Department of Justice Withdraws Key Healthcare Antitrust Policy Statements
On Friday, February 3, the Department of Justice, Antitrust Division (the “DOJ”) announced its withdrawal of three policy statements on health care antitrust enforcement: (1) The Department of Justice and Federal Trade Commission Antitrust Enforcement Policy Statements in the Healthcare Area (Sept. 15, 1993); (2) The Department of Justice and Federal Trade Commission Statements of Antitrust Enforcement Policy in Healthcare (Aug. 1, 1996); and (3) The Department of Justice and Federal Trade Commission Statement of Antirust Enforcement Policy Regarding Accountable Care Organizations Participating in the Medicare Shared Savings Program (Oct. 20, 2011) (together, the “Healthcare Statements”). It has been reported that the Federal Trade Commission (the “FTC”), which shares antitrust enforcement authority with the DOJ (together the “Agencies”), intends to withdraw the Healthcare Statements as well. Assuming the FTC follows the DOJ’s lead, the withdrawal of the Healthcare Statements may be the most significant antitrust enforcement development under the Biden Administration to date and is likely the most significant healthcare antitrust development in decades.
Prior to their withdrawal by the DOJ on Friday, the Healthcare Statements represented a cornerstone of federal antitrust enforcement and have provided U.S. healthcare industry providers, payors, employers, and others, with hundreds of pages of detailed guidance regarding the Agencies’ views regarding the application of the U.S. federal antitrust laws to the healthcare industry, which represents one-sixth of the U.S. economy and accounts for nearly half of federal antitrust enforcement activity. The Healthcare Statements cover hospital mergers, provider joint ventures—including clinically and financially integrated networks –group purchasing, information sharing, and several other collaborative activities prevalent in the healthcare industry.
In contrast to other recent actions by the DOJ and FTC under the Biden Administration, the withdrawal of the Healthcare Statements comes as a surprise, and it does not appear that the Agencies will issue new or revised Healthcare Statements. Rather, the DOJ stated, “Recent enforcement actions and competition advocacy in healthcare provide guidance to the public, and a case-by-case enforcement approach will allow the Division to better evaluate mergers and conduct in healthcare markets that may harm competition.”
What Does it Mean?
For nearly 30 years, healthcare industry participants (and their counsel), have relied on the Healthcare Statements in assessing the federal antitrust enforcement risks of possible transactions, ventures, and other business conduct. The Agencies’ enforcement actions, the DOJ’s business review letters and the FTC’s advisory opinions may remain in place, but, among other things, the withdrawal eliminates the antitrust enforcement “safety zones” that had provided certainty for healthcare companies’ contemplating and engaging in a wide range of commercial activities. For example, the Healthcare Statements established explicit safety zones based on market share for clinically or financially integrated providers jointly contracting with commercial payors. (e.g., The Department of Justice and Federal Trade Commission Statements of Antitrust Enforcement Policy in Healthcare, Statements 8 and 9 (Aug. 1 1996)).
The withdrawal of the Healthcare Statements also means that activities that previously may have presented low antitrust risk, such as those within the antitrust enforcement safety zones, may now be in the Agencies’ cross-hairs. The Agencies have steadily expanded their enforcement activity and have adopted ever broader positions concerning their enforcement authority under the current leadership, so the healthcare industry should expect this announcement to portend increasingly vigorous federal antitrust enforcement in the healthcare space. In explaining their rationale for withdrawing the Healthcare Statements, the DOJ stated, “The statements are overly permissive on certain subjects, such as information sharing, and no longer serve their intended purposes of providing encompassing guidance to the public on relevant healthcare competition issues in today’s environment.” Although the courts are the ultimate arbiters on the scope and application of the federal antitrust laws, the Agencies have broad investigative and enforcement powers that can create meaningful risks for companies well before companies or the Agencies seek judicial intervention.
As a result of recently heightened antitrust scrutiny and new significant uncertainty from the Agencies, healthcare companies across the industry should carefully assess the antitrust risks of their transactions, ventures, and other business conduct.