FTC Approves Merger of Pharmacy Benefits Managers Express Scripts and Medco

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The FTC announced yesterday that it had closed its investigation into the proposed combination of two of the country’s three largest pharmacy benefit managers (PBMs) without taking action to challenge the transaction. On the same day, Express Scripts, Inc. announced that it had completed its acquisition of Medco Health Solutions.

Three of the four commissioners concluded that a violation of Sec. 7 of the Clayton Act neither had occurred nor was likely to occur as a result of Express Scripts’ acquisition of Medco. “While this transaction appears to result in a significant increase in industry concentration, nearly every other consideration weighs against an enforcement action to block the transaction.”

The transaction was not likely to produce unilateral or coordinated anticompetitive effects in the market for the provision of full-service PBM services to health care benefit plan sponsors, including public and private employers and unions, according to the Commission.

In addition to Express Scripts and Medco, competitors in the market included CVS Caremark—the nation’s second-largest PBM—as well as PBMs owned by large national health plans and some smaller standalone PBMs.

After analyzing the market, the Commission concluded that Express Scripts and Medco were not such close competitors that the elimination of one of these firms would allow the merged entity to unilaterally impose anticompetitive price increases. Medco and CVS Caremark focused on serving the nation’s largest employers, while Express Scripts’ customer base was more heavily skewed towards health plans and mid-size plan sponsors. Changes in the industry also meant that smaller PBMs and those owned by health plans were growing competitors for employer business.

Coordinated interaction among competitors in the market also was unlikely following the merger. The PBM industry was not necessarily conducive to coordination, it was noted.

The Commission also considered the concerns of retail and specialty pharmacies and concluded that there was little risk of the merged company exercising monopsony power. According to the Commission, there was no reason to believe that the merger would lead to lower reimbursement rates to retail pharmacies. Even if the transaction enabled the merged firm to reduce the reimbursement it offers to network pharmacies, there was no evidence that this would result in reduced output or curtailment of pharmacy services generally.

Moreover, evidence did not support concerns that the merged entity would exercise market power to demand more exclusive distribution arrangements from manufacturers of specialty drugs used to treat complex and rare conditions.

Dissent

Calling the transaction a “game changer,” Commissioner Julie Brill issued a dissent from the Commission’s decision to close the investigation. While Commissioner Brill expressed “some discomfort about unilateral effects” from the merger, she reserved her sharpest criticism of the transaction for the likelihood of coordinated effects. Pointing to statements of the parties, Commissioner Brill said: “[I]t is not difficult to conceive how the post-merger duopoly could pull its competitive punches when it comes to bidding for one another’s customers.” The commissioner called on the agency to conduct an analysis of the industry in three years to determine the transaction’s impact on prices to employers.

Reaction

Separately, Senator Herb Kohl (Wisconsin) issued a statement on April 2, saying that he expected the FTC “to carefully monitor the market to ensure that consumers are not harmed by loss of community pharmacies.” Kohl, Chairman of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy, and Consumer Rights, had sent a letter to FTC Chairman Jon Leibowitz on February 2, expressing his concerns about the proposed transaction.

Confidence in Internet Depends on Privacy Protections: FTC

This posting was written by Thomas A. Long, Editor of CCH Privacy Law in Marketing.

Consumers must be confident that their privacy will be protected if they are to take advantage of all the benefits offered by the Internet marketplace, the FTC told the Senate Committee on Commerce, Science and Transportation on June 29.

Commissioner Julie Brill delivered testimony on behalf of the FTC at a hearing examining how entities collect, maintain, secure, and use personal information in today’s economy and whether consumers are adequately protected under current law.

“Privacy has been an important component of the Commission’s consumer protection mission for 40 years,” Brill said. “During this time, the Commission’s goal in the privacy arena has remained constant: to protect consumers’ personal information and ensure that they have the confidence to take advantage of the many benefits offered by the dynamic and ever-changing marketplace.”

FTC Approach

According to the testimony, the FTC has taken a three-pronged approach to preserving consumers’ privacy: law enforcement actions, consumer and business education efforts, and policy initiatives.

In the last 15 years, the FTC has brought more than 300 privacy-related actions, including 34 data security cases; 84 Fair Credit Reporting Act cases; 97 spam cases; 15 spyware cases; and 16 cases enforcing the Children’s Online Privacy Protection Act.

The FTC noted that, while the Commission has not taken positions advocating any particular legislative proposals, it favors data security legislation “that would (1) impose data security standards on companies, and (2) require companies, in appropriate circumstances, to provide notification to consumers when there is a security breach.”

Based on roundtable discussions that involved privacy experts, business representatives, and academics, the FTC staff issued a preliminary report on December 1, 2010, proposing a privacy framework with three main concepts, the testimony stated. First, companies should adopt a “privacy by design” approach by building privacy protections into their everyday business practices, FTC staff recommended.

Second, companies should provide an easy way for consumers to control the collection and use of their personal information—for example, by offering a mechanism to opt out of online behavioral tracking, often referred to as “Do Not Track.” A Do Not Track system should have five key attributes, the FTC said:

(1) It should be universal;

(2) It should be easy to find, understand, and use;

(3) Choices offered should be persistent;

(4) It should be comprehensive, effective, and enforceable; and

(5) It would not only opt consumers out of receiving targeted ads, but it also would opt them out of collection of behavioral data for all purposes other than certain commonly accepted practices.

Third, the staff report called on companies to improve their privacy notices so that consumers, advocacy groups, regulators, and others can compare data practices and choices across companies, thus promoting competition.

The Commission vote to issue the testimony was 5-0, with Commissioner J. Thomas Rosch dissenting in part and issuing a separate statement recommending that the Commission and Congress learn more about Do Not Track before proceeding.

Commissioner Rosch’s Statement

“The root problem with the concept of ‘Do Not Track’ is that we, and with respect, the Congress, do not know enough about most tracking to determine how to achieve the five attributes identified in today’s Commission testimony, or even whether those attributes can be achieved,” Rosch said.

“This is not to say that a Do Not Track mechanism is not feasible. It is to say that we must gather competent and reliable evidence about what kind of tracking is occurring before we embrace any particular mechanism. We must also gather reliable evidence about the practices most consumers are concerned about.”

Kellogg Agrees to Tougher Restrictions to Resolve FTC Ad Claims

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

After resolving an FTC complaint last year that it had engaged in false advertising by claiming that eating a bowl of Frosted Mini-Wheats cereal would improve childrens’ attentiveness, the Kellogg Company has agreed to settle agency allegations that it made questionable immunity-related claims for its Rice Krispies cereal. The cereal maker has agreed to new advertising restricts.

Under the FTC consent order resolving the 2009 complaint, Kellogg was barred from making claims about the benefits to cognitive health, process, or function provided by any cereal or any morning food or snack food unless the claims were true or substantiated.

The modified consent order prohibits Kellogg from making claims about any health benefit of any food unless the claims are backed by scientific evidence and are not misleading.

On product packaging, Kellogg claimed that Rice Krispies cereal “now helps support your child’s immunity,” with “25 percent Daily Value of Antioxidants and Nutrients—Vitamins A,B,C, and E.” The back of the cereal box stated that “Kellogg’s Rice Krispies has been improved to include antioxidants and nutrients tht your family needs to help them stay healthy.”

Concurring Statements

FTC Chairman Jon Leibowitz and Commissioner Julie Brill issued a concurring statement, expressing their concern “that at the same time that Kellogg was making promises to the Commission regarding Frosted Mini-Wheats, the company was preparing to make problematic claims about Rice Krispies.”

The statement noted that “[i]n light of the timing of the launch of the Rice Krispies campaign, it is reasonable to conclude that planning for the new `immunity’ claims was well underway while Kellogg was negotiating and finalizing its agreement with the FTC to not make unsubstantiated `cognitive ability’ claims about Frosted Mini-Wheats.”

The case is In the Matter of Kellogg Co., FTC File No. 082 3145, June 3, 2010. A news release on the case appears here on the FTC website. An order to show cause and order modifying order appears here. Further details will appear in CCH Trade Regulation Reporter.

Ramirez, Brill Sworn In as New Federal Trade Commissioners

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Edith Ramirez and Julie Brill were sworn in as new Federal Trade Commissioners by FTC Chairman Jon Leibowitz on April 5 and 6, respectively. Ramirez filled an open position on the Commission, and Brill now occupies the vacancy created by the departure of Pamela Jones Harbour. Harbour, whose term ended last September, resigned effective April 6.

Prior to joining the FTC, Ramirez was a partner at Quinn Emanuel Urquhart & Sullivan, LLP in Los Angeles. Before joining Quinn Emanuel, she was an associate at Gibson, Dunn & Crutcher, LLP, in Los Angeles and clerked for the Hon. Alfred T. Goodwin in the U.S. Court of Appeals for the Ninth Circuit. Ramirez’s term will expire on September 25, 2015.

Brill comes to the FTC from the North Carolina Department of Justice, where she served as Senior Deputy Attorney General and Chief of Consumer Protection and Antitrust. Prior to her move to the North Carolina Department of Justice, Brill was an Assistant Attorney General for Consumer Protection and Antitrust for the State of Vermont for over 20 years. Brill’s term will expire on September 25, 2016.

Further information about the swearing in of Commissioner Ramirez appears here on the FTC website. Further information on the swearing in of Commissioner Brill appears here.

A statement from Commissioner Harbour on her resignation appears here.

FTC Commissioner Jones Harbour Resigns

This posting was written by John W. Arden. Editor of CCH Trade Regulation Reporter.

Following the Senate confirmation of her successor last week, Federal Trade Commissioner Pamela Jones Harbour submitted her resignation as Commissioner, effective April 6, 2010.

Commissioner Jones Harbour will be succeeded by Julie Brill, who was confirmed by the Senate on March 3, along with fellow FTC nominee Edith Ramirez.

Brill will serve a seven-year term, starting from September 26, 2009, the date that Jones Harbour’s term expired.

“During my six and one-half years on the Commission, I have had the privilege of serving with eight tremendously talented Commissioners,” said Jones Harbour. “I thank all of them for their fellowship and friendship, and for always keeping me "on my game."

She also thanked FTC senior managers and career staff for their substantive expertise and their devotion to the agency’s competition and consumer protection missions.

“These individuals are the real driving force behind the Commission's tradition of excellence, and I will always be proud of all we have accomplished together,” said the Commissioner.

The March 10 statement by Jones Harbour appears here on the FTC website.

Senate Confirms Brill and Ramirez as FTC Commissioners

This posting was written by John W. Arden.

Julie Simone Brill and Edith Ramirez were confirmed by the Senate yesterday as Federal Trade Commissioners. Brill will serve a seven-year term, starting from September 26, 2009, while Ramirez will serve a seven-year term, starting from September 26, 2008.

“We look forward to welcoming the newly confirmed Federal Trade Commissioners Julie Brill and Edith Ramirez,” said FTC Chairman Jon Leibowitz. “They are both exceptionally talented and committed, and will bring a wealth of experience, knowledge, and new energy to the Commission.”

The Chairman remarked how the announcement was “bittersweet” because of the imminent departure of Commissioner Pamela Jones Harbour.

“She has been a wonderful colleague and dedicated public servant over the years, and will be greatly missed,” Leibowitz said.

The two new Commissioners were nominated by the Obama Administration on November 17, 2009. Brill was nominated to succeed Commissioner Jones Harbour, whose term expired last September. Ramirez was nominated to serve the vacancy created by the departure of Commissioner Deborah Platt Majoras in March 2008.

Brill has served as Senior Deputy Attorney General and Chief of Consumer Protection for North Carolina since February 2009. Prior to that, she was an Assistant Attorney for Consumer Protection and Antitrust for the State of Vermont for more than 20 years. She is an adjunct faculty member at Columbia Law School.

Ramirez was a partner in the Los Angeles office of Quinn Emanuel Urquhart Oliver & Hedges, specializing in intellectual property and complex litigation. She is a graduate of Harvard Law School, where she worked on the Harvard Law Review with President Obama.

For the first time in nearly two years, the Federal Trade Commission has a full complement of members. The addition of two new Commissioners brings the membership to three Democrats (Commissiioners Leibowitz, Brill, and Ramirez) and two Republicans (Commissioners William Kovacic and J. Thomas Rosch).

Senate Committee Hears from FTC Nominees

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

The two nominees to serve as commissioners at the Federal Trade Commission testified today before the Senate Commerce, Science and Transportation Committee.

Julie Brill, Senior Deputy Attorney General and Chief of Consumer Protection for North Carolina, and Edith Ramirez, a partner with Quinn Emanuel Urquhart Oliver & Hedges, LLP, told the committee of their accomplishments and their plans if confirmed as commissioners.

The committee also heard from persons nominated for other positions: David L. Strickland (nominated as Administrator of the National Highway Traffic Safety Administration U.S. Department of Transportation), Nicole Y. Lamb-Hale (nominated as the Assistant Secretary for Manufacturing and Services, U.S. Department of Commerce), and Michael A. Khouri (nominated as Commissioner of the Federal Maritime Commission).

Brill, who had served for many years in the Vermont Attorney General’s Office, was proudly introduced by Senator Patrick Leahy of Vermont. Brill said that her top priority, if confirmed as an FTC member, would be “focusing on economic scams that have been so pernicious to consumers during the economic crisis,” such as “get rich quick” scams.

Brill described what she would bring to the Commission as: “passion for aggressively protecting consumers, humility and grace in exercising authority, and the need to carefully balance the interests and concerns of businesses, consumers, and other stakeholders in legislative, regulatory and law enforcement initiatives.”

In light of Brill’s experience with state enforcement, the nominee said that she hoped to build upon the bonds that already exist between the FTC and the state attorneys general. She expressed her belief that the FTC has done a good job in the consumer protection area, especially lately.

In introductory remarks, Committee Chairman John D. Rockefeller, IV (West Virginia) said that Edith Ramirez would bring extensive experience in complex business litigation and that he appreciated her critical eye for mergers and business combinations which may potentially harm consumers.

Ramirez said that she was confident that her experience and background, including her activities in her community, would enable her to bring a fresh perspective to the issues confronting the FTC.

She said that “the Commission’s duty to combat deceptive and unfair business practices and to foster competition has never been greater, particularly in the areas that have the greatest impact on the daily lives of ordinary Americans such as financial services, healthcare, energy, and technology.”

Ramirez said that she would make it a priority to help ordinary Americans understand the role of the FTC and its consumer protection mission.

Two Intended FTC Nominees Announced by White House

This posting was written by Jeffrey May, Editor of CCH Trade Regulation Reporter.

Update: Nominations for the two FTC Commissioners were sent to the Senate on November 17. Julie Brill was nominated to serve a seven-year term from September 26, 2009. She would succeed Commissioner Pamela Jones Harbour. Edith Ramirez was nominated for a seven-year term from September 26, 2008, to fill the vacancy created by the departure of Commissioner Deborah Platt Majoras in March 2008 The announcement appears here on the White House website.

The Obama Administration announced on November 16 two candidates to serve as Federal Trade Commissioners.

The President named Julie Brill, Senior Deputy Attorney General and Chief of Consumer Protection for North Carolina, and Edith Ramirez, a partner in the Los Angeles office of Quinn Emanuel Urquhart Oliver & Hedges, LLP. Both are Democrats.

The White House announcement did not specify which potential nominee would fill the vacancy created by the departure of Deborah Platt Majoras in March 2008 and which candidate would replace Commissioner Pamela Jones Harbour, an Independent whose term expired on September 26.

Before joining the North Carolina Department of Justice in February 2009, Brill was an Assistant Attorney General for Consumer Protection and Antitrust for the State of Vermont for over 20 years. Prior to her career in law enforcement, Brill was an associate at Paul, Weiss, Rifkind, Wharton & Garrison in New York and clerked for Vermont Federal District Court Judge Franklin S. Billings Jr. She is an adjunct faculty member at Columbia Law School.

Ramirez is a graduate of Harvard Law School, where she worked on the Harvard Law Review with President Obama. She served as a law clerk to the Honorable Alfred T. Goodwin, U.S. Court of Appeals for the Ninth Circuit. In her current practice, Ramirez specializes in intellectual property and complex litigation matters.

A White House announcement on nominees for the FTC has been expected for weeks. A September 8 posting on Trade Regulation Talk discussed speculation concerning these nominations.

FTC Chairman Jon Leibowitz had commented at Fordham University’s International Antitrust Law Conference on September 24 that it was highly likely that the nominees would be named soon. Chairman Leibowitz went on to say that the Commission was working well despite the absence of a fifth member.

In addition to Leibowitz and Harbour, the two other current members of the Commission are Republicans William E. Kovacic and J. Thomas Rosch. Kovacic’s term expires in September 2011, and Rosch’s term expires one year later.

At the same time as the FTC candidates were named, the White House announced nominees for ambassadors to Nepal and Trinidad and Tobaggo. A nominee for the federal co-chair of the Appalachian Regional Commission was also announced.

“These individuals bring a depth of experience to their respective roles, and I am confident they will serve my administration and the American people well," Presidet Obama said. "I look forward to working with them in the months and years ahead.”

Text of the announcement appears here on the White House website.

Administration Reportedly Considering Two for FTC Vacancies

This posting was written by John W. Arden.

The Obama Administration is considering two candidates for open positions on the Federal Trade Commission, according to a story published by Reuters on September 3.

There has been an open position on the Commission for the last 18 months—since Deborah Platt Majoras resigned in March 2008. The term of Commissioner Pamela Jones Harbour expires this month. She is not expected to be nominated for another term.

The two candidates reportedly under consideration are Julie Brill, Senior Deputy Attorney General and Chief of Consumer Protection for North Carolina, and Edith Ramirez, a partner with Quinn Emanuel Urquhart Oliver & Hedges, LLP, a 400-plus lawyer firm based in Los Angeles.

Brill, a graduate of Princeton University and New York University School of Law, previously served as Assistant Attorney General of the Consumer Protection Division of the Vermont Attorney General’s Office. She has received several honors in her government service, including Privacy International’s 2001 Brandeis Award for work on privacy issues and the 1995 National Association of Attorneys General Marvin Award for leadership in advancing the goals of the organization. Brill is a Lecturer-in-Law at Columbia Law School.

Ramirez is a graduate of Harvard-Radcliffe College and Harvard Law School, where she worked on the Harvard Law Review with President Barack Obama. In her law practice, she has handled a broad range of complex business litigation, including matters involving copyright and trademark infringement, antitrust, and unfair competition. She served in the Obama presidential campaign as Director of Latino Outreach in California.

The Federal Trade Commission is headed by five Commissioners, nominated by the President and confirmed by the Senate, each serving a seven-year term. No more than three Commissioners can be of the same political party. Currently, the Commission is chaired by Democrat Jon Leibowitz. The other members are Commissioner Jones Harbour, an Independent, and Republicans William E. Kovacic and J. Thomas Rosch.

The Reuters story appears here.