Pricing Conduct in Health Care Industries
| Date | 01 February 2010 |
CHAPTER
IV
PRICING
CONDUCT
IN
HEALTH
CARE
INDUSTRIES
“Pricing
conduct”
covers
a
broad
range
of
activities.
One
of
the
major
purposes
of
the
antitrust
laws
is
to
prevent
many
types
of
concerted
and
unilateral
conduct
that
directly
or
indirectly
affect
prices
as
a
result
of
seller
or
buyer
market
power.
This
chapter
outlines
several
types
of
collusive
and
exclusionary
conduct
arising
in
the
health
care
sector
that
can
have
a
direct
or
relatively
direct effect
on
prices
and
thus
might
violate
the
antitrust
laws.
A.
Horizontal
Price-Fixing
Agreements
Among
Providers
As
noted
above,
“naked”
price-fixing
agreements
among
competing
sellers
or
buyers
are
per
se
unlawful.'
In
the
health
care
sector,
horizontal
price-fixing
agreements
among
providers
can
arise
in
a
number
of
contexts
and
forms. For
example,
members
of
a
medical
society
might
simply
agree
on
the
prices
at
which
they
will
offer
their
services;'
a
group
of
providers,
through
an
association
or
otherwise,
might
agree
to
refuse
to
contract
with
a
health
plan
unless
it
increases
reimbursement’
or
copayment
amounts;*
or
the
group
might
develop
a
—_—
See
supra
ch.
II.D.3.a.
2.
See,
e.g.,
United
States
v.
Lake
Country
Optometric
Soc’y,
Crim.
No.
W95CRI114
(W.D.
Tex.
1996)
(guilty
plea
for
fixing
price
of
eye
exams;
$75,000
fine
and five-year probation).
3,
F.g.,
Baltimore
Metro.
Pharm.
Ass’n,
117
F.T.C.
95
(1994)
(consent
order);
Mich.
State
Med.
Soc’y,
101
F.T.C.
191
(1983)
(“boycott”
of
Biue
Cross
and
Medicaid
to
increase
reimbursement);
Consent
Decree,
United
States
v.
Mass.
Allergy
Soc’y,
1992
WL
178713
(D.
Mass.
1992)
(allegation
that
defendant
forced
HMO
to
increase
reimbursement);
Consent
Decree,
United
States
v.
Mont.
Nursing
Home
Ass’n,
1982
WL
1867
(D.
Mont.
1982)
(settling
case
alleging
agreement
among
nursing
homes
not
to
participate
in
Medicaid
absent
increased
reimbursement);
DeGregorio
v.
Segal,
(E.D.
Pa.
1978)
(same).
4.
United
States
v.
A,
Lanoy
Alston,
D.M.D.,
P.C.,
(th
Cir.
1992}.
13]
152
Antitrust
Health
Care
Handbook
schedule
of
minimum
fees,’
an
“advisory”
or
“suggested”
fee
schedule,°
or
arelative
value guide
including
suggested
relative
values
for
different
medical
services
that,
when
multiplied
by
conversion
factors
of
specific
dollar
amounts,
becomes
a
fee
schedule.’
Or,
as
discussed
below,
the
most
frequent
price-fixing
problem
in
the
health
care
sector
at
present
is
the
joint
negotiation
of
fee-for-service
prices
with
health
plans
by
provider-controlled
contracting
networks
on
behalf
of
the
competing
provider
members.
Horizontal
price-fixing
concerns
can
arise
when
competing
physician
groups
agree
among
themselves
on
the
terms
by
which
they
will
provide
services
to
hospitals and
their
patients.
In
one
case,
for
example,
the
FTC
challenged
an
agreement between
two
anesthesiology
practices
that
agreed
on
the
price
they
would
demand
from
a
hospital
to
provide
coverage
after
refusing
to
negotiate
with
the
hospital separately.*
On
the
buyer
side,
hospitals
might
agree
on
the
wages
to
pay
their
nurses,’
or
a
sham
group-purchasing
organization
may
be
no
more
than
a
buyer
price-fixing
cartel.
Pharmacies
have
alleged
that
pharmacy
benefit
managers
(PBMs)
are
a
conduit
through
which
PBM
health
insurer
customers
fix
the
prices
paid
to
pharmacies
for
dispensing
prescriptions.”
Un
&.g.,N.
Cal.
Pharm.
Ass’n
v.
United
States,
(9th
Cir.
1962).
6.
See,
e.g.,
Alston,
974
F.2d
at
1214
(“[A]doption
of
suggested
.
. .
fee
schedules
will
run
afoul
of
Section
One's
per
se
rule
as
a
thinly
veiled
attempt
at
price
fixing.”).
But
see
United
States
v.
Am.
Soc’y
of
Anesthesiologists,
473
F.
Supp.
147
(S.D.N-Y.
1979)
(upholding
defendant’s
advisory
fee
schedule}.
7.
E.g.,
Am.
Coll.
of
Obstetricians
&
Gynecologists,
88
F.T.C.
955
(1976),
modified,
104
F.T.C.
524
(1984).
For
an
extended
discussion
of
the
development,
dissemination,
and
use
of
such
schedules,
see
Am.
Soc’y
of
Internal
Med.,
105
F.T.C.
505
(1985)
(FTC
Advisory
Opinion).
Grossmont
Anesthesia
Servs.
Med.
Group,
136
F.T.C.
65
(2003).
9.
E.g.,
Consent
Decree
and
Competitive
Impact
Statement,
United
States
v.
Ariz.
Hosp.
&
Healthcare
Ass’n,
2007-2
Trade
Cas.
(CCH)
¥
75,869
(D.
Ariz.
2007)
(challenging
alleged
hospital
conspiracy
fixing
traveling-
nurse
wages);
see
generally
Jeff
Miles,
The
Nursing
Shortage,
Wage-
Information
Sharing
Among
Competing
Hospitals,
and
the
Antitrust
Laws,
7
Hous.
J.
oF
HEALTH
L.
&
POL’y
305
(2007).
10.
See,
eg.,
N.
Jackson
Pharmacy
v,
Caremark
Rx,
Inc.,
385
F.
Supp.
2d
740
(N_D.
Ill.
2005);
N.
Jackson
Pharmacy
v.
Express
Scripts,
Inc.,
(N.D.
Ala.
2004)
(“{I]f
plan
sponsors
have
conspired
to
fix
prices,
a
horizontal
restraint
is
created
even
if
PBMs
are
used
to
carry
os
Pricing
Conduct
in
Health
Care
Indusiries
153
Naked
horizontal
price-fixing
agreements
are
subject
to
possible
criminal
prosecution
by
the
Antitrust
Division.''
Although
rare,
the
Antitrust
Division,
in
years
past,
has
filed
criminal
actions against
provider
groups
for
participating
in
price-fixing
agreements.
In
recent
years,
health
care
providers,
particularly
physicians,
have
created and
participated
in
a
variety
of
different
types
of
organizations
that
act
as
networks
to
market
and
deliver
their
services
in
a
coordinated
manner
as
a
group,
such
as
physician
organizations
(POs),
mdependent
practice
associations
([PAs),
preferred
provider
organizations
(PPQs),
and
physician-hospital
organizations
(PHOs).
PHOs
include
hospitals
and
physictans
and
sometimes
other
types
of
providers
as
well.
Frequently,
these
organizations
collectively
negotiate
contract
terms,
including
price
terms,
with
health
pians
on
behalf
of
their
members.
Because
these
networks
and
their
interactions
over
price
with
health
plans
are
controlled
by
competing
providers
and
directly
affect
the
reimbursement
level
that
their
competing
physician
members
obtain
from
health
plans,
these
types
of
networks
(and
their
directors,
employees,
and
consultants)
have been
a
frequent
target
of
both
state
and
federal
governmental
antitrust
enforcement
agencies
in
cases
alleging
unlawful
horizontal
price-fixing
agreements.'?
The
networks’
actions
are
deemed
out
the
scheme.”);
Bellevue
Drug
Co.
v.
Advance
PCS, 2004
WL
724490
(E.D.
Pa.
2004).
11.
See,
eg.,
Information,
United
States
v.
Rhone-Poulenc
Biochimie,
S.A.,
Cr.
No.
4:003CR567RWS
(E.D.
Mo.,
filed
Sept.
18,
2003),
available
at
http://www.usdoj.gov/atr/public/press_releases/2003/201284.htm
(alleging
price-fixing
conspiracy
among
producers
of
a
chemical
that
decreases
rate
at
which
X-ray
contrast
media
disperses
in
the
body
during
imaging
procedures;
guilty
plea
and
$5
million
fine).
12.
See
United
States
v.
Alston,
(9th
Cir.
1992);
Information,
United
States
v.
Lake
Country
Optometric
Soc’y,
Cr.
No.
W9CR114
(W.D.
Tex.,
filed
available
at
http:/Awww.usdoj.gov/atr/cases/f0600/0607
pdf.
13.
See,
eg.,
Consent
Order,
Alta
Bates
Med.
Group,
Inc.,
Dkt.
No.
C-4260
(FTC
July
10,
2009),
available
at
http://www.ftc.gov/os/caselist/
0510260/090714abmgdo.pdf;
Consent
Order,
Indep.
Physician
Assocs.
Med.
Group,
Dkt.
No.
C-4245
(FTC
Feb.
2,
2009),
available
at
http://www.ftc.gov/os/caselist/0610258/index.shtm;
Proposed
Consent
Order,
Boulder
Valley
Individual
Practice
Ass’n,
File
No.
051
0252
(FTC
Dec.
24,
2008),
available
at
hitp://www?.ftc.gov/os/caselist/0510252/
081224boulderagree.pdf;
Consent
Decree
and
Competitive
Impact
Statement,
United
States
v.
Fed’n
of
Physicians
&
Dentists,
2008
WL
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