Daily Archives: February 4, 2022

Zachary Dulabon, CLS ’23

In the past few years authorities have begun to take an increasingly hard look at labor market restrictions and the potential application of antitrust scrutiny.^[1] Recent scholarship has used the National Residency Matching Program  (NRMP) as an example of how sharing of salary information among employers may be used as a facilitating practice to fix wages in labor markets, such that this practice in other labor markets is particularly ripe for antitrust scrutiny.^[2]  It is high time that the statutory exemption from antitrust scrutiny that the NRPM enjoys be reconsidered, as medical residents should have a meaningful say in the compensation, hours, and conditions associated with their employment.  Allowing for antitrust challenges to the system could lead to reforms, with courts considering less restrictive alternatives to the proffered procompetitive justifications for the NRMP.^[3]

Residency refers to the period of three to seven years following graduation from medical school that prospective physicians spend working and training before they can become a licensed physician.^[4]  On the third Friday of every March, applicants to residency programs are notified of the residency program to which they are matched.  This annual process is the culmination of months of stress for applicants, as the opaque process leaves them in the dark about where and in what practice area they will be working for the next several years.^[5]  According to the 2021 Report from the Association of American Medical Colleges (AAMC), the average salary for first year residents was $59,279 in 2021 with relatively little variation across both specialty and geographical location.^[6]  When adjusted for inflation, there has been a small decrease in the real wage for residents since 1972, and when taking into account that residents routinely work more than eighty hours per week, the hourly wage may be below the relevant jurisdiction’s minimum.^[7]

The small spread in compensation is facilitated by information sharing among the programs and the restraints on individual negotiation imposed by the NRMP.^[8]  Participation in the NRMP is near compulsory.  Completion of a residency program accredited by the Accreditation Council for Graduate Medical Education (ACGME) is required to become a licensed physician, and nearly all spots in ACGME accredited programs are filled through the NRMP.^[9]  The NRMP uses a computer algorithm to match applicants and programs based upon the rank order lists of preferred programs and preferred applicants.^[10]  Applicants are prohibited from agreeing on any employment terms prior to the match and from discussing with other applicants how they plan to rank programs.  Critically, both applicants and programs are contractually bound to adhere to whatever match the algorithm produces.  These restraints effectively bar applicants from engaging in negotiations over the terms of employment with the program with which they are matched.^[11]

The horizontal nature of these restraints raise obvious antitrust questions, and, in 2002, a class-action suit was brought against the AAMC, NRMP, the ACGME, and participating residency programs on behalf of all individuals who had been employed in accredited residency programs.^[12]  The plaintiffs in Jung v. Association of American Medical Colleges asserted that the defendants had violated Section 1 of the Sherman Act through horizontal agreements to impose anti-competitive restraints on medical residency placement and hiring through the NPRM; amounting to a de facto prohibition on the ability of residents to engage in individual negotiations.^[13]  The plaintiffs alleged that these practices, along with information sharing, had resulted in the fixing of wages at a level below the competitive equilibrium.^[14]  In a February 2004 order addressing the Defendant’s motion to dismiss, the Court allowed the suit to proceed against several of the defendants and gave nodding approval to the plaintiff’s theories regarding the alleged agreement and the nature of the antitrust violation.  Before the suit could proceed further, Congress sprang into action by exempting the NRMP from antitrust law in the Pension Funding Equity Act of 2004.^[15] The statutory exemption led to the subsequent dismissal of the suit by the district court and denials of the plaintiff’s attempts to appeal the decision.^[16]  There have been no subsequent antitrust challenges alleging horizontal price fixing by residency programs.  This is because it would be nearly impossible for plaintiffs to prove an agreement without using participation in the NRMP as evidence.^[17]  The exploitation of residents during the COVID-19 pandemic in conjunction with unionization may be the impetus needed to either get residency programs to voluntarily allow for meaningful negotiation or for Congress to reconsider the antitrust exemption of the NRMP.^[18]

^[1] See Department of Justice Antitrust Division and Federal Trade Commission to Hold Workshop on Promoting Competition in Labor Markets, Dep’t of Just. (Oct. 27, 2021) https://www.justice.gov/opa/pr/department-justice-antitrust-division-and-federal-trade-commission-hold-workshop-promoting; DOJ Criminally Prosecutes First No-Poach Agreement on Heels of First Criminal Wage Fixing Indictment, Cooley (Jan. 12, 2021) https://www.cooley.com/news/insight/2021/2021-01-12-doj-criminally-prosecutes-first-no-poach-agreement.

^[2] See Richard A. Bales & Katherine V.W. Stone, The Invisible Web at Work: Artificial Intelligence and Electronic Surveillance in the Workplace, 41 Berkeley J. Emp. & Lab. L. 1, 38–39 (2020); Suresh Naidu et. al., Antitrust Remedies for Labor Market Power, 132 Harv. L. Rev. 536, 599–600 (2018).

^[3]  Melissa Mayeux, A Match Made in Antitrust Heaven? A Liberalistic Exploration of the Medical Match’s Antitrust Exemption, 13 Wash U. Jur. Rev. 121, 143–44 (2020).

^[4] Mayeux, supra note 3, at 121.

^[5] Id. at 126.

^[6] Ass’n Am. Med. Colls., Survey of Resident/Fellow Stipends and Benefits Report (2021),  https://www.aamc.org/media/9606/download. While wages have remained stagnant the average debt of medical school graduates is now over $200,000.  Furthermore, the COVID-19 pandemic further highlighted the significant demands placed upon residents in terms of both the type of care they provide and the hours they work. Clifford M. Marks, Make Residency—and Health Care—More Equitable by Scrapping the Match, Stat (Mar. 18, 2021), https://www.statnews.com/2021/03/18/make-residency-more-equitable-scrap-the-match/.

^[7] Mayeux, supra note 3, at 129.

^[8] See George L. Priest, Timing “Disturbances” in Labor Market Contracting: Roth’s Findings and the Effects of Labor Market Monopsony, 28 J. Lab. Econ. 447, 450–51 (2010).

^[9] The Match: Explaining the Application Process and Your Residency Results, St. Geo. U. (Mar. 17, 2021), https://www.sgu.edu/blog/medical/explaining-the-match-for-residency/.

^[10] Alvin E. Roth, The Origins, History, and Design of the Resident Match, 289 JAMA 909, 911 (2003).

^[11] Kristin Madison, The Residency Match: Competitive Restraints in an Imperfect World, 42 Hous. L. Rev. 759, 775–76 (2005).

^[12] Jung v. Ass’n of Am. Med. Colls., 300 F. Supp. 2d 119, 125 (D.D.C. 2004).

^[13] Id. at 125–27.

^[14] Id. at 166–69.

^[15]  A provision of the act, entitled “Confirmation of Antitrust Status of Graduate Medical Resident Matching programs states that “It shall not be unlawful under the antitrust laws to sponsor, conduct, or participate in a graduate medical education residency matching program… Evidence of any of the conduct described in the preceding sentence shall not be admissible in federal court to support any claim or action alleging a violation of the antitrust laws.” 15 U.S.C. § 37b(b)(2).

^[16] Jung v. Ass’n of Am. Med. Colleges, 339 F. Supp. 2d 26 (D.D.C. 2004); Jung v. Ass’n of Am. Med. Colls.,184 F. App’x 9 (D.C. Cir. 2006), cert. denied, 127 S. Ct. 1041 (2007).

^[17] Mayeux, supra note 3, at 145.

^[18] See Marks, supra note 6 (arguing that due to the significant debt burden and the increase in exploitation of residents by hospitals during COVD-19, the NRMP should be disbanded or subject to challenge).

Logan Wilke, CLS ’23

Martin Shkreli, aka the “Pharma Bro,” gained notoriety in 2015 for purchasing a drug that treats toxoplasmosis, a parasitic infection primarily affecting those with HIV/AIDS, and raising its price by 5,000%.[1]  Although Shkreli had originally defended this price increase as “not excessive at all,”[2] the Federal Trade Commission and a group of seven States Attorneys’ offices pursued a lawsuit against him and his company, Vyera Pharmaceuticals, alleging that the hike was only possible due to “an elaborate, multi-part scheme to block generic entry” in violation of both federal and state antitrust laws.[3]

Although Vyera settled ahead of trial, [4] a federal court recently found Shkreli individually liable under federal and state law for monopolizing the market for the drug and blocking generic entry.[5]  Following a bench trial in federal court in December 2021, the court ordered Shkreli barred for life from participating in the pharmaceutical industry and to disgorge $64.6 million in net profits.[6]

While this result certainly offers some comfort in knowing that Shkreli’s notoriously brazen scheme did not go unpunished, an earlier ruling against Vyera has implications for antitrust enforcement beyond the case at hand.  Earlier last year, the Supreme Court held that the FTC does not have the authority to obtain equitable monetary relief as a remedy in federal court.[7]  As a result, the FTC could no longer seek disgorgement, a form of such relief, of Vyera’s allegedly ill-gotten profits in the case at hand.[8]  Still, State plaintiffs maintained their claims for disgorgement under the Sherman Act, Clayton Act, and their respective state laws.[9]  While the court did not rule on every state’s authority to seek disgorgement, the court did hold that in New York, where Vyera conducted its scheme, state law grants such authority to the New York Attorney General, one of the plaintiffs.[10]

An open question remained, however, as to the scope of such relief.  Vyera moved for partial summary judgment on the issue, arguing that State plaintiffs may only pursue disgorgement where the defendants’ net profits are tied to sales that have victimized citizens of their States.[11]  The court denied the motion, finding that New York Executive Law § 63(12) permits the Attorney General to seek relief on behalf of out-of-state residents injured by the wrongdoing stemming from a company’s New York-based operations.[12]  As the Attorney General can use this authority to enforce its state antitrust law, the finding allowed the court to hold Shkreli personally liable to disgorge the $64.6 million of excess profits gained from the scheme.[13]

As the FTC remains unable to seek disgorgement in the courts, this ruling paves the way for the New York Attorney General and other State enforcers with similar state-law statutory authority to fill the void and pursue nationwide disgorgement as New York did here.[14]  Although disgorgement had not been used widely until the past decade, it has become an increasingly important tool for antitrust enforcers to deter future violations where injunctive relief alone would not suffice.[15]

[1] Cecilia Kang, Martin Shkreli Faces New Accusations Over High-Priced Drug, New York Times (Dec. 21, 2020), https://www.nytimes.com/2020/01/27/business/martin-shkreli-ftc-lawsuit.html.

[2] CBS News, CEO: 5,000-percent Drug Price Hike “Not Excessive at All,” CBS News (Sep. 22, 2015), https://www.cbsnews.com/news/turing-pharmaceuticals-ceo-martin-shkreli-defends-5000-percent-price-hike-on-daraprim-drug/.

[3] See Complaint, Fed. Trade Comm’n v. Vyera Pharms., LLC, No. 20CV00706, 2021 WL 4392481 at 2 (S.D.N.Y. Jan. 27, 2020) (ECF 1).

[4] See Luc Cohen and Brenan Pierson, U.S. FTC Focuses on Deal with Japanese Company in Shkreli Trial, Reuters (Dec. 14, 2021), https://www.reuters.com/world/us/us-ftc-states-take-shkreli-trial-over-price-hike-2021-12-14/.

[5] See Opinion and Order, Fed. Trade Comm’n v. Vyera Pharms., LLC, No. 20CV00706 at 6 (S.D.N.Y. Jan. 14, 2022).

[6] Id. at 6-7.

[7] See AMG Cap. Mgmt., LLC v. Fed. Trade Comm’n, 141 S. Ct. 1341 (2021). The Court interpretated Section 13(b) of the FTC Act to authorize the Commission to seek equitable monetary relief through administrative proceedings but not in federal court.

[8] See Opinion and Order Denying 459 Motion for Partial Summary Judgment at 9, Fed. Trade Comm’n v. Vyera Pharms., LLC, No. 20CV00706, 2021 WL 4392481 (S.D.N.Y. Sept. 24, 2020) (ECF 482).

[9] See id. at 10.

[10] See id. at 11.

[11] See id. at 4.

[12] See id. at 11.

[13] See Opinion and Order, supra note 5 at 129 (New York Executive Law § 63(12) authorizes the Attorney General to seek actions in equity, including for monetary relief, “to disgorge unlawfully gained profits wherever they were derived.”  The Attorney General can use this authority to enforce the Donnelly Act, the State’s antitrust statute.).

[14] See Consumer Protection and Recovery Act, H.R. 2668, 117th Cong. (2021); Although the House passed stand-alone legislation in July to amend the FTC Act to expressly authorize the Commission to seek equitable monetary relief, the bill passed largely along party lines and has not moved in the Senate.

[15] See Fed. Trade Comm’n, Withdrawal of the Commission’s Policy Statement on Monetary Equitable Remedies in Competition Cases, at 2 (July 31, 2012), https://www.ftc.gov/publicstatements/2012/07/statement-commission-regarding-withdrawal-commissions-policy-statement.