered for an average of 1.5 years after the 2012 divestiture, indicating a lack of real, sustainable
competition in the markets, according to the CAP. Before exiting most of the divested markets,
the acquirers also often raised the premiums for the divested plans, the CAP said.
The acquirers in that case were Cigna, Vantage Health Plan and WellCare Health Plans,
each approved by the DoJ as viable divestiture buyers.
That said, the current mergers under investigation are much larger than Humana’s USD
150m purchase of Arcadian. Divestitures from these mergers could require a large degree of
supervision, the consultant said. “You are divesting lives, customer contracts, arrangements
between providers and that health plan,” the consultant said. “They are intangible assets.”
The DoJ has also historically examined the position of the merging insurance companies as
a monopsony power when purchasing physician services, according to an attorney with
experience in healthcare antitrust. As a result, regulators have mandated specific conduct
remedies to address those concerns, further increasing government oversight of divestitures in
healthcare mergers, this attorney said.
19. Divestitures in the current mergers of national health insurers stand to be more extensive and
potentially more complex, the consultant said. In the Halliburton complaint, Baer had said:
“Customers and competition should not have to bear the risks of a failed or inadequate remedy.”
In that same document, the DoJ cited the substantial resources that would be required to
supervise the remedy to ensure its effectiveness.
“Halliburton’s proposed remedy is so complicated and convoluted that it would require
unprecedented resources to oversee it,” the DoJ wrote.
The managed care industry has long been examined by antitrust regulators using a more or less
defined rubric. Historically, the reviewing agency evaluates local markets such as metropolitan
statistical areas (MSAs) and try to determine whether the merging companies in that local
market comprise each other’s closest competitors. If so, the agency will require a divestiture.
It may be that regulators are beginning to look beyond traditional modes of analysis when
addressing the competitive effects of mergers, taking instead a more “holistic approach” that
assesses deals as potentially transformational to their respective industries, the consultant said.
The attorney agreed, adding that Baer in particular is thoughtful and proactive. “Especially with
his recent promotion, I think he could be trying to take a broader view of the issues, very easily,”
the attorney said. Baer was recently promoted to assistant attorney general of the overall DoJ.
Antitrust has gotten better about being “commonsensical,” Baer has said. This approach
goes beyond calculating concentration via market shares or arguing “some artificial market
definition” without questioning actual competitive dynamics and competitive pressures, Baer
has said.
This constitutes “negative signaling,” the consultant said. Sometimes standard antitrust
analysis “just isn’t right,” and with so many current deals pushing the margins, “bigger picture
arguments” should be examined, the consultant said.
A spokesperson for America’s Health Insurance Plans (AHIP) dismissed outside commentary
on the mergers as mere speculation. “Health plans operate in a highly competitive regulatory
environment – at the state and federal level – where they need to demonstrate their value every
day to consumers by delivering affordable coverage,” the spokesperson said. Anthem, Cigna
and Humana are all AHIP members.
19
20. The insurance companies have argued their acquisitions would create efficiencies – basically,
lower costs and better care – but past industry mergers offer little support for those claims.
Also, competition levels in the industry, which were supposed to increase after the adoption of
the Affordable Care Act (ACA), show signs of diminution as insurers move to comply with a host
of new regulations.
“We have maybe two or three, maybe four players, in all of our major markets,” said Diana Moss,
president of the American Antitrust Institute. “You can’t make an efficiencies defense effectively
on a merger that’s anticompetitive, so DoJ for those reasons is going to be looking very hard at
these deals.”
by Madeline O’Leary in New York, Reuben Miller in San Francisco and
Ryan Lynch in Washington DC
• Companies
• Baker Hughes Incorporated Goldman Sachs (Financial advisor) Davis Polk & Wardwell LLP (Lawyer)
WilmerHale (Lawyer)
• Cigna Corporation Cravath, Swaine & Moore LLP (Lawyer) Morgan Stanley (Financial advisor)
• Halliburton Company Credit Suisse (Financial advisor) Bank of America Merrill Lynch (Financial advisor)
Baker Botts LLP (Lawyer) Wachtell, Lipton, Rosen & Katz (Lawyer)
• Anthem Inc. Credit Suisse (Financial advisor) White & Case LLP (Lawyer) UBS Investment Bank
(Financial advisor)
• Aetna Inc Davis Polk & Wardwell LLP (Lawyer) Lazard (Financial advisor) Citi (Financial advisor)
• Humana Inc Goldman Sachs (Financial advisor) Fried Frank Harris Shriver & Jacobson LLP (Lawyer)
• Agencies
• Florida Office of Insurance Regulation
• M&A
• Baker Hughes Incorporated / Halliburton Company
• Humana Inc / Aetna Inc
• Cigna Corporation / Anthem Inc.
20
21. May 13 - DoJ official raises doubts about health insurance
mergers -Antitrust in Healthcare conference
PaRR Confirmed
· New insurers face ‘chicken and egg problem’
· Unclear if efficiencies passed on to consumers
A senior Department of Justice (DoJ) official who is reviewing two major health insurance
mergers raised doubts today (13 May) about the extent of industry competition and company
justifications for the deals.
Peter Mucchetti, chief of the DOJ Ligitation 1 Section, told an industry conference that the
prospect of new entrants into the insurance market is not a justification for approving the
mergers.
Entrants into US health insurance markets may find it difficult to compete because they must
build a network of members while also attracting providers, Mucchetti said. There is a
“chicken and egg problem” because insurers need to have a large number of members in order
to negotiate competitive rates with physicians and other healthcare providers. However,
prospective members choose a plan based in part on the insurer’s network of providers.
Mucchetti was speaking at the American Bar Association’s “Antitrust in Healthcare” conference.
Health insurance is very important to people, and it matters whether any particular health insurer
has a reputation for business stability, Mucchetti said. Market entry is limited, he said, and the
DoJ has previouslysaid there are barriers to entry.
The DoJ is currently reviewing Anthem’s (NYSE:ANTM) proposed acquisition of Cigna (NYSE:CI)
and Aetna’s (NYSE:AET) announced purchase of Humana (NYSE:HUM). Mucchetti declined to
comment on the deals, both of which are currently under a second request at the DoJ.
Mucchetti also poured cold water on cost savings as a justification for mergers. Claiming
efficiencies to justify a merger is a tough hurdle for health insurance companies, Mucchetti said.
The courts have been skeptical about efficiencies for two reasons. The first is that it is unclear
how efficiencies are passed along to consumers, he said. The efficiencies must be significant
enough to benefit consumers while negating the harm of lost competition as a result of the
merger. The second issue is whether the efficiencies are merger-specific, he said.
21
22. “Do you really have to merge or is there another way of getting the same outcome that doesn’t
give us the bad outcome of losing competition?” Mucchetti said.
by Ryan Lynch and Madeline O’Leary in Arlington, Virginia
• Companies
• Cigna Corporation Cravath, Swaine & Moore LLP (Lawyer) Morgan Stanley (Financial advisor)
• Anthem Inc. Credit Suisse (Financial advisor) White & Case LLP (Lawyer) UBS Investment Bank
(Financial advisor)
• Aetna Inc Davis Polk & Wardwell LLP (Lawyer) Lazard (Financial advisor) Citi (Financial advisor)
• Humana Inc Goldman Sachs (Financial advisor) Fried Frank Harris Shriver & Jacobson LLP (Lawyer)
• Agencies
• US Department of Justice (DoJ)
• M&A
• Humana Inc / Aetna Inc
• Cigna Corporation / Anthem Inc.
22
23. June 8th - Cigna/Anthem facing national ASO question
PaRR Strong evidence
· Few competitors in the national market for ASO plans
· Debate on TPAs as competitors
· Healthcare providers are opposing deal on local level
Anthem’s (NYSE:ANTM) pursuit of Cigna (NYSE:CI) raises national concerns in the administrative
services only (ASO) market, according to several healthcare specialists.
The proposed merger, announced in July 2015, is currently under a lengthy second request at
the Department of Justice (DoJ). The companies have certified substantial compliance with the
second request and have entered into a timing agreement with the DoJ that expires in July, this
news service previously reported.
Under an ASO plan, a company covers its employees’ medical claims with its own funds,
then the company contracts with an insurer to provide “administrative services,” which can
include claims processing.
The extent to which competition exists in the ASO space has been a subject of debate,
and Anthem and Cigna have been scrutinized for their potential post-merger dominance in this
market. Large companies could be left with fewer insurers to turn to for nationwide service,
this news service previously reported.
“There are local and regional markets for ASOs,” said an antitrust attorney with healthcare
experience. “But the one that’s going to create the most problems is the national market because
there will be fewer competitors in that market.”
A spokesperson for Medica, a Minnesota-based regional insurer, agreed that a broader
geography may be appropriate for the ASO market, which is a focus of the Cigna/Anthem deal.
The ASO space “tends to be a market that bigger national companies play in,” the spokesperson
said. Also, most of the activity with national plans involves a Blue Cross Blue Shield insurer, he
said. Anthem is the nation’s largest for-profit Blue Cross company.
Anthem maintains that there is not a national market. The head-to-head competition between
Anthem and Cigna is “not as significant as a lot of people think it is,” Tom Zielinsky, Anthem’s
executive vice presidentand general counsel said at the UBS Global Healthcare Conference in
New York last month. 23
24. Steve Wojcik, vice president of public policy for the National Business Group on Health, said
there are onlyabout “half a dozen” insurers that can provide ASO services nationally. However,
the market is relatively competitive, and one less player would not have much of an effect, he
said. Anthem and Cigna are members of the National Business Group on Health.
Anthem and Cigna have claimed that the estimated market shares are “incomplete” due to
the exclusion of certain players, such as third-party administrators (TPAs), this news service
previously reported.
TPAs serve primarily as the claims processors in ASO arrangements. Publicly reported
membership figures are not available, so their market shares relative to Cigna and Anthem are
unclear, an antitrust attorney with healthcare experience said.
“Those shares are going to have to be put together from raw data, obtained from the companies
that provide those services. There are many third-party administrators, large and small, local,
regional and national,” this attorney said.
The primary role of an ASO is the administrative function, so the large insurance companies will
also serve as TPAs when they are working with companies in ASO arrangements, a healthcare
consultant noted. That said, Aetna, Humana, the organizations associated with Blue Cross and
Blue Shield, Cigna and UnitedHealthcare compete in this market, the consultant said.
Then there are organizations that are strictly TPAs and not insurance companies. To compete
with the insurers, these types of TPAs must offer networks either by developing their own,
contracting with existing networks, or renting networks from one of the larger insurance
companies, the consultant said.
UMR, which is owned by UnitedHealthcare, is a TPA with access to United’s network of
providers, the consultant said. Then there is Meritain Health, which is an independent subsidiary
of Aetna. Another competitor is CoreSource, a Trustmark company. There are also many other
local and regional players, the consultant said.
They differentiate themselves on their services in part by offering more flexibility, the consultant
said. Still, if the most flexible TPA in the market is unable to negotiate network discounts at the
level of the largest insurers, they may not be able to win business, the consultant said.
That is why the “vast majority” of employers in the US will still use Cigna, Aetna, Humana,
United and the other members of Blue Cross for their ASO arrangements, the consultant said.
This is true for local, regional and national employers, the consultant said. There is a demand for
24
25. nationally-scaled ASOs, particularly among the larger employers, he said.
TPAs are not viable competitors if there is a national market for ASO services, the antitrust
attorney said. “If there is a national market for ASO services, then only firms providing ASO
services on a national basis would be included. The vast majority of companies providing ASO
services are local,” that attorney said.
Despite the possibility of a multistate market definition, lobbyists for healthcare providers
– which generally oppose the health insurance mergers – are not necessarily pushing for
broad geographies. The American Hospital Association and other groups, including the
Virginia Hospital & Healthcare Association, are working together to oppose the Cigna/Anthem
deal on a state-by-state basis.
“Healthcare is local,” said Christopher Bailey, executive vice president of the Virginia Hospital
& Healthcare Association. “Where the real value is provided – at the frontline of care – it’s very
local.”
The Federal Trade Commission (FTC) has won recent merger challenges, such as Office Depot/
Staples and US Foods/Sysco, which involved a nationwide business-to-business market.
Yet those cases are not a template for advocating against the Cigna/Anthem merger, at least
from the perspective of the hospitals.
“I don’t think healthcare is as amenable to national marketplace factors,” Bailey said.
by Ryan Lynch in Washington DC and Madeline O’Leary in New York
• Companies
• Cigna Corporation Cravath, Swaine & Moore LLP (Lawyer) Morgan Stanley (Financial advisor)
• Anthem Inc. Credit Suisse (Financial advisor) White & Case LLP (Lawyer) UBS Investment Bank (Financial
advisor) Troutman Sanders (Lawyer)
• Aetna Inc Davis Polk & Wardwell LLP (Lawyer) Lazard (Financial advisor) Citi (Financial advisor)
• Humana Inc Goldman Sachs (Financial advisor) Fried Frank Harris Shriver & Jacobson LLP (Lawyer)
• Agencies
• US Department of Justice (DoJ)
• M&A
• Humana Inc / Aetna Inc
• Cigna Corporation / Anthem Inc.
25
26. June 27th - Cigna/Anthem, Humana/Aetna tied to same
July fate, source says
PaRR Strong evidence
The Department of Justice (DoJ) is linking its concurrent reviews of two health insurance deals
together and is attempting to achieve resolution on both by mid-July, a person familiar with the
matter said.
Anthem (NYSE:ANTM) announced plans to acquire Cigna (NYSE:CI) and Aetna (NYSE:AET)
moved to merge with Humana (NYSE:HUM) within weeks of each other last summer amid
continued consolidation in the US healthcare industry. The companies in both deals have timing
agreements with the DoJ that expire around the same time next month.
The Cigna/Anthem review has largely focused on the market for providing health insurance
services to employers, while Humana/Aetna has looked at local Medicare Advantage markets,
as previously reported by this news service.
On the differences between the two mergers, the person familiar said the approach at the DoJ
has been to look at the two mergers with a wide lens, as part of a major industry consolidation.
This person added that if the DoJ moves to block the transactions it would likely announce this
as part of the same statement and separate legal complaints.
A source familiar with the matter said the two transactions involve different areas of the health
insurance market and should not be lumped together. The source declined to comment on the
investigations.
Efforts to block the Anthem transaction are gearing up at the DoJ, the person familiar said,
adding that if the regulator feels there is no resolute remedy in the near future, the agency must
take action.
If the merger is not blocked by mid-July, that would indicate there has been a major shift
internally, the person said. Media reports have also stated the DoJ is skeptical about the deal.
Cigna and Anthem met with Associate Attorney General William Baer last week to discuss their
proposed deal.
26
27. The meeting on Friday was largely to set a tone and see whether the health insurers had
developed a plan that would adequately remedy the transaction, the person said. This was a
“put up or shut up” meeting, and no immediate resolutions were found, the person added.
He cautioned that a remedy could be found, though he discounted this possibility.
The person familiar compared the Anthem meeting to one held between the DoJ and Halliburton
(NYSE:HAL) and Baker Hughes (NYSE:BHI). The two oilfield services groups worked for months
to present a divestiture package to the DoJ to resolve antitrust concerns but the government
filed suit and the companies terminated their merger.
A spokesperson for Anthem said: “We do not and will not comment on confidential meetings
with regulators, including whether any of the information being reported based on unauthorized
disclosures and speculation is accurate.”
The DoJ declined to comment. Representatives for Cigna, Aetna and Humana did not immediately
respond to requests for comment.
by Reuben Miller in San Francisco, with additional reporting by Madeline O’Leary
in New York and Ryan Lynch in Washington DC
• Companies
• Cigna Corporation Cravath, Swaine & Moore LLP (Lawyer) Morgan Stanley (Financial advisor) Anthem Inc.
Credit Suisse (Financial advisor) White & Case LLP (Lawyer) UBS Investment Bank (Financial advisor)
• Aetna Inc Davis Polk & Wardwell LLP (Lawyer) Lazard (Financial advisor) Citi (Financial advisor)
• Humana Inc Goldman Sachs (Financial advisor) Fried Frank Harris Shriver & Jacobson LLP (Lawyer)
• Agencies
• US Department of Justice (DoJ)
• US Federal Trade Commission (FTC)
• M&A
• Humana Inc / Aetna Inc
• Cigna Corporation / Anthem Inc.
27
28. June 28th - Humana/Aetna waiting on Georgia,Texas, NewYork
PaRR Confirmed
Humana (NYSE: HUM) and Aetna (NYSE: AET) still need insurance regulators in Georgia, Texas
and New York to sign off on their proposed merger.
The states are required to sign off on “change of control” in Humana as a condition for the USD
37bn deal to close. Missouri regulators have objected to the merger, but no change of control is
needed in that state.
The two health insurers announced plans to merge in 2015 and are currently under a lengthy
second request at the Department of Justice (DoJ). The companies have entered into a flexible
timing agreement with the DoJ that expires in mid-July.
In Georgia, the Office of Insurance and Safety Fire Commissioner will hold a hearing on 26
July to evaluate oral comments from the public. Proceedings will then continue on 28 July if
necessary. There is no timetable for a ruling after the hearing, but decisions are typically
announced within a few days to a few weeks, according to a spokesperson.
In Texas, a hearing is not required unless state regulators deny Aetna’s bid to acquire control
of Humana. The Texas Department of Insurance (TDI) is “in the process of reviewing that merger
and there is no timeline for completion of the review,” a TDI spokesperson said.
And in New York, state regulators are still deciding whether to hold a public hearing, according
to a spokesperson for the Department of Financial Services. There is no deadline for a ruling by
New York authorities, the spokesperson said.
The merger has already been approved in 17 states, including Illinois, Florida and Connecticut.
by Ryan Lynch in Washington DC
• Companies
• Aetna Inc Davis Polk & Wardwell LLP (Lawyer) Lazard (Financial advisor) Citi (Financial advisor)
• Humana Inc Goldman Sachs (Financial advisor) Fried Frank Harris Shriver & Jacobson LLP (Lawyer)
• Agencies
• US Department of Justice (DoJ)
• Texas Department of Insurance
• New York State Department of Financial Services
• M&A
• Humana Inc / Aetna Inc28
29. Drug pricing, Pay for delay,
and Pharma:
US drug prices face long-term risks
PaRR Strong Evidence
· US Congress not expected to pass legislation soon
· Average drug prices affected by discounts and rebates
· HHS a wild card; antitrust agencies to avoid price regulation
Although the current US Congress is unlikely to act on drug prices, there is growing anxiety
in thepharmaceutical industry about presidential campaign politics and a potential role for the
Department of Health and Human Services (HHS), industry sources said.
The US House Oversight Committee on 4 February will hold a hearing on drug pricing issues,
with CEOs from Turing Pharmaceuticals and Valeant Pharmaceuticals (NYSE:VRX) having been
asked to testify. But the expected political theater poses no real threat, industry sources said.
“Nothing happens on drug pricing in 2016 except political posturing in an election year designed
to make drug pricing regulation a political wedge issue,” Evercore analyst Terry Haines wrote in
a 21 January research note.
A DC-based pharma policy specialist agreed with that assessment. “Congress definitely isn’t
going to do anything,” he said.
However, there is political risk outside of Congress, the specialist said. In particular,
pharmaceutical companies are “frustrated and nervous” about ballot initiatives in California
and Ohio to lower drug prices, as well as the “steady drumbeat” on the issue from 2016
presidential candidates.
Former Secretary of State Hillary Clinton, Sen. Bernie Sanders (D-VT) and Donald Trump have all
said that Medicare should be able to negotiate drug prices. Also, Sen. Marco Rubio (R-FL) has
criticized the industry for “pure profiteering”.
29
30. However, it is difficult to determine whether average drug prices are actually increasing
substantially, since the ever-increasing size and power of ‘pharmacy benefits managers’ like
Express Scripts and UnitedHealthcare’s OptumRX are forcing pharma manufacturers to lower
prices. In addition, there are myriad government buyers who may be able to obtain different drug
prices.
Industry data vendor IMS Health concluded that drug invoice prices increased 13.5% on average
in 2014. But after discounts, rebates and other prices concessions, the average price increase
was just 5.5%, the lowest in five years.
HHS and antitrust agencies
Lingering in the background of these policy debates is a Department of Justice (DoJ)
investigation launched in 2014 that appears to focus on the generic drug industry. Companies
including Lannett (NYSE: LCI), Impax Laboratories (NASDAQ: IPXL), Par Pharmaceutical,
now owned by Endo International (NASDAQ: ENDP) and Allergan (NYSE: AGN) have disclosed
the receipt of DoJ subpoenas.
A former DoJ attorney said the subpoenas are likely to ask for volumes of data including emails,
travel records, invoices, and memos. There are often negotiations between the agency and the
companies regarding the scope of the subpoena, and the DoJ also speaks with witnesses, such
as former employees.
Although resolution can occur more quickly as a result of company cooperation, DoJ
investigations typically last three to five years.
“These cases just take a long time – there are no shortcuts,” the former DoJ attorney said.
In terms of broader effects, a wild card for the industry is the Centers for Medicare and
Medicaid Services (CMS) at the HHS, an agency which is involved in the DoJ investigation
and already plays a role in reviewing health insurance rate increases.
“CMS could possible play a role [on drug pricing], but I’m not sure what they can do at this
point unilaterally other than changing formularies, which would upset a lot of people,” said
the specialist.
30
31. The possibility of price regulation by CMS has arisen in the past, and it could reemerge,
particularly under a new Democratic president. The current administration has given no
indication of imminent action, Haines noted in his report.
In contrast to the HHS, the US antitrust agencies would likely resist a regulatory role
on pricing issues.
Senator Amy Klobuchar (D-MN) and others have asked the Federal Trade Commission (FTC)
to intervene on pricing, but former FTC lawyers said the agency has little appetite for active
regulation of the market.
“I think they’d be very reluctant to step into a price regulator role, and they really would fight
against that,” said Joseph Miller, a partner at Crowell & Moring who previously worked at the
DoJ and FTC.
The FTC does have authority under Section 5 to address unfair methods of competition. However,
using Section 5 to prosecute high prices would be a “terrible, terrible precedent that I don’t think
they would want to set,” Miller said.
by Ryan Lynch in New York
• Companies
• Valeant Pharmaceuticals International, Inc.
• Endo International plc
• Allergan plc
• IMPAX Laboratories Inc
• Lannett Company, Inc.
• Turing Pharmaceuticals, LLC
• Agencies
• US Department of Justice (DoJ)
• US Federal Trade Commission (FTC)
• US Department of Health and Human Services (HHS)
31
32. April 1 - FTC bolsters pay-for-delay suit before
commissioner departs
PaRR Strong evidence
· Commissioner Brill leaves agency after voting to support case
· ‘Something to do on her way out,’ law professor says
· Departure had ‘absolutely nothing to do’ with timing of lawsuit – source
The Federal Trade Commission (FTC) gained additional support in its pay-for-delay case
against Endo Pharmaceuticals and other drug companies by filing the lawsuit just prior to a
commissioner’s departure from the agency.
Commissioner Julie Brill, who voted with her fellow FTC Democrats to bring the case,
had previously announced she would leave the FTC after her last day on 31 March.
“This would be something to do on her way out,” said Michael Carrier, who teaches antitrust
at Rutgers Law School and has written extensively on pay-for-delay litigation. As a practical
matter, it “doesn’t look persuasive” for the FTC to bring a case with only two commissioners,
Carrier said.
FTC Chairwoman Edith Ramirez and Commissioner Terrell McSweeny also voted to bring the
lawsuit, whichwas filed in the US District Court for the Eastern District of Pennsylvania.
Brill’s support for the case helped provide a counterweight to the dissent of Commissioner
Maureen Ohlhausen, the sole Republican leader at the FTC.
Although Ohlhausen wrote that she had “reason to believe” the agreement violated Section 5
of the FTC Act, the Republican commissioner argued that seeking disgorgement would not serve
the public interest. The FTC’s administrative process would have been a better forum in which to
litigate the case, Ohlhausen wrote in her dissenting statement.
A source familiar with the FTC’s case countered that the timing of the lawsuit had “absolutely
nothing to do” with Brill’s departure.
Pay-for-delay issues have been of interest to the FTC for many years, and this case represents
another part of the agency’s effort to stop unlawful reverse payment settlements, the source said.
33. The 30 March lawsuit, which also named Watson Laboratories, owned by Allergan, and Impax
Laboratories as defendants, marks the first FTC case alleging that an agreement not to market an
authorized generic – also known as a ‘no-AG commitment’ – constitutes a reverse payment.
Carrier said that because no-AG agreements transfer significant value to generic drug firms,
the FTC has a “pretty good case”.
Also, there would be no reason for the US Supreme Court to examine the no-AG issue,
both Carrier and the source said.v
“As of now there’s no circuit split,” Carrier noted. “The Lamictal case in the [US Third Circuit
Court of Appeals] was as clear as can be that this does constitute payment. No court has come
out the other way.”
The source said it is clear that no-AG commitments are a form of compensation under the high
court’s ruling in Actavis. In that ruling, issued in 2013, the justices instructed lower courts to apply
a ‘rule of reason’ test to determine whether a reverse payment violates the antitrust laws.
“I think the Supreme Court has spoken in the Actavis case,” the source said.
Along with the FTC’s complaint, the agency voted 4-0 to accept a settlement prohibiting Teikoku
Seiyaku Co. and Teikoku Pharma USA from entering certain types of pay-for-delay agreements
for 20 years.
The case is Federal Trade Commission v. Endo Pharmaceuticals Inc. et al., no. 16cv1440, in the US
District Court for the Eastern District of Pennsylvania (Philadelphia).
by Ryan Lynch and Peter Geier in Washington DC
• Companies
• Endo International plc
• Allergan plc
• IMPAX Laboratories Inc
• Teikoku Seiyaku Co Ltd
• Teikoku Pharma USA Inc
• Watson Pharmaceuticals (selected generic assets)
• Agencies
• US Federal Trade Commission (FTC)
33