The firing of the Federal Trade Commission’s (FTC’s) two remaining Democratic commissioners Wednesday could raise new, unresolved legal questions and threaten a case on pharmacy benefit managers.
President Donald Trump fired Alvaro Bedoya and Rebecca Kelly Slaughter, who join former Chair Lina Khan in leaving the agency in the last few months. The five-person commission is now led by Chair Andrew Ferguson and Melissa Holyoak, two Republicans.
The decision could have unintended consequences on a lawsuit against the country’s three largest PBMs and their affiliated group purchasing organizations. Trump has expressed interest in reining in the “pharmacy middlemen,” a goal that saw bipartisan consensus in Congress and at the FTC during the Biden administration.
Brought forward in September, the FTC lawsuit is accusing CVS Health’s Caremark Rx, Cigna’s Express Scripts and UnitedHealth Group’s OptumRx of “engaging in anticompetitive and unfair rebating practices that have artificially inflated the list price of insulin drugs.”
The action was supported by the three Democratic members, but Ferguson and Holyoak recused themselves without explanation. Now, Ferguson and Holyoak are the only remaining members on the commission. Mark Meador, another Republican, could be the third commission member if the Senate confirms him later this month.
A quorum requires a “majority of the members in the commission in office and not recused” to vote on an action. It’s plausible Meador could be the only commissioner to issue a decision after oral arguments on this case.
Under normal FTC proceedings, there is historical precedent for the agency to function with just three, or, in rare circumstances, two members. And Trump is under no obligation to appoint more members. Current statute says the two open spots must be filled by Democrats and that he can’t stack the commission with all Republicans—though he may decide to defy the statute and send that issue to the courts as well.
But, if the PBM case is only heard by potentially one member, does that constitute a quorum to vote for or against certain actions? It’s an open question and not legally certain, experts told Fierce Healthcare.
“My understanding is that the FTC’s existing rule on a quorum is that you can have a quorum of one,” said William Kovacic, former FTC chair under President Barrack Obama and director of the Competition Law Center at George Washington University. “There might be a separate issue about whether the FTC is correctly promulgating those rules.”
That might not necessarily be the case. Former FTC General Counsel under President Bill Clinton Stephen Calkins and John Villafranco, partner at law firm Kelley Drye & Warren, laid out the legal rationale against a single person quorum in a Law360 article in 2018.
“How can you have a majority of a single member?” the authors asked. “Had the commission really been contemplating empowering a single commissioner, wouldn’t it have mentioned that? Nothing in the commission’s history, structure or purpose suggests an intention to allow a single commissioner to act for the commission.”
The FTC did not immediately return a request for comment.
As the PBMs seek to dismiss the case entirely, the new uncertainty could bolster their argument and renew efforts to get the lawsuit tossed. That could prove complicated now there are currently no non-recused members on the case.
Ferguson and Holyoak disagreed with the release of interim reports on PBMs on procedural grounds, but there is no indication the chair is looking to abruptly end the investigations into PBM business practices.
Healthcare mergers and antitrust actions aren’t expected to be impacted too much by these firings. This sector enjoys more bipartisanship than other areas at the agency, and members agreed on many issues during Khan’s tenure. There could be, however, changes in approach toward pharmaceutical mergers, said Katherine Funk, an antitrust attorney and shareholder at Baker Donelson.
“I think there’s going to be much more openness to divestitures and resolving issues,” she said. “I don’t think there’s going to be any changes with regard to hospital mergers."
Trump's governing philosophy puts courts to the test
Dismissing Bedoya and Slaughter itself is highly controversial and violates the legal precedent Humphrey’s Executor, which states independent agencies heads can only be fired for cause.
The Trump administration—likely less concerned about the voting dynamics of the FTC since Republicans would already hold a 3-2 advantage—wants to challenge this precedent, instead subscribing to the unitary executive theory of power. In short, it believes these agencies should not be independent but rather under control of the executive branch and the president.
Trump has already taken steps to assert this authority and speed run legal challenges to the Supreme Court, so a conservative majority can rule in his favor. The firings, even if unlawful, currently prevent Bedoya and Slaughter from voting on key issues until the Supreme Court rules on the matter.
White House Press Secretary Karoline Leavitt said Bedoya and Slaughter were fired because the “time was right” and added Trump has the authority to fire them.
“If we have to fight it to the Supreme Court, we certainly will,” she said during a press briefing.
Bedoya and Slaughter are expected to sue. It’s an open question how the Supreme Court will rule.
“Most appellate lawyers and lawyers that do work with the Supreme Court have speculated that decision [Humphrey’s Executor] could be overturned and that the president may win a case like this,” said Sean McConnell, chair of antitrust and competition at law firm Duane Morris.
Under the Seila Law LLC v. Consumer Financial Protection Bureau (CFPB) ruling of 2020, the Supreme Court ruled a president can fire the CFPB head at will—perhaps a precursor to a future decision impacting the FTC.
“The Supreme Court, in a number of instances in recent years, has hinted they are willing to revisit those precedents,” said Kovacic. “There is some merit to the argument. There is merit to leaving the status quo alone too. It’s a contestable issue.
“Certainly the White House is betting they’ll pitch it aside right away,” he said. “I’m not sure they’re right.”
Trump has already taken wide-reaching actions to curtail the power of independent agencies. Last month, he issued an executive order with demands for future rulemaking in agencies like the FTC to flow rulemaking through the White House. He has already fired the heads of the National Labor Relations Board and the Merit Systems Protection Board, among other terminations. The Department of Justice also told (PDF) Congress it believes Humphrey’s Executor is unconstitutional.
Bedoya doesn’t think his firing is purely another indication Trump is flexing his strength through renewed executive power.
“If this were just a unitary executive thing, we would’ve been on that checklist week one or two,” he said in an interview following the firing.
He suggested billionaire influence over the current administration could have led to the firings, since the FTC is suing powerful tech corporations tied to Elon Musk, Mark Zuckerberg and Jeff Bezos that have donated to Trump. If the president disagrees with a lawsuit for political reasons, he asked, what’s to stop unfair firings in the future?
“I understand folks who want the president be empowered and their agenda made law,” he conceded, before saying unitary executive theory can quickly become merged with, effectively, corporate pardons if the proper guardrails aren’t in place.
Bedoya and Slaughter both said in interviews March 19 they aren’t sure what happens to the PBM insulin lawsuit now that they are gone. Democratic lawmakers reacted with outrage at the firings.
Preliminary rulings and appeals aside, it would likely be at least a year until the Supreme Court hears and gives a final ruling on any lawsuit brought by Bedoya and Slaughter.
Can FTC rulings be upheld until a Supreme Court decision is made? Any negative ruling a company receives is more likely to be challenged, antitrust attorneys theorized. The FTC could, potentially, feel paralyzed if companies look likely to win those lawsuits.
And what happens if the Supreme Court decides to rule in the fired commissioners’ favor?
“I’m not absolutely sure,” said Kovacic. “I doubt the court would invalidate decisions taken in the interim. It depends a lot on what Bedoya or Slaughter ask for in their complaints.”