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Leibowitz talks of challenging patent agreements, role of antitrust enforcement

By Joe Carlson
Posted: February 9, 2013 - 12:01 am ET

Jon Leibowitz is leaving his post this week as chairman of the Federal Trade Commission after presiding over a period of intense scrutiny of the healthcare industry.

Leibowitz, 54, was appointed as one of the bipartisan commission's Democratic members in 2004 and then was elevated to chairman in the early months of the Obama administration.

Since then, he has aggressively pursued the commission's efforts to challenge pay-for-delay patent agreements in patent litigation, which keep generic competitors off the market. One of those cases, FTC v. Watson Pharmaceuticals, is scheduled for oral arguments before the U.S. Supreme Court on March 25.

Also during his four years as chairman, the panel has approved several challenges to hospital mergers and acquisitions and registered its first victories in federal courts in hospital cases since early 1990s.

Modern Healthcare legal affairs reporter Joe Carlson interviewed Leibowitz about his tenure and the role of antitrust enforcement in fostering quality and efficiency in healthcare.

Joe Carlson: Why are you stepping down now, and what is next for you?

Jon Leibowitz: I don't know what is next for me, but I have been in government for 21 out of the last 25 years, and it is time, I think, for me and for my family—I have two teenage daughters who will be going to college soon—to think about doing something else. These jobs are exhilarating, but they are also exhausting.

Carlson: Tell me about your thoughts on the role of healthcare in the Federal Trade Commission's activities and the prominence of healthcare, and what kind of record are you leaving in terms of healthcare victories and losses?

Leibowitz: Some of that we will find out in the next six months or so, but I would say this: As you know, our commission is very consensus-driven, and we try to take the greatest good for the greatest number of people approach. Healthcare in the United States is about 18% of the GDP. That is unsustainable and it is unacceptable. In Europe, where the healthcare is roughly or almost as good, they spend about 7% or 8% of their GDP, maybe up to 10%. And we are big believers here that the more competition you have, the more prices go down and choices go up.

Carlson: Do prices in healthcare actually go down?

Leibowitz: Yes, they do go down. I think when you generally have more competition, prices do go down. For example, one of our signal issues is what we call “pay for delay” pharmaceutical payments, reverse payments where brand pharmaceutical companies put—figuratively—a big bag of cash on the table, and in these sweetheart deals the generic takes the money in exchange for not entering the market, and it is win-win for the companies, but lose-lose for consumers. If we are fortunate enough to win our case before the Supreme Court, we will save consumers billions of dollars a year.

Carlson: How can the FTC stepping in to block a merger between two hospitals that operate in the same community lower prices?

Leibowitz: Obviously, we let many, many hospital mergers go through because they are not anti-competitive, but in the last several years, I think we have challenged four hospital mergers. We have won two preliminary injunctions. One is on appeal in the 6th Circuit and one is at the Supreme Court. But let me give you a hypothetical. If there are two hospitals and they are providing competitive services and they merge, it might very well be that they start raising the price to payers, to insurers, and those costs are passed on to businesses and they are passed on to consumers and they are passed on to the federal government, by the way, which runs Medicare as well as a variety of other healthcare programs.

Carlson: So, in that healthcare-provider arena, it is really more about stopping an increase in price rather than driving prices backward.

Leibowitz: I think that is a fair point. Under one of my predecessors, Tim Muris, we did a retrospective of hospital mergers. When they looked at some consummated hospital mergers, including one involving Evanston (Ill.) Northwestern Hospital, that consummated hospital merger actually increased costs to the payers two and three times what they had been paying before. And in that instance, we did actually bring a case—that was when I was a nonchair commissioner—and the staff's complaint was sustained.

Carlson: What is the No. 1 way that a hospital or any healthcare provider can get itself in trouble in terms of antitrust?

Leibowitz: I worked for a trade association (the Motion Picture Association of America from 2000 to 2004), and antitrust compliance was very difficult even though some of the things that the compliance officers wanted the trade association not to do weren't problematic at all. Having said that, I think if they use good judgment, hospital administrators—and they don't conspire to set prices with their competitors—they will be on the right side of the law. And of course, the other thing is if they are doing something that they are not certain of they can always call us up and we can tell them whether they are permitted to do that or not.

Carlson: Something I hear from providers whose mergers that have been blocked or challenged is that they are trying to follow the guidelines in the healthcare reform law, which dictates accountable care, care coordination. Are those goals in the reform law compatible with the antitrust laws as they exist today?

Leibowitz: I think they are. I mean, it is a great question. And again, the vast majority of healthcare providers, they follow the law. But yes, I think that certainly in broad-brush strokes the goals of the antitrust laws, which are essentially ensuring that competition brings down prices and give consumers more choice, are also consistent with the Affordable Care Act, which is also trying to restrain the dramatic growth in medical costs. We work very closely with the Justice Department and HHS and CMS to try to come up with an approach that really takes a very light touch with respect to ACOs. We like to see, I think as an agency, experimentation to reduce healthcare costs. And we also recognize that, as you know, the healthcare industry is a market that is a combination of a free market and also regulations. We are just trying to see whether accountable care organizations can work to reduce prices. If they do, I think you will see more of it and we will be very pleased.

Editor's note: Questions and answers were edited for clarity and length.

Leibowitz, who is stepping down as FTC chairman this week, was a commissioner for more than four years before being appointed chairman in 2009.
Photo credit: AP PHOTO

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