An executive order issued by President Joe Biden on July 9, 2021 cracks down on hospital and health insurance consolidations and other actions it said decreases competition and drives up prices.
The four areas of healthcare targeted are: prescription drugs, hospital consolidation, health insurance consolidations and hearing aids.
Hospital consolidation has left many areas, especially rural communities, without good options for convenient and affordable healthcare service, the order said.
“Thanks to unchecked mergers, the ten largest healthcare systems now control a quarter of the market,” the order said. “Since 2010, 139 rural hospitals have shuttered, including a high of 19 last year, in the middle of a healthcare crisis. Research shows that hospitals in consolidated markets charge far higher prices than hospitals in markets with several competitors.”
The order encourages the Department of Justice and the Federal Trade Commission to enforce antitrust laws vigorously and “recognizes that the law allows them to challenge prior bad mergers that past Administrations did not previously challenge.”
In the order, Biden encourages the DOJ and FTC to review and revise their merger guidelines to ensure patients are not harmed by such mergers.
Responding today, FTC Chair Lina Khan and Acting Assistant Attorney General of the Justice Department Antitrust Division Richard A. Powers said they plan soon to jointly launch a review of their merger guidelines with the goal of updating them to reflect a rigorous analytical approach consistent with applicable law.
“We must ensure that the merger guidelines reflect current economic realities and empirical learning and that they guide enforcers to review mergers with the skepticism the law demands,” they said. “The current guidelines deserve a hard look to determine whether they are overly permissive.”
Biden directed the Department of Health and Human Services to support existing hospital price transparency rules and to finish implementing bipartisan federal legislation to address surprise hospital billing.
Consolidation in the health insurance industry has meant that many consumers have little choice when it comes to selecting insurers, the order said.
Biden directed HHS to standardize plan options in the health insurance marketplace so people can comparison shop more easily. Plans offered on the exchanges are complicated by the various services offered and differences in deductibles, the order said.
High prescription drug prices are, in part, the result of lack of competition among drug manufacturers, the order said.
“The largest pharmaceutical companies are able to wield their market power to reap average annual profits of 15-20%, as compared to average annual profits of 4-9% for the largest non-drug companies,” it said.
The order encourages the FTC to ban “pay for delay,” a system in which drug manufacturers pay generic manufacturers to stay out of the market.
The practice has raised drug prices by $3.5 billion per year. Research also shows that “pay for delay” and similar deals between generic and brand-name manufacturers reduce innovation, the order said.
The president directed the Food and Drug Administration to work with states and tribes to safely import prescription drugs from Canada, pursuant to the Medicare Modernization Act of 2003; directed HHS to increase support for generic and biosimilar drugs; and directed HHS to issue a comprehensive plan within 45 days to combat high prescription drug prices and price gouging.
The four largest hearing aid manufacturers now control 84% of the market, according to the order.
The president wants to see hearing aids, now available only through a doctor’s visit, available over the counter. In the order, the president directs HHS to consider issuing proposed rules within 120 days to allow hearing aids to be sold over the counter.
“Hearing aids are so expensive that only 14% of the approximately 48 million Americans with hearing loss use them,” the order said. “On average, they cost more than $5,000 per pair, and those costs are often not covered by health insurance.”
In 2017, Congress passed a bipartisan proposal to allow hearing aids to be sold over the counter. However, under the Trump Administration, the FDA failed to issue the necessary rules that would actually allow hearing aids to be sold over the counter, the order said.
WHY THIS MATTERS
Rick Pollack, president and CEO of the American Hospital Association urged federal agencies to focus on policies that address competition among commercial health insurers.
“In fact, with commercial health insurance plans, nearly three out of four markets were highly concentrated in 2019 and the top five largest insurers alone control nearly 50% of the market. Studies have found that when an insurance market is highly concentrated, insurers reduce provider payments and do not pass savings along to the consumer.”
Hospital mergers and acquisitions, he said, “undergo an enormous amount of rigorous scrutiny from the federal antitrust agencies and state attorneys general. Finally, contrary to statements in the executive order, health systems can be a particularly important option for retaining access to hospital services in some rural communities. Mergers with larger hospital systems can also provide community hospitals the scale and resources needed to improve quality and decrease costs.”
The executive order did not recognize the exceptional value and essential services health systems provide to their patients and communities each day, especially during COVID-19, he said.
“Many hospitals were also called upon to backstop an inadequate public health response by providing information, counseling and vaccinations as those became available,” Pollack said.
Speculation on Twitter questions what the order means for such consolidations as Optum acquiring Change Healthcare, a deal announced in January.
THE LARGER TREND
The order includes 72 initiatives focused on anticompetitive practices in labor markets, agricultural markets, healthcare markets and the tech sector.
It establishes a White House Competition Council, led by the Director of the National Economic Council, to monitor progress on finalizing the initiatives in the order and coordinate the federal government’s response to “the rising power of large corporations in the economy.”