2020's Biggest Antitrust Developments and What to Expect in 2021

In the third installment of their popular annual series, John D. Carroll of Sheppard Mullin Richter & Hampton LLP and Alexis J. Gilman of Crowell and Moring LLP detail 2020's biggest antitrust developments and highlight what attorneys should expect in 2021. From AHLA's Antitrust Practice Group.

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Transcript

Speaker 1: 0:14

Hey, everybody. Uh, welcome to the HLA speaking of Health Law Podcast. Today we'll be discussing 20 twenty's biggest antitrust developments in healthcare and what to expect in 2021. I'm Alexis Skillman. I'm a partner in the Antitrust and Competition Group at Kroll and Mooring. Coming to you from my home office in Virginia. John.

Speaker 2: 0:35

Hey, Alexis, great to be doing this with you again. I believe this is year three in our annual tradition of mm-hmm.<affirmative>, discussing these issues. Uh, as Alexis mentioned, I'm John Carroll. I'm a partner in the Antitrust and Competition Group at Shepherd Mullen, and normally in the Washington DC office, but I am currently at my home office in a great state of Maryland.

Speaker 1: 0:57

So, yeah, John, this, this is our third year of doing the podcast, and I think that either means that the A H L A thinks we're doing something right, or they think the third time's gonna be the charm for us. Uh, but we'll<laugh> we'll let the audience decide that one. Uh, first, a, a couple, uh, housekeeping items. One, a disclaimer, I guess really just one housekeeping item, a disclaimer, which is, uh, to the extent John or I express any views on the topics or matters we talk about today, these views are going to be our own and not those of our firm or any clients. So, uh, with that, John, why don't you kick us off with the number 10, uh, healthcare antitrust development of 2020, which I know we had talked about was gonna be your move to Shepherd Mullen, but we thought some more about it and thought,<laugh>, we, we should probably go with something else for number 10. So why don't you tell, uh, everybody what the real number 10 is here,

Speaker 2: 1:48

<laugh>. I appreciate that, Alexis. I'm not sure where on the top, top 10 or even top 20 my move would fall into, uh, fall into in the pecking order. But as Alexis mentioned, I did, uh, recently joined Shepherd and Shepherd Mullin, uh, for King and Spalding, and excited to, excited to be here and, and excited to talk about, uh, the healthcare antitrust developments we're about to talk about. So, as thank you, uh, as is our tradition, we are gonna count down 10 to one, and Alexis has handed it off to me for number 10 in 2020. Number 10 should come as no surprise. Uh, and that is the, uh, the, the coronavirus or Covid 19 advisory opinions and guidance, uh, provided by the antitrust enforcement agencies. Of course, uh, 2020, uh, uh, very sadly and dramatically has been, um, the year of Covid 19. Alexis and I are in our home offices and, and both have young families, and I'm sure, um, many of our listeners are dealing with any number of personal and professional and logistical challenges, uh, associated with the pandemic. And of course, antitrust enforcement in, in particular, healthcare antitrust enforcement, uh, was no exception. And, uh, one thing to note before we get into some specifics, and this is a bit of editorializing, but I think is born out by the evidence, uh, and the statistics, and that is the extraordinary response from, um, from the, from the agencies, the F T C, which is Alexis's former home in my former home, uh, and, and the doj, both agencies, as you will see, and, and as Alexis will describe in some detail later on, were profoundly active in the healthcare antitrust space in 2020. Uh, and, and profoundly active in the antitrust space generally in 2020. All of that happening with, um, lawyers working remotely and any other number, like I said, of challenges confronting them, um, including substantively. And so on that note, um, there's, there, the agencies really jumped right in, um, in March to, uh, do what they could to provide guidance to practitioners and providers in particular with respect to, um, you know, the, the COVID advisory opinions they provided in March, uh, toward the end of March in 2020, the agencies issued guidance and outlined an expedited expedited review process, uh, for companies seeking to work together and covid 19 related collaborations. Uh, in that they reminded healthcare providers that the antitrust laws still apply to ventures between all competitors, and there was not an exemption provided to covid 19 collaborations, but the agencies acknowledge the urgency of the public health crisis, uh, by committing the FTC and DOJ to a very expedite expedited turnaround, seven calendar days, once all necessary information is received, uh, for written guidance. This is part of the larger framework, uh, at the Department of Justice Antitrust Division and Federal Trade Commission regarding, uh, business review letters and FTC advisory opinions. Uh, since then, um, some, uh, market participants have availed themselves of this process. You know, among other things, there was a business review letter, uh, following that joint statement that was issued in early April to several healthcare distributors of, of P p e, personal healthcare, personal protective equipment, uh, and medications. Uh, those providers or distributors, rather, included among others, McKesson. And the, the Business Review letter described the ways in which they're requesting parties seek to cooperate, and concluded that that cooperation likely would not raise competitive concerns. Uh, there have been a, a few others, including one involving eco hair braiders in October. Um, there haven't been that many, but there, it's something to keep an eye on. Uh, but, uh, you know, the bigger picture is in 2020, certainly, uh, covid, uh, jumps out. There were, there were some other guidance as well with respect to, uh, mergers back in March where at least initially the agencies, uh, for a period of time were not granting early termination, although they went back to granting those. And, um, were, uh, under a system where electronic, uh, submissions or filings under the Har Scott Rodino Act for, for pre-merger notification, uh, were accepted. And that has remained in place. So that is number 10. Uh, Alexis, happy to turn it over to you for number nine.

Speaker 1: 6:11

All right, number nine, uh, duty to deal that case of St. Luke's versus ProMedica. So, these names may sound, uh, very familiar to folks, and that is because the roots of this case go back a decade. Um, as some folks may remember, if you follow the merger space in 2010, ProMedica acquired St. Luke's, uh, and St. Luke's located just outside of Toledo, Ohio. In a, in a case that I actually worked on when I was at the ftc, the FTC challenged and succeeded in getting an injunction to under unwind that transaction. But actually, it wasn't only until last year in August, 2020 that St. Luke's was actually sold off by ProMedica to McLaren Healthcare. So, where this case come from, comes from is that on the day that McLaren acquired St. Luke's, uh, ProMedica's Health Insurance subsidiary Paramount Care, allegedly gave notice to St. Luke's that it was terminating the contracts that it had with St. Luke's, thereby eliminating St. Luke's from Paramount's Commercial Health Plan and its Medicare Advantage Networks. Uh, couple months later, November, St. Luke's sued ProMED in Paramount seeking a preliminary junction to prevent paramount from terminating St. Luke's from the Paramount Networks. Uh, St. Luke's claimed that the termination, or its termination was in any competitive attempt by Proa to monopolize the hospital market in the Til area, and was an unreasonable restrain of trade in violation of the antitrust laws. Basically, St. Luke's alleged that ProMedica feared that now that it was owned by McLaren, St. Luke's would be more of an effective competitor to ProMedica ProMedica's health system. And so that's why it's health plans terminated St. Luke's. Um, for, for kind of context and background in, in antitrust, there's generally, I'd say, no obligation for one firm to do business or deal with another, including competitors. Um, but there is an old Supreme Court case that's called Aspen Skiing, and in that case, basically holds that in certain circumstances, it is an antitrust violation under Section two of the Sherman Act. Uh, that's the act that prohibits monopolization and attempted mo monopolization. It is an antitrust violation to refuse to deal with a competitor. Um, while, um, other cases in Combinators have, uh, repeatedly said that, that Aspen skiing case lies, quote, at the outer or near the outer boundary of section two liability, uh, the district court in, in this case, here in the St. Luke's challenge to the paramedic determination, the district court entered a preliminary injunction, uh, preventing paramedic from terminating Paramount's contract with St. Luke's. So, um, right now, paramedic is appealing that decision, but it is an important initial decision that does have my view implications for integrated healthcare systems, because it means that it, at least in certain circumstances, uh, a hospital owned health plan might be limited in its ability to terminate arrival hospital or healthcare provider from its, uh, health Plan Network. So I think this is gonna be an important case, uh, to watch going forward. Uh, John, number eight.

Speaker 2: 9:22

Thanks, Alexis. Number eight, uh, will be very brief<laugh>, uh, because as you and I have discussed and involves a matter where, uh, our respective law firms and, and many other law firms have, uh, at least some potential, if not actual involvement. And so, uh, neither of us can, can really, uh, speak about it, but, uh, it, it is a, it is a development worth noting. And that is the, um, December, uh, settlement, uh, in the Blue Cross Blue Shield, uh, M D l with the subscriber class. Uh, not much more I'm gonna say about it other than, um, I would encourage our listeners to, uh, if they haven't already become familiar with it. It's an interesting case,<laugh>, that you and I unfortunately can't discuss. Yep. But we felt like, uh, we had to, we had to include it in the, in the top 10, um, given the nature of it. And so, uh, with that, Alexis, unless you have more to say about it,<laugh>, go ahead.

Speaker 1: 10:18

I, I, I think that's a good teaser. We'll leave it for folks to chase that one down so we can hopefully keep our jobs, or at least our firms keep the clients<laugh>. Um, no, uh, let's move to number seven, which I'm calling Pharma fights. Um, so last year we saw multiple fights over pharmaceutical, uh, mergers. And, and I'm not talking about fights among the pharma companies. I'm talking about the fights among the Federal Trade Commission commissioners. Uh, I'd say the commissioners were strikingly, if not brutally divided over whether to approve a couple, uh, pharma mergers and the terms of the remedies imposed, uh, to clear those murders. So in one in October, the FTC voted three to two split along party lines, um, to approve Mylan's acquisition of Pfizer's Upshaw division, subject to, uh, several divestitures, um, about, uh, regarding 10 generic pharmaceutical markets. Commissioner Chopra, in his dissent that was joined by Commissioner Slaughter opposed the settlement clearing the merger because he said the status quo approach of seeking settlements through divestitures of individual products is myopic. And, uh, he basically said the settlement failed to discourage pharma companies from proposing any competitive mergers, and the commission in general failed to address other concerns that he had with the merger. I'd say more notably, in May of last year, the F T C, uh, approved AbbVie's acquisition of Allergan, again, on a three two vote, that, again, split on party lines. Um, so as a condition of approving that deal, the FTC required emerging parties to divest two products, um, one to treat, uh, uh, ex exocrine pancreatic inefficiency insufficiency, E p I, uh, clearly I'm an expert in that product, um, to divest that product or a couple products in that area to divest your bio, Nestle. And the commission also required the parties to sell an i l 23 inhibitor drug, uh, that was in development to treat moderate to severe Crohn's disease and ulcerative colitis, uh, to sell those rights back to AstraZeneca. Um, so Insent, in this case, commissioner Slaughter, wrote that she didn't share the majority's confidence that the effects of the transaction on innovation competition were benign. And she also shared the concerns that Commissioner Chopra had, who was much more critical, uh, of the decision in his dissent. Um, it's, it's worth a re it's worth a read, but to give you a flavor of his dissent, commissioner Choppa wrote, quote, the agency's default strategy of requiring merging parties to divest overlapping drugs is narrow, flawed and ineffective. End quote. Uh, he also questioned whether Nestle had the capabilities to succeed as a divestiture buyer, and he was critical of, uh, returning the development rights to the I L 23 product and development back to AstraZeneca. Uh, the majority statement responding to, to the dissent, particularly Commissioner Chopra's dissent, you know, that'd be interested in your take, John, but is perhaps the most stinging statement I've ever seen out of the commission. So the, the majority wrote in response to Commissioner Chopra's dissent that quote, we are concerned by the dissents disregard for facts and law, and its dismissal of the work of the dedicated and hardworking FTC staff. His dissent makes misleading claims about the staff's investigation, do.dot, it goes on, it relies on false assertions, misapplication of law, and specious logic. It appears to have fully embraced the adage to never let the truth get in the way of a good story end quote, uh, yikes<laugh>. That's, that's rough stuff. Uh, as far as, uh, FTC statements go, um, the takeaway here to understate it is that the FTC was deeply, deeply divided on farmer enforcement. And depending on the composition of the ftc under the Biden administration, which we'll talk about some more later on, uh, the FTC could remain deeply divided on this issue on the foreseeable future, which would, um, likely lead to, uh, longer investigations and pot, potentially stronger enforcement in, in this area. Um, so that is definitely, um, something to keep watch of in our number seven development last year.

Speaker 2: 14:39

Yeah, thanks, Alexis. And, and I would agree, um, I'm not sure, you know, I've not lucked through every statement by every commissioner in the long<laugh> in Gloria Glenn, long and glorious history, the Federal Trade Commission, but certainly that quote stands out and, and sort of interesting, uh, footnote or or recent development, the, the Commissioner Chopra, um, who you indicated mm-hmm. Wrote the dissent, has, I think just recently been named to be the director of the CF p v, the Consumer Financial Financial Protection Bureau. So, um, you know, putting politics aside, that's an interesting development mm-hmm.<affirmative>, and, um, I would encourage our listeners who are interested in, you know, outside of healthcare issues or antitrust issues, but in, you know, financial services and consumer protection issues to, to take note mm-hmm.<affirmative>, uh, as to who, whom the new, who the new director is going to be. And there's a, a lot of, uh, lot of information, um, about, uh, now almost former Commissioner Chopra and his views on, uh, a number of issues including consumer protection issues. And that's another, another interesting development. Not a, certainly not a slow news day, slow news week, slow news year already in 2021. Um, speaking of the FTC and adding in the doj, we're at number six, which is all things vertical, vertical merger guidelines, uh, that were issued, uh, in July of 2020 as part, again, of an extraordinarily active year by the agencies under any circumstances, but, but really just incredible in light of, um, all the challenges, uh, operationally that they, uh, have been enduring like the rest of us. In any event, in, in, in late of that month, uh, July of 2020, the FTC and the DOJ issued, uh, the vertical Merger guidelines, uh, which outlined how the agencies evaluate the, the likely competitive impact of vertical mergers, uh, and whether those mergers raise antitrust concerns. This is the first time, uh, that the DOJ and the FTC have issued joint, uh, guidelines on vertical, uh, mergers, and they represent the first major revision to guidance on vertical murder, vertical mergers, uh, since the, the DOJs 1984, uh, non horizontal merger guidelines, which the doj, uh, withdrew in January. Um, so why does this matter? Well, you know, vertical transactions, um, I think just generally can be said are, uh, uh, an increasing focus in antitrust law and, and merger enforcement more generally in the US and even abroad. And why this matters for healthcare is because the healthcare industry is replete with, um, the healthcare industry is replete, uh, with, uh, ver so-called vertical transactions. So, for example, you know, transactions, combinations, joint ventures between and among payers and different types of providers like hospitals and transactions between, you know, hospitals and physician groups. And so, um, those agency, the agencies issued, uh, those guidelines, uh, what do they say? Uh, in a nutshell, they don't offer bright line rules to distinguish, uh, you know, know anti-competitive from pro-competitive, uh, vertical mergers. But they do summarize the type of harm that the agencies consider, uh, when they're making enforcement decisions, principally foreclosure, in other words, cutting off or for foreclosing, um, competition in a way that affects competition meaningfully raising rivals costs access to competitively sensitive information and increased risk of coordination. Uh, now along on the lines of what Alexis just talked about, we had some dissents, uh, including the same, uh, commissioner, uh, Chopra, uh, who al who voted no, and, and, and as well as Commissioner Slaughter, who is now acting, uh, uh, chairperson of the Federal Trade Commission. And, um, we could spend a lot of time, like any number of the, the topics that we're discussing here today, we could, Alexis and I would happily, you know, sit by the fireside on a cold winter, evening<laugh> and, and talk antitrust law, but that'd probably be only the two of us that maybe a handful of other, uh, people quarantine

Speaker 1: 18:49

Really getting to you, John<laugh>. It's true.

Speaker 2: 18:52

It's what we love. It's what we love. Uh, but the, the central concern is that the agencies did not take a position according to those who dissented and, and others, uh, other practitioners. And those out in the antitrust bar commenting on these, um, that, that they, there are a number of folks, uh, commentators who believe that vertical mergers are not presumptively benign and that they create barriers to entry. I'm gonna, I'm not gonna add any editorial comment to that, except to say it's an interesting development, a lot of moving pieces. Uh, we have a new administration, Alexis is gonna dig into that later. And this is just another, um, another thing to keep, uh, to keep, uh, taking a close look at, and that could have some pretty, pretty serious implications, uh, for the industry and other industries moving forward. Alexis

Speaker 1: 19:39

Agreed. Absolutely. Number five, CPAs. So last year, and this would be the third time in five years, uh, hospitals proposing to consolidate used a certificate of public advantage or a COBRA process to overcome, uh, objections from the ftc. So, as a, as a quick primer for folks who may not be familiar, uh, a copa, which is also sometimes called a cooperative agreement in some states, um, is, is basically a law in a regulatory structure regime that immunizes certain transactions or collaborations, um, often among healthcare providers from federal and state antitrust law. And this is done under what's called the State Action Doctrine. And the state action doctrine basically applies, um, where a couple of conditions are met. One is where a state has clearly articulated and firmly expressed, typically through legislation, uh, the state's policy being to permit otherwise any competitive transactions or conduct. And second, the state also pla, uh, has, has deemed to replace competition with active state supervision. So in 2020, Texas approved a couple transactions under this, uh, COPA process. It, it approved, uh, community health systems' sale of Abilene Regional Medical Center to another hospital that was also located in Abilene, uh, as well as a sale of San Angelo Community Medical Center, who another hospital that was also based in San Angelo. Uh, the ftc, uh, objected and opposed, uh, the grant of these KPAs. It submitted a very lengthy written public statement, which is, um, sort of, its, um, uh, mo in, in these COPA processes. Uh, but over the FTCs objections, Texas approved both cocoa's subject to certain conditions opposed on the merge hospitals. Um, the conditions basically included pre-approval of any changes in reimbursement rates for hospital services, and the annual public meetings be held to assess whether the KPAs, uh, conditions were actually being followed, um, in some other terms. Um, so this co approval in, or these co approvals in Texas were the third defeat for the FTC in recent years in trying to stop mergers that were seeking to be completed, uh, pursuant to these COBRA laws. Uh, in 2016, you had West Virginia approving a cooperative agreement that cleared the acquisition of St. Mary's, uh, medical Center by Cabell Huntington Hospital. As a result of that approval, the FTC dropped a lawsuit that was pending at the time to block the deal. And then in 2018, uh, Tennessee, Virginia approved the combination of Mountain State's Health Alliance at Mont Health System that formed ballot health, uh, under their respective COPA and cooperative agreement laws in those two states. So, um, just one final note on COPA is the process can be quite lengthy, but I think these cases in 2020 and earlier show that that process can be used successfully to overcome FTC objections to provider transactions that would, uh, would normally raise and, and do raise significant agency concerns. Um, so that's number five. Number four is me again, uh, and I'm calling it the FTC fights on, um, so in 2020, the FTC filed three lawsuits, um, to block hospital murders. So, uh, was undeterred, uh, by the cos obviously. So in, in, in particular, the FTC filed suit to block the combination of Jefferson Health and Einstein Healthcare Network in the Phil Philadelphia Pennsylvania area. It sued, uh, to block the proposed acquisition, uh, by Methodist le Le Bon of two tenant hospitals in Memphis, Tennessee, uh, under the St. Francis Banner. That deal was subsequently abandoned. And third, the FT C suited to block the proposed combination of Hackensack Meridian and Englewood Health in New Jersey. Uh, that case is pending. Uh, the DOJ filed a four suit against a hospital transaction in Pennsylvania, which, um, John will talk, talk about later. Um, spoiler alert, the couple of these mergers will be on, uh, on our list, uh, later on. Um, but just a couple high level comments on, on my part here. Um, the first is, I think the three FTC suits and the DOJs fourth, uh, suit to, um, combined represent the most cases that the agencies have filed in a single year to stop provider murders. I, I think the previous high, I mean, John, correct me if I'm wrong, or if you know, otherwise, I think the previous high was in 2015 when the FTC filed three such, uh, challenges to stop hospital murders. Uh, the second comment is, I think it's worth noting that the FTC pursued all three of these, uh, hospital challenges by unanimous vote commission, uh, for years, if not decades. Uh, the FTCs voted on a bipartisan, if not nonpartisan basis, and a unanimous basis to challenge horizontal combinations of hospitals and other healthcare providers in court. And, and finally, the last thing I'll mention is that these suits to block the four transactions, um, pick up on a, on a, a note John had to kick us off, is that there really was no lead up in the FTC or the DOJ scrutiny of provider mergers despite the Covid pandemic, uh, both agencies reiterated press release and blog posts that their legal standards and the level of scrutiny they were giving mergers remained unchanged despite, uh, COVID. And the FTC said in a blog post, it hadn't lowered its standards for evaluating the failing firm defense in merger reviews. So, um, I think providers saw in 2020 and should continue to expect going forward that the in agencies are gonna continue to give close scrutiny to horizontal combinations of providers. Uh, so that's number four, John. Now, uh, you have number three.

Speaker 2: 25:34

Yes. And, uh, it wasn't just the ftc, uh, it's been active in this space, as you mentioned. And Alexis, I think you're right. I'd have to go do a little homework. I think you're right. I, I think, um, that was the most active period, certainly, um, you know, more active than when you were in charge.<laugh>, clearly, what, one by one? I just have to point that out.<laugh>, uh, an, an improvement from the Alexis Gilman tenure, uh, by according to some, uh, just throwing that out there, uh, no, in all seriousness, I, I think Alexis makes a number of good points, um, on the, on the current state. And it, and it, it is remarkable. We could probably take the whole podcast just talking about that. Um, but in addition to the ftc, the DOJ weighed in as well, uh, certainly in the, in the provider space. And, um, yet another caveat on this, which is, um, for this deal, which is the Geisinger Evangelical deal, uh, my former law firm, um, was or is involved. And so while I wasn't personally involved in that matter, I'm gonna keep this exceedingly short and high level out of an abundance of caution. So the quick summary is that, um, back in August, doj uh, sued to block Geisinger Health's partial acquisition of what it considered to be its close rival evangelical, uh, community hospital. Uh, the DO J'S complaint alleged that that agreement umla, uh, altered the relationship between the parties that, uh, raised the likelihood of coordination, likelihood rather of coordination and reduced incentives to compete against each other. Um, it was a partial acquisition. That's what makes it interesting in a number of different ways. Um, that lawsuit was, uh, filed in the US District Court for the middle district of, uh, Pennsylvania. And I encourage our listeners to take a look at the complaint and, and follow that, uh, story, uh, and development in that case as they moved forward. Alexis.

Speaker 1: 27:30

All right. Number two, uh, we've cleverly called this alleged, and I'll emphasize alleged crime doesn't pay in 2020 a two-part story. I'm very dramatic. I know. So, uh, last year we saw a couple criminal antitrust enforcement actions, uh, come full bore into the healthcare industry. So in alleged crime doesn't pay in 2020 part one, we saw the DOJ and the state of Florida secure big fines for an alleged conspiracy to divide the market for oncology services in Florida. Um, more specifically, in April, the DOJ filed an information against Florida Cancer Cancer Specialists and referral institutes, or FC s Um, the DOJ basically alleged that FC S had agreed with another oncology provider, uh, that FCS was only going to provide medical oncology services in southwest Florida, and that FCS would refrain from hiring radiation oncologists or providing radiation oncology services. And in return, the other provider, uh, uh, allegedly agreed that it would only provide radiation oncology services in southwest Florida, and that it wouldn't hire medical oncologists will provide medical oncology services in competition with FC S. So, uh, this was, um, effectively settled under a deferred prosecution agreement, um, between FC S and the doj. Under it, FC S agreed to cooperate with the DO J'S ongoing investigation, and FC S agreed to pay a penalty of a hundred million dollars. That's the statutory maximum, uh, that was available. FCS also agreed to dis discourge profits from the alleged conspiracy to the state of Florida in the amount of another 20 million. And, uh, that's not all. Uh, a few months later, the former president of FCS was criminally indicted, and he faces, uh, uh, up to 10 years in prison, and a 1 million or larger fine. So, uh, no small matter there, uh, in, uh, part two of alleged crime doesn't pay In 2020, we saw the DOJ bring its first ever criminal wage fixing prosecution against the former owner of a home healthcare staffing agents, uh, healthcare staffing company in Texas. So the former owner, Niraj Genal, allegedly agreed with a competitor to decrease the, the rates they were paying, the physical therapist and physical therapists assistance. Um, this alleged conspiracy actually only lasted for, uh, six months from March to August, 2017. Um, notably though this alleged conspiracy was previously investigated by the FTC and settled in 2018 through a civil consent order. Uh, but the d OJ nonetheless went ahead and indicted, uh, the owner gin for the alleged wage fixing and for allegedly obstructing the FTCs investigation by making false misleading statements and concealing information from the ftc. So that case is ongoing. Um, I guess what I'd say here is while, um, criminal antitrust is certainly not, um, unprecedented, I think relatively rare, um, in, in the healthcare industry, um, but, but these two enforcement actions clearly show that, uh, I think antitrust, uh, criminal antitrust is here to stay in healthcare. So I think healthcare providers and payers need to make sure that they have robust and effective antitrust compliance policies and programs in place, uh, so they don't, uh, face down some of these same, uh, allegations that we saw here. Uh, John, you wanna bring us home in 2020 and number

Speaker 2: 31:08

One? Absolutely. And I, and I, I share your views on the importance of the compliance policy. Yes. Um, I'm happy to, happy to have the responsibility to provide the number one for 2020, and then number 10 for 2021, we'll just go straight through it. I'm, you know, happy to anchor the podcast<laugh> on that front<laugh>. So, number one, um, is the, the FTCs, uh, loss, uh, in, in seeking to block the, uh, combination of, of Jefferson and Einstein, uh, which Alexis alluded to, why is this number one, because the FTC lost. Why is that noteworthy? Because they haven't lost in a while, and they tend not to lose. Um, Alexis, I don't know when you were there, what the losses were, but they were rare.<laugh>

Speaker 1: 31:52

A couple, couple district

Speaker 2: 31:53

That's a

Speaker 1: 31:53

Pick idea Court. Yeah. A couple district court losses that were reversed on appeal, but

Speaker 2: 31:57

Exactly, yeah, yeah. Advocate, right? Um, and some other things. So, um, there you go. So, um, uh, in December, uh, it was December 8th. In fact, uh, the US District Court for the Eastern District of Pennsylvania denied the FTCs request, uh, for preliminary injunction in that matter. Um, and they, uh, were not able to get a stay either. Um, it's interesting on a number of fronts, again, just the relative, um, and frequency with which is these cases, but also, um, some of the, the, the substance here, particularly on, um, how the FTC attempted to meet its burden to define the geographic market. And the reaction to that from the district court are really interesting. Um, the, the main line here from the district court decision is that the FTCs proposed geographic market were not supported by the quote, the industry's commercial realities. Uh, and so it was interesting how, uh, they're the court, you know, faulted, uh, the way that the FTC used what's called the hypothe Hypothetical Monopolist test, um, for incorporating things like diversion ratios for patients, um, and didn't provide the evidence that supported their arguments that ensure or payer demand is aligned with payer payer demand. Um, so the, you know, the government built its, uh, its proposed markets by relying on, on alternatives for patients, but not insurers, uh, would substitute according to the court lot more to dig in, in, into there. But it was a really interesting decision. Um, and again, I, I don't believe the FTC was able to get a stay. Um, and so, you know, that that would be number one. Alexis, anything to add before we we turn the calendar?

Speaker 1: 33:40

No, like, like you said, on other matters, we could spend, you know, the whole hour or more on that case alone, interesting issues, but I think you hit the highlights, and that's one to watch. Um, so, all right. So we're gonna turn the calendar, I guess we already have, uh, to 2021 and talk about, um, the top 10 issues and healthcare intrust developments that we should all be watching in 2021. Uh, John, what do you have coming in at number 10?

Speaker 2: 34:06

Yes, I, I have the pleasure of doing number 10 and going straight through into nine, but starting out with 10, um, one thing to watch for, I think, which I think which has made our list every year, is what's gonna happen in, in the generic price fixing, uh, cases and investigations, as most folks know, um, you know, beginning, I believe in 2016, uh, at the state level, there's been an ongoing sprawling investigation by, uh, state Attorneys General and the Department of Justice, uh, including some indictments, some trials, some pleas, uh, across, uh, a wide swath of the generic drug industry. Uh, 2020 was no exception. And, you know, following this into 2021, it will be interesting to see what happens, um, on, you know, I think there's some trials, uh, coming up, uh, some executives that have been charged, some executives waiting trial. And so, um, continuing to monitor that is something that should be on the radar. Another thing, oh, I'm sorry, Alexis, you have number nine. Before I go to number eight, my apologies.

Speaker 1: 35:14

Oh, no problem. No problem. Uh, number nine. So, uh, we mentioned this one, but, um, I think number nine for us is, uh, the decision or potential decision in the FTCs challenge to the Hackensack Meridian Englewood Health merger. Um, you know, I think, as we discussed, the FCC filed three of the four suits against hospital mergers last year. Uh, one was abandoned by the parties, the FTC loss one, although that one's on appeal, and this is the Ft. C'S third suit, the, the suit against Hackensack and Englewood's transaction, and that's slated to go to trial later this year. I'm gonna be lucky to see if the FTC recovers from its loss in the Jefferson Einstein case, or whether it suffers another loss in back to back years. I think one interesting note to this, uh, suit against Hackensack in Englewood is that New Jersey, uh, of course is in the third circuit, which is the same circuit where, uh, the same circuit that's gonna hear the FTCs appeal in the Jefferson Einstein case. So, uh, one to watch, John.

Speaker 2: 36:16

Thanks, Alexis. So, coming in at number eight is, uh, the 11th circuit's, uh, potential decision in the, um, Oscar Insurance company of Florida against, um, Florida Blue, uh, also known as, uh, blue Cross Blue Shield of Florida. Uh, that's a, an ongoing, um, suit, uh, where the lower court had found that Florida blue did not violate the antitrust laws, uh, by preventing insurance brokers from selling policies for a competitor. Um, the DOJ had weighed in, uh, now, former Assistant Attorney General Macon de Raheem, uh, had appeared before the panel, uh, at the end of November, telling the panel that the government is concerned that the district court had misinterpreted the laws as to what conduct or transactions should be subject to the antitrust laws in light of the, um, McCarran Ferguson Act, which immunizes insurers from federal lawsuits involving the business of insurance. Lot of developments there, um, that we could go into in more detail, including some, some things involving Theran Ferguson. Uh, but the point is, uh, you know, looking forward into 2021, uh, one to watch is, uh, is this matter With that, uh, Alexis, uh, happy to turn it over to you for number seven.

Speaker 1: 37:30

Okay. This one is, is maybe throw folks for a little bit of a curve ball. It's a Supreme Court decision in an, in a case called AM MG Capital. It's, uh, a non merger conduct case that's really a consumer protection case at the Supreme Court. Uh, but it could have a big impact on the FT C's ability to obtain, uh, financial penalties in antitrust cases. So the Supreme Court just heard, uh, argue oral arguments a few weeks ago in a case called AM MG Capital Management versus ftc. The question in the case is whether the FTC has the authority under section 13 B of the FTC Act to obtain monetary relief like discord restitution. Um, so 13 B for folks who don't have that, uh, ingrained into their memory, section 13 B says that the FTC is authorized to obtain an injunction to stop violations of the antitrust laws or the consumer protection laws that the FTC enforces. So the, the question before the court is whether an injunction includes monetary relief and a long string of court decisions for a long period of time has held that yes, the FTC does have authority under 13 B to get monetary relief, but the seventh Circuit in a different case decided recently said no, 13 B doesn't give the FTC that authority. It clearly doesn't say that in the statute. So that same question is before the court. The Supreme Court in the a MG case and reports about the oral argument pretty strongly suggest that the majority of the court, including justices on the left leaning side of the court, uh, that the majority is inclined to apply a textualist reading of 13 B to hold that the FTC does not, in fact have the authority to obtain monetary relief. So, um, while that, uh, ability to get monetary relief is more often relevant in consumer protection cases filed by the ftc, it it has, the FTC has in the past and, and recently sought that kind of relief in antitrust cases. So, if the Supreme Court wipes out the FTCs authority, um, to get monetarial relief, I think that would take away one of the agency's strongest and, you know, biggest enforcement tools, uh, maybe biggest hammers it has, and that would, I think, push the agency to try to get a legislative fix from Congress. So stay tuned for a, a decision in the A M G case in 2021. John.

Speaker 2: 39:56

Thanks, Alexis. Coming in at number six, um, we're just gonna call this scrutiny of non-reportable deals.<laugh>, uh, in other words, uh, transactions that are not reportable under the HAR Scott Regino Act, um, this is something to keep an eye on whether that transaction is structured in ways, um, that, uh, do not require a heart Scott filing for any number of reasons or whether they fail to meet the monetary threshold. Uh, there, um, we, I think both feel that those are the types of deals, um, that will come under increasing scrutiny by the FTC and perhaps the doj. An example would be, um, so-called rollups of physician practices by private equity firms. Um, something definitely to keep an eye on. I would also point out, you know, just the other day, I think it was last week, uh, it was made public that the FTC had issued some subpoenas to, um, health insurers as part of a broader, uh, effort, uh, to scrutinize, um, the, uh, the healthcare industry, uh, as it studies the impact of physician group and healthcare facility consolidation, uh, during the last several years, one of the retrospectives, um, that the ftc, uh, has undertaken, uh, really led by the Bureau of Economics, I believe in that instance. Uh, I guess the tagline here is, uh, small deals don't mean small problem. Um, and it's, uh, it will be interesting certainly as practitioners, but also just as observers more broadly in the industry, um, to see what happens with respect to, uh, whether states the FTC or DOJ are all, or some combination thereof, uh, how, how they scrutinize those deals, Alexis,

Speaker 1: 41:36

Yep, totally agree that we might even could have moved that one further down our list. But, uh, I, I agree that's an important one to watch. Um, number five brings us back to, uh, pharmaceutical mergers. Um, as, as we talked about earlier, that the FTC was bitterly divided on the commission's approach to pharma mergers, uh, commissioner Trumper and Slaughter in particular, pushing for a stronger and possibly a more litigious approach to antitrust enforcement in pharma mergers at some point, uh, as we'll discuss even later in the podcast, the Biden administration will have a chance to appoint a couple new commissioners and will eventually have a Democratic majority at the ftc. If that panel of three, um, Democrats are aligned with, uh, commissioner Trumper and Slaughter's view on antitrust enforcement and farmer murders, we could see a, a pretty big shift in how the agency has conducted enforcement in this area for the past several years, if not decades. So that's, uh, certainly one to watch in my view. Uh, that's number five. Taking us to number four, John,

Speaker 2: 42:38

Thanks Alexis. And along the lines of what I'd said in 2020 with respect to the vertical vertical merger guidelines, um, and, and certainly in light of what Alexis just said, with a, a changing in the guard at the FTC and at the DO O J, um, this is vertical merger scrutiny and enforcement, that's number four. Um, I think both of us and several others anticipate that there will be, uh, a, a ramp up if it hasn't already started in, uh, the agencies taking a look at, uh, mergers that are not directly between competitors, but between or among others in the, uh, entities that are up and down the supply chain. So when hospitals acquire physician practices, health plans, acquire PBMs, et cetera, um, these are transactions we anticipate will certainly be an area of focus. And, um, something to, uh, keep our eyes on, uh, in 2021, Alexis.

Speaker 1: 43:32

All right, number three brings us back to the Jefferson Einstein case. So I'm sure John will both be watching what the third Circuit decides in the Ft. C's appeal, uh, of, uh, the FTC loss in the Jefferson Einstein case. As, as John mentioned, the district court, um, turn down the PI and the Third Circuit deny the FTC in the ags attempt for emergency stay of the decision pending appeal. Um, since then, the Pennsylvania Attorney General has dropped outta the case. Uh, reports say that the AG secured commitments from Jefferson to invest about 200 million over seven years in Einstein's North Philadelphia, uh, healthcare facility. So think losing the AG is, is not, uh, particularly helpful for the FTCs chances. But we'll see. I think another thing adding to at least my interest here is that the third circuit is the, the circuit court that in 2016 overturned the FTCs District court loss in the, the Penn State Hershey Pinnacle merger. So it'll be interesting to see if the Third Circuit saves the FTC again, or whether the court will affirm and give the FTC its first appellate court loss in a hospital merger in, I think over a couple decades. So, uh, definitely one to watch.

Speaker 2: 44:47

Thanks, Alexis. So coming in, we're down to the last two, I get number two, you get number one,<laugh>. Uh, number number two is something that we, I don't think we've talked about, which is, uh, legislation and potentially rulemaking. Um, you know, antitrust, uh, has been in the headlines beyond the healthcare arena, as folks may know with, uh, you know, a action, certainly, um, at the congressional level in addition to the agencies, uh, domestically and abroad. And so we have, uh, with a new president and with a new Congress, and specifically with a Senate that, uh, we<laugh> has, has changed hands and by the slimmest of majorities is now controlled by, uh, the Democrats, uh, some possibility, potentially real possibility that we will see, uh, legislative changes to the antitrust laws. And there is a lot, there is a significant amount of, of legislation that's been introduced that's being, or that's being drafted, uh, as we understand it from folks like Senator Klobuchar that, uh, concern everything from, uh, mergers to conduct, uh, and some industries in particular. And, uh, you know, looking at all of that and, and the broader landscape in terms of the, uh, priorities of the incoming in administration, um, and Congress, something without a doubt to keep an eye on as, um, antitrust goes beyond just what, um, what we do or what the agencies do, uh, and, and can certainly, um, potentially be dramatically affected by, uh, some of the legislation that, uh, seems to be getting at least some support over on the Hill. Alexis

Speaker 1: 46:28

Agreed. Um, so perhaps not surprisingly, our number one development to look out for in 2021 is, uh, the new leadership, uh, coming into the antitrust agencies at the DOJ and the F P C. Um, as, as you may have heard, there's a new president. Um, so that means that President Biden is going to have the opportunity to point a new Assistant Attorney General to lead the antitrust division at the doj. And at the ftc, uh, Republican Chairman Simons announced he's gonna step down at the end of January. Commissioner Chopra, as John mentioned, was nominated to lead the C F P B, so he'll presumably depart at some point. And as all John also, uh, previewed, uh, the President Tap Commissioner Slaughter to be the acting chair of the F ftc. So, um, where we stand at the FTCs, the president is gonna have, uh, opportunities to fill two commissioner seats and either make acting chair slaughter the permanent chair, or to appoint one of the two incoming commissioners, uh, as chair of the ftc. I think, uh, it would be fair to say that there is a, a battle, I guess, uh, among the moderate and left-leaning wings of the Democratic Party on who should lead the DOJ and fill the F T C Commissioner slots. I think a lot of this is probably driven by the debate about whether there should be a big crackdown on tech firms as has already started. Um, but there's a broader debate about, um, the overall robustness of antitrust enforcement and whether and how much tougher it should actually be. So the outcome of that debate may play itself out in the form of who's nominated to fill these key leadership positions at the antitrust agencies, and can certainly have a big impact on the direction and intensity of antitrust enforcement in healthcare. Um, you know, as I think we've conveyed today that we think there's, uh, been pretty intense and rigorous antitrust enforcement in healthcare in 2020 and, and prior years. Um, but there's even more pressure coming, I would say, from the left, for even stronger antitrust enforcement. So depending on who leads the agencies, um, we could see, you know, even stronger enforcement in certain areas like vertical integration, pharma mergers, et cetera. So stay tuned, uh, because I suspect we'll be talking about this, uh, in next year's podcast, John, if, um, they ask us back. But, uh, that's our program. So I wanna thank John very much for doing this, uh, again with me. It's always fun. And we wanna thank the H L A for having us both back and finally thank our audience for listening. We hope everyone has a better, safer and healthier 2021.

Speaker 2: 49:05

Great. Thanks, Alexis. This was a pleasure yet again, and, and looking forward to connecting in the coming year. Uh, and, uh, thanks again to the A H L A, which has a lot of great content, not just on antitrust, but other health law issues. Uh, everyone, uh, share Alexis's wishes for a safer, healthier, and happier 2021. And, uh, that will do it for us. Thanks very much.

Speaker 1: 49:31

All right, thanks John. Take care, everybody.