Warren Urges FTC to Protect Patients, Scrutinize Cardinal-GI Alliance Deal
Merger of Big Drug Wholesaler, Gastroenterology Service Provider Threatens Competition, Cost Increases, and Health Risks to Patients
By allowing wholesalers to control physician practices, wholesalers could pressure doctors to prescribe medicine that is most profitable for them, even if it's not in the best interest of their patients
Text of Letter (PDF)
Washington, D.C. -- U.S. Senator Elizabeth Warren (D-Mass.) wrote to Federal Trade Commission (FTC) Chair Lina Khan, urging the agency to closely scrutinize pharmaceutical wholesaler Cardinal Health's $3.9 billion proposed acquisition of a majority stake in GI Alliance, the country's largest gastroenterology management services organization.
"This deal threatens to limit competition by expanding Cardinal Health's control of physician practices, while giving Cardinal an incentive to restrict those practices from contracting with Cardinal's rival wholesalers," wrote Senator Warren.
Cardinal Health has a long history of leveraging its dominant market power in a way that negatively impacts patients and health care providers. The company controls 28% of the prescription drug wholesale market, making it one of the three biggest wholesalers in the country. Along the way, Cardinal has pursued an aggressive vertical acquisition strategy, buying up companies to solidify its dominance in the wholesaler market , including acquiring a Group Purchasing Organization (GPO), a data analytics firm, medical device lines, specialty pharmacies, and physician practices. These acquisitions are part of a broader trend of health care conglomerates operating as both seller and buyer of prescription drug services.
"Cardinal has consistently locked its customers into restrictive contracts, blocked out rival wholesalers, and squeezed generic drug manufacturers, leading to more frequent drug shortages, higher drug costs, and poorer health outcomes," wrote Senator Warren.
In October, Senator Warren sounded the alarm about another one of Cardinal's proposed acquisitions: Cardinal's acquisition of Integrated Oncology Network (ION), an MSO that oversees over 50 physician practices spanning 10 states. With this acquisition, Cardinal would be able to force its affiliated practices to enter into sole-source or prime vendor agreements, locking them in and effectively blocking competing wholesalers from offering their services -- while introducing conflicts of interest that could raise drug costs. The FTC did not act, and the acquisition was completed earlier this month. The new Cardinal-GI Alliance deal is even larger in scope, posing a bigger threat.
"In addition to the concerns I outlined in my October letter, the acquisition of GI alliance introduces further opportunities for self-dealing, as Cardinal serves as the primary supplier of pharmaceutical products for Gastrologix GPO -- the only gastroenterology-focused GPO in the nation," wrote Senator Warren. "Accordingly, I urge FTC to closely scrutinize this deal, including under Section 7 of the Clayton Act, which prohibits any acquisition that may substantially lessen competition or tend to create a monopoly."
Senator Warren has long highlighted the negative consequences of vertical integration in the health care industry on patients, providers, and taxpayers. Senator Warren recently introduced her Patients Before Monopolies Act (PBM Act), bipartisan and bicameral legislation to prohibit joint ownership of PBMs and pharmacies, a gross conflict of interest that enables these companies to enrich themselves at the expense of patients and independent pharmacies.
Senator Warren has led efforts to use every tool available to the government to lower drug prices and fight anticompetitive business practices in the health care industry: