The Insufferable Bros Who Run Corporate America
A quiet merger trial between antitrust enforcers and a pharma data giant called IQVIA reveals how bro-style executives control your medical data.
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Today’s subject is a near secret trial about a big merger, whose outcome will be determined between Christmas and New Year’s, the slowest period for news.
The firm being sued is called IQVIA, it’s a corporation that few outside of the pharmaceutical industry have heard about, but one that controls how doctors learn about medicine. And as you’ll see, even if you don’t know them, IQVIA, and its frat-boy executives, know a LOT about you.
And now, on with the bro-down.
Directing a Doctor’s Pen
Americans spend $600 billion on pharmaceuticals a year, and every dollar goes out under a prescription by a doctor. “The most expensive piece of medical equipment,” goes a saying, “is a doctor’s pen.” And doctors, though imagined as pure scientists in white coats, are targets for aggressive marketing campaigns, because getting information to doctors about which pills to give patients is big business.
Given the trends in American business towards monopolization since the 1980s, it won’t surprise you to learn there’s one corporation that stands between pharmaceutical firm marketing divisions and the doctor with the pen. It’s called IQVIA, and it is the result of a series of mergers, with the original seed company being IMS Health, co-founded by Arthur Sackler in the 1950s. Yes, that Sackler.
IQVIA is now embroiled in a fight with the Federal Trade Commission over a merger that will determine the future of this $600 billion of spending, and more broadly, which medicines get developed and sold worldwide. Specifically, the FTC alleges IQVIA is trying to monopolize advertising to health care professionals (HCP) by buying up two of the three key firms that run online advertising targeted at doctors. These firms have vaguely titillating names. There’s Lasso, for which IQVIA paid a rumored $400 million, and DeepIntent, for which it forked over an apparent $800 million. (The remaining one is PulsePoint.)
That fight has happened at trial over the past month in a courtroom in Manhattan, where lawyers for the FTC sat across from a host of well-heeled firms in various parts of the pharmaceutical marketing world to argue about corporate power in health care, and debate whether the acquisition of DeepIntent is legal. The judge - a smart and guarded man named Edgardo Ramos - will issue a decision by next Friday, on December 29th, one of the most news dead days of the year.
As with the Google search trial, this is happening very quietly, almost in secret. Trials, especially of such importance, should be public, but this one mostly isn’t. Reporting is sporadic, if there’s any at all. DeepIntent isn’t a public company, so this trial isn’t really of interest to Wall Street traders, which means a lot of reporters who would ordinarily care, simply don’t know it’s happening.
There’s no web or audio feed, and I had to buy trial transcripts, which cost roughly $200/day, just to get access to what should be public record. Even buying and reading the transcripts is limited; witnesses are routinely questioned in closed session. (Most of the transcripts are here.) And much of the evidence you’d see if you were in the court room, like various sordid emails, and at least one presentation that refers to data as a weapon and uses a picture of the Death Star, is not online. IQVIA, like Google, fights against public disclosure where its market power is concerned.
And yet, there is a story here. As I read the trial transcripts, redactions and all, I’m realizing that pharmaceutical marketing is the most bro-style shit-talking industry I’ve ever seen. This fact shouldn’t be a surprise, I mean, a standard tactic to push expensive pills was to hire former cheerleaders to flirt with dorks in white coats, such that ‘pharma girls’ actually became a gag on the sitcom How I Met Your Mother. And of course this is the industry where Martin Shkreli made his fortune.
But the story of IQVIA and how it is seeking to monopolize the space, explains so much about the twisted culture of corporate America. In this trial, executives were confronted with emails in which they used middle finger emojis towards rivals and talked about “blowing minds” in the industry. At one point, an executive texted a colleague at a rival firm, “Are we preparing a bag of cash right now?” with the response being “how big? 😉.” They then joked about how much money they would both make ‘integrating’ the two firms. Bro-ing down is fine at a tailgate, but when paired with a legal regime tolerant of consolidation, it means bros come to control the industry designed to help doctors learn which medicine to prescribe.
Ok, so what’s this case actually about, and why does it matter?
IQVIA has $14 billion a year in global revenue, which is a little over 2% of all pharmaceutical spending in America. It gets this revenue largely because it has the most important storehouse of medical data in the world, including information on nearly every medication prescribed to every patient in the U.S., the doctor who prescribed it, the pharmacy at which it was dispensed, the disease history of the patient, its pricing, and hundreds of other touch points. Nearly every major pharmaceutical firm, and most governments, depend on IQVIA to understand how to develop, finance, track, and deploy medical treatments.
Where does IQVIA get this data? Lots of places. But as one source told me, one key area is from the payment processing systems that connect pharmacy software, doctors, and insurance companies, which are called switches. “IQVIA is basically a dark web data broker,” he told me. “They pay the switches to collect all the pharmacy claims data and then aggregate and resell the data in all kinds of different ways, mostly to Pharma. Their data is absurdly expensive.” So it’s data about you and me, and from independent pharmacies and insurers, but IQVIA gets it all, without our permission.
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A different source in the pharmacy business told me that IQVIA “is so dominant that they extract physician prescribing data from pharmacies for exactly $0 in payment- while generating revenues in excess of $50,000/pharmacy from sales of that data.” And that power is intentional. “IQVIA is a company of dozens of mergers,” he added, “and many name changes. International Market Statistics, then IMS, then spun off as IMS Health, then merged with Opus Health, as well as Quintiles to form Quintiles-IMS, then a rebrand to IQVIA. IQVIA needs to have like 20 years worth of mergers reversed, IMO.”
IQVIA is in virtually every crevice of the healthcare industry. For instance, a big part of their business, bought in 2016, is to run clinical trials for pharmaceutical firms like Pfizer, using their storehouse of data and knowledge of patient populations. IQVIA is the largest contract research organization in the world, and profit margins in this industry, I’m told from a source, are something like 50-70%. During Covid, for instance, IQVIA ran 200 clinical trials for therapeutics and helped epidemiologists set up the protocols for reopening the National Basketball Association and Olympics. They sell data to the Food and Drug Administration, the Drug Enforcement Agency, the Department of Health and Human Services, and have employees in over 100 countries. IQVIA even helps pharma firms plan their medical portfolios and helps them do mergers.
The culture of IQVIA is aggressive and frankly, full of the kind of pointless lying that instantly makes me suspicious. I’m not exaggerating. In its initial response to the FTC, the firm actually denied that it was “formerly IMS Health.”
It’s a merger, you see, and therefore, I don’t know, new or something? I suspect the reason for this denial is because IQVIA doesn’t want anyone to think that its original corporate form was founded by Arthur Sackler. It’s a very weird denial. On the firm’s website, IQVIA names IMS Health and Quintiles as predecessor corporations and its ‘proud heritage of innovation and discovery.’
So that’s who IQVIA is. But why is the firm in a trial?
In 2020, IQVIA, though it profited quite nicely from the Covid crisis, had a problem. Traditionally, direct sales to doctors involved a variety of practices, some above-board, some sleazy - like sending attractive sales reps to flirt with doctors. All of these techniques relied on IQVIA data, to plan out sales campaigns. During the pandemic sales reps couldn’t visit doctors. Instead, pill makers had to turn to the internet, and in particular, targeted online advertising to doctors, known as HCP (health care provider) marketing.
The backstory is that in the late 2010s, entrepreneurs started advertising platforms for pharmaceutical firms, which is, as it came out at trial, a very high-margin business, especially after the explosion of targeted advertising during Covid. Today, there are three main ad middlemen, DeepIntent, Lasso, and PulsePoint. Each of these ad platforms do for health care advertising what Google does for the rest of the internet, putting medical ads on the hundreds of thousands of websites and apps that doctors use, ensuring that advertisers reached the right doctors with the right medicines (cancer drugs for oncologists, and so forth), and tracking what those doctors prescribe. This business gives them control of what doctors see in ads, but also helps move money to medical websites and services that doctors frequent.
IQVIA’s strategy, according to the FTC, is to monopolize the space by buying two of the three leading firms - Lasso and DeepIntent - that do this specialized form of advertising to doctors. With the DeepIntent purchase, the Federal Trade Commission stepped in, filing a Clayton Act claim that IQVIA was seeking to reduce competition by buying up most of a market. This was likely the first time a government entity, or really anyone, had said no to IQVIA executives.
The FTC is making three basic claims in its case. First, there’s indirect evidence that this merger violates the law, just a basic increase in market concentration. Lasso and DeepIntent are the top two players in the market, much more than the 30% market share necessary to show that there’s a lessening of competition. Second, there’s direct evidence as well. Sales documents and internal chatter show Lasso and DeepIntent frequently and commonly directly compete for business, and so combining them would lessen competition. And third, most interestingly, IQVIA itself, if it gets DeepIntent, has an incentive to cut off its “gold standard” store of data to the only independent adtech firm remaining in the market, PulsePoint. It will become the dominant vertically integrated monopolist in the health care provider advertising platform world, much as Google became the middleman in general purpose advertising after it bought DoubleClick and AdMob (among others).
IQVIA’s best counter argument is that there is no specialized market of advertising to doctors, and thus, there’s no market to monopolize. Sophisticated advertisers like pharmaceutical firms can as easily use Google and Facebook to reach their target audience, as well as specialized ad firms such as The Trade Desk, AdTheorent, and Amobee. Moreover, goes the argument, it’s easy to start a new business and compete with IQVIA, so the idea there would be a reduction in competition is “speculative.”
The whole case turns on market definition, in other words. And this one is also at a moment of technological inflection, when it’s hard to measure market shares, but where, according to the FTC, monopolization is happening in its incipiency but where IQVIA by contrast argues there’s dynamism and new firm entry.
Why was there such a big opportunity in health care adtech? Why couldn’t pharmaceutical advertiers just use, say, Google, or other general purpose ad platforms to reach doctors? The FTC argues Google, and other general purpose targeted ad firms, aren’t set up very well for the task. The search giant helps consumer packaged goods companies target people that might buy, say, soup, or Apple products, but it is leery of putting pharmaceutical claims in its ad for political reasons, which made it not a viable platform for reaching doctors with very specific marketing claims.
Plus, HCP advertising is a wholly different beast. It’s highly regulated, and complicated. As one industry participant put it, you don’t “want a diabetes-related ad to show up to a cancer specialist,” and you need to “understand the physician's prescribing behavior in terms of what the specialization of their practice or the hospital affiliation is, and so on and so forth.” Sometimes the targeting gets very specific, such as finding, as one data provider put it, not just “an oncologist, but an oncologist who sees non-small cell size lung cancer patients and they want to target the guys that see the most.” Google doesn’t do that.
The explosion of HCP advertising during Covid did not go unnoticed at IQVIA, which sold data to these new ad platforms. And here I found the evidence presented by the FTC persuasive. Everyone in the industry understood the end goal was consolidation in the hands of IQVIA. For years, like most acquisitive firms, the data giant already had an internal antitrust compliance program, which is a signal of its intent, since you don’t hire antitrust lawyers to train your executives on how to talk unless you intend to do a bunch of acquisitions that might be unlawful.
And as early as 2020, Frank Lin, who later became an IQVIA executive, was musing on how the firm should “lock up the 1-to-1 programmatic market” with a purchase of multiple companies in the space, including DeepIntent. Lin’s firm, acquired by IQVIA, had a ‘data everywhere strategy,’ one of whose principles was “We are not here to compete but to dominate.”
The next year, an IQVIA executive wrote a colleague about the potential of buying up the whole ad platform space, noting that DeepIntent, PulsePoint, and Lasso held the top three spots in the market, and that “we can hold that easily with IQV data,” implying they could cut off data to rivals. A few months later, the CEO of IQVIA North America, Jon Resnick decided to purchase both Lasso and DeepIntent, texting “Let’s buy both. Famous last words.” Resnick knew what he was saying, because in internal slide decks IQVIA executives recognized that they were buying up rivals, regularly calling Lasso, PulsePoint, and DeepIntent ‘the Big Three’. The roll-up strategy was brazen, with Lin talking to a colleague about the roll-ups and exclaiming, “You are shitting me.” That colleague responded with "Our team and industry are going to 💩 themselves."
In court, the FTC and IQVIA both had experts fighting over market share definition, with IQVIA using disgraced economist Mark Israel to dispute whether it even was a market. But all that testimony was speculative nonsense, as paid econometric models tend to be. More interesting were the internal discussions from the actual market participants.
Bro shit-talking was not, in general, good for IQVIA’s case. There was, for instance, the trash talk among direct competitors. “I hate those small dicks, we are going to take every one of their clients,” said Lasso’s CEO, Greg Fields about his rival. I want to "make sure DeepIntent goes fucking upside down" and "destroy them so bad,” he added. Indeed, as a PulsePoint executive said during trial, "in the vast majority of cases we either lose, or fail to win, business from or to DeepIntent and Lasso.” The situation is not, as IQVIA argued, a fluid market with dozens of competitors and lots of new firms entering. No, this was a three car race, and they hated each other, until they were rolled up.
The most interesting FTC claim is that IQVIA will now have an incentive to cut off data from its sole remaining rival in HCP adtech, PulsePoint, and it will also have an incentive not to buy data from potential data providers who compete with its business. This is what’s called a vertical claim, and it’s the kind of argument the commission just won at the Fifth Circuit in its Illumina-Grail case. The vertical argument is important because it was the vertical roll-ups that allowed big tech to dominate markets, and enforcers and courts, until recently, haven’t really taken on vertical questions for decades. (It’s also guideline five in the new merger guidelines, saying a combination that creates a firm that might “limit access to products or services that its rivals use to compete” is unlawful.)
The evidence here is also compelling. PulsePoint, the remaining adtech firm in the market, told the court “that 70-80% of of their clients relied on IQVIA data,” so losing access to that data would cause clients to move to rivals. (A Merck executive testified on this point, but in closed session.) More importantly, internally at IQVIA, discussion of cutting off access to data seemed to be routine. One IQVIA executive discussed how to think about a “unified IQVIA plus DMD plus MDG,” which “could include sunsetting our support for working with PulsePoint.” One email discussed hypotheticals on what would happen if “competitors are barred from using IQVIA data,” to which another executive noted he already shut down certain advanced forms of access. There was even a policy document that listed items to consider when reviewing whether to share data, with the second one being “Vendor is a direct competitor.”
This evidence is how the FTC is arguing that this was a monopolization strategy. And each time the FTC would present these internal emails or presentations to an IQVIA executive, the witness would use a variant of ‘You’re misreading it,’ ‘I was kidding,’ ‘I don’t know what that meant,’ or ‘That’s out of context.’ Of course, I only have access to the public stuff, not what is redacted or was heard in closed session, so maybe there was something I’m missing.
IQVIA’s counter-arguments weren’t ridiculous, but had a whiff of old-school Bork-ian ‘mergers are efficient’ musty odor. “The leading antitrust scholar in the world,” said their lawyer Chantale Fiebig of Weil Gotshal, “reminds us that at all times we must remember that if we believe that markets generally work well when left alone, that intervention is justified only in the relatively few cases where the judiciary can fix the problem more reliably, more cheaply, or more than the market can fix itself.” That is pretty much straight from Robert Bork’s 1978 Antitrust Paradox, but it is not what the Clayton Act says.
The practical arguments were better. IQVIA’s lawyers claimed that if they buy DeepIntent, the firm will have lower costs, be able to offer data more cheaply, and give better customer service. None of that has any implications on competition, but it was an attempt to argue vertical mergers are efficient. In terms of market definition, which was a better counter to the FTC’s case, they pointed to other firms in the market outside of the Big Three, and even went through an in-court demonstration with the judge about how easy it is to upload a list of doctors to Facebook and start advertising to them. A Google executive testified, and one argument from IQVIA was that the government in the Virginia is claiming that Google is a monopolist in adtech, which doesn’t make sense if IQVIA is also a monopolist in adtech. They even paid a doctor/economist at Harvard Medical School, professor Anupan Jena, to argue the merger will save lives.
There was also a refreshing moment of truth when one of the lawyers for DeepIntent, Alex Okuliar, a former advisor to Federal Trade Commission Chair Maureen Ohlausen and current co-chair of Morrison Foerster’s Global Antitrust Law Practice Group, admitted the old model of antitrust is based on gut feel. "Your Honor,” he said, “I close with an observation as a former antitrust enforcer. I was often called on to decide whether or not to challenge a deal. In addition to thinking about the law, the merits of the case, and the interests of the people, I always asked whether the case seemed credible at a gut level.” After all the debate over economic efficiency and fancy standards over the last decade, I respect Okuliar’s candor that the old model of antitrust is just vibes.
So what happens now? Judge Ramos kept his cards close to his chest, though he did not grant IQVIA’s attempt to deem the FTC itself unconstitutional, which is now a routine claim by especially aggressive firms. (IQVIA and DeepIntent lawyers also made other dumb claims, like the FTC is unconstitutional because there aren’t any Republican commissioners on board right now.) Ramos was also sympathetic to the idea that the FTC has a lower burden of proof in this hearing, for technical reasons that matter in administrative law and will very much upset the defense bar. And in general, his questions were tough, and slightly more skeptical of IQVIA’s lawyers. This case should be a slam-dunk, but with these cases, you just never know. I have no idea how the judge will rule, though if I had to guess I imagine he’s leaning slightly to the government’s side.
All that said, reading through this trial and learning about this weird part of the adtech world, did teach me about why corporate America, and the pharmaceutical industry, is so bloated and over-priced. Fundamentally, the data IQVIA has, through its payment of the owners of switches, is our data, and yet IQVIA gets to monetize it and use it as a competitive weapon. None of us, not the pharmacy, or the doctor, or anyone else, consented to give our data to help a would-be monopolist festival of bros as they joke about bags of money. And until the FTC under Lina Khan filed suit, no one had ever told these guys ‘no’ to their strategy of destroying rivals to squeeze out cash, and so they act with impunity to do so. And why wouldn’t they? If these executives weren’t rolling up this new market, someone else would. And that will remain the case, until and unless a judge puts a stop to it, as per the Clayton Act.
Then IQVIA will have to compete on the merits, and there will actually be some choice and innovation in how the information about our health you and I give to our providers is used.
UPDATE 12/29/23: The FTC won the court battle, with Judge Ramos ruling for the government in its request for a preliminary injunction to block the merger. We don’t know the details of the decision because the full opinion will be redacted to block confidential business information. It’ll be public at some point after January 5th.
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