Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Tuesday, November 2, 2010

Are Clinically Integrated Physician Networks Candy-Coated Cartels?

Posted by D. Daniel Sokol

Gregory Pelnar (Compass Lexecon) asks Are Clinically Integrated Physician Networks Candy-Coated Cartels?

ABSTRACT: Are "clinically integrated" physician networks that jointly contract with third-party payors such as Blue Cross little more than "candy-coated" cartels? If the answer is not necessarily, then how can one distinguish the good (i.e., those that raise consumer welfare) from the bad (i.e., those that do not)? While the Antitrust Division of the U.S. Department of Justice ("DOJ") and the Federal Trade Commission ("FTC") (collectively, "the Agencies") have provided some general guidance on this issue, there has been a call for the Agencies to provide additional guidance.

In what follows, I review the variety of organizational forms that populate the market for physician services. I then discuss the antitrust treatment of one type of organizational form-the clinically integrated physician network joint venture. Then I present an economic analysis of clinical integration. I conclude with some thoughts on additional guidance.

November 2, 2010 | Permalink | Comments (0) | TrackBack (0)

An Opportunity for Reform of the U.K. Competition Regime

Posted by D. Daniel Sokol

Antonio Bavasso & Simon Pritchard (Allen & Overy) suggest An Opportunity for Reform of the U.K. Competition Regime.

ABSTRACT: The Government's spending review provides an opportunity to look strategically at possible reforms in U.K. competition law enforcement. The reforms that modernized the U.K. regime of competition enforcement with the 1998 Competition Act and the 2002 Enterprise Act have largely been successful. The United Kingdom is now seen as one of the worldwide leaders in best practices for competition enforcement. Actions of competition authorities and regulators are subject to an effective system of appeal and judicial review by a respected and authoritative Competition Appeal Tribunal ("CAT").

The rhetoric of the "public interest" that would bring larger parts of competition law enforcement back into the political sphere under a public interest (as opposed to competition) test seems to have receded.  This retreat should be welcomed, as it would have put the United Kingdom out of step with international best practices. The financial crisis has not shifted that paradigm. Cases such as Lloyds/HBOS are-and should remain-the exception. There is, however, scope for reform to help the system, as a whole, deliver more for less.

November 2, 2010 | Permalink | Comments (0) | TrackBack (0)

Clinical Integration: The Balancing of Competition and Health Care Policies

Posted by D. Daniel Sokol

Christi Braun (Ober Kaler) discusses Clinical Integration: The Balancing of Competition and Health Care Policies.

ABSTRACT: The reason that clinical integration is a topic on which the Federal Trade Commission ("FTC") and the Department of Justice Antitrust Division ("DOJ") have written and spoken extensively is that providers who develop and operate clinical integration networks do so with the intent to jointly sell their services to health insurance plans, self-insured employers, and other third-party payers (collectively, "payers"). Concerned about the market power that joint contracting by otherwise independent, competing providers can generate and, thus, the potential harm of higher prices and reduced consumer access to high quality care, the federal antitrust authorities have prosecuted many provider organizations for unreasonably restraining competition through joint contracting. To date, though, neither federal agency has prosecuted, or entered a consent order with, a provider-contracting network that implemented a legitimate program of clinical integration among its participating providers. The reason is their desire to promote, rather than stifle, the development of innovative arrangements through which providers will work collaboratively to improve the quality of care patients receive and to control the spiraling rise of health care costs. And that reason is not surprising, given that controlling costs and improving quality was, and will remain, a major focus of health care reform.

November 2, 2010 | Permalink | Comments (0) | TrackBack (0)

Monday, November 1, 2010

Market Definition, the New Horizontal Merger Guidelines, and the Long March Away from Structural Presumptions

Posted by D. Daniel Sokol

Deb Garza (Covington) provides some historical context to the merger guidelin discussion in her comment Market Definition, the New Horizontal Merger Guidelines, and the Long March Away from Structural Presumptions.

 

November 1, 2010 | Permalink | Comments (0) | TrackBack (0)

The Cost of Death - Competition and Consumers in the Funerary Services Market

Posted by D. Daniel Sokol

Francisco Marcos, Instituto de Empresa Business School describes The Cost of Death - Competition and Consumers in the Funerary Services Market.

ABSTRACT: This book develops an economic and legal analysis on the Spanish funerary services market from the point of view of antitrust and consumers’ protection laws. After describing the main services that can be contracted in this market, and the peculiar process of decision-making and consumption, the main agents of the market are examined, as well as the relationships between them and the legal framework in which they develop their activities, explaining the important liberalization of its regulation in 1997. The study of the agents, their behavior guidelines and the regulatory framework in which they act leads to the analysis on the competition restrictions on the funerary market, detailing the most common illegal practices that can be extracted from the Spanish Competition Tribunal’s resolutions and from the experience in other countries. From a contractual perspective, the weak position and vulnerability of consumers in this market due to information constraints and emotional reasons may justify the adoption of legal rules that protect them from potential abuses by funeral firms.

November 1, 2010 | Permalink | Comments (0) | TrackBack (0)

Brand Loyalty, Generic Entry and Price Competition in Pharmaceuticals in the Quarter Century After the 1984 Waxman-Hatch Legislation

Posted by D. Daniel Sokol

Ernst R. Berndt, MIT Sloan School of Management and Murray Aitken, Healthcare Insight, IMS Health observe Brand Loyalty, Generic Entry and Price Competition in Pharmaceuticals in the Quarter Century After the 1984 Waxman-Hatch Legislation.

ABSTRACT: The landmark Waxman-Hatch Act of 1984 represented a “grand compromise” legislation that sought to balance incentives for innovation by establishing finite periods of market exclusivity yet simultaneously providing access to lower cost generics expeditiously following patent expiration. Here we examine trends in the first quarter century since passage of the legislation, building on earlier work by Grabowski and Vernon [1992,1996] and Cook [1998]. The generic share of retail prescriptions in the U.S. has grown from 18.6% in 1984 to 74.5% in 2009, with a notable acceleration in recent years. This increase reflects increases in both the share of the total market potentially accessible by generics, and the generic efficiency rate – the latter frequently approaching 100%. Whereas in 1994, the generic price index fell from 100 to 80 in the 12 months following initial generic entry and by 24 months to 65, in 2009 the comparable generic price indexes are 68 and 27, respectively. Recent studies sponsored by the American Association of Retired Persons focus only on brand prices and ignore substitution to lower priced options following loss of patent protection. For the prescription drugs most commonly used by beneficiaries in Medicare Part D, the average price per prescription declined by 21.3% from 2006 to 2009, rather than increasing by 25-28% as reported by the AARP. Finally, we quantify changes over time in the average daily cost of pharmaceutical treatment in nine major therapy areas, encompassing the entire set of molecules within each therapy class, not simply the molecule whose patent has expired. Across all nine therapeutic areas, at 24 months post-generic entry, the weighted mean reduction in pharmaceutical treatment cost per patient is 35.1%.

November 1, 2010 | Permalink | Comments (0) | TrackBack (0)

Recidivism Revealed: Private International Cartels 1991-2009

Posted by D. Daniel Sokol

John M. Connor Purdue University - Ag Econ discusses Recidivism Revealed: Private International Cartels 1991-2009.

ABSTRACT: The objective of this paper is to look for empirical regularities in the sample of 389 recidivists that engaged in international price-fixing in the past 20 years. Recidivism appears to be increasing rapidly, both in number and relative to all corporate cartelists. Recidivists are overwhelmingly headquartered in northern Europe or Japan, and they tend to be highly diversified multinational firms that sell homogeneous producer goods. The skills acquired from participating in multiple price conspiracies are transferable across divisional lines at very low marginal costs. Those acquired skills include identifying feasible collusive opportunities, negotiating mutually satisfactory deals, diplomatically dealing with partners when no enforceable contract exists, and evading detection by the antitrust authorities.

November 1, 2010 | Permalink | Comments (0) | TrackBack (0)

Collusion at the Extensive Margin

Posted by D. Daniel Sokol

Martin C. Byford, RMIT University - School of Economics, Finance and Marketing and Joshua S. Gans, University of Melbourne - Melbourne Business School, University of Melbourne - Department of Economics describe Collusion at the Extensive Margin.

ABSTRACT: This paper is the first to examine collusion at the extensive margin (whereby firms collude by avoiding entry into each other's markets or territories). We demonstrate that such collusion offers distinct predictions for the role of multiple markets in sustaining collusion such as the use of proportionate response enforcement mechanisms, the possibilities of oligopolistic competition with a collusive fringe, and predatory entry. We argue that collusion at the extensive margin poses dicult issues for antitrust authorities relative to its intensive margin counterpart.

November 1, 2010 | Permalink | Comments (0) | TrackBack (0)