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Our Take: Sutter Health agrees to tentative settlement in antitrust trial

Oct 21, 2019

Just before opening arguments were expected to begin last Wednesday, the presiding judge announced in San Francisco Superior Court that Sutter Health, one of California’s largest health systems, had reached a preliminary settlement agreement in an antitrust lawsuit initiated five years ago by a labor union.

The lawsuit subsequently gained class-action status when approximately 1,500 self-funded health plans in Northern California became plaintiffs. Last year, the state’s attorney general filed a second lawsuit against Sutter Health and the two lawsuits were later combined.

The Sacramento-based nonprofit health system has been accused of stifling competition through clauses built into its contracts with health plans. The plaintiffs in the case claim that Sutter’s tactics drove up the cost of care significantly in markets the health system dominated. With 24 hospitals, 34 surgery centers, and roughly 5,500 physicians, Sutter Health’s reach is far and wide.

Details of the proposed settlement have not been released. The judge informed the jury that the details probably would be made public early next year during approval hearings, NPR reported.

Our Take
We’ve been following this case as it has unfolded, and we were curious as to how it would play out. Sutter indicated as recently as a couple of weeks ago that it intended to put up a fight, insisting that it had done nothing to hurt competition in the markets it serves and blaming Northern California’s higher cost of care on insurers. We can only speculate about what caused the change in course.

The Associated Press reported that Sutter could have paid almost $3 billion if it had lost the lawsuit. Health plans in the case were seeking $900 million in damages, but the law allows juries to award triple damages.

Perhaps legal counsel was finally able to convince Sutter officials that going to trial wasn’t worth the risk — either financially or in terms of the health system’s standing within the communities it serves.

A more plausible reason, though, is that Sutter would prefer to keep information about its contracting policies from becoming public knowledge. By settling the case, the health system has more control over the information that gets released.

Whatever the reason behind Sutter’s decision to settle, we’ll have to wait a while longer for any legal precedents this case might have established regarding “predatory” pricing practices. Depending on the terms of the settlement, this case may still provide some insight. If not, Sutter Health still faces a separate federal antitrust lawsuit, so another opportunity may not be far off.

What else you need to know
The wholesale acquisition cost of drugs increased by a median of 25.8% from January 2017 through March of this year, or approximately 8% annually, according to the first report released since California enacted its drug price transparency law. Nationally, the annual rate of inflation during that period was 2%. Generic drugs had the largest median increase during the reporting period, at 37.6%. In this first report, state officials analyzed pricing trends for approximately 1,000 products.

The Bristol-Myers Squibb-Pfizer Alliance is collaborating with Fitbit to identify people who are at increased risk for stroke through earlier detection of atrial fibrillation, BMS and Pfizer said in a joint press release. Fitbit has developed software for its wearable devices that can detect potential atrial fibrillation. After the FDA clears the software, Fitbit will work with the Alliance to provide information to device wearers who receive alerts about possible heart rhythm irregularities, and encourage them to consult with their physician. According to the press release, in 2019, an estimated 8 million people in the U.S. will be affected by atrial fibrillation, which can be asymptomatic.“[S]tudies suggest that more than 25% of people who have the condition find out after they have a stroke,” the drug companies noted.

Amazon is partnering with City of Hope, a Duarte, Calif.-based treatment center for cancer and diabetes, to provide cancer support services to U.S. Amazon employees and their families. The services will include a dedicated phone line that will connect callers with oncology nurses, specialized support for complex cancers, and reviews of diagnoses and treatment plans by City of Hope’s physician specialists, the center said in a press statement. In the most complex cases, and when appropriate, City of Hope cancer experts will engage with the employee’s local primary oncologist to offer recommendations and assistance with interpreting test results. Employees will also have the option to be evaluated at City of Hope.

Hackensack Meridian Health and Englewood Health have signed a definitive merger agreement, their boards of trustees announced last Tuesday. The two New Jersey-based, not-for-profit organizations had already established a clinical and academic affiliation in 2015. If state and federal regulators approve the merger, Hackensack Meridian Health will make a $400 million investment in Englewood Health. Hackensack Meridian Health has 17 hospitals and an affiliation with Memorial Sloan Kettering Cancer Center. Englewood Health comprises a 352-bed hospital near New York City, a physician network, and the Englewood Health Foundation.

Meanwhile, RWJBarnabas Health, based in West Orange, N.J., signed a non-binding letter of intent to acquire Trinitas Regional Medical Center and its affiliates. Located in Elizabeth, N.J., Trinitas RMC is a 554-bed, Catholic acute care teaching facility with 12 centers of excellence. RWJBarnabas Health serves nine counties and has 11 acute care hospitals, three acute care children’s hospitals, two accountable care organizations, and numerous other facilities and entities. The two organizations anticipate reaching a definitive agreement by the end of this year. To be completed, the acquisition would require approvals from the Catholic Church and state and federal regulatory agencies.

Drug distributors McKesson, AmerisourceBergen, and Cardinal Health are discussing an agreement with state and local authorities to settle thousands of opioid-related lawsuits for $18 billion, The Wall Street Journal reported on Thursday, citing “people familiar with the matter.” The amount would be paid over the course of 18 years. Reuters noted that the three companies control about 85% of the U.S. prescription drug market. All three are named as defendants in a federal trial in Ohio, in which opening arguments are scheduled to begin this week.

Earlier this month, Johnson & Johnson agreed to a $20 million settlement in the Ohio trial; the Associated Press reported last week that J&J might pay $4 billion toward a global settlement. Teva Pharmaceutical Industries has reportedly offered to contribute drugs and distribution services valued as high as $29 billion, according to The Journal. As we reported previously, Purdue Pharma negotiated a tentative settlement valued at as much as $12 billion as part of its bankruptcy agreement.

What we’re reading
Editor’s Note: This week we discovered Dr. Robert Pearl’s Monthly Musings on American Healthcare, a monthly newsletter covering a variety of topics. It’s very good. If you’re interested, you can sign up here.
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