Antitrust

Antitrust laws are regulatory mechanisms designed to assure a competitive marketplace, not to protect the competitor, however big, small, good, or bad. Congress believes marketplace competition produces lower prices and better goods and services. There are federal and state antitrust laws. In Iowa, the bulk of antitrust action is brought in federal court under federal antitrust laws. Government regulators have made it clear physician behaviors are subject to antitrust scrutiny.

Federal Antitrust Laws

Section 1 of the Sherman Act, prohibiting concerted action to restrain trade or commerce, is the best known of the federal antitrust laws. The Department of Justice (DOJ) is the enforcement agency. An agreement between distinct entities to restrain trade is key to a Sherman charge. The unilateral action of a single enterprise, such as an integrated medical group, to advance its interests in the marketplace is not covered.

Courts interpret the Sherman Act as prohibiting concerted action to unreasonably restrain trade and have developed two ways to test the reasonableness of the restraint. The first, per se violations, are so pernicious and so unjustified as to be presumed as illegal even if done with consumer interests at heart; per se violations include price fixing, boycotts, and market allocations by competitors. The second test deploys a "rule of reason" analysis where the anticompetitive effects of an alleged restraint are balanced against its pro-competitive benefits.

Section 2 of the Sherman Act and section 7 of the Clayton Act prohibit monopolistic behaviors. The DOJ and the Federal Trade Commission (FTC) enjoy enforcement authority. Prohibited monopolistic actions require proof of market power. The relevant geographic and product markets must be defined. Monopoly cases are difficult and expensive to prove and to defend.

The AMA has Antitrust resources to help understand federal antitrust laws and their applicability to physician practices as well as AMA's advocacy efforts in the antitrust arena.

Iowa Law

Iowa Competition Law, Iowa Code chapter 553, is designed to complement and be harmonized with the federal antitrust laws. Similar to Section 1 of the Sherman Act, Iowa's law provides that a contract, combination, or conspiracy between two or more persons shall not restrain or monopolize trade or commerce in a relevant market. Similar to Section 2 of the Sherman Act and Section 7 of the Clayton Act, Iowa's law provides that a person shall not monopolize or attempt to monopolize trade or commerce in a relevant market for the purpose of excluding competition or controlling, fixing, or maintaining prices. The Iowa attorney general is empowered to bring criminal and civil actions under Iowa's law. In addition, a person injured or threatened with injury by conduct prohibited under the law may seek statutory remedy.

FTC/DOJ Report on Competition in Health Care

The Federal Trade Commission (FTC) and the federal Department of Justice (DOJ) issued a report entitled, "Improving HealthCare: A Dose of Competition" in July 2004. The FTC and DOJ found, among other things, that state certificate of need (CON) laws "can actually increase prices by fostering anticompetitive barriers to entry." A disappointing feature of the report was its response to health plan power in the marketplace. "Although there may be disparities in bargaining position between some payors and some providers, the available evidence does not indicate that there is a monopsony power problem in most health care markets."

Questions:

  1. What is the current role of competition in health care and how can it be enhanced to increase consumer welfare?
  2. How has and how should antitrust enforcement work to protect existing and potential competition in health care?

Recommendations:

  1. Private payers, governments, and providers should continue experiments to improve incentives for providers to lower costs and enhance quality and for consumers to seek lower prices and better quality;
  2. States should decrease barriers to entry into provider markets, including elimination of state certificate of need (CON) laws;
  3. Governments should reexamine the role of subsidies in health care markets in light of their inefficiencies and potential to distort competition;
  4. Government should not enact legislation to permit independent physicians to bargain collectively;
  5. States should consider the potential costs and benefits of regulating pharmacy benefit manager transparency;
  6. Governments should reconsider whether current mandates best serve their citizens' health care needs. When deciding to mandate particular benefits, governments should consider that such mandates are likely to reduce competition, restrict consumer choice, raise the cost of health insurance, and increase the number of uninsured Americans.