A pair of national associations representing over 21,000 independent pharmacies have joined the growing list of organizations asking the U.S. Department of Justice (DOJ) to intervene and stop the merger of health technology company Change Healthcare with UnitedHealth Group’s subsidiary OptumInsight.
In a letter and a statement, the independent and community pharmacy advocates warned that if allowed, the deal would create a “corporate monster” that would lay waste to market competition and further harm pharmacies struggling to stay afloat amidst what they describe as predatory Pharmacy Benefit Manager (PBM) practices.
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The American Hospital Association (AHA), American Antitrust Institute, American Medical Association and pensioner investors in Change have already voiced their concerns with the deal. That has led the DOJ to consider suit and initiate a timing agreement that holds off the deal until the agency is able to conclude its investigation.
The companies’ September 15 deadline to certify compliance with this agreement has come and gone, and once they certify, Change and UHG still cannot proceed with the merger for another 120 days unless DOJ says they have no remaining concerns. The pharmacies have seized this opportunity to get their arguments in.
Two advocate statements in two days
In a September 29 letter, Greg Reybold, American Pharmacy Cooperative, Inc. (APCI)’s new Director of Healthcare Policy and General Counsel, told the Department that the merger would continue the negative trend of PBM consolidation.“APCI is deeply concerned that allowing the proposed acquisition of Change Healthcare is likely to create more conflicts of interest, reduce competition, and lead to greater inefficiencies in an already inefficient and flawed system,” Reybold wrote.
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On September 30, B. Douglas Hoey, CEO of the National Community Pharmacists’ Association (NCPA) warned the merger would be a threat to fair competition, independent pharmacies, and patient choice.
Hoey’s comments followed a meeting where he had told DOJ attorneys this deal would “create an unfair competitive advantage for a company that is already dominant,” referring to UHG. UnitedHealth Group is the United States’ fifth-largest company by 2020 revenue, and the largest payer, covering 70 million lives.
In its letter, APCI urged the agency to more deeply investigate UHG practices on data use, vertical competition and steering more thoroughly before deciding whether to approve the deal.
“Pharmacy is uniquely qualified to speak to this because we’ve endured anticompetitive behavior such as patient steering on the grandest of scales,” Reybold said in a phone interview.
Steering business toward UHG
Both independent pharmacy advocate organizations raised the loudest alarm on the data sharing that would take place through the merger, with Reybold calling it “unprecedented” and Hoey warning UHG would abuse this “trove of intelligence on its competitors, including thousands of independent pharmacies and their patients” through practices such as steering.
Steering is where a PBM requires patients to obtain their medications through a PBM-affiliated mail-order speciality pharmacy instead of from their oncologist or an independent pharmacy. While physician and healthcare provider patient steering is subject to Stark and other anti-kickback laws, Reybold said, large PBMs have engaged in the practice on a massive scale for years that has been relatively unhindered.
“Steering has a terrible impact on patients, largely the most vulnerable such as oncology or HIV patients who lose choice, lose continuity of care, and are forced to delay care by the practice,” Reybold said in a phone call. “I don’t know a bigger issue impacting healthcare prices or a better example of anticompetitive behavior.”
Hoey went so far as to say his organization believes the merged entity would use that intelligence to steer patients away from local pharmacies, to both UHG’s health plan and Optum’s mail-order pharmacy by undercutting reimbursements and raising fees.
Horizontal effects
APCI cited Change’s own annual report to bolster its assertion that the health technology company has outsize market impact for an independently-owned upstart and is thus a direct horizontal competitor to OptumInsights.
Referencing Change’s Annual Report and Form 10k 2020, Reybold said the company’s Intelligent Healthcare Network has facilitated over 15 billion transactions and approximately $1.5 trillion in adjudicated claims in the 2020 fiscal year alone, totaling over one-third of all U.S. healthcare expenditures.
His letter to DOJ said that Optum provides many of these same markets with a number of overlapping services, including revenue cycle management, payment accuracy, healthcare data and analytics, provider payment services, value-based care, provider network management, and pharmacy solutions.
“Because of the redundancy of markets and services combined with the sheer number of healthcare transactions the respective companies touch, the proposed acquisition will reduce substantial head-to-head competition, result in significant consolidation in the healthcare technology market and as such the potential adverse effects resulting directly from the loss of competition deserves scrutiny,” Reybold wrote in the letter.
Not surprisingly, Optum and Change Healthcare disagree with that assessment.
“Optum and Change Healthcare share a vision for better health outcomes and experiences for everyone, at lower cost,” an Optum spokesperson said in an email. “With distinct and complementary capabilities, this combination will help health care providers and payers better serve patients by more effectively connecting and simplifying key clinical, administrative and payment processes to the benefit of the health system and the people we serve.”
Vertical effects
Reybold continued by arguing that UHC’s acquisition of Change would have not just horizontal but critical anticompetitive effects, citing Change’s own 2020 annual report again, which emphasized “the alignment it has with its customers due to not being owned by a payer or provider organization.”
This patient alignment would be eradicated by a merger with one of the largest payer-provider networks in the country, APCI said, leading instead to corporate self-interest.
APCI also said the loss of such a significant disruptor would have widespread harm on the competitive landscape.
“In an industry as consolidated and vertically integrated as the healthcare industry is, independence of a company performing the breadth of services Change Healthcare performs goes beyond mere ‘alignment,’ and becomes a central selling point.”
Authority to act
Reybold, an attorney who spent six years at Georgia Pharmacy Association before joining APCI in September, is confident that DOJ has the license to act in whatever manner it deems necessary.
“Section 7 of the Clayton Act allows the DOJ to act on any merger or acquisition that has the potential to lessen competition,” Reybold said. “I don’t know of a better example of that than not allowing providers and physicians to compete through the quality of care they give patients.”
Photo: Ekkaluck, Getty Images
