Department of Justice’s Antitrust Priorities in Health Care Target Private Equity, Labor, and More
In a keynote speech delivered to the American Bar Association’s Antitrust in Healthcare Conference in Arlington, Virginia on Friday, June 3, 2022, Deputy Assistant Attorney General Andrew Forman of the Department of Justice’s Antitrust Division stressed the Division’s keen interest in robust enforcement of antitrust laws in the health care and life sciences sector, while also laying out several key areas of focus for civil antitrust enforcement. Forman’s remarks singled out private equity acquisitions as a particular area of concern, as well as highlighting issues related to data, labor, and business entanglements like joint ventures as additional enforcement priorities.
The speech was Forman’s first formal address since joining the Antitrust Division earlier this spring and came following a listening forum by the Division and the Federal Trade Commission (FTC) in April to learn from individuals affected by health care mergers. According to Forman, nurses, professors, physicians, pharmacists, and patients told the agencies that consolidation has resulted in “the reduction of research, staffing shortages, and decreased quality of care.” Forman expressed concern that, while intermediaries like insurers and pharmacy benefit managers (PBMs) can add genuine value, the multiple layers of participants in health care decisions can also add “cost, delay, and burden, while reducing quality and impeding innovation which competition brings.” Those concerns underscored the need for robust antitrust enforcement in healthcare.
Forman had pointed words for those private equity firms with “an undue focus on short-term profits and aggressive cost-cutting.” He stated that the Division often favors market participants as purchasers of assets over private equity firms, and he laid out specific areas of enforcement for private equity transactions going forward, including:
A focus on private equity roll-ups where a series of smaller transactions may, cumulatively, have the effect of lessening competition;
Consideration of whether a private equity focus on short-term financial gains chills competition and innovation;
Potential enforcement under Section 8 of the Clayton Act to the extent private equity investments lead to improper board of director interlocks; and
Plans to look more closely at whether private equity firms are properly complying with their obligations under the Hart-Scott-Rodino Act.
Health care data, when held by those with market or monopoly power, is another area of enforcement interest to the Division. Forman described the Division’s concerns over the barriers to entry created by concentrated data, as well as the potential for those with large data reservoirs to restrict the flow of data in anticompetitive ways, or even to use that data for anticompetitive purposes themselves.
The Division also will have concern with commercial relationships between companies that otherwise should be competing, such as joint ventures, loose affiliations, and or other “entanglements.” In the Division’s view, such relationships may turn business rivals into what he described as “frenemies.” Forman suggested that a range of actors, from providers to pharmaceutical manufacturers to insurers, could be less likely to challenge each other on pricing, innovation, and expansion if they have other business relationships they wish to protect. He singled out the Geisinger/Evangelical case1 as one example of a collaboration agreement between rivals that the Division believed would stifle competition and noted that the parties in that matter ultimately entered into a consent decree in March 2021.
Forman also pointed out that the Geisinger/Evangelical case had a labor component, as the Division had alleged that senior executives had entered into an unlawful no-poach agreement not to recruit each other’s employees. He cited that case as further evidence of the “[D]ivision’s steadfast approach to labor competition enforcement in the health care space” and referenced a Statement of Interest the Division recently filed in a case involving non-competes for anesthesiologists in Reno, Nevada. Forman said that labor issues in health care will continue to be a major focus of the Division.
The speech concluded with Forman echoing recent comments from Assistant Attorney General Jonathan Kanter with respect to the extremely high bar for approval of any potential remedies—such as divestitures in merger cases—in the health care sector. Forman described Kanter as “skeptical of remedies that create any potential risk for not fully addressing the likely competitive harm” and placed the burden on companies to “eliminate risks associated with remedies rather than have the Division assume and monitor those risks.” The Division’s concerns about remedies are especially acute in health care, where a failed remedy “can lead to deeply personal harm in people’s everyday lives and pocketbooks.”
Overall, Forman’s speech served to emphasize many of the recent trends in antitrust enforcement in health care labor, data, collaborations among rivals, and the challenges facing remedies. More significantly, Forman issued a clear warning to private equity firms involved in the health care industry to expect increased scrutiny from the Division to the extent their practices may stifle competition and innovation in favor of short-term profit.
1 United States of America v. Geisinger Health et al.,20-cv-01383, in the U.S. District Court for the Middle District of Pennsylvania.