Businesses at different levels in the supply chain of a product choose to merge ("vertical mergers," compared with "horizontal mergers" where business at the same level in the supply chain merge) for a variety of reasons, many of which can be beneficial to competition and/or consumers. Vertical mergers can lead to efficiencies in supply chains, eliminations of multiple profit margins, and elimination of markups. Nowhere has this been as evident and prominent as health care. Whether a by-product of health care reform such as Patient Affordable Care Act ("ACA") or the result of businesses seeking solutions to problems that plague the health care industry, vertical mergers in health care are here to stay. The past three years alone saw some of the largest vertical mergers the health care industry has ever known, including: CVS' acquisition of AETNA (2017), Anthem, Inc.'s purchase of Aspire Health (2018), and in Michigan the merger of Total HealthCare and Priority Health (2019). While the efficiencies that result from a vertical merger explain why they are not often challenged by the Department of Justice or Federal Trade Commission (the "Agencies"), the plethora of vertical activity in the health care field makes it no surprise that the Agencies saw fit to updating their guidelines on vertical mergers.
Click here to read further commentary on the draft 2020 vertical merger guidelines.
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