Enforcer Insights: A Discussion with Brad Albert, Acting Assistant Director, Healthcare Division, Federal Trade Commission

Interview by: Aimee DeFilippo, Partner, Jones Day; Vice Chair of the Health Care and Pharmaceutical Committee

Bradley S. Albert is the Acting Assistant Director of the Health Care Division of the Federal Trade Commission’s Bureau of Competition in Washington, D.C.  In this capacity, he supervises the day-to-day work of approximately thirty-five lawyers and other professionals charged with investigating and prosecuting anticompetitive conduct in the health care and pharmaceutical industries.  Brad has supervised or contributed significantly to many of the Health Care Division’s most impactful law enforcement investigations and litigations over the last 25 years, including FTC v. Actavis¸ FTC v. Cephalon, In re Impax, FTC v. Surescripts, and FTC v. Vyera.  He also supervises the review of the more than 250 pharmaceutical patent settlement agreements the Commission receives each year.

Brad, let’s start with pharmaceutical matters.  The pharmaceutical industry has faced significant antitrust scrutiny for decades, and enforcement in this area certainly hasn’t waned during the Biden Administration.  In recent years, the FTC has questioned PBM practices and drug rebates, brought monopolization cases against drug manufacturers, challenged pharmaceutical mergers (including on more novel theories like bundling), withdrawn longstanding agency guidance and issued warnings, and much more.  Before we get to some of the newer FTC activity in this area, we recently passed the ten-year mark since the Supreme Court decision in FTC v. Actavis.  How do you view the current state of the law in this area, and what can you say about the FTC’s continued review of brand-generic/biosimilar settlements? 

The FTC’s reverse-payment program has been enormously successful. When we began challenging reverse payments more than 20 years ago, the practice was becoming increasingly common and costly for the health care system. A 2010 FTC study estimated that reverse payments were costing American consumers more than $3.5 billion per year. Since Actavis, however, the number of reverse payments has plummeted. In 2012, the year before Actavis, we identified 33 pharmaceutical patent settlements that included potential reverse payments. In 2017, there were only three such settlements. And brand and generic companies are having no difficulty settling without payments: The total number of settlements nearly doubled from 2012 to 2017.

I view the current state of reverse-payment law as well-established and clear. Despite concerns that courts would find Actavis difficult to apply, reverse-payment decisions have actually been strikingly consistent. At the circuit level, the First, Third, and Fifth Circuits have addressed reverse payments and adopted similar standards. And district courts throughout the country have largely followed suit.

Even though reverse payment settlements have largely stopped, we continue to closely monitor every pharmaceutical patent settlement submitted to us under the Medicare Modernization Act, and as of 2018 we also review patent settlements for biologic drug products. We hope to release multiple annual reports in the coming months summarizing the types of agreements that have been submitted. And, based on our review of these agreements, we will not hesitate to challenge reverse payments when we find them.

In July 2023, the FTC voted to issue a statement cautioning against reliance on prior advocacy statements and studies related to pharmacy benefit managers (PBMs).  This came in the wake of a February 2022 request for public comments on the impact of PBM practices, and (later that year) the announcement of an FTC study scrutinizing the impact of vertically integrated PBMs on access and affordability of prescription drugs.  Can you describe the Commission’s core concerns surrounding PBM practices and address why the decision was made to revoke the prior PBM-related advocacy statements and studies?  What conclusions can PBMs and other pharmaceutical market participants draw from these actions?

The FTC is actively examining every aspect of the pharmaceutical supply chain, and PBMs play an ever-growing role in that chain. The FTC launched a major study of PBMs in February 2022 and then expanded it in May 2023. While that study is ongoing, even the early public responses indicate that there may be concerns with the PBMs. Patients, community pharmacists, and providers have all complained that PBMs impose unnecessary fees, unfair take-it-or-leave-it contracts, and burdensome administrative requirements like prior authorizations. These are areas that the Health Care Division has also been looking into for some time: for example, we successfully resolved our landmark case against the e-prescribing company Surescripts, which is partially owned by two PBMs and which involved prior authorization issues. 

Given these concerns, it became clear that the older PBM guidance was based on an outdated understanding of the market. Indeed, the FTC’s last PBM study was released in 2005. Moreover, the Commission was concerned that this outdated guidance was used in some states to inhibit the passage of important transparency and disclosure requirements. Basically, we were concerned that staying silent on the risk of relying on this outdated guidance could significantly harm patients and other stakeholders in healthcare markets. And so while we await the resolution of the FTC’s current 6(b) study of PBMs and other relevant market players, the Commission wanted to take important interim actions to make clear that our understanding of this market is actively evolving.

Last fall saw significant activity related to the Orange Book, with the FTC first issuing a policy statement warning brand pharmaceutical manufacturers against improperly listing patents in the FDA’s Orange Book, followed by the FTC’s challenge of more than 100 patents as improperly listed in the Orange Book.  What can you say about the Commission’s interest in this area?

We have been concerned about improper Orange Book listings for more than 20 years because of their potential for causing serious anticompetitive harm. By suing for infringement of any Orange-Book-listed patent, an incumbent pharmaceutical manufacturer can automatically block generic competition for multiple years, regardless of the merits of the patent infringement suit. So improperly listing and then asserting a patent can be an easy way for a company to stifle competition. In addition to our recent policy statement, the FTC has conducted a study on this practice, brought an enforcement action, and filed multiple amicus briefs. We remain highly concerned about companies using this strategy, and will take appropriate action if we determine that an improper listing has been used to impede competition.

The Second Circuit recently upheld Martin Shkreli’s lifetime ban from the pharmaceutical industry after the FTC sued him individually for his role in an anticompetitive scheme to inflate the price of the drug Daraprim. How does this lifetime ban fit into the agency’s broader health care priorities?

Mr. Shkreli was the originator and architect of the scheme to impose a dramatic price increase on Darparim—a 50-year-old lifesaving drug with no patent protection—and then take aggressive steps to prevent anyone else from making a cheaper generic version. He created a company (Vyera) to execute this scheme, and then continued to run that company even when formally ousted from leadership and imprisoned on unrelated charges. We believed it was critically important to name him individually and to make sure he could not replicate his course of conduct by starting another company.

The lifetime ban is an illustration of how we seek to use all of the tools at our disposal to protect consumers. The law allows for the naming of individuals in appropriate circumstances, and we will not hesitate to take that step where an individual represents a specific threat of future harmful conduct. A similar example is our naming Welsh Carson as a defendant in our USAP case: As with Mr. Shkreli, Welsh Carson’s reach is not limited to a single company. It set up USAP to carry out its Texas anesthesia consolidation scheme, but it has also created other companies to enact similar strategies in different markets. We believe it will continue to operate in this way unless enjoined. In circumstances like that, naming additional defendants is necessary to protect the health care system.

Switching gears away from the pharmaceutical industry to healthcare providers, a good deal of FTC enforcement activity vis-à-vis healthcare providers has been focused on hospital mergers in recent years.  What are the main healthcare provider-focused investigations that your shop handles?

Our current public healthcare provider matter is our ongoing enforcement action against U.S. Anesthesia Partners (USAP) and the private equity firm that created and ran it, Welsh Carson. Our complaint alleges that USAP was conceived by Welsh Carson as a vehicle to buy up independent hospital anesthesia practices throughout Texas until it became so large that it could demand exorbitant rates from insurers, employers, and patients. Along the way, USAP and Welsh Carson entered various other types of agreements to limit competition. The result has been a massive increase in anesthesia costs for Texans, and correspondingly enormous profits for USAP and Welsh Carson. This case is notable in that it names a private equity firm as a defendant due to the firm’s central role in planning and executing the anticompetitive conduct, and because it contains a “standalone” claim under Section 5 of the FTC Act challenging USAP’s acquisitions throughout the state of Texas to achieve a dominant position.

Last summer, the FTC joined the DOJ in withdrawing longstanding healthcare policy statements issued in 1993 and 1996, as well as a policy statement issued in 2011 focusing on accountable care organizations.  Can you explain the FTC’s reasoning for withdrawing this guidance?  What conclusions should healthcare providers and other market participants draw from the FTC’s action here?

There were two components of this decision. The first is very simple: the FTC and the DOJ see eye-to-eye on these critical health care enforcement issues, and the FTC wanted to make sure that the public understood that there was no daylight between the two agencies on how we understood these policy statements. The second is that these statements no longer served their intended purposes.  Part of this is just the age of the policy statements: two of them were old enough to rent cars. They thus no longer reflected the realities of the markets that they were purporting to describe. The rescinded statements also created “safety zones” that were being used in contexts that were never contemplated, such as sharing competitively sensitive wage and benefit information with other employers.  I think one of my colleagues at the DOJ had a helpful analogy: these enforcement statements were like developing specifications for audio cassette tapes and then applying them to digital streaming. That’s a bad idea both for playing music and for explaining to the public our current understanding of the competitive issues in the healthcare markets.

Finally, where do you see the future of enforcement for the Healthcare Division?  What are the cases and areas to watch going forward? 

For many years, the Health Care division spent a significant portion of its resources investigating and challenging reverse-payment agreements. With the litigation successes in this area, and the resulting reduction in such anticompetitive settlements, our focus has been changing. We brought the first post-Ohio v. American Express platform case in FTC v. Surescripts, which we successfully settled last year after obtaining precedent-setting rulings on market definition. We prevailed at trial against a pharmaceutical manufacturer for engaging in sham patent litigation in FTC v. AbbVie, a judgment the Third Circuit affirmed. And as I mentioned earlier, we recently had our first lifetime ban on an individual defendant in a competition case affirmed by the Second Circuit in FTC v. Shkreli, and we just filed the FTC v. USAP enforcement action challenging an ongoing roll-up scheme to suppress competition in Texas anesthesiology practices.

We are committed to building on these successes to bring more competition throughout healthcare and pharmaceutical markets. And as we have in the past, the Health Care Division will continue to use all of the enforcement tools available to us to protect competition and consumers in these markets.