alerts & publications
Collusion in the Healthcare Industry: DOJ Charges Oncology Group for its Participation in a Criminal Antitrust ConspiracyMay 6, 2020
The US antitrust agencies are not cutting back enforcement of antitrust laws in the face of the COVID-19 crisis. On April 30, 2020, the Department of Justice’s Antitrust Division (“DOJ”) charged by criminal information Florida Cancer Specialists & Research Institute, LLC (“FCS”)—one of the largest privately held oncology provider groups in the US—with conspiracy to allocate oncology treatments for cancer patients in southwest Florida.1 The DOJ’s investigation found that from at least 1999 through 2016, FCS and a competitor oncology company in the region agreed to allocate chemotherapy treatments to FCS and radiation treatments to the competitor oncology company, in violation of Section 1 of the Sherman Act. This is the first criminal charge in the DOJ’s ongoing investigation into market allocation within the oncology industry.
FCS entered into a deferred prosecution agreement (“DPA”) with the DOJ to resolve the felony charge and agreed to pay a criminal penalty of US$100 million, the statutory maximum. Under the DPA, FCS will cooperate with the DOJ’s ongoing investigation into market allocation in the oncology industry. FCS also agreed to maintain an effective antitrust compliance program and, during the term of the agreement, not to enforce non-compete agreements with current and former oncologists and employees.
Along with the DOJ, the Florida Attorney General’s Office also announced a civil settlement with FCS involving violations of the Florida Antitrust Act and Florida Deceptive and Unfair Trade Practices Act. The Florida civil settlement requires FCS to pay US$20 million in disgorgement of profits over four years and to undertake a robust compliance program to ensure conformity with state and federal antitrust laws.2
FCS’s actions have been the subject of other antitrust lawsuits. In 2015, Mid Florida Cancer Centers (“Mid Florida”) sued FCS for violations of Florida’s antitrust laws. Similar to the DOJ’s charge, Mid Florida alleged that FCS and Adventist Health System (“Adventist”) entered into an unlawful and anticompetitive agreement to not compete with each other for medical oncology and radiation treatments. FCS settled with Mid Florida for an undisclosed amount and was dismissed from the lawsuit in early 2019, but the case continues against Adventist. In July 2019, Mid Florida’s antitrust claims survived a motion to dismiss, and the case is set for a jury trial later this year. Monmouth County, New Jersey also filed a class action lawsuit against FCS, alleging that it conspired not to compete with another cancer care provider, 21st Century Oncology LLC, in the southwest Florida oncology services market. The parties also settled that lawsuit earlier this year.
The criminal charge against FCS represents the culmination of DOJ’s active efforts to target potential collusion in the healthcare industry. In addition to the current investigation into the oncology market, the DOJ is known to be investigating:
- Anticompetitive practices in the generic pharmaceutical industry. In December 2019, the DOJ and Rising Pharmaceuticals Inc. (“Rising”), a generic pharmaceutical company, entered into a deferred prosecution agreement after the DOJ filed a criminal complaint alleging that Rising participated in a criminal antitrust conspiracy to fix prices and allocate customers for a medicine used to treat hypertension. This was the fourth charge in the DOJ’s ongoing investigation into this industry.3
- Anticompetitive steering restrictions in contracts between health insurers and providers. “Steering” refers to the methods insurers use to offer consumers healthcare options that can reduce expenses. In 2018, the DOJ reached a settlement with Atrium Health (“Atrium”) after it filed a civil complaint alleging that Atrium used its market power in the Charlotte, NC area to restrict insurers from engaging in steering practices that could lead consumers to choose healthcare providers that offer lower costs and better value.4
- Anticompetitive marketing practices. The DOJ has also investigated and reached settlements to end hospital practices that allocated territories for healthcare services marketing. For example, in 2018, the DOJ reached an agreement with Henry Ford Allegiance Health to settle claims that the health system conspired with rival hospitals to restrict marketing practices that deprived consumers of valuable healthcare information.5
Healthcare companies should be aware of the DOJ’s current and past investigations into the healthcare industry and their implications as they consider collaborative actions and potential business combinations in the face of the COVID-19 pandemic. The criminal charge against FCS signals the antitrust agencies’ continued concern about potential anticompetitive conduct in the healthcare industry. While the antitrust agencies have recognized that many types of collaborative activities among healthcare providers, especially those designed to improve the health and safety response to the COVID-19 pandemic, would be consistent with the antitrust laws, they have also made clear that they will not hesitate to hold accountable those who try to use the pandemic to engage in antitrust violations. Healthcare companies considering collaborative actions and potential business combinations should carefully evaluate their plans to ensure that they comply with antitrust law, including guidelines issued by the DOJ and the Federal Trade Commission. They should also consider taking advantage of the expedited review process that the antitrust agencies are providing to companies that plan to engage in collaborative actions in response to COVID-19.
O’Melveny has robust antitrust, healthcare, and life sciences practices, and healthcare companies with any questions about the potential antitrust implications of their actions should contact the undersigned attorneys.
This memorandum is a summary for general information and discussion only and may be considered an advertisement for certain purposes. It is not a full analysis of the matters presented, may not be relied upon as legal advice, and does not purport to represent the views of our clients or the Firm. Ben Bradshaw, an O'Melveny partner licensed to practice law in California and the District of Columbia, Riccardo Celli, an O'Melveny partner licensed to practice law in the Capital Region of Brussels, the Law Society England & Wales, and Roma, Courtney Dyer, an O'Melveny partner licensed to practice law in the District of Columbia and New York, Andrew Frackman, an O'Melveny partner licensed to practice law in New Jersey and New York, Philip Monaghan, an O'Melveny partner licensed to practice law in the Capital Region of Brussels, Hong Kong, the Law Society England & Wales, and the Law Society Ireland, Bo Pearl, an O'Melveny partner licensed to practice law in California, Anna Pletcher, an O'Melveny partner licensed to practice law in California, Katrina Robson, an O'Melveny partner licensed to practice law in California and the District of Columbia, Ian Simmons, an O'Melveny partner licensed to practice law in the District of Columbia and Pennsylvania, Michael Tubach, an O'Melveny partner licensed to practice law in California and the District of Columbia, Courtney C. Byrd, an O'Melveny counsel licensed to practice law in the District of Columbia and Maryland, Zhao Liu, an O'Melveny counsel licensed to practice law in California and the District of Columbia, Stephen McIntyre, an O'Melveny counsel licensed to practice law in California, Sergei Zaslavsky, an O'Melveny counsel licensed to practice law in the District of Columbia and Maryland, Kimberly Cullen, an O'Melveny associate licensed to practice law in the District of Columbia and Pennsylvania, and Trisha Parikh, an O'Melveny associate licensed to practice law in California, contributed to the content of this newsletter. The views expressed in this newsletter are the views of the authors except as otherwise noted.
© 2020 O’Melveny & Myers LLP. All Rights Reserved. Portions of this communication may contain attorney advertising. Prior results do not guarantee a similar outcome. Please direct all inquiries regarding New York’s Rules of Professional Conduct to O’Melveny & Myers LLP, Times Square Tower, 7 Times Square, New York, NY, 10036, T: +1 212 326 2000.
Thank you for your interest. Before you communicate with one of our attorneys, please note: Any comments our attorneys share with you are general information and not legal advice. No attorney-client relationship will exist between you or your business and O’Melveny or any of its attorneys unless conflicts have been cleared, our management has given its approval, and an engagement letter has been signed. Meanwhile, you agree: we have no duty to advise you or provide you with legal assistance; you will not divulge any confidences or send any confidential or sensitive information to our attorneys (we are not in a position to keep it confidential and might be required to convey it to our clients); and, you may not use this contact to attempt to disqualify O’Melveny from representing other clients adverse to you or your business. By clicking "accept" you acknowledge receipt and agree to all of the terms of this paragraph and our Disclaimer.