Health Insurance and Drug Company Execs Must Be Chuckling Over Antitrust Enforcement of Providers

Unbridled healthcare market competition and the resulting higher prices for healthcare services have turned up the heat on the federal antitrust agencies that are supposed to protect us from such things. The scrutinizers are getting scrutinized for not doing their jobs effectively, and rightfully so.

We talked about that on a recent episode of our 4sight Health Roundup podcast, “More Healthcare Competition Through Better Healthcare Antitrust Enforcement.”

Most of our discussion and of the scrutiny are about the lack of antitrust enforcement by the Federal Trade Commission and antitrust division of the U.S. Department of Justice (DOJ) of healthcare provider mergers and acquisitions — hospitals, health systems and medical practices. Little of the discussion and of the scrutiny is about mergers and acquisitions in other sectors of the healthcare industry.

That’s why I found two recent industry reports so interesting. Together, the reports suggest that the FTC and DOJ have a blind spot when it comes to consolidation in other healthcare markets.

The Association of American Medical Colleges (AAMC) released the first report, Why Market Power Matters for Patients, Insurers, and Hospitals, on May 1, 2024. AAMC researchers compared the market shares of the largest health systems in each state with the market shares of the largest health insurers in each state. The AAMC researchers defined a health system as one that has at least one hospital and at least one physician group practice under common ownership or joint management. They measured market share for health systems by total hospital discharges in a state, and they measured market share for insurers by total enrollment in a state.

Here’s what they found:

• On average, the three largest health systems in a state had a combined market share of 43.1%.
• On average, the three largest health insurers in a state had a combined market share of 82.2%.

In other words, big insurers have nearly double the combined market share in a state compared with big health systems. Yet, no one at the federal or state level is giving health insurers grief over market consolidation.

“This increased consolidation of insurers suggests that policymakers’ exclusive focus on regulating provider consolidation is problematic,” the report said. “Insurer consolidation has resulted in lower prices (or charges), but the impact on reimbursements to providers is unclear. Importantly, there has not been evidence of reduced premiums for patients and some studies have found evidence that insurer consolidation increases premiums.”

The second report is a study published May 20, 2024, in the Journal of the American Medical Association. Four researchers with Brigham and Women’s Hospital and the Harvard Medical School wanted to know how active the FTC has been in overseeing the pharmaceutical sector of the healthcare industry for potential antitrust violations. The short answer is not too active.

The researchers identified 85 antitrust actions by the FTC against pharmaceutical manufacturers from 2000 through 2022. Of the 85 actions, 62 were antitrust challenges of proposed mergers or acquisitions. Twenty-two were enforcement actions against alleged anticompetitive behavior like violations of patent agreements or non-compete agreements. One was a new regulation on premerger notifications.

Of the 62 antitrust challenges to proposed mergers or acquisitions, 61 went through after the parties to the consolidation agreed to certain conditions like selling off a drug that would give the combined drug companies a monopoly on that particular drug. In one cast the parties scrapped their proposed deal.

So, as the researchers noted after using math that even I can understand, the FTC took as average of one enforcement action a year against drug companies over the 22-year study period. The agency challenged an average of three proposed drug company mergers or acquisitions a year over the study period.

The researchers described the FTC’s antitrust track record as “pursuing a small fraction of the estimated misconduct and consolidation in the pharmaceutical marketplace.”

The two reports raise the question of why federal antitrust agencies seem to be more lenient with health insurance companies and drug companies than they are with providers. I don’t know, and I don’t want to speculate. I do know that consumers need more competition in every sector of the healthcare industry if they’re ever going to see healthcare prices get more affordable.

Thanks for reading.