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State of California Department of Justice
Rob Bonta
Attorney General
Attorney General
The Competition Unit conducts all antitrust and other competition-related work that impacts the healthcare markets in California. The section investigates and enforces California’s antitrust and unfair competition laws as well as federal antitrust laws as they might impact the affordability, accessibility, availability, and quality of healthcare services and pharmaceutical products. Typical matters include investigation and litigation over collusive pay-for-delay agreements between pharmaceutical companies, review of healthcare providers and drug companies in consolidated markets, antitrust cases against healthcare providers using anticompetitive contracts and conduct to inflate pricing, and investigations related to pricing and choice in the market.
Healthcare and Anti-competitive Conduct
State of California v. Sutter Health
In March 2018, the Attorney General sued Sutter Health, the largest hospital system in Northern California, for anticompetitive practices that resulted in higher healthcare costs. Sutter's practices harmed California’s healthcare market by charging higher prices unrelated to quality or cost of care.
The litigation began in 2014 when a class action suit led by United Food and Commercial Workers International, and Union and Employers Benefit Trust challenged Sutter’s practices in rendering services and setting prices. The lawsuit sought compensation for alleged unlawful, anticompetitive business practices, which caused patients to pay more than necessary for healthcare services and products. The Attorney General’s lawsuit on behalf of the people of California sought injunctive relief to compel Sutter to correct its anticompetitive business practices moving forward. The separate lawsuits were combined by the court into one case.
On the eve of trial, the parties reached a tentative settlement, which received preliminary approval in March 2021. The settlement received final approval in August 2021.
For additional information on the Attorney General’s healthcare matters, see the Healthcare Rights and Access section.
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Healthcare and Pharmaceuticals
California et al. v. Vyera Pharmaceuticals and ‘Pharma Bro’ Martin Shkreli et al.
The Attorney General joined a lawsuit filed by the New York Attorney General and the Federal Trade Commission in 2020 against Vyera Pharmaceuticals and two of its former CEOs — including ‘Pharma Bro’ Martin Shkreli — for stifling competition to protect exorbitant, monopolistic pricing of the drug Daraprim. Daraprim is a drug used to treat the parasitic disease toxoplasmosis, which poses serious and often life-threatening consequences for those with compromised immune systems. When it purchased the rights to Daraprim in 2015, Vyera Pharmaceuticals became the only Food and Drug Administration-approved source of the medication for this disease in the market. Facing no competition from generic versions of the drug, Shkreli and Vyera Pharmaceuticals raised the price of the drug overnight by more than 4,000 percent, from $17.50 per pill to $750.
Pay-for-Delay Settlements
The Attorney General reached four settlement agreements in 2019 against pharmaceutical companies for entering into collusive “pay-for-delay agreements” that illegally delayed affordable prescription drugs from entering the market. Pay-for-delay agreements allow a brand name drug company to preserve its monopoly by entering into an agreement with a generic drug company. Under the agreement, the brand name company pays the generic drug company to delay the release of the generic drug. Without any generic alternatives, consumers are forced to pay higher prices for the brand name drug.
Together, the settlements forced these pharmaceutical companies to pay nearly $70 million to the state. The settlements included the largest pay-for-delay settlement received by any state, and also marked the first injunctive relief for a state against future pay-for-delay agreements. The first settlement with Teva addresses anticompetitive pay-for-delay agreements that delayed a generic narcolepsy drug, Provigil, from entering the market for almost six years. The three other settlements with Teva, Endo Pharmaceuticals, and Teikoku address similar practices that prevented a generic version of the drug Lidoderm, a shingles medication, from entering the market for almost two years. Pay-for-delay agreements force consumers to pay as much as 90 percent more for drugs shielded from competition.
U.S. vs. Anthem / Cigna
In 2016-2017, the Attorney General joined with the U.S. Department of Justice and other states to successfully block the proposed $48 billion merger of two health insurance companies, Anthem and Cigna. The consolidation of two of the five largest insurers in the U.S. at the same time Aetna and Humana were also attempting to merge would have significantly undercut competition, driving up health care costs for consumers and employers. The proposed merger would have been the largest in the history of the health-insurance industry and would have created the nation’s largest health insurer, with approximately 53 million plan participants.
For complaints relating to anticompetitive activities and transactions in healthcare, please feel free to access the following link to file a complaint here.
Multistate Coalition Supporting Federal Trade Commission’s Proposed Rule Limiting Non-Competes in Employment
On April 19, 2023, our Office led a multistate coalition in submitting comments in support of the Federal Trade Commission’s proposed rule banning non-compete clauses. The comment letter described how low- and middle-wage workers would benefit the most from the proposed rule’s beneficial effects on wage increases and job mobility. The comment letter also described how the proposed rule would improve racial and gender equity. The comment letter described how the proposed rule would improve conditions in the healthcare industry, which is experiencing a nationwide healthcare worker shortage, especially among physicians and nurses.
After the final rule was published, our Office joined 16 other attorneys general in submitting amici curiae briefs in support of the Federal Trade Commission’s final rule. Those amici curiae briefs drew from the states’ experience to argue that the Federal Trade Commission’s rule provided a crucial national floor for interstate labor markets. The amici curiae briefs were filed in the United States Court of Appeals for the Fifth Circuit and the United States Court of Appeals for the Eleventh Circuit.
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San Ramon Regional Medical Center and John Muir Health Merger Challenge with the Federal Trade Commission
The Competition Unit and the Federal Trade Commission (FTC), filed an antitrust lawsuit in the U.S. District Court for the Northern District of California, challenging John Muir Health’s (John Muir) acquisition of Tenet Healthcare Corporation’s (Tenet) controlling interest in the for-profit San Ramon Regional Medical Center located in San Ramon in Contra Costa County. The complaint for a temporary restraining order and preliminary injunction argued that the acquisition is inherently anticompetitive, and illegal under the Clayton Act. It sought to block John Muir and Tenet from completing the proposed acquisition, under which John Muir would become the sole owner of San Ramon Regional Medical Center. In the lawsuit, Attorney General Bonta and the FTC argued the proposed acquisition illegally threatened to eliminate substantial competition between the San Ramon Regional Medical Center and John Muir’s nearby hospitals, significantly increasing consolidation in an already highly concentrated market, and leading to increased prices for patients, employers, and insurers. The defendants abandoned the transaction shortly after our suit was filed.
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Comments on Merger Guidelines
The Competition Unit co-led a coalition of 19 attorneys general in submitting a comment letter to the United States Department of Justice (DOJ) and the Federal Trade Commission (FTC) regarding the agencies’ proposed revisions to the Merger Guidelines. Merger Guidelines describe the standards used by DOJ and FTC to determine whether mergers and acquisitions comply with federal antitrust law. In addition to serving as a guide to federal and state enforcers, companies considering mergers, and defense counsel, the Merger Guidelines have been treated by courts as persuasive guidance on merger law. In the comment letter, the attorneys general commend DOJ and FTC for seeking to strengthen federal and state merger enforcement as well as urge the agencies to go further to protect competition in the marketplace.
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Children’s Hospital of Orange County-Rady Children’s Hospital San Diego
The California Attorney General Rob Bonta conditionally approved the affiliation of Rady Children’s Hospital and Health Center and Children’s Hospital of Orange County (CHOC) and CHOC at Mission. The proposed transaction presented both horizontal and cross market competitive effects as two of the state’s largest and most profitable pediatric hospitals planned to combine, making it the most dominant pediatric healthcare provider south of Los Angeles. The AG approved a number of conditions, including conditions to preserve competition to prevent the risk of price hikes. These conditions include:
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Effects of Private Equity on Healthcare
California’s Attorney General, through HRA, led a coalition of 11 Attorneys General in submitting a response to a request for comment by HHS, the FTC, and the United States DOJ on the effects of private equity on healthcare. The comment lays out the aggressive profiteering by private equity-owned healthcare systems, which leads to higher healthcare costs, poor healthcare quality, and less access to care for patients. To ensure fair competition and eliminate potential anticompetitive practices, the comment advocates for the following enforcement and regulations: to collect and make information on organizational structure, quality of care, and enhanced payments to providers that participate in federal and state health programs available to federal and state enforcers, with no carve out or exclusions for organization structures where an investor owns less than 25% of a holding entity or healthcare asset; and prohibit participants in federal and state healthcare programs from using anticompetitive contracting practices such as anti-steering of providers to deter such practices by private equity investors and other asset managers, among other actions. HHS's ultimate report adopted many of these recommendations.
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Attorney General Bonta Conditionally Approves Ownership Change of High Desert Hospital
California Attorney General Rob Bonta conditionally approved a change in control of St. Mary Medical Center (SMMC), a general acute care hospital in Apple Valley in San Bernardino County. In the joint venture, SMMC will own 70% while Kaiser will own 30% and have substantial joint control of the company’s hospitals operations.
While evaluating the proposed transaction between Kaiser and SMMC, the Attorney General’s Office received hundreds of comments from members of the High Desert community regarding the impact the change of control could have on their ability to access healthcare at SMMC. A thorough investigation revealed that SMMC’s affiliation with Kaiser could lead to a preference for beds for Kaiser’s patients, which might cause Medi-Cal patients to lose access to acute care, emergency, maternity, pediatric, and cardiology services. Kaiser’s dominance as a health insurer and SMMC’s as a main provider of hospital services in the area could also lead to anticompetitive effects in the region’s healthcare market. To address these issues, Attorney General Bonta’s approval imposes multiple competitive and health impact conditions.
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Attorney General Bonta Conditionally Approves Sale of Adventist Health Vallejo
California Attorney General Rob Bonta today conditionally approved the sale of Adventist Health Vallejo (Adventist Vallejo), an acute psychiatric inpatient hospital, to Acadia Healthcare Company Inc. (Acadia), a national for-profit behavioral health system. The Attorney General’s conditions, upon which the sale is contingent, address the risk of price increases in the limited market for acute psychiatric services in Northern California and ensure the availability of high-quality services for patients in the region, including those under the age of 18.
Among the concerns found while investigating the proposed sale were impacts on competition in the acute psychiatric services market in the region. As owners of both San Jose Behavioral and Adventist Vallejo, Acadia could leverage both hospitals to increase prices, potentially reducing the quality, availability, and accessibility of these vital services. Adventist Vallejo also plays a vital role in treating the mental health of children in the region. The Attorney General’s conditions, including barring Acadia from burdening Adventist Vallejo with debt and the appointment of an evaluation team to conduct a comprehensive survey of the quality of care at San Jose Behavioral, will help preserve the continuity and availability of this essential care.
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Attorney General Bonta Joins Historic FTC Settlement with Major Pharma Company Amgen
On May 16, 2023, California joined a lawsuit filed by the FTC challenging Amgen, Inc.’s proposed acquisition of Horizon Therapeutics (Horizon); the lawsuit was the first ever challenge of a pharmaceutical merger. Horizon specializes in manufacturing medications for rare and often severe autoimmune diseases, such as thyroid eye disease and chronic refractory gout. The FTC’s lawsuit, joined by California and five other states, alleged that Amgen’s proposed acquisition of Horizon would allow it to muscle out competitors and in effect, making it potentially impossible for new, more affordable medications to reach patients.
The settlement resolves these allegations by providing meaningful safeguards against such future anticompetitive practices by Amgen. The terms of the settlement include:
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Attorney General Bonta, The Regents/UCSF Health Enter into Cooperative Settlement Agreement to Protect Health Services for San Francisco Residents
On July 2, 2024, the court approved a settlement that California Attorney General Rob Bonta reached with The Regents of the University of California and UCSF Health (The Regents/UCSF Health) regarding enforceable conditions on The Regents’ purchase of Dignity Health's two San Francisco hospitals, St. Mary’s Medical Center and Saint Francis Memorial Hospital. Both hospitals serve a diverse community, including a large number of elderly, unhoused, and publicly insured patients who rely on Medi-Cal, Medicare, or charity care to access essential health services. Under the settlement agreement, The Regents/UCSF Health are required to maintain services for the unhoused and Medi-Cal and Medicare beneficiaries, provide $430 million in capital investments, and safeguard the affordability of and access to services for residents of San Francisco. Additionally, the settlement has conditions for seven years, overseen by an independent monitor, in order to maintain competition in the healthcare market, including but not limited to:
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