Chapter V. State Antitrust Enforcement in Health Care Markets
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CHAPTER V
STATE ANTITRUST ENFORCEMENT IN
HEALTH CARE MARKETS
A. Introduction
Perhaps no sector of the economy has received more attention from
state attorneys general over the last two decades than has the health care
sector.1 The huge amount that this country spends on health care2 has led
some commentators to call for increased antitrust enforcement in the
health care sector.3 This increase is likely to include additional
enforcement by the states.
1. Forms of State Involvement
State involvement in health care antitrust matters has come in a
number of forms. As discussed below, those forms of involvement can
include: multidistrict and single-district treble-damage actions against
1. For helpful overviews, see Patricia A. Conners, State Antitrust
Enforcement in Health Care: Recent Developments, Written Materials to
Accompany Remarks before the AHLA/ABA Health Care Forum (May
12, 2005) (on file with the editors); Patricia A. Conners, State Antitrust
Enforcement in Health Care: Recent Developments, Written Materials to
Accompany Remarks by the Chair of the Multistate Antitrust Task Force
before the ABA Section of Antitrust Law and the American Health
Lawyers Association Program on Health Law (May 15-16, 2003) (on file
with the editors).
2. See Aaron Catlin et al., National Health Spending in 2006: A Year of
Change for Prescription Drugs, 27 HEALTH AFF. 14, 14 (2008) (noting
that in 2006, U.S. h ealth care spending increased by 6.7% to $2.1 trillion,
constituting 16% of U.S. gross domestic product).
3. See, e.g., David Burda, Un derstanding Too Well How Healthcare
Antitrust Enforcement Is Eroding, MOD. HEALTHCARE, Jan. 21, 2002, at
28; Joseph Weber, The Power Play in Health Care, BUS. WK., Jan. 28,
2002, at 90, 90 (“Sic the feds and states on hospitals and other providers,
which are using their growing market power to ratchet up prices.”). At
the same time, however, providers are lamenting the perceived market
power of managed care plans and the failure of federal and state antitrust
authorities to address it. See generally AM. MED. ASS’N, COMPETITION IN
HEALTH INSURANCE: A COMPREHENSIVE STUDY OF U.S. MARKETS
(2006).
136 State Antitrust Enforcement Handbook
national and international firms that produce health care products;
enforcement actions against local providers under state antitrust laws;
actions brought under the federal antitrust laws, including joint
investigations and lawsuits with the U.S. Department of Justice (DOJ)
and the Federal Trade Commission (FTC); actions by the states after
deferral by one of the federal agencies; support by the states of federal
investigations; formal opinions of state attorneys general; advisory
opinions from states’ antitrust enforcement units; and recommendations
and reports on competition in health care markets.
2. History of State Health Care Antitrust Enforcement
State antitrust enforcement efforts in health care, like enforcement by
private parties and the federal agencies, began in large part after the
Supreme Court’s 1975 decision in Goldfarb v. Virginia State Bar4 and its
1976 decision in Hospital Building Co. v. Trustees of Rex Hospital.5
Goldfarb, a case about attorneys, held that the terms “trade and
commerce,” as used in the antitrust laws, include the learned
professions.6 Later decisions confirmed that Goldfarb’s holding applies
to the medical profession.7 Pre-Goldfarb case law had been unclear on
this point.8 This uncertainty tended to deter earlier state antitrust
enforcement actions against physicians and other health care
4. 421 U.S. 773 (1975). Also in 1975, the FTC established its health care
antitrust enforcement program. See Elizabeth Gee, Ass’t Dir., Bureau of
Competition, Fed. Trade Comm’n, Remarks at the National Health
Lawyers Association Sixteenth Annual Seminar on Antitrust in the
Healthcare Field (Feb. 1, 1983).
5. 425 U.S. 738 (1976).
6. Goldfarb, 421 U.S. at 786-88.
medical profession is not exempt from the antitrust laws.”); Ballard v.
Blue Shield of S.W. Va., 543 F.2d 1075, 1079 (4th Cir. 1976) (“We
perceive no material distinction between payment for legal services, as in
Goldfarb, and payment for health care . . . .”).
that medical practitioners “follow a profession and not a trade”);
Henenfeld v. Am. Podiatry Ass’n, 1968 Trade Cas. (CCH) ¶ 72,331, at
84,902 (S.D.N.Y 1968) (noting that the court had a “serious question”
whether podiatry constituted “trade or commerce”).
Health Care 137
professionals, although the DOJ had brought some actions before the
decision in Goldfarb.9
A year after Goldfarb , Rex Hospital established that even activities
of health care providers that appear local or intrastate in nature, such as
the provision of hospital services, will usually affect interstate commerce
sufficiently to bring the challenged conduct within the reach of the
Sherman Act.10 The Supreme Court’s later decision in Summit Health v.
Pinhas11 suggests that most conduct that affects the delivery of health
care will have the required effect on interstate co mmerce. For example,
the purchase of equipment and medicines from out-of-state vendors, the
acceptance of payment from out-of-state sources such as commercial
insurers and Medicare, the treatment of patients from outside a state, and
the receipt of financing from out-of-state sources sufficiently affect
interstate commerce to confer federal antitrust jurisdiction.12
The year 1976 was important in the history of state antitrust
enforcement for two reasons that go beyond Rex Hospital. First, the
Crime Control Act of 197613 provided $30 million in grants to the states
as “seed money” to establish state antitrust enforcement programs.
These grants started many state antitrust enforcement programs. Second,
Congress enacted the Hart-Scott-Rodino Antitrust Improvements Act,14
(upholding criminal conviction of the American Medical Association for
exclusionary conduct toward health maintenance organizations and their
physicians); N. Cal. Pharm. Ass’n v. United States, 306 F.2d 379, 385
(9th Cir. 1962) (affirming criminal conviction of association of
pharmacists and noting that “it is an area of ‘entrepreneurial,’ rather than
professional activity, [in which] appellants are charged with having run
afoul of the Sherman Act”); see also United States v. Or. State Med.
Soc’y, 343 U.S. 326 (1952) (refraining from deciding whether medical
services constitute trade or commerce).
10. Rex Hospital, 425 U.S. at 743.
practitioner from the market could have the requisite effect on interstate
commerce).
1991).
13. Pub. L. No. 94-503, sec. 116, § 3739(i), 90 Stat. 2407, 2416 (formerly
codified at 42 U.S.C. § 3739(i)) (repealed 1979).
14. Pub. L. No. 94-435, 90 Stat. 1383 (1976) (codified as amended in
scattered sections of 15 U.S.C.).
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