In a rare case of the Justice Department suing to block a proposed vertical merger and stop “anti-competitive” practices, a D.C. judge has given two healthcare companies — United and Change Healthcare — the green light to join forces.
The Biden administration has shown a broader agenda to tackle antitrust in health care, so the DOJ complaint is not a surprise, according to Kevin Hamm, a partner at Hunton Andrews Kurth.
“The fact that the DOJ brought this case is not surprising given public statements by Biden and the Executive Order calling for stronger antitrust enforcement, as well as public statements by the current leadership of both agencies,” Hamm said via email. “The Department of Justice has suffered recent losses in some criminal cases, including price-fixing, wage-fixing and anti-poaching, and it is notable that pursuing wage-fixing and anti-poaching as criminal offenses is a departure from the previous policy of prosecuting these types of cases as civil torts.’
Hamm pointed out that this is one of the few vertical mergers challenged by the DOJ. “This was the second DOJ legal challenge to a vertical merger after AT&T/Time Warner, and prior to this case it had been more than 40 years since a vertical merger challenge had been challenged (vs. a consent decree settlement),” Hamm said.
On Monday, US District Judge Carl Nichols issued an order denying the DOJ’s request to block the proposed merger between the two healthcare companies, which would have in combination with Change Healthcare and Optum Insight, part of UnitedHealth Group.
Nashville, Tenn.-based Change Healthcare provides analytics and data to providers and payers to improve workflows and clinical decision-making, according to the company’s website.
“Change’s technologies save United’s rivals tens of billions of dollars each year and reduce healthcare costs for American families,” according to the DOJ in its original complaint.
The government charged in February that the merger would allow anti-competitive data sharing that would give United an unfair advantage over its competitors.
“United’s proposed acquisition of Change, with its competitors’ competitively sensitive data, would allow United to co-opt its rival insurers’ innovations and their competitive strategies and reduce their incentives to pursue those innovations and strategies in the first place,” the DOJ said.
“The proposed acquisition would also allow United to use its control of Change’s technologies to disadvantage its health insurance competitors by raising their costs and denying or delaying their access to innovation and improvements in the quality of products and services, delivered by Change,” the DOJ continued in a complaint.
United has purchased more than 35 healthcare companies in the past 10 years. Although United representatives did not immediately respond to a request for comment, Change Healthcare issued a statement celebrating the judge’s decision. “We are pleased that the U.S. District Court for the District of Columbia has approved the combination between Optum Insight and Change Healthcare, and we look forward to working to complete the merger,” Change Healthcare said in a statement.
While the case is a rare example of the DOJ cracking down on alleged antitrust practices, Hamm says it won’t be the last. And the DOJ may choose to appeal the case.
“But in the meantime, I wouldn’t expect the DOJ (or the FTC) to give up investigating certain types of vertical mergers,” Hamm said.
UnitedHealth representatives did not immediately respond to requests for comment.
Photo: Andrey Popov, Getty Images