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A More Aggressive FTC Is Starting to Target Drug Mergers and Industry Middlemen

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by Arthur Allen
Mon, 22 May 2023 09:00:00 +0000

Under the leadership of an aggressive opponent of anti-competitive business practices, the Federal Trade Commission is moving against drug companies and industry middlemen as part of the Biden administration's push for lower drug prices at the pharmacy counter.

On May 16, the FTC sued to block the merger of drugmakers Amgen and Horizon , saying the tangled web of drug industry deal-making would enable Amgen to leverage the monopoly power of two top Horizon that have no rivals.

In its lawsuit, the FTC said that if it Amgen's $27.8 purchase to go through, Amgen could pressure the companies that manage access to prescription drugs — pharmacy benefit managers, or PBMs — to boost the two extremely expensive Horizon products in a way that would inhibit any competition.

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The suit, the first time since 2009 that the FTC has tried to block a drug company merger, reflects Chair Lina Khan's strong interest in antitrust action. In announcing the suit, the agency said that by fighting monopoly powers it aimed to tame prices and improve patients' access to cheaper products.

FTC's action is a “shot across the bow for the pharmaceutical industry,” said Robin Feldman, a professor and drug industry expert at the of California College of the Law-San Francisco. David Balto, a former FTC official and attorney who fought the 2019 Bristol-Myers Squibb-Celgene and 2020 AbbVie-Allergan mergers, said FTC's action was long overdue.

The Horizon-Amgen merger would “cost consumers in higher prices, less choice, and innovation,” he said. “The merger would have given Amgen even more tools to exploit consumers and harm competition.”

The FTC also announced an expansion of a yearlong investigation of the PBMs, saying it was looking at two giant drug- companies, Ascent Health Services and Zinc Health Services. Critics claim the PBMs set up these companies to conceal profits.

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When Amgen announced its purchase of Horizon in December — the biggest biopharma transaction in 2022 — it showed particular interest in Horizon's drugs for thyroid eye disease (Tepezza) and severe gout (Krystexxa), which the company was charging up to $350,000 and $650,000, respectively, for a year of treatment. The complaint said the merger would disadvantage biotech rivals that have similar products in advanced clinical testing.

Amgen could promote the Horizon drugs through “cross-market bundling,” the FTC said. That means requiring PBMs to promote some of Amgen's less popular drugs — the Horizon products, in this case — in exchange for Amgen offering the PBMs large rebates for its blockbusters. Amgen has nine drugs that each earned more than $1 billion last year, according to the complaint, the most popular being Enbrel, which treats rheumatoid arthritis and other diseases.

The three biggest PBMs negotiate prices and access to 80% of prescription drugs in the U.S., giving them enormous bargaining power. Their ability to influence which drugs Americans can get, and at what price, enables the PBMs to obtain billions in rebates from drug manufacturers.

“The prospect that Amgen could leverage its portfolio of blockbuster drugs to gain advantages over potential rivals is not hypothetical,” the FTC complaint states. “Amgen has deployed this very strategy to extract favorable terms from payers to protect sales of Amgen's struggling drugs.”

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The complaint noted that biotech Regeneron last year sued Amgen, alleging that the latter's rebating strategy harmed Regeneron's ability to sell its competing cholesterol drug, Praluent. Amgen's Repatha generated $1.3 billion in global revenue in 2022.

It “may be effectively impossible” for smaller rivals to “match the value of bundled rebates that Amgen would be able to offer” as it leverages placement of the Horizon drugs on health plan formularies, the complaint states.

Business analysts were skeptical that the FTC action would succeed. Until now the commission and the Department of Justice have shied away from challenging pharmaceutical mergers, a precedent that will be hard to overcome.

Research on the impact of mergers has shown that they often benefit shareholders by increasing stock prices, but hurt innovation in drug by trimming research projects and staffing.

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Waves of consolidation shrank the field of leading pharma companies from 60 to 10 from 1995 to 2015. Most of the mergers in recent years have involved “big fish buying up lots of little fish,” such as biotech companies with promising drugs, Feldman said.

The giant Amgen-Horizon merger is an obvious exception, and therefore a good for the FTC to demonstrate a “theory of harm” around drug industry bundling maneuvers with PBMs, said Aaron Glick, a mergers analyst with Cowen & Co.

But that doesn't mean the FTC will win.

Amgen may or may not engage in anti-competitive practices, but “a separate question is, how does this lawsuit fit under current antitrust laws and precedent?” Glick said. “The way the law is set up today, it seems unlikely it will hold up in court.”

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The FTC's argument about Amgen's behavior with Horizon products is hypothetical. The pending Regeneron suit against Amgen, as well as other, successful lawsuits, suggests that rules are in place to suppress this kind of anti-competitive behavior when it occurs, Glick said.

The judge presiding over the case in U.S. District Court in Illinois is John Kness, who was appointed by then-President Donald Trump and is a former member of the Federalist Society, whose membership tends to be skeptical of antitrust efforts. The case is likely to be settled by Dec. 12, the deadline for the merger to go through under current terms.

Amgen sought to undercut the government's case by agreeing not to bundle Horizon products in future negotiations with pharmacy benefit managers. That promise, while hard to enforce, might get a sympathetic hearing in court, Glick said.

Still, even a loss would enable the FTC to shed light on a problem in the industry and what it sees as a deficiency in antitrust laws that it wants Congress to correct, he said.

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The day after suing to stop the merger, the FTC announced it was pushing further into an investigation of pharmacy benefit managers that it began last June. The agency demanded information from Ascent and Zinc, the two so-called rebate aggregators — drug purchasing organizations set up by PBMs Express Scripts and CVS Caremark.

At a May 10 hearing, Eli Lilly & Co. Dave Ricks said that most of the $8 billion in rebate checks his company paid last year went to rebate aggregators, rather than to the PBMs directly. A “big chunk” of the $8 billion went overseas, he said. Ascent is based in Switzerland, while Emisar Pharma Services, an aggregator established by PBM OptumRx, is headquartered in Ireland. Zinc Health Services is registered in the U.S.

Critics say the aggregators enable PBMs to obscure the size and destination of rebates and other fees they charge as intermediaries in the drug business.

The PBMs say their efforts reduce prices at the pharmaceutical counter. Testimony in Congress and in FTC hearings over the past year indicate that, at least in some instances, they actually increase them.

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KFF Health News is a national newsroom that produces in-depth journalism about health issues and is one of the core operating programs at KFF—an independent source of health policy research, polling, and journalism. Learn more about KFF.

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By: Arthur Allen
Title: A More Aggressive FTC Is Starting to Target Drug Mergers and Industry Middlemen
Sourced From: kffhealthnews.org//article/a-more-aggressive-ftc-is-starting-to-target-drug-mergers-and-industry-middlemen/
Published Date: Mon, 22 May 2023 09:00:00 +0000

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In San Francisco’s Chinatown, a CEO Works With the Community To Bolster Hospital

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Bernard J. Wolfson
Fri, 19 Apr 2024 09:00:00 +0000

SAN FRANCISCO — Chinese Hospital, located in the heart of this 's legendary Chinatown, struggles with many of the same financial and demographic challenges that plague small independent hospitals in underserved across the country.

Many of its patients are aging Chinese speakers with limited incomes who are reliant on Medicare and Medi-Cal, which pay less than commercial insurance and often don't fully cover provider costs. And due to an arcane federal rule, Chinese Hospital receives a lower rate of reimbursement than many other hospitals that treat a large number of low-income patients. Add the high cost of labor and supplies in this post-pandemic world, and it's not hard to see why the hospital lost $20 million over the past two years and tapped a nearly $10.4 million loan from the 's distressed hospital loan fund.

Yet the 88-bed hospital has strong ties to the of California-San Francisco and the city's public health department. And it gets from businesses, charities, and the surrounding community. For Jian Zhang, 58, the hospital's since 2017, fundraising is like breathing.

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“I feel like it's a full-time job for me,” said Zhang, who arrived in San Francisco from Guangzhou, China, as an international student in 1990, earned a nursing doctorate from the University of San Francisco, and has remained in the Bay Area.

Revenue from fundraising and other services have provided a big boost, helping the hospital significantly offset what it lost on patient care in 2022, according to the hospital and state data. By contrast, Madera Community Hospital and Beverly Hospital were far less able to do so. Those hospitals, which also serve low-income populations with many patients on government programs, filed for bankruptcy last year.

Chinese Hospital has its roots in a medicinal dispensary, founded in 1899 to provide health care for Chinese immigrants who were effectively excluded from mainstream medical facilities. The hospital itself opened in 1925, and a second building was added next door in 1979. In 2016, a new building replaced the original hospital.

, Chinese Hospital includes those two buildings plus five outpatient clinics offering Eastern and Western medicine, spread out across San Francisco and neighboring San Mateo County. Through partnerships, Chinese Hospital has been able to offer specialty services to its patients, including eye surgery, palliative care, and a stroke center. And $10 million in grants it received from the state last year will help build a subacute unit, which is for fragile patients who still need nursing and monitoring following a hospital stay.

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In an interview with KFF Health News senior correspondent Bernard J. Wolfson, Zhang discussed the challenges facing small independent hospitals, including Chinese Hospital, and offered her vision for its future. The following Q&A has been edited for length and clarity:

Q: What are some of the main challenges your hospital faces?

We are facing all the challenges other hospitals are facing, especially the covid pandemic and its associated negative impact — the physician shortage and workforce shortage, the labor cost increases. But as a small community hospital, we don't have a lot of reserve money. It's hard to make ends meet.

That is a huge because of the low reimbursement rate. We serve more than 80% Medicare and Medi-Cal patients.

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Q: What are some specific challenges of serving a largely Chinese population?

In this market, with the workforce shortage, and especially after the pandemic, it's even harder to recruit bilingual physicians, and other bilingual staff.

And culturally, Chinese patients, when they are sick, need to drink soup for healing or eat certain other foods for healing. You can't be providing sandwiches and salads. They won't eat that. So our kitchen has to provide Chinese food, has to boil soup, and then we have to cook different food for our patients who are non-Chinese.

Q: Are you concerned about the state's budget shortfall?

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Absolutely. We all were expecting that Medi-Cal would increase rates. We have been pushing that for many years. But if it's not going to happen, a lot of our programs we probably won't be able to do. I am very concerned about it.

Q: Chinese Hospital has its own health plan, and you said 40% to 50% of your patients are members of it. How has that helped?

It's like Kaiser Permanente. You have your own members, and you manage them. You want your patients to be in outpatient. So you take care of them, keep them healthy, so they don't need to to the hospital for acute care. That's how you save money.

Q: And I imagine that getting fixed monthly payments — capitation payments — for a large proportion of your patients also helps?

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Definitely, capitation payments help. Especially during the pandemic. Think about it. If you didn't have capitation payments, when procedures were canceled, you didn't have income.

Q: What else has helped you weather the storm?

We have partnerships with San Francisco's Department of Public Health and UCSF. During the pandemic, we took overflow patients from the city, so we didn't have to lay off a lot of people. We signed a contract with the city to open up the second floor of our hospital to take overflow patients from Zuckerberg San Francisco General hospital.

Q: You also have strong fundraising activity.

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We do have strong community support. The hospital is not just a hospital to me. It's really part of our history. In the past, it was the only place [Chinese people] could go. Wherever I went, to a conference, for example, somebody would raise their hand and say, “Oh, I was born at Chinese Hospital” or “My grandfather was born at Chinese Hospital.” It is really, really deeply rooted in the community.

Q: What's your vision for the future of the hospital?

Chinese Hospital is very important to the community, and I want to see it survive and thrive. But it definitely needs support from the government and from the community. Moving forward, we will continue to build on collaborations and partnerships.

This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. 

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——————————
By: Bernard J. Wolfson
Title: In San Francisco's Chinatown, a CEO Works With the Community To Bolster Hospital
Sourced From: kffhealthnews.org/news/article/san-francisco-chinatown-chinese-hospital-ceo-jian-zhang-interview/
Published Date: Fri, 19 Apr 2024 09:00:00 +0000

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Newsom Offers a Compromise to Protect Indoor Workers from Heat

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Samantha Young
Thu, 18 Apr 2024 23:15:57 +0000

SACRAMENTO, Calif. — Gov. Gavin Newsom's administration has compromised on long-sought rules that would protect indoor workers from extreme heat, saying tens of thousands of prison and jail employees — and prisoners — would have to wait for relief.

The deal a month after the administration unexpectedly rejected sweeping heat standards for workers in sweltering warehouses, steamy kitchens, and other dangerously hot job sites. The rules had been years in the making, and a worker safety board voted to adopt them March 21. But in a controversial move, the administration upended the process by saying the cost to cool state prisons was unclear — and likely very expensive.

So the Democratic administration said the rules can proceed but must exempt tens of thousands of workers at 33 state prisons, conservation camps, and local jails, “in recognition of the unique implementation challenges,” said Eric Berg, of California's Division of Occupational Safety and , at a Thursday hearing. A separate regulation will be drafted for correctional facilities, which could take a year, if not longer.

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It's unclear if the standards will become law in time to protect millions of other workers from summer's intensifying heat. The compromise rules must go through a 15-day public comment period, and legal reviews within 100 days, which could push implementation well into summer. But that can't even happen until the original regulation is rejected by the Office of Administrative Law, which has until next month.

“Summer is arriving, and many workers, unfortunately, are going to suffer heat conditions,” said Tim Shadix, legal director at the Warehouse Worker Resource Center. “Some will likely get really sick, potentially even die from heat illness, while we continue to wait for the standard.”

Berg told members of the Occupational Safety and Health Standards Board on April 18 that Cal/OSHA would try to accelerate the timeline and get protections in place for summer.

California has had heat standards on the books for outdoor workers since 2005, and rules for indoor workplaces have been in the works since 2016. The proposed standards would require work sites to be cooled below 87 degrees Fahrenheit when employees are present and below 82 degrees in places where workers wear protective clothing or are exposed to radiant heat, such as furnaces. Buildings could be cooled with conditioning, fans, misters, and other methods.

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The rules allow workarounds for businesses that can't cool their workplaces sufficiently, such as laundries or restaurant kitchens.

Because the rules would have a sweeping economic impact, state law requires Newsom's Department of Finance to sign off on the financial projections, which it refused to do last month when it was unclear how much the regulations would cost state prisons. The California Department of Corrections and Rehabilitation said implementing the standards in its prisons and other facilities could cost billions, but the board's economic analysis pegged the cost at less than $1 million a year.

Department of Finance spokesperson H.D. Palmer couldn't promise that the compromise rules would be signed off on, but “given that the earlier correctional estimates were the issue before, not having them in the revised package would appear to address that issue,” he said.

Business and agricultural groups complained repeatedly during the rulemaking process that complying with the rules would burden businesses financially. At the April 18 hearing, they highlighted the administration's lack of transparency and questioned why one sector should be given an exemption over another.

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“The massive state costs that are of concern, specifically around prisons in the billions of dollars, are also costs that California employers will bear,” said Robert Moutrie, a senior policy advocate at the California Chamber of Commerce.

Labor advocates asked board members not to exempt prisons, saying corrections workers need protection from heat, too.

“It's a huge concern that prison workplaces all over are being excluded from the heat standard, leaving out not just guards, but also nurses, janitors, and the other prison workers across California unprotected from heat,” said AnaStacia Nicol Wright, an attorney with Worksafe, a workplace safety advocacy nonprofit. “California needs to prioritize the safety and well-being of their workers, regardless of whether they work in corrections, a farm, or a sugar refinery.”

Prisons will continue to cooling stations in air-conditioned , and make stations, fans, portable cooling units, and ice more available to workers, according to the California Department of Corrections and Rehabilitation. Prison housing units, which house roughly 94,000 inmates as of January, all can be cooled, usually with evaporative coolers and fans.

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Only Minnesota and Oregon have adopted heat rules for indoor workers. Legislation has stalled in Congress, and even though the Biden administration has initiated the long process of establishing national heat standards for outdoor and indoor work, they may take years to finalize.

Seven workers died in California from indoor heat between 2010 and 2017. Heat stress can lead to heat exhaustion, heatstroke, cardiac arrest, and kidney failure. In 2021, the Centers for Disease Control and Prevention reported, 1,600 heat-related deaths occurred nationally, which is likely an undercount because providers are not required to them. It's not clear how many of these deaths are related to work, either indoors or outdoors.

“These are not overly cumbersome things to implement, and they are easy ways to keep people safe and healthy,” said Jessica Early, patient advocacy coordinator at the National Union of Healthcare Workers. “Now is the urgent time to make our workplaces safer and more resilient in the face of rising temperatures.”

This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation. 

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——————————
By: Samantha Young
Title: Newsom Offers a Compromise to Protect Indoor Workers from Heat
Sourced From: kffhealthnews.org//article/newsom-indoor-heat-standards-compromise-prisons/
Published Date: Thu, 18 Apr 2024 23:15:57 +0000

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Too Big To Fail? Now It’s ‘Too Big To Hack’

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Thu, 18 Apr 2024 18:00:00 +0000

The Host

Mary Agnes Carey
KFF


@maryagnescarey


Read Mary Agnes' stories.

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Lawmakers in Washington this week held the first congressional hearing on the Change cyberattack, a breach that sent shock waves through the system as payments for care ground to a halt and left some providers in financial trouble. Republicans and Democrats alike zeroed in on how big health care conglomerations — like Change's parent company, UnitedHealth Group — are leaving vulnerable.

And nearly 1 in 4 adults who lost Medicaid coverage in the past year are now uninsured, according to a new KFF survey probing the effects of what's known as the “unwinding” of enrollments in the insurance program for low-income people since pandemic-era protections expired.

This week's panelists are Mary Agnes Carey of KFF Health News, Jessie Hellmann of CQ Roll Call, Sarah Karlin-Smith of the Pink Sheet, and Lauren Weber of The Washington Post.

Panelists

Jessie Hellmann
CQ Roll Call

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@jessiehellmann


Read Jessie's stories.

Sarah Karlin-Smith
Pink Sheet


@SarahKarlin

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Read Sarah's stories.

Lauren Weber
The Washington Post


@LaurenWeberHP


Read Lauren's stories.

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Among the takeaways from this week's episode:

  • Though the Change Healthcare hearing on Capitol Hill illuminated bipartisan agreement on the perils of vertical integration in health care, lawmakers did not agree on possible . Addressing consolidation, however, could remedy issues in health care beyond cybersecurity.
  • The KFF survey on the unwinding found that nearly half of those who lost coverage signed back up for Medicaid weeks or months later, a signal that those enrollees should never have been dropped in the first place. Even a temporary loss in health coverage can have serious, lingering consequences.
  • Republicans in Arizona are grappling with the fallout from the 's newly reinstated, -era abortion law — echoing recent problems for Alabama Republicans after a state Supreme Court ruling upended access to in vitro fertilization there. Softened stances from conservative hard-liners like Senate candidate Kari Lake point to the potential negative consequences for the party in a critical election year.
  • And the Centers for Disease Control and Prevention released new information about the current measles outbreak, revealing that many of those sickened are children, as well as adults who are unvaccinated or whose vaccination status is unknown.

Also this week, Julie Rovner, KFF Health News' chief Washington correspondent, interviews Caroline Pearson of the Peterson Health Technology Institute.

Plus, for “extra credit,” the panelists suggest health policy stories they read this week that they think you should read, too:

Mary Agnes Carey: KFF Health News' “When Rogue Brokers Switch People's ACA Policies, Tax Surprises Can Follow,” by Julie Appleby. 

Jessie Hellmann: Tampa Bay Times' “Vulnerable Florida Patients Scramble After Abrupt Medicaid Termination,” by Teghan Simonton. 

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Sarah Karlin-Smith: Stat's “Grocers Are Pushing Legislation They Claim Would Enhance Food Safety. Advocates Say It Would Gut FDA Rules,” by Nicholas Florko. 

Lauren Weber: The New York Times' “Chinese Company Under Congressional Scrutiny Makes Key U.S. Drugs,” by Christina Jewett. 

Also mentioned on this week's :

Credits

Francis Ying
Audio producer

Emmarie Huetteman
Editor

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To hear all our podcasts, click here.

And subscribe to KFF Health News' “What the Health?” on SpotifyApple PodcastsPocket Casts, or wherever you listen to podcasts.

——————————
Title: Too Big To Fail? Now It's ‘Too Big To Hack'
Sourced From: kffhealthnews.org/news/podcast/what-the-health-343-health-care-consolidation-april-18-2024/
Published Date: Thu, 18 Apr 2024 18:00:00 +0000

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