In an interesting political twist, the difference in approaches to antitrust enforcement between Democrat and Republican Administrations has been narrowing.  It used to be that the difference in party control of the Antitrust Division and the Federal Trade Commission would have a significant impact on enforcement priorities.  That gap is definitely changing and reflects growing agreement in the public in preventing anti-competitive conduct.

Much of this has been the result of the growing influence of tech companies, social media and media outlets.  The public has become concerned about this rapid change in the marketplace. 

Another area of growing public frustration has been with the lack of competition in the healthcare sector, resulting in higher prices, lower quality of care, and higher deductibles.  The American public is getting fed up with this deteriorating situation.

The outgoing Assistant Attorney General Jonathan Kanter gave an interesting speech on the need for more antitrust enforcement in the healthcare industry.  His comments are noteworthy and likely to bring about common interests with the new Trump Administration.

AAG Kanter expressed his concern about the growth and expansion of monopoly power in the healthcare industry, citing the difficulty that individuals experience in securing coverage for their prescription medication, the problems that doctors experience in “battling corporate middlemen to secure care for their patients, and as provider rollups encourage cutting corners and short staffing.”

According to AAG Kanter, health care costs totaled $4.5 trillion in 2022. Of the total health care spending, Medicare and Medicaid together accounted for approximately 40%. While Medicare has long contracted with insurers to offer privately run plans, these companies played only a minor role in providing healthcare services until the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (MMA) was enacted. In his view, Medicare Advantage has become substantially more expensive per patient to American taxpayers than traditional Medicare, as insurers exploit the system to charge the government more.

Compounding this situation, AAG Kanter noted that employer-sponsored insurance costs also continue to climb substantially. For three years, employer premiums have increased by more than 5%, and family premiums for employer-sponsored health insurance rose 7% this year. As health care costs skyrocket, businesses are shifting more of those costs onto their workers, with insurance plans that require them to pay more — higher premiums, higher deductibles, higher co-pays and higher out-of-pocket minimums.

To address all of these marketplace infirmities, AAG Kanter cited the following remedies for competition policy and antitrust enforcement.  He drew an interesting analogy to the videogame — Tetris.  Antitrust enforcers analyzed competition issues based on “simplistic blocks” that created vertical or horizontal market relationships, focusing on provider markets or insurer markets without considering competitive interplays.

The reliance on two-dimensional “vertical” and “horizontal” analysis ignored the rapid reorganization of the healthcare marketplace into a multi-sided or multidimensional platform. As a result competition analysis and enforcement missed opportunities to “assess how broader changes in business, such as the rise of platform business models, health care technology and regulatory incentives, impacted competition.”

Too often, “vertical integration” was seen as leading to greater value, lower costs and more integrated care. This simple approach, however, “blessed consolidation and entrenchment across vast swathes of the health care ecosystem without appropriate consideration of the boarder impact.”

As Kanter noted, America’s largest health care companies are no longer just health insurers or pharmacy benefit managers, and they are no longer just doctor groups or hospitals. They are all of the above. Meanwhile, consolidated health markets have failed to deliver on the promise of better care, lower prices, and increased access. Instead of increasing efficiency, health care platform integration and annexation has created perverse incentives, conflicts of interest and opportunities for self-preferencing.

As an example of a growing problem, AAG Kanter noted the rise of pharmacy benefit managers (PBM) was characterized as a useful counterweight to drug companies and pharmacies. PBMs have themselves become big — three vertically integrated entities now control 80% of the industry, with each enjoying even greater market power at the local level.  The loser in this equation has been the consumer since patients have not benefited from the risk of PBMs. Instead, PBMs have engaged in self-preferencing and steering to affiliated pharmacies to the exclusion of others, pushing rebating practices that drive up sticker prices and discourage new drug entry, enabling their affiliated insurers to evade medical loss-ratios and tying PBM and medical insurance products.

AAG Kanter noted similar concerns in other parts of the healthcare marketplace, noting moat-building, steering and coercion and regulatory gamesmanship. To this end, healthcare companies are entering multiple levels of the ecosystem to shield themselves from competition by forcing competitors engage in similar high-cost entry strategies. 

In addition, with the development of health care platforms and stacks, AAG Kanter noted there are growing conflicts of interest that manifest in ways such as steering, self-preferencing, exclusivity and other forms of exclusionary and anticompetitive conduct. Further, he noted that competition often entails regulatory gamesmanship where circumvention of regulations results in significant financial gains. 

AAG Kanter noted that the confluence of these significant trends can harm patients and communities. Small and independent healthcare businesses are vanishing in the face of dominant large multi-level healthcare systems.  AAG Kanter closed by stating that “we are at an inflection point,” and [a failure to act] will result in a health care market “where a few integrated health care platform stacks will amass a generational hold over health care.”